UK HRC market ready to restock, prices perceived as bottomed

UK hot-rolled coil prices have reached bottom levels, market sources said Aug. 19, with distributors reportedly ready to restock on better end-user demand and recent stability.

Market participants reported a general stability in offer levels, with the Platts assessment hovering around GBP700/mt DDP through August.

This is in contrast to dramatic slides witnessed since April peaks — when the assessment stood at GBP1225/mt. Prices fell GBP185/mt in May, GBP150/mt in June and GBP80/mt in July before reaching a rough stabilization point in the last few weeks.

Demand levels have been poor after the initial price drop following the Russian invasion of Ukraine in February, given market uncertainties and fears of devaluation, with some sources preferring the term “correction” to characterize the recent pricing trend.

However, UK HRC prices have fallen beyond levels seen in the market prior to the Russian invasion and the resultant rally, where January-February prices were assessed between GBP800-850/mt DDP UK.

This has led sources to describe current price levels as “non-sensical,” given dramatically higher input costs, especially on energy, creating a squeeze between downward demand pressures and tightening production margins.

“Compared to prices pre-invasion, the current spot level is non-sensical,” said a stockholder source. “It’s purely driven by the demand question – many have been ready to push the button in terms of restocking but were waiting for some certainty before doing so.”

Sources widely consider current levels as the bottom, plateauing longer than expected due to the traditional summer wind-down, but with an uptick in both demand and offer levels in sight.

Buy- and sell-side sources agree that price increases will need to be substantial to push the market upward, as some buyers continue to attempt to drive the market lower, perceiving opportunity for cheaper offers.

“The market needs a strong signal that this is the end and prices have to go up,” said a mill source.

A stockholder agreed, offering that buyers are “waiting for a trigger point. If mills are bullish and push prices up by GBP100/mt or more people will be more inclined to believe it,” he said.

For distributors, end-user demand is reportedly improving, with holes beginning to appear in inventories worthy of restocking – stockholders were heard on the day as ready to engage more substantive purchasing now some stability has returned to the market.

Northern European mills remain the focus, able to offer high-quality material at competitive prices and short lead-times.

Offers from Northwest European mills were heard Aug. 19 at GBP680-690/mt DDP UK, with domestic offers reported on a range of GBP690-705/mt DDP. Offers from a domestic mill at this level were heard as pulled on the day, however, regarded as “unsustainable” by the mill source – anticipating near-term increases.

Rising prices in the non-EU import market continue to avert buyer attention, with Asian and Turkish material heard higher on week at GBP710-715/mt and GBP730-750/mt respectively, both DDP West Midlands. Long lead times and lingering uncertainties on late-Q4 price direction – the delivery time for said material – also render imports further afield as unattractive.

The Platts assessment was down GBP10/mt on week, at GBP695/mt DDP West Midlands, UK.

Platts is part of S&P Global Commodity Insights.

— Benjamin Steven