THE MEPS - EU AVERAGE STEEL PRICE DOWN 2.5 PERCENT IN OCTOBER

An ongoing lack of end-user demand is creating negative price pressure in the EU market. Restocking by the distributors caused a brief, temporary upturn in mill sales during the third quarter. This has now come to an end. Moreover, market players are concerned that the current level of consumption is not high enough to justify restarting so much previously idled capacity. Basis values have already weakened in several countries and buyers are anticipating further discounts in period one 2010.

Despite reports by politicians and the media to the contrary, German steel market players can see no real improvement in the economic situation. The mills were talking of higher prices for the final trimester but, in fact, some spot values are softening. Customers are not ordering large quantities of third country imports because they are not confident about market developments in the intervening three months it takes for delivery.

The uptick in French demand, seen last month, has been generally short lived. Activity is now slowing down. Distributors have been filling up stocks but, with sales to consumers remaining poor, they are now adopting a very cautious attitude. The possible threat of non-EU imports, widely discussed at an international level, does not seem to be a reality in France, at least for now. Overseas prices may be interesting but delivery lead times, stretching to the end of 2009 and the beginning of 2010, are putting off potential buyers, given the current uncertainty of the market.

Italian activity has quietened down, following the brief resumption of business immediately after the holidays. Prices have started to soften due to a shortage of real demand, which shows no signs of improvement in the short-term, and import pressure. Further reductions are anticipated. Distributor and end-user business is being hindered more and more by difficulties with access to credit.

These are uncertain times in the UK flat products market. Demand and prices have reached a plateau. The burst of purchasing activity that followed the summer vacation has abated. Restocking has ceased, with service centres now comfortable with the levels of their inventories. Sales to consumers remain slow and the renewed air of confidence, reported in September, has evaporated. There is much talk of offers of cheap third country imports but, as most buyers would prefer to purchase on short delivery lead times, there is very little serious interest at present.

Financial problems, plus doubts over future price trends, are limiting the size of orders being placed in Belgium. Delivery lead times from the producers are relatively short, despite output cuts. Supply chain stocks are generally still too high as sales have fallen back since early September. Basis values are stable for now, with the mills pushing for increases which are unlikely to materialise. Both import and export activity in the port of Antwerp is dull.

Having learnt from recent experience, Spanish distributors are working with much lower inventories now, keeping them in balance with the current subdued level of consumption. Basis values have fallen back a little in recent weeks. Today's figures are probably not sustainable into the first quarter 2010. Increasingly cheaper Chinese offers have caused customers to temporarily stop booking third country imports as they wait to see how cheap they will become. Traders say that buyers, currently, require short delivery lead times. However, there is hardly any material in the ports at present, although some vessels are due towards the end of the year.

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

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