EU HRC: Italian mills drive EU-wide increases

More European hot-rolled coil (HRC) producers have lifted offers, but increases are expected to solidify after Christmas as most buyers have covered their requirements for January.

The Argus daily Italian index increased by €2.25/t today to €416.25/t ex-works. The northwest European index also nudged higher, rising by €2.75/t to €424.50/t ex-works. The front-month swap moved up to €423, while January was assessed at €445 and February rose by €10 to €455.

ArcelorMittal began instructing customers of a €30-40/t increase across Europe today, taking its northwest European offer to €450/t ex-works and Italian offer to €430/t ex-works. It is at a premium to these levels that contracts will be negotiated, the company told customers.

The price increases are driven mainly by Italian producers as a result of multiple factors. First, the uncertain future of one mill means some buyers are not willing to risk purchasing from the seller, leaving them with fewer supply options. Even if the producer is offering at the most attractive level, offers are subject to it continuing production and delivery times, and thus cannot be guaranteed.

Another reason for the increases are the production cuts across Europe that are balancing out sluggish demand to an extent. Given its relative spot liquidity compared with northwest Europe, Italy is typically the quickest market to react.

Import prices are also rising as a result of firmer slab and scrap costs. Turkish mills have offered as high as $500/t fob for HRC, up by as much as $20-25/t over the course of the day. One mill was heard to have sold at $465/t fob, although this was unconfirmed. Italian buyers estimate import value at €430-435/t cif Italy. Similar levels have been offered into northwest Europe.

Other central and east European mills have moved offers up too. US Steel Kosice and others have raised offers by €25-30/t. One Italian mill boosted its offer substantially, to €440-450/t ex-works, for the first quarter on the back of strengthening slab.

Despite the rapid move, market participants are sceptical about mills achieving their target levels, but most expect to see deals concluded at partial increases in the next couple of months. Italian producers have settled some January contracts into northern Europe at best at a rollover compared with December.

But buyers' prices are yet to move at all, and processed material is available at last month's levels. Consumption remains low, but should buyers need to purchase material urgently, they would need to accept higher levels.

source: Argus Media