EU HRC: Italian market rebounds

Although Turkish mills' attempted hot-rolled coil (HRC) price increases have so far fallen flat, Italian producers have benefited from the reduction of the US tariffs on Turkey and managed to achieve higher levels.

The Argus northwest European HRC index is unchanged today at €470.50/t, but the discount for Italy has narrowed to €20.25/t.

Material from Turkey remains unattractive for European buyers at $520-530/t fob, owing to longer lead times and a €20-30/t gap with the Italian domestic price. But their access — in theory — to the US market has given leverage to Italian producers to raise prices, contributing to a relative shortening of their lead times, with all but one mills having now moved into selling from their July programme.

That said, Italian producers have still conceded to discounts from their new target prices after negotiations, following last week's increase announcements from a number of EU mills. Some said higher iron ore prices and production cuts will filter into a further increase later in the summer, although extended maintenance in August may still be required.

Although the sentiment in Italy is more positive than before, not all buyers are convinced that this will linger, because of weak end-user demand. While producers take advantage of the momentum, prices can only rise permanently if real demand re-emerges.

But signals from the automotive industry are improving, with the latest figures from the European automotive association ACEA showing that new registrations have edged down by 0.4pc on the year — a decline still, but the smallest year-on-year fall since August 2018. The automotive industry remains fragile, with uncertainty over the US's next move regarding auto tariffs spooking some buyers.