According to MEPS, An absence of
competitively-priced third country import offers enabled European flat product
producers to target and secure significant increases, in May. They seized this
window of opportunity to try to rectify their huge loss-making situation, which
was not sustainable. Over the last month, supply tightness became more acute by
the day. Buyers, although amazed by the scale and speed of the price increases,
still believe that some short-term potential to support a further hike exists
in the market. However, they expect prices to peak in the autumn. The ongoing
upward trend in Chinese export prices has gone into reverse, in recent days. If
this continues, it could create negative pressure in Europe, later in the year.
German demand is relatively stable, at present, although exports of
manufactured goods to Asia and the Middle East weakened. The auto market
continues to flourish, with widespread discounting bolstering sales. EU
steelmakers continued to ramp up basis values for strip mill products, aided by
a lack of any outside competition. Supply on the spot market is constrained
and, in some cases, inadequate. However, the larger service centres, having
restocked over the last few months, will probably have sufficient material to
see them through the summer.
French basis numbers increased very quickly, due to a dearth of imports.
Distributors tried to secure tonnages before further rises but certain products
are difficult to obtain. Meanwhile, downstream activity remained at a similar
level to the first quarter. Nonetheless, end-users started to place orders as
they realised that resale values were also moving up.
Italian values strengthened significantly on a lack of import offers and local
output issues. The upward movement has been rapid, in May. Quotations from
China, Iran and India were far too expensive to interest buyers. Domestic mill
delivery lead times lengthened from two to three months. Some customers,
concerned that they may not get material in time, are trying to buy more than
normal. However, real demand has changed very little. Auto demand is ticking
over but is described as ‘not exciting’. Any improvement in building activity
is only seasonal. Service centres report that a very large proportion of their
customers are not resisting higher resale values.
Price rises have been particularly dramatic, in the UK. Suppliers and buyers
feel that another increase of £20 per tonne is possible. Sourcing has proved
difficult. Some mainland European mills have reduced allocations to UK
customers. Distributors report that sales are good. They can obtain resale
prices based on their replacement costs plus profit.
Positive price momentum has continued in Belgium. Mill delivery lead times are
long. A number of buyers, both stockholders and end-users, are purchasing more
than they need immediately, anticipating further increases in the future.
Others report they have been unable to secure sufficient quantities.
The sharp decrease in competitively-priced import offers has led to further
rapid advances in the Spanish flat products market. Buyers have started to
examine import opportunities for September/October delivery now that local
selling values have become so high. However, competitive offers are difficult
to locate. Most domestic deliveries are now into August/September. Demand is
stable at an acceptable level. Distributors’ inventories have been rebuilt and
may even be on the high side, at present. Therefore, many service centres do
not need to re-order any large quantities immediately.
Source: meps