In our previous analysis, we mentioned that the price gap between longs and flats in Europe had increased greatly and that we expected this gap to be filled. Although the local flats prices in the European market lag somewhat behind longs prices, Russian and Ukrainian mills have started to fill the gap in question by announcing new price hikes.
This week the CIS mills issued their new prices one after another, with the rise in raw material prices being influential in their decision to hike prices. The fact that Russia has started to focus more on domestic supplies has resulted in a reduction in the tonnages allocated for export markets. This week, HRC offers ex-Ilyich mill of Ukraine have increased to $680-685/mt FOB Odessa for March shipments.
With regard to Europe, although the market has rebounded a little, the rebound has not yet reached the expected levels. European mills have hiked their prices; however, sales are not as high as expected. Nevertheless, we see stockists concluding purchases to replenish their stocks which declined before the New Year. Offers heard for HRC in Europe are at €490-500/mt CFR main European ports. Offers above this range are not yet being accepted in the market. The general expectation is that demand will rise and that the price hikes will start to be accepted in the local European market.
The situation regarding the southern Europe market is similar with prices rising by €20-30/mt as compared to the period prior to the holidays. The base prices of Italian mills are at around €475/mt for HRC. On the other hand, offers for CRC are at €560-570/mt CFR southern Europe. With regard to Spain, although there are many offers heard, actual price levels have not emerged yet. Inventories in the southern Europe are not full; however, supplies are available. European traders, which are currently refraining from imports, will speed up their purchases in the coming days with the revival in demand.
Demand in eastern Europe is not very strong either. While mills in Bulgaria and Romania have hiked their prices in their local markets, demand is still slow. However, demand is expected to revive in the coming days. The sales price of hot rolled coils in the local Romanian market is at €510/mt, excluding VAT, while the sales price of S275JR plate is at €630-635/mt, excluding VAT, in the same market.
Consequently, while European mills are raising their prices, demand is still calm. Although demand is expected to rebound, there is also the risk posed by the current global economic crisis which may result in a contraction of demand.