EU HRC market grapples with multiple disturbances

The European hot-rolled coil (HRC) market is grappling with several major disruptions that could affect the price direction going forward.

The most well-publicised event has been production disruptions at ArcelorMittal’s mills in France and Spain. The recent fire at Dunkirk’s blast furnace number four has taken about 10,000 t/day of pig iron off line, while the fire at Gijon’s blast furnace A has impacted about 6,000 t/day of output. This equates to more than 120,000 t/week of slab lost at the sites.

This has seen Europe’s largest steelmaker importing slab from its subsidiary in Brazil, but also buying Asian material. It reportedly placed an order for 100,000t or more of Indonesian material at about $650-660/t cfr in recent days. ArcelorMittal has been informing some customers that deliveries will be delayed by about two months. One service centre that placed orders for June arrival in March has been told its material will now arrive in early August.

Other mills are also having delivery performance issues, and pig iron output remains low, partly as mills struggle to ramp up previously idled units, and partly in response to low apparent demand. Tata IJmuiden’s force majeure on cold-rolled coil and hot-dip galvanised is still in force, which has affected availability of downstream products. Some carmakers have been scrambling to secure supply as a result.

Automotive is actually one of the brighter demand sectors in comparison to recent years. German carmakers produced 39pc more vehicles over the first quarter of this year compared with the same period of 2022, and have been calling off more just-in-time supply from local steelmakers. They also appear to have reduced their usage of third-country material to an extent, judging by the slow utilisation of quotas for autogauge material. But the uptick has not been felt throughout the supply chain, with automotive-facing service centres and cold rollers saying offtake has still been quite low, albeit stronger than the second half of last year.

Weakness in Asia and the large price disparity between China and Europe is another key driver. Argus’ domestic Italian HRC benchmark index is currently trading at a premium of more than $310/t to the fob Tianjin marker. Chinese mills have to contend with anti-dumping and subsidy duties in Europe, but this disparity is filtering into offers from other bulk Asian exporters. Chinese net steel exports surged more than 80pc year on year in March to almost 87mn t on an annualised basis, forcing other Asian sellers to seek export outlets.

There was talk of an Indian mill selling into Italy about €690/t cif on Wednesday. There has been talk of the same mill potentially selling a quota-busting volume into the UK, although nothing appears to have been finalised as of yet. Large German buyers said they could access Indian material about €700/t cif.

Indian offers into Turkey about $720-730/t of late suggest the country’s producers could drop further if needed.

Argus’ benchmark Italian HRC index was €860.50/t on Wednesday, with the benchmark northwest EU index at a €15/t discount. Italy has been firmer than the north European market of late given lower domestic production, but greater north-south flow could reduce this gap.

By Colin Richardson