The sharp rise in coil costs and the prospect of supply shortages in the coming months are expected to weigh heavily on the European manufacturing segment. Several sources warn that the loss of competitiveness flagged by industry associations to the European Commission is now close to materialising.
Coil derivative prices in Italy are rising but continue to lag behind European coil increases, prompting re-rollers to use the Tube and Wire fair last week to implement increases.
One Spanish coil seller tells Kallanish after the trade show that clients are reporting a stagnating market, with demand described as practically at a standstill and activity broadly sluggish this month.
Italian re-rollers and service centres describe an increasingly difficult market. Steelmakers are now clearly benefitting from CBAM and quotas on one side while the downstream sector is struggling to absorb input cost increases on the other.
One large service centre describes the prospect of extremely expensive hot rolled coil as a serious concern. In Dusseldorf, the general understanding among participants was that prices will increase in the coming weeks to around €770/tonne ($905.70/t) base delivered, although no increases were announced at the tradeshow itself.
With the new safeguard measures set to take effect this summer alongside CBAM, importing is expected to become increasingly challenging, leaving European supply as the only realistic alternative for most market participants. Several sources anticipate HRC asking prices to rise by around €100/t compared to current levels as July approaches.
The market is expected to find itself with depleted inventories by then, having used up import purchases made over recent months, with no cheaper alternative to pricey EU coils.
Despite the challenging geopolitical environment, the new safeguard measures will be implemented with its full force, slashing quotas significantly. “It will be a blow to all steel processing companies,” one large service centre source says.
He adds that companies currently importing must record default CBAM values in their financial reporting for the year as emissions certification for suppliers will not be available until September, meaning there will be no way to certify suppliers before the first quarter of 2027.
Large re-rollers continue to source from the import market, though at significant risk. They are also absorbing the majority of available quota allocations, as shown by Indian quotas for the second quarter already being exhausted and Turkish quotas depleting rapidly.
Sheet demand remains generally weak, with activity limited to temporary phases of restocking. Despite service centres’ attempts to push prices to €800/t ($940.99/t), hot rolled sheet contract prices are holding at €770/t base delivered, with some contracts being concluded at €20/t below this.
