The prevailing lull of demand for steel in northwestern Europe’s manufacturing industries is increasingly pressuring distributors of coil to offer at lower levels.
In order to attract reserved buyers, to generate cash flow, and to keep business going, an increasing number of distributors are making offers at levels not much higher than prices set by mills.
“They offer sale prices that reflect neither the stock value nor the costs for restocking,” one German distributor manager tells Kallanish. He expresses concern over aggressive market behaviour which he observes mainly from large players.
Falling sales prices at distributors are parallel to the price trend seen at mills. The recovery of prices over the eight months since last summer lost its momentum in May, shortly after the ex-works price for hot-rolled coil had climbed above €700/tonne ($793/t).
“The mills had pushed too fast, and then came the backlash,” a Dutch buyer says.
“I don’t even hear €700/t offers anymore,” one trader says, adding that distributors are extremely nervous these days.
Transactions are seen at €660-690/t, and possibly still softening. To that base price, German mills usually add several standard extra charges for size, certificates and insurance among others, resulting in an effective ex-works price is around €30/t higher.
“And that’s where I see the low point of prices from various distributors now,” the southern German manager says. He believes that other distributors are banking on mills prices falling.
These concessions come at a critical time for profitability, because the incoming material now stems from the peak price period in April, he notes, with distributors competing with one another, and also with mills.
Author: Christian Koehl
