HDG stocks remain elevated in EU but HRC inventories fall

Stock levels of hot rolled coil among EU service centers dropped significantly year-on-year in December whereas inventories of coated coils remain elevated, according to steel federation EUROMETAL.

Shipments by service centers increased 0.2% in 2017 from 2016 while stock levels moderated between November and December to an index of 107 (100 equals the monthly average of 2015). This meant stock inventories in December were at the same level as they had been in December 2016.

Eurometal identified a significant divergence in products, with apparent hot rolled coil tightness reflecting the strength in the price. The index for HRC dropped to 93 in December, down from 104 a year earlier.

Inventories of cold rolled coil also fell to 99 from 106 in December 2016, despite the continued presence of imports. Whereas HRC imports fell 55% on year in November, CRC imports rose 7%.

At the other end of the spectrum, Eurometal found the index for coated coils in December was 127, well above the 110 in December 2016.

Many in the market have been scratching their heads as to why the hot dip galvanized coil price has been more resistant to offer increases than other products. High zinc costs, rising hot rolled coil substrate prices and strong end user demand have not seen the base grade DX51D HDG market edge much further than €670/mt ex-works in northern Europe.

But the significant booking of imports early in the year, and the lower than anticipated impact of anti-dumping duties on Chinese volumes, means stock levels remain elevated.

The latest customs figures suggest imports will be increasingly less of a factor, with HDG arrivals in November down 23% y-o-y. This compared with a 34% y-o-y increase in the January-November 2017 total. But sources also suggest domestic HDG output is higher with mills producing more galvanized coil in preference to CRC.

Multi-product and proximity stockholders saw their sales in 2017 decline by 0.8% compared to 2016, with only HRC, CRC and tubes performing stronger year on year. Stocks in 2017 were at an index of 101, slightly above index of 99 a year earlier.

EUROMETAL is the European Federation of Steel, Tubes and Metals Distribution & Trade.

Peter Brennan, PLATTS