Merchant bar prices in Western and Southern Europe are stable compared to last month, with some producers now considering increases amid elevated production costs and rising scrap prices.
Some market participants in France, Spain, and Italy contend that passing on increases downstream is challenging, as consumption remains constrained in Europe. This situation is offset by a more robust demand from Eastern European countries.
A leading steel producer tells Kallanish that while volumes in Europe remain average, margins have significantly deteriorated since the latter half of 2023.
The elevated energy prices, particularly in Italy, along with high scrap values, continue to exert pressure on profitability.
Meanwhile, the reduced sales volumes are adversely affecting the European distribution sector, which is experiencing extremely low margins.
The financial performance of several major distributors in France and Italy that previously relied on volume sales has been significantly impacted by the decline in long steel products and rumours of payment delays are spreading.
European producers have capitalised on the closure of Ostrava, identifying a market gap that enabled them to reclaim the market share previously held by the steelmaker.
Currently, France and Spain have the lowest pricing in Europe, ranging from €240-260/tonne base delivered ($263-285/t). In contrast, Italy presents the highest prices, with a base delivered rate of €280-290/t excluding the average size extras priced at €420/t. Spanish producers are present in Italy, with a notable concentration in France.
The current conditions in the downstream market are hindering price increases, as diminished consumption and narrow margins restrict any upward movement to only marginal adjustments.
The tariffs imposed by the US are impacting producers only to a slight extent, while the prevailing geopolitical uncertainty is leading buyers to purchase limited quantities on a more frequent basis.
In Italy, distributors continue to buy truckloads that have already been pre-sold. In Italy, there was a restocking phase observed in March, amid a moderate resurgence in apparent demand.
However, a producer source indicates that if distributors do not sell their past purchases, they will begin to destock, leading to a slowdown in demand this month.
Eastern European nations are actively supporting demand and establishing consistent purchases. Germany’s recently announced €500 billion ($552 billion) infrastructure fund may yield some positive outcomes; however, another source presents a more cautious perspective on these potential impacts. The allocation of funds is projected to occur over ten years, ultimately representing less than 2% of the nation’s GDP.
Merchant bar price trends are expected to stabilise in April, a month characterised by reduced activity due to various public holidays.
Meanwhile, the projections for volumes in 2025 present a neutral outlook, lacking both optimism and pessimism. Sales volumes for producers are projected to stabilise at the levels observed in 2024. Short-term projections indicate that margins are likely to experience continued pressure.
Natalia Capra France
