EU HRC: Sentiment shakier

Subdued demand continues to undermine sentiment in the northwest European hot-rolled coil (HRC) market. Some mills are still so hungry for tonnes that they are offering into Italy, opposite to the usual trade-flow from south to north.

A large Italian seller is understood to be offering at €500/t delivered, with northwest European offers from two mills into Italy €10/t lower, swaying buyers to purchase from there. Another Italian producer has been on the market with base-grade material at €480/t ex-works this month.

But some primary northwest European sellers remain officially out of the market as they work to roll over January-June pricing into the second half of the year — a tall order, given falling spot prices since the fourth quarter.

Mill margins have been squeezed by high raw material costs and softer steel pricing, but contract buyers do not want to miss out on lower spot levels. Some deals have been concluded €20-35/t lower than January-June deliveries.

The absence of some mills means a quiet spot market, clouding price discovery. Argus' daily northwest Europe HRC index slipped by €1/t today to €478.50/t ex-works, based on 13 inputs from buy and sell-side sources.

Appetite for imports has ebbed. Russian HRC has been booked into Italy at around €470/t cif, and there is likely to be some liquidity at this level. But traders are not hearing too much interest at their offers of €475/t and above. An Indian mill was heard offering at around €480/t cif for July shipment, a more competitive lead time than Turkish offers of August-September.

One Turkish mill is still struggling with furnace problems, and sources suggest these will not be resolved until at least September. The mill is buying Brazilian and CIS slab as a result. Falling scrap costs are prompting concern that Turkish sellers could further cut their offers from the current €480/t cif level.

Europe's automotive market seems to have normalised to an extent, with some sub-suppliers now back at the table for contract talks. Given this year's destocking, mills' production cuts and the lack of competitive import offers, some feel the market could reverse sharply, when it does turn. By now, buyers are usually planning their October requirements, but have not done so yet because of domestic suppliers' short lead times.