STEEL NEWS

MEPS: EU Steel Prices Peak or Low?

According to the British analytical agency MEPS International Ltd., the rapid rise in steel prices in Europe stopped at the beginning of February, as buyers perceived the latest news on the development of the scrap market in Turkey. In addition, the approaching Chinese New Year has reduced the level of activity in the Far East. European participants in the supply chain are now pondering the prospect of price reductions in the coming months. Prices for imported scrap in Turkey rose sharply to $ 500 per tonne in December 2020 and in the first half of January this year.

However, local residents' concerns about market volatility led to a drop in value of about 20% by early February. This caused a decline in European prices for products that are closely related to the movement of scrap, in particular for rebar. Other structural steel products have followed suit. However, the first signs of a resumption of the rally in the Turkish scrap market are clear. Buyers of steel using a wait and see attitude may need to react quickly.

Much of the European market is watching China for a clear direction after the Lunar New Year. Many are optimistic that China will continue to import steel, supporting strong global steel demand. However, the signals are mixed. The new regulation has certainly increased the initial interest in imported scrap. Subsequently, purchases were suspended to prevent overheating of prices. New government spending is expected to boost steel demand, but isolation from the coronavirus could dampen activity, creating a surplus for exports. Competitive offers have already been received from Chinese suppliers in various regions, including Africa and the Middle East.

European flat products continue to push for higher prices, but with limited success. The market leader recently announced a new minimum baseline for hot rolled coils at € 750 per tonne, which was seen as an attempt to build on previous gains. Other companies are less ambitious to follow this step. In their opinion, the market is on the flat, but not necessarily at its peak.

The mills' drive to maintain selling prices is certainly justified for products with limited availability. Cold-rolled coils and coated sheets are proving difficult throughout the supply chain. European prices for these products remain unchanged. Prices for wire rod are held in the same way.

Increased delivery times, due in part to reduced coil capacities in Europe, have kept mills optimistic. The import proposals did not generate much interest. However, today coil offers from South Korea and India are competitive in price and delivery. A downturn in the Turkish market or cheap offers from China could result in more Turkish manufacturers returning to the European arena.

The current EU and UK safeguards are only valid until the end of the second quarter. Any expansion could mitigate further import competition.