UK coil market 'toughest' in years

The UK coil market is as "tough" as it has been in years, according to a source at one mill selling into the region.

Service centres are sufficiently stocked and demand has dipped, so they are willing to withhold purchases for as long as possible — most centres seem to have ample stock for the fourth quarter.

The seller was very concerned by the automotive industry's outlook after the steep drop in new car registrations in September. Jaguar Land Rover has moved to a three-day week at its Castle Bromwich site as it grapples with reduced diesel sales and the likely fallout from the UK's exit from the EU, while Toyota said it might need to temporarily close its Derbyshire plant. Most of the Derbyshire plant's sales go to EU destinations.

Carmaker Nissan also spoke out on Brexit today, saying a ‘no deal' scenario would threaten timely component deliveries from the EU. Timely delivery of certain parts is vital for smooth production, although some parts can be purchased from further afield.

Auto-galvanised service centres are searching for other markets. Automotive companies account for over 60pc of European hot-dip galvanised consumption.

On the hot-rolled coil (HRC) side, Turkish offers were back in the market at £530/t ddp West Midlands. Material from an integrated producer was offered by two trading firms at as low as £520/t ddp, but any price advantage disappeared because of exchange rate fluctuations. One source said $630/t cfr (£483.79/t) was a workable price into the UK, while Turkish expectations for galvanised sales slipped to around $760/t cfr for DX51 Z140.

This was competitive against a small trader stock sale to a service centre at £675/t ddp for 1,250mm wide 1.5mm thick Z275 material.

Trading firms seemed adequately stocked across the coil suite. One seller said it could not sell cold-rolled coil at £575/t ddp, but had concluded some sales for a particular thicknesses that must have been in shorter supply.

HRC from one domestic supplier was heard to be available at £540/t ddp, while another mill was behind on deliveries. But one large distributor said it would be able to secure a price in the low-£500s/t ddp for a sizeable order. Another buyer said fresh orders could be delivered by the end of the year.

Potential Brexit outcomes also concerned service centres — none wanted to book imported supply only for a deal to be announced that would see the pound appreciate and prices weaken. One trading firm said this could play into a tighter market for European sellers going forward, especially as with the approach of the end of the preliminary tariff rate quota period in February.

Market sentiment has reversed sharply from summer, when most buy and sell-side sources anticipated price increases into the fourth quarter. Now, most seem more concerned about buying before a further slip in prices devalues their stocks, heightening the wait-and-see mood.