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Monday Market Monitor - EU - WEEK 21- Weakness prevails- 01 Jun 10

We have seen a growing gap between domestic and import prices in Europe this week.

While the main EU domestic producers are not giving any sign of will in decreasing prices, with some of them like ArcelorMittal announcing further increases for beginning of June, relevant to August deliveries, prices offered from import are substantially decreasing.

However, the weakness of Euro against USD is helping to keep nominal prices still unworkable for many buyers.

All in all the situation seems extremely deteriorated, however the low level of stocks that is a common denominator for all main EU markets still gives the hope that beginning of June a new shift of purchases could revive the entire market and determine a generalized price increase. The announced Chinese cut to the export tax rebate, if implemented, will definitely help to improve the sentiment.

All producers of long products, including de bars, wire rod and H beams mills are crossing a very delicate moment as their order books are basically empty and without immediate perspectives of new bookings. Buyers are holding back and thus prices are falling down at a quite fast pace.

One week ago, Italian de bars producers were offering a price of EUR 480 per tonne to EUR 485 per tonne FOB Stowed for commercial grade and standard size de bars, while beginning of this week they were available to consider orders at EUR 460 per tonne. However not even this level was good enough to collect significant orders.
At the same time, Spanish Mills were quoting slightly lower than Italians, respectively EUR 470 per tonne last week and EUR 450 per tonne FOB ST this week.

However the lowest negotiable price, seems to be the one offered from Greece where customers could eventually book as low as of EUR 440 per tonne FOB ST.
Many Italian producers and re rollers are now considering to stop production and some of them have already done it. The consideration behind such a move is that while the closing down has well determined and known costs, continuing the race at always lower possible selling prices will probably give much worst results.

Although decreased the price of scrap is still keeping levels that are not in line with the finished product price decrease which is another item pushing producers towards the stop decision. Among others, it seems that also Riva has decided to suspend the production of all long products Italian units.
All H-beams producers are still convinced that demand should revive by beginning of June due to a rather low and generally un assorted stock level and thus resisting on quotation still very close to those of April.
Therefore it seems that the first two weeks of June will be determinant about the trend of the next future.
All in all the situation seems extremely deteriorated, however the low level of stocks that is a common denominator for all main EU markets still gives the hope that beginning of June a new shift of purchases could revive the entire market and determine a generalized price increase. The announced Chinese cut to the export tax rebate, if implemented, will definitely help to improve the sentiment.

Jun 1, 2010 09:28
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