Tuesday, June 19, 2012

EU Steel prices continue to fall

MEPS reported further falls in prices:

European buyers of flat products are reluctant to place orders in what they perceive to be a declining market. Although the mills are attempting to hold on to selling values, it is a struggle to do so. They may decide to lower their capacity utilisation rates even further in order to try to balance supply with demand. As the euro loses ground against the US dollar, third country import offers are scarce. Although international raw material prices have come down a little, the weakening currency is eating away at what should be a reduction in production costs.

In Germany, offers from southern European mills are below those from domestic sources at present. There is no threat from third country importers as their quotations are more or less in line with Italian ones and delivery lead times are far more extended. Service centres have started to reduce their stocks to the absolute minimum over the last few weeks because of concern that the euro crisis will hit the German economy.

In France, service centres are fighting for orders, with very low resale values. End-users’ order books are getting shorter, with investments still being postponed, linked to the general economic uncertainty throughout Europe. Producers are trying to resist the downward price movements without success.

The Italian market has weakened even more, with further signs of developing price erosion. Service centres report that business levels have reduced significantly. Consequently, they are afraid to buy more steel. Their current inventories are losing value as ex-mill basis figures trend downwards. As a result, their already poor profit margins are being eaten away.

In the UK, buyers are waiting to see if the mills in mainland Europe will offer further reductions. However, resale values are holding up relatively well, so far. Distributors’ stocks are in line with current demand and some service centres report good levels of business with fair order books to the end of the year.

The Spanish market is quieter than it was in May. Demand is very low with few enquiries either on the mills or the distributors. A number of small stockists, who have been struggling to survive in the economic gloom, have found they can hang on no longer. Finance is a major factor in the grim state of the market.

A general lack of confidence in Europe and fears over the economic situation, particularly in Southern Europe is impacting on manufacturing and putting a brake on activity. A combination of the crisis in the Eurozone and weak domestic demand is putting the skids under the UK's manufacturing sector once again, which has failed to grow in line with earlier optimism.

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