EU HRC: Summer slowdown persists

The European hot-rolled coil market remains subdued, with Italian participants on holiday and the north quiet.

Export and domestic demand is still scarce because of the holidays, although some traders suggest buyers are checking prices for fourth-quarter arrival.

An Italian mill is offering at €440-445/t ex-works for S235JR material, but only has limited September deliveries available as a result of continuing maintenance. There was talk ArcelorMittal had reached a deal with the Italian government that would keep its Taranto plant operating, but this could not be confirmed; traders have been taking long positions in anticipation of supply disruption, which could lead to an increasingly oversupplied market in the coming months.

Germany remains weak, with macroeconomic data stoking caution. Industrial output in Germany — western Europe's largest steel consumer — fell by 1.5pc in June as protectionist measures hit demand for exports and the automotive sector's downturn continued to take its toll.

One mill in Germany has been selling at below €450/t ex-works for HRC, but probably for heavier-gauge material with higher extras and a lower base price once normalised back to commodity grade. In June, the mill concluded such sales to a nearby customer at as low €420/t ex-works.

The intensifying trade war is undermining sentiment, with fob China HRC prices down by another $3/t today, at $490/t. Europe is insulated from China to a large extent because of dumping duties, but weakness in the world's largest consumer and producer typically reverberates throughout the global marketplace. Indian material was offered into Italy at around €450/t cfr, with similar offers into Turkey as the country's mills look to divert tonnage from the weakening Asian market. There was talk of Russian offers into Turkey at similar levels.

A trader was trying to buy material for southern Europe, with offers at $500/t fob. The trader deemed $495/t fob as workable for some mills.

The primary problem for Europe is not import prices, although cheaper offers are emerging. Weak demand is the main problem, with outsell prices from service centres to end-users under increased pressure as the latter sense their strength in a buyers' market.

Some suggest price drops for replacement coil are futile in this environment, as they are unlikely to spur demand during the holiday season. Whether the market falls or rises after the summer break depends on the speed with which buyers need to buy. At present, it is clear buyers are more concerned with destocking.

Argus' daily northwest Europe HRC index edged up by €0.50/t today to €467.75/t ex-works, while the daily Italian index slipped by €0.50/t to €445.25/t ex-works. In the forward market, September was still backwardated to August, at €464/t against €468/t. October was assessed at €464.5/t, down by €0.50/t.