EU HRC: Mills adopting firmer stance in the north

Northwest European coil buyers could get a shock after the festive period if they do not place orders soon.

Argus' daily northwest Europe hot-rolled coil index was static today at €421.50/t ex-works, while daily Italian prices were also unmoved at €413/t.

Mills are all targeting increases, supported by reduced production and import penetration — and limited quota availability on hot-dip galvanised and cold-rolled coil — and firmer prices elsewhere in the world. Some overseas material has been booked lately, mainly by Italian buyers caught out by the Ilva situation, but these are comparatively expensive relative to domestic prices.

There could be some cheap spot material left for December-January, but most mills are firmer in their resolve and nobody wants supply arriving ahead of the year-end. Customers are not yet sold on the likelihood of increases, with pockets of destocking ongoing. But some auto-sub suppliers buying half-yearly contract supply are increasingly keen to finalise bookings before breaking up in December.

The large reduction in stocks this year, especially in the automotive supply chain, should see the normalisation of apparent and real demand next year — apparent demand has plunged compared with real requirements, with service centres and auto-suppliers turning steel into cash.

In Italy, uncertainty about the future of Ilva endures, as negotiations with the government continue. Some market participants deem steelmaker ArcelorMittal's requirements to continue operating the plant — namely the 4,000 layoffs and the legal protection guarantee — unattainable in the long-term, as political instability could see government positions change even if an agreement is reached now.

A lot of buyers have already decided to seek alternative sources for their hot-rolled coil needs. Material from other sellers with small availability as early as December can be found at €410-415/t ex-works. Although expectations were that higher scrap and elevated prices from imports, especially from Turkey, would support the domestic market, while demand and final consumption remain low. Offers from Turkey are around $445-455/t fob. An offer from Egypt was heard at $485-490/t cif basis for end of January shipment.