Following report id from MEPS
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Market sentiment remains depressed. The slightly more positive attitude witnessed at the start of 2009 has evaporated a month later. Producers failed to achieve the first quarter price rises they had hoped for, due to continuing weak demand and a lack of any desire on the part of customers to order ahead.
In Germany, market players report that activity levels are diminishing virtually daily. It is difficult to obtain precise indications of prices because the mills tend to negotiate each new order on an individual customer basis. Overall, we have noted few further price reductions. This could change when deals are struck for period two if the steel makers secure considerable decreases in the upcoming raw material price settlements. Inventories are still high at mills and customers. This situation is expected to persist for another five/six months as demand is only around half of normal.
As sales have not been recovering in the French market, values continued to fall. Producers still have plenty of material available, despite output cuts, and they are fighting for the few available orders. The lowest offers are coming from suppliers in Southern Europe, whilst the high figures in our table represent those from French steelworks. We do not anticipate further reductions. Meanwhile, both consumers and distributors are prioritising stock depletion and this is progressing relatively well.
Italian customers have been badly hit by the dramatic collapse in activity. Business at steel processors and service centres is reportedly down by an average of 50 percent. This absence of orders over the last four months means many companies still have inventories in place that they bought last summer at very high prices. Some have enormous stocks, others less so, but all are losing money. They also have to contend with credit problems, delayed payments and expected bankruptcies, especially among auto related clients. However, the sharp cutbacks in steel production are now being felt and prices have stabilised. New transactions with Chinese mills are almost nonexistent.
Real consumption has declined considerably in the UK. A lack of market confidence, linked to the general economic climate, and limitations on credit are exacerbating the situation. The manufacturing base is suffering badly, despite the weakness of sterling. However, the depreciation of the currency is at least reducing import competition from third country steel makers. There are no new overseas offers of relevance but traders still have stock to sell. High inventories and weak demand are playing havoc with distributor pricing but ex-mill values are stable.
The Belgian market remains quiet. Consumers have plenty of material in their warehouses and the mills continue to carry stock, even though production cuts were implemented. Distributors are keeping inventories to the absolute minimum. We have noted a further decline in mill prices.
The outlook in the Spanish market is bleak with a lack of credit availability and rapidly decreasing stock values. Service centres' resale figures are so close to purchase prices that there is no profit margin. The driving force is an overwhelming need to generate cash. Nevertheless, distributors still need to purchase some material to fill shortfalls of certain grades/sizes as their stocks reduce. Delivery lead times from domestic mills have lengthened because of recent capacity cuts and are now at seven to eight weeks, depending on product. Basis values are steady. Further discounting is unlikely to result in more sales because real consumption has not improved.