UK coil distributors see demand holding steady at reduced levels

Sales volumes surpassed initial predictions, during the lockdown period, according to several UK coil distributors. However, no notable improvement in demand is expected to occur before September.

A number of contract customers are opting for quarterly deals, rather than half-yearly agreements, because of the current market uncertainty. Nevertheless, with mill profit margins very tight, spot prices are believed to have reached the bottom of the current cycle.

High inventories restrict mill orders

Inventories of hot rolled coil, at UK distributors and service centres, are sufficient for current needs. Resale prices may remain weak, and new mill bookings limited, as many stockists offload excess material, in an attempt to generate cash flow.

Distributors report that activity in the cold rolled coil market is improving, albeit gradually. At present, orders on the mills are modest because buyers are trying to utilise their current inventories. Reduced credit limits would pose a problem for a number of companies if they wished to increase their purchase volumes. 

Coated coil stock levels remain above current market requirements. Buyers believe that any revival in activity will be gradual. Several end-users are considering shortening their traditional summer shutdowns to offset the reduced production that was undertaken during the height of the lockdown restrictions.

Plate mills struggle to fill schedules

European heavy plate mills are struggling to fill their production schedules. Low oil prices and a lack of finance are leading to a decline in new line pipe projects. This is expected to adversely affect plate producers’ order books, in the medium term.

Purchase volumes remain low, in the UK plate market. Following stability in April and early May, prices trended downwards, in recent weeks. An increase in competition between distributors is noted, as they look to offload their excess inventories.