EU Steel Prices Slip in October as Sentiment Fades

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.