EU HRC: Market mulls Turkey S232 tariff cut
The European hot-rolled coil (HRC) market was assessing the impact of the US Section 232 tariff on Turkish steel being reduced to 25pc today from 50pc.
The cut is beneficial for domestic European mills, as Turkish HRC shipments to the EU were up by more than 50pc on the year during the first quarter at 1.07mn t, from 712,991t.
But the unpredictability of US trade policy still remains an issue with the delay of the Section 232 automotive decision prolonging uncertainty for an important end-use market.
The Argus daily northwest Europe HRC index slipped by €3.50/t to €470.50/t ex-works today. One buyer said it was offered at €465/t ex-works for commodity grade S235, while a seller said value was around this level. A trader reported buying from a large north European mill at €450/t ex-works.
Traders have sensed a buying opportunity for third-country material in the past week or so, with Turkish prices slipping to become more competitive with European levels. But Turkish mills will push up offers on the back of the tariff cut news, and following the recent increase announcements from producers ArcelorMittal and Marcegaglia.
One Turkish mill was reportedly going to return to market with offers around $520/t fob, up by around $40/t on the latest transactions. Another mill said it was seeing demand at around $500/t fob, up from $480-490/t fob levels during an industry event in Milan, but it was not sure that it would accept these levels because of potential price upside. The chances of the mills selling at $520/t fob levels are slim and traders that had previously been ready to bid decided to hold off as a result. Northwest European buyers are bidding around €470-475/t cfr levels, and mills and traders are seeing increased enquiries from some buyers.
Those that do not need to buy continue to wait and see how events unfold.
Although there is little price arbitrage for Turkish mills to sell HRC to the US at current levels, the 25pc tariff makes it more likely that they can sell cold-rolled coil and hot-dip galvanised. This could provide some much needed domestic demand for HRC producers from re-rollers. Turkish mills have seen their domestic market contract by around 50pc in the past year or so.
The reopening of the US also gives mills leverage in their talks with European buyers, and another region to target should they wish to reduce shipments to the EU during the now open safeguard review. Vietnam has closed as a market for Turkish — and European — mills given softer Chinese pricing.
EU mills target contract rollovers
European mills are trying to delay their contractual negotiations for the second half of the year in the anticipation of more production cuts and firmer prices. As justification for their firmer spot offers, mills point to rising costs, with 62pc iron ore now above $100/dry metric tonnes for the first time in around five years. At current cash costs, steelmakers are losing money on every tonne they sell.
Some mills have indicated that they may try to get a rollover for contracts in the second half of the year, whereas buyers are looking for large declines mirroring the spot market drop. The Argus headline northwest EU HRC index is down by €65.25/t since mid-November.
One automotive sub-supplier said it would begin negotiations at €60/t lower than its last contract levels, of around €520/t, but did not expect to achieve the full fall. Mills heavily linked to contractual business could take a hit in the second half of the year if they acquiesce to large declines, especially given high costs.
Related news posts
Evion-Metachem Indian project starts producing graphite
Evion-Metachem Indian project starts producing graphite
Singapore, 2 May (Argus) — Australian graphite producer Evion's joint venture with Indian producer Metachem Manufacturing has produced and sold 700kg of expandable graphite, with more output planned in the coming months, after missing its timeline last year. Capacity of the expandable graphite plant, located at Kurkumbh near the west Indian city of Pune, will increase to at least 1,800 t/yr over the coming months, said Evion in its latest quarterly activity report. The agreement between the two firms originally envisioned 2,000-2,500 t/yr of production capacity in the first three years, with plans to begin an expansion to double the capacity starting from the second year. Evion previously was expecting first production in October-December 2023. Evion, formerly known as BlackEarth Minerals, back in 2021 signed an offtake deal with Austrian downstream graphite firm Grafitbergbau Kaiserberg for up to 2,500 t/yr of expandable graphite. Graphite concentrate for the plant is expected to come from external parties in the first two years of operations, subsequently switching to products from its Maniry graphite project in Madagascar, said Evion. Madagascar's national office for the environment is carrying out the environmental and social impact assessment for the Maniry project, according to Evion. India in July 2023 identified 30 critical minerals necessary to its green energy transition and energy self-reliance, including graphite. The country's mines ministry, through state trading firm MSTC, in March launched the second round of its auction , involving 18 blocks, for development of critical and strategic minerals in the country. By Joseph Ho Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
US southbound barge demand falls off earlier than usual
US southbound barge demand falls off earlier than usual
Houston, 1 May (Argus) — Southbound barge rates in the US have fallen on unseasonably low demand because of increased competition in the international grain market. Rates for voyages down river have deteriorated to "unsustainable" levels, said American Commercial Barge Line. Southbound rates declined in April to an average tariff of 284pc across all rivers this April, according to the US Department of Agriculture (USDA), which is below breakeven levels for many barge carriers. Rates typically do not fall below a 300pc tariff until May or June. Southbound freight values for May are expected to hold steady or move lower, said sources this week. Southbound activity has increased recently because of the low rates, but not enough to push prices up. The US has already sold 84pc of its forecast corn exports and 89pc of forecast soybean exports with only five months left until the end of the corn and soybean marketing year, according to the USDA. US corn and soybean prices have come down since the beginning of the year in order to stay competitive with other origins. The USDA lowered its forecast for US soybean exports by 545,000t in its April report as soybeans from Brazil and Argentina were more competitively priced. US farmers are holding onto more of their harvest from last year because of low crop prices, curbing exports. Prompt CBOT corn futures averaged $435/bushel in April, down 34pc from April 2023. Weak southbound demand could last until fall when the US enters harvest season and exports ramp up southbound barge demand. Major agriculture-producing countries such as Argentina and Brazil are expected to export their grain harvest before the US. Brazil has finished planting corn on time . unlike last year. The US may face less competition from Brazil in the fall as a result. Carriers are tying up barges earlier than usual to avoid losses on southbound barge voyages. Carriers that have already parked their barges will take their time re-entering the market unless tariffs become profitable again. The carriers who remain on the river will gain more southbound market share and possibly more northbound spot interest. By Meghan Yoyotte and Eduardo Gonzalez Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
US Fed signals rates likely to stay high for longer
US Fed signals rates likely to stay high for longer
Houston, 1 May (Argus) — Federal Reserve policymakers signaled they are likely to hold rates higher for longer until they are confident inflation is slowing "sustainably" towards the 2pc target. The Federal Open Market Committee (FOMC) held the federal funds target rate unchanged at a 23-year high of 5.25-5.5pc, for the sixth consecutive meeting. This followed 11 rate increases from March 2022 through July 2023 that amounted to the most aggressive hiking campaign in four decades. "We don't think it would be appropriate to dial back our restrictive policy stance until we've gained greater confidence that inflation is moving down sustainably," Fed chair Jerome Powell told a press conference after the meeting. "It appears it'll take longer to reach the point of confidence that rate cuts will be in scope." In a statement the FOMC cited a lack of further progress towards the committee's 2pc inflation objective in recent months as part of the decision to hold the rate steady. Despite this, the FOMC said the risks to achieving its employment and inflation goals "have moved toward better balance over the past year," shifting prior language that said the goals "are moving into better balance." The decision to keep rates steady was widely expected. CME's FedWatch tool, which tracks fed funds futures trading, had assigned a 99pc probability to the Fed holding rates steady today while giving 58pc odds of rate declines beginning at the 7 November meeting. In March, Fed policymakers had signaled they believed three quarter points cuts were likely this year. Inflation has ticked up lately after falling from four-decade highs in mid-2022. The consumer price index inched back up to an annual 3.5pc in March after reaching a recent low of 3pc in June 2023. The employment cost index edged up in the first quarter to the highest in a year. At the same time, job growth, wages and demand have remained resilient. The Fed also said it would begin slowing the pace of reducing its balance sheet of Treasuries and other notes in June, partly to avoid stress in money markets. By Bob Willis Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
New US rule may let some shippers swap railroads
New US rule may let some shippers swap railroads
Washington, 30 April (Argus) — US rail regulators today issued a final rule designed to help customers switch railroads in cases of poor rail service, but it is already drawing mixed reviews. Reciprocal switching, which allows freight shippers or receivers captive to a single railroad to access to an alternate carrier, has been allowed under US Surface Transportation Board (STB) rules. But shippers had not used existing STB rules to petition for reciprocal switching in 35 years, prompting regulators to revise rules to encourage shippers to pursue switching while helping resolve service problems. "The rule adopted today has broken new ground in the effort to provide competitive options in an extraordinarily consolidated rail industry," said outgoing STB chairman Martin Oberman. The five-person board unanimously approved a rule that would allow the board to order a reciprocal switching agreement if a facility's rail service falls below specified levels. Orders would be for 3-5 years. "Given the repeated episodes of severe service deterioration in recent years, and the continuing impediments to robust and consistent rail service despite the recent improvements accomplished by Class I carriers, the board has chosen to focus on making reciprocal switching available to shippers who have suffered service problems over an extended period of time," Oberman said today. STB commissioner Robert Primus voted to approve the rule, but also said it did not go far enough. The rule adopted today is "unlikely to accomplish what the board set out to do" since it does not cover freight moving under contract, he said. "I am voting for the final rule because something is better than nothing," Primus said. But he said the rule also does nothing to address competition in the rail industry. The Association of American Railroads (AAR) is reviewing the 154-page final rule, but carriers have been historically opposed to reciprocal switching proposals. "Railroads have been clear about the risks of expanded switching and the resulting slippery slope toward unjustified market intervention," AAR said. But the trade group was pleased that STB rejected "previous proposals that amounted to open access," which is a broad term for proposals that call for railroads to allow other carriers to operate over their tracks. The American Short Line and Regional Railroad Association declined to comment but has indicated it does not expect the rule to have an appreciable impact on shortline traffic, service or operations. Today's rule has drawn mixed reactions from some shipper groups. The National Industrial Transportation League (NITL), which filed its own reciprocal switching proposal in 2011, said it was encouraged by the collection of service metrics required under the rule. But "it is disheartened by its narrow scope as it does not appear to apply to the vast majority of freight rail traffic that moves under contracts or is subject to commodity exemptions," said NITL executive director Nancy O'Liddy, noting it was a departure from the group's original petition which sought switching as a way to facilitate railroad economic competitiveness. The Chlorine Institute said, in its initial analysis, that it does not "see significant benefit for our shipper members since it excludes contract traffic which covers the vast majority of chlorine and other relevant chemical shipments." By Abby Caplan Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Business intelligence reports
Get concise, trustworthy and unbiased analysis of the latest trends and developments in oil and energy markets. These reports are specially created for decision makers who don’t have time to track markets day-by-day, minute-by-minute.
Learn more