EU HRC: Some signs the market is close to a floor

The northwest European hot-rolled coil market remains under pressure today as concern over the underlying macroeconomic backdrop continues, but there are some signs of an impending bottom.

The Argus daily northwest Europe HRC index slipped to €511.25/t ex-works today, down by €2/t on the day.

Imports continue to constrain domestic pricing somewhat. But lead times from some origins, notably Turkey, are extended into April-May, which is crimping buy-side appetite given uncertainty over the economic environment and domestic pricing going forward.

Pricing from Turkey also seems to be rising on the back of a potential lunar new year uptick in Asia as the market approaches the typical restocking season.

A Turkish mill was said to be offering dry HRC into Antwerp at €490/t cfr, but this is substantially above where most other quotes are, at around €460-465/t cfr. Offers into the south reached as low as €437/t cfr earlier this week, but are now closer to €450-455/t cfr. Traders servicing Spain and Italy are getting more calls from customers.

In particular, appetite for third-country pickled and oiled (P&O) HRC has increased. In recent years there has been a reduction in independently operated pickling and oiling lines domestically in northern Europe, and availability from primary exporters — such as Turkey — is not abundant. Turkey is now toll-processing dry HRC into P&O domestically before exporting, which has seen its supply increase somewhat.

Taiwan, a regular supplier of P&O, was offering at €490/t cfr southern Europe, at a substantial premium to dry HRC. Egypt, another regular P&O supplier, cannot compete on prices at present because of high finance repayment costs. Import offers for P&O material are €26/t above those for dry coil, a market participant said.