SUBSTANTIAL STEEL PRICE HIKES INEVITABLE IN EU BUT FEW DEALS SO FAR

EU mills are benefiting from a lack of competitive third country imports. Low inventories at distributors need to be replenished and customers are accepting that prices must go up as producers try to recover higher input costs. ArcelorMittal has announced a 12/15 percent hike for April deliveries. First quarter order books filled up quickly as buyers placed business ahead of the anticipated price rises. Although a small number of deals have been done at higher prices, it is too early for period two settlements to be finalised. Consequently, the figures in our flat products price tables are indicative of those agreed for late first quarter orders.

Business levels in Germany are acceptable. Customers are faced with price hikes in the second trimester but it will be early March before serious discussions begin. A number of buyers believe that the mills' demands are too much and that €40/50 per tonne would be a more realistic target, with perhaps a further €30 per tonne in the third quarter. Stocks at the service centres are back to normal levels now and some distributors have tried to build inventories ahead of any price advances. There are no attractive third country quotations. Chinese and Indian producers have stopped offering and Russian prices are too high.

Values are moving up in the French market as buyers express concern at the magnitude of the proposed rises. Should the situation reverse quite soon, distributors could be in trouble. Negotiations for April are not yet completed but certainly first quarter prices are no longer valid as the mills have closed their books. The figures in our table refer to the last period one deals that took place. Buyers are expecting to pay €70/80 per tonne more. The large quantities of strip products held by service centres and end-users were adjusted by the end of 2007 and stocks are now close to normal levels, so customers are forced to return to the market.

The threat from Chinese imports has lessened considerably in Italy, partly due to logistic difficulties at Chinese ports and also because of the changes to export duties. In addition, maintenance closures at Italian domestic mills have also served to tighten supply. This limited availability, together with low inventories and escalating raw material costs, has enabled local producers to push through some significant increases during recent price settlements. They will be seeking further rises in the coming months, despite relatively slow demand at present.

In the UK, Corus expects to lift second quarter strip product prices by £80/106 per tonne, depending on specification. The company said that more hikes cannot be ruled out. Although met with disbelief by some customers, the proposed values will still be attractive compared to current International figures. Real demand is not strong and there are indications of weakening end user order books going forward, due to current difficulties in financial markets. However, the inventories that built up in the latter half of 2007 have now worked their way through the system. Consequently, distributors have started purchasing again.

Belgian customers are anticipating sharp increases as raw material expenditure soars. There is no negative pressure whatsoever from non-EU imports. The home market is strong. Inventories at service centres and end-users are low and restocking continues. Demand is still good. Distributors are recouping any mill rises from their customers.

The Spanish market is quiet. Demand is slowing down because the economy is performing less well. Sales to the construction sector have fallen back dramatically. In general, service centres do not have a lot of orders but their stocks were back to normal by the turn of the year and now some gaps are appearing for certain sizes/specifications. Although the target prices proposed for period two by European suppliers are still substantially below International market levels, some buyers still feel the full amount will be difficult for the mills to implement.

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

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