Thursday, March 19, 2009

EU Steel Report from MEPS

The EU mills continue to curb capacity but many market players question whether the cuts are sufficient. Distributors are still destocking because sales to end-users are so poor that the whole process is taking much longer than anticipated. Credit issues are exacerbating an already dismal demand situation. The producers have held back from making official announcements for the second quarter. They lowered prices for March output, amidst weak demand, financial uncertainty and severe competition for the small amounts of business that were available.
German consumption remains subdued with no signals that any improvement is on the horizon. Distributors are finding it hard to reduce inventories due to dreadfully low sales. Basis values continue to dip slightly. It is difficult to establish a market level since each mill makes its own price, depending on quantity and how few orders they have on their books. Some suppliers are carrying a great deal of stock. There are plenty of third country offers at prices below those of the domestic producers but buyers consider purchasing that far ahead to be too risky.
There has been no improvement in the French market in terms of demand and anyone willing to buy significant tonnages makes the price. In this context, values have fallen further this month. Stock levels remain too high relative to demand and are not declining sufficiently fast. Although there is less import competition from China, the number of offers from Ukraine and Russia has increased.
Market sentiment is at a low ebb in Italy, where we cannot see any signs of recovery in demand. The very low activity levels are expected to persist for the next few quarters. Customers are buying the absolute minimum necessary to survive. The stock adjustment phase is ongoing because inventories are not being absorbed due to muted sales volumes. Domestic mills have trimmed basis values to match Turkish import competition but orders do not really depend on price anymore, so further discounts are unlikely to promote more business.
Steel production in the UK is being seriously undermined by extremely weak consumption and continued destocking. Distributors are in dire straits, particularly those supplying strip to the auto and domestic appliance manufacturers. Many are only purchasing for contractual business they already have in place, rather than restocking, because the demand picture changes daily. Although third country material is available, in the current climate, customers do not want the exposure involved.
In Belgium, warehouses are full, with the mills supplying standard sizes ex-stock. Basis figures, generally, are well down on those reported in February. Some non-EU steel, purchased at relatively high prices, is now arriving at Antwerp. The European buyers have no other choice than to sell this material at a loss. Distributors are letting stock go very cheaply, just to raise cash.
Spanish service centre inventories are too high for current demand, which is very subdued. The market is unlikely to recover for another six months. Suppliers are having to contend with some major credit problems. Current overseas quotations are reported to be on a par with domestic prices as local mills discount down to the import level. However, buyers are not interested in purchasing from foreign sources when they can deal with Spanish producers and get material within three to four weeks, or less.

Original Report For Steel Industry News and Pricing information visit MEPS


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