According to Sheffield based forecast consultants, MEPS, there is something of an impasse in the western European flat products market as customers prefer to sit on the sidelines rather than place business at the inflated prices being demanded by the domestic producers. Consequently, order intake at the mills is slow.
Many customers have stocks that are adequate for now following purchases in late 2010 and early 2011, ahead of the increases. Buyers think that the steelmakers may eventually be prepared to relax their offers. However, escalating raw material costs in Q2 are likely to persuade them to push for further hikes.
German customers are battling higher basis values because final users cannot always pass on their growing costs by putting up the price of their finished goods. The market is quiet since many companies have enough steel in stock and are not ready to pay more just yet.
In France, last month's surge in basis values is tailing off. Producers are finding it more difficult to implement further increases as demand remains moderate. Some buyers will not order as they claim to have sufficient material to enable them to wait until the summer holidays. However, mill delivery lead times are extending and a number of distributors' inventories are quite low.
Italian end-users, having decided not to accept further increases, have virtually stopped purchasing. Consequently, the stockholders have problems recouping the most recent mill hikes from their customers and are now living off existing inventories. They bought heavily at the end of 2010 and can afford to wait before reordering. For now, the producers are still claiming the inflated numbers but cannot sell at these levels. Moreover, quantities of third country imports are arriving at the Italian ports, so the domestic mills may well be forced to reduce their price expectations.
The UK market has been quite busy as both service centres and end-users bought ahead of perceived price rises. MEPS has noted a number of upward price movements over the last four weeks. However, some distributors are already well covered for the second quarter. Having bought third country tonnage at the end of last year, they do not need to pay the higher values that local mills are demanding. At present, there are few new attractive foreign offers to dampen the positive tone of the market.
Spanish steel consumption is absolutely flat. The economic situation shows no positive signals. The service centres were relatively busy in January and February as end-users tried to beat the price advances but the market is quieter now. Distributors are struggling to recoup the mill increases. Companies bought third country material quite heavily last November. This is now starting to arrive at the ports, so they are in no hurry to re-order.