European steel service center stockpiling of coils could lead to market instability amid market uncertainty, sources told S&P Global Platts Wednesday.
“The market is quieter with each passing day as companies are shutting down voluntarily meaning there is less turnover and Belgian companies are fearful of a forced lockdown,” A Benelux-based service center source said. “This will have an impact on subcontracting companies and the economy is likely in a recession scenario now. The coils market however is stable with imports only being offered when the currency rates move to certain levels.”
Stockpiling of coils by service centers could lead to instability in the coming months if consumption remained at depressed levels, according to an Italy-based rolling mill source.
“End-user buyers are booking but for specific jobs or projects and they are just accepting prices without much negotiation,” he said. “However some service centers are buying without thinking of the macro outlook, they are like supermarket shoppers hoarding groceries and this might be messy if they have to liquidate at a later date if their customers don’t continue to purchase. The smaller service centers don’t hedge their inventory so it would be disruptive for the market if they needed cash and had to sell quickly.”
The market in Europe would remain stable until mid-April Easter holidays then there was potential for a softening in pricing, the source said.
Another Italy-based mill source said that production costs for steel producers remained high and this would support prices in the short term..
“Costs remain relatively high and mills are not making money so prices cant go lower,” he said. “Mills are selling what they can at the moment in this difficult situation.”
The Platts TSI hot-rolled coil index was calculated 50 euro cent lower Wednesday at Eur482.50/mt ($523.37/mt) ex-works Ruhr, and in southern Europe was assessed at Eur453/mt ex-works Italy, gaining 50 euro cent day on day.
Cold-rolled coil slipped Eur1.50 day on day and was assessed at Eur555/mt ex-works Ruhr.
— Len Griffin