For the Italian quarto plate market, the first four months of 2007 represented one great purchase binge which, however, raises question marks for the second half of the year as regards prices and purchase volumes. Furthermore, the impact on the market of the new Chinese export tariffs will also have to be taken into account.
The current market is one which is now facing high levels of inventory as compared to a real demand which has remained substantially unchanged. The consequence? - the first feelings of uncertainty and the first reductions in sales prices. The present Italian market quotations for quarto plate (in traditional steels) are around Euro 650/mt, representing an average drop of Euro 20-30/mt over the last 10 days. There are even some who, perhaps referring to prices on paper which never actually materialized in fact, say that the price drop has been as big as Euro 50/mt. On the other hand, there has been no slowdown in the prices of high-resistance steel products, for which demand is flourishing. As regards the end-users, the earthmoving machinery sector seems to be going well, while the agricultural machinery sector appears rather weak.
Returning to the issue of inventory, the current levels in the hands of the traders are high due to the huge purchases carried out in recent months - a period when the continually rising quotations made it attractive to place orders. The end-users also seem to have carried out high levels of purchases in the January-April period - and this alone could suggest an imminent decline in apparent consumption.
The national economy has been in good shape, but not so good as to justify such a mass of purchases and to absorb such huge tonnages of steel.
There is also the important factor of imports, and particularly those coming from China.
The products arriving now are those which were ordered between October and December of last year when Chinese quotations were quite lower than they are now. Also, the reduction of the Chinese export tax rebate had led many Chinese exporters to boost their sales volumes and ship as many goods as possible before the introduction of the measure. As a result, there are a lot more Chinese products arriving in Italy at a price that, today, appears very competitive. However, the price of purchasing these products is far higher.
How will the traders react? It is difficult to say. According to some market players, there are definite reasons why quotations in the coming months will not exceed the threshold of Euro 700/mt. An approach focused on volumes and less on profit margins could incite end-users to place orders (especially for the products arriving from China these days), even though their warehouses are fairly well-stocked. The most widespread tendency seen in quotations seems to lie between stability and moderate decline, on condition that the situation is not subverted by speculation-linked variables.