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News

EU Steel strip prices will be higher in January

MEPS (International) : 14 December, 2004  (New Product)
The next move for European strip mill product prices will definitely be upwards. The tone of the market has become somewhat more hesitant, although still quite firm.
The next move for European strip mill product prices will definitely be upwards. The tone of the market has become somewhat more hesitant, although still quite firm.

We are leaving our published prices for this month unchanged from November across all the major EU steel markets. This is because we have insufficient evidence of a significant number of transactions having taken place. Higher prices are likely to come but they are not yet firmly established. If we were a commodity exchange, we would be showing increased values but on an extremely very thin volume of trading.

We have detected a shift in sentiment. The desperation of previous months has been replaced by a far less tense atmosphere. Many buyers appear content to sit back and wait, using up the steel they already have in stock before coming into the market for more.

This month we have undertaken our regular research of steel transactions a little earlier than usual, because of the forthcoming holidays. This time-slip may be one reason why we have been unable to find evidence of widespread price rises. Deals completed later in the month may well allow increased values to be firmly embedded.

Another reason may be that some major European mills have left the market guessing about their intentions. While all have let it be known they expect prices to go up, there has been no co-ordinated approach. One major mill was dropping informal hints of a 5 percent increase right from late October, before officially announcing it in the third week of November. If its intention was to get buyers placing orders in December, before the new price reference comes into force, it seems to have been unsuccessful.

Some other mills have only just made known their price announcements for January. In fact, one major supplier has, as this publication goes to press, still not formally indicated its market pricing intentions for period one; instead, it is apparently concentrating on securing increases in its long-term contract prices.

The main reason why buyers are holding off is that there appears to be plenty of stock in the supply chain. Earlier in the year, they were desperate to secure material at almost any price. Many purchasers have placed orders in advance of each quarterly price increase this year and have not always obtained all the steel they required when they wanted it. The mills seem to have caught up with the backlog of orders, putting customers in a position where they can now afford to refrain from placing new business.

The supply position has been strengthened by increased arrivals of imports. Higher tonnages of strip products, particularly cold rolled coil and galvanized from third countries, are available to European buyers.

The normal end-of-year slowdown is also playing its part. Many firms try to reduce their holdings of steel and other materials at the time of the annual stock-take, so that they do not have too much high-priced steel on their books. Come January, they should be returning to the market to replenish those run-down inventories.

Source: MEPS - European Steel Review
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