EU HRC: Rising import offers buoy Italian pricing

The Italian hot-rolled coil (HRC) market typically trades at a discount to northwest Europe because import pressure has more of an immediate impact.

Turkey's economic problems and its loss of the US as an export market exacerbated this trend in October-December. But now southern European pricing is bouncing back quicker than in the north, despite Italy entering technical recession, with more buyers — typically with lower stocks than the north after last year's strong stock draw — convinced the uptrend is here to stay.

Italy's exposure to imports is now benefiting the country's mills, given higher prices out of key export hubs, such as Turkey, the CIS and China. Argus' weekly cif southern Europe HRC assessment rose by €10/t to €490/t today.

Fob CIS prices have increased by $40/t so far this month, while fob Turkey levels are up by $50/t in the last four weeks and could rise further as mills hike domestic prices. There was talk of Turkish offers rising as high as $560/t fob today, equating to €496/t fob — well above the latest quotations. Freight from Turkey to Italy is €22-23/t at present.

Northwest European prices have risen by just €5.50/t so far this month, with many buyers well stocked and in no need of spot volumes after covering their first-quarter requirements. Argus' daily northwest Europe HRC index was flat at €508.50/t ex-works today, having risen by €2.50/t yesterday.

As a result, the Italian differential to the northwest European market remained at just €26.50/t today, as mills in the south have been able to push through €20-40/t increases quicker than in Germany and the Benelux countries — albeit from a lower level. One mill said it was achieving sales at around €485-490/t ex-works, while a trader said he was moving tonnage at €495/t ex-works. Some buyers still questioned these levels, with one suggesting the market was closer to €460/t ex-works.

Northern European mill offers have risen to €530-540/t ex-works for second-quarter tonnage, but buyers are holding back because of their stock situation and the uncertain economic environment. All the EU's largest economies are experiencing headwinds, and demand from key sectors — notably the automotive industry — is sluggish.

But the rise in raw material prices has not slowed much, despite a surprising slip in iron ore prices over the last two days. Fob Australia premium low-volatile coking coal prices have risen by $6/t over the last two days to $207/t, reflecting an uptick in demand outside China.