UK HRC: Mills vie to lure buyers

The UK hot-rolled coil (HRC) market remains subdued as buyers hold off in the knowledge European material is the cheapest in the world.

Argus' assessment was steady at £455/t ddp West Midlands.

A German mill was heard to have offered into the UK at as low as £445/t ddp West Midlands in the last week or so, although this was probably for S235, with S275 requiring offers around £10/t higher. The mill has not been seen offering into the UK for some time. A northern European re-roller was also heard to be offering at around the £450/t ddp West Midlands level.

Trading firms were able to offer Turkish S275 at £476-480/t ddp, but this was unattractive to buyers, given quiet demand and the uncertain economic environment. Despite a weak Turkish market, mills seem in no rush to sell, and have little scope on pricing without raw materials costs softening first.

Service centres are reluctant to commit to tonnage, in the belief that prices will soften, and are only buying what they need.

Some have experienced a volume boost from Meridian Metal Trading entering administration, which has cushioned any reduction in underlying demand. Cheaper stock is starting to arrive, meaning margin pressure is alleviated to some extent, with most stockists suggesting they are profitable.

Duferco is carrying out due diligence on Meridian Metal Trading, having incorporated Meridian Steel earlier this month, and the deal is likely to be concluded this week. This has caused some concern at service centres, given that the company will need to regain market share. The business is likely to be restructured, with a greater focus on its West Midlands site.

Mill sources say prices need to rise in the UK and wider EU, but beyond the intensifying margin squeeze, there is little justification.

Demand usually ebbs in the summer, and stockpiling ahead of the UK's departure from the EU could exacerbate this where consumers feel they are sufficiently stocked. UK construction activity has quietened, with businesses less keen to invest, with property prices in London and the southeast continuing to cool.

But EU mills are the cheapest supply source, their order-books could fill up and they do not need to cut prices further.

The fact that German mills are selling commodity-grade HRC into north Africa demonstrates the weakness of the continental European market. "All of this just feels like there is a Europe-wide recession going on," one trader said. Mills even have some mid-year orders ready as their lead times have been so short.

EU HRC quiet

Argus' northwest Europe HRC index was static today at €487.25/t ex-works, with trading still subdued after the Easter break. As in the UK, buyers are in no rush to purchase as they have sufficient material and can secure swift deliveries domestically, allowing them to buy only what they need at no risk.

Turkish mills offered into Spain at €480-485/t cfr, with discounts of €5-10/t possible, but these levels are not particularly interesting to buyers, given prevailing domestic lead times and pricing.

Hot-dip galvanised demand and prices remain under pressure, with automotive suppliers still trying to sell into the industrial sectors, where the market is also soft. Two Chinese mills have reportedly booked a substantial amount of automotive-gauge material that will clear customs on 1 July and potentially help to swiftly exhaust China's 527,000t duty-exempt quota.