During June, the European steel market continued to be affected by rising global trade uncertainty. Steel buyers, particularly at the distributors, were, where possible, postponing their purchasing decisions. Moreover, political upheaval, in parts of the region, led to a lack of investment. As buying activity slowed, prices, for strip mill products, registered modest downward movements, in June. Meanwhile, contract negotiations with OEMs, for the second half of 2018, are ongoing, with producers looking for small price increases. Healthy underlying demand supports the proposed hikes, although a softening in raw material costs does not.
In May, a further slowdown in the pace of German manufacturing growth was recorded. Availability of standard grade strip mill products is good. Steelmakers are well booked into the third quarter. However, a number of buyers note that restrictions on the purchase of additional quantities have abated. Third country imports are rarely competitive. Producers are demanding increased prices, from contract customers, for the second half of 2018. The initiative has met with a degree of resistance. Meanwhile, recent spot market business was negotiated at slightly lower figures than a month ago. Service centres continue to cut their resale values in order to try to stimulate sales and reduce stock levels.
French demand for strip mill products continues to be supported by the auto industry. Mills in northern Europe are reporting full order books, with delivery lead times at fourteen weeks, in some instances. Basis values continued to decrease a little, in June. Activity slowed, in May, and the expected pickup has not yet materialised. However, according to distributors, sales volumes remain acceptable, although inventories are relatively high. Moreover, ongoing strikes are adversely affecting transportation.
Italy’s manufacturing sector continued to expand, in May, albeit at a slower rate than earlier in the year. Spot market prices are under negative pressure as a result of political upheaval, market uncertainty regarding the US Section 232 disruption and reduced purchasing by distributors. Further price falls cannot be ruled out. Underlying consumption is reasonable. However, customers believe that the downward price trend will continue, as a result of weak order intake at the mills.
UK distributors report that sales activity is slowly recovering. However, their resale margins are still unsatisfactory. Independent service centres complain that mill-owned distributors are selling aggressively, thus lowering customers’ price expectations. Both the auto and construction industries continue to underperform. Basis values quoted by steelmakers are similar to those reported, in May.
Small negative price changes were noted, in the Belgian market, in June. The economy is slowing, with growth forecasts revised downwards. Buyers are slow to make purchasing decisions. In general, distributors’ resale prices reflect replacement costs but margins are below recent norms. Service centre stocks are relatively low. Domestic mill quantities are limited. Import pressure is lacking. Overseas deals were on hold, in early June, as buyers awaited the outcome of the Section 232 measures.
Spanish manufacturing output growth eased downwards, in May. The steel market remains quiet, despite healthy underlying consumption. Expectations of lower prices, in the near future, led to a ‘wait and see’ attitude amongst buyers, especially at the service centres. Distributors reported reasonable sales, in May, but complain that June order books are shortening. Although current import offers are not particularly attractive, overseas material, booked earlier in the year, is now arriving, resulting in high inventories. Domestic price corrections were noted, for all strip mill product categories, this month.