EUROPE FLAT STEEL OUTLOOK: Q1 domestic HRC prices to track rising offers

Transaction prices for domestic hot-rolled coil (HRC) in the European Union are expected to rise in the first quarter of 2018, with some even matching December’s official offers, according to market sources.

But the official prices announced by mills might not be fully reflected across the different regions.

ArcerloMittal increased its offer price for HRC to €580 ($688) per tonne ex-works in Northern Europe on December 12, compared with deals reported at €520-540 per tonne ex-works in the same week.

Offers from other steelmakers were reported at €560-580 per tonne ex-works.

Metal Bulletin’s weekly price assessment for domestic HRC in Northern Europe was €530-550 per tonne ex-works on December 20.

The assessment for Southern Europe domestic HRC was €520-535 per tonne ex-works on December 20, while official offers in Italy and Spain have been reported at €520-550 per tonne ex-works.

Mills in the north of the EU are unlikely to reach the offer level in transactions, sources said, but deals are likely to move up by €10-20 per tonne in the region in the first quarter.

In the south, where the official prices are lower, some deals could be done at the upper end of the range, particularly in Spain, where prices are traditionally higher, according to a market source.

Any price increases will be gradual, supported by a pick-up in seasonal demand, a lack of competitive import offers and solid order books at European mills for the first quarter.

“The price will go up, but it will not jump by €50 per tonne, it will go up in small steps like plus €5-10 per tonne,” a German trader said.

“European mills are going to have a very flexible strategy on the prices,” a representative of a German mill said.

“As soon as mills see that they start to lose tonnage, they will reduce prices to keep the imports out. So it will be very tricky for the guys who are used to buying a lot from imports to benefit, especially taking into account the long lead times,” he added.

An Italian trader said “the price trend in Southern Europe is upward, and the only short-term uncertainty is [the cost of] raw materials.

“Unless there are some significant downturns in iron ore or coking coal prices, HRC prices will move up,” he said.

Demand for HRC in Europe is expected to start its recovery from the seasonal lull in the second half of January, when buyers traditionally start to rebuild stocks. During the first quarter, domestic prices usually move up, on these seasonal factors.

Prices for both domestic and imported HRC in Europe began to rise in December, reflecting the international market trend.

But not many deals were reported at these higher prices and since the mills increased their offers the market has been slow ahead of the Christmas holidays.

Overall, in the fourth quarter, domestic HRC prices in Northern Europe have been largely stable despite seasonal de-stocking activity, supported by the limited availability of imports and the fact that mills have been well booked.

In contrast, Southern European HRC prices have been more volatile in the final quarter, as they have been more exposed to fluctuations in HRC import prices.

Import influence
In early October, the European Commission (EC) imposed fixed charges of €17.60-96.50 per tonne as a definitive trade defence measure against HRC from Brazil, Iran, Russia and Ukraine.

The European steel association, Eurofer, had been concerned the trade measures would not protect the EU market from imports from the four countries.

But the fixed charges have resulted in a decrease in imports from the countries involved in the case.

HRC deliveries from the four countries fell by 61.09% to 1.44 million tonnes in January-October of 2017, according to data released by Eurofer.

Only Russian steelmaker Severstal resumed trading HRC to the EU even though it has been subject to an anti-dumping duty since late October. The duty the EC set for Severstal’s material was the lowest in the range - a fixed rate of €17.60 per tonne.

But since doing a couple of deals in October, Severstal has not made any new offers, according to market sources.

“There are some alternative sources of HRC in the market,” an Italian distributor said. “But we may see a shortage of HRC in the medium-run, which will allow [European] mills to increase prices.”

Turkey used to ship its HRC mainly to Southern Europe, but due to lower freight costs in recent months, it has been targeting more sales to Antwerp in Belgium, according to market sources.

Meanwhile, suppliers from South Korea, Taiwan and Egypt have increased their deliveries to Europe by 95.44% year on year to 3.43 million in the first 10 months of 2017, according to Eurofer.

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