Stockholders in the UK hot-rolled coil market reported strong activity to start the year Jan. 5, though uncertainties remain as to the longevity of expected increases.
“So far we’ve been very busy, but it’s only the first couple of days,” said one stockholder. “Distributors restocked which is adding fire to bullish sentiments, but that had little to do with end-user demand.”
Another stockholder clarified further, pinning much of the drive in end-user activity on logistical factors rather than real demand.
“We have been busy this week but that was always going to happen with the traditional restocking process,” said the source. “People don’t want material in December when books are closing on credit and storage factors. There’s no real surprise in the increased activity – it’s still too early to celebrate.”
That said, sources expected prices to be supported in January due to longer mill lead times both domestically and in Europe, with material heard booked on the day for March delivery.
Deals were heard for larger, more representative tonnages at GBP610-615/mt DDP West Midlands, with minimal volumes traded higher in the mid-GBP600s.
How long the circa GBP610/mt DDP price level will be sustained is doubted however, with price increases expected for week beginning January 9.
Sources anticipate the tradable level to advance to the mid-to-late GBP600s from domestic and European mills, reinforced by tighter supply post-production cuts last year.
“When it comes time to buy, production cuts do bite,” said a stockholder. “Lead times are a lot longer than they were in October, higher prices will theoretically have more support.”
Platts is part of S&P Global Commodity Insights.
— Benjamin Steven