European producers reluctant to cut HRC prices again amid rising costs

Hot-rolled coil prices across Europe stabilized on Wednesday October 4, despite slow demand, but sources told Fastmarkets that further cuts are unlikely due to rising production costs.

Fastmarkets calculated its daily steel HRC index domestic, exw Northern Europe at €618.92 ($648.02) per tonne on Wednesday, down by €1.08 from €620 per tonne on October 3.

The index was down by €6.71 per tonne week on week and by €40.25 per tonne month on month.

Some offers from integrated mills in the region were reported at €630-640 per tonne ex-works for coil with lead times of four-to-six weeks.

And one source reported an offer at €610 per tonne ex-works from an integrated mill in the region – although this could not be widely confirmed by other market participants.

Buyer price ideas were around €600-630 per tonne ex-works, sources said, but trading in the region remained weak, with the lack of end-user demand seen as the main obstacle.

Distributors and steel service centers have no pressure to restock because most already have “sufficient” inventories, Fastmarkets understands.

“Mills are asking for inquiries and orders, so prices [for HRC] remain under pressure. And because we are approaching the end of the year, consumers would like to [keep] their stock levels low. So a major buying recovery is very unlikely,” a trading source in the region told Fastmarkets.

Most market participants expect HRC producers across Europe to maintain their offer prices above €600 per tonne ex-works due to the rising production costs and to trim their output volumes to balance the market.

“[HRC] below €600 per tonne ex-works would be a catastrophe for the steel mills. European producers now face higher costs due to more expensive raw materials, so we expect them to either maintain a base price above €600 [per tonne ex-works] or to bring down capacity, or both,” a steel service center source in Northern Europe said.

Market participants said that instead of switching off blast furnaces, European mills might reduce output at their rolling mills and stockpile slab instead.

“Producers in Europe are not really willing to bring down crude steel output much due to free carbon-dioxide emissions allocations for next year. So they might just trim production at the rolling mills, which would have the same effect on the market in that HRC availability will be reduced,” a trading source in Germany told Fastmarkets.

Fastmarkets’ calculated its daily steel HRC index domestic, exw Italy at €605 per tonne on Wednesday, stable day on day.

Italian mills were reluctant to drop their official offers below €610-620 per tonne ex-works, while bids from some buyers were coming in at €580-600 per tonne ex-works.

Lead times from local mills were reported at four to six weeks.

Sources said that domestic prices were probably close to rock bottom and that they do not expect to see any more big declines in the near future.

“Costs are rising at [the steel] mills so they are reluctant to go below €600 per tonne ex-works,” a distributor said.

Published by: Julia Bolotova