Production cuts needed in European HRC market to balance supply, demand – sources

More production cuts are needed to stop the downward trend in prices in the European hot-rolled coil market, steel market participants in the region told Fastmarkets on Friday October 13.

In Northern Europe, conditions remained quiet on Friday, with a slowdown in consumption limiting trading.

Distributors and steel service centers (SSCs) reported reduced orders from the automotive industry and were quite aggressive in downstream sales, with some cut-to-length coil prices reported at around €680-700 ($720-741) per tonne cpt.

“Demand from end-users is slowing down. So why buy more [HRC] when clients need less material and at the same time prices are under pressure. Some people tell me restocking will not start before November,” a source at a steel service center told Fastmarkets.

“What you book today might be too expensive tomorrow and if orders are placed in November the material could arrive in December [and] stockholders and SSCs would like to have their warehouses as empty as possible at the end of the year,” he added.

Another market participant said: “SSCs also have weak orderbooks and lead times for processed coil from some of them are just two or three days after order.”

One integrated mill in Northern Europe reported an offer for November-delivery HRC at €630-640 per tonne ex-works and said “cost wise [that is] a bare minimum level.”

Buyer price ideas for HRC in Northern Europe were still around €600-630 per tonne ex-works.

One transaction was reported by a trading source at €600 per tonne ex-works in Germany on Friday, but this had not been widely confirmed by other sources by the time of publication.

Fastmarkets calculated its daily steel HRC index domestic, exw Northern Europe at €617.08 per tonne on Friday, down by just €1.67 per tonne from €618.75 per tonne on October 12.

The index was up by €0.08 per tonne week on week, but down by €25.00 per tonne month on month.

Sources agreed that due to increasing costs, producers cannot continue to reduce HRC prices.

But because of low consumption, the only consistent way to stop the downtrend would be capacity reductions, they said.

“If mills keep their [full] capacities online, they won’t be able to increase prices. ArcelorMittal has already closed [blast furnaces] in Germany and Belgium. And there are rumors that Salzgitter would like to prolong the shutdown of its Salzgitter blast furnace,” another source said.

Several market participants told Fastmarkets that ArcelorMittal is not going to restart its 2.5 million-tpy blast furnace No1 at Fos-sur-Mer in northern France in early November as planned. The company had not responded to a request for comment before publication.

In Southern Europe, Fastmarkets calculated its corresponding daily steel HRC index domestic, exw Italy at €593.02 per tonne on Friday, down by just €3.61 per tonne from €596.63 per tonne on October 12.

The index was also down by €12.95 per tonne week on week and by €34.31 per tonne month on month.

Buyers in Italy were bidding at €600 per tonne delivered for November-delivery coil, which nets back to about €585 per tonne ex-works.

Some sources told Fastmarkets that €600 per tonne delivered was still an acceptable price for Italian mills, adding that some deals had been already been done at that price.

But one mill source disagreed, saying that €600 per tonne ex-works was the lowest possible acceptable price because of rising costs.

Just like in Northern Europe, slow consumption and falling prices in the downstream market were putting pressure on HRC prices in Italy.

Most sources agreed that rock bottom was close, if not already reached, because of high costs.

Meanwhile, HRC import prices remain uncompetitive in Europe at the moment.

Asia-origin HRC imports for January-February delivery, for instance, were on offer at around €580-600 per tonne CFR to Italy, which was basically in line with domestic prices.

Bids for imports were also heard at €540-550 per tonne CFR from Italian buyers, but overseas suppliers were not ready to accept such low levels.

Published by: Julia Bolotova