EU STEEL PRICES BOTTOMING OUT - UPTURN EXPECTED IN THE SPRING

Many steelmakers and manufacturing companies took much longer breaks than usual over the Christmas/New Year holiday period because of the current economic downturn. Indeed, as we conducted our January research, several firms had still not reopened. Consequently, business has been slow in the steel market at the start of 2009 with very few transactions concluded so far.

In Germany, real demand remains depressed with stocks at both service centres and mills above acceptable levels. End-users also feel that their inventories are more than sufficient for the current rate of manufacturing activity. Material, ordered in the middle of last year, is arriving from China and Russia. Traders cannot find buyers for this steel in the present financial climate. Distributors are trying to reduce their high priced inventories by offering cheap deals. They are only purchasing small quantities in the first quarter. Very few orders have been finalised at the high values in our table.

The French market is extremely quiet as demand has not picked up. Stock levels have fallen but most buyers are still waiting before refilling their inventories. As a result, some ordering is expected in the coming weeks but a full recovery in demand is not forecast because end-user markets remain weak. Prices continued to drop during the month of December but producers are now aiming to stabilise them. There have been few settlements in the first part of this month.

The Italian situation is still quite gloomy following the extended holiday period. However, there is the likelihood of some restocking activity over the next few months, albeit at a slow pace. As so little ordering is underway at present, there are no fresh quotations from the domestic producers. A lack of credit is blocking potential new business. Many insurers are reducing credit lines to the whole auto sector rather than just individual companies.

UK flat product prices for period one are lower than in the final quarter 2008. However, market players feel they may have reached the bottom, particularly if the mills can continue to keep supply in balance with real consumption, which continues to spiral downwards. The vehicle sector is already suffering badly and there may be more bad news to come. Indeed, the outlook is not good across every sector of industry. Problems with credit insurance are creating even more havoc. On a slightly brighter note, the surplus stock is working its way through the supply chain and inventories are now better aligned. This should start to generate some new enquiries. Moreover, the weakness of Sterling against both the Euro and US Dollar is benefiting local mills. November/December output from domestic distributors was reportedly down by around 40 percent compared to the norm for the time of year. Consequently, resale values were very low.

There is virtually no business activity in the Belgian flat steel market in early January which makes if difficult to establish a price level, although further major declines are not anticipated. Consumers still have plenty of material in their warehouses.

Spanish customers are only buying relatively small quantities at present to fill gaps in their stocks. However, there is more interest in purchasing now that inventories have come down considerably. Business is expected to strengthen, at least a little, as the quarter progresses but underlying demand has not improved. Several large customers are still discussing first trimester prices with their suppliers. Turkish and Russian mills are selling quite aggressively, although the recent volatility in the Euro/US Dollar exchange rate has caused some problems.

Source: MEPS - European Steel Review - click here for a free sample copy

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