Trading in EU HRC market slow; ArcelorMittal increases offers

Activity in the European hot-rolled coil market remained muted on Aug. 26 as buyers have been in wait-and-see mode due to high stocks.

ArcelorMittal, the biggest coil producer in the EU, increased offers despite limited demand in the attempt to end a negative trend and as steelmakers need to cover surging energy and other production costs.

Platts assessed hot-rolled coil in Northern Europe up by Eur10/mt day on day at Eur710/mt ex-works Ruhr Aug. 26.

Market participants estimated achievable prices for HRC at Eur700-720/mt ex-works Ruhr, in line with deals reported earlier this week.

New offers from ArcelorMittal have been heard significantly higher – at Eur800/mt ex-works for October rolling and at Eur850/mt ex-works for November production coil.

Market sources had mixed reaction on the price rise announcement, as some believed that the recovery is not achievable due to low demand. European distributors have high stocks of coil and this, combined with slow activity of end consumers, is unlikely to support price rise.

In addition, German mills had been dragging prices down over the past couple of weeks trying to stimulate buying activity with low prices.

“Steelmakers were like hungry wolfs – chasing orders,” a Northern European trader said. “They needed low prices to make sure the mills got the volumes that would allow them to run production without additional stoppages.”

Distributors affiliated with the steelmakers were also reported to focus on coil supply from domestic mills, substituting import deliveries, to secure sufficient production rates.

The price rise, however, is needed as steelmakers have been trading HRC at prices close to below production costs, according to market participants. European mills faced surging energy and logistics costs, but still had to cut finished steel prices.

In addition, distributors across Europe have full stocks of expensive material booked in the second quarter this year and declining prices from mills also made them cut their prices ex-stock.

Some market participants believe that offer increase, if followed by other steelmakers, would put an end to the downward trend that has settled on the EU coil market over the past several months. Although the targeted level of Eur800/mt ex-works is unlikely to be achieved in the medium term.

— Maria Tanatar, Benjamin Steven