EU HRC: Mills push for increase

An Italian steelmaker has informed decoilers that the minimum price for new orders of hot-rolled coil (HRC) will be €460/t ex-works, up from its previous target of €445-450/t ex-works. Other mills are understood to be pushing for higher prices too.

The Argus daily Italian HRC index rose to €446.50/t ex-works today, as market participants expected it to be increasingly hard for small and mid-sized buyers to purchase at lower levels: one buyer was indicatively offered €470/t ex-works. But a number of traders reported this week that buyers are still able to book at €440-450/t delivered base. These prices could be for higher grades with more extras, and thus a lower base price. Many expect hefty discounts from the new mill targets for big orders, but large buyers now appear to have retreated from the market.

Large tonnage deals at €445/t delivered, as reported yesterday, occurred a few weeks ago, according to a sell-side source, but others said these were more recent. Pipe and tube prices in Italy came under pressure during the initial outbreak of the coronavirus in China, but last week some increases were attempted, which are now less likely to be accepted considering the spread of the disease in Europe.

There is a lot of misinformation in the market about the coronavirus, perpetuated by local and international media, which is clouding price discovery.

Expectations for price development going forward are also diverging. On one hand, some suggest the coronavirus will hamper economic growth in Europe, slowing steel buying activity. There is a lot of talk that Italy's faltering economy could slip into recession — a technical recession is two consecutive quarters of negative growth — as it is focused on the industrial, export-led north. Chinese prices are under pressure again this week as stocks grow.

On the other hand, production disruptions could occur should the spread intensify, although Italy's Arvedi yesterday said that it is not experiencing any problems so far. Any end-users that are forced to slow or reduce working time by the virus could also have pent-up demand when they restart. Disruptions to production could happen on either side of the supply chain, as there is a large concentration of buyers and processors in the north of the country. Considering scrap collection and delivery logistics, should travel restrictions and trucking issues in Italy escalate, mills reliant on scrap could also face a problem sourcing material.

Producers could be announcing increases to cash in on any buyers looking for prompt delivery, given the uncertainty over production. Some long steel mills reportedly have a large amount of trucks on standby, the trader said.

Some expect to see Turkish HRC prices slide again. An offer was heard today at $525-535/t cfr Italy — largely in line with offers reported last week. But a bid for slab from a Turkish mill was heard lower today, indicative that mills may anticipate a fall. Sheets were heard available in Italy at €530 delivered.

Northwest European steelmakers continued to talk about long lead times, and suggested some buyers were concerned by talk of disrupted Italian deliveries and were looking to buy prompt nearby material as a result. Despite talk of automotive companies reducing production because of a lack of components, mill sources said there had been no change in demand, and that buyers were taking delivery of contractual material as normal. Some pointed to continued price strength as evidence that there was sufficient demand to underpin the market at current levels. Import offers remained unattractive and local mills were quoting €500/t ex-works for small tonnages; many buyers were only buying what they needed, rather than taking additional tonnage, given the heightened uncertainty. While buyers agreed that the coronavirus could impact demand, it was also clear that one worker at a mill becoming ill could lead to supply disruption in a comparatively tight market.

Argus' daily northwest Europe HRC index nudged up by €0.75/t today to €484.75/t ex-works. The cif southern Europe HRC assessment rose by €5/t to €475/t.