European hot-rolled coil prices continue to decline

Prices for hot rolled coil in Western Europe have continued to decline over the past four weeks. Further cuts are expected in late November and early December. Prices in Germany are especially weak. On the contrary, in France and the UK they are kept at a slightly higher level.

Most factories are short on orders and are looking to fill gaps in their December production schedules in an attempt to improve cash flow. Production is shrinking and production capacity is idle in an attempt to balance supply and demand. The upcoming maintenance of the plant may be extended to the first quarter of next year.

Price discounts do not lead to a significant increase in purchases from distributors and service centers. Few transactions are made, with most orders being in small quantities. Inventory levels are gradually falling, but continue to exceed current market needs.

Sales to end users are limited. A number of customers are reluctant to accept receipt of material due to the fact that their warehouses are full. Also, they don't want to receive an expensive reel that they originally ordered a few months ago. This makes it difficult for distributors to get rid of their old inventory and meet year-end inventory targets that are lower than usual.
Strong competition from East Asian producers is putting pressure on local prices. Some European traders are willing to take risks when buying goods in third countries, but many are discouraged by this because of the long delivery times. Orders placed now will arrive in March/April 2023. In addition, the uncertain price trend for both domestic and imported coil creates a reluctance to buy material of foreign origin.

Market conditions in Asia are weak and production cuts in the region have been limited. In addition, the energy cost crisis is less severe than in Europe. However, given the current cost of raw materials for steel production, it is believed that the price offers of East Asian plants bring minimal profit or may be unprofitable.

Turkish quotes are not competitive. While they have the advantage of using cheap Russian slabs, re-equipment costs for re-rollers have risen due to rising gas and electricity prices. This is forcing Turkish roll manufacturers to significantly reduce production volumes, reducing the amount of material available for export.