EU HRC: Tightness impacting northern deliveries

Tightness in the northwest European hot-rolled coil (HRC) market means that deliveries are being delayed, and mills with more than one site are having to divert orders to different plants to ensure they are fulfilled.

One buyer that normally takes HRC from a particular site has had its orders re-routed to another plant. This disruption and extended lead times means some buyers are placing orders earlier than they had expected to ensure continuity of supply.

Other customers that moved to shorter contracts at the back end of last year have been caught out by the quick increase in prices this year, and are having to pay more than they had anticipated to secure second-quarter tonnages that they would have got at lower levels in the fourth quarter. The recent increase in apparent demand and the reduced production means that mill lead times have extended, with all major sellers now booked into April.

An automotive sub-supplier said inquiries and deliveries have increased, albeit from the very low level of last year. One service centre also alluded to brisker end-buying, but said it was unclear whether it was restocking or a genuine increase in end-use activity.

Argus' daily northwest Europe HRC index nudged up €1.75/t today to €468.75/t ($511.50/t) ex-works. One large steelmaker said €500/t ex-works was being achieved for back-to-back deals and end-users, but even €490/t ex-works was achievable for larger service centres.

While the market is tight, some are trying to withhold on purchases to ascertain the impact of the coronavirus on the market and critical end-use supply chains.

Turkish import offers have also fallen. One buyer was recently quoted €475/t cfr Antwerp from Turkey and lower levels are probably available. But Turkish sellers do not appear desperate to sell into Europe yet, with one largely off market.

Traders reported stable offers for smaller lots of HRC from Turkish mills at around $500/t fob today, but rumours about an unconfirmed deal concluded an Italian tube producer at $475/t fob for April-shipment material have shaken the market. A mill reported the alleged buyer had bid $460/t fob Turkey. Late last week, Turkish sellers were rejecting bids at $460-473/t fob, according to traders.

Market participants estimate the equivalent of the sale to be €450/t cif Italy, in line with expectations about the workable imported price considering Italian mill prices. Offers from Egypt were higher at €475-480/t cif, while India continues to be absent.

The Argus daily Italian HRC index edged down by €0.50/t to €441.25/t ex-works.

Mills in Italy are offering from their March-April delivery programmes, but prices have slipped and continue to face moderate pressure, as buyers postpone purchasing amid uncertainty. Although fundamental factors, such as reduced EU supply and stable demand, are present, the coronavirus outbreak is affecting sentiment in Europe. In addition, some expect less volatile supply from ArcelorMittal's Ilva assets to translate into buyers pushing for discounts.