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European steel mills targeting increases for H2 contracts

London — European steelmakers have begun contract negotiations for the second halfof the year with a mill source suggesting Tuesday that hot rolled coil offerlevels will be around Eur580-Eur585/mt on an ex-works Ruhr basis.

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The Platts index for the spot market has been rangebound betweenEur570/mt and Eur575/mt since mid-February with market activity slowed by highdownstream inventories and uncertainty over price direction.

But the increase in the spot price at the beginning of the year suggestsmills will seek increases of Eur30/mt on top of the contract levels agreed inH1 when industrial clients settled at around the Eur 540/mt mark.

"For the moment the mills are still quite confident and they say priceshave increased since December/January and, ok, that's right, it's probably aEur30-40/mt increase from that point," a service center buyer said.

Buying activity had largely stalled with seemingly little appetite fromthe buy-side on the market uncertainty. But mill sources said inquiries havepicked up on a lack of import options.

"It's starting now, people want to start securing their needs becausethey have excellent activity. Also with China picking up and the euro weakness[making imports less attractive], customers don't want to speculate anymore,"a mill source said.

A source close to a tier-2 mill said it was seeking some Eur10-20/mtincreases for quarterly and half year contracts as contract prices were agreedlater, with half of the Q3 availability already sold.

A German buyer said he had received H2 offers at Eur570-580/mt, but saidEur560/mt was more realistic.

Another service center buyer said there would be more contracts settledthan normal, particularly in the automotive sector, as some service centersopted for six-month rather than annual contracts.

"The H1 negotiation is usually harder, there's more intention to changesupplier, it's usually easier in H2. For sure there will be an increase, Ithink more than Eur20/mt," another mill source said.

--Peter Brennan,

--Edited by Jeremy Lovell,