Major European hot-rolled coil producers have increased output markedly since September-October last year and are now running close to full capacity despite weak demand, data from Navigate Commodities show.
Tata Steel Ijmuiden has increased its run rate from around 66pc in September 2023 to full utilisation so far this month, Navigate said. Leading producer ArcelorMittal has increased production at its Fos-sur-Mer site in France from 45pc last October to full utilisation today, while its Dunkirk plant is also running at full capacity.
German producers ThyssenKrupp and Salzgitter are running at full capacity. ArcelorMittal's Bremen plant has ramped up from 75pc in August to full production today, and its Eisenhuttenstadt plant has increased its run-rate from 64pc in September to 100pc so far this month.
Voestalpine's Linz site in Austria is slightly below, at 98.5pc, while Swedish steelmaker SSAB is running its Lulea site in Sweden and Raahe plant in Finland at full capacity. Its Swedish Oxelosund site has minimal production.
Italy's only operational integrated producer Arvedi is running at over 97pc capacity, up from 70pc in September. US Steel Kosice in Slovakia is also at its maximum run rates, Navigate said.
Mills are responding to a firmer pricing environment: the Argus benchmark north EU HRC index has risen by €52/t since the start of September to €628/t on 15 January, while the Italian index increased by €56.50/t to €638.50/t over the same period.
Constrained import supply and a higher floor price for imports because of CBAM costs are driving prices and utilisation. Revisions to the EU steel safeguard could increase demand for EU mills' hot-rolled, cold-rolled and hot-dip-galvanised coil by an incremental 6mn t/yr if the domestic price remains more attractive than imports with safeguard duties, Argus calculations show.
A sustained 500,000 t/months increase in EU27 hot metal output typically coincides with a roughly €55-60/t increase in CME EU HRC futures prices 4-5 months later, Navigate said. This could occur under the new safeguard, some sources said.
However, some suggest domestic mills could battle for market share as they look to secure some of this additional demand.
EU mills would need to pay the full cost of their remaining carbon exposure for additional production not covered by free emissions trading scheme allowances, which would increase the cost of the domestic marginal tonne by around €180/t at current carbon prices.
The contango on the futures curve has softened in recent weeks, with spot rises last year outpacing increases on paper. The second-quarter contract traded at €670/t on 15 January, at a premium to the underlying index and just slightly below the third-quarter settlement of €680/t.
