EU hot metal output declining: Tathya

European hot metal production fell to its lowest level since the end of January in the week ending 27 May, according to Tathya Earth.

Tathya's European production index registered 87.47 in week 21, its lowest level since 86.24 in the fourth week of January. The index started at 100 in the first week of January 2020.

The declines are unsurprising given weakening demand and low import offers, and especially as talk of output cuts at some mills has proliferated in the last few weeks.

European hot-rolled coil (HRC) prices have continued to trend lower in recent weeks amid softer apparent and real demand. Since 11 April Argus' headline Italian HRC index has sagged from €864/t to €681/t, a decline of €183/t. Over the same period the benchmark northwest EU HRC index has dropped by a more gradual €123.25/t, from €847/t to €723.75/t.

The faster declines in Italy have been driven by stronger import influence in Europe's largest coil importing country. At the beginning of May there was a gap of almost €150/t between Argus' daily Italian HRC index and the twice weekly cif Italy marker. That has now moderated to €101/t after sharper declines in domestic offers, but remains much larger than historically. Large buyers are bidding around €560/t cif for imports, while domestic producers are offering €670-680/t.

There is a belief domestic mills will not have to drop to import levels given the risk of some quotas oversubscribing, but at the same time local producers seem increasingly hungry for tonnes. Mills from north Europe are offering into the south at €700/t delivered, while Italian mills are targeting similar levels into central and eastern Europe.

By Colin Richardson