Monday, November 17, 2008

Will European steel prices go in to free fall?

 MEPS are reporting a dire picture in the European Steel Market

Demand for steel in the EU has collapsed. Current price levels are, however, hard to verify because very few forward orders are being placed. Buyers are afraid to purchase because selling values are dropping on a daily basis. Moreover, customers' orders books have reduced dramatically - leaving OEM's and distributors with excessive inventories.

Such is the decline in real consumption, that existing stocks through the supply chain will be sufficient to meet market requirements for several weeks and even months ahead. Recently announced savage cuts in steel production are not just required to rebalance the market in the short term. They are necessary to cut costs as the mills and service centres are facing unprecedented negative price pressure. This is because customers are only buying steel products which can immediately be converted to finished goods as the credit hurricane sweeps through the manufacturing sector in all member states.

Read the full report here.

It's clear from our previous reports that the steel producers are slashing steel production to avoid a price collapse, but until demand picks up the market is likely to be very volatile.

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