Activity remains frozen in the northwest European hot-rolled coil (HRC) market, as buyers anticipate further price declines and destock accordingly ahead of the year-end.
Argus' daily northwest Europe HRC index slumped by €4.50/t to €418.75 ex-works today, a record low since the index's inception last November. The forward curve was broadly stable, with October assessed at €434, and November and December at €430 and €431, respectively.
The daily Italian index slipped by €1.75/t to €396/t ex-works, while the southern European HRC import price shed €10/t to €380/t cif.
Mills are still hungry for tonnes, with announced output reductions not yet filtering through into firmer sentiment.
There is increasing talk of mills trying to amend their contractual agreements for next year, to avoid locking in loss-making levels based off current spot prices. Some automakers reneged on contractual tonnages last year in favour of cheaper spot purchases, which mills will utilise as they look to different terms to offset tremendous margin pressure.
Many participants are looking to the BlechExpo event in Stuttgart in a few weeks' time to provide direction.
Mills hope production cuts and the return of some apparent demand for first-quarter tonnes could lead to a rebound after an intense period of destocking. One steelmaker said inquiry levels have ticked up from practically nothing for the fourth quarter: most sources had anticipated a bout of buying after the incredibly quiet summer months, but this never materialised. On the back of SSAB's announcement that it will idle another blast furnace — meaning it has off line 1.8mn t/yr of its 4.9mn t/yr capacity — sources are expecting other mills in the midst of budget planning to take similar actions.
If steelmakers do not manage to amend contractual terms for next year, some could be facing an existential crisis.
While import prices have stabilised a touch, aided by firmer scrap, previous bookings remain a headache for domestic mills.
With cfr Turkey scrap prices rising of late, and looming output cuts, some participants expect the HRC market could be supported until the year-end. But seasonally the last few months are some of the weakest, and mills and distributors are still keen for sales. Decent amounts of HRC have arrived, and will arrive, at Italian ports in the fourth quarter.
Data today from European steel associations show that German crude steel production continued to fall in September, down by 4pc on the year to 3.35mn t, registering a double-digit decline in hot-rolled steel output. Italian crude steel production edged up by 1.1pc in September — the first time in four mounts. But August data shows that flats output slumped by 31pc to 451,000t — the lowest on record — reaffirming that mills undertook extended summer maintenances.
