Weakening Italian hot-rolled coil (HRC) prices weighed on the northwest European market today, as hungry mills in the south offered at competitive levels into the north.
Sluggish domestic coil demand means that European mills have been selling slab into Turkey at as low as $350/t cfr, as the country's mills look to mitigate rising scrap costs. Mills in Italy and central and eastern Europe were offering HRC into the north at €410/t or less delivered, substantially below the target price of €420/t ex-works plus for domestic sellers.
Argus' daily northwest Europe HRC index slipped by €2.50/t to €416.25/t ex-works. The Italian index dropped by €1.75/t to €393.25/t ex-works, taking the discount to the north to €23/t.
Russian shipments into Antwerp are still available at below €400/t cfr, with one German trader reportedly being offered $350/t fob from one mill for a large volume — although it is not clear whether this was for the European market.
There is talk of one Italian buyer targeting $425/t cfr (€383/t) effective for Turkish coil, and sources suggested it is likely to succeed. The buyer had initially been looking to take less tonnage, but flexed up to 100,000t as it expects the market is close to bottoming out. A Turkish mill offered $430/t cif Italy (€387/t) to one buyer, and an Italian steelmaker is seeking Turkish coil for January shipment. One trader said he recently offered $400/t fob Turkey base for HRC.
Some traders are starting to talk the market up, sensing that pricing may have reached its lowest point. One trader is offering into Italy and the Iberian peninsula at around €420/t dat from stocks for immediate delivery. This seems high, but the trader believes it could be attractive for small and medium-sized buyers wanting to buy some top-up tonnes without committing to large domestic or import cargoes.
Italian service centres said that sheet outsell prices are still under pressure, with consumers buying only what they need on very short notice. Buyers are taking the occasional small volumes, then exiting the market for a week or so until they need more material. As a result, service centres are still destocking, but the process is slower than they would like.
But some large consumers, such as white goods producers, are now trying to settle contractual agreements for the first half of next year, sensing that it might be the right time to buy.
Italian service centres see little room for further declines in replacement costs, citing rising scrap and a cessation of the regression in import offers from certain sources, notably Turkey. Scrap could remain underpinned in the coming months as winter constrains collection, as is typically the case.
Expectations of a rebound headed into the first quarter filtered into a firmer forward curve for northwest Europe. Argus assessed December at €432/t, while November slipped by €3.50/t to €426.50/t, narrowing the contango. The month-to-date average for October is €431.75/t.
