Europe scrambles for Asian HRC after Turkey earthquakes disrupt supplies

Indian, Vietnamese and South Korean steelmakers have reported healthy inquiries from European buyers, with a major Indian steelmaker already concluding transactions at around $800 per tonne CFR Antwerp and Vietnamese steelmakers booking quantities at $680-685 per tonne FOB.

An Australian producer sold HRC into Italy at $750 per tonne CFR, while HRC from a major South Korean steelmaker was sold in Southern Europe at €750 ($804.79) per tonne CFR, sources told Fastmarkets.

“South Korean steelmakers are likely to aim for $720 per tonne FOB to Europe, if they have excess supplies for the spot markets,” according to a seller source dealing with a major South Korean steelmaker.

Taiwanese and Indonesian HRC were also heard to have been sold into Europe at €760 per tonne CFR Southern Europe.

European buyers had already been buying HRC in the spot import market due to reduced supplies in the region, partly caused by low operating rates at European steelmakers in the fourth quarter of 2022.

Vietnam’s decision to divert domestic HRC supplies to Europe has also squeezed local buyers there, who are now having to import HRC from China to make up for supply shortfalls.

“Buyers [in Vietnam] are accepting prices of $670-685 per tonne CFR now because of the reduced quantities available from local producers,” a trader source in Vietnam told Fastmarkets on Thursday.

Market participants expect spot prices to continue increasing in the near term, even though many Vietnamese buyers have fulfilled their import demands with Chinese Q195 HRC cargoes in the two weeks after the Lunar New Year.

“Prices may even go as high as $700 per tonne cfr Vietnam,” a seller source close to a major Vietnamese blast-furnace-based producer said.

Market participants expect the next offers from major Vietnamese producer Formosa Ha Tinh Steel Corp to be higher in the middle of the month, especially as the latest offer price from domestic competitor Hoa Phat Group was only at $650-655 per tonne CIF for domestic buyers.

Indian steelmakers are also bullish on spot prices, mainly because domestic demand has been strong.

“I won’t sell much into Europe because local demand from the infrastructure sector is good,” a seller source close to a major Indian steelmaker said.

Other Indian steelmakers are now aiming to sell at more than $800 per tonne CFR, an increase of $20 per tonne on the previous transactions, which were heard at $780 per tonne CFR Europe.

Indirect benefits for China

With short supplies forcing Vietnamese buyers to accept higher import prices, China-origin HRC — which is subject to hefty anti-dumping duties in Europe — is expected to see higher export prices and continuing trading, market participants said.

Fastmarkets calculated its steel hot-rolled coil index export, fob main port China at $625 per tonne on February 9, up by $5 per tonne from the previous day.

HRC exports from China — the largest steel-producing country in the world — have been active since December last year, mainly due to changes to the exchange rates, lower freight rates, price gaps between different markets and low inventories at distributors and end users, a trader in eastern China said.

Several traders said that HRC export trading had seemingly weakened, compared with the period before the Lunar New Year holiday, but traders agreed that the earthquake in Turkey had caused a supply shortage that was likely to help Chinese export trading regain some momentum.

Southeast Asian countries and Turkey are transshipment ports for Chinese steel flowing into Europe and Africa, traders said.

“High energy costs and sanctions on Russia have already increased European demand for Asia-origin steel. Now that demand is set to increase after the devastating earthquake that has disrupted transportation in Turkey,” a trader in northern China said.

Countries in the Association of Southeast Asian Nations (ASEAN) remain the top destination for Chinese steel exports, while Turkey has also been one of the major buyers.

More than 2.74 million tonnes of Chinese HRC were exported to Vietnam in 2022, accounting for nearly 27% of the total exports of this flat steel product from China, making it the biggest buyer of Chinese HRC exports, according to Fastmarkets’ calculations based on data from China’s General Administration of Customs.

Customs data also shows that the volume to Turkey imported 616,694 tonnes, or 6% of China’s total HRC exports, in 2022, putting it in fifth place.