Sentiment is increasingly bearish in the European hot-rolled coil market as a result of short domestic lead times, competitive prices from eastern Europe and Turkey, and service centres fighting for sheet business.
Argus' daily northwest Europe HRC index shed €5.75/t to €501/t ex-works today. The discount for Italian material compared with northwest Europe narrowed slightly to €32.75/t, given the bigger fall in northern pricing.
Buyers are still holding back and service centres in Germany and the Netherlands are competing hard for business to generate cash from adequate stocks, in the hope that they can buy replacement coil at a cheaper price going forward.
One Benelux-based service centre said it lost cut sheet business to aggressive pricing. The cold-rolled sheet order was in a variety of widths and thicknesses and would take time to complete, but a competitor offered a three-day turnaround from order intake to delivery, suggesting they had the required product readily available.
A weakening market heading into the second quarter — typically the strongest of the year given the rise in construction activity — despite the EU safeguard protection poses questions for the rest of the year. Mills expect the automotive sector to start to normalise in the third quarter, and that imports will begin to work their way through the system in the next few months, giving them a more captive market.
Some German mills were heard to be selling spot HRC at €490/t ex-works, although this could not be confirmed. Some mills said lead times are increasing, but customers are under the impression that they are increasingly desperate for tonnage. And there were unconfirmed reports of one European mill selling to Turkey, where pricing is starting to come under pressure recently. Turkey has been the largest export market for European mills, but shipments plunged last year after the prolonged weakness of the lira and subsequent macroeconomic issues.
European mills questioned how long Turkish mills could sell to Europe — with the latest offers to Iberia at around €480/t cif — given limited slab supply. But the mills that sell HRC to Europe from Turkey all have their own melting capacity.
