German market sees HRC price rise to subside, renewed optimism over capacity: Platts survey

German steel market participants expects a more subdued approach to future pricing from market-leading mill ArcelorMittal after its latest HRC offer increase of Eur20/mt to Eur1,170/mt May 28 fell short of the mill's usual Eur50/mt increases.

While inventories were expected to remain low as mills get through months-long order backlogs, participants showed they were hopeful of a small boost in available capacity over the summer period, data from the monthly steel sentiment survey by S&P Global Platts showed June 3.

In the survey conducted among German producers, distributors, traders and end-buyers at the start of June, the index for steel price development stood at 72, down 24 points from last month's tally of 96, suggesting a soft relaxation in the exceptionally bullish prices experienced in the first half of 2021.

Despite a unanimous shift in pricing sentiment, clarity on workable prices is uncertain, with wide offer ranges between Eur1,120-1,180/mt ex-works Ruhr from the few mills still able to offer material for Q4. Chronic supply shortages across the steel complex still remains, with more notice of import offers into Europe as buyers seek alternatives to meet domestic availability.

Over the last week, offers from Egypt, China, Korea and Japan were heard between Eur980-1,125/mt CIF European Ports, with foreign producers able to offer cheaper prices, and similar lead times to domestic mills.

North European HRC prices currently stand at Eur1,140/mt ex-works Ruhr, and CRC prices at Eur1,295/mt ex-works Ruhr.

Domestic demand was said to be cooling down because of lackluster automotive inquiries, with more tonnage now available for other normally less-prioritized customers in need.

"The market has calmed down, car manufacturers are running at lower production than they intended so they will absorb less material than the forecast, so it means there is material on the market for other applications, as auto is not taking it," a European service center source said.

Meanwhile, a European buyer said demand was strong mostly for long-term orders, and that there was less focus on spot transactions.

"I don't expect big increases anymore, there's no reason for them, when I look at mill backlogs. Lead times are getting shorter. Then prices will be stable, and then go down," the buyer said. "Backlogs are suddenly gone and mills are running out."

For price movement, most bullish among survey participants were producers at an index of 88 with traders not far behind at 79 and end-buyers trailing with an index of 50.

Inventories seen stable, capacity to increase

With producers and stockholders now less focused on supplying the automotive industry, late orders from mills were now being delivered to patient customers, as well as an influx of import material now arriving into European ports. However, the sentiment survey revealed participants still expected very low inventories at an index of 32, though this was higher than May's index of 28.

Producers and end-buyers tallied at 25, unchanged from May, while traders stood at 46, a 10-point jump from their initial inventory expectations last month.

A European mill source said although the supply situation was somewhat alleviated by the lack of automotive demand, he cautioned it would not fix the situation.

"Auto has needed slightly less because of semiconductor [shortage], it has only diminished the [supply] problem, it doesn't solve it. Whereas we once had a lack of 1,300 tons, we now have only a gap of 1,200 tons."

A second European mill source said, "there is some material in Antwerp awaiting new quotas to open, demand is still good, prices stable."

The current dialogue surrounding German inventories differs greatly from recent data obtained by Platts on May 28, which showed average flat steel stocks fell in April by 1.9% month on month to 1.03 million mt, and yearly stocks dropped by 16% from the previous year.

There was renewed optimism about the possibility of greater capacity in the market, with the index for production standing at 70, indicating a significant increase, up from May's already bullish index of 62. Producers were at 61 -- the least bullish on production levels -- whereas traders were at 71 and end-buyers at 75.

Adding to the bullish sentiment on production, a European service center source noted small steel volumes between 100 and 300 mt were now available in the market.

"They're not big volumes, but there is more availability. Smaller capacities are rising up again," the source said. "Maybe July-August production possible, with August-September delivery."