Transaction prices for domestic hot-rolled coil (HRC) increased in Europe on 4 March due expected import supply disruptions caused by the conflict in the Middle East. European coil producers are expected to withdraw offers soon and return seeking higher prices.
Deals for HRC in Northwest Europe have been settled at EUR690-710/t ex-works, with a majority of the indications reported at EUR700-710/t ex-works. The deals were settled for smaller lots of material of a few hundred tonnes per lot.
The achieved prices are EUR20-30/t higher than deals settled a week earlier.
Some buyers have said that the major European coil producers have started to withdraw offers from the market. But this information has not been confirmed by steelmakers.
European rebar mills have unanimously withdrawn offers from the market.
Flat steel market participants believe that the coil steelmakers would do the same or attempt another price rise as the latest deals have almost reached their target prices of EUR720-730/t delivered.
“Buyers did not want to accept higher prices [of around EUR700/t ex-works]. But now the situation fully changed. The offered volumes are limited, and buyers would now accept higher prices, because they understand that after some time the supply will be even more scarce with no import and high prices from stocks,” a distributor said.
Some larger traders have stopped offering imported coil available from European stocks, preparing to increase prices.
The expected delays of import steel shipments to Europe due to rerouting from the Suez Canal to the Cape of Good Hope, and rising freight and energy costs helped steelmakers achieve higher HRC prices. Market sources estimated that steel deliveries to Europe from Asia and the Middle East might take an additional two to four weeks compared with original expectations.
Opinions in the market are divided as some believe that import delays of a couple of weeks would not have a material impact and the price rise was mainly a panic response of some buyers. Others, however, point out that the timing of the potential delays is critical as the EU’s new quota system is expected to come into force from July this year.
Under the new quota system, a 47% reduction in volume and a doubling of duties to 50% have been proposed. Lack of details on the country-specific quotas or any caps in the global quotas has made European importers extremely cautious on steel imports arriving in the third quarter. The delivery delays greatly increase the likelihood of exceeding the new tighter quotas.
Multiple sources compared the current market situation to 2022, when domestic coil prices in Europe skyrocketed after Russia attacked Ukraine. Later in 2022, however, prices tumbled as the war had a greater negative impact on demand than on supply.
