/ European flat steel market kept rather stable in August. In South and Eastern Europe HRC prices were 500-530 euro ($642-680) per ton EXW and all attempts of the manufacturers to increase the prices failed due to very low demand.
Nevertheless, despite negative market conditions European manufacturers managed to keep the prices form the fall. The absence of the import helped them. The prices for HR steel from Ukraine in mid. August amounted about $600-620 per ton CFR/DAF. The products from Russia, China, India, and Middle East countries reached $650-670 per ton CFR. At such a small difference in prices the consumers and distributors preferred to buy local products, which could be delivered by small amounts with shortest delivery terms. Besides, import meant more complicated payment terms.
Many European companies announced the prices increase ion Sep. by 30-40 euro per ton. However, there no offers at new prices yet. Regional manufacturers have the chances for success, although the prices will start growing not earlier than the second part of Sep.
Negative expectations of European steel market participants were based, first of all on negative economy trends in the region. However, recently the situation somewhat changed. According to the latest information, in the Q2 of 2010 the growth rate in the EU turned to be much higher than the expected (1% against 0.6-0.7%).
Germany, which GDP in the Q2 increased by 2.2 % as compared with previous months became the “engine” of European economy. This was the highest figure since 1990. The growth in the Q2 of 2010 was up 8-9% on the figures of the Q2 of 2009. This growth is comparable with China and India. According to experts export, spurred by euro/US dollar rate decrease played the key role in this growth. Meanwhile Germany domestic consumer’s market remained weak. Unemployment level did not change in recent half-year.
Big part of Germany export is cars and machines. Thus steel products suppliers for these sectors can rely on the demand increase in last months of the current year. At the same time construction remains a “black hole” of European economy. Galvanized steel, rebar, and beams consumption reduced this year by 20-30 % as compared with 2009. The price for galvanized steel for construction amounts in the majority of European countries less than 600 euro per ton EXW, i.e. the prices for these products are lower than CRC prices. Average load of the capacities at Spanish and Italian long products mini-mills does not exceed 30-50%.
However, European construction steel manufacturers increased the prices in August by 20-30 euro per ton. Rebar prices in Southern Europe in the end of the month amounted 460-490 euro per ton EXW. Some companies offered these products at 500 euro per ton EXW in Sep. In Germany rebar price exceed 520 euro per ton EXW. The manufacturers say that the main reason for the prices increase is raw materials prices growth and limited supply due to output volumes reduction. Although there are no new deals neither at old nor at new prices, the manufacturers hope that the sales resume in Sep.
Thus, in Sep. steel products prices in Europe are to grow. The demand activation will cause import resumption by European companies. But we still should not rely on significant increase in European market.