European HRC mills push for higher prices despite weak demand and high inventories – WSD

European mills have become increasingly confident about their ability to raise prices, although their higher targets have not yet been widely accepted. Ahead of the EuroBLECH exhibition in Hannover, one major producer attempted to increase its HRC offers by approximately €60/t. However, the move was not followed by other mills and met with considerable skepticism among buyers, who questioned whether the market could absorb such an increase under current demand conditions.

Despite the limited success of this attempt, producers remain determined to defend their pricing position. Mills are gradually raising offers and are unwilling to offer discounts, particularly as negotiations begin for half-year and annual contracts with major customers. Some producers have reportedly sold out their first-quarter 2027 allocations, while others still have limited rolling capacity available for December.

Distributors and service centers are still holding substantial inventories accumulated earlier in the year, particularly after large volumes of imported flat steel were customs-cleared in June ahead of tighter safeguard quotas introduced in July. Since underlying consumption has failed to recover, inventory drawdown is taking longer than expected.

Buyers are restricting purchases to immediate requirements or filling specific gaps in their product portfolios. There is little speculative restocking in the market, and distributors remain reluctant to accumulate additional material at higher prices while their existing inventories are sufficient.

The combination of tariff-rate quotas and CBAM has made overseas purchases more expensive and complicated, while higher freight costs have further reduced their attractiveness. As a result, European mills have greater leverage in negotiations. “I expect them to achieve their goals. Buyers will have little choice but to return to the domestic market. It’s only a matter of time, and I don’t think it will take long,” a German distributor said.

WSD Take. WSD expects HRC prices at €760/t EXW NW Europe in October–November, with a further increase to €780–800/t by year-end, later in the period than previously forecast, as weak demand delays the next round of increases. EU prices are currently behaving as if the market were oversupplied, despite a fundamental supply gap of millions of tonnes per quarter driven by tighter TRQs. Restarted steelmaking facilities, with around 8 million tonnes of net capacity, have met weak apparent demand, which has lowered capacity utilization and held back prices.

However, weak buying in Q3 is drawing down inventories very quickly. According to preliminary estimates, apparent consumption fell 11% y/y in Q3. With end-user activity expected to decline only slightly, by around 1.0% y/y, this implies a supply gap of 3.5 million tonnes in Q3. Long lead times and high risks make imports an unviable option. Moreover, import volumes have become predictable, as they are rigidly fixed by quotas.

Under these conditions, domestic supply is the key driver of the market. For the market to balance, both apparent demand and domestic output must grow. That growth will support prices and domestic margins, which have fallen to €157/t, their lowest level since January. Restoring a normal margin level requires a price increase of €30–40/t.

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Courtesy : https://gmk.center/en/news/