Steel Strip

Steelworks in Port Talbot, Wales, owned by the Tata Group, one of the foreign firms ‘investing in the UK as a key player in Europe’. Photograph: Anthony Devlin/PA

Britain’s hard-pressed manufacturers have expressed growing unease that the financial sector was defended in Europe by David Cameron at the expense of Britain’s industrial interests.

Steelmakers fear the UK could lose its "leadership" position on issues such as deregulation and competitiveness, while other manufacturers fear a growing isolation from a key market.

"In the short term it should make no difference as all the EU structures are in place, but across the longer term … we are going to become less relevant in political decision-making," said Ian Rodgers, director of the trade body UK Steel.

Read the full story by Terry Macallister at the Guardian

Whilst David Cameron and the Government have made a lot of noise recently about taking measures to help Industry and manufacturing their actions show that their traditional loyalty to the city is far stronger. Our largest export market is Europe and any step that weakens our influence within that market is a betrayal of the manufacturing sector.

More than 150 workers at a North Lincolnshire steel firm are taking an extended Christmas break to help their employer stay in business.

Staff at Caparo Merchant Bar (CMB) in Scunthorpe have agreed to take a longer, partly-unpaid, holiday over the Christmas and new year period.

Workers are being supported by the Community Trade Union in an effort to help the company.

The move aims to ease the company’s wage bill in the process.

Full story at BBC News

Warsaw Business Journal reported that steel giant ArcelorMittal, which controls 70% of the Polish steel production market, wants to reduce the number of its employees in the Czech Republic by around 10%.
The company plans to launch a voluntary redundancy scheme there in the near future.
Due to a decline in demand for steel, ArcelorMittal has already announced that it will soon idle one of its three blast furnaces in Poland. This will reportedly result in significant job losses. It is even rumored that up to 3,000 employees who work at the Polish steel furnace may be laid off soon.
Trade unions at ArcelorMittal Poland fear that in the face of the crisis the steel maker may soon decide to cut more jobs in Poland.
Nonetheless, Ms Sylwia Winiarek, a spokesperson for ArcelorMittal Poland, said that "No employment reduction decisions have been made at the company."

A hot strip mill at a huge steel plant is to be mothballed because of "continuing poor demand", with the loss of 115 jobs, it has been announced.

Tata Steel said the temporary mothballing of the mill at its Llanwern site in Newport, will take immediate effect.

The move will lead to the loss of 115 agency workers, contractors and others on fixed-term contract jobs.

Tata Steel said the facility is expected to remain mothballed until the UK economy and steel demand justify a restart of operations.

Read More at Wales Online

Global economic uncertainty is causing steel consumption to slow in Europe. Moreover, buyers are reluctant to place forward orders on the mills, given the current financial climate. Market players feel that worldwide production cuts will hold the key to price stabilisation. Although the mills are curbing capacity, the results are unlikely to be felt until the start of 2012 at the earliest. Traders are reluctant to place new business with third country suppliers as market sentiment remains weak.
There is very little demand in Germany. In general, steel prices have weakened further. The mills appear to be offering different levels of discount, depending on customer and tonnage. However, end-user activity is still relatively strong in comparison with other European countries. Auto production is at a good level for the luxury brands, which are still enjoying excellent export sales. Other industries are reducing their steel stocks but trying not to lay off personnel. Service centres can obtain supplies from the steelmakers within three to four weeks and, therefore, are only buying when they already have orders for the material.
Prices have decreased in the French market, despite producers’ efforts to stabilise them. Some distributors report that activity has dropped since early October. This is being felt more by smaller players because of the commercial actions of large and mill-tied enterprises who are actively destocking. All buyers concur that they are only purchasing the strict minimum, as they aim to have very low inventories by the end of the year.
There is a great deal of uncertainty in the Italian market at every level. This is not facilitating business activity. Domestic steel demand is poor since end-user consumption has slowed, particularly in the construction, automotive and white goods sectors. Export markets have also weakened. There is no significant import pressure at present but suppliers from Turkey and Russia are looking for orders and may start to offer quite soon.
The current financial issues in mainland Europe have had a disruptive effect on steel business in the UK, where confidence is at a low ebb. Ex-mill basis figures have continued to slip over the last month. End-users and distributors have managed stocks down to a low point. Several service centres claim that their sales volumes are reasonable but that margins need lifting. However, the recent downward drift in resale values may now have halted.
As expected, Spanish consumption has deteriorated further. Service centres refuse to build up inventories and continue to just buy what they need for tomorrow. The mills have offered more price concessions, despite a lack of third country competition. Distributors’ resale values are below replacement costs, and, in some instances, they are losing money just to generate cash.

Report Courtesy of MEPS

Unsurprisingly, the economic uncertainty within Europe is impacting upon demand and resulting steel prices.

The most recent MEPS report sums up the situation

EU buyers are reluctant to place orders on the mills as concern over the current financial crisis is undermining business confidence. They believe that prices could go down even further and so are staying out of the market for now. Because demand is so mediocre, the output cuts that European producers have implemented so far have not had any positive effects on basis values. However, more are planned by several steelmakers.
The German strip market is described as “difficult”. Activity has not recovered from the lows experienced during the summer. End-users are postponing orders. Service centres are keeping inventories low because they are unclear about the direction of prices. Many of them purchased third country imports earlier in the year when values were higher. This material is now arriving and they are forced to sell at a discount. Domestic mills have reduced their offers for now. They will curb capacity to try to stabilise the market.
Given the current economic and financial uncertainty, French buyers remain very cautious, even if stocks are run down. This trend is not expected to change, with the end of the year looming. There is some demand from end-users but they are challenging distributors’ resale prices. Ex-mill basis values are also under pressure. The producers appear to be unwilling to drop them any further, preferring to adjust their output instead.
The Italian economy is very weak and turmoil in the financial markets has dampened sentiment significantly. Delivery lead times from the domestic mills are short. Stocks at the ports have gone down substantially. A favourable exchange rate has been shielding the Italian producers from new import competition as well as helping them to export.
End-user demand tends to be sector specific at present in the UK. Distributors’ margins are poor as resale values are continually weakening. Ex-mill figures are fairly steady because producers realise that further discounts are unlikely to generate more business.
The capacity reductions are taking time to have any positive influence on the Spanish market, where the threat of recession has caused business confidence to evaporate. Activity has not picked up, with buyers placing small orders only when they are desperate for material. Traders are finding it virtually impossible to find new third country offers at competitive rates.

ECONOMIC TURMOIL LEADS TO WEAKNESS IN EUROPEAN STEEL MARKET latest MEPS report

Despite earlier market expectations to the contrary, European demand has not picked up following the long holiday break. This is partly due to grave concerns over the financial situation across the region. The mills are experiencing low levels of order entry and, consequently, some production cuts have already been announced. ArcelorMittal has idled several of its blast furnaces in France, Belgium and Germany. This may also have to happen at other European sites. Producers have signalled their intention to push up strip mill prices for the fourth quarter but the success of this initiative is questionable. Third country material, booked earlier in the year, is now starting to arrive at the docks but the import threat, as far as new orders are concerned, has receded.
There are fears of a serious slowdown in the German market. The summer months of July and August have been exceptionally quiet. End-users have work for now but their forward order books are looking thin. Buyers are reluctant to place steel business before they can clearly see the direction of prices in the final trimester. Current domestic spot market values are slightly below those tabled in July.
Activity remains sluggish in the French market in early September. There is little enthusiasm to purchase, especially with today’s economic turmoil. Distributors are working with the steel they have in stock. Nonetheless, producers have been talking about increases. However, buyers do not believe the current market situation can justify any advances.
In Italy, Riva, Marcegaglia and Arvedi have announced price hikes for strip mill products with immediate effect. However, in reality, there has been continuing weakness during the summer. The economic chaos, widespread through the eurozone, is worrying customers, who see no hope of improvement in the steel industry in the near-term, either at home or abroad. Consumption is at a low ebb.
The UK market is described as “weak and depressing”. Producers reacted to a lack of orders by slashing prices, week on week, through August but things may have settled now. Customers who took advantage of these opportunities are now covered for most of period four. Distributors report that business is as tough as ever, which is a reflection of the general economic situation. Their resale values are under considerable pressure.
The Spanish scene is described as “dreadful” with a continuation of July’s total lack of activity. Confidence is very low. Service centres report that they are selling less than in the first two quarters because end-user consumption is dire.

Most consuming sectors of hot rolled coil are healthy with the exception of the pipe making industry, which is weaker than the others. The steel companies, seeing that demand was not huge, have revised their figures downwards to a greater extent than was anticipated by several buyers. Stocks at the service centres are relatively low. Distributors will need to purchase after the holidays and some may even start to do so in the remaining weeks of July, while prices are low.

The German mills are not so dependent on the commodity grades as their rolling schedules are full with orders for the more exotic qualities for the next three months and beyond. Wind tower and line-pipe markets are particularly busy. Consequently, producers have held on to prices for commercial material, although customers are pushing for discounts by quoting cheap Chinese offers.
European cold rolled coil demand shows no signs of revival. Customers are wary of placing new business because they anticipate that prices could go even lower.
Although underlying consumption is good in Germany, most buyers have postponed order placement in the hope of cheaper prices in the latter half of the third trimester. As a result, the mills have offered substantial discounts.

More detail in the full report here

UK manufacturing sector growth fell to its lowest rate for 21 months in June as new orders declined, a survey says.

The Markit/Cips manufacturing purchasing managers’ index (PMI) for June fell to 51.3, down from May’s downwardly revised measure of 52.0. A figure above 50 indicates expansion.

Markit said that growth was "stalling", with weak domestic demand and the recent boost to exports now fading.

However, there were signs that inflationary pressures had eased.

"The manufacturing sector continued to slip closer to stagnation in June," said Rob Dobson, senior economist at Markit.

"The data will call into question the sector’s ability to play a major role in delivering a robust and sustainable economic recovery."

More at BBC News

The World Steel Association (worldsteel) has published the 2011 edition of World Steel in Figures. It is now available on worldsteel.org.

Total world production was 1,413.5 mmt in 2010, up from 1,230.9 mmt in 2009.

Visit World Steel Association for more