EU HRC: Import prices stabilise

Activity in the European hot-rolled coil (HRC) market remains scarce, with buyers reluctant to buy so close to year-end and expecting further softening in domestic offers.

Import prices have stabilised, with third-country sellers realising there is little point in lowering offers when many enquiries are from trading companies with no firm demand behind them: trading firms have offered imports at ever-cheaper levels in recent weeks in a largely failed attempt to stimulate demand. Ostensibly, they have been shorting the market, but overseas mills are now countering only where it is clear there is real business to be booked.

Stocks are low, but buyers are still happy to nurse them for fear of buying material that will only depreciate and lead times from some sellers are running as low as three to four weeks.

The recent acceleration of the price downturn makes some sellers think the market might be close to its nadir. But there is still a great deal of concern over the macroeconomic environment, with manufacturing remaining low and uncertainty over Brexit and the ongoing US-China tariff dispute persisting.

There are signs that diesel engines are becoming more politically acceptable, as the global automobile market downturn has been exacerbated by the turn-away from fuel in Europe. Registrations are also picking up, although this has yet to translate into firmer steel demand from carmakers and their suppliers.

But today the World Trade Organisation said the US would be able to impose measures on $7.5bn EU goods and services as a result of the EU's non-compliance on Airbus government subsidies — a sign that global trade tensions could intensify.

More mills are suggesting they will seek to amend contract durations in their upcoming discussions with buyers; mills do not want to lock in contracts based on current spot prices, which will likely be lossmaking. Instead, they want to shorten contract terms with their buyers, in the hope that pricing starts to rise next year.

Argus' daily northwest Europe HRC index slipped by €1.50/t today to €448/t ex-works. The Italian daily index fell by €2/t today to €419/t ex-works.

With import levels into Italy holding steady at €400-420/t cif, depending on buyer requirements, local sellers are focusing on retaining their market share and some are filling up their October production programmes. Offers today were heard at €430-440/t delivered, with the higher end not attracting much interest, while prices for larger cargoes are understood to have concluded at below these levels, especially when transportation costs are lower.