German HRC producers offer discounts to spur buying

German hot-rolled coil producers have been offering substantial discounts to generate sales and cash flow, market sources told S&P Global Commodity Insights.

Platts assessed Northern European HRC stable on the day at Eur800/mt ex-works Ruhr Aug. 5, according to S&P Global data.

Deals and tradable value were at $800/mt ex-works Ruhr.

A distributor said a German mill sealed a deal with a Northern European buyer at a price below Eur750/mt ex-works Ruhr. The information was not confirmed widely, but another distributor said they “would not be surprised” to see such a transaction.

Official offers were at Eur850/mt ex-works Ruhr. A source calculated base prices from effective offers they received at Eur800-Eur840/mt ex-works Northern Europe.

North European steelmakers were driven by the need to fill order books and generate cash flow, sources said. Demand from distributors has remained weak due to a combination of high inventories and big volumes of imported coil that are expected to arrive in the EU over September-October.

The situation in Italy was similar but the country’s steelmakers have not been offering discounts to generate orders. That was due to significant production cuts, with flat steel producers either halting production for several weeks or stopping some blast furnaces.

HRC in Italy was stable on the day at Eur770/mt ex-works Aug. 5. Official offers were at Eur780-Eur 800/mt ex-works Italy.

“Italian market is more balanced compared with Germany,” an Italian source said. “When German mills notice a buyer that cautiously shows any signs that they might be interested in material, producers attack the buyer as vultures ready to cut prices.”

“In Italy, mills have stopped for August, while in Germany buyers have high stocks and the mills struggle to sell,” the source said. “Producers ready to cut prices, going below cost to make a deal and generate cash flow.”

Market sources said prices are most likely to recover in September.

Automotive manufacturers have shown increased interest in steel purchases after buying lower volumes earlier in 2022 due to a shortage of semiconductor chips and other components.

“Carmakers started to contact steel suppliers saying that they would need more material than they booked last year,” a North European distributor said. “This is a good sign, but we will see if the demand rise will be sustainable.”

— Maria Tanatar, Benjamin Steven