German steel market expects more price rises on weak home supply: Platts survey

German steel market participants expect prices to rise further in April, following the latest round of hikes from market-leading mill ArcelorMittal in March as well as long domestic lead times and tight supply gripping the European market, data from the monthly steel sentiment survey by S&P Global Platts showed April 7.

In the survey, conducted among German producers, distributors, traders and end-buyers at the start of April, the index for steel price development stood at 92, indicating a notable expansion — an index of 50 indicates stability — from March when the index tallied 73.

It was difficult to ascertain workable HRC prices following the Easter holidays, with few offers in the market and more buying-interest geared towards imports. However, the outlook of those surveyed suggests Eur900/mt ex-works Ruhr is likely to be achieved.

“It actually looks like we will reach Eur900/mt for HRC. There is not too many offers from mills — you need to beg for material,” a German distributor said. “If import restrictions stay in the market, then there is no reason why the market should become weak.”

Just one month after their previous announcement of a price increase, ArcelorMittal initiated an additional round of offer hikes March 26, with offers at Eur900/mt ex-works Ruhr and Eur1050/mt EXW Ruhr for hot-dipped galvanized coils.

EU market looks toward imports

After a pause of several weeks, Indian producers were heard to be offering into the European market again, with domestic European distributors and buyers more open to foreign possibilities.

“I am always looking for imports, but the offers are very few. Only long lead times are available for shipment in July-August,” the same German distributor said.

However, with the Indian steel quota now exhausted and the slashed tax rebate on Chinese imports, a Benelux service center said buying foreign steel would be no easier than getting material domestically.

“Imports are getting expensive, besides the Indian quota is already completed; China will lower exports. Russia might be an option and further exotics like Thailand, Mexico, Egypt — maybe,” the service center source said. “Turkey is a big question mark as well.”

For price movement, most bullish among the groups were end buyers at an index of 100, whereas traders were at 89 and producers at 87.

Inventories declining faster than production

With German producers needing to ration stocks and slash allocations to contract holders, the sentiment survey showed participants expected further declines in inventories, with the index at 40, just slightly up from March at 39.

Producers and distributors tallied at 25, suggesting expectations of a drastic decreases in stock levels, while traders and end-buyers were mostly in agreement at 46 and 50, respectively, suggesting stable inventories.

Compared to a year ago when demand was poor, the chronic imbalance between supply and demand suggests the positive trend in EU steel prices is here to stay, according to a Europe-based mill source.

“[Prices] are showing that the industry needs a huge amount of steel, not like last year, when nobody needed steel,” the mill source said. “There is an appetite, it is encouraging, but the prices are not good [long-term] for the industry.”

With delays expected on additional capacity, the index for production stood at 50 indicating stability, slightly down from March at 52. Producers were at 75 — the most bullish on production levels — whereas traders were at 50 and end-buyers much lower at 25.

On the future of European production, a European steel service center source said it was unlikely capacity would come back in full force, so long as mills focused investment on greener steel production.

“In the past, steelmakers pushed on production, but now it’s changed in Europe and China,” the source said. “There is a new vision about pollution. Mills are preferring to maintain their margins because they need to cover the investment to do the necessary conversions towards greener production.”

— Amanda Flint