EU coil market sees limited justification for hikes

European buyers of coil still have doubts about mills being able to achieve their desired level of price hike, although they appreciate the move in principle.

The unofficial announcement made by ArcelorMittal in early October (see Kallanish 2 October) to bring up coil prices by €40/tonne ($43) was spoken out loud at the Euroblech trade show in Hanover last week. “Of course, prior to the trade show, Hannibal would climb on the elephant and trumpet a price,” one German attendant quipped. “And they [mills] will be sticking to it, yes, but the fundamental economic data are even below the forecasts of the first half-year, so where are the grounds for higher prices?” he wondered.

Although the increase attempt is considered justified in the interest of profitability for mills and a healthier pricing structure, some observers say that, one step down the chain, prices are still being spoiled at distributor level.

“High stocks are leading to severe competition between distributors and service centres, caused by the need for cash flow and for low inventories at year-end,” a Dutch manager told Kallanish a few weeks previously. That situation has not changed much. “There are still distributors conceding a loss when selling, to keep the shop running,” a distribution group manager said during last week’s trade show.

Sheet cut from hot rolled coil in countries like Germany, France and Italy is being handled at approximately €630/t ($684), sometimes less. The price would be just about acceptable if the coil was bought during the price trough in September, at less than €550/t, “but most material will be coil bought during times of prices exceeding €600”, another observer cautioned.

According to the Dutch source, low demand still means distributors and service centres are refraining from sending out inquiries to mills.

A source offering a totally different point of view is technology supplier Schuler, maker of sheet processing equipment. In the run-up to Euroblech, it issued a statement on what it called a structural crisis in the automotive industry. “Because of low car sales, the pressing plants are not being utilised and carmakers are refraining from investment,” Schuler wrote.

Christian Koehl Germany

kallanish.com