EU HRC: Market hoping for price increases

Traders and buyers complained about the lack of impetus in the northwest Europe hot-rolled coil (HRC) market today.

Argus' daily northwest Europe HRC index was stable at €510.25/t ex-works.

There is a growing buy-side belief that mills should start to push up prices as the definitive safeguard is implemented next month, which could tighten the market. Well-stocked buyers want upside leverage for their own sales prices and a sign the market has finally bottomed. The spectre of cheaper forward replacement costs has weighed on sentiment and dissuaded service centres from committing to large volumes.

"Look at what happened in the US when duties came in, prices shot up," one trader said, suggesting European mills should push for increases sooner rather than later.

The preliminary hot-dip galvanised quota has now entered critical, meaning buyers may need to pay a 25pc duty. But nobody is realistically likely to clear customs between now and the implementation of the new definitive quota on 3 February, meaning they will not be hit with the duty. The preliminary HRC quota has drawn down quite substantially lately, although there is still around 963,000t remaining.

Slab and scrap pricing also seem to be stabilising, with blast furnace raw materials rising too. And there is a sense that CIS coil availability has lessened somewhat, with some mills full for February rolling. Argus' daily fob CIS HRC assessment increased slightly by $1.20/t to $447.50/t today.

Perceived sell-side constraints and lessening import competition are bullish factors, but underlying demand remains sluggish and there is uncertainty over Brexit and the wider European economy. As a result, the market is stabilising rather than rebounding. Some service centres have more stock than they would like, and competition to move cut sheet is strong.

Certain mills are also on relatively short lead times — up to four weeks quicker than their Turkish competitors. Domestic mills are possibly fighting it out among themselves as a result of this, rather than with third-country sellers.