Hot-rolled coil (HRC) prices in Italy have risen to a premium to hot-rolled plate (HRP) for the first time in more than four years, after the products reacted differently to the introduction of a stricter EU quota regime on 1 July.
The new quota system has proven more disruptive for HRC than for HRP, which has allowed coil producers to push for price hikes. Meanwhile, falling slab prices coupled with subdued demand for plate have weighed on plate prices.
Argus' daily Italian HRC index was assessed at €708.50/t ex-works on Monday, trading at an €8.50/t premium to the fortnightly Italian plate assessment for S235 grades. The Italian HRC index was up by €39/t on the month on Monday, while the plate index on 17 July tumbled by €25/t from a month earlier.
The reduction in free quota allocations under the EU's new import regime from 1 July was sharper for plate, at 46pc to 1.2mn t/yr, but the distribution of the quotas was more favourable than for HRC. Coil quota volumes fell by 33pc to 5.2mn t/yr, but the fragmented distribution of the volumes means that usable quotas are actually lower because of small allocations for certain suppliers, and additional trade measures.
These concerns have already been flagged by Italian steel association Assofermet, which said the EU's new steel safeguard is projected to result in a 60-70pc drop in usable steel import quotas.
Various HRC cargoes were rerouted from Europe to north Africa and other destinations last week as trading firms sought to avoid the new 50pc tariffs on out-of-quota volumes.
HRC prices rose in reaction to the tightening of imports, but falling slab prices removed some of the cost pressure from plate re-rollers, giving them room to reduce their offers to try and secure orders. Some market participants linked falling slab prices directly to the new EU safeguard measures, stating that non-EU suppliers would turn to the production of semi-finished products because slab sales to the EU remain exempt from trade measures, except from Russia. Seasonal factors and previous restocking waves that saw plate-making slab offers rise above $600/t cfr Italy have also contributed to the pressure on slab prices over the summer.
Demand for domestic product has reacted to quota allocations and expected supply crunches, with HRC bookings accelerating. In contrast, high stocks at plate buyers have kept them on the sidelines, in the expectation that prices could fall further.
