EU HRC: Higher offers bolster market

The northwest European hot-rolled coil (HRC) market continues to advance, with the vast majority of mills maintaining their offers at higher levels.

Argus' daily northwest Europe HRC index rose by €1/t today to €455.25/t ex-works, taking the monthly average to €443.37/t. The daily Italian index increased by another €2.25/t today to €444.25/t ex-works, as the differential narrowed to €11/t.

Service centres have paid €30/t plus for HRC compared with December, although some are not desperate to buy after locking in sufficient material in their quarterly and half-yearly contracts. Most mills are now quoting for late March-April deliveries, and strong import offers continue to support their expectations.

Import offers are around €470-480/t cfr Antwerp, which justifies the €500/t ex-works plus offers being tabled by some mills. One mill is telling the market it is booked out into June, while ArcelorMittal has informed customers it will be relining blast furnace B at its Ghent works in Belgium in September — while this is some way off, the mill will have to stockpile slab ahead of the refurbishment, which will reduce supply it can sell into the market.

Service centres cite brisker demand, and even some automotive suppliers maintain that trade is brisker now the destocking of 2019 is out of the way. The realignment of apparent and real demand is one of the primary drivers of the current uptick in pricing, with decoilers looking to restock.

Steelmakers suggest big buyers with more exposure to the international market are realising they will pay more, and as a result are placing volumes domestically because imports are too expensive. This is helping to nudge out lead times, reducing the urgency of mills to sell.

Given the apparent tightness, Argus assessed the northwest European February forward market at €465/t, up by €5/t, while March was assessed up by the same amount to €472.50/t.

That said, some still question the extent of the recovery in real demand, and mills are still cautious about the situation of their domestic rivals given how ruthlessly they competed for tonnage last year.

Italian producers are also being cautious, carefully evaluating their own offers and keeping a close eye on the import market to prevent Turkish mills from gaining more market share, should local Italian prices rise too quickly.

There is chatter of concluded deals into south Europe at $495-505/t fob Turkey last week, but small quantity offers are being kept at $510-515/t fob. This is still a reduction in comparison with offers made at the beginning of the month, when the lowest available level was $520/t fob, but the producers are making a healthy margin even at sales of around $500/t fob. Traders reported an offer for Indian HRC at €485/t cfr and for South Korean cold-rolled coil (CRC) at €570-580/t cfr Europe.

Turkish scrap prices are showing signs of weakness, with the Argus HMS 80:20 assessment down by $5.50/t on the day yesterday to $282.50/t cfr. Many expect the downtrend to continue in the next few weeks, which is likely to pressure coil pricing out of Turkey, depending on domestic flats demand. The approach of the lunar new year in China this weekend implies that should some buyers need material, they may wait for after the holidays, while traders speculate on the price direction during the country's absence.

Yet Italian market participants still anticipate a further increase in local pricing in the coming weeks, although some producers see resistance and have readjusted their expectations. Mills have already managed to achieve increases of as much as €20-30/t compared with December pricing, but the limit may be nearer than previously thought. ArcelorMittal's plan to shut down steel shop 1 at Taranto in Italy from 23 January until 31 March may provide some leverage, although it could see the producer struggle to raise prices again, as buyers deem its offering risky.