EU HRC: Some contract talks continuing in north

Not all contractual deals between northwest European steelmakers and larger distributors have been concluded yet.

Some large German distributors are pressing for €440/t ex-works base, which is below some of the half-yearly deals done to cold-rollers and precision strip producers.

One northwest European mill said it had settled some first-half deals at €460/t with automotive customers and others, representing a €50-60/t decline on the year. The distributors are trying to secure reductions closer to €80/t, as their competitors have concluded supply deals at similar levels with end-users.

These continuing talks partly explain why mills have started to announce increases, to underline the fact that larger declines will not be realised. One northwest European mill has increased its offer to €460/t ex-works base after steelmaker ArcelorMittal's announcement of a €500/t target level in the north. But this level is not yet palatable to customers and most spot sales are still concluded closer to €440/t ex-works.

While ArcelorMittal appears to be firm on its increase, another mill still appears flexible on price to secure volumes. Real demand has not changed, and service centres fear it will be difficult to pass on increases. This theme is replicated in Italy. While another mill has increased its offer to €450/t base ex-works, and imports remain uncompetitive, some decoilers doubt the likelihood of rises sticking as demand and sheet prices are weak.

A trader tabled a fresh offer into Italy and Antwerp today at around €480/t cfr, but received a lukewarm response from buyers, which are not yet ready to pay such levels — perhaps understandably, given where domestic transaction prices are.

The firming trend is much more apparent outside Europe than within the EU at the moment, with material offered at $510-525/t fob from Turkey. But within the EU it is supported by firm raw material costs, with the German market expecting a €20/t scrap cost increase in February, and iron ore remaining comparatively strong.

Argus' domestic northwest Europe HRC index was static today at €441.50/t ex-works, while the daily Italian index was unmoved at €435/t. The diminishing spread between the two is making it difficult for Italian mills to move material into the north, beyond their contractual business.