European steel prices are reported as wobbly, too

By Staff -- Purchasing, 2/8/2001

Despite some evidence of stable demand within Europe, the regional steel market was impacted by global oversupply during the latter half of 2000. While rebar and plate maintained some level of price stability, sheet products and sections were hit particularly hard. And no price inflation is expected in 2001, according to a market report and outlook prepared by FerrousExchange.com in New York.

How will European steel producers react to this situation? As with any difficult market, rumors of further plant closings and consolidation seem to have increased in recent months. Corus recently shuttered its Tinsley Park bar mill in England and the announcement of at least one additional plant is expected in February. Thyssen Krupp has scuttled plans for such "strategic opportunities" as plant expansions. Finally, Salzgitter completed several major acquisitions during 2000 and is rumored to be looking at acquiring Usinor's 49% share in plate producer Dillinger.

Western European prices for hot-rolled coils have declined by more than 20% since September, while prices for cold-rolled coils have fallen by nearly 25% during this same period. Though European end-use demand for flat products has remained strong, global supply/demand imbalances continue to drive European prices downward. Market sources indicate that prices will decline further, and there is no certainty as to when the market will pick up again. Current stocks of hot-rolled coils remain high due to the strong import levels during the early part of 2000. This may lead some mills to slightly reduce their production levels and should help stabilize prices.

Market sources expect modest price declines for hot-rolled coils during the first quarter of 2001. Additionally, most producers expect the price of both cold-rolled coils and galvanized to remain stable.

The Western European price of heavy plate has remained fairly steady during the September-December timeframe, holding at approximately $375/metric ton. European contacts confirm that European heavy-plate producers have filled their order books for the first several months of 2001, driven extensively by an increase in orders for line pipe due to higher oil prices. Additionally, strong end-use demand for plate in the shipbuilding, appliances and machine-building sectors have also served to strengthen aggregate demand for this product.

Western European prices for rebar have remained stable during the fourth quarter. Reports indicate that the German rebar market will remain stable. Additionally, the Spanish market seems to be very strong, and prices have remained stable in the U.K.

Western European prices have declined by roughly 20% since mid-September for light and heavy structurals. Section demand within Germany appears to be slightly strengthened as indicated by reduced stock levels between the third and fourth quarters of 2000. However, current stocks appear to be high in other parts of Europe due to weakened demand in France and stable demand in the UK. Both U.S. and Asian demand for European sections also appears to be slowing. Going forward, it appears that European end-use demand will remain fairly stable during 2001. The key to the European section market, however, will be U.S. import demand. Only a reversal of the current decline in U.S. demand will allow prices to rebound back to higher levels.