EU HRC: Macro gloom weighs on north

North European hot-rolled coil (HRC) prices slipped today as some mills acquiesced to lower prices than their competition.

Argus‘ daily northwest EU HRC index slipped by €3.25/t to €641/t ($686/t).

A German producer was selling November delivery HRC at €640/t ex-works, while a Benelux-based seller was transacting at €645/t delivered Ruhr to some customers. Some were still trying to maintain offers around €700/t, but getting very little traction.

Weakness in manufacturing new orders continued to depress sentiment and apparent demand across the north European steel market. German manufacturing new orders fell by 11.7pc on the month and 10.5pc on year in July, according to figures from the Federal Statistics Office of Germany. Domestic new orders for manufacturers were at their lowest in the last eight years, excluding the plunge caused by the Covid-19 pandemic in 2020.

This contraction weighed heavy in the minds of service centres, leading to continued destocking despite comparatively low inventories. This was exacerbated by concern over the strength of automotive demand going forward.

One north European mill executive said automakers were taking 20-30pc less steel than they had budgeted, as they reduced purchases amid potential supply chain disruption caused by floods in eastern Europe. Another mill executive said existing order books were quite deep, and reductions in end demand would be more moderate, around 2-5pc for the fourth quarter.

A number of buy- and sell-side sources suggest a round of cost-cutting is inevitable should the market situation not change soon.

Italian prices nudged slightly higher today, on higher offer. Argus‘ daily Italian HRC index rose by €1/t to €631.50/t.

The lowest mill offer is around €680/t base delivered for October and November delivery. But €650/t would be more realistic given weakness in the sheet market, one source said. “Customers are not willing to buy. Our costs and other mills’ are high, but the new prices — €700/t for HRC, €800/t for HDG — nobody buys,” one sell-side source said.

However, there were some supply-side constraints, he said. “Stocks are full, ports are full. Quotas will be full from 1 October, so maybe there will be a lack of steel. The positive is that people are not buying from import — due to the risk of the safeguards, big confusion on the Russian declaration measures, and the feeling is that EU mills are not willing to go back in prices. Mills will try to reduce production instead of reducing prices.”

Sellers were hoping sheet prices tick up, sparking some restocking. But there was little evidence mills will reduce output, as they did last year, as margins are just about positive, another seller said.

Turkish material was heard at €620-640/t cif Italy inclusive of duties. Material for the first quarter arrival out of Asia was offered at €615-625/t cif Spain. Ukrainian material was heard close to €600/t cfr Italy. There was talk about large buyers able to get under €600/t cfr from Asian suppliers in the “other countries” quota.

Japanese cold-rolled coil (CRC) was offered at $730/t cfr, whereas Korean material remains at €665/t cfr. There were reports for other offers between €680-700/t cfr for earlier shipment, in October.

Futures prices softened today, perhaps reflecting weak German sentiment caused by the macroeconomic picture. September slipped by €11/t on the CME’s north European HRC contract to €652/t, while October, November and December fell back by €10/t — October and November to €655/t and December to €660/t.

Source: Lora Stoyanova, Argus Media