EU HRC: Prices falling but some sense a bottom

Excessive destocking continues to weigh on apparent demand in the European coil markets, with buyers nursing their inventories and postponing procurement for as long as possible.

Argus' headline daily Italian and northwest European hot-rolled coil (HRC) indices declined again today, as domestic sellers tried to stimulate buying from service centres.

The northwest Europe index fell by €5/t to €429.50/t ex-works, meaning that it has declined by €17/t this week alone. The Italian index dropped by €3.25/t to €410/t ex-works. The northwest Europe forward curve dipped too — October was assessed at €442.50/t, while November and December slipped to €430/t.

A Russian mill's aggressive offers into Asia are causing concern that Indian sellers could return to Europe. The lowest-priced deal into Italy for large shipments was heard at €390/t cif, for Egyptian coil. The lowest offer heard into Antwerp for December shipment was €410/t cfr, but traders suggest they could slip lower for delivery further out. Buyers are reluctant to purchase, even at this level — one trader was discussing a 2,000t shipment and the service centre involved decided to decline the deal.

With sheet prices so low in Europe, buyers are reluctant to restock and are still trying to trim their inventories. But availability of certain sizes is starting to be a headache for German service centres, which have really depleted their stockpiles.

Despite the pervading bearishness, some are starting to see signs that the market is close to its nadir. European mills have been losing money for long enough and are trying to draw a line under prices, perhaps helped by concerns that Turkey might be sanctioned, which is crimping demand for its material from European buyers. There is also some concern about Turkish material exceeding the 30pc quarterly safeguard cap, which has reduced demand somewhat.

One Italian buyer tried to achieve a €5/t reduction from a domestic mill, but it refused, suggesting it could not drop further.

The Egyptian longs safeguard could also be bullish for scrap, pushing up costs for electric arc furnace mills and filtering into higher finished product offers. Nevertheless, European scrap has been very depressed of late. Argus' delivered mill assessment for E8 new scrap fell by €40/t this month to €190-200/t, as mills reduced demand. And recent Turkish sales into Egypt normalised at around €380-385/t cif, which the country's mills could potentially replicate into Europe should they find a willing buyer.

source: Argus Media