EU HRC: Northern mills hike offers as Italy firms

Market: Metals
15/11/19

Domestic Italian hot-rolled coil (HRC) prices continued to firm today, spurred further by yesterday's news that steelmaker ArcelorMittal will ramp down all its Ilva blast furnaces by 15 January.

Argus' daily ex-works Italy index jumped by €5.75/t to €400/t ex-works. One domestic mill was selling around this price and was even considering €410-415/t ex-works for January. Another domestic mill has also been trying to increase prices amid firmer scrap and import costs.

Some Ilva-exposed buyers were increasingly concerned about supply, although others appeared fairly relaxed.

Import offers from Turkish mills continued to climb. One offered at roughly €425/t cif Ravenna for a few thousand tonnes, a level a trader claimed to have sold at. Another mill pulled its offers, and is anticipated to hike prices further next week.

Many traders were extremely bullish on the market's prospects because of supply disruption, and despite slack demand.

Mills in the north are trying to take advantage of strengthening Italian prices, and import offers moving to around €420/t cfr Antwerp. Some large northwest European mills have informed customers of €30-40/t increases, which they suggest will take offers to €440-450/t ex-works.

This is substantially above spot prices. The Argus daily northwest Europe HRC index slipped by €1.25/today to €412.25/t ex-works, taking the premium over Italy to €12.25/t. Italian prices have risen by €16/t since 7 November, while northern prices have slipped by €1.75/t over the same period.

The northwest European forward curve firmed for the coming months. November slipped by €0.25 to €413.75, but December rose by €7.50/t to €432.50, while January was assessed €6.50 higher at €437.50.

Demand is starting to pick up from some industrial customers in Germany. Two service centre sources said buyers had returned to the table since a trade fair in Stuttgart last week, sensing it was a good time to buy. Their enthusiasm was dented slightly by deals for December delivery from a few mills done as low as €400-410/t delivered base. But other mills have hardened their stance in the last week or so, and refuse to take part at such import-displacement prices. And inventory is not high in the supply chain, after a ferocious period of destocking.

Some second and third-tier suppliers in the automotive supply chain have already agreed to some contractual volumes. Mills and service centres anticipate that automotive demand will not be as bad as people expect, as the inventory has been run down severely this year, meaning apparent demand will be more aligned to real buying.

The northern mills are also pushing for increases to use as leverage in difficult contractual talks. Mills expect to sign half-yearly contract deals €40-50/t lower than this year, although they are pushing for shorter-terms in some instances because of the weak market environment. Annual accords could slip by €50-60/t or more.

While many concur the market has bottomed, and prices will probably rise, some allude to the likelihood of slippage in raw material costs and the tepid demand environment as likely to constrain prices. And more material could be searching for a home if China stops importing the amount of slab and coil it has been.

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