EU HRC: Italy sales to Germany support

The recently opened-up arbitrage for Italian mills into northern Europe is lending support to southern hot-rolled coil (HRC) prices, despite less favourable conditions in the local market.

Some sellers have concluded sales into Germany at €490/t delivered, allowing them to hold firm in outstanding negotiations with steel service centres (SSCs) in Italy.

The Argus daily Italian index today is unchanged at €441.75/t ex-works, as the price has been fairly stable in the past week amid limited trading activity.

Italian mills are still finding it difficult to convince SSCs to pay more, as they are fighting for downstream orders and unable to raise sheet prices in an increasing coils market. The SSCs booked large volumes of HRC in November, when Italian prices were at multi-month lows, and are selling based off stock cost rather than replacement values.

But local mills earlier this month did give discounts to some of the biggest buyers, such as tube makers and re-rollers. The former this week have also booked large quantities of Turkish HRC at €450-455/t cif Italy. But firmer scrap prices, coupled with lower-priced sales in Italy and also north Africa, are again seeing Turkish mills tabling high offers to trading firms. European SSCs were bidding €465/t cif against offers of €485/t, a sell-side source said.

Turkish material was offered into Spain at about $500/t fob base, and sources suggest mills in the country may have revised their lower offers based on the bounce-back in scrap. Recently, market participants placed the Spanish local market at about €480/t delivered.

Northwest European HRC prices today continued to climb, as large service centres acquiesced to smaller volumes at higher prices.

Argus' daily northwest HRC index jumped by €5.75/t to €480/t ex-works. Service centres were paying more if they needed cargoes, but only for smaller volumes as they were trying to hold off in the hope of decreases in a few weeks. Mills have pulled back expectations from €500/t ex-works and above, but are still firmly pushing for increases.

One German service centre reported buying European S35 JR +N cut sheet at €500/t delivered, but it was not clear whether this was a fresh purchase. Buyers were trying to leverage more competitive Italian prices and still hoping for cheaper imports. Italian galv was available at €580-590/t delivered, against local offers of €600/t ex-works. One mill reported selling small HRC volumes at €485-490/t ex-works for May arrival.

Asian HRC was offered into Antwerp at €465-475/t cfr, but some of this could be May arrival, which is a rather extended lead time in an uncertain market. Cold-rolled coil, DC01 grade, was offered at €530-532/t cfr for April shipment, May arrival. European mills are wary of the development in Korean offers, as they expect it might be affected by the coronavirus outbreak, which has had an impact on Asia-Pacific demand.