FURTHER EU STEEL PRICE RISES EXPECTED FOR THIRD QUARTER DELIVERIES

The third quarter of the year is often regarded as an inauspicious time to attempt an increase in steel prices in Europe. Even if demand in the first half has been solid, things can change abruptly when buyers go off for their Summer holidays.

But in 2006, European steel mills appear to be confident of securing further upward adjustments in the next quarter – and in some cases even earlier. It was in the last few days of March – before period one had even finished – that US Steel Europe announced plans to raise its prices by “a minimum of €30 per tonne”.

Corus moved to advance prices for structurals from 30 April and plate from 1 May. In strip products, USSE has not yet been followed by any other producers. MEPS is aware that mills are telling their customers to expect formal announcements soon.

Global market conditions certainly appear to be in the mills’ favour. Prices are rising around the world – hot rolled coil imported into Asia is reported to be selling at more than $US500 per tonne. Prices of coil exports from Russia and Ukraine have been increasing steadily. US prices remain strong.

European domestic conditions are also firmer. Real consumption of flat products has taken an upward turn. The important German and Italian markets appear to be consuming somewhat larger tonnages than had been anticipated at the start of this year. France is the only major EU market currently described as weak. MEPS average EU flat products price in April is up by €15 per tonne from March.

Despite some reports of increased imports into southern Europe, these do not appear to be undermining price levels. Many regular exporters are either out of the market or are offering uncompetitive prices. Exporters of strip and plate products from the CIS are still trying to catch up with a backlog caused by the severe winter weather, and by breakdowns at some steelworks.

European mills do not usually announce prices too far in advance of their effective date unless they are supremely confident that they will get what they are asking. If there is doubt in their minds, they will delay until they have a clearer view of the market’s underlying condition. They strive to avoid a situation where they announce a price increase only to see it fail. But this time, the mills have passed through the increases they announced for the second trimester so easily that they appear to have been imbued with self-belief for period three.

As early as the first week of April, some mills were claiming to be fully booked through the second quarter. What “fully booked” actually means in this context is open to debate, however. Some stockholders say they are being quoted delivery no earlier than September for certain products, and other buyers say they are unable to obtain all the tonnage they want. While playing down talk of a shortage, mills are anxious not to allow over-buying to result in a build-up of stocks. That would risk a repeat of the 2004 “bubble”, which was followed by a plunge in prices the following year.

The extent of the likely third quarter attempted price increases is not yet clear. At the bottom end of the range are suggestions of €10/30 per tonne for uncoated coil. At least €60/80 per tonne is being mentioned for hot-dip galvanized coils, where mills – having rejected the idea of a special surcharge - are seeking to pass on their record high zinc costs.

Source: MEPS - European Steel Review