EU HRC: Market senses a bottom

There is a growing sense that European hot-rolled coil (HRC) prices are close to bottoming, with sentiment supported by a few positive factors.

The expectation of increases is much clearer in Italy, where it looks as if steel producer ArcelorMittal will walk away from Italian firm Ilva. ArcelorMittal cannot offer from the plant and has cancelled orders for some customers, causing concern over availability. Some buyers have already shifted their supply lines to other group plants in the event of disruption at Ilva.

Mills in Turkey and elsewhere are trying to take advantage of this situation, and some buyers have seen import offers reach €400/t cfr and above. One Turkish mill has reneged on deals and tried to renegotiate prices around €20/t higher. A trader said one mill's offer rose by $15-20/t previously. An Indian mill has also increased its price to €400/t and above from €380-385/t cif.

A domestic Italian mill is reportedly targeting €410/t ex-works for January, up by around €20-30/t, according to customers. One trader said he bid around €417/t for quayside material in Italy, and a seller said there have been some isolated deals around €400/t ex-works, though the market is not yet at this price.

The likelihood of a firmer market is less clear in the north. A buyer purchased a fairly small cargo of Russian supply at around €380/t fca, and some local mills are still competing to displace import offers given sluggish demand. The German market has experienced ferocious destocking on the back of ongoing automotive sluggishness, with one large buyer reducing its inventory from around 220,000-240,000t, to 160,000t.

There is talk a German mill will reduce output across its blast furnaces, although it denies suggestions that one will be idled outright.

Steelmakers are not looking forward to contractual talk with automakers and original equipment manufacturers, some of which are targeting declines of €80-100/t. Even a €40/t decline, which two mills have said is very likely, would mean a large margin squeeze given comparatively high costs.

Argus' daily northwest Europe HRC index fell by €1/t to €414/t ex-works, while the daily Italian index fell by €1 to €384/t ex-works.