Global economic uncertainty is causing steel consumption to slow in Europe. Moreover, buyers are reluctant to place forward orders on the mills, given the current financial climate.
UK based market consultants, MEPS International, say buyers feel that worldwide production cuts will hold the key to price stabilisation. Although the mills are curbing capacity, the results are unlikely to be felt until the start of 2012 at the earliest. Traders are reluctant to place new business with third country suppliers as market sentiment remains weak.
There is very little demand in Germany. In general, steel prices have weakened further. The mills appear to be offering different levels of discount, depending on customer and tonnage. However, end-user activity in Germany is still relatively strong in comparison with other European countries. Auto production is at a good level for the luxury brands, which are still enjoying excellent export sales. Other industries are reducing their steel stocks but trying not to lay off personnel. Service centres can obtain supplies from the steelmakers within three to four weeks and, therefore, are only buying when they already have orders for the material.
Prices have decreased in the French market, despite producers’ efforts to stabilise them. Some distributors report that activity has dropped since early October. This is being felt more by smaller players because of the commercial actions of large and mill-tied enterprises who are actively destocking. All buyers agree that they are only purchasing the strict minimum, as they aim to have very low inventories by the end of the year.
There is a great deal of uncertainty in the Italian market at every level. This is not facilitating business activity. Domestic steel demand is poor since end-user consumption has slowed, particularly in the construction, automotive and white goods sectors. Export markets have also weakened.
There is no significant import pressure at present but suppliers from Turkey and Russia are looking for orders and may start to offer quite soon.
The current financial issues in mainland Europe have had a disruptive effect on steel business in the UK, where confidence is at a low ebb. Ex-mill basis figures have continued to slip over the past month. End-users and distributors have managed stocks down to a low point. Several service centres claim that their sales volumes are reasonable but that margins need lifting. However, the recent downward drift in resale values may now have halted.
As expected, Spanish consumption has deteriorated further. Service centres refuse to build up inventories and continue to just buy what they need for tomorrow. The mills have offered more price concessions, despite a lack of third country competition. Distributors’ resale values are below replacement costs, and, in some instances, they are losing money just to generate cash.
Source: MEPS - European Steel Review www.meps.co.uk