Amid the European Commission's recent hot rolled coil (HRC) anti-dumping duties and a corresponding fall of imports into the European Union, the spread between domestic northern European prices and imports has tightened dramatically.
The differential between S&P Global Platts ex-works Ruhr and CIF Antwerp indices is now a mere Eur10/mt, meaning import arrivals are likely to diminish, perhaps bolstering European suppliers' hopes for higher levels.
Between 2011 and August 2017, spreads between the daily prices averaged Eur18.60/mt, but with wild swings. There was a negative spread of Eur8.50/mt in November 2014 and a spread of slightly above Eur70/mt in April 2011.
Import volume and pricing data shows third-country shipments into the EU consistently responded to a change in spreads. However, the level of import volumes has risen considerably since 2015 due to increased overproduction in Asia absorbing much of the European demand increase.
Between 2011 and 2014, a Eur20/mt spread between domestic and import prices saw imports into the EU total approximately 500,000-550,000 mt per month. Yet between 2015 and 2017, at the same spread between import and domestic prices, EU countries imported close to 700,000 mt on average.
While spreads of below Eur10/mt seen in August are infrequent, the western European HRC market has witnessed this several times within the last two years; each time this margin corresponded with monthly EU imports of around 550,000 mt to 600,000 mt.
With an average lead time of slightly under two months, however, spreads of Eur 8.29/mt in September, and October at only Eur5.29/mt, point to even lower levels of imports into the EU in November and December.
Since this February, every Eur 1/mt decrease in the spread between ex-works and import prices has reduced imports in the following month by approximately 20,000 mt.
Continuing this trend at the same rate for the next two months, this would imply monthly EU imports below 500,000 mt, down from 557,000 mt in August, as spreads decreased further.
Similar volumes were imported in January 2015 after the domestic/import spread dropped below Eur 10/mt in late 2014.
With anti-dumping tariffs imposed on China, Iran, Brazil, Russia, Ukraine and Serbia in place, imports of HRC into the EU are likely to fall to import levels seen before 2015, 25% below the monthly average of 660,000 mt in the last two years.
