EU steel prices expected to rise after Q2 downturn

Flat products basis values continued to edge downwards across Europe in late June. Nevertheless, EU mills are keen to implement price rises, citing growing raw material costs and low profit margins. However, stockholders and service centres are reluctant to accept increases in selling figures, as order volumes from downstream customers remain low.

The northern European steel market is slowly recovering. Demand is improving as restrictions to prevent the spread of Covid-19 are eased across the continent. Prices reported by market participants in the middle of the July were slightly higher than those recorded in late June. Nevertheless, basis values for most products were down, month-on-month, when compared with the figures recorded by MEPS in the first half of June.

Flat products prices, in southern European countries, moved upwards, tentatively, this month. Demand is rising and local mills continue to restrict output. EU steelmakers were able to push through a modest increase in selling figures, due to reduced supply in the market. Several buyers made speculative purchases, anticipating further advances in transaction values.

Import volumes into Europe are falling, as previous concerns about a potential reduction in quotas deterred buyers from ordering third country material. The amendments to the safeguard measures, from July 1, 2020, will restrict the volume of supplies entering the EU market, from specified countries, in the coming months.

Activity is expected to pick up, after the summer holiday period. Limited restocking is anticipated, and end-user demand is likely to be stronger. Consequently, transaction values are forecast to move upwards, at that time.

Nonetheless, the market is expected to remain challenging for the remainder of 2020. Buyers are likely to continue purchasing cautiously. Consequently, price rises are forecast to be below the EU steelmakers’ ambitions.

Any increases in mill selling figures may be temporary. A reduction in sales volumes in the fourth quarter is anticipated. A second spike in Covid-19, in the autumn/winter, would be disastrous for the EU economy and steel market.