EU HRC: Italian prices slip further

Italian hot-rolled coil (HRC) prices continued to slip today as sellers re-adjusted their expectations given recent softening in import offers.

Argus' daily Italian HRC index slipped by €2/t today to €417/t ex-works, down from September's monthly average of €434.50/t. With the northwest Europe HRC index static at €448/t ex-works, this left the differential at €31/t, its highest level since 17 April.

Some trading firms are positioning for further slippage in import prices, despite their stability over the last week or so; softening domestic prices necessitate a further drop in imports if third-country sellers and trading companies want to conclude business.

Italian mills have been cutting output more intensely recently. Italian crude production dipped below 1mn t for the first since 2014 in August, data show. Although this is seasonally the slowest month with the market at large on holiday, it still shows production cuts took place. ArcelorMittal's widely publicised reductions are also starting this month, while some mills have been bringing maintenances forward to this quarter.

European mills were slow to respond to declining import prices over the first few weeks of September, implying they were not as nervous about ample supply. While they have softened since, some Turkish mills are reportedly mulling production cuts, and scrap is looking surprisingly sticky, with steelmakers procuring lately. December shipment offers from Turkish sellers are at $420-430/t fob, although some anticipate they will slip to $410/t fob as the mills look to move stock.

Turkish re-rollers have been more active into Europe recently, following several months of low exports, weighing down domestic cold-rolled coil prices, which this week were heard at €500/t ex-works and below.

The fob China HRC forward curve suggests prices in the world's largest steel producer and consumer could come under more pressure. A contract for January traded on the London Metal Exchange at $433/t today, a decent backwardation from the $451/t index print. Argus' northwest Europe HRC curve also ticked lower, with October at €448.50/t, and November and December at €442/t.