EU HRC: Demand remains tepid

The European hot-rolled coil (HRC) market remains under pressure despite mills announcing price increases and production cuts.

The Argus domestic northwest European HRC index was static at €474/t ex-works today. The UK assessment slipped by £2.50/t to £447.50/t ddp West Midlands, with some prices heard as low as £440-445/t ddp from certain suppliers.

With lead times for HRC around four-to-six weeks and stocks not low compared with demand — although some do need to buy — it remains a buyers' market. As a result service centres do not believe the recent increase announcements will be implemented. Slippage in Asian pricing of late is also spooking some buyers, alongside record Chinese production.

Softening slab and scrap costs are allowing Turkish mills to become more competitive in Europe, with some quoting to Italy as low as €460/t delivered customer basis. Traders see this as something of a buying opportunity, but there is still reticence from some to book because the lead time is not as attractive as domestic material. Turkish sellers said domestic demand is down by around 50pc, while their export markets have been whittled away. Vietnam, which has been a release valve for mills, is now effectively closed as Chinese prices slip.

With European imports typically having to be around €30/t cheaper than domestic material to attract interest, traders and mills see room for increases before imports become a genuine threat. And sellers are desperate to increase prices as they are losing money at current levels. Some suggest the cash-cost is around €480/t for coastal European mills, which is below the Argus HRC index. And EU export sales are still being reported around $495/t cfr (€441/t) Turkey for large tonnages, which is very competitive and below cost.

Contractual talks for third-quarter tonnages are under way, but no deals have been concluded yet. But there is an expectation that some contracts could have been signed at a recent trade fair in Milan.