The majority of second quarter business has yet to be settled. A number of EU steelmakers have announced plans to lift April prices by around €20/30 per tonne but many customers believe the amounts to be too ambitious, given the availability of cheaper third country imports. However, the number of offers have declined recently and, pricewise, they are less interesting than at the end of 2006. In addition, there is a lot of uncertainty over whether and when the Chinese government will cut the export tax rebate.
In Germany, Thyssen Krupp has yet to formerly announce its target prices for period two. Although producers have indicated that they want buyers to pay higher basis values, deals are still being finalised. We have reports of shortages of stock material at the mills. Customers bought large quantities of imports at the end of last year and these are still arriving at the docks.
French demand is only average, with stocks at normal levels. The full second trimester basis price hikes, suggested by Arcelor, may be difficult to implement. The company will also make changes to its extras price list, effective April 1. Service centres claim they cannot pass on the recent higher basis prices to their clients.
Following the upward price trend in third country import offers, Riva has been able to secure further small increases this month in Italy. As market sentiment improves, more hikes look quite possible during the second quarter. Real consumption has revived substantially since the start of 2007 but inventories have grown as foreign material, ordered last year, continues to arrive.
Period two business is still not settled in the UK but buyers say they expect to pay more as there are fewer supply options now. Demand is described as "steady but not exciting". Plenty of third country material is standing at the quayside and will take time to work through the system. Moreover, Chinese steel, booked three to four months ago is now arriving. Stocks are generally in balance, so buyers are not rushing to place more orders at present. Some distributors have a problem with resale values which are currently low compared to mill prices.
In Belgium, strip product values are moving up slowly as imported material becomes increasingly expensive. Customers believe figures could gain more as the quarter evolves. Service centre sales are very healthy and the Belgian economic outlook for the rest of 2007 is good. Distributors, who let inventories become depleted at the end of last year, are finding it difficult to rebuild them, such is the strength of demand from end-users.
Although most Spanish service centres had adjusted their inventories by the end of 2006, stocks are growing again with more non-EU material still to reach the ports. Consumers are keeping their stocks low. Demand is brisk but distributors' margins are very poor as it is taking some time to transfer mill prices to resale clients. Those second quarter deals that have been closed have resulted in slightly higher basis numbers.
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