EU HRC Market Caught Between Tightening Supply and Weak Demand
HRC offers increased by €5/t to €740–760/t EXW in Northern Europe and stayed at €720–740/t EXW in Southern Europe. Import offers into Italy remained unchanged at €580–600/t CIF.
European producers remain the most optimistic group in the market. Mills see little reason to offer discounts because their order books are relatively healthy, imports have become more difficult and several production disruptions could tighten domestic availability. Maintenance and unplanned outages have already created bottlenecks at some plants. In particular, ArcelorMittal has reduced production at its Eisenhüttenstadt operation in Germany, and the gradual shutdown of Acciaierie d’Italia’s hot-end operations will decrease available HRC supply in Southern Europe.
Higher production costs are giving mills another reason to defend current prices. Producers therefore expect the underlying trend to remain upward even if the next increase is delayed by weak demand. Some suppliers anticipate stronger buying from mid-October, when inventories could start approaching levels that require replenishment.
Many companies report that they accumulated substantial inventories earlier in the year in anticipation of stronger sales that failed to materialize. Some service centers have enough material for around three months of sales. Slow inventory turnover means they have little need to return to mills for significant volumes. Service centers and distributors are struggling to pass higher coil purchasing costs on to their customers, and some end users are postponing or canceling orders. As a result, buyers have little incentive to replenish inventories at today’s mill prices.
Safeguard restrictions and CBAM have made overseas purchases considerably more complicated, particularly for smaller traders. Buyers must consider not only the headline price offers but also quota availability, potential duties and carbon-related costs. This uncertainty has reduced willingness to commit to large import volumes even when nominal overseas prices remain attractive. “The price advantage of imported steel is no longer enough to offset the additional regulatory and financial risks. Now importing is a game for big players,” an Italian trader told WSD.
WSD Take.
WSD expects HRC prices at €780/t EXW NW Europe in October, with a further increase to €800/t in November–December. Domestic supply is now the key driver of EU pricing. Current margins do not incentivize mills to increase supply: the steelmaking margin collapsed in September to €165/t from €205/t, partly because production costs rose by €16/t. This forces mills to defend their offers.
There are relatively few import offers on the market. Once quota risk, duties and CBAM costs are factored in, imports look expensive at current prices. In addition, import contracts for Q1 2027 will carry the cost of capital needed to hold CBAM certificates covering 50% of embedded emissions at the end of each quarter.
Apparent consumption fell 13.0% y/y in July–August, while activity in steel-consuming sectors was broadly flat. This implies a 2.8 million-tonne supply gap that was not offset by higher domestic output and was instead met by a significant inventory drawdown. October imports will not be able to make up for a drawdown of this size, which will lead to faster price growth in Q4.