WEEKLY EUROPE HRC WRAP: Northern European price recovers despite return of imports

Domestic prices for hot-rolled coil in Northern Europe rose in the week to Friday February 14 despite offers from non-European suppliers returning to the market.

Fastmarkets’ daily steel hot-rolled coil index, domestic, exw Northern Europe was €479.34 ($519.12) per tonne on Friday, up by €7.67 per tonne from €471.67 per tonne a week earlier on February 7.

The index was calculated based on deals and “workable” prices heard at €475-485 per tonne ex-works.

Official offers have been heard at €480-500 per tonne ex-works.

Northern European steelmakers have been applying a similar pricing policy across the region of refusing to give discounts and the situation is unlikely to change this month, according to market sources.

Domestic producers secured good order books earlier this year – they are currently offering late April-May shipment HRC – so are in no hurry to make new deals. They were able to secure good order books due to combination of production cuts across Europe as well as a recovery in restocking activity and a lack of competitive import offers in January.

Distributors, in the meantime, have been mainly booking smaller tonnages to maintain sufficient stocks levels. Buyers have been reluctant to take a risk in buying big volumes of HRC with long lead times because they are uncertain that the domestic price rise will be sustainable in the second quarter.

Although buyers have been cautious over buying bigger tonnages of coil the prices are unlikely to decrease in the first quarter, market sources added.

While market sentiment in Northern Europe has been mainly positive, the situation had been different in the south of the continent. Demand was low last week and market sources told Fastmarkets they are pessimistic it will recover soon.

Distributors in the south of Europe have high stocks of HRC and end-user demand remains low, market sources said. Additionally, end consumers have been reluctant to accept price rises for processed HRC.

As a result, Southern European mills were trading HRC at €440-445 per tonne ex-works at the end of last week, down by €5-10 per tonne compared with prices at the beginning of the week. The region’s steelmakers, in the meantime, were said to continue targeting €460-470 per tonne ex-works.

In addition, to compensate for the lack of buyer interest in the domestic market Italian mills had been trading HRC in Germany at €440 per tonne ex-works. Taking into the account the transportation costs of about €20-40 per tonne, the deals are unlikely to have a negative impact on the Northern European market, according to market sources.

Returning imports ‘no threat’ to domestic price levels
Non-EU suppliers also returned to the market last week, but this change is unlikely to pose threat to the domestic prices, market participants said. This is because the gap between the offers and domestic prices was not wide enough to spur buyers’ interest when taking into account additional transportation costs, the market sources told Fastmarkets.

One Turkish supplier sold 20,000 tonnes of HRC to an Italian buyer at $475 per tonne fob, the equivalent of €455-460 per tonne cfr, taking into account a freight rate of $20-25 per tonne.

Other Turkish suppliers, however, did not offer material at similar prices and were reported not to have significant volumes to offer in the EU due to either scheduled maintenance in March or order books being filled until April.

HRC from Taiwan was offered to Southern Europe at €460 per tonne cfr last week. In addition, Russian material was sold to Northern Europe at the equivalent of €455 per tonne cfr Antwerp. The steelmaker was reported to be out of the market after the deals were made.

Turkish coil was offered to the region at €470-475 per tonne cfr Antwerp.

In the end of last week, the European Commission (EC) initiated a second review of existing safeguard measures into a number of imported steel products. Market sources are still waiting to evaluate the effects any upcoming changes will have on the market.

According to data available as of February 14, Turkish suppliers have used 49.81% of their quota for January-March 2020. Russian mills have used 36.22% of their first quarter quota.

Any material exceeding the quota will be hit by a 25% tariff, according to current safeguard measures.

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