Low EU consumption discourages coil price increases

While some European steelmakers have considered hot rolled coil price increases, others are discouraged by the low consumption seen across end-use sectors and service centres, Kallanish hears.

The European Commission’s decision last week to introduce a 15% cap per origin over the “other country” tariff-rate quota (TRQ) for HRC sparked some excitement in the market, as suppliers believed prices would rise amid limited imports. Several European mill sources and buyers are however doubtful that increases will stick in such a weak market. They fear that a hike may result in a standoff, as already happened in February when excessive increases froze activity.

The white goods and automotive sectors are ordering limited volumes. New passenger car registrations are declining in several European countries, as well as production figures in the first quarter. According to a seller of HRC, carmakers are postponing their coil purchasing programmes.

The market for coil derivatives downstream continues to be weak. Service centres have been losing money this year, unable to raise their selling prices. “Prices are not falling further but they are not increasing either. Buyers will ask for a rollover for material from Asia but will buy less and less from countries such as Japan and Vietnam because of the lower quotas. It would be a success if we managed to keep import prices stable in this market,” a trader comments.

However, lower availability from third countries will soon become an issue. “I do not think companies are realising how serious the safeguard quota situation is. If some demand restarts, even for a technical restocking phase before August, there will not be enough procurement sources,” a large buyer comments.

“It will take some time before producers feel the impact of the EU’s 15% quota cap decision. [Certain] third countries will stop offering within the quota. Those with some quota left will raise their prices and then we will be able to increase our prices in Europe,” another mill source comments. Producers are presently grappling with high production costs and non-existent demand, he adds.

The HRC market remains stagnant in Europe. Before the Commission announcement and considering the very weak consumption for coil and its derivatives downstream, EU steelmakers were bracing for a circa €20/tonne ($22) price decline in June.

The Commission imposed the cap due to a surge in imports from certain new origins related to growing overcapacity in certain regions, as well as to the significant pressure exerted by a strong increase in Chinese exports. The TRQ amendment was made after the HRC other country quota was exhausted on the first day of the quarter for several consecutive quarters (see Kallanish 3 June).

HRC prices are stable compared to May, with trade limited and confidence on the side of buyers lacking. Transactions range from €630-640/t base ex-works in Europe, or €650/t base delivered.

Natalia Capra France