EU HRC: Italy continues to slip, north quiet

The Italian hot-rolled coil (HRC) market continued to ebb today as mills offered reduced levels for July rolling on slow demand from several consuming sectors.

Argus' daily Italian HRC index slipped by €1.50/t to €456.50/t ex-works. The headline daily northwest European HRC index was unchanged at €475/t ex-works, putting the Italian discount at €18.50/t. The northwest index was underpinned by 14 inputs, and the Italian by seven.

Stockholders and tubemakers in Italy are well stocked, and are now looking to sell, but downstream demand remains lacklustre, with one buyer saying his cut sheet price had fallen by €10/t on the week. As a result, service centre margins are under pressure, lessening their appetite to purchase now.

Because of the sluggish domestic demand, one Italian mill reportedly sold into Turkey at $505/t cfr this week to move volume. A mill in the Benelux countries had been selling into the country at a similar level, and slightly lower, a few weeks back. After the sharp rise in Turkish sales into the EU from the fourth quarter of last year, European mills have been more than happy to reciprocate into Turkey at competitive levels, given the domestic slowdown.

Turkish material has been offered into Italy at €455-460/t cif, but there was talk of Turkish mills preparing to raise offers, with one mill extending its August outage to correct a furnace problem. One trader said his bids at $500/t fob to one Turkish mill were refused last week.

Northern Europe remains subdued, with most buyers covered for the third quarter. There is talk of eastern European material being competitive in southern Germany, particularly from one mill that has just changed ownership.

Europe-wide, there is expectation that the market could rebound heading into the fourth quarter, as supply cuts bite and quotas take effect. It is increasingly likely that the EU's HRC quota will move to a country-by-country basis, which could tighten supply significantly. And if the hot-dip galvanised material booked from China into the new quota is primarily destined for the automotive industry — rather than trader positions — it could feed into firmer demand for domestic galv. This could in turn tighten supply of HRC and cold-rolled coil (CRC) substrate.

After the summer break, buyers will need to procure. Should lead times be longer because of output cuts, this could fuel the perception of a shortage.