HIGH INVENTORIES DRIVE EU STEEL PRICES LOWER

The EU strip market is relatively quiet ahead of the conclusion of price negotiations for third quarter business. Service centres are well stocked until September and are in no rush to settle. Traders are waiting for new offers from Chinese mills following the recent changes in export taxes. EU steelmakers appear to be controlling production in-line with demand quite well.

German buyers are in discussions over period three deliveries but nothing has been fixed yet. They expect to finalise during the second half of June. A number of market players do not expect to pay any more than in the second quarter. They believe that the large quantities of third country material sitting at the ports, together with the lower prices being offered by Italian producers, will influence the outcome. Moreover, demand will cool ahead of the holidays.

French prices for late second quarter deliveries of strip mill products are showing signs of weakness and there is an air of uncertainty in the market place. Negotiations for period three have not started yet. Producers confirm they are now looking for a smaller increase of €10/15 per tonne, compared to the €20/30 per tonne initially proposed. Stocks are higher than is customary and demand only average. The expected improvement in the auto industry has not materialised.

Although real consumption is just about normal, the Italian market is quiet as many customers are fully covered until September. Reports suggest that Riva and Marcegaglia are still trying to book orders for July production. This has resulted in lower domestic prices for all flat products. A great deal of foreign material is in the ports and warehouses and more is due to arrive. Some traders still have Chinese material contracted to be delivered at prices settled before the new tax reforms were established. They are unsure of what will happen to these orders now.

A decrease in new offers from Chinese suppliers appears to have encouraged Corus to look for higher basis prices in the third quarter. A number of buyers have been informed that they will have to pay substantially more. Period three values will also see some adjustments to extras when the company implements its new price list from July 1. There are no real negative signs in the market but uncertainty abounds. Therefore, customers are reluctant to place forward orders. Stock levels are reasonable. Most of the third country material at the quayside is believed to be sold and companies have taken those tonnages into account when assessing their inventories. Availability from Continental Europe is somewhat restricted.

Belgian stocks are on a good level. Huge quantities of flat products are standing at Antwerp with insufficient de-coiling capacity to move the material on. A lot of this steel has arrived late, having been bought at quite low prices. Demand is down due to the approaching holidays. Customers, concerned about the current high prices, are proceeding cautiously. The mills are talking about third quarter increases of €20 per tonne but many buyers do not think the plan is achievable. Large quantities of third country imports, already at the docks and also due to arrive shortly, are threatening to cause oversupply in the Spanish market.