European Prices Decline Amid Limited Transactions

European Prices Decline Amid Limited Transactions

European buyers of strip mill products are purchasing minimal quantities, at present, due to the Covid-19 pandemic and lockdown measures imposed by the authorities, in individual countries. This resulted in the completion of a reduced number of transactions between buyers and sellers, in recent weeks. It is clear, however, that basis values are trending downwards, quite quickly.

Before the virus struck, most steelmakers had orders booked to the end of the second quarter. However, buyers are now asking for some of those orders to be delayed. Moreover, companies are reluctant to commit to new forward orders because of the threat of an extended economic slowdown. Buyers need a clear sight of future demand before normal purchasing procedures can resume.

European mills began dropping prices, in response to decreasing business activity levels. However, little incentive exists for the producers to reduce prices further, with so few orders available. Furthermore, mill profits are already hit by high production costs resulting from inefficient rolling volumes. Crude steel output by EU steelmakers, in the second quarter of 2020, is expected to slump by 28 percent, year-on-year.

Import protection incoming

Cheap offers from overseas suppliers are another factor exerting negative pressure on local selling values. The European Steel Association, Eurofer, has asked the European Commission to tighten the prevailing import safeguard measures, due to the fall in demand in the steel sector created by the coronavirus.

Eurofer is suggesting that existing import quotas for the second and third quarters should be cut by as much as 75 percent, with a further review undertaken for the final quarter of 2020 and the first trimester of 2021.

A number of steel distributors and processors are critical of this approach. It is possible that just the threat of quota reductions may deter import offers or encourage EU buyers to be more reluctant to take positions on overseas purchases.

Other trade protection action is underway. The European Commission recently launched an antidumping investigation into imports of hot rolled flat products of Turkish origin. Provisional measures may be enacted by December 14, 2020, with definitive measures scheduled for June 11, 2021.

Source: MEPS International Ltd.

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