Wednesday, April 18, 2007


The majority of period two business has now been settled at higher prices than those paid in the first quarter. The initiative was made easier for the EU steelmakers by a decline in the number of attractive third country offers. Nevertheless, large quantities of material, ordered at the end of 2006, continue to arrive, particularly at the southern European ports. Domestic producers are already talking about further price rises in the third trimester, although no official announcements have been made.

In Germany, real demand is still strong. However, stocks at the service centres are on the high side because companies bought ahead of the second quarter to avoid paying the proposed price rise. In addition, a lot of non-EU material was purchased at the end of last year and this is still being delivered, helping to swell inventories. Although some customers are paying more than in the first quarter, a number of other buyers claim that the general tendency is for first trimester values to be rolled over to the April/June period. As new Far East price offers are now similar to those from EU suppliers, customers prefer to purchase nearer home and, consequently, import quantities should decrease.

French prices are continuing to advance in April with further rises expected in the coming months. Demand is described as "normal" or "fairly good", with stocks at adequate levels. Service centres continue to struggle to recover the higher basis prices from their clients.

In Italy, Riva has secured a number of significant increases this month, compared to March. Local supply has been tightened by maintenance work at the company's Taranto plant and there is less threat from imports. Chinese mills, in particular, are less active in the market. Demand is good and inventories are satisfactory. However, although mill prices are climbing rapidly, resale values are very difficult to boost as end-users are resisting the increases.

Demand in the UK market is described as "not exciting". Nevertheless, buyers are now paying more because there are fewer supply options. Inventories are generally in balance with current demand. Some distributors still have a problem with resale values which are low compared to present day ex-mill prices.

End-users are keeping stocks down in Belgium, where demand is good. Service centre sales are still very healthy and it is easier now to recoup the mill price hikes from their customers. As predicted in our March issue, strip product values continue to move upwards.

High stock levels are impeding producers' efforts to lift prices in Spain. Even so, some gains have been made for period two business. Distributors are covered through until August/early September with inventories already in their warehouses or material on order. Service centres are finally transferring the mill increases to their clients. Buyers are loathe to pay the higher prices demanded by importers for May/June so traders are having to take positions rather than conducting back to back business.   


This report seems to fit in well with what we are seeing in the UK. Demand is not strong but the steelmakers remain bullish on prices, at the same time as end user buyers remain resistant to increases. With the first and second quarter increases combined steel strip will have moved up by some 60 euros by the start of July, with further increases rumoured toward the end of the year.


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