European steel coil buyers look to manage inventories, financial liquidity

European hot-rolled coil pricing slipped Eur1 lower Monday with steel inventories and liquidity management an ongoing concern, sources told S&P Global Platts.

A Nordic-based buyer lamented there were no new construction or automotive projects for his export business, and said he was not interested in making any new contracts anytime soon.

“We are looking to cancel the contracts we have – they’re simply too large of volumes for us to take on. Everyone is looking at their liquidity right now. We don’t want our stocks to be that high if we don’t have orders that will utilize it,” he said.

The same source said he was seeing conservative buying activity from customers seeking volumes for “very urgent” delivery.

“Any [resurgence] in demand is from re-opened orders that were placed well before the shutdown. We’re now able to send material to France and Italy,” he said.

An Italian distributor source said there would be a gradual recovery in activity in May through to July, but said stock levels would remain high until June “at the earliest.”

When asked about the current demand sentiment in Italy, the same source said market prices were still under pressure from a “very low repurchasing attitude.”

“Mills will try to increase their capacity higher than 50%, but they will need to balance this with the demand,” he said.

A German service center noted that although lockdown measures were easing with more industries back to work, the demand story was unchanged.

“The market is extremely under pressure like in 2009 — the only thing is that stocks are not as overloaded, so this is the most positive point to come about from all of this,” he said, adding that mills were actively trying to get rid of material.

Demand remained lackluster and it was now becoming clear that steel inventories have reached elevated levels with some service centers and stockholders offering to sell at discount to cover short term financing requirements, a Benelux-based service center source said.

“Some mills have not stopped producing during the lockdowns and outside Europe, there has been continuous production which is why there are now huge volumes of imports available to come to Europe and this is the reason for the Eurofer safeguard letter,” source said.

“But if the EC cuts the safeguard quota but then does nothing further to reactivate demand then it is a pointless task — at the moment all service centers have high stocks and end users also.”

“In Europe during the lockdown service centers and stockholders stopped operations, closed shop and demand fell to zero, so there was no invoicing and no turnover, but mills continued to produce and now there are further incoming mill flows but the SSCs cant take any more material,” the source said, adding that some Italian service centers were now close to breaching credit limits as a result and were actively looking to dispose of inventory to raise funds.

“I got an an inquiry from a south European SSC who asked if I was looking to buy stock and when he sent over the stock list this was for 4,000 mt of coils — which makes me think that some mills or service centers will not survive this downturn.”

The Platts TSI hot-rolled coil index was calculated Monday at Eur427.50/mt ($465.16/mt) ex-works Ruhr, and at Eur413.50/mt ex-works South Europe, slipping Eur1 in both regions.

Cold-rolled coil lost Eur1 day on day and was assessed at Eur521.50/mt ex-works Ruhr.

— Len Griffin, Amanda Flint