EU HRC: Italian mills offering to Germany

Italian mills are once again offering to Germany and the Benelux region after domestic prices slipped in recent weeks.

German buyers have been offered €485-490/t base delivered from Italy, although there was talk of one mill being as low as €440/t. But buyers are reluctant to place, with one Benelux service centre still waiting for an order agreed in April. Demand in Germany remains low — the country's industrial orders fell by 2.2pc month on month in May.

Mills had been seeking €490/t ex-works in the spot market for a few weeks, but failed to achieve these levels and are now seeking €480/t ex-works. One steelmaker has recently finalised half-yearly contract talks with an automotive supplier at an €18/t reduction from the first half of 2019, leaving its price just above €500/t for that contractual business.

The Argus domestic northwest Europe HRC index was unmoved at €475/t ex-works, underpinned by 12 inputs from buy and sell-side sources. One buyer suggested this level was only available from a re-roller, with other mills at higher levels.

The daily Italian index nudged up by €0.50/t to €457/t ex-works on nine inputs from buy and sell-side sources, leaving the discount for Italian material at €18/t.

Italian mills are also looking to export markets again as they try to offset slowing domestic demand. There was continued talk of one mill selling to Turkey at $505/t cfr. A Turkish mill was offering to Italy at €455-460/t cif still, but not attracting many orders given competitive domestic prices and short lead times. Its offer to Spain was €470/t cif, though traders were confident that they could buy at €465/t cif. Turkey's two other hot-rolled coil producers are largely out of the market.

Material was also offered to Antwerp at €470-475/t cif. Cold-rolled coil was offered at €555/t delivered service centre, but this failed to attract demand given the high level of uncertainty in the market.

Traders are still struggling to make import offers work to Europe, although some might now be taking long positions in expectation of an uptick in fourth-quarter pricing. Many believe the market will firm in the fourth quarter with the steel safeguard review seen as tightening HRC supply, and as production cuts bite and import arrivals are likely to be low. Some also expect the automotive market to normalise by then, once carmakers finalise destocking of inventory amassed during the transition to the Worldwide Harmonised Light Vehicle Test Procedure, which was implemented towards the end of last year.

Traders are also taking some galvanised steel positions from Turkey, perhaps as they envisage prices increasing because China has exceeded its 4B quota. But mills are struggling with their galvanised steel contracts because of the amount of material in the marketplace.

One service centre said its inventory was balanced, and it was receiving more stock now rather than reducing.