EU HRC: Major mill returns to market

Italian hot-rolled coil (HRC) producers have increased offers on rising import prices and scrap costs, despite one of the main sellers returning to the market.

The mill has started offering January material despite recent concerns about its ability to produce going forward; market participants expect the seller to continue running into the new year.

Official list prices in Italy are now as high as €430-440/t ex-works, although deals have not been concluded at such levels. The Argus daily Italian index rose by €0.25/t to €414/t ex-works.

Import offers into Italy continue to rise, but it is unlikely that buyers have accepted the highest asking prices, as domestic coil is on a par with or close to imports and on shorter lead times. Turkish mills in particular have raised prices as a result of high scrap and slab costs.

Today's news that US President Donald Trump has reimposed section 232 duties on Brazilian steel could shake up the already-fragile European market. The duties would mean slab availability increases for ex-US markets, which could adversely affect CIS slab prices and see Turkish mills cut HRC offers: a Brazilian cold-rolled offer was heard into Europe at competitive levels a few weeks ago, but the mill withdrew the offer based on firming slab prices.

Contractual negotiations remain the primary focus of the northwest European HRC market. The daily northwest Europe index was stable today at €421.75/t ex-works.

Mills are trying to drag out annual and half-yearly talks as they expect spot prices to recover and provide more leverage. Some customers are trying to conclude before the festive season as they also foresee increases.

One northwest European steelmaker expects HRC base prices to settle at a minimum of €440/t ex-works. At these levels, it is less likely that mills will look to change pricing mechanisms or shorten contract durations; had buyers refused to move away from their €80-100/t declines, mills would have been forced to change the nature of their contractual deals as they cannot afford such declines.

But many buyers are in no rush to finalise agreements as they expect firm sentiment to ebb, given the lack of fundamental change in demand. There has been no uptick in automotive orders for the first quarter compared with earlier this year, mill sources said. But they hope some restocking will bolster apparent consumption despite stable real demand. At the same time, Europe's production cuts, equating to about 6 mn t/yr, and safeguard quotas could tighten the supply and demand balance somewhat.

One producer in the Benelux has been offering hot-dip galvanised at competitive levels of €30-40/t below its competitors in the north.