As coil prices from northwestern European mills remain weak, but apparently will not sink much further, the deterioration downstream is more severe, market players point out.
“It is not the mills nor demand that determines the market and prices, but the distributors and service centres, pressured by the necessity to clear inventories and generate cash,” one Ruhr-based service centre (SSC) manager tells Kallanish. “You need continuous liquidity, otherwise you might run into insolvency even though your annual balance sheet is fine,” he explains.
Sales levels from SSCs and distributors have reached a critically low level, due to the slowdown in business among their customers, of which many have introduced short working. According to the manager, 60% of the total coil volume for end users goes via distributors, and 40% is sold from mills directly. “It is hard to tell who started the dumping, if it was the mills or the distributors,” he says.
In line with many others in Germany and Austria, he sees mill prices for hot rolled coil at between €600 and €640/tonne ex-works ($638-680). “This means €660 delivered for service centres, and many are selling off for €680,” which means making a loss in view of an SSC’s costs for processing services, storing, transportation and others.
According to an Austrian source, a realistic price would be €720/t for HRC to cover all costs. In southern Germany, too, “I hear prices of under €700 for HRC cut and slit, and below €800 for CRC,” he observes. Normally, SSCs need a premium of €60-70/t to break even, but ideally try to fetch €100, if times allow, players say.
Christian Koehl Germany