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EU Steel Prices Slip in October as Sentiment Fades

Date: 2018-10-29
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EU steel prices for strip mill products either remained stable or turned down slightly, in October. The negative movement was most pronounced in the south of the region, i.e. Italy and Spain. EU steel producers continue to target higher prices but face strong resistance to this initiative. This comes, particularly, from service centres, due to their inability to fully pass on previous increases to their customers. Moreover, inventories at the distributors are relatively high, enabling them to postpone immediate purchasing decisions until the future pricing trend becomes clear.

Domestic mill delivery lead times are no longer extended. Stockholders report that demand failed to recover after the holiday period. Cheap offers from Turkish mills also undermined confidence in the market. Nonetheless, EU steel prices are supported by a lack of competitive quotations from other third country sources, the existing safeguard measures and relatively high mill input costs.

Growth in the German manufacturing industry slowed, in September. New export orders dropped sharply. In the steel sector, strip mill product prices were, generally, stable, with some minor negative adjustments, in October. The steelmakers continue to try to secure increases. Market demand is reasonable, with the notable exception of the vehicle manufacturing sector. Service centre stocks are relatively high. Third country import offers are slightly below European quotations, at present.

Despite the steel producers’ continued push for rises, French prices remained stable, or declined, a little, in October. Activity has not picked up since the summer. Distributors complain of a slow September market – with reduced sales volumes, compared with the same period last year.

In Italy, last month’s upward steel price trend has reversed. Underlying demand is weak. Distributors report that sales reduced in October, compared with the previous month. Their customers are postponing order placement as they watch prices fall. Resale margins are poor, with many stockists discounting heavily. Because distributors’ resale prices are down, they are, in turn, pushing for reductions from the mills.

Market sentiment weakened in the UK, in October. MEPS notes growing uncertainty over the potential outcome of the Brexit negotiations. Demand from the auto sector is particularly problematic. Prices for several strip mill products softened, partly due to currency exchange rate movements and pressure to match import offers from Turkey. Service centres have sufficient stock to enable them to postpone purchasing decisions.

Despite price hike proposals by the major EU steel mills, Belgian market values softened, this month. Service centres report lower than expected levels of activity, leading to higher than average inventories. Their resale values are difficult to maintain as end-users refuse to pay more because underlying consumption has weakened. In some instances, payments to distributors are being delayed, indicating a decline in demand.

The Spanish manufacturing sector recorded a slowdown in growth, at the end of the third quarter. The €20 per tonne price hikes, secured by domestic steelmakers, in September, were virtually wiped out, this month, during negotiations for December/January deliveries. High stock levels at the service centres and weakening demand led to buyer resistance to the inflated prices. Volumes of imported material, ordered earlier in the year, are now arriving. New third country import offers are cheaper than a month ago, but few deals were struck because of quota issues.

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