European steel producer ArcelorMittal has cut its hot-rolled coil (HRC) offer for November delivery by €40/t to €810/t.
The move comes at a pivotal moment for a market that is desperately trying to understand which will be the biggest driver of price going forward — low demand or high costs.
ArcelorMittal has shut around 6mn-7mn t/yr of flats-oriented crude steel capacity in response to weaker buying and rising costs. Market participants suggest more cuts could be needed given weaker offtake from certain sectors, such as the auto industry.
There is widespread belief in the market that other producers need to take crude and rolling capacity off line to support prices. Attendees at EUROMETAL‘s Southern European conference in Milan, Italy suggested the high cost, low demand environment could persist for some time.
ArcelorMittal was the first to increase prices and some other steel mills followed suit, although their resolve has faded quickly in response to weak apparent demand.
Mills throughout northern Europe have become more flexible on price in the last week or so, underlining the weakness in their rolling programmes.
How the market perceives and reacts to ArcelorMittal’s move could help determine price direction in the coming months. If buyers welcome the move and place tonnes, acknowledging that the mill is “giving back” some of its profit from recent years, the market could stabilise. But if they view the move as capitulation and opt to continue withholding purchases, other mills will likely reduce their prices and an ugly battle for tonnages — similar to 2019 — could ensue.
Imports also have a key role to play in determining price development. Offers have increased since flooding affected shipments from Posco’s Pohang mill in South Korea. A few large-scale buyers booked third-country tonnes to fill the supply gap around €700/t cif and slightly below. But overall sentiment remains shaky, with raw materials such as scrap softening. European mills have been operating their coke ovens at full capacity to generate gas enabling them to reduce costly purchases of external energy. But with blast furnace utilisation rates reducing, and likely needing to fall further, coke inventories could build and lead to excesses and more cost deceleration. While energy prices remain high, they are exceptionally volatile. The headline Dutch TTF everyday natural gas assessment droppedbelow €200/MWh on 15 September, down from a peak of €308/MWh on 26 August.
By Colin Richardson
