EU HRC: Hungry mills agree to lower levels

European steel hot-rolled coil (HRC) prices slipped today as the market emerged slowly from the holidays.

Argus' daily northwest Europe HRC index fell to €513.25/t, down by €3.75/t on the day.

Germany's flirtation with a technical recession, the global automotive slowdown, soft purchasing managers' indices and uncertainty surrounding the UK's withdrawal from the EU are dulling buying appetite.

Some stockists must buy, but are not overly concerned about HRC prices increasing, with ample material available domestically and mills eager to fill their rolling programmes.

The HRC quota is not restrictive, and sources question the credibility of a quarterly quota where unused allocations can be rolled into the next period.

Some market participants say cold-rolled coil (CRC) and hot-dip galvanised (HDG) steel prices might firm, given that Europe's definitive safeguard is more restrictive and administratively burdensome than the preliminary first-come, first-served global quota. This would probably pull up substrate HRC pricing too.

Nevertheless, galvanised steel stocks remain more than adequate, and the preliminary quotas for HDG and CRC are not filled. Eurometal, the European steel, tubes and metals distribution and trade federation, said HDG stocks were high in November — flat service centre shipments fell by 4pc that month and it is unlikely that stocks have been hugely drawn down since.

Quarterly HRC contracts from tier-one mills are close to €520-525/t ex-works, while half-yearly pricing is €540-545/t after some suppliers agreed to reductions. But these levels are still not acceptable for all stockists, as automotive sub-contractors are fighting over every euro given declining end-demand. Service centres selling to automotive suppliers are holding some stock for longer as the subcontractors are delaying shipments.

Turkish HRC offers into southern Europe have fallen as low as €440-445/t cfr, weighing on domestic prices. Turkish offers into Antwerp are at €460-465/t cfr, but some buyers are still unconvinced as they expect domestic pricing to be at near parity when the material arrives in April-May. The prospect of lower forward replacement costs continues to constrain outsell pricing from service centres to end-users. And some mills are considering how to respond to such levels to build up an orderbook for the second quarter.

Summary of market activity heard by Argus

• HRC, EU — Tradable value at €497.5/t ex-works northwest European mill, according to a trader
• HRC, EU — Tradable value at €505/t ex-works northwest European mill, according to a buyer
• HRC, EU — Commodity grade material booked at €500/t ex-works northwest Europe, according to a trader
• HRC, EU — Tradable value at €507.5/t ex-works northwest European mill, according to a buyer
• HRC, EU — Tradable value at €515/t ex-works northwest European mill for small volumes, according to a seller
• HRC, EU — Turkish material trading at €440-445/t cfr southern port, according to a trader
• HRC, EU — Turkish material trading at €460-465/t cfr Antwerp, according to a buyer
• HRC, EU — Italian material available at €500/t ddp northwest European works, according to a buyer
• HRC, UK — Turkish material offered at £447/t ddp West Midlands for April shipment, according to a buyer