German distributors still postponing restocking: Klöckner’s Kerkhoff
Distributors in Germany remain reserved when buying larger volumes of steel for their inventories, according to Klöckner & Co chief executive Guido Kerkhoff.
The point of replenishing the shelves has not yet been reached, Kerkhoff said during a conference call on Wednesday when asked by Kallanish for the status quo of distributor and service centre buying behaviour. Regular business with a continuous turnover of products is not yet in sight. “I think the status quo is that people buy only as much as they are expecting to sell,” he replied.
He alluded that prices are starting to see some gentle recovery, but real demand is yet to improve. Nevertheless, he is not completely pessimistic. “Warehouses are still relatively empty, but, yes, I do believe that the point of return to business will come,” he noted.
His estimation is reflected in the outlook the company gives for the fourth quarter, and ultimately for the whole of 2024. In Europe, it sees a drop in real steel demand by 1-3%, with the transport/automotive segment pointing more steeply downwards than construction, mechanical engineering, or household appliances. The one sector with relatively stable demand is energy. “It does not look like activity will increase, but we are at an already low level,” Kerkhoff said.
The group is overall more upbeat about performance and prospects in its other big market, the USA, but here, too, sees a slight dip of between 0% and 1% in demand from its customer industries. However, “this is quite normal in an election year with the insecurities this brings,” he concluded.
Christian Koehl Germany
EU HRC market remains largely stable as buyers avoid bookings
Domestic prices for European hot-rolled coil remained largely stable on Sept. 20, as buying activity remained limited in the market due to low end-user demand.
“Buyers, such as service centers and distributors, are not in a great position to offload material,” an Italy-based mill source said. “Therefore, they are not in a great rush to buy. End-user demand is just not enough.”
“Pricing is not the problem,” a distributor source said. “Problem is low/no demand.”
Platts assessed Northwest European HRC stable on the day at Eur555/mt ex-works Ruhr on Sept. 20. Tradable values were reported at Eur550/mt EXW Ruhr from a buy-side source.
Platts assessed domestic HRC prices in Southern Europe also stable on the day at Eur555/mt EXW Italy, with tradable values reported at Eur540-580/mt EXW Italy.
Sources said that production overcapacity in Asia has made it difficult for European suppliers to compete with them. However, interest in imports still remained weak due to concerns around safeguard duties and anti-dumping investigations.
“Production overcapacity in Asia is making things difficult for EU suppliers,” a service center source said.
Platts assessed imported HRC in Northwest Europe at Eur540/mt CIF Antwerp, down Eur5 on the day.
Meanwhile, Platts assessed imported HRC in Southern Europe at Eur540/mt CIF Italy, up Eur5 on the day.
German rebar benders face diminishing profitability
Distributors and benders of rebar in Germany have had reason to complain about deteriorating prices throughout the whole year, especially on the selling end to builders.
A manager at one renowned bender group has now pointed out to Kallanish that many companies of its kind could also see their financial cushion diminish in the remainder of the year. “There is an essential difference in that the older jobs that generated some profit are now completed,” he explains. “Now, we will be handling orders from the second half of 2023,” when sales prices sunk to the level of rebar intake prices, and in some cases undercut them.
His group informed customers during the summer that it would not be able to work with sales prices of less than €700/tonne ($775). It asked customers “not to perceive this letter as a sign of weakness, but as a proof of trying to work as partners on the same footing.”
This calculation would apply a rebar intake price from mills of around €620/t delivered, where prices landed in May/June. Overall, values have hardly budged since.
According to benders, the price deterioration downstream is harder. Another manager, who has not read the former group’s letter, but agrees with its content and message, says: “I myself went down in an offer as far as €640 on the sale side – and I did not get the award. Someone else was cheaper.”
On the brighter side, the former group’s manager notes that some types of jobs are increasingly available, even if not profitable. According to him, job offers from big projects are coming in. But this is good news only for big benders that handle volumes of 3,000 tonnes and more. “And still, these jobs are not profitable either,” he bemoans.
Christian Koehl Germany
EU HRC: North nudges up, import offers soften
North European hot-rolled coil prices rose slightly today in continued quiet trading, as some mills sought a rollover for October rolling.
Argus‘ daily northwest EU HRC index rose by €1.75/t to €591/t ex-works, while the daily Italian index was unchanged at €595.25/t as the August holiday continued to quieten trade. The twice weekly cif Italy assessment nudged down by €7.50/t to €555/t cif.
A major European steelmaker officially offered to northern buyers at €630/t, but buy-side sources said this level was much too high because of weak demand. Service centres in Germany and the Benelux reported losing cut-to-length deals below €700/t, and as low as €670/t ex-works from some mill-tied distributors. While most offers were around €600-620/t base, they expected to buy below for a reasonable tonnage as mills looked to fill their rolling programmes.
One producer appears less hungry, despite not offering widely for October yet, as it is sending coil and slab to the UK.
Projects have been postponed because of the high interest rate environment, which means service centre inventories are not moving as quickly as anticipated — however they are not highly stocked, as everyone has been managing stock levels, especially those who are approaching their financial year-end. One processor said projects booked earlier in the year for October have been pushed back into the second quarter, given high interest rates.
A buyer quoted a rollover around €610/t said mills should have pushed for slight increases to try and stop the market falling.
With pressure on costs, as Chinese steelmakers reduce their production, some suggested there would be further downside for coil prices as mills will have more wiggle room without sacrificing margin. Traders said €560/t could be a viable price from domestic producers should costs continue to soften. Some expected the Chinese steel market to be close to bottoming, and a flurry of short covering could stabilise prices, helping sentiment in the global marketplace.
Chinese HRC was offered into Antwerp today around €600/t by at least one trader, although there are negotiations ongoing against another offer tabled as low as $510/t cfr, which is around €540/t including duties at today’s exchange rate with dumping and countervailing measures of 18.1pc.
Sustained decreases in Chinese HRC prices have filtered into lower offers for HRC, especially from some Asian sellers. The softening is exacerbated by the strengthening of the euro against the US dollar, making dollar-denominated offers work out lower in euro than last week.
A Vietnamese mill was confirmed to offer at €535-540/t cfr EU, but it was struggling to find any interest. India was reported at €560-575/t cfr south EU.
One offer from a Turkish mill stood at just under €560/t cfr Italy last week, whereas another mill was heard offering HRC at between €570-590/t cfr, duty included. Trader offers have been made at a premium to these prices, especially for some higher-quality Asian material, although one seller was heard close to the Vietnamese offer. Japanese cold-rolled coil was offered into Antwerp at €665/t fca, down around €20/t over the last week.
Feedback from buyers was limited, with many still absent from the market for holidays.
In the futures market today, October traded twice at €616/t on the CME Group’s north European contract, while two fourth quarter strips traded later in the day at €630/t.
EU mills gain processed coil share from distributors
European stockholding distributors and steel service centres have conceded some share of the coil market to mills and their direct supply to consumers. This applies to cold rolled and galvanized coil more than to plain hot rolled coil, Kallanish learns from statistics issued by distributors association EUROMETAL.
“Direct mill sales improve their channel position gradually the further wide strips are upgraded by cold rolling and coating,” the association writes in a recent research paper.
Of all HRC sales in the EU, the share of mill sales directly to customers in 2023 was 23%, while that of steel service centres was 40%. The statistics also consider “mill sales as pre-material” – such as for tubemakers – which took a 24% share. The remainder (13%) was sold by stockholding distributors – Multi-Product & Proximity Steel Distribution – which play a lesser role in terms of volume.
The picture shifts for further processed coil. For CRC, mills took a share of 41%, with 42% taken by SSCs. Mill sales as pre-material obviously play a lesser role for processed coil; the share of CRC here is a mere 6%. Mills score highest on coated coil, with a share of 49%, against 30% taken by SSCs.
In total, of all strip products taken together, mills, in their direct-to-customer sales, lifted their share from 34% in 2021 to 36% in 2023, totalling 22 million tonnes. The share of SSCs in that two-year period dropped by the same rate, from 38% to 36%, also totalling 22mt.
EUROMETAL notes that distributors play an overall bigger role in sales of long products, for which they account for 75% of total EU supply (see European distributors lose volume in 2020s – 20 August).
Christian Koehl Germany
European distributors lose volume in 2020s
Geopolitical tensions, trade disputes and steel trade measures have disrupted formerly well consolidated supply channels, at the cost of stockholding distributors and service centres (SSCs), European distributors’ federation EUROMETAL says in a recent research paper.
The EU steel distribution sector has experienced a marked contraction, with business volumes decreasing from 77 million tonnes in 2021 to 62mt in 2023. The downturn was particularly pronounced in the Multi-Product & Proximity Steel Stockholding Distribution segment, which saw a reduction from 47mt in 2021 to 37mt in 2023. Service centres’ supply volume in 2023 was 25mt.
EUROMETAL assesses the overall European steel supply potential – what it calls the typical steel distribution product portfolio market – at 116mt in 2023. This compares with 117mt in the 2020 pandemic year, 138mt in 2021 and 121mt in 2022. However, of this total, nearly half is served by mills, with 54mt supplied from mills directly to end users in 2023.
The decline in recent years is attributed to a combination of factors, like the economic downturn, supply chain disruptions affecting production and consumption patterns, geopolitical tensions and trade disputes, EUROMETAL notes. However, “steel distribution remains a vital component of the supply chain, as it offers essential services such as stockholding, processing, and value-added solutions to customers,” the association affirms to Kallanish.
Looking at the typical product groups, EUROMETAL notes that service centres continue to be a major player, accounting for 44% or 21.9mt of strip product supplies to the general industry, automotive, and construction sectors. The end-user quarto plate market saw 3.8mt supplied by stockholders and SSCs, with 4.1mt sold directly by mills to end-user segments.
For long steel products, distributors maintain a dominant share of 75% (22.8mt) in supplying to end users, while direct mill sales to end users accounted for only 7.5mt. The market for tubular steel products, totalling 10.6mt in 2023, was equally supplied by EU steel distributors and direct mill sales, each accounting for 5.3mt.
Christian Koehl Germany