European hot rolled coil prices maintain downward trend

Western European hot rolled coil prices continued to decline, during the past four weeks. Further reductions are expected in late November and early December. Prices in Germany are particularly weak. In contrast, they are holding up at a slightly higher level in France and the UK. 

Most mills are short of orders and are aiming to fill gaps in their December production schedules, as they try to improve cash flow. Output is being cut and production facilities idled, in an attempt to balance supply with demand. Upcoming plant maintenance may be extended into the first quarter of next year. 

Price discounts are failing to induce a substantial upturn in buying from distributors and service centres. Few transactions are taking place, with most orders being for small quantities. Stock levels are gradually falling, but they continue to exceed current market requirements.  

Sales volumes to end-users are limited. A number of customers are reluctant to accept receipt of material, due to their full warehouses. Furthermore, they wish to avoid receiving high-priced coil, originally ordered several months ago. This is making it difficult for distributors to offload their old inventory and achieve their year-end stock targets, which are lower than usual. 

Strong competition from East Asian producers is exerting negative pressure on local prices. Some European traders are willing to risk purchasing from third countries, but many are dissuaded because of the long delivery lead times involved. Orders placed now would arrive in March/April 2023. Moreover, the uncertain price trend for both domestic and import coil creates a reluctance to purchase foreign-origin material. 

Market conditions in Asia are weak, and production cuts in the region have been limited. Moreover, the energy cost crisis is less severe than that being witnessed in Europe. Nonetheless, considering current steelmaking raw material expenditure, price offers from East Asian mills are believed to generate minimal profit, or may be lossmaking. 

Turkish quotations are uncompetitive. Despite having the advantage of using cheap Russian slab, conversion costs for rerollers have escalated, due to the upturn in gas and electricity prices. This is leading Turkish coil producers to undertake substantial output cuts, reducing the quantity of material available for export.