European steel market remains depressive for several weeks. A lot of consumers and distributors accumulated stocks actively in March-April to secure from Q3 price hike waited for that time. As a result they have sufficient resources and do not need in essential purchases. At the same time hardening of financial problems in a number of countries of the region, concerns about the second surge of crisis, a deep downturn in construction and stop of recover in European automotive industry led to negative expectations among market participants.
In recent two month without a little, demand for steel products in European Union is on a low level, majority of deals provide purchase of small lots with minimal terms of delivery. With coming of mid-summer negative seasonal factors begin to play more and more remarkable role. And many analysts however are not quite sure the situation is going to improve noticeably as the autumn comes.
Simultaneously European producers of flat steel refuse to release prices which are hold merely the same level since May. Cost of hot rolled coils of local production in EU is within the range of EUR 580-610/t EXW, cold rolled coils – EUR 650-670/t EXW. Only heavy plate turned cheaper recent month which quotations dropped from EUR 680-700/t to 620-660/t EXW.Moreover, Corus, Thyssen Krupp and some other companies announced price increases for July by 50 euro per ton. By steelmakers’ words they are forced to act in such illogical way by growth of raw materials prices. So a representative of Thyssen Krupp has noticed last week in his interview to Reuters that cost of Brazilian iron ore has risen from 66 euro/ton last year to 160 euro/ton CIF in the current year which is 2 B euro for the company in the annual equivalent.
However prices are determined not only by the level of producers’ expenses. That’s why price increase for flat products in July doesn’t seem much probable. Arcelor Mittal tried to lift prices in the first half of June at its East European mills from 610 to 640-650 euro/ton EXW but it had to put them back. It seems that in the current situation when consumers are ready to pay higher price for local products with minimal delivery periods and flexible supply terms, quotations of European steel companies may remain at the current level in July as well but low demand will prevent growth.
In opinion of some analysts situation may change in the second half of summer when buyers having exhausted majority of their stocks will have to start its renewal. However it is not a fact they choose production of local producers for that purpose. A great unprecedented discrepancy between local and import prices appeared in EU market. Ukrainian HRC are offered for $ 560-580 per ton CFR/DAF, Russian material is $ 600-620 per ton CFR/DAF. Ukrainian heavy plate is below $ 690/t CFR/DAF.Yet there is no interest from majority of consumers for these offers but exclusively for the reason they are temporarily not purchasing any material at all. But if the optimists who are waiting for activation of consumer demand in Europe already in the second half of July are right, import products may become more competitive.