Nov 16 2005
Fourth quarter price rise announcements by European mills making flat rolled products have prevented prices falling further. Indeed they have achieved some small increase in per-tonne sales revenue. So far this quarter, the MEPS average flat product price has risen by around €8 per tonne.
This is a lot less than the 5 percent the mills said they wanted; it is an improvement of barely 1.5 percent. It takes the average market price back only to where it was in July – leaving it a long way below the peak of €602 per tonne that it reached in January 2005.
The dynamics of the market have not changed significantly. Consumption of strip products may have increased a little, as the domestic appliance sector is performing somewhat more strongly than in the first half of 2005. But the automotive industry is continuing to lag – with its fourth quarter output forecast to be down by about 1 percent year-on-year.
Inventory stocks have certainly reduced but they were at such high levels after last year’s over-production that the fall has not given the mills’ much additional momentum. Our market sources tell us that delivery lead-times remain quite short and have not extended as the producers had been hoping.
With a few exceptions, pressure from imports has lessened. Tonnages as a whole averaged about 1.2 million tonnes per month of flat products in the first half of this year – a sharp increase from less than 1 million tonnes in the same 2004 period. However all the indications are that imports have been declining since mid-year.
Weakness of the euro against the dollar is making imports more expensive. Since the start of this year the European currency has lost approximately 14 percent of its value in dollar terms. This combined with falling prices has made Europe a less attractive market for steel exporters.
There is talk from EU mill organisations that a fresh round of anti-dumping complaints is in preparation. While some of the low-priced material on the world market may already have been purchased by EU buyers, the threat of anti-dumping action may head off any further substantial tonnages of import.
Several EU producers say they will be looking for further price rises in the first quarter of next year. The only firm figure mentioned so far is a rather modest €20 per tonne. While market conditions are definitely improving, the mills are not likely to achieve even that small increase in full on January 1.
We forecast that the MEPS average EU flat product price will edge slowly upward during the first quarter 2006. This would leave it at just below €500 per tonne in March. More gains should be available in period two if – as is widely expected – industrial and construction activity in the EU picks up.
http://www.meps.co.uk/