MEPS REPORTS A SLIGHT UPTURN IN EU STEEL PRICES IN JULY

Demand and prices are strengthening in the European strip market as the destocking phase is all but over and buyers need to fill the gaps in their inventories. Delivery lead times are lengthening and a surge in third country imports is unlikely due to the competitiveness of domestic prices. Several major mills have told customers they intend to lift basis values for the third quarter. The proposed rises range from €20 to €30 per tonne. However, some companies feel the move is premature. There are concerns that producers may try to ramp up capacity too soon and that the market will be unable to absorb the increased supply, especially as the summer vacation is looming.

There are more enquiries now in the German market but they are mainly from customers looking for specific qualities and dimensions because they have run out of these items. Consequently, the mills have received a greater number of orders in recent weeks but volumes remain low. It is too early to say whether buyers will eventually accept the higher prices demanded. Certainly, some period three business has already been concluded at second quarter figures. Signs of improvement in real consumption are virtually non-existent.

In France, stock levels are returning to normal. Activity is picking up slowly, particularly in the auto sector, but many end-users are still suffering from the economic downturn. Offers from the mills are limited because of output curbs. As a result, most EU suppliers have announced price hikes for the July/September period. Values have remained stable, so far, but market participants believe that the proposed increases are likely to be implemented soon.

Business is not so bad in Italy. Activity has picked up quite suddenly. All, or most, of the surplus stock has been removed from the supply chain and customers need to purchase material again, although not in large quantities as consumption is relatively low. Companies are still struggling but the consensus view is that the worst is behind them. Riva has been able to push up prices as availability has been tightened by significant output cuts. Improvements in international markets have lessened import pressure.

Market signals are slightly more encouraging now in the UK. The mills are lifting prices. They have seen a spike in purchasing as customers run out of inventories and the production restraints of recent months have significantly restricted supply. However, market players fear it may be a "false dawn" because there are no signs to indicate any uptick in real consumption. Buyers generally have paid more for third quarter business due to limited availability, reportedly exacerbated by "production issues" at Corus that are causing deliveries to run up to two months late.

The Belgian scene has changed very little. Producers are claiming increases but customers believe the proposals to be too ambitious for the moment, since inventories have still not been cleared. Underlying demand has not improved and the general economy is weak.

Spanish distributors' stocks have been reduced to very low levels. Service centres report that enquiries have gone up a little, recently, but there are fears that the upcoming summer holidays will dampen this small revival. Nevertheless, stockists and end-users recognise that prices are firming. Most July/August business has already been booked at figures similar to the second quarter but September deliveries are likely to carry a premium as supply tightens. Import prices are still above local ones. Additionally, the tonnages that most customers require are not sufficiently large to warrant ordering overseas.

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

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