EU HRC: Import offers support prices

Northwest European hot-rolled coil (HRC) prices continued to firm today, while Italian prices remained stable.

Previously cautious buyers were encouraged to pay more by rising import offers in the north. Italian steel service centres (SSCs) and end-users are still holding off making large purchases given quiet end-user demand.

Argus' daily northwest Europe HRC index rose by €1.25/t today to €481.25/t ex-works. The daily Italian index fell by €0.50/t to €441/t ex-works, so discount to the north was €40.25/t — sufficient to cover transportation costs from Italy into Germany.

A Turkish steelmaker sold to a German buyer at €450/t cfr early last week, while material from one Russian seller was also sold into the country from Maastricht stock at around €465/t delivered duty paid, equating to €450-455/t cfr. Early last week, a deal for Turkish HRC was concluded into Italy at the same level for large quantities, but this was not available to small and medium-sized buyers.

Since then, Turkish mills have hiked export offers again, with quotes now around €480/t cfr into the north and €470-480/t cfr Italy. Most Turkish producers are suggesting they have upcoming maintenance, in a bid to tighten supply, but only one mill is confirmed to have downtime planned in April. The main driver behind Turkish mills' HRC price push is the rebound in scrap costs, supported by strong demand from the domestic flats market, following export sales of galvanised steel and cold-rolled coil (CRC) into Europe this month.

Higher HRC import offers are giving Italian mills leverage in negotiations with SSCs, although these buyers are only purchasing hand to mouth, given the uncertain market. In Italy, transactions are still sluggish, with real consumption low, while uncertainty in global steel pricing means buyers are unwilling to make purchases and sit on depreciating inventories.

With German buyers more accepting of the increases, lead times in the north are extending. One German mill is booked into May and in no rush to sell. Some are also reporting firmer buying from the automotive sector than anticipated, as well as brisk apparent demand over the last few weeks. But new passenger car registrations fell by 7.5pc on the year in January, according to European automobile manufacturers association ACEA data published today.

German buyers have been procuring Italian material in recent weeks, given the building discount. One Italian mill sold into Germany at the equivalent of around €440/t ex-works base or around €490/t delivered, while others have been offering CRC and hot-dip galvanised (HDG). Italian HDG prices of around €540/t ex-works are substantially below the levels targeted by northern counterparts. One German SSC booked tonnes below these prices, but could not increase the volume in the last week.

With import offers rising, and Germany becoming an outlet for Italian mills, sell-side sources expect southern prices to follow the north higher — Argus' daily northwest Europe HRC index has risen by €42/t since the start of the year, while the daily Italian index has risen by just €11.75/t.

Participants are still gauging the impact of the coronavirus, with some cheaper South Korean offers heard. Buyers were trying to achieve €522-525/t cfr Antwerp for South Korean DC01 CRC for April shipment. Offers were around €530/t cfr. Offers into Italy were at €540/t cfr from South Korea and Brazil this week, while Italian CRC prices are understood to be at €530-540/t ex-works.

The impact of the virus on automotive supply chains remained a concern, as did the stockbuild in China and sluggish Chinese demand. As a result, many buyers were buying as little as possible for their immediate requirements and are concerned over real demand heading into the second quarter.

On the other hand, there is talk that Chinese mills will be implementing production cuts, which could lend support to global prices. Many in Europe still seem to be seeking clearer signals from Asia.