Posted on 28 Mar 2022
Market leader ArcelorMittal and another leading European steel mill have maintained their hot-rolled coil (HRC) offers at €1,400/t, a clear sign of slowing momentum in the coil suite.
Prices have exploded since earlier this month — Argus' benchmark northwest EU HRC index has jumped by €441.25t since 1 March, while the headline Italian index has gained €429.75/t over the same period.
However, some end-users are now opting to skip purchasing and risk running out of stocks, while service centres are also increasingly concerned about placing at high levels with the seasonally slower summer period just around the corner. Some are seriously considering reducing production rather than buying at what they perceive is the height of the market, deeming the latter riskier. Several service centres and distributors surveyed by Argus said demand from their customers has dissipated in recent days.
The arbitrage for imported material has also ballooned given the precipitous increases in local prices, which is likely to constrain upside. The spread between north European and Chinese HRC is almost $700/t, and slab and coils are already being sold into Europe from the world's largest producer. Cold-rolled coil has been sold around €1,260/t cfr including duty, €240/t below domestic offers, while material is also available from other export markets — such as India — at similar levels. Chinese slab was sold at around €1,000/t cfr +/- in recent days.
North European futures sold off in muted trade yesterday. April and May both traded down €75/t on the CME Group's screen to €1,500/t — US HRC also sold off, albeit not by the same magnitude.
There is still the risk of export taxes in China, and lockdowns in key production hubs are constraining output, which will be likely to support prices.
Source:Argus Media
