UK HRC: EU mills crash price

Desperate western European mills depressed the UK hot-rolled coil (HRC) market this week, as they offered at aggressive levels to try to extend floundering lead times.

Argus' weekly index slipped by £17.50/t to £455/t ddp West Midlands. German HRC was offered as low as £445/t ddp on a six-to-eight-week lead time, according to some buy- and sell-side sources. A European re-roller was also highly competitive despite the fairly firm cost of slab. Unusually, European material is currently more competitive than Asian coil.

Traders were struggling to make anything work and appetite for forward material was very weak, with many buyers forecasting further price softening headed into the typically slower third quarter; people do not want to commit to big tonnages for this period, given that it is a quieter and shorter trading spell even when the market is firm.

There is also concern that pre-Brexit restocking could lead to a demand vacuum at some point, hitting service centres that have not banked the strong trading months to help them through a downturn.

Turkish offers would be around £480/t ddp or slightly lower for S275 grade coil, with Indian material at a similar level or higher. With scrap into Turkey currently sticky above $300/t cfr, people questioned their ability to match European offers — although there was a belief that import pricing would moderate a touch.

Participants are already writing off 2019 as a bad year. While some service centres report brisk business over the first quarter in volume terms, margins have not been strong. This is now alleviating slightly, given lower-priced replacement material.

Talk in the market suggested Duferco would be the eventual buyer of stricken service centre Meridian, though the deal does not appear to have been finalised. However, a company called Meridian Steel was incorporated on 5 April, according to a Companies House filing. Duferco directors are the directors of Meridian Steel.