EU HRC: Regional prices diverge on Italian strength

European hot-rolled coil (HRC) prices diverged today, as expectations of a rebound in the south failed to follow the usual trend of affecting prices in the north.

Argus' northwest Europe HRC index slipped by €1.50/t today to €412.50/t ex-works. But the daily Italian index rose by €2/t to €386/t ex-works, as some expected a bounce as a result of production disruption.

The northwest forward curve was relatively static. December was unchanged at €425 and January moved up a touch to €431, while the current month-to-date average was €414.25.

German service centres, many of which are exposed to the automotive sector, have destocked to the point at which they have some inventory holes. But some remain reluctant to commit as they expect pricing to soften further in the coming months despite production cuts.

Automotive volumes will not normalise sufficiently next year to support the German market and the wider economy, according to some buyers. And competitive Russian material still poses a headache for local suppliers, despite some overseas mills pulling back from the market in the expectation of increased prices going forward.

One service centre source said that ArcelorMiittal is unlikely to walk away from Italy's Ilva, and when the situation is resolved it will have a lot of material to sell in order to fill its order books. This could actually act as a break on pricing in the first quarter, despite prevailing sentiment that the market may have found a floor. Traders are anticipating a rebound, but some service centres say a bounce will be difficult without a change in underlying demand levels. One German service centre said it will hold off from purchasing until February, and is experiencing an increase in competition from Italian sheet sellers, even in northern Germany.

But others are contemplating imports, in the expectation of domestic prices rising.

In the south, some are alluding to availability concerns given the issues at Ilva. One seller said that small volumes have transacted at around €400/t ex-works, even though this may not yet be representative of the wider market. Turkish sellers have pulled back offers and moved them higher, and some buyers suggest they have reneged on previous deals to push for stronger prices.

One Italian mill has pulled back its offers and is targeting over €400/t ex-works for January. A strike started at ArcelorMittal's Taranto works at 07:00 today, and will last for 24 hours. The company cannot offer any material from the site after informing the government of its intention to walk away from its lease deal.