European strip mill product prices continued to escalate, in December, driven by a sharp rise in raw material costs. Moreover, third country import volumes were restricted, due to trade defence measures, on both hot and cold rolled coil, and by Chinese cuts in supply. The threat of an antidumping investigation into galvanised steel imports from China also significantly slowed the placement of new orders with Chinese producers.

Domestic mill order books are healthy and delivery lead times remain extended. Steelmakers, keen to stay ahead of raw material cost developments, announced further price hikes in late November. Buyers expect the mills’ new targets to be achieved shortly and further initiatives cannot be ruled out in the first trimester of 2017.

Strip mill product prices continue to advance, in Germany, as a result of restricted supply, extended delivery lead times and the surging cost of production at the mills. Steel buyers are keen to secure quantities ahead of further rises. They state that a number of producers are controlling volume flow on quarterly contracts. Further price hikes are anticipated.

French steel demand is reasonable going into the last month of 2016. Buyers are pre-empting their future requirements, following the rapid price increases. Mills plan to build on this momentum and continue to lift basis values for deliveries into the beginning of next year. Buyers comment that quotations are only valid for a week to ten days, then revised upwards. Imports are still very limited.

General steel demand, in Italy, is quite flat, with the major exception of the auto industry, which continues to flourish. The mechanical engineering sector is improving. Construction activity continues to stagnate and, following the recent referendum, a new phase of political instability is envisaged, which does not bode well for future investment prospects. Strip mill product basis figures soared in December, as a result of a dearth of imported material, together with higher input costs at the steelmakers. A significant amount of uncertainty exists in the market. Many buyers fear that prices may go down again, as quickly as they have risen. Service centres complain that their profitability is at risk as resale customers are not yet willing to pay more. Consequently, distributors purchase as little as possible.

Several continental European steelmakers are not supplying the UK market, at present. Therefore, customers’ options are limited, leaving them no choice but to pay the substantially higher prices demanded by the domestic mills. They have been told to expect material to be more expensive when April deliveries are negotiated. Service centres are busy and resale values are moving up, enabling them to preserve their profit margins. Distributors complain of a lack of supply from the Far East. At times, deals were put together, only to be subsequently withdrawn, to the frustration of potential buyers.

Belgian demand is relatively brisk. The increased cost of raw materials forced ex-mill steel prices upwards. Very little competition exists from overseas suppliers. European producers are confident that further advances can be secured. A number of buyers have limited the quantities they order because prices are so high.

Spanish manufacturing output continues to grow strongly. Steel demand is satisfactory and forecast to increase a little in the first quarter of 2017. The installation of a new government is expected to create a more positive economic environment. Service centre steel inventories are kept as low as possible for fear of stock losses – should the new, higher prices not stick. Distributors encountered difficulties with passing on the mill hikes to the marketplace. Ongoing constrained supply led to much higher basis numbers, in December.