In the UK, demand is weak, compared with previous expectations, but increased activity was noticeable, in recent weeks. Several service centres continued to operate, throughout the lockdown period, with reduced staff. More are now reopening. They have plenty of stock to work through, before placing new orders for the third quarter.
Reduced demand for strip mill products led to prices being marked down by around £20 per tonne, this month. Turkish origin hot rolled coil is available from the docks at competitive prices.
UK vehicle output figures dropped substantially, in March, year-on-year. Figures for April are expected to show an even sharper downturn. Activity remains weak, in May, but some restarts are planned. Market participants expect that it will be next year before anything approaching normality is reached.
A number of UK distributors secured a £20 per tonne decrease for cold rolled coil, during price discussions with European mills, for July/August delivery. They hope to negotiate further reductions. Meanwhile, Brazilian material, for arrival in August/September, has recently been booked at competitive prices.
Construction hits record low in April
A recent release by IHS Markit/CIPS shows that the UK Construction PMI plunged to just 8.2 in April. This is the lowest figure since the series commenced 23 years ago. A reading below 50 signals contraction.
Duncan Brock, from the Chartered Institute of Procurement & Supply, commented that “though a fall in output was not a complete surprise, the scale and suddenness of the drop has knocked the wind out of building work in the UK”. He also highlighted the challenges that the construction industry faces. “For a sector still not fully recovered from the skills shortages created by the financial crisis in 2008, the vacuum of output created by the pandemic has knocked the sector back another decade.”
With housebuilding largely on hold, sales of rebar have been limited. This could start to pick up imminently. Nonetheless, companies may need to work through their existing stocks before placing new orders. Many projects were postponed. The £15 per tonne rise that the mills secured, in April, was lost during recent settlements. Mesh quality wire rod prices are also falling, due to a significant dip in domestic sales.
Market participants are hoping that, despite the significant reduction in non-residential construction activity, companies will slowly begin to return to near normality. Reductions in the output of structural sections and merchant bar are less than the drop in orders. Distributors are gradually reducing their existing stocks to reflect actual requirement. Future demand levels are uncertain.
Source: MEPS International Ltd.