German steel
producers and traders expect prices to see some upward momentum over August
amid low supply, as production levels are expected to drop, according to data
from S&P Global Commodity Insights’ monthly steel sentiment survey.
The survey saw
traders and producers almost equally bullish on pricing, with the August
pricing outlook index at around 54 points, up from around 29 points in July.
Producers were more
bullish for August with the index at around 58 points compared with 50 points
for traders, but both measures were higher compared to July when the index
stood at 38 points for producers and 20 points for traders.
Despite slow demand
amid the summer holidays in Europe, production levels were expected to fall
lower than usual for the season so there might be some upward momentum in
prices, sources said. In addition, producers noted that continuously high costs
for electricity and gas were also going to impact prices in the near term.
The index for
production outlook was flat at 18 points for August compared with July.
“We’ve seen negative
production in [the first half of the year] for raw steel and further reductions
in the upcoming weeks are more than in previous years. It could force prices
upwards but when you don’t need material the price doesn’t really matter,” one
German service center source dealing in flat steel products told S&P Global.
One executive at a
long steel producer expected prices to remain stable during the summer holidays
in Europe amid slow seasonal demand.
“Post August, we
will not be able to make money at this level due to energy costs like
electricity and gas,” he said, adding that higher energy costs were forecast in
the near term.
The source also
indicated that producers might raise prices when customers start returning from
holidays and activity picks up.
Platts, part of
S&P Global Commodity Insights data, assessed TSI Northwest Europe rebar
down Eur5/mt on the week to Eur980/mt ($997/mt) ex-works Aug. 3.
For flat products,
market participants expected mills to increase prices in the near-to-mid-term,
with one large integrated producer predicted to lead the market in an upward
trend from mid-August. Official offer levels for hot-rolled coil have
stabilized at Eur850/mt ex-works Ruhr, but tradable values are much lower with
substantial discounts reported as achievable – as low as Eur800/mt ex-works and
below – due to the muted demand.
Mills were keen to
establish higher pricing going into Q4, both on production margins due to
rising energy costs, and so not to jeopardize negotiations for H1 2023
contracts, sources said.
Platts assessed TSI
North European hot-rolled coil down Eur40/mt on the day to Eur800/mt ex-works
Aug. 4.
Low inventory
The index for inventory sentiment for August stood at 34 points, compared with
40 points in July, suggesting that market participants expected stored steel
volumes to be low this month.
Traders agreed that
inventory levels would be significantly lower during August, with an index of
35 points, down from 55 points in July. However, steel producers were more
bullish on their stance, putting August inventories at 33 points, up from 25
points in July.
“Inventories are
still relatively strong on low demand so I don’t see buyers coming back until
late September — supply in October could be tight,” the German service center
source said.
Holders of steel
were focusing on depleting inventories, with current sales prices to end-users
well below input costs from higher-priced material purchased in the wake of
Russia’s invasion of Ukraine.