German steel pricing sentiment bullish for March, inventories expected lower: Platts survey

New York — German steel pricing expectations have risen substantially for March following steep offer increases from market-leading mill Arcelor Mittal in February, as well as short supply woes and longer lead times propping up steel costs, data from the monthly steel sentiment survey by S&P Global Platts showed March 9.

In the survey of German producers, distributors, and traders conducted at the beginning of March, the index for steel price development stood at 73, indicating a generous expansion (an index of 50 indicates stability), up significantly from February, when the index stood at 65.

A German distributor source said prices would continue to increase to those announced by Arcelor Mittal as long as domestic inventories dwindled and demand remained robust, with buyers look to lock in lower prices ahead of further hikes.

"We'll see further increase because of long lead times and pressure in the market," the distributor source said.

After several weeks of pricing stalemate, an additional round of offer increases announced by Arcelor Mittal on Feb. 26 jumpstarted the European market again, with offers increasing by Eur50/mt to Eur800/mt ex-works Ruhr and Eur920/mt EXW Ruhr for hot-dipped galvanized coils.

The bullish sentiment did not waver, however, even despite some temporary softening in China. Asian imports were still heard to remain in their more lucrative domestic markets, with import prices increasing steadily into Europe.

HRC import prices were assessed at Eur712/mt CIF Antwerp March 8, up Eur17/mt since the beginning of February.

Most bullish among the groups were producers at an index of 75, whereas traders were at 71.

Inventories falling faster than rate of production

With German stock levels at a 33-year lows, the sentiment survey showed participants expect further declines in available inventories, with the index at 39, just slightly up from February at 34. Producers and distributors/traders were fairly congruent in outlook, at 39 and 40, respectively.

"The trend is still up, although China has weakened somewhat. Material is still scarce and will remain so until April-May," a European service center said. "Inventories are decreasing more than the volume of new material arrivals. Stocks are too low and that might have an impact on production."

With additional capacity not expected until after the summer, a Benelux distributor said he did not see an increase in inventories with stockholders squeezed and mills unable to adhere to prompt delivery times.

"Lead times are the biggest problem. Prices will increase and stockholders have nothing," the source said. "I don't think capacity will come back until after the summer holidays."

With returning capacity now expected to be delayed, the index for production stood at 52 indicating stability, however this was down from the February index at 67. Producers were at 65, again the most bullish on production levels, whereas the distribution and trading sector were much lower at 39.