Only low volumes seen traded in European HRC spot market, mills plan more cuts for Q4

European hot-rolled coil prices were stable to slightly weaker in a low-volume market on Wednesday October 26, with European producers planning more production cuts in the fourth quarter, Fastmarkets understands.More European producers plan to reduce HRC output because they expect demand to remain low in an oversupplied market.

The production cuts might help to balance supply and demand, sources said, but it will take some time before the output cuts have any discernible effect.

Buyers and mills have different views on market developments at the moment, however.

Producers expect buyers to come back to the market to book first-quarter 2023 volumes in December, with that rebound in activity and the announced output cuts expected to push up HRC prices.

Conversely, buyers only expect to see limited restocking in December because of still-high stock levels.

“I think we will need to restock for [HRC] with delivery in the mid-first quarter [of] 2023 at the earliest,” a steel service center source told Fastmarkets.

Fastmarkets calculated its daily steel hot-rolled coil index domestic, ex-works Northern Europe at €666.25 ($660.37) per tonne on Wednesday, down by €3.75 from €670 per tonne on the previous day.

The latest calculation is down by €3.75 per tonne week on week and by €97.08 per tonne month on month.

Transactions were reported in the region at €650 per tonne exw, while offers for HRC with December lead times were heard at €670-685 per tonne exw, sources said.

After the index was published, a trading source in Benelux reported a deal at €630 per tonne exw from the integrated mill in the region, but this was not widely confirmed by other sources.

One distributor source reported an offer of €735 per tonne delivered in Germany from an integrated mill, equivalent to about €685 per tonne exw.

Steel mills have started negotiations with end users for long-term contracts for 2023, but no deals have been concluded yet because the gap between offers and bids remains too wide.

Buyers’ price ideas for the 2023 first-half contracts were around €680-700 per tonne exw, while producers were aiming for a minimum of €800 per tonne exw, sources said.

“The half-year price doesn’t work in such a volatile market. We’ve moved to quarterly contracts with some customers during [the Covid-19 pandemic, and] I think this will, eventually, become more common,” a mill source told Fastmarkets.

Fastmarkets’ calculation of its daily steel hot-rolled coil index domestic, exw Italy was €685 per tonne on Wednesday, down by €10 per tonne from €695 per tonne on Tuesday October 25.

The latest calculation of the Italian index is up by €10 per tonne week on week but down by €78.41 per tonne month on month.

Offers from integrated mills in Italy were reported at €680-720 per tonne exw, sources said, while bids from stockholders and tubemakers were reported at €650-570 per tonne exw.

The market in Italy was also quiet on Wednesday, with buyers delaying restocking.

Import HRC offers from Japan and South Korea came in at €620-630 per tonne cfr Italy, but bids were reported at €600-610 per tonne cfr. There also were unconfirmed reports of Japan-origin HRC for mid-first-quarter 2023 delivery at €620 per tonne cfr in the week to Wednesday.

Published by: Julia Bolotova