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Feature: Northern European HRC prices reach record high: Platts data


HRC prices reach record high of Eur830/mt

Demand for steel overtakes price consideration

Ramp-up unlikely due to maintenance

  • Author
  • Amanda Flint    Laura Varriale
  • Editor
  • Richard Rubin
  • Commodity
  • Metals

London — Northern European hot-rolled coil prices reached their highest ever level March 25, superseding the Eur800/mt mark not seen since the peak of the global financial crisis in June 2008, according to S&P Global Platts data.

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Over the last three months, prices have soared into unforeseen territory as frantic customer demand – fueled by crippling steel shortages and unattractive imports – propelled the steel market into a bullish trend many in the market would deem unsustainable.

Since the start of this year, the Platts daily North European HRC assessment has increased by a staggering Eur195/mt, to Eur830/mt ex-works Ruhr March 25, and in Southern Europe, prices climbed by Eur168/mt, to Eur825/mt ex-works Italy.

Due to the chronic shortage of steel, discussions about prices in the European market have been considered theoretical by many participants who are argue there is nothing for mills to offer, with some of the Continent's market-leading steel producers inundated with late orders and previously agreed delivery times they are unable to achieve. This coupled with increasing demand from the automotive and white goods sector, particularly in the German and Benelux area, have created a critical imbalance between supply and demand.

"I don't buy every day," a German distribution source said. "I see demand is stronger than supply. I don't know when the supply will come back, I think the shortage will prevail over the summer and this will increase prices."

Current HRC lead times were heard for as late as early Q4, with allocations for July now concluded.

Low German inventories, credit lending issues

Flat steel stocks across the German distribution sector fell by 2.6% month on month to 1.11 million mt in February, adding to the 33-year low, with the year-on-year decrease standing at 8.2%.

Low stocks levels and sluggish production output from mills have had buy-side players favoring material availability over price.

The same distribution source added that even if buyer and seller were to agree on a price and had the material available on stock, there would be significant financial adversities to overcome.

"I see real difficulties for customers, steel service centers and distributors to finance their deals," the distributor said. "You need a higher credit limit and that's the problem for many participants in the supply chain. Our banks do not give us enough credit. We can agree to the price and we have the material, but we cannot fulfil the contracts."

A German trader said while most customers have grown more amenable to accepting higher prices, service centers have been the most agreeable, using the new price level to push up their own prices and margins which have been performing well.

"There are high margins for those who had brought larger inventories into the new year, and those certainly are the steel service centers," the trader said. "They should have suffered by the end of 2020, when they probably had to devalue their inventories – those should be the ones making the big bucks now, in contrast to the back-to-back business."

Imports currently not option to ease shortage

"Thinking about the tough shortage we are having in the EU, I think that the import volumes won't be enough and so it will be very important to stop these safeguards," an Italian service center source said.

Another German distributor argued that the current prices seen from imports were not considered "dumping" prices and should therefore not be penalized for undercutting domestic suppliers.

"All EU producers ship material abroad to the US because of higher prices, why should they put additional duties? The prices we are facing are not dumping prices," the German source said.

Recent HRC import prices from India were heard at Eur830/mt CIF Antwerp and CRC imports heard at Eur995/mt CIF Antwerp ex-India. Buy-side sources also commented on the lack of availability of import material as Europe is still – despite record highs – lagging price levels in the US and therefore less attractive as a destination from suppliers outside Europe.

Signs bull market will continue

Recent levelling from raw materials has not trickled through to finished steel prices yet and demand for finished steel is forecasted to increase this year. The expectation of mills ramping up further is unlikely to become reality with blast furnace relining and maintenance scheduled at major producers.

The question in which way ArcelorMittal Italia will curb production at Taranto is also uncertain and while Liberty Steel told Platts temporary issues with pre-material were resolved, sources said they continued to be wary of further supply disruption.

Shortages have become so apparent that sources said mills were "selective" in their order bookings, trying to maintain steel supply chains and mitigate risks of production disruptions at end-customers like the automotive sector. One German steel service center source said the global semiconductor shortage affecting production at carmakers is likely to offset some of the pressure from mills, meaning the steel shortage has – not yet – been the culprit for production disruption.