European coil mills are holding firm in their offers, with the vast majority having now formally informed customers of at least one increase for the first quarter.
Argus' daily Italian hot-rolled coil index rose by €1.75/t today to €418/t ex-works, while the northwest Europe index gained €2.75/t to reach €427.25/t ex-works.
In Italy one steelmaker announced another increase yesterday, referring to Argus' commentary in its note to customers. The €30/t rise takes its official offer to €450-460/t ex-works base, at the same level as or above its competitors in northwest Europe. Another Italian steelmaker has hiked its offer to €440-450/t ex-works base on the back of costlier slab and strengthening import prices.
Turkish mills keep hiking their offers too, with traders servicing southern Europe offered $500/t fob — a level that most deem unworkable at present, despite domestic producers' attempts to ratchet up prices again. There is still talk of sales at $470/t fob, however.
A Brazilian steelmaker recently upped its cold-rolled coil offer to €535/t cif Iberian peninsula, after completing deals at €485/t cif or thereabouts in the last 10 days. A trader has sold slightly above €490/t cif of late into Spain, but has now pushed its offer up.
Some steelmaking executives are starting to suggest buyers are becoming panicked and rushing to procure. But this narrative is not supported by many buy-side sources, who remain relatively sanguine about the recent uptrend.
In Germany one issue is the hyper-competitive market for sheet. Some steel service centres servicing the automotive supply chain are acquiescing to first half of the year deals at an €80/t-plus discount to the same period of this year. This is the level being sought by buyers, which mills have refused as it would make for a torrid 2020; something few can afford after a brutal year. Mills are offering full-year 2020 contracts at a discount of around €50/t compared to this year, while some suggest €440-450/t ex-works base will be possible for first-half 2020 contracts.
The service centres offering such appetising prices are using spot material accumulated during the rapid market downturn of the last few months, as well as some first-quarter arrival material. This poses a headache for their competitors, which cannot source replacement coil at such steep discounts.
While mills are in no rush to finalise contracts as they think upside will continue and provide them with more bargaining power, many buyers are also holding back as they feel slack demand will force producers to relent. Several mill sources surveyed by Argus admit their first-quarter order-books have seen no uptick from the integral automotive sector compared to January-March this year. Many buyers are questioning the actual strength of mill order-books and lead times.
Italian sheet pricing remains depressed, with processors struggling to pass through any more increases despite the bullish stance being adopted by mills.
