What's the latest situation in the Italian markets for beams and merchant bars? How will these markets evolve in the near future? Mario Angiolini (Sider Center), Enrico Fornelli (Beltrame), Alessandro Loda (Loda Fabio), Giuseppe Masserdotti (Stefana), Arrigo Vanoli (Vanoli Ferro) and Luigi Zolezzi (Siderimpex) shared their views with us during a discussion on the state of the markets in question.
Divergence between views of producers and traders - A clear difference of views emerged between producers and traders regarding evaluations of the current market situation and expectations for the future. This divergence of views can be attributed to the producers' greater proximity to a continental European reference point, whereas the traders and service centers are more focused on the domestic situation. For the steel producers, at least as far as beams and merchant bars are concerned, 2007 is turning out to be a very positive year with consistent levels of orders and satisfactory profit margins. In recent weeks, the market has continued to give evidence of good health backed by positive margins, especially due to the good levels of demand coming from abroad.
However, distributors have a different view of the situation. Due to strong competition and the slowdown seen in demand in June, a price war has broken out which has put traders and service centers in difficulty, obliging them to concede significant discounts to their customers. Producers and traders also express differing opinions when making their predictions for the future: the former are more optimistic, expecting that current price levels will either be maintained or see a slight increase up to the end of September; traders, though, are more pessimistic, forecasting a fall in quotations.
Beams - The divergence between producers and distributors appears to be particularly evident as regards the Italian beams market. Traders express a general negative sentiment, due to a number of factors. In the first place, there was a slowdown in end-user demand last month which caused a rise in nervousness in the market and a consequent surge in competitiveness between market players. In second place, in recent weeks there was a slight fall in the offering prices of some producers (those who were less dependent on demand from abroad), followed by a stronger fall in quotations made to end-users.
However, adopting the point of view of the producers, the overall market climate appears a lot better. The mills' order books are healthy, due also to the contribution of demand from both EU and non-EU countries. The profit margin on sales is good and there has been an increase in sales quantities in the first part of the year. Besides, the steel mills' inventory levels are currently low.
For the months ahead, the steel mills expect that prices will be maintained at least until the end of September. This conviction is supported by the fact that demand is still high (especially overseas demand), and by the fact that traders' inventory levels are below normal while producers' stocks are low. Further price increases are forecast for beams of larger dimensions due to the inadequate supply of material being offered.
Traders, on the other hand, are less optimistic and express the view that beam quotations may see a downward movement.
Merchant bars - After the acceleration of the first four months of the current year and the partial slowdown of subsequent months, demand for merchant bars can currently be said to be at normal levels. The merchant bar quantities sold in the first six months of the year, both by traders and by producers, are in line with the quantities registered in 2006. The producers'sales prices are currently stable and also guarantee a satisfactory profit margin. Traders' quotations, on the other hand, have been greatly influenced by the strong levels of competition, resulting in reduced margins. Furthermore, traders' levels of inventory are low due to the destocking phase of recent months.
On an international scale, the closure of Beltrame's French facility at Valenciennes has already caused an increase of €10/mt in quotations in Germany, and could soon bring about a similar rise in France.
Looking forward to the near future, producers underline that a number of factors (such as the possible increase in scrap prices over the summer, traders' low stock levels and the probable reduction in available supplies due to Beltrame's renovation work) could result in a surge in prices in September. Traders are being more cautious and expect quotations to remain at current levels.