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EU Steel Prices in Decline in May as Demand Falters

The recent negative trend in European strip mill prices continued, in May. Reduced demand from the auto sector is still undermining the steelmakers’ ambitions for increased basis values. Moreover, general activity in the marketplace is below projections for this time of year. Global trade tensions and political uncertainties led to a lack of investment and created a great deal of caution. Service centre inventories are in surplus for current requirements, leading to substantial negative pressure on resale prices. Procurement by distributors remains weak. New import offers are uncompetitive, at present. Large quantities of foreign material, booked at the turn of the year, will take time to be consumed.

Due to weak demand, and in order to try to stem further price erosion, ArcelorMittal announced its intention to temporarily idle production at the steelmaking facilities in Krakow, Poland, and reduce output in Asturias, Spain. In addition, the planned increase of shipments from ArcelorMittal Italia will be slowed down. These actions should result in a total reduction in supply of 3 million tonnes per year. In a later development, the company informed buyers of an intended price rise of €30/40 per tonne for all strip mill products.

Further contraction was noted in Germany’s manufacturing sector, in April. In the steel market, sentiment is negative with activity still at a relatively low level, amidst continuing falls in selling values. Buyers are cautious, hesitating to place new orders. They anticipate further price reductions, as producers try to plug gaps in their order books. The differential between domestic offers and those from overseas is narrow, which has a dampening effect on new import activity.

French basis values decreased since last month. Activity remained at a reasonable level, although below that in April. MEPS detects substantial competition between distributors, who have been forced to adjust their resale prices accordingly. They then negotiated discounts with the steelmakers, in order to preserve their profit margins. Now, with the expectation of further price decreases, major service centres are delaying purchases until June, at the earliest. A number of traders are reported to be selling at a loss. Very few new offers are quoted by third country importers.

The downturn in the Italian manufacturing sector continued, in April, for the ninth consecutive month. This has badly affected the steel market. Moreover, the number of working days, in April/early May, were severely curtailed by holidays, thus negatively impacting domestic sales volumes. All strip mill products show price weakness, mainly due to import pressure and low underlying demand. Expectations remain fragile because of the problems in the auto sector and the fear of further steel price reductions. Service centres are using the stock they have on hand. They see little possibility to lift resale values as end-users refuse to pay more.

The UK economy is reasonably robust, remaining one of the better performing countries in the EU. In the steel sector, distributors report acceptable sales volumes but profit margins are reduced. Independent service centres complain that integrated mill-owned distributors are selling aggressively. In general, inventories are in balance with current sales activity. In May, strip mill product selling values were revised downwards.

Demand for flat products is stable, in Belgium. Distributors, viewing the current price trend as negative, are buying very cautiously. Delivery lead times from domestic suppliers are short. Recent service centre activity was slow due to public holidays. Both sales volumes and resale prices are decreasing. As a result of this negative scenario, the steelmakers, whose order books remain poor, have further discounted basis values of strip mill products. MEPS notes little influence from third country imports.

Spain’s manufacturing sector continued to expand during April but at a faster rate than in March. The steel market is relatively stable, with regional variations between the north and south of the country. Service centre sales volumes turned down slightly, in May. Current resale values do not reflect replacement costs. Offers from importers are slightly more interesting to buyers than they were a month ago. Domestic ex-mill basis values underwent further downward movement.

Source: MEPS

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