EU HRC: Mixed signals continue

European hot-rolled coil (HRC) mills that have announced production cuts remain largely inflexible on price, although some others are still offering small discounts.

One Italian mill, which has no August production to sell to the north, is reportedly transacting at around €480-490/t base for small tonnage July production sales to Germany. Sellers suggest this is on an ex-works equivalent basis, and buyers delivered. At the same time, German sellers are still moving material to Italy at around €480/t delivered.

Some buyers in the north that rely on spot tonnages more than contractual volume are starting to commit as they have run down stocks in recent months. Customers are also beginning to return to the table for fourth-quarter import tonnages in the belief that the market will start to firm after summer as production cuts kick in.

Asian import offers have become increasingly competitive following the large rundown in Chinese prices in May and early June, which has normalised the previously yawning gap between European and Asian prices. South Korean material has been offered to Italy at around €475/t cif, slightly above pricing from one Turkish steelmaker.

There is a question over how much material will be cleared into the new quota period once it opens at the beginning of next month. A slew of stock hitting customs could have a negative impact on the marketplace. At the same time, potential changes to the definitive safeguard, such as country-by-country quotas for HRC, could stoke some optimism.

Argus' headline northwest European HRC index nudged up by €1/t today to €477.75/t ex-works. The discount for Italian material was €12/t.

In the over-the-counter swaps market, the bid-offer spread for the third and fourth quarters was €480-485/t, up a touch on the day, flattening the forward curve somewhat.