Activity in the European flat products market is quiet ahead of the summer holidays, according to MEPS research.
Although consumption is strengthening in several countries and economic indicators are good, producers, keen to book orders, have agreed to further small price reductions. Customers have called for lower basis values, citing the mills’ relatively low raw material costs and the availability of cheaper third country imports.
As the domestic auto sector is busy, German steelmakers have strong order books from those companies. However, other industrial sectors are only performing at a level comparable to last year. Distributors are reducing resale values in order to compete for business. Buyers are of the opinion that further minor weakness could develop over the next six to eight weeks.
Activity remains weak in the French market, where end-users have short order books and are worried about the situation in September. They are, therefore, unwilling to order material now. There will only be a slight increase in orders for September delivery because underlying consumption is poor. As a result, basis values have eroded further, despite mills’ efforts to stabilise them.
Market sentiment in the Italian steel sector is very negative. After the Italian mills decided to drop basis values to encourage orders, buyers report that their quotations are now being met by some North European producers. End-users are worried about their stock levels as all hopes of demand improvement, forecast earlier in the year, have been dashed.
UK service centres report they have a wide range of busy customers. Distributors’ sales volumes are well up on 2013 and, for some, the best in several years. Nevertheless, mill prices remain low. Indeed, they have continued to drift downwards, due to the strength of sterling, which is serving to attract material from mainland Europe and further afield.
There have been no major changes in the Belgian market, where demand is flat. Distributors report that end-users are endlessly shopping around to get bigger discounts. Stockholders from neighbouring countries are also competing for business. Delivery lead times from the steelmakers are extremely short.
There are signals that the Spanish economy is slowly reviving. New projects are coming on stream and some of those that were postponed during the financial crisis are being reactivated. It could be well into the final quarter before this improvement makes itself felt in the domestic steel industry, which, currently, is quite dull. Suppliers are, therefore, looking continually to export markets.