European Hot-Rolled Coil Market Confronts Downbeat Sentiment

Germany: Amidst lower purchasing activity, Hot-Rolled Coil prices have been falling in the European market over the past few weeks. According to suppliers, European Hot-Rolled Coil manufacturers require help filling their order books, while buyers postpone purchase activities due to sufficient stockpiles. The buyers reported a number of local deals for small volumes of Hot-Rolled Coil settled at USD 650-670/MT EXW. Meanwhile, German manufacturers indicated an effective level of USD 670/MT EXW as the bare minimum, claiming that this price is already very close to the coastline and has reduced their profit margins.

Most Hot-Rolled Coil manufacturers in the European region continue to supply the market with December-rolling coil. Steel mills are reluctant to make stable prices for Hot-Rolled Coil for first-quarter production due to weak market fundamentals. Manufacturers intend to raise prices for January-February production, but this is unrealistic at the moment because more downstream demand is required. Meanwhile, buyers believe there is still room for price declines due to sluggish demand and oversupply in the market. Notably, steel service centers and European distributors still need support to reduce their inventories before the end of the year.

According to our sources, domestic and import prices for Hot-Rolled Coil in Italy fell on November 11, as producers offered discounts to stimulate deals. Some mills decided to lower their prices to sell larger volumes before ceasing production in December. Furthermore, the euro's strength against the US dollar, combined with weak Far East flat steel markets, aided the decline. However, downstream demand remained limited due to distributor inventories, seasonal destocking by the end of the year, and weaker steel consumption by end-users, which continued to put downward pressure on Hot-Rolled Coil prices.

Furthermore, several market participants stated that Hot-Rolled Coil distributors were active at the end of the week because distributors needed to secure some volumes for January. Although the rebound in downstream demand is likely to be momentary, domestic Hot-Rolled Coil prices in Europe are unlikely to fall further. According to market participants, the positive effects of production curtailments and high production costs will contribute to price stability. Thus, Chemanalyst anticipates that Hot-Rolled Coil prices will remain low until December because of the increased inventory and abundant import offers.