Many European coil buyers, while welcoming the current surge in prices, believe the uptrend is facilitated by an artificial shortage and says little about demand in the market.
“Restrictions on production capacities to achieve a better balance between supply and demand in the European market are beginning to have an apparent effect,” a Dutch manager observes. “After all, the delivery times for material from new production have increased considerably, which has made a number of buyers a little restless,” he tells Kallanish.
A buyer at a German processor also states that lead times at German and Austrian mills are stretching into April. Another processor’s manager flatly attributes the recovery to the mill production cuts and little else.
Price targets of up to €500/tonne ($556), as given by some mills, are therefore considered unrealistic. “The market cannot and will not swallow that,” a German trader says. He attributes the current surge to regulatory measures and to production cutbacks. “The way I know our friends [at the mills], as soon as prices are back to profitable, they will reheat their blast furnaces,” he says. “That’s how it used to be. One will start and the others will follow.”
He believes the price for hot rolled coil will even out at €440/t ex-works; others are less sceptical and are preparing for prices to exceed €450/t.