EU HRC: AM increase raises eyebrows again

Market participants' expectations that European mills would attempt yet another price increase for the fourth quarter were finally met today with an announcement by ArcelorMittal of a €30/t hike.

Many questioned the timing of the increase, as most of Italy is still off, while indicators of the state of the German economy are worsening day by day, with talk of a recession dampening buying interest further.

The steelmaker is asking for €510/t ex-works in Germany and €490/t ex-works in Italy for October deliveries — far above Argus assessments at €468/t ex-works in northwest Europe and €442/t ex-works Italy. Another mill in Italy has asked for €460/t ex-works, while a German seller was heard to have offered into Italy at €455/t delivered, although this is likely netted back excluding extras.

"Everybody now knows that their declared prices have no meaning. They do not match with their actuals," a market participant said about the latest increase. "Mills give discounts as soon as they announce new prices," another said.

Although market participants recognise the need for European mills to push for an increase after more than six months of pressured margins, buyers will not easily accept higher levels, especially since raw materials prices have come down since the beginning of the month.

In addition, demand expectations diverge — buyers see no recovery in demand in the fourth quarter and many plan only making small orders to fill gaps, but some mills' demand projections for the rest of the year give them reason to argue that there is sufficient grounds for a price hike. Both sides agree that no more destocking is expected, but say that depleted inventories are unlikely to see a lot of speculative purchases.

But at the same time, traders today reported slashed hot-rolled coil (HRC) offers from Turkey and India — both are becoming more aggressive amid declining local prices and the EU import quota cap at 30pc. Turkish export prices heard today stood at $485-490/t fob Turkey, but larger orders are likely to get even more wiggle room, according to traders, and fluctuations in the exchange rate could make some offers attractive to buyers.