EU steel market - Divide increases between North and South

January 31, 2011
European price movements can be dissected into North and South.
While Northern Europe viz., Germany and neighbouring countries price movements is reminiscent of the peaks of 2007 & 2008, in South Europe the increases have been subdued.
Domestic mills in Spain and Italy have increased HRC basis parity price up to EUR 640 per tonne and EUR 620 per tonne, respectively. However, customers are quite reluctant to book at new levels, bidding EUR 20 per tonne to EUR 30 per tonne less.
Import others are not attractive as prime mills are quoting above EUR 600 per tonne CFR FO at sight. Only Ukrainian mills are offering around EUR 560 per tonne to EUR 570 per tonne CFR FO at sight. However poor quality and low coil weight make this material unattractive.
HRP and HRC prices in Germany have taken a big jump during past week. The HRC prices are well above EUR 600 per tonne CFR FO Antwerp with peaks touching EUR 650 per tonne CFR FO.

HRP are offered by the domestic mills at prices beyond EUR 700 per tonne basis parity with imports reaching EUR 620 per tonne CFR FO Antwerp and even more.
Mills are deliberately maintaining low quantities to justify further increases.
The recent correction in scrap prices had negligible impact as mills have taken advantage with prices jumping depending on category and product by EUR 20 per tonne to EUR 50 per tonne.
Debars and wire rod are offered in the domestic market at prices around EUR 550 per tonne to EUR 600 per tonne in both Spain and Italy while in Germany these levels have been surpassed.
Exports from Spain and Italy are at levels of EUR 530 per tonne to EUR 500 per tonne FOB ST for debars and wire rod respectively.

Imports are not unattractive for the time being. Turkish offers have receded to levels lower than USD 700 per tonne for debars and wire rod.
The trend seems quite sell settled and prices are most probably remaining under pressure for the weeks to come. That should be quite sure for North Europe market where general economy situation has definitely jumped beyond the last crisis hurdles and is running at best levels of the last 5 years.

In South Europe the situation is still critic as both Spain and Italy are still fighting with a general economy situation still far from a complete recovery. Unemployment levels are still quite high, especially in Spain where still almost 20% of the working force is without a fixed employment, GDP perspectives are indicating an economy that is increasing by mere 1% or even, investments are lacking and bank financing is still short and erratic. In this scenario, the consumption is obviously not fully supporting the price trend demonstrated by the price difference with North Europe as indicated above. So for South Europe the positive present trend might be short lived.