/Rusmet.ru, Victor Tarnavskiy/ European economy, which has not recover after the problems in Greece, got new strike, this time from Hungary. New Hungarian Prime Minister, Victor Orban said that the economical situation in the country was in a bad condition and there was a possibility of default. However, the next day the Government tried to smooth the Prime Minister’s announcement. The Ministry of Finance announced the introduction of State expenses reduction in order to keep the budget deficit at 3.8%. But the damage had been already made.
It was proved once again that investors and analysts are pessimistic in EU economy prospects estimations. The announcement of Hungarian Prime Minister woke up the recent fears about the possibility of defaults “chain reaction”, firstly in small European countries and then, perhaps, in large ones. The euro to US dollar rate has fell to the lowest in recent four years.
The economy problems of the region badly affect European steel market. Today almost nobody believes in the demand recovery in the nearest future. The consumers and traders this summer will act as they did in 2009, reducing the stockpiles and buying minimal volumes of steel products according to their current needs.
The European long products manufacturers are in the worst situation. Flats manufacturers can count on decent consumption volumes. But construction sector in most EU countries is in crisis condition. Only Polish companies can hope for State investments into the sector due to the preparation for Euro-2012. European loan market is far from recovery as well. Today construction sector is the least attractive sector for the investors.
Although many European long products manufacturers reduced output volumes in recent several weeks and stopped some capacities, the supply in the market exceeds the demand. The absence of buyers’ interest makes the manufacturers to decrease the prices. That is why flat steel prices in Europe keep rather stable during recent month despite negative market situation. However, construction steel is falling. By the beginning of the month rebar prices in the south of Europe decreased by 15-20% as compared with the growth peak in late Apr. If to count in US dollars taking into account decreased euro rate, the fall exceeds 25%.
In early June Spanish and Italian companies offered rebar at 440-450 euro per ton EXW. In Germany the prices amounted 470 euro per ton EXW. Nevertheless the manufacturers admit that there are no orders in recent time. Turkish companies also did not find any buyers. In late May they offered rebar at 500-510 euro per ton CFR to Germany and other European countries.
European companies are searching for the buyers abroad. Cheap euro allows them to provide dumping policy. In the end of last week European rebar prices fell to 420-440 euro ($506-530) per ton FOB in forewing market, i.e. European companies offer their products at lower price then Turkish and Ukrainian competitors.
However, some manufacturers in EU intend to stop rebar output at all. This decision is considered by Italian Riva. This can cause excessive scrap in Europe, where the traders already complain for excessive stockpiles of scrap. In recent weeks European scrap was supplies to Turkey and India at low prices.
Besides, the weakness of European long products market will negatively affect Middle East. The consumers there are not active. Further decrease of European rebar prices in the Mediterranean will make them hope for the prices decrease in other regions.