2017 REVIEW: EU long steel H2 prices soar on rising costs, Algerian demand comeback

Prices for European long steel products reached a five-year high in the second half of 2017, after a sharp rise in production costs and the return of demand from Algerian rebar importers.

Domestic prices for European rebar and wire rod began to climb in late July – amid rising costs for ferro-alloys, graphite electrodes and refractories – with Spain’s Celsa Steel introducing an extra charge of €9 per tonne.

At the same time, Algeria issued long-awaited rebar import licences with a tonnage allowance of 534,100 tonnes for the remainder of 2017.

The return of the Algerian buyers reduced the pricing pressure on Southern European rebar producers caused by domestic oversupply.

The combination of these two factors led to domestic Southern European rebar prices rising to a peak of €510-535 ($605-635) per tonne delivered on September 13, up from an annual low of €375-410 per tonne delivered on May 31.

Similarly, Metal Bulletin’s weekly price assessment for Southern European rebar exports rose to €490-500 per tonne fob on September 27 on the back of Algerian buying activity. This was up from €380-390 per tonne on May 31.

In mid-September, Algeria’s ministry of commerce issued additional rebar import licences for the rest of 2017, amounting to around 400,000 tonnes.

This brought the total import volume allowance to roughly 1 million tonnes for 2017 – significantly lower than the quota of 2 million tonnes set for 2016.

The additional allowances prolonged Algerian import demand for rebar, and helped support prices towards the end of the year.

Low stock levels and a lack of customer orders over the summer months was followed by strong demand for rebar in Northern Europe in September, market participants said.

Metal Bulletin’s weekly domestic price assessment for rebar reached a peak of €545-580 per tonne delivered in Northern Europe on September 20, compared with €435-455 per tonne delivered on June 21.

End users in the construction sector were waiting for Northern European rebar prices to drop before ordering, but rising electrodes and refractory costs at mills kept pushing rebar prices up, according to market sources.

With customer rebar stocks low, the return of market activity after the summer holiday period led to a need for quick delivery times to minimize delays to construction projects. This also allowed stockholders to push prices up.

The return of demand from Algeria also reduced oversupply in Europe in the second half of the year, supporting the upward price movement. Southern European mills often sold into markets such as Germany during the first half of 2017.

European domestic prices for wire rod also rose into the second half of the year due to the higher mill production costs, although the increase was not as sharp as the jump in rebar prices.

Metal Bulletin’s price assessment for domestic mesh-quality wire rod reached an annual peak of €530-550 per tonne delivered in Northern Europe on September 20, up from €430-450 per tonne delivered on June 21.

In Southern Europe, domestic prices for mesh-quality wire rod reached a peak of €520-535 per tonne delivered on October 25, up from €450-460 per tonne on July 26.

Market participants continued to voice concerns about wire rod availability from European mills, with non-integrated wire rod processers calling for continued access to imports.

Prices for both rebar and mesh-quality wire rod softened slightly through November and December, during the traditional seasonal slowdown, but remain relatively strong as the cost of graphite electrodes, refractories and ferro-alloys continue to exert upward pressure.