EUROPE FLAT STEEL WRAP: Domestic HRC prices fall $57-114 in Q2 on tough import competition

Low import offers dragged down domestic prices for hot rolled coil (HRC) across Europe by €50-100 ($57-114) per tonne in the second quarter of 2017.

The situation is expected to change in the third quarter due to the positive consequences that will arise from an upcoming definitive decision in the EU’s anti-dumping case into material originating from Russia, Ukraine, Iran, Brazil and Serbia.

The European Commission (EC) made a decision in April not to impose preliminary duties on HRC from the five countries.

That decision was made as the EC is evaluating the possible damage that a significant reduction in import volumes might have on European distribution, according to market sources.

A consortium of steel companies from Italy and elsewhere across Europe was established in mid-July 2016 to maintain competition in the EU steel market and to represent the interests of independent distributors in the case. This consortium was established by Italian steel trade association Assofermet and is represented by Brussels-based law firm Van Bael & Bellis.

Reacting to these developments, Russian steelmakers took the opportunity to sell substantial volumes of HRC to Europe at prices below the average import cost in April-May. This resulted in injury to the domestic prices.

Russian steelmakers Magnitogorsk Iron & Steel Works (MMK) and Severstal resumed trading HRC to Europe in early April.

European buyers have also been looking for alternative sources of HRC and, as a result, a deal for material from Australia was reported in Italy in May at a competitive price. This deal was followed by a decrease in import offers both from other overseas suppliers and from domestic sources.

Metal Bulletin’s weekly domestic price assessment for HRC in Northern Europe dropped by €60-70 ($69-80) per tonne from the beginning of April to €490-510 ($560-582) per tonne ex-works on Wednesday June 28. The assessment for imported material in the region decreased by €70 ($80) per tonne over the same period to €440-455 ($503-520) per tonne cfr main ports.

The assessment for domestic HRC in Southern Europe was €450-480 ($514-548) per tonne ex-works in the last week on June, down by €50-70 ($57-80) per tonne since the beginning of the second quarter. The assessment for imported material dropped by €65 ($74) per tonne over the quarter to €430-450 ($491-514) per tonne cfr main ports in the region.

Meanwhile, Metal Bulletin’s weekly price assessment for domestic HRC in Central Europe fell by €90-100 ($103-114) per tonne from the beginning of April to €440-460 ($503-525) per tonne ex-works on June 28.

The massive drop in the second quarter is likely to have already reached “bottom” by the end of June, according to market sources. Domestic HRC prices are expected to be supported by a combination of positive effects from upcoming trade defence measures and stronger buying activity.

“I heard that prices are stable and that mills [in Northern Europe] are trying to keep prices above €500 [$571] per tonne ex-works for HRC. Demand has picked up but, for now, there’s no sign that prices will go up as well. However, I believe that we will see higher prices after the summer,” a Northern European trader said.

A second trader said that Russian and other mills involved in the trade case have stopped trading to Europe so as not to be hit by any duties that may be imposed, as delivery times come closer to the settlement date for definitive duties.

The EC is expected to announce definitive anti-dumping duties for HRC from Russia, Ukraine, Brazil, Iran and Serbia ahead of the original deadline of October 6 this year, according to market sources. The sources claim that the decision is likely to be announced in late August-early September, while some say that it might be announced as early as the middle of July.

“It is hard to predict the outcome of this case, and a lot of rumours are circulating around it. The EC has determined that all countries [involved] in the case have dumped material, but there are also rumours that Serbia and Iran might be excluded from the case,” a third source said.

Although the CIS steelmakers have stopped offering material to avoid being hit by duties, HRC prices from other countries, such as Turkey and India, have been competitive, sources said.

However, the announcement of the definitive duties on hot rolled products from the five countries is likely to have a positive effect, as both European and overseas mills might try to push prices up after the final decision is announced.

Demand is expected to drop significantly in the second half of July and into August, due to holidays and scheduled maintenance outages in the EU.

“European mills are offering material with production and delivery at the end of the third quarter, at the earliest, so they are unlikely to decrease prices further to get more deals,” the first source said.

Although, in the short term, the market will see a seasonal slowdown, buyers have already started to restock HRC for the second half of this year, according to market sources, resulting in an improvement in steel demand.