UK industry fears isolation amid EU treaty fallout

 

Steelmakers anxious that PM's defence of the City of London will lose UK manufacturers their competitive edge and key markets

Steelworks in Port Talbot, Wales, owned by the Tata Group, one of the foreign firms 'investing in the UK as a key player in Europe'. Photograph: Anthony Devlin/PA

Britain's hard-pressed manufacturers have expressed growing unease that the financial sector was defended in Europe by David Cameron at the expense of Britain's industrial interests.

Steelmakers fear the UK could lose its "leadership" position on issues such as deregulation and competitiveness, while other manufacturers fear a growing isolation from a key market.

"In the short term it should make no difference as all the EU structures are in place, but across the longer term … we are going to become less relevant in political decision-making," said Ian Rodgers, director of the trade body UK Steel.

Read the full story by Terry Macallister at the Guardian

Whilst David Cameron and the Government have made a lot of noise recently about taking measures to help Industry and manufacturing their actions show that their traditional loyalty to the city is far stronger. Our largest export market is Europe and any step that weakens our influence within that market is a betrayal of the manufacturing sector.

 

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ALL STEEL PRODUCT PRICES FALL AS EUROPEAN ECONOMIC TURMOIL PERSISTS

Global economic uncertainty is causing steel consumption to slow in Europe. Moreover, buyers are reluctant to place forward orders on the mills, given the current financial climate. Market players feel that worldwide production cuts will hold the key to price stabilisation. Although the mills are curbing capacity, the results are unlikely to be felt until the start of 2012 at the earliest. Traders are reluctant to place new business with third country suppliers as market sentiment remains weak.
There is very little demand in Germany. In general, steel prices have weakened further. The mills appear to be offering different levels of discount, depending on customer and tonnage. However, end-user activity is still relatively strong in comparison with other European countries. Auto production is at a good level for the luxury brands, which are still enjoying excellent export sales. Other industries are reducing their steel stocks but trying not to lay off personnel. Service centres can obtain supplies from the steelmakers within three to four weeks and, therefore, are only buying when they already have orders for the material.
Prices have decreased in the French market, despite producers’ efforts to stabilise them. Some distributors report that activity has dropped since early October. This is being felt more by smaller players because of the commercial actions of large and mill-tied enterprises who are actively destocking. All buyers concur that they are only purchasing the strict minimum, as they aim to have very low inventories by the end of the year.
There is a great deal of uncertainty in the Italian market at every level. This is not facilitating business activity. Domestic steel demand is poor since end-user consumption has slowed, particularly in the construction, automotive and white goods sectors. Export markets have also weakened. There is no significant import pressure at present but suppliers from Turkey and Russia are looking for orders and may start to offer quite soon.
The current financial issues in mainland Europe have had a disruptive effect on steel business in the UK, where confidence is at a low ebb. Ex-mill basis figures have continued to slip over the last month. End-users and distributors have managed stocks down to a low point. Several service centres claim that their sales volumes are reasonable but that margins need lifting. However, the recent downward drift in resale values may now have halted.
As expected, Spanish consumption has deteriorated further. Service centres refuse to build up inventories and continue to just buy what they need for tomorrow. The mills have offered more price concessions, despite a lack of third country competition. Distributors’ resale values are below replacement costs, and, in some instances, they are losing money just to generate cash.

 

Report Courtesy of MEPS

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MEPS EU steel Prices – latest report

There is something of an impasse in the west European flat products market as customers prefer to sit on the sidelines rather than place business at the inflated prices being demanded by the domestic producers. Consequently, order intake at the mills is slow. Many companies have stocks that are adequate for now. These were purchased in late 2010 and early 2011, ahead of the increases. Buyers think that the steelmakers may eventually be prepared to relax their offers. However, escalating raw material costs in the second quarter are likely to persuade them to push for further hikes.
German customers are battling higher basis values because final users cannot always pass on their growing costs by putting up the price of their finished goods. The market is quiet since many companies have enough steel in stock and are not ready to pay more just yet.
In France, last month's surge in basis values is tailing off. Producers are finding it more difficult to implement further increases as demand remains moderate. Some buyers will not order as they claim to have sufficient material to enable them to wait until the summer holidays. However, mill delivery lead times are extending and a number of distributors' inventories are quite low.
Italian end-users, having decided not to accept further increases, have virtually stopped purchasing. Consequently, the stockholders have problems recouping the most recent mill hikes from their customers and are now living off existing inventories. They bought heavily at the end of 2010 and can afford to wait before reordering. For now, the producers are still claiming the inflated numbers but cannot sell at these levels. Moreover, quantities of third country imports are arriving at the Italian ports, so the domestic mills may well be forced to reduce their price expectations.
The UK market has been quite busy as both service centres and end-users bought ahead of perceived price rises. MEPS has noted a number of upward price movements over the last four weeks. However, some distributors are already well covered for the second quarter. Having bought third country tonnage at the end of last year, they do not need to pay the higher values that local mills are demanding. At present, there are few new attractive foreign offers to dampen the positive tone of the market.
Spanish steel consumption is absolutely flat. The economic situation shows no positive signals. The service centres were relatively busy in January/February as end-users tried to beat the price advances but the market is quieter now. Distributors are struggling to recoup the mill increases. Companies bought third country material quite heavily last November. This is now starting to arrive at the ports, so they are in no hurry to re-order.

Source MEPS UK

Whilst 2011 and has started quite strongly in the UK, it does seem that buyers are now holding off placing orders. Although some products are short on availability, stocks seem generally high within the market and companies are holding back on re-ordering. It is clear that the steel producers are eager to push prices higher, but a strong resistance amongst end users to accept further increases is squeezing the distributors.

 

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