European steel HRC buyers question sustainability of price uptrend

European hot-rolled coil buyers were questioning the sustainability of the recent uptrend in prices, given the limited end-user demand, Fastmarkets heard on Tuesday January 17.
Fastmarkets calculated its daily steel hot-rolled coil index, domestic, exw Northern Europe, at €715.42 ($774.83) per tonne on Tuesday, down by €2.46 per tonne from €717.88 per tonne on Monday.

The latest calculation of the index was up by €8.96 per tonne week on week, however, and by €70.63 per tonne month on month.

European producers were largely sold out of HRC for first-quarter deliveries, market sources said.

“We have no allocation for March-[delivery] HRC, while it’s too early to offer for April,” a mill in Northern Europe told Fastmarkets.

Offers from mills in the region were heard at €750-780 per tonne delivered on Tuesday, which would net back to about €720-750 per tonne ex-works.

Several sources told Fastmarkets that one producer in Central Europe had cancelled 50-60% of non-binding orders for HRC, apparently in an attempt to push buyers to conclude binding agreements and to try to increase prices.

Buyers’ estimates of achievable prices were around €700-720 per tonne ex-works, Fastmarkets heard.

A producer source told Fastmarkets that his company was not ruling out a new round of price rises in February.

But several buyer sources told Fastmarkets that the recent uptick in HRC prices was largely driven by reduced coil availability resulting from production cuts, rather than improved demand. In fact, demand for HRC from end-user sectors remained low, several sources said.

“The market situation is difficult now. Those traders who did not restock in December are trying to close some gaps [in stock], but it is very hard to pass higher prices downstream,” a trading source in the region said.

Distributors largely preferred to do back-to-back business, which has become a trend in the EU steel market due to high levels of volatility.

“We are mainly selling small batches [of HRC], 200-300 tonnes. Nobody is buying thousands of tonnes these days,” a second trading source said.

Fastmarkets’ calculation of its daily steel hot-rolled coil index, domestic, exw Italy, was €706.67 per tonne on Tuesday, down by €2.08 per tonne from €708.75 per tonne on Monday.

The latest calculation of the index was still up by €15 per tonne week on week and by €68.34 per tonne month on month.

Local mills were offering HRC to the market at around €750 per tonne delivered, according to sources – equivalent to €720-730 per tonne ex-works.

Some buyers estimated the workable price at €690-700 per tonne ex-works, but levels below €700 per tonne ex-works were not considered viable by most mills.

Trading in Italy’s market was rather slow on Tuesday. Similarly to Northern Europe, buyers said that it was difficult to pass on higher HRC prices to end-users.

Import offers were mainly stable day-on-day at high levels.

An offer from a Japanese supplier was reported at $750 per tonne CFR to Italy, for March-April shipment.

Offers of HRC to Europe from Southeast Asian suppliers were reported around €700-710 per tonne CFR Italy for March-April shipment.

But a sharp import price rise compared with levels late last year, and also longer lead times, has kept European buyers away from trading with overseas suppliers so far.

Published by: Julia Bolotova