European CRC, HDG costs rise, Italy makes first move for higher pricing

Downstream coils prices moved higher in South Europe as mills pushed for increases Sept. 7, while North European CRC and HDG saw slight decline on weaker automotive demand and high distributor stocks.

In Northern Europe, cold-rolled coil was down Eur35/mt on the week, assessed at Eur860/mt ex-works Ruhr. Hot-dip galvanized material also moved down Eur10/mt to Eur890/mt ex-works Ruhr.

For CRC, indications were heard in a range of Eur850-870/mt ex-works Northern Europe, with the Platts assessment settling in the middle of the range. A mill source said current price levels were below the targets for sustainable margins on rising energy costs.

“We’re currently seeing levels of around Eur850/mt on CRC and Eur870/mt on HDG, but these really need to be at least Eur30/mt higher on current costs,” said the source. “These levels just aren’t sustainable.”

Distribution sources attributed softer pricing to excess material in service centers and ports, as well as insufficient automotive demand. While the automotive sector is signaling more positively for the current and future months, demand is still below expectations and the required level to support higher pricing, sources said, with one distributor expecting prices to remain under pressure for few weeks.

“There are signs of recovery for automotive but at the moment this remains on the books, it’s yet to be seen what levels will actually manifest as physical requests,” said a service center source.

Buyers seemed to be increasingly looking to imports for cold-rolled volumes, with a deal heard on the day at Eur800/mt CIF Antwerp ex-Taiwan. The full impact on the import market of the recent events at POSCO’s Pohang plants have yet to be confirmed however, with some sources expecting this to create upward pressure on downstream imports in the near-term.

In contrast to the North European market, South European CRC and HDG prices moved up Eur40/mt on the week, to be assessed at Eur900/mt and Eur910/mt for ex-works CRC and HDG, respectively.

Italian mills were heard as pushing for higher prices Sept. 6-7, driven primarily by higher energy costs. The targeted increase across the Italian market was cited by a mill source at around Eur50/mt.

Higher pricing in the Italian market, in comparison to North Europe, was motivated by energy costs, mill closures, and an increased responsiveness of Italian mills to cost drivers, said one distributor, expecting Northern mills to follow the increase.

A mill source agreed, “I think all the mills need to increase, it’s hard to say how much as demand really isn’t recovering to desired levels, but at the very least its obvious costs are too high to sustain these prices.”

While integrated blast furnace route producers can recycle gas emitted during production – even using it for electricity production – as well as skip reheating stages to reduce energy costs, South European re-rollers and EAF steelmakers must source their own gas for production, a particularly expensive cost further downstream on CRC and HDG supply.

Some sources even speculated that Northern producers may be achieving high profits on selling hedged energy back into the market at currently inflated levels, making idling sites even more profitable than producing in the low-demand market.

Platts is part of S&P Global Commodity Insights.

— Benjamin Steven