EU HRC: Mills pare back expectations

Some leading European mills have pared back their price expectations from a few weeks ago despite recent price upside.

Some mills had been hoping to break €500/t ($545/t) ex-works for hot-rolled coil (HRC), but an executive at one leading producer concedes that this expectation has been shelved, although some deals are edging closer to this level.

Argus' daily northwest Europe HRC index climbed by €3.50/t today to €472.25/t ex-works.

Reduced production and the recent uptick in bookings mean that European mills are now fairly comfortable and striving to rebuild their profit margins. But buyers are struggling with the pervading uncertainty, as coronavirus, raw material volatility and slipping import offers cloud market direction. As a result, they are only buying what they need, or holding off totally if they have sufficient material in hand.

Russian HRC was heard offered into Antwerp at around €480/t fca for small lots. Some trader offers are edging closer to the €450/t cfr level that would be palatable to decoilers. Asian traders are beginning to offer short in anticipation of further slippage in Chinese prices. Indian mills remain conspicuous by their absence, although some expect that they could be offering back into Europe soon.

Buyers are trying to use these factors as leverage, alongside the more flexible pricing policy of Italian steelmakers, to try and solicit discounts. Not much spot Italian material has been heard sold into northern Europe, although most participants expect deals to happen given the increasing gap between the two regions.

And most northern European mills are strongly implementing their increases, although some think they might adapt their pricing strategy into March if they need orders. The difficulty will be reducing prices without impacting confidence in the coil and sheet supply chain.

In Italy, market talk about the deal reported yesterday from Turkey at $475/t fob for April shipment has intensified. Sources close to the buyer said the price may be different, but the market appears to have taken $475/t fob as indicative of large-volume purchases. Some said this would net back to $495-500/t cfr, but considering the strengthening of the dollar against the euro, the euro equivalent is understood to be €450-455/t cif Italy. Buyers of medium lots now target $480/t fob Turkey. The Argus daily Italian index edged back up by €0.50/t to €441.75/t ex-works.

Market signals are mixed and inconsistent — amid decreasing HRC prices out of Turkey as mills' push to secure orders, scrap prices appear to have confidently rebounded. The Argus HMS 1/2 80:20 ferrous scrap assessment rose by $6.20/t today.

Meanwhile, Italian mills are still pushing for $440-450/t ex-works, especially to service centres, who are for now delaying purchases and resisting these levels. Imports are out of reach for all but the biggest buyers for now. The big buyers concluded business with Italian mills at discounts earlier this month, as they have struggled to pass costs on to consumers.