Although we have noted some minor downward corrections for flat products over the last month, market prices are starting to stabilise in most parts of the EU. The import threat from third country suppliers appears to have abated. The domestic mills would like to impose rises for the first quarter 2010 but the success of this initiative is not guaranteed as final consumption remains weak. Service centres are determined to keep their inventories down to match the reduction in demand. Inadequate credit insurance continues to be a major issue in many countries.
In Germany, order intake is on the low side, so the producers, having recently lifted capacity, are short of business. Stock levels are in line with the current level of consumption. Third country import offers are no longer attractive when compared to domestic prices. Activity is not expected to pick up until the second half of next year at the earliest, and then by only a small amount. Independent service centres are complaining that producers are pushing very cheap material into the market via their integrated distribution networks. This policy is creating financial hardship for a number of stockists, particularly smaller companies.
Our French strip mill figures are lower than a month ago but now appear to have stopped falling, with the possibility of either stabilisation or a small rise in January. General demand is slightly better than of late, although still well below the norm.
Italian customers are keeping their inventories down in order to benefit their year-end balance sheets. Final demand shows no signs of improvement. The banks are reviewing credit lines based on the low turnover of 2009 and, therefore, they are cutting them quite dramatically. The inability of some companies to open letters of credit is working against the traders, to the advantage of domestic suppliers. Some service centres are selling at a loss because of a desperate need for cash. It is feared that a number are close to bankruptcy. There is virtually no import threat at present. Turkish mills do not need to export, thanks to relatively healthy domestic demand. However, this could change quite soon. Chinese offers to Italian buyers have waned recently. Some Russian steel is due for imminent arrival but locally produced material is the cheapest option at the moment.
The UK market shows no improvement. If anything, consumption reduced during October/November but inventories are now at comfortable volumes. Companies are targeting to have as little stock as possible by the end of the year and, consequently, are unlikely to buy more unless the need is urgent. The distribution sector is particularly cut-throat at present, with many resale prices not based on replacement costs. There has been some downward correction on ex-mill basis values which is likely to continue into January and February due to the arrival of third country material, although the tonnages on order are not huge.
There is virtually no business being contracted in the Belgian market. Despite plenty of offers, end-users are waiting until the start of next year before making any decisions. Stocks at service centres are lower now but buyers are reluctant to purchase more material. An increasing number of distributors and consumers are in financial difficulties as the effects of the economic crisis become apparent. Credit insurers are tightening their limits. There is, however, no pressure from non-EU imports at present.
The Spanish market continues to be flat with poor end-user demand. Inventories have been run down. Service centres claim that their profit margins are suffering because a need to create cashflow at all costs has led to severe competition in this sector. There are very few third country import deals being finalised. Customers want small lots on short delivery lead times. Moreover, the European mills are highly competitive this quarter, although they are trying to talk up period one prices.