EU HRC market enters ‘new era’ of cost-driven increases

Tradable ranges were uncertain in the European hot-rolled coil market Sept. 5, as the market digested the viability of the recent mill price increases.

In Northern Europe, official offers were heard as holding firm at Eur800/mt ex-works Ruhr and Northern Europe, though negotiable prices were less certain.

Platts assessed hot-rolled coil in Northern Europe up Eur5/mt Sept. 5, at Eur760/mt ex-works Ruhr.

Buyers reported mixed expectations for price direction, with some seeing increases as “necessary” given sky-rocketing energy costs, while others were less willing to accept higher prices in the low-demand market.

“I’m pretty convinced at this stage that mills have no choice but to increase prices,” a service center source said. “Eur800/mt seems to be something of a balancing point against which they can achieve sufficient coverage of costs, but it’ll still take a couple of weeks to climb to these levels, it won’t happen overnight.”

Other distributors were less accepting of increases, with one saying “I don’t see how prices can increase with stocks so high and all forecasts indicating decline. I understand why costs are pushing offer levels higher but it’s the negotiable price that matters. Everyone will do what they can to drive prices higher, but it just doesn’t seem realistic at the moment.”

Another service center source agreed, “The mills have indeed increased prices but it’s unclear whether the market is ready for it. They’re missing a lot of orders and need to produce, so if an interesting bid hits the table everything suggests they’d accept it.”

While demand is the traditional factor behind price fluctuation, costs are increasingly at the forefront of explanations for higher pricing, a service center source said.

“We’re seeing a new era where prices are driven by costs instead of demand,” the source said. “Normally prices go down alongside volumes, but in the current scenario, we’ll see low volumes yet high prices driven by exploding costs.”

As a result of bullish trends in the EU market, Italian buyers in particular were heard turning toward imports for a portion of required volumes, though the majority of offers were pulled toward the end of last week for upward revision after deals settled at Eur670/mt CFR Italy ex-India and Japan.

New offers have not yet hit the market, but prices were expected to increase Eur40-50/mt, trader sources indicated. Eur660-670/mt CIF was still regarded as achievable by one trader, with the Platts HRC CIF South Europe assessment unchanged at Eur670/mt on the day.

In the Italian domestic market, offers were at Eur800-820/mt ex-works Italy. Sources indicated that discounts were available, though the tradable range was moving closer to Eur800/mt on rising production costs.

Italian service centers were considering introducing energy surcharges on some products to manage rising costs, though whether buyers will accept the passing on of energy costs has yet to be seen.

Platts is part of S&P Global Commodity Insights.

— Benjamin Steven