EU HRC: Mills certain market has reached nadir

Northwest European hot-rolled coil (HRC) mill sources are increasingly certain the market has reached a floor now major suppliers are reportedly quoting around €530/t ex-works.

Argus' daily northwest Europe HRC index nudged up by €0.50/t to €505/t ex-works.

Vale's force majeure declaration is likely to exacerbate the pressure on costs and harden mill resolve, alongside strengthening export prices from key regions. Offers out of Turkey have risen to around $530/t fob and Black Sea mills are targeting higher levels.

Italian mills are seeking stronger levels in northern Europe close to €500/t delivered, up by €10-20/t on previous orders.

A Scandinavian service centre source said activity in his markets had perked up from low levels in recent weeks, and mill sources suggest buyers are keener to engage for second-quarter supply given positive momentum in the international markets.

Import pressure has abated, bolstering Italian mills' domestic price expectations, and some mills are reportedly out of the market. Offers have moved up to around €475-480/t ex-works from some mills in the country's south. One steelmaker said a leading mill was happy to get €15/t increases in Italy after trying to implement a €30/t rise as demand remains tepid.

Turkish material has transacted at €495/t cif Italy and one trader reported a very high offer at €515/t cif.

In the north well-stocked buyers are in no real need of material for the first quarter and as a result most remain out of the market. Some sellers have not followed the increase announcements, and material is still available on relatively short lead times.

The automotive slowdown continues to be a major issue for mills, and they need to divert tonnage elsewhere as a result. Brexit uncertainty is not helping matters. A European supplier said he was trying to keep a very short orderbook into the UK in fear of a no-deal Brexit and subsequent "Trumpian" decision to impose tariffs.

One mill executive said steelmakers would be largely insulated from iron ore costs strengthening as most will have hedged their exposure through derivatives markets — and mills will be sitting on fairly high raw material stockpiles.

Summary of market activity heard by Argus:

• HRC, EU: Italian mill offering at €500/t ddp Germany
• HRC, EU: Northwest European mill offering at €535/t ex-works
• HRC, EU: Northwest European mill offering at €530/t ex-works
• HRC, EU: Northern European seller estimates tradeable value at €495/t ex-works in Germany
• HRC, EU: North European material available at €480-490/t ex-works basis, according to service centre
• HRC, EU: Trader estimates tradeable value at €475/t ex-works Italy