EU LONG STEEL OUTLOOK: Spring demand boost expected; regional pricing mixed
Participants in the European long steel markets expect consumption to rise once the weather improves in April, but the outlook for prices appears to differ between Northern and Southern Europe, market sources told Metal Bulletin this week.
Cold weather conditions restricted construction activity in Europe in March, decreasing demand for long steel products.
Market participants expect higher end-user activity in Northern Europe in the second quarter of the year, with milder weather expected to boost rebar consumption and, potentially, prices.
But some market participants in Northern Europe are waiting for the Wire 2018 trade fair, to be held in Düsseldorf, Germany, on April 16-20, before concluding new transactions.
In comparison, rebar market demand could remain relatively weak in Southern Europe over April.
In late March, Italian and Spanish mills reduced rebar prices – which still remain relatively high compared with one year ago – amid low buying activity among both domestic end-users and export destinations, and a fall in domestic ferrous scrap prices in the two countries.
Metal Bulletin’s daily ferrous scrap index for Northern European HMS 1&2 (80:20) also fell this week, closing at $348.78 per tonne cfr Turkey on April 4, down week on week from $367.05 per tonne on March 28.
While most Southern European market participants expect demand to improve once the mild weather arrives in April, some were less optimistic.
“There is no rush to buy [rebar] because people have enough stock, but they don’t want the value of those stocks to depreciate. There is an expectation that prices will fall but it hasn’t really happened yet,” one Southern European producer source said.
Demand from the Algerian market, traditionally the principal rebar export destination for Southern European mills, is also expected to remain quiet in April.
This has been attributed to a large price difference between European and domestic Algerian mills, which also have abundant stocks due to weak consumption from the domestic construction sector.
“Demand from Algeria is silent. EU mills are trying to keep rebar export prices up but may have to follow prices downward,” one export trader said. “Algerian buyers are saying that €430 [$528] per tonne [fob Southern Europe] would be reasonable because the Algerian dinar is currently weak.”
Mesh-quality wire rod prices in both Northern and Southern Europe are likely to remain strong, with European mills well booked for April.
EU safeguard import investigation
Market participants do not expect any immediate effect on pricing from the decision on March 26 by the European Commission (EC) to start a safeguard investigation into imports of 26 steel product types.
“I do not think that the South European rebar export prices will soften in the coming weeks because there will be good domestic demand as well as export demand from the United States, where the Section 232 [import tariffs] are not yet an issue for European producers,” a second export trader said.
The EC started the safeguard case, which could last as long as nine months, in an attempt to prevent steel being redirected from the US to the EU after tariffs were imposed on steel imports from several countries last month.
The EU, Argentina, Australia, Brazil and South Korea have received temporary exemptions from the US tariffs.
Some EU market participants expect an increase in import volumes of long steel products from Turkey, whose producers have been hit by the Section 232 tariffs and are expected to redirect volumes to other markets.
“Turkish offers are very aggressive – we have even seen them as low as $570 per tonne fob this week – so domestic EU rebar prices could fall soon,” a third trader said.
Metal Bulletin’s latest weekly price assessment for rebar exports out of Turkey was $580-585 per tonne fob on March 29, down from the previous week’s $585-595 per tonne fob.
Import volumes of Turkey-origin rebar into the EU amounted to 457,000 tonnes in 2017, up from 311,000 tonnes in 2016, according to official EU trade statistics.
Meanwhile, import volumes of Turkey-origin wire rod into the EU amounted to 431,000 tonnes in 2017, up from 207,000 tonnes in 2016.