EU steel prices appear to be rising faster than expected in even the most recent forecasts. MEPS are reporting that amidst rising demand and restocking the major producers, ThyssenKrupp, Arcelor Corus and Salzgitter have announced July increases of up to €50 from July. With little stock available on the “spot” market they are sure to be at least partially successful in achieving these increases.
Whilst the EU commision report an increase in business confidence for the fifth month in a row (particularly in manufacturing), this is not being reflected in the UK, where we feel that service centres and re-rollers will experience some difficulties in recovering these increased costs from the end users.
Costs are certainly on the increase for the steelmakers with iron ore, alloys and energy moving upwards and it is natural for them to take advantage of strong market conditions to recover these. However since the largest part of demand increase may be due to inventory and speculative restocking, there is a danger that when the speculators feel the price is at it’s peak they will stop buying. This could lead to a rapid “fall off” in demand and prices could tumble.
I have long been of the opinion that when prices rise too quickly in the steel sector, speculative buying and selling can cloud the true demand situation, and lead to unstable market conditions and the possibility of prices “crashing” back. This benefits neither the producers or the market, but it seems that the steel manufacturers are still determined to push forward high increases, when a slower more moderate approach might lead to stability and an improved situation for producers and consumers alike.
The latest MEPS report can be seen here