European HRC seller talks of first-quarter increase

"The direction is pretty clear, but people don't want to hear it," the mill executive said. His company is seeking €570/t ex-works for first-quarter hot-rolled coil (HRC) deliveries, and he estimated current tradeable value at €550/t ex-works. A trader said €530-535/t would be achievable for larger orders, while buyers estimate values at €540-545/t.

Import pressure has lessened, certainly in northern Europe, with Turkey not as eager to sell. There is a widespread belief that the US will relax its section 232 duty on Turkish material to the original 25pc, which could partly explain why Turkish mills were less competitive in Europe. Import appetite was further subdued by the market focusing on the existing quota and what the European Commission may announce for the definitive measure in February. Softer domestic prices also reduced the arbitrage somewhat.

The mill source cited supply-side constraints, with three European blast furnaces off line for maintenance and low water levels on the Rhine reducing production at some German mills. ThyssenKrupp has brought forward blast furnace maintenance after declaring force majeure because it cannot ship raw materials on the Rhine. This was causing its lead times to extend, but was not seen as a major issue for buyers, which had sufficient inventories.

Most buyers were surprised by the mooted price increase, suggesting that the market is still searching for clarity after the Euroblech exhibition in Hanover. Service centres are largely covered for the rest of the year and not yet willing to commit to first-quarter supplies given concerns over future direction and tepid demand.

Domestic prices fell last week as mills were looking for additional volumes given cancellations by automotive sellers, and with one southern European steelmaker aggressively trying to fill its orderbook.

On the cold-rolled side, there was some import pressure, with Brazilian material on offer to the north below €600/t cfr, substantially beneath expectations of domestic mills at around €630/t ex-works.

In the UK, one domestic producer cut its first-quarter HRC offer to £520/t delivered duty paid (ddp), down by £10-20/t from the fourth quarter, and buyers expected other mills to follow suit. An offer of Turkish HRC at £510/t ddp spooked the market and made life tougher for sellers with material to offload. This offer came hot on the heels of a slew of Turkey-origin sales at £530/t ddp. The new offer was from a Marmara-based mill not often seen in the market.

"It looks like prices will soften rather than rise, I am very nervous about placing forward because of the lack of direction," a service centre source said.

Galvanised was the softest product in Europe, including the UK, given the automotive issues and the level of stocks in the system.