EU AVERAGE STEEL PRICES UP 15/18 PERCENT FOR SHEET PRODUCERS IN MARCH
Flat product prices have been substantially affected by the tremendous raw material cost escalations announced in recent times. Price demands from domestic producers shot up in the last few weeks. ArcelorMittal tabled a further €40 per tonne hike for the second quarter, on top of the 12/15 percent we reported in our February issue and all the major producers are talking of even higher prices in the near future. With third country import offers comparatively scarce, buyers have nowhere else to go. The upward price trend is certainly not demand led. Customers, although initially sympathetic to the mills' needs to cover rising input costs, are becoming increasingly concerned at the imminent prospect of more expensive steel.
Many new construction proposals will be re-evaluated in view of these significant steel price hikes. EU demand was expected to decline in this important consuming sector because of the credit crunch. The current steel pricing picture can only exacerbate the situation. The first of many building project cancellations was recently announced by Werder Bremen, the German football club. A plan to extend seating capacity at their ground has been scrapped because of high steel costs.
Business levels are reasonable in Germany. Service centres are not overstocked at present, having reduced their inventories late last year. Buyers are trying to book as much material as possible because the mills intend to lift prices even more but producers are only accepting orders for reduced quantities. End-users are finding it difficult to come to terms with such huge rises.
In France, inventories at distributors and end-users have been successfully adjusted and buyers need to re-order. The second quarter increases are being passed on quite easily but there is a feeling the higher values will not last. Demand is still at a normal level.
Italian consumption is far from robust as the general economy is slow. There is a distinct lack of import offers at attractive prices. Local values are being driven by the cost of raw materials, energy and freight, enabling producers to push through a further round of significant increases during settlements for April shipments. These are reflected in our tables. Since then, Riva has opened its books for May at even more inflated figures. This has encouraged a sudden renewed interest in third country offers. Many customers are trying to survive on stocks, which are shrinking very quickly, as they suspect a price collapse may be just around the corner.
End-user demand is reported to be steady by UK service centres but availability is fast becoming a problem, particularly for those who are not regular European mill customers. Stocks are probably on the low side. There is some concern that there might be an influx of third country steel in the third quarter as domestic prices soar but orders would need to be agreed quite soon for material to arrive by then. We have unconfirmed reports that Corus is considering a further £50 per tonne hike.
Belgian companies, who have very little stock, are being told they will have to accept less tonnage than they require during period two. There are no import offers and none seem likely at present. End-users are resisting service centre efforts to pass on the higher mill values.
Spanish demand is extremely weak. Poor construction activity is beginning to adversely affect distributors' sales. Inventories at the service centres are comfortable but below normal levels. Buyers have been forced to agree to substantial hikes in order to obtain second trimester material. Third country suppliers are out of the market completely.
We have heard rumours of even higher price increases from Corus, closer to £100