EU HRC: Sheet pressure hits coil market

The European hot-rolled coil (HRC) market remains weak, as a consumer push for sheet cost declines undermines mill attempts to stop contract prices slipping.

Argus' headline daily northwest Europe HRC index slipped by €0.75/t to €474.25/t ex-works today, underpinned by 12 inputs. The Italian index was stable at €457/t ex-works on nine inputs, putting the differential at €17.25/t.

Consumers are clamouring for sheet price declines as business slows heading into the summer, against a fragile macroeconomic backdrop. Service centres with contractual volumes in place are not dipping into the spot market much because of weak demand, and some have high stocks. One Italian service centre executive said he is sitting on almost five months of inventory, which is around one month above normal for his business.

He has tried to stick to €5/t week-on-week reductions for cut sheet sales in the past two weeks or so, but others are agreeing to bigger declines as competition heats up. One Italian buyer said his sheet cost fell by €10/t last week.

Another trader had a customer say they did not need to buy for the rest of the year. Transactions by southern European mills for September arrivals are expected to be very scarce.

Some Italian buyers are in negotiations with importers, with one Turkish mill close to €455-460/t ($510-515/t) cif base after lifting some bids at €465/t cif into Iberia. An Indian mill was offering around $540/t cfr Italy, while a Japanese mill was heard to be aggressive.

Some service centres suggest they have no need to buy third-country material on long lead times, given quick delivery times and competitive prices from domestic suppliers.

One large mill is reportedly still trying to target €490/t base delivered for commodity material as it finalises contractual talks, but is not getting many orders at this level.

Some contract talks are under way, at €15-25/t reductions compared with the first six months of the year.