EU HRC: ArcelorMittal offer raises eyebrows

A significant price hike for hot-rolled coil (HRC) by global steel producer ArcelorMittal today was rejected by some market participants in Europe. But there is a growing consensus that prices may be close to stabilising.

Argus' daily northwest Europe HRC index dropped by €1.50/t to €474/t today, with the discount for Italian product narrowing to €25.75/t, despite ArcelorMittal setting its commodity grade S235 HRC offer for northern Europe at €530/t ex-works, and offers for southern and eastern Europe at €510/t ex-works.

ArcelorMittal is trying to restore margins after the rundown in steel pricing over the past six months or so, and steep cost increases in 2019. It is lobbying the European Commission to tighten safeguard measures on HRC because of rising imports this year, led by Turkey. This, alongside an expected drop in imports this summer because of recent low European pricing, could tighten the market. But while a small increase price could soon be achieved, it is unlikely to be of the extent that some mills are hoping for.

ArcelorMittal's focus on Turkey is ironic, considering the amount of HRC European mills have been selling to the country in the past month or so, traders said. Hundreds of thousands of tonnes could ship to Turkish buyers this summer, because of competitive European pricing recently. Deals with Turkish pipe-makers and service centres have been heard as low as $495-505/t cif. And German commodity-grade coil is even being offered to Asia-Pacific, suggesting how bearish the domestic market has been.

Some traders suggested that if Turkish cold-rolled coil and hot-dip galvanised (HDG) shipments to the EU come into focus, the commission should look at where re-rollers sourced their substrate.

Turkish HRC import pricing is becoming more competitive as scrap prices have slipped. The latest import deals for premium, heavy melting scrap 1/2 80:20 were at $286/t and $290/t, while the latest coil offer to Europe was around €450/t cif Italy, equivalent to around $480/t fob — a trader purchased from Turkey for Europe at just above this level this week. For Antwerp imports pricing would need to be around €470/t cif.

EU mills could deliberately ramp up offers to attract lower-priced Turkish imports, with a view to the commission tightening its safeguard — "short-term pain for long-term benefit," one trader said.

The HDG market could receive some support in the coming months because of a potential shortage — Chinese automotive-gauge product that will clear customs on 1 July is already sold, which could lead to a shortfall for other applications. Some Chinese sellers are no longer accepting orders for commercial quality product to focus on their big European buyers.

Against this background, if other producers follow ArcelorMittal in cutting production and pressing for higher prices, despite limited demand growth, HDG could experience some upward pressure.