EUROPE FLAT STEEL WRAP: Q2 to bring price stability despite downward sentiment

Domestic prices for hot rolled coil (HRC) in the EU will remain stable in the second quarter of 2017 despite negative sentiment prevailing in the market at the start of the year.

A majority of European HRC producers are well booked for second-quarter rolling, which will support price stability, Metal Bulletin has heard.

In addition, two anti-dumping cases into imports of material from China, and from Russia, Ukraine, Brazil, Iran and Serbia, have resulted in limited deliveries of HRC from overseas.

“Since the anti-dumping investigations were started, HRC has been mainly delivered from Turkey and India. So far, India has been offering the lowest prices, but this has had no significant effect on prices [overall] and I do not think that the situation will change,” an Italian trader said.

The European Commission (EC) set preliminary duties on imports of Chinese HRC at 13.20-22.60% on October 7 last year. Definitive duties should be announced on April 7.

The EC is also expected to announce its decision on HRC from five other countries on April 7. Rumours have been circulating in the market that the EC is unlikely to impose preliminary anti-dumping duties on the material, and that Serbia has been excluded from the case.

However, even if the EC decides against preliminary duties, definitive duties may still be imposed within six months.

Furthermore, even if the EC decides to skip preliminary duties on HRC from the five named countries, it is unlikely that demand for imported material will jump, according to market sources.

“The EC has not made any official announcement of its intention not to impose preliminary duties. Even if [such an announcement] is made, it remains unclear when and at what level the definitive duties will be settled. So buyers are unlikely to start buying HRC [from the countries involved in the trade case],” a German distributor said.

“Once again, if you bring in material and they decide [to impose] anti-dumping duties, you [could be] in trouble,” a Southern European trader said.

While the EU is shielded by trade defence measures from the negative influences of cheap imports, the price decline in the wider international market might affect European prices. Metal Bulletin’s weekly price assessment for HRC exported from China has fallen by 7.77% since the end of February.

“There is still a risk that countries that can no longer sell to Europe will sell to other destinations. And material from those destinations will be redirected to the EU,” a fourth source said.

In addition, demand in Europe will start to decrease in the second quarter due to the seasonal market slowdown during summer.

As a result, domestic HRC prices in the EU might fall slightly “in the late second quarter at the earliest”, according to the sources.

First quarter
In the first quarter of 2017, domestic HRC prices in Europe continued to rise after the sharp increase seen in November 2016, triggered by a jump in coking coal prices.

Buyers expected that European mills would have to decrease their prices for HRC after a sharp rise at the end of 2016, as demand was not strong and raw material costs had stopped increasing. In addition, end-users were not ready to accept high prices for HRC, according to market sources.

Despite the downward sentiment, however, prices have continued to go up, supported by anti-dumping measures in the EU.

“The mills almost sold out their first-quarter rolling HRC in January, so they were in no hurry to decrease prices,” a trader said.

Metal Bulletin’s weekly domestic price assessment for HRC in Northern Europe increased to €560-580 ($601-623) per tonne ex-works on Wednesday March 29, from €540-550 ($580-590) per tonne ex-works at the end of December 2016.

The assessment for HRC in Central Europe was €550-560 ($590-601) per tonne ex-works on March 29, up from €510-520 ($548-558) per tonne ex-works in late December last year.

The assessment for HRC in Southern Europe also picked up to €530-540 ($569-580) per tonne ex-works on March 29, from €520-530 ($558-569) per tonne ex-works at the end of 2016.

The price rises in the region were also supported by the decline in HRC output from Italian steelmaker Ilva.

The steelmaker had scheduled the relining of one of its rolling mills in January but later postponed the maintenance outage. Since that time, Ilva has been offering limited volumes of second-production material at high prices that are considered “unworkable”.

ArcelorMittal has submitted a bid to buy Ilva in a consortium with Italian re-roller Marcegaglia and bank Intesa Sanpaolo. It has submitted an additional bid of €1.60 billion ($1.72 billion) for the Italian steelmaker, on top of the €2.30 billion ($2.47 billion) investment proposed on March 6.

ArcelorMittal’s bid is reported to be higher than the €1.20 billion ($1.29 billion) proposed by a competing consortium known as AcciaItalia, comprising Indian steelmaker JSW Steel, Italian steelmaker Arvedi, Italian state holding company CDP and Delfin Investment.