Northwest European buyers are adamant the current coil price high cannot last forever, although they cannot make out a turning point in the foreseeable future.
“Such phases don’t last, and what goes up will come down,” a manager at a stockholder group tells Kallanish, but also concedes that the corrective downturn is behind the visible horizon. “I hear different opinions every day. In January, I thought it will be over soon, but in fact it has become more dramatic,” he says of the prevailing confusion.
A buyer at a processing group is more precise in his outlook. “For the next two months I see zero indicators for a drop,” he comments. He cites many indicators for continued demand. In addition to China’s curbed exports and problems at European mills like Liberty, Ilva and Dunaferr, he notes that order activity at miners like Vale for heavy vehicles points at increasing activity upstream.
The jury is out on whether this means, as some market participants suggest, that one should accept prices surpassing €900/tonne ($1,072) for hot rolled coil, which could this week be tagged at €950 by mills. This is especially the case, those sources say, since delivery times now stretch late into the third quarter.
The stockholder’s manager issues a warning here: “Unless you have back-to-back agreements, I’d be very cautious. The bubble could burst in, say, October, when today’s orders arrive. So, you paid €900 today, and may have to sell at €700,” he says.
Price would matter less if supply arrived sooner, thereby reducing the current exposure to months of risk. “I can look three to five weeks ahead, but not that far,” he concludes.
Christian Koehl Germany