Steel Strip demand and prices weaken

Unsurprisingly, the economic uncertainty within Europe is impacting upon demand and resulting steel prices.

The most recent MEPS report sums up the situation

EU buyers are reluctant to place orders on the mills as concern over the current financial crisis is undermining business confidence. They believe that prices could go down even further and so are staying out of the market for now. Because demand is so mediocre, the output cuts that European producers have implemented so far have not had any positive effects on basis values. However, more are planned by several steelmakers.
The German strip market is described as “difficult”. Activity has not recovered from the lows experienced during the summer. End-users are postponing orders. Service centres are keeping inventories low because they are unclear about the direction of prices. Many of them purchased third country imports earlier in the year when values were higher. This material is now arriving and they are forced to sell at a discount. Domestic mills have reduced their offers for now. They will curb capacity to try to stabilise the market.
Given the current economic and financial uncertainty, French buyers remain very cautious, even if stocks are run down. This trend is not expected to change, with the end of the year looming. There is some demand from end-users but they are challenging distributors’ resale prices. Ex-mill basis values are also under pressure. The producers appear to be unwilling to drop them any further, preferring to adjust their output instead.
The Italian economy is very weak and turmoil in the financial markets has dampened sentiment significantly. Delivery lead times from the domestic mills are short. Stocks at the ports have gone down substantially. A favourable exchange rate has been shielding the Italian producers from new import competition as well as helping them to export.
End-user demand tends to be sector specific at present in the UK. Distributors’ margins are poor as resale values are continually weakening. Ex-mill figures are fairly steady because producers realise that further discounts are unlikely to generate more business.
The capacity reductions are taking time to have any positive influence on the Spanish market, where the threat of recession has caused business confidence to evaporate. Activity has not picked up, with buyers placing small orders only when they are desperate for material. Traders are finding it virtually impossible to find new third country offers at competitive rates.