Uncertainty, low margins downstream compromise French steel prices

French steel prices are experiencing a slight decline, particularly for coil derivatives and certain long products. This decrease is primarily attributed to weak downstream consumption and market uncertainty, which is raising concerns, especially for some coil derivatives like sheets and tubes, buyers tell Kallanish.

Market participants anticipate prices will remain weak, particularly for longs, due to competitive pressure from Italian and Spanish producers who are offering at lower prices than domestic products. Profitability continues to be a critical concern and the primary factor driving buyers to seek discounts.

A major buyer indicates that while volumes are meeting expectations, low profitability is compelling numerous firms to put pressure on producers to secure price reductions.

The downstream sector, encompassing construction firms and distributors, is focusing simply on achieving breakeven each quarter, with little expectation for a more positive outcome in the near term.

A distributor remarks: “Companies with strong financial foundations will endure, while others are likely to face big challenges.” He notes that if the downstream sector experiences financial difficulties, it will create a ripple effect upstream.

May saw a downturn in sales and June appears to be subdued, with numerous buyers adopting a wait-and-see approach. A source from a distribution network indicates there is significant pressure to cut costs due to low margins. “We will continue to put pressure on producers to reduce prices,” he comments.

Domestic sections are stable, whereas rebar, mesh, and merchant bar are experiencing a slight decline of approximately €10-20/tonne ($11-22) on average, compared to the peak observed in early May. This trend is influenced by competitive import offers from within Europe.

First category beams are now at €770/t delivered, while domestic merchant bar prices in France are observed at €230-240/t base delivered, with effective prices, inclusive of size extras, at €650-660/t delivered. Domestic rebar is hovering at €630-640/t delivered on average, sources suggest.

Natalia Capra France

kallanish.com