European coil and green steel round-up: European HRC prices rise as market digests new fundamentals

Prices jumped in the European hot-rolled coil market in the week to 10 July, as market participants took stock of their new trading reality. 

Mills are pushing increased offer levels into the market, but buyer acceptance is limited given high inventory levels purchased in advance of the EU’s new tariff-rate quotas (TRQs), which entered into force 1 July, and the general complexity of the new import regime.

In Northwest Europe, the majority of price indications for HRC were reported at around EUR710/t ex-works, with volumes confirmed traded at that price level, though both buyer and mill sources still report trades in the market below EUR700/t ex-works where orderbook gaps remain in steelmakers’ summer rolling schedules.

Offers in Northwest Europe were heard between EUR700-750/t ex-works, and a leading mill was heard as increasing its offer price to EUR770/t ex-works/delivered toward the end of week. Moving into the quieter summer period, market participants expect prices to slowly increase for September-October delivery, as stock levels wind down and new dependencies on domestic supply become more evident.

In the Italian market, trading dynamics were very similar, though buyers were more pessimistic about the impact of increased domestic market share, given Italy’s traditionally higher dependence on imported volumes. Offers were reported between EUR680-730/t delivered, as well as the revised EUR770/t delivered offer, but sources on both sides of the market reported volumes still trading well below EUR700/t ex-works.

One Italian distributor described the new TRQs as a “turning point” for the European steel market, seeing the implications of the EU’s new import regime as far more significant than most in the market seem to believe.

As the new TRQs allocate volumes across several tiers of access, such as depending on whether an origin holds a Free Trade Agreement (FTA) with the EU, or reached an agreement with the bloc in WTO negotiations, some origins – like Australia – are only workable once sufficient quarterly TRQ volumes have accumulated via the carry-over mechanism. Additionally, as other trade defense instruments (TDIs) like anti-dumping and countervailing duties apply cumulatively with the new TRQ duty of 50%, even more TRQ volumes allocated to trading partners are deemed unworkable by steel market participants, with sources estimating less that than a third of cat 1A HRC imports in 2025 would clear duty-free under the revised framework.

The reduction in eligible duty-free volumes has caught many in the trade on the wrong foot, with reports that some traders are attempting to reroute volumes from Asia now subject to new out-of-quota costs, as well as revise contracted DDP terms with customers that still have impending requirements.

Market participants thus expect that the summer quiet period could end slightly earlier than usual, with some anticipating market activity to ramp-up in August, prior to traditional September restocking cycles. Certainly, the market is now near-unanimous in holding bullish sentiments for the fourth quarter, with a new import clearance period and better visibility of workable trade flows.

Green Steel

Activity in the low-carbon market is stable, largely business as usual, as distributors stick to back-to-back trading with end-consumers, and mills target the highest of premiums for project demand from end-users.

At the end of next week, the European Commission will present its proposal to revise the Emissions Trading System (ETS), which could reduce both domestic and international ‘production’ costs, if free allocation phase-out schedules are relaxed, or pushed beyond the existing 2034 zero-point.

The EU’s steelmakers are positioned in two camps ahead of the review, with three of the bloc’s largest integrated producers – ArcelorMittal, Thyssenkrupp, and Voestalpine – calling for a freeze to ETS costs, while others – including SSAB, Salzgitter, greenfield newcomers, and leading independent EAF steelmakers – want to maintain the ETS in its current form, as a decarbonisation incentive.

Author: Benjamin Steven

opisnet.com