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Borrowing costs weigh on flat steel distribution: Assofermet - 30 November 2011

The lack of liquidity in the market and rising borrowing costs is weighing on the distribution chain, in a period in which demand is poor due to weak fundamentals, Michele Ciocca, President of Assofermet’s distribution arm, tells Steel Business Briefing.

“Our position in the middle of the chain between steel producers and the end-users means that we have to be like sort of 'cushion'. In the last few weeks we have seen incredible disruptions in the markets,” Ciocca explains. “The increased cost of borrowing is weighing on our side as well as on our clients because they have more and more difficulties to obtaining money from the banks,” Ciocca adds.

“We are going to close the year with a very bad quarter,” he says. The outlook for 2012 is also weak, as “our sector reflects GDP,” pointing to a recent OECD forecast that the Italian economy will contract 0.5% in 2012.

“Prices have dropped substantially in the last two months, but it seems the bottom has been reached: mills are trying to ask for slight increases as the strong dollar is preventing third-country imports, and buyers' stocks are low,” he says. “I don’t expect higher price increases due to the fundamentals but coils prices cannot fall further, because lower prices will be not be sustainable,” he concludes.

Meanwhile, Italian large service centres are focusing on agreeing six-month contracts with auto and white good producers, other market sources tell SBB. According to market participants, end-users are trying to close the deals because they do not expect spot prices to fall further and they believe that spot prices will slightly increase, preventing them from asking for a discount on H1 2011.

 

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