UK HRC: Yawning gap to imports may help domestics

Domestic UK hot-rolled coil (HRC) prices edged up today on the back of booming import offers.

Argus' weekly ddp West Midlands HRC assessment rose £7.50/t to £412.50/t. There was a yawning gap between third-country and domestic tonnage, with Turkish and Indian material around £470-475/t ddp, and European sellers edging up into the £410-420/t ddp range. Indian mills are mainly off market, Turkish producers also seem to be well-booked for January-March, and Russian sellers have a small allocation for Europe.

Globally, the market has coalesced around $500-510/t fob levels.

These factors may embolden domestic mills, but demand remains the big question. Some service centres had a comparatively brisk start to the year, but others say end-buying has not resumed since the holiday — perhaps unsurprisingly, with many participants only returning this week.

Most decoilers want price increases after watching their stock depreciate continually over the course of 2019; the Argus assessment fell from £492.50/t ddp in the middle of February to a series low of £375/t in mid-November.

At the same time, they want to see clear signs that the typical run-down in outsell prices over the fourth quarter, as people look to generate cash, has stopped. There is still concern over credit insurance coverage, with a leading insurer giving one large hot-rolled player until March to submit "favourable" information before it reviews its position.

Some traders say buyers are stepping in to buy having thought in Q4 that prices would slip. This could fuel upwards movement, but also the downside should real demand not increase.

If real demand does pick up in the coming weeks, mills are likely to secure price increases, especially if import offers remain elevated. However, if business is slow, European mills will still have to compete with each other — as they did ruthlessly over the second and third quarters of 2019 — even if imports remain strong.