European HRC prices to increase in January 2023 amid lower supplies

European hot-rolled coil (HRC) prices are likely to increase in January 2023, as steel mills expecting demand to rise and hoping to close deals at higher prices due to lower supply.

In Northern Europe HRC offers rose above Euro 700/t ($745/t) compared to Euro 650-680/t ($692-$724/t) in December. Although the agreements on higher prices have not yet been finalised and steel mills are positive as they have good order books. Moreover, production cuts during the third and fourth quarters of 2022 and potential growth in end-user demand will lead to price hike.

Prices of Italian steel mills in early 2023 will be Euro 670-680/t ($713-$724/t) as mills are closed for the Christmas holidays and are expected to return after 9 January 2023.

Turkey’s export opportunities are unlikely to boost early next year due to high production costs, low availability of scrap and a smaller selection of suppliers of slabs, as well as high energy prices. However, India is likely to dominate the HRC import market in the short term.

The import share of hot-rolled coils from Turkey was 14% in January-October 2022 period, but only about 100,000 tons in November-December 2022.

The competitiveness of Turkish producers in Europe began to decline even before the country’s factories faced high production costs problems. However, before the Indian government introduced export duties in May 2022, after which Japan was the benchmark for import prices for about six months.

Market participants believe that the abolition of export duties by Indian government in November 2022, will restore its position in the European imported HRC market. New offers and deals were announced in late November. However, offers from Turkey will not work in the short term. This can only happen if Turkish sellers are willing to offer significant discounts, which is not possible for the mills.

Outlook
The need to replenish inventories against a backdrop of lower production and high energy costs will lead to a price hike in January 2023, as per market sources.

~GMK Center