May 21 2009
Market sentiment has visibly changed in the flat products sector. We can detect an air of mild optimism, albeit tempered with extreme caution. The downward pressure on steel prices appears to be abating, helped by the recent severe production cuts, which have limited availability. Nevertheless, underlying demand remains weak. Customers are still not placing orders far in advance but diminishing inventory levels have caused mill sales to pick up slightly.
The German market is very quiet as buyers hesitate to finalise business and are only purchasing small quantities on as short as possible delivery schedules. Companies are not ordering anything that is surplus to their immediate requirements. Service centres are reportedly operating on average at 50 percent of their usual activity. Consequently, stock reduction is proceeding quite slowly.
The French market continues to be characterised by weak demand and ongoing destocking. However, producers have stabilised strip mill product prices and some are applying a small increase, although this is not linked to any improvements in consumption. The success of the initiative seems to be due to the effects of ongoing output curbs together with a strong desire on the part of the mills to recoup recent losses. Already, distributors are meeting with strong resistance from their customers when they try to lift resale values in line with their new purchasing prices.
In Italy, market players are less pessimistic than four weeks ago. At last, they can see signs of movement in activity, although they are quick to point out this situation may be only temporary. For the first time in many months, service centres are starting to issue enquiries. Their stocks have been depleted and replenishment is necessary. Local mills are attempting to lift prices marginally to try to recover the increased costs incurred due to production cutbacks. Even importers seem less desperate to offload tonnage and are trying to secure higher prices with quotations up by $US10/15 per tonne. It remains to be seen whether customers will accept this.
There is very little demand from UK end-users. Manufacturing industry continues to struggle but a few positive signs are developing. In the auto sector, Nissan in particular has picked up some business for smaller vehicles as a result of the various car scrapping schemes in place in a number of EU countries. In the construction industry, government backed projects for hospitals and prisons are generating more demand. Service centres, in the main, are only ordering for business already on their books or to fill gaps in inventories. In general, stock depletion is progressing well but resale prices from some distributors still do not reflect replacement costs. The sudden, positive movement in the Sterling exchange rate is making foreign deals look more attractive but buyers seem unwilling to run the risk at present, when material can be obtained relatively quickly from nearer home.
In Belgium, price movements are lagging behind those in the long products sector because there are still surplus quantities of steel at the mills and service centres. Market confidence has strengthened slightly even though it remains uncertain. Spanish stocks are at an undesirable level which gives distributors cause for concern since real consumption is extremely low. Resale values have not picked up. Nevertheless, players feel that the recent relentless deterioration in market conditions has been arrested for now. In fact, some buyers are confident enough to start to consider importing again. However, the current price differential is not quite large enough to be attractive.
Source: MEPS