The continued decline in steel demand in the manufacturing industry of Northwestern Europe is increasingly forcing distributors of rolled steel to offer products at lower prices.
In order to attract discreet customers, generate cash flow and keep the business afloat, an increasing number of distributors are making offers at prices not much higher than those set by the manufacturing plants.
"They offer selling prices that do not reflect either the warehouse value or the cost of restocking," one of the managers of the German distributor tells Callanish. He expresses concern about aggressive behavior in the market, which he observes mainly from major players.
The decrease in selling prices at distributors occurs in parallel with the price trend observed at factories. The price recovery, which had been observed for eight months since last summer, stopped in May, shortly after selling prices for hot-rolled coils rose above 700 euros per ton ($793 per ton).
"The factories were working too fast, and then the backlash started," says the Dutch buyer.
"I don't even hear offers for 700 euros per ton anymore," says one trader, adding that distributors have been very nervous lately.
Transactions are expected at the level of 660-690 euros per ton and may still decline. German factories usually add several standard margins to this base price, including for size, certificates and insurance, resulting in an effective factory price of about 30 euros per ton higher.
"And that's exactly what I see as the reason for the price cuts at various distributors," says a manager from Southern Germany. He believes that other distributors are betting on lower factory prices.
He notes that these benefits are provided at a critical time for profitability, as incoming materials now fall during the peak price period in April, when distributors compete with each other, as well as with factories.
Author: Christian Kel
Kallanish.com
