EU HRC: Higher prices yet to be achieved: Correction

Corrects the Italian HRC differential in paragraph 2.

More European coil producers have quietly announced price increases, and Turkish hot-rolled offers were heard up substantially at $520-530/t fob today.

But buyers still do not believe any increase will be implemented on the back of weak demand and comparatively high stocks, and prices nudged a touch lower today. Argus' headline northwest European HRC index edged down by €0.25/t to €470.50/t ($525/t) ex-works, and the discount for Italian material was wider at €27.75/t.

Essentially all European mills are attempting to raise offers, citing higher raw material costs and production cuts. Mills are making losses and need leverage ahead of second half year contractual talks.

But buyers' expectations fall way short of mills' targets, as geopolitical uncertainty and weak fundamentals continue to dampen sentiment.

Some Turkish mills are offering August shipment, which is not attractive to European buyers as certain EU mills still work to close their June rolling programmes. Lead times aside, the higher target prices from Turkey are also widely considered unachievable. An Italian mill was heard to have raised its target price, but that is still $10-20/t lower than Turkish mills are quoting.

The US Section 232 tariff being relaxed back to 25pc is having little impact, as Turkish mills are unlikely to be able to sell to the US at current prices. But the opening up of that opportunity could provide support to European prices later in the year, as some volumes are likely to find their way to the US. It also provides Turkish mills with some leverage in negotiations with European buyers, and another market should they wish to reduce their shipments during the safeguard review.