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Downtrend persists in European HRC market; production cuts said necessary to balance supply/demand

Trading remained weak in the European hot-rolled coil market on Wednesday March 6 amid downbeat sentiment among buyers, a lack of end-user demand and reportedly “inevitable” output cuts, Fastmarkets heard. In Northern Europe, only small-tonnage bookings were reported recently, with buyers said to be focused on destocking rather than purchasing new HRC volumes in a declining market.

“When we talk about [HRC] trading these days, it is mainly 100 tons here and there. But basically, nobody is buying,” a buyer in Germany said.

Most buyers’ estimates of tradeable prices were reported at €700-720 ($760-781) per tonne ex-works on Wednesday, while offers were heard in the range of €720-730 per tonne ex-works from integrated mills and €690-700 per tonne ex-works from a re-roller in the Benelux area.

“Any price we mention is very theoretical because there is no trading. The main point is not the price; the main point is demand, which is nonexistent at the moment,” a second buyer in Germany said. Most suppliers in the region were heard offering April-May delivery for HRC.

As a result, Fastmarkets calculated its daily steel HRC index, domestic, exw Northern Europe at €712.65 per tonne on Wednesday, down by €1.60 per tonne from €714.25 per tonne on Tuesday March 5. The index was down by €3.39 per tonne week on week and by €46.93 per tonne month on month. Market sources described reducing output as the only viable option for European mills to stop the price downtrend.

“Output cuts are inevitable. The sooner mills do it, the better, because the effect on markets and prices will be delayed anyway,” a steel service center source in the Benelux area said.

“Mills should accept the situation and reduce capacity,” a trading source in the region said.

Meanwhile, in Southern Europe, Fastmarkets’ steel HRC index, domestic, exw Italy was calculated at €689.38 per tonne on Wednesday, down by €3.59 per tonne day on day from €692.97 per tonne. The index was down by €22.50 per tonne week on week and by €63.12 per tonne month on month.

HRC offers in Italy were mainly heard at €700 per tonne delivered (equivalent to €685-690 per tonne ex-works), while some industry sources said that €690 per tonne delivered (€675-680 per tonne ex-works) was also achievable on bigger volumes.

A domestic supplier was said to be offering April-delivery HRC. Tradable prices for HRC in Italy were mainly reported in the range of €680-690 per tonne ex-works. Trading remained thin despite significant price decreases in the domestic market over the past few weeks, and most buyers were still postponing restocking, sources said.

“We do not need to buy [HRC], we have enough stock to wait for a few more weeks,” a steel service center source said. And there is still room for the price to decline in the domestic market, most industry sources said. Some buyers claimed they expect HRC to hit €650 per tonne ex-works, indicating they would consider restocking at this price.

In the secondary market, 4mm HR sheet was heard traded no higher than €760-780 per tonne CPT, compared with €780-800 per tonne CPT heard in late February. Trading in the secondary market recovered slightly in early March because some buyers needed to restock, but it was not enough to support a price rebound, some industry sources said.

Import HRC offers from Asia were consolidating around €600-620 per tonne CFR, but buying interest has remained low, Fastmarkets understands. Most overseas suppliers were heard offering May-shipment HRC, which would mean June-July arrival.

Published by: Julia Bolotova