European steel prices move north and south

A MEPS (International) product story

Edited by the Engineeringtalk editorial team Oct 26, 2006

Prices for flat rolled steel products in the European market are showing widely divergent trends this month.

Prices for flat rolled steel products in the European market are showing widely divergent trends this month.

A steep gradient has emerged - prices get progressively stronger as you move from south to north.

Prices are falling in Italy but rising in Germany and Scandinavia.

There is also a feeling of weakness in some other south European markets.

The MEPS published negotiated basis prices in Italy have fallen this month by 6% for hot rolled coil and by 6.7% for cold reduced coil.

The prices for plate and hot-dip galvanised have also come down, but by only 3% in the same comparison.

This weakness is spilling over into neighbouring countries such as Austria, southern France and Spain.

In northern Europe, mills have had some success in winning the price increases for flat products.

This is the case for hot rolled coil and galvanised, where the German market is seeing month-on-month increases.

Cold rolled coil prices have moved up less strongly.

Part of the reason for the divergent price trends is the volume of imports of strip products from third countries into the EU.

These have been at record levels this year and are being concentrated very much in southern Europe.

Evidence from import licence applications suggests that volumes will remain high through to the end of the year.

Shipments from China are particularly noteworthy.

They reached 1.7 million tonnes in January-July and may exceed 4 million tonnes for the whole year.

Chinese producers have indicated that they will be reining back their exports to Europe in 2007.

If they do, other suppliers in Iran, India and Egypt may step in to fill the gap.

The current imports are adding to the over-supply which is now coming to characterise the market.

Restocking after last year's inventory liquidation is now essentially complete.

But EU-25 crude steel output continues to rise.

It is up more than 6% so far in 2006.

MEPS' projection for the full twelve months is 199 million tonnes - an increase of almost 7%.

This is far in excess of actual demand.

Stockholders seem to be confident of good trading conditions in quarter four.

But current values are likely to be the peak - certainly for hot rolled and cold rolled coil.

Galvanised prices may keep some upward momentum into 2007, partly because of the price of zinc which recently hit a new record high.

Prices for some long products are holding up better than flat products.

Although concrete reinforcing bar values are down this month in some countries (partly because of lower scrap prices), other long products are generally firm.

Compared with September, negotiated basis prices for medium sections and beams have risen by 2.3% in Germany and France, and by more than 4% in Spain and Italy.

Availability appears to be quite restricted.

Mills may not be producing all the tonnage that they could, and there are also reports of operating problems at some section mills.