Activity in the EU strip mill product market was muted during the summer holidays. Numerous supply chain participants remarked that conditions were quieter than usual for the time of year. In early/mid-September, the market remained subdued. Procurement by distributors is still weak, due to concerns about their own tight resale margins. Overall demand indicates little, or no, improvement in the short term. Global trade tensions and political uncertainty continue to create a great amount of caution. Steelmakers, whose profit margins are being squeezed, continued to attempt to raise basis prices but their proposals were rejected by buyers. Purchasing executives, across Europe, were able to negotiate rollover values, or even small discounts in some instances, with regional steel producers. Despite cutbacks in production by the major mills, customers perceive no significant supply tightness, although delivery lead times have extended.
The lack of activity in the auto industry continues to have a negative impact on Germany’s economy. Machinery manufacture is also under pressure, after many years of growth. The steel market is very quiet amidst such a pessimistic outlook. A number of service centres are selling aggressively, in order to offload stock that is surplus to requirements. Supplying mills are lacking orders, thus negating any opportunities for the implementation of price increases.
Activity on the French flat products market was slow to pick up at the beginning of September. Buyers confirm a significant slowdown in a number of industries. They believe that this will affect the rest of the year. Prices are suffering as a result. Several mills are reported to be struggling to sell material they have in stock.
The downturn in the Italian manufacturing sector continued, in August, as companies recorded the thirteenth consecutive monthly decline in both output and new orders. Steel market participants comment that, under the new government, policies may change, bringing some form of new investment to the country. For the moment, the steel industry is depressed, with little sign of any demand recovery in the post-holiday period. Producers are attempting to maintain, or even increase, current prices. However, their ambitions were undermined, during the summer, by poor market sentiment, at home and abroad, whilst iron ore costs also softened.
In August, output volumes in the UK manufacturing sector fell, as the intake of new orders contracted, at the fastest rate for over seven years. In the steel sector, a number of service centres were quite busy in July/August, against the traditional seasonal pattern. Margins on low-cost inventories were reasonable. In direct contrast, other distributors, often those allied to the auto industry, report very poor business conditions. Buyers comment that the recent steelmaking capacity cuts were insufficient, leaving the market oversupplied.
Tepid demand and high service centre stocks prevented implementation of the proposed rises for strip mill products, in Belgium. In reality, prices came under renewed downward pressure. Sentiment is poor. Very few deals were booked over the summer, despite steelmakers’ keenness to secure business, in an effort to plug holes in their order books. Distributors comment that credit insurance companies are warning that payment problems may develop with a number of end-users.
Spain’s manufacturing sector continued to contract during August, undermined by the sharpest fall in output since May 2013 and a further decline in new orders. Steelmakers’ order books are quite weak. Buyers have halted their purchasing as they evaluate import offers which, with the recent drop in raw material costs, have become much more competitive, although lead times are long. August proved to be a dire month for Spanish service centres. Market participants were reluctant to replenish stock in a context of decreasing prices. In the meantime, real activity remains mediocre. Resale values are very low as distributors fight for the few orders available.
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