The north European hot-rolled coil (HRC) forward curve has flattened considerably of late, lessening the strong contango of recent months.
March traded at €620/t today on the CME Group's north European contract, and June at a slight premium of €623/t. On screen, April also traded at €623/t.
Some derivatives participants expressed surprise at the narrow range, as they thought the curve would be firmer on the back of impending import constraints: the European Commission is currently conducting a functional review of its steel safeguard, which was requested by Eurofer and member states.
Mills' firmer spot stance is seemingly generating some small restocking at present. Several service centres have reported brisker activity in the past few days, and traders suggest enquiries are also increasing, although it is hard to make imports work at present.
The market leader is still offering officially at €630/t base, and has made sales close to €600/t, and higher in some regions. Most other offers are €600/t and above, although one producer is still offering close to €580/t, according to buyers.
The curve is still at a fairly strong contango compared with spot prices, with Argus' underlying northwest EU HRC index averaging €564.50/t so far this month — the index was at €573/t on Tuesday, up by €14.70/t since the start of the month. Over the same period mill margins have widened slightly more, with raw material costs also decelerating. The HRC index was at a €78.89/t premium to Argus' daily blast furnace-basic oxygen furnace opex cost marker on Tuesday, up from €60.65/t on 2 January.
Other participants question the strength of underlying demand, and suggest this is driving the flat curve. Data from the IFO Institute show overall German manufacturing inventory rose to its highest level in over a decade in December, while new orders contracted at the fastest rate since the depths of the Covid-19 pandemic in June 2020. The German economy contracted last year amid high energy costs and difficulties competing in export markets.
