UK HRC: Buyers sceptical amid uptrend

The UK hot-rolled coil (HRC) market was shrouded in uncertainty today. Despite the bullish uptrend seen internationally and price increase attempts from European mills, buyers do not believe rises will stick.

Replacement costs are undeniably rising from third-country suppliers. Turkish offers are now closer to £490-500/t ddp for S275, up from £470/t ddp West Midlands a few weeks ago. Offers from Turkey's three coil mills have risen to $530/t fob plus from around $500/t in a matter of weeks. A trader said his firm bids are not being lifted as the mills are not keen to sell.

Freight is also expensive for traders and buyers taking Turkish material — the weak lira has facilitated exports and discouraged imports, meaning a lot of vessels are leaving the country but very few are ballasting back. One trader said his company paid $76/t on its last tube shipment from Turkey, the highest price he has ever seen.

Some Indian coil suppliers have exited the market, and seem to be waiting for China's return from the lunar new year holiday to ascertain direction. CIS prices are also increasing, and the surge in iron ore costs could further harden mills' resolve to achieve rises and avoid margin compression. Scrap costs have also soared into Turkey, and some are expecting the Australian rainy season to impact metallurgical coal pricing, which has typically occurred in recent years.

At the same time, logistics, storage and transportation costs are rising in the UK, as the country's main steel ports push through price rises.

All of this has given breathing space to Liberty Steel Newport and a Belgian mill, both of which had been competing hard for business against imports.

Liberty has reportedly increased prices by around £30/t, taking its offer to £495-500/t ddp West Midlands, in line with ex-stock pricing from traders. ArcelorMittal's €30/t increase in mainland Europe also applies to the UK.

But buyers are decidedly sceptical and can afford to wait. Stock is plentiful with traders and service centres, and some European mills are hungrier than usual because of the automotive issue.

If European producers decide to keep their prices at parity to or just below Turkish mills, the latter could adjust offers lower as the beleaguered domestic market does not provide a sufficient cushion to keep them from turning to exports.

After the significant rundown in European and UK prices over the fourth quarter of last year, which Turkey contributed to significantly, this would immediately be bearish for sentiment — over the fourth quarter stockists became accustomed to buying imported material only to see a cheaper offer in the next week or two, akin to 2015 when competitive Chinese forward pricing had a strong impact on the psyche of the market. Soft outsell pricing is also hitting demand, with hot-rolled sheet reportedly available to buy at £520/t ddp today.

Argus' inaugural weekly domestic UK HRC assessment was £487.50/t ddp West Midlands today. This reflected rising offers from most mills, but also the reticence of buyers to place at the new levels.

Summary of market activity heard by Argus

• HRC, UK: A domestic steelmaker offering S275 at £494/t ddp West Midlands, according to trader
• HRC, UK: A domestic steelmaker offering S275 at £481/t ex-works, according to trader
• HRC, UK: A domestic steelmaker offering S275 at £500/t ddp, according to trader
• HRC, UK: Tradeable value at £490/t ddp West Midlands, according to trader
• HRC, UK: Tradeable value at £500/t ddp West Midlands, according to trader
• HRC, UK: Tradeable value at £500/t ddp West Midlands, according to trader
• HRC, UK: Turkish S275 offered at £490-500/t ddp, according to traders
• HRC, UK: Turkish S275 booked at £470-475/t ddp West Midlands a few weeks ago, according to trader