MEPS are reporting:-
Following ArcelorMittal's recent price announcement, it now seems unlikely that any strip mill product increases will be implemented in the first quarter 2008. The company intends to defer the rise, which will reflect escalation in raw material costs, until period two. Inventories in most countries under review are still not at comfortable levels and third country imports, ordered some time ago, continue to arrive. We have very few price changes to report as most fourth quarter sales were finalised last month. Annual contract negotiations with automotive and domestic appliance makers appear to be at an impasse.
German order intake from end-users has been a little lower since the Summer but is still at a reasonable level. Stocks should be adjusted back to normal by early 2008. Some service centres have either stopped buying completely or are purchasing less than usual to speed up the process. However, there is a lot of material at the docks still to be offered by traders with unsold tonnage. Buyers will not order new third country steel because of the anti-dumping threat. There is some uncertainty as to whether ThyssenKrupp will try to lift strip mill prices in the first quarter. The decision will rest on the outcome of the annual auto contract negotiations which are not, as yet, completed. In the meantime, the company is accepting business for January/March delivery with prices to be agreed at a later date.
Prices in the French market are virtually unchanged this month, although strip mill values are still under some pressure. Negotiations have started for the first quarter next year with producers integrating into their period one prices the decreases conceded during the fourth trimester. Demand is feeble except from the automotive industry which remains at a better level. Under such conditions, the next price rise is expected around March/April.
Although third country import pressure is weak in Italy, material ordered some time ago continues to arrive at the ports, disturbing the balance of the market. Activity levels are low as customers work through surplus inventories, which will probably not be cleared by the start of next year. Riva has reacted by further reducing basis prices. The cuts are in the region of €10/20 per tonne.
UK market players believe that the announcement from ArcelorMittal more or less rules out any possibility of a January price rise. However, there seems no reason why prices should not hold up in period one at current levels because import offers are few. Demand has not been strong throughout 2007 but a number of distributors report a pick up in business during November. Holes are starting to appear in their inventories and they need to reorder.
The destocking movement is still in progress in Belgium. Demand on service centres is good for the time of year. Consequently, turnover is high but margins continue to suffer. Mill basis values are stable. Customers are disinclined to consider accepting any large price rises in the second quarter. There is little or no third country import pressure.
The Spanish market has changed very little since our last report. Demand on the mills in dull. Stocks are definitely declining as customers make very few new purchases. Any shortages of specific sizes/specifications can usually be filled quite quickly from material standing at the ports. However, with the exception of plate, inventories of foreign material have reduced considerably. Buyers anticipate price advances in period two.