UNITED KINGDOM May 20 2015 5:39 PM
LONDON (Scrap Register): Flat product basis numbers are generally unchanged in western Europe, although MEPS can detect a little negative pressure in certain countries. Activity is picking up, albeit slowly, as the economic climate improves. Some steelmakers have decent order books. However, their raw material costs remain low, providing them with limited backing to lift selling prices. Many third country producers continue to reduce flat product prices. Buyers, in general, are beginning to show more interest, although, because of the long delivery lead times involved, much of this material would be arriving in the holiday period.
German buyers anticipate flat, or slightly lower, values in the third trimester. The direction will depend on demand, which, currently, is slightly better than in 2014. Service centres are busy supplying the booming auto industry and sales to construction are also satisfactory. However, distributors’ margins remain low because of overcapacity in that sector.
In France, market participants remain sceptical about reports of an economic recovery as they have seen no signs of it, so far. Activity in the steel market continues to be generally lacklustre, with some sectors, such as construction and energy, suffering more than others. For now, steelmakers are unable to raise prices. Third country import volumes have increased because the Chinese and Indian suppliers have aligned their prices to local values.
Italian flat product basis numbers are also below those reported last month, mainly due to import pressure. The number of Chinese offers, in particular, is growing. Industrial production activity in the first quarter 2015 was slow to start, although it accelerated a little in March. The only sector to record any real improvement was automotive. The recovery in carmaking is now the main driver of steel consumption in Italy. Ongoing attempts by steelmakers to lift prices should, at least, produce some stability.
UK service centres report that April business was still at a good level, although perhaps slightly down on March, in some instances. Resale margins are reasonable. Ex-mill basis values have stopped falling. Buyers feel that prices have now reached the bottom and, subject to exchange rate movements, will be similar in the third quarter. Traders are no longer pushing Chinese material, which is, currently, only slightly cheaper than European.
Belgian stockholders have plenty of material. There is a great deal of competition between them to gain orders. Consequently, their profit margins are thin. Market players expect the present situation to persist until September.
In Spain, steel buyers are waiting to see how the European mills will react to very attractively priced third country quotations. Decisions will have to be made quite soon if customers are to take advantage of these cheap offers. Already, some companies have booked overseas business as the price differential is quite large. However, domestic producers are reluctant to offer discounts as, at present, their order books are satisfactory because local consumption is improving and export sales are reasonably good. The situation is finely balanced.
