EU HRC: German gloom deepens

Gloom continues to dominate the European hot-rolled coil (HRC) market, with some mills still chasing tonnes while demand is relatively quiet for the time of year.

Argus' headline daily domestic northwest Europe HRC index slipped by €0.25/t today to €461.75/t ex-works. The daily Italian index was unchanged at €441.25/t ex-works.

Activity has not really restarted despite participants returning from holiday, and falling prices in the rest of the world are manifesting in lower European buy-side expectations. One Indian mill has offered material at around €430/t cif Italy for November arrival, while an offer for pickled and oiled material was heard at a high €480/t cif.

Turkish HRC was on offer at €435/t cif Italy for 3,000t, while participants in Turkey said export offers stood at $460-475/t fob. Such levels were not attracting much interest, especially at the higher end.

Lower import offers into Italy, subdued demand and last week's news that ArcelorMittal Italy is continuing production after the Crescita decree came into effect are going to hinder steelmakers' efforts to achieve a €30/t increase. Most buyers have laughed off the attempt, with mills even admitting higher pricing will be difficult to achieve given the pervading bearishness.

One Turkish mill offered DD11 at €445/t cif base into Spain, while Indian cold-rolled coil (CRC) was on offer at €510/t cif on an effective basis for November delivery. One mill that has announced increases domestically is still taking orders at older levels. Some mills have seen their order books for hot-dip galvanised and CRC move out into November because of planned and unplanned maintenance and capacity reduction.

German mills are reportedly cutting back hot-dip galvanised production in the coming months because of weak auto-uptake and suppliers to automotive trying to sell into other industrial sectors.

Market woes hitting some hard

The weakening coil market is causing increasing financial problems for service centres and distributors, particularly in Germany given the country's shaky economy.

Credit insurers are reassessing their exposure to the steel stockholding sector in general, particularly those dealing with the automotive industry, and some companies have had limits almost removed completely. One distributor in Duisburg is struggling to source from suppliers as a result, and is aggressively selling stock to generate cash.

The quiet demand means that this desire to reduce stock is weighing on outsell prices for cut sheet from service centres to consumers.

Some suppliers to the automotive industry in Germany have reduced working hours, effectively dropping to a three-day week. And there is also growing market talk that mills may have to follow suit to some extent. At least one northern European mill has already reduced working hours.