EU HRC: Mills still look to exports

Reduced supply from CIS countries and Turkey is giving European hot-rolled coil (HRC) mills increased opportunity to sell into third-country markets to try and offset weak domestic demand.

Argus' northwest Europe index was unchanged at €475.25/t ex-works, and Italy static at €456.25/t ex-works, leaving the differential at €19/t.

A large seller in North Africa slashed its HRC offering by the equivalent of $30/t amid weak demand and lower-priced imports. Market participants reported increased activity from European mills in the region, with offers earlier this week to Algeria heard at $525-530/t cfr. Turkish and Indian sellers are also active in the MENA region, albeit with longer lead times than EU producers.

Depressed local European prices are seeing less offers from south-to-north and vice versa, as buyers are avoiding speculative orders and only purchasing small quantities. German mills continue to fight to make sales in northern Europe.

Imports remain uncompetitive, with market participants estimating workable levels for customers at below €450/t cif Italy, considering the lead times into September and October.

Short lead times across the continent — one mill is drawing on July stocks — mean some sellers have diminished pricing power. But one producer is planning to increase its offers after the summer seasonal lull ends and once buyers begin making enquiries for September deliveries.

Sell-side sources say a crunch in supply after the summer and reduced stocks for buyers would require them to purchase at higher levels. In addition, some say the ruling for ArcelorMittal Italia to shut down its blast furnace number 2 could support prices if it were to happen. This is understood not to be causing concern among buyers for now.

In the over-the-counter swaps market, the fourth quarter moved into a slight contango to spot, with the bid-offer at €485-495/t. A trader yesterday bought for the fourth quarter, when the bid-offer was €477-487/t.