EUROPE HRC WRAP: Shortage drives prices further up, but market wary of China price fall

Domestic prices for hot-rolled coil in the EU increased in the week to Friday May 28, supported by continuing coil shortages and good demand.

The mood in the market, however, has changed due to a decline of prices in China.

Sentiment in the European coil segment has turned from bullish to mixed, with buyers starting to believe that a recent price correction in China might put an end to the price rises in Europe. As a result, buyers who have stocks of coil preferred to wait before placing orders, until the price trend in China was clearer.

In addition, European buyers have been struggling to open credit lines due to the high prices of flat steel, and as a result they chose to pause their purchasing activity while monitoring China’s coil market.

Most European buyers have low stocks due to a persistent material shortage, and cannot hold back for long before making deals, market sources said, but there were no signs that coil availability in Europe would increase.

Some additional volumes appeared in the spot market after car manufacturers reduced their purchase volumes due to a fall in vehicle production rates caused by the continued shortage of semiconductors, two sources told Fastmarkets.

Market sources also said that end-consumers, which in the past had been accepting of weekly price rises, have become reluctant to make deals at current levels.

As a result, market sources thought that prices were likely to stabilize at their current levels, with buyers who need material more quickly paying higher prices.

At the end of last week, however, ArcelorMittal increased its HRC offers to €1,170 ($1,428) per tonne ex-works, up by €20 per tonne.

Fastmarkets calculated its daily steel hot-rolled coil index, domestic, exw Northern Europe, at €1,136.25 per tonne on May 28, up by €19.58 per tonne week on week and by €148.75 per tonne month on month.

Friday’s index was based on market participants’ estimates of achievable prices at €1,130-1,150 per tonne ex-works and at €1,120-1,150 per tonne ex-works, as well as offers at €1,150 per tonne ex-works.

Fastmarkets calculated its corresponding daily steel HRC index, domestic, exw Italy, at €1,133.33 per tonne on Friday, up by €27.08 per tonne week on week and up by €148.33 per tonne month on month.

Market sources estimated achievable prices at €1,120-1,130 per tonne ex-works, with offers heard at €1,150 per tonne ex-works.

Access to overseas coil has also been limited by the EU’s safeguard measures and uncertainty about whether these will remain in place after June 30. In addition, traditional non-EU suppliers have been reported to be redirecting volumes to the United States, where they can achieve higher prices.

The safeguard measures were imposed for an initial period of three years and are scheduled to expire on June 30, 2021.

On February 26, the European Commission started an investigation into the possible extension of the safeguard measures imposed on 26 steel product categories. The results of this have yet to be announced, but will be made public by June 30 at the latest.

The European Commission was expected to present a draft of the adjusted safeguard measures to the World Trade Organization and other interested parties in early June this year, market sources said.

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