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EU price recovery - but at a risk
April 2002
After eighteen months of price decline, the EU strip mill sector is now in the first phase of recovery. Negotiations for second quarter deliveries have been completed at substantially higher values than in the previous three months in most southern and central member states. In the north, increases have been much harder to obtain.
It should be noted that the price improvements are not the result of better real consumption. All the strong gains have been made by the producers who have taken firm action to rebalance supply with demand in the market place. The mean, year on year, steel output cut of 8 percent in Germany, France, Italy, Spain, UK and Belgium in the first two months of 2002 indicated their resolve to rectify the situation.
As a result of their actions, prices have surged in the six member states. Our EU average transaction prices are calculated on the values reported for the major producing nations and account for more than 80 percent of total output. They show hot rolled coil currently 14 percent above its value at the start of the year. The cold rolled sheet figure is 10 percent higher. Hot dipped galvanised coil has moved up 12 percent.
In contrast, steel manufactures in Austria, Denmark, Finland, Holland, Sweden and Norway (those covered in the Supplement to this publication) reported production increases equating to 8.6 percent. Price rises in most of these countries have been substantially below those in the main steelmaking member states.
This situation highlights the importance of regulating supply and subsequently bringing equilibrium into the market as a pre-requisite to price enhancement. On this topic we must countenance a word of caution to the major steel producers. There are suggestions that certain mills are contemplating returning to normal levels of production in the near term. This could jeopardise all the effort that has been put in to securing price rise in recent months.
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