Italian steel distributors and service centres say product values will “inevitably decline” if the current level of demand and small-volume sales continue in the fourth quarter.
“We are lacking volumes. Our clients continue to order the minimum amount each week. All coil derivatives are falling because service centres are chasing clients and discounting material. It will not be long before the market starts seeing financial trouble,” one source in the sector tells Kallanish.
While values are seen declining, distributors and agents who spoke to Kallanish rule out a collapse because of the high cost of production and processing, which will prevent prices across the market from falling below a certain level.
Purchasing groups are beginning to see financial issues and a general pessimism spreading among their members. Demand for both flat and long products is not seen recovering this month and the entire year is forecast to continue seeing the current low level of consumption.
“Prices are in a phase of stabilisation and apart from some mild movement, we do not see many changes happening in the coming months. Re-rollers and distributors will face serious margin issues. Many do not always manage to cover their costs,” another source comments.
Distributors believe that price increases in this market cannot possibly stick due to the weak performance of some key sectors, such as white goods, machinery and construction. Those suppliers who are well stocked and can offer a wide range of products are in a better position compared to the very specialised ones.
The focus throughout the entire value chain is to buy cheap and keep stocks low. With this objective in mind, five European purchasing groups recently created a large pan-European purchasing unit called Astedis, with the intention to create synergies and mutualise buying efforts (see Kallanish 19 September).
Natalia Capra France