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According to MEPS International Ltd latest report - MEPS European Steel Review, the EU flat products market is slow ahead of the summer vacation period. Order intake at the mills is very subdued, with few deals being concluded. Basis figures could deteriorate further as the producers become more desperate to book business before the shutdowns. However, many market participants believe that prices are bottoming out and some suppliers are considering an increase in September. There is very little interest in foreign material, even though overseas mills are reducing their prices.
The German market is already winding down, with some companies already on holiday. Basis figures are weakening. Customers are not interested in purchasing large quantities so the mills, lacking orders, are willing to negotiate. Some buyers think that prices have gone as low as is possible, given today’s input costs. Service centres continue to keep stock levels low as many are experiencing financial difficulties. There has been no pickup in demand but it is still reasonable in comparison with many other EU countries. It would seem that the reality is better than sentiment would suggest.
Activity remains weak in France and is expected to slow down towards the end of the month. Nonetheless, some sources note a slight improvement. This may be only apparent demand as a number of stockholders have been reordering a little before the summer so that they can start September with some material available. However, other participants report that better end-user activity has translated into a small increase in purchasing because distributors had so little stock. In the meantime, prices have continued to fall, as the market is still oversupplied. Also, third country imports are getting cheaper. Although the differential is small, they are more attractive than three months ago.
The Italian market continues to contract as tough government austerity measures take hold. This diminished demand has resulted in a virtually total lack of orders at the mills and further downward price pressure. Service centres claim their margins are being squeezed ever tighter. End-users and distributors are keeping inventories as low as possible. Several are closing for as long as four weeks over the summer because that is the easiest way to cope with the volume reductions. Chinese suppliers are back in the market as are Indian and South Korean mills. Many buyers are reluctant to do deals because they have to consider the risk of purchasing material that will not arrive until the end of October or even November. Moreover there is plenty of steel from European sources where deliveries are available in three to four weeks. Some speculative third country business has been concluded, however.
Mill order books are flat in the UK. Demand appears to be stabilising after falling earlier in the year. Currently, volumes are very small and suppliers have reduced basis values accordingly. Customers will need to see a substantial demand recovery before accepting steelmakers’ proposals for increases in the autumn. There is tremendous competition, between distributors, for orders, resulting in low resale prices. Spot values are down again in Belgium - cheaper by €10/20 per tonne. Quarterly contract quotations for period three show even sharper drops. Mill delivery lead times are very short. Stockists from Germany and the Netherlands are visiting end-users and small service centres in Belgium with offers below current mill prices.
There is negative price pressure in Spain, where consumption is sluggish due to the dire economic situation. Market participants state that conditions become worse every month. Producers can be very flexible. Sometimes they will contemplate charging special, lower than normal, basis figures for the higher specifications plus extras as per list. Service centres are only buying material for which they already have orders on their books, as they minimise their stock levels.
