MEPS APRIL - EU COMPOSITE STEEL PRICE UP 45 PERCENT, YEAR ON YEAR

Despite relatively low activity levels and poor final demand, flat product steel prices are ascending rapidly. This trend is likely to continue into the third quarter as period two is virtually sold out at most European mills. Producers are justifying the increases on the grounds of their escalating raw material costs. However, the hikes are not supported by any substantial improvement in end-user consumption and there are fears that the higher prices could damage the small recovery that has begun. Customers are forced to pay more because of limited availability. Third country imports are said to be virtually nonexistent.

Selling values have shot up in Germany, with customers in shock at the sharpness of the increases. Delivery lead times are extending and order intake at the mills has picked up. With little or no import competition, buyers have nowhere else to go. Some companies are trying to purchase ahead of more anticipated rises. Such actions could cause stocks to grow a little if the financial climate will allow this. Thus, the lack of credit insurance is now having an even greater influence on the market.

Prices continue to strengthen significantly in France. Customers comment that the steelmakers are acting very forcefully and there is not much room for negotiation. Demand from end-users has stepped up slightly and should improve further as the quarter progresses. The main activity is coming from the auto and domestic appliance industries. Some distributors have such low inventories that shortages of certain dimensions/grades are starting to occur. The service centres are beginning to pass on the mill advances to their customers.

Although some small revival in sales has been noted in Italy, it is nowhere near enough to justify the huge price rises that have taken place over the last four weeks. These are purely attributable to hikes in input costs. Domestic availability is limited. The mills claim that their production capacities are quite full. Buyers still find it difficult to finance purchases. However, they will try to order ahead of future increases where possible and, consequently, stocks are no longer as depleted as earlier in the year. For traders, overseas quotations are going up on a daily basis, making it problematic to locate competitive material.

In the UK, suppliers are steadily boosting basis values in order to pass along their higher raw material expenditure. Customers say they have no choice but to pay the new figures. Although there is optimism about market developments from a pricing perspective, there is still underlying concern over consumption. Nevertheless, market sentiment is better and more activity is taking place, especially at the distributors. They now need to restock because their low inventories are no longer sufficient for the higher demand. Buyers must place forward orders with EU mills since there is very little trader stock available. They are loathe to purchase from third countries due to the long delivery lead times involved. Consequently, supply is quite restricted. Financial restraints are preventing any significant speculative purchasing ahead of further perceived hikes.

Belgian figures are going up very quickly. Customers complain that all offers are made with no options given. Mill supply appears quite tight. However, we hear that a number of large wholesalers bought a lot of cheaply priced material in November 2009 and still have huge inventories.

Basis numbers are booming in Spain. Nevertheless, buyers are being very prudent and only ordering small quantities. They are starting to absorb the new prices but demand remains flat. Traders are not eager to take positions in such a volatile market. Consequently, they are concluding very little business. In any case, customers are not willing to risk deliveries beyond June/July.

Activity in the European construction industry is slowly improving with the onset of spring. Long product makers have secured some remarkable price hikes over the last month, with figures moving up virtually on a weekly basis, as they finally claw back their substantial input costs.

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

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