EU HRC market quiet, digesting tariff rate quotas

The European steel coil markets remained quiet today, with demand seasonally slow and import activity subdued by safeguard measures.

One large mill is targeting €580/t ($679/t) ex-works for hot rolled coil, but buyers said it would not be obtainable yet amid lethargic activity. Buy-side sources said transaction prices are around €560-565/t ex-works.

Nevertheless, material ordered now from the mill would not arrive until November, and some UK customers have been told it is booked out for the whole of the fourth quarter.

One trader believed €580/t could be achievable in September, when the European market returns from its holidays.

He had alluded to a flurry of import demand when the European safeguard was announced. But import offers have now gone quiet with participants trying to figure out the mechanics of the preliminary tariff rate quota imposed by the European Commission. "I don't know how Europe will police the quota", one large buyer said, alluding to the difficulty of collating all the material booked and arriving since it was announced. The quota is on a first come first serve basis, and it is not yet clear how much has been filled.

A steelmaker said forex had made Indian and Turkish material more expensive too. This, combined with buyer reluctance to share the duty with traders, has stymied bookings. Long lead times for third-country material have also dampened buy-side appetite, with some material quoted for delivery in three to four months.

In the UK HRC prices are quoted in the £540-550/t range, although larger buyers had secured material cheaper than this for late third quarter/fourth quarter arrival. One trader said he had bought at £520/t ddp from two western European mills.

Import offers are around £545-555/t ddp, which is uncompetitive in terms of price and lead time, as material produced in the EU can be bought on two-month lead times, according to a large buyer.

HRC is the softest of the coil suite in the UK, with hot dip galvanised supply tightest, sources said. One trader has reduced its HRC stock offer from £555/t to £549/t, for material at a port in South Wales.

HR sheet outsell prices have slipped back from £585/t to £565/t, which means service centres are selling below replacement cost — £50-60/t is generally viewed as the margin required to process coil into sheet.

There was a feeling HDG could be quite tight heading into the fourth quarter in the UK, given the lack of competitive import options available and people withholding purchases of late because of the prevailing uncertainty.

Most domestic mills are busy fulfilling contractual tonnes with OEMS and other sectors, so they are not allocating large volumes to independent service centres, one source said.

An Italian supplier has increased its galv price £30-40/t for the fourth quarter, one buyer said.

"There aren't many people to go to for galv, there is a limited number of supply options", one trader said.

Thinner gauge material used to be the preserve of traders, who were primarily fulfilling it with Chinese product. The absence of these tonnes means European sellers are now doing more light-gauge material to fill that supply void.