EU HRC: Export offers still circulating

The northwest European hot-rolled coil market was winding down ahead of the Easter holiday today, but there was continued talk of hyper-competitive export offers from major suppliers.

Mills have been keen to export to try to firm up the supply-demand balance ahead of third-quarter contractual talks.

Mills have been offering into north Africa at around $540-550/t cfr for S235, or €477-486/t. Argus' domestic northwest Europe hot-rolled coil (HRC) index slipped by €1.75/t to €490/t ex-works today in quiet trading, as buyers continued to wait for lower pricing and mills looked to rebuild their weak order books.

Bearishness continues to shroud the automotive sector. New carbon dioxide emissions regulations come into force next year, under which carmakers must cut their average emissions to below 95g per kilometre by 2021. After the furore and shrinkage in demand caused by the new emissions testing regime at the back end of last year, many are concerned about the impact of the regulations.

Most buyers have already written off this year, as the second quarter is typically the firmest pricing period and the market remains weak. Should mills fail to secure increases now, many buyers think they will not get any for the remainder of the year. Sell-side sources suggest cost-related increases might be possible headed into the third quarter given steep rises in iron ore — margins are unquestionably under pressure.

However, there could be a barrage of material hitting import statistics in March and April based on the drawdown in the global HRC quota. Customs data suggests over 700,000t of HRC was cleared to enter the EU in March, and 517,000t was imported over April 1-16. Should that daily average rate persist until the end of the month, April imports will be close to the all-time high of 963,700t imported in January.

As the material piles up and buyers refrain from booking given soft demand, which is amplified by quick delivery times from local mills, service centres could remain very reluctant to commit to big tonnages. Offers from central European mills are still competitive for end-May arrival. Turkish pricing has moderated somewhat too, although at around $500/t fob based on the latest booking, it is still not hugely attractive to buyers.