Hot Rolled Coil Market Sentiment Shifts Optimistic On European Market Production Cuts

Germany: On Thursday, July 7, hot-rolled coil prices were near the bottom in the European market; some buyers were anticipating further price declines while manufacturers resisted additional price drops. Thus, the producers started to prune the production activity. According to market participants, the European Hot-Rolled Coil market has witnessed an uptick in sentiment, fueled by production cuts and increased import offers. Additionally, demand has started to recover gradually, and most buyers are expected to restock by the end of July. However, market participants expect some restocking activity in the second half of July, but the restocking will be limited because buyers are already overstocked and will only book the tonnages they require.

Energy prices in Europe have been highly volatile in recent months due to global sanctions imposed following Russia's invasion of Ukraine. According to manufacturers, electricity prices in some countries were five times higher than at the same time last year. Energy prices will skyrocket if Russia cuts off gas supplies to Europe in the coming quarters of 2022.

Over the past week, Mills noted some improvement in demand from automotive original equipment manufacturers (OEMs), with more inquiries for August-September material coming in. The majority of distributors believe that prices have reached their bottom. Mills either accept firm bids or negotiate with dependable clients. Exporters increased offers as well. This, coupled with European production cuts, has shifted the trend, and prices will soon recover. Most European steelmakers have been cutting production to balance supply with lower demand. Producers intend to extend summer maintenance and, in some cases, shut down blast furnaces.

Furthermore, Central European producers have begun to offer slabs on the EU spot market in order to reduce coil supply. Import offers of HRC from Asia into Northern Europe have risen by about USD 15-35/MT compared to previous quotations. As a ripple effect, ChemAnalyst anticipates that the European Hot Rolled Coil prices will stabilize, backed by the lower production activity amidst the slower demand recovery.