New Year Fails to Lift European Steel Prices

European strip mill product prices declined for the fourth successive month, in January 2019. Market conditions are weak across the region. Buyers are reluctant to make purchasing decisions, amidst rising political uncertainty and a lack of clarity regarding the EC safeguard quota system. Softening demand in a number of countries, particularly from the automotive sector, is also a factor. Moreover, inventories, especially at the service centres, are sufficient for current requirements – allowing companies to adopt a ‘wait and see’ attitude. Consequently, sales volumes, in January, were small. The talk of price increases subsided. The traditional restocking, around the turn of the year, has been delayed. Competitively priced imports are still available, either as new orders or, ex-stock, from the ports. Turkey is the most aggressive non-EU supplying country, currently, but Indian mills are also prepared to lower their offers.

In Germany, Brexit and the USA’s trade policies are creating uncertainty. Investments are being postponed. Strip mill product prices continued to slide, in January. European steelmakers, with plenty of capacity to fill because of a lack of demand from the automakers, discounted basis values. Service centres reduced their inventories at the end of 2018. A number of them are now restocking. The year started quietly, with less activity than in the previous January. Buyers are wary and only order for their immediate requirements, in anticipation of further price reductions. Offers, from overseas suppliers, continue to be low cost.

With demand prospects, for 2019, below those of last year, French strip mill product buyers remain cautious. Nonetheless, activity, in January, was expected to be in line with that which was experienced during the last months of 2018. The slowdown in the auto industry continues to be of concern to market participants. Demand in January remains strong because customers need to refill inventories, but activity levels in February may prove to be more problematic.

Political difficulties and a subsequent lack of investment decisions continue to negatively affect the Italian economy. Steel selling figures were still under downward pressure, in the latter part of December, but some buyers report price stabilisation in early/mid January. Nevertheless, sentiment remains poor. Only modest improvements are anticipated, for demand and prices. Inventory levels are slightly reduced. This may lead to a degree of stock replenishment.

UK service centres reported an acceptable level of sales at the start of 2019. However, the country’s impending exit from the EU continues to cause great concern in business circles. Companies tried to run down their inventories, in December, with little sign of any restocking, so far, in January. Resale values are well below the level required by most distributors. Several companies continue to sell material very cheaply, in order to generate cash. Ex-mill basis values show signs of weakness.

Belgian business activity is quiet, with further downward pressure on strip mill product prices. Buyers adopt a ‘wait and see’ position as uncertainty persists. Many annual contracts, between OEMs and mills, have yet to be settled. In the general market, the steelmakers are willing to make price concessions, in order to secure business. Competition between distributors is fierce.

The Spanish manufacturing sector continued to expand during December 2018, albeit at a slower rate than in previous months. Steel market participants are concerned about the current situation, notably, the state of European economies, Brexit and escalating trade tensions worldwide. Steel buyers held off purchasing, as a consequence. Local steelmakers continued to adjust basis values downwards, for February/March deliveries. The move was driven by the continuing decline in import prices. Service centres report muted demand with negative pressure on resale figures.