Sentiment in the flat downstream segment is decidedly cautious this week according to sources at the Tube and Wire trade show in Düsseldorf.
They are describing a market weighed down by unreliable downstream demand and the difficulty faced by service centres and re-rollers in passing hot rolled coil (HRC) price increases through to customers.
The market mood at the show appears two-tiered: producers with a broadly positive outlook and preparing further price increases, while the manufacturing sector is grappling with demand weakness and financial pressure, overwhelmed by the geopolitical uncertainty, Kallanish notes.
No further coil price increase announcements are expected during the event, according to multiple sources. However, mills are said to be readying additional hikes to be implemented around the time of the European Commission’s new safeguard announcement.
One steelmaker source tells Kallanish that demand is not exceptional, but order books are filling steadily, adding there is no urgency to sell. No price increase is being considered at present, the source confirms, as the market continues to gradually absorb recent HRC hikes. European HRC prices are currently stable week-on-week at €700-720/tonne ($825.01-848.59/t) base delivered or ex-works depending on order size.
According to traders, the level of import transactions remains low as only large processors are continuing to buy globally. Import offers for service centres have dried up, with buyers staying away from the import market due to CBAM charges and the approaching new safeguard measures. The sole exception is cold rolled coil, where structural European shortages are forcing buyers to continue sourcing on a ddp basis at €860-880/t on average.
Service centre sources report improved margins despite unreliable demand, supported by rising sheet prices. Many are still depleting stocks of lower priced HRC purchased on the import market ahead of the CBAM implementation, providing several months of financial relieve.
However, the uncertainty emerging in Dusseldorf is that service centres will now need to reassess their HRC costs on the basis of more recent purchases, meaning their selling prices will have to move higher. Hot rolled sheets are currently at €770-780/t delivered on average, but with the market leader quoting HRC at €750/t for Southern Europe and the current lower imports, margins will soon come under pressure and profitability is at risk for many service centres.
Author: Natalia Capra
