Jul 6 2005
The mood in the flat products market has developed an even more negative tone. Very few deals had been concluded for the third quarter when we undertook our research in the first two weeks of June. The mills were forced into conceding discounts on previous selling values in an effort to obtain the few orders available for deliveries at the second trimester. The increasing volumes of imports earlier in the year have offset the production cuts undertaken by the domestic mills.
End users and distributors continue to be over stocked. The volume of orders to be placed for delivery in period three 2005 will be substantially lower than in the same time span a year earlier. The market is likely to continue to be in excess for most of the next six months.
The MEPS Average Flat Products Price has dipped sharply this month. As a result, our forecast for the next twelve months has been downrated. We do, however, believe that the bottom of this cycle will occur in Springtime 2006. An upturn in prices for hot rolled coil is anticipated in negotiations in April. Cold rolled and coated product rises are expected to follow slightly later. Recovery for commercial grade plate may take a little longer.
EU long product prices continue to decrease, following the fall in scrap values. The market is quiet. There is also pressure in several member states from third country imports. The June reduction in the MEPS Average Long Products Price was quite dramatic. The impact was felt across all product forms but was most noticeable in structural sections and wire rod. Bar product prices were less seriously damaged.
Our forecasts have been downgraded this month for all product types. Scrap prices are likely to continue to slip in the medium term due to the over supply situation in Asia and the production cutbacks in the EU and US. Modest price gains are anticipated in mid year for wire rod and reinforcing bars as the building sectors improve for seasonal reasons. We expect Spring 2006 to be the next significant upturn in the EU long products segment.