Key facts
- Hot-rolled coil (HRC) prices in Italy are at a premium to hot-rolled plate (HRP) for the first time in over four years.
- The divergence is due to the EU's new quota regime implemented on July 1.
- HRC import quotas fell by 33% to 5.2mn t/yr, with usable quotas lower due to fragmented distribution.
- Plate import quota allocations fell by 46% to 1.2mn t/yr, but distribution was more favorable.
- HRC prices rose due to tightening imports, while falling slab prices eased cost pressure for plate re-rollers.
Hot-rolled coil (HRC) prices in Italy have risen to a premium over hot-rolled plate (HRP) for the first time in more than four years, driven by the differing impacts of a new EU quota regime introduced on July 1. The new system has been more disruptive for HRC, allowing coil producers to increase prices, while falling slab prices and subdued demand for plate have suppressed plate prices.
Argus' daily Italian HRC index was assessed at €708.50/t ex-works, trading at an €8.50/t premium to the Italian plate assessment for S235 grades. The Italian HRC index increased by €39/t on the month, while the plate index fell by €25/t over the same period.
The reduction in free quota allocations under the EU's new import regime was sharper for plate (46% to 1.2mn t/yr), but the distribution of quotas was more favorable than for HRC. Coil quota volumes decreased by 33% to 5.2mn t/yr, but fragmented distribution means usable quotas are effectively lower due to small allocations for certain suppliers and additional trade measures. The Italian steel association Assofermet has warned that the EU's new steel safeguard could lead to a 60-70% drop in usable steel import quotas.
Trading firms rerouted HRC cargoes from Europe to other destinations to avoid new 50% tariffs on out-of-quota volumes. While HRC prices rose due to import tightening, falling slab prices reduced cost pressure for plate re-rollers, enabling them to lower offers to secure orders. Some market participants linked the decline in slab prices to the EU safeguard measures, as non-EU suppliers may shift to producing semi-finished products since slab sales to the EU are exempt from trade measures, except from Russia. Seasonal factors and prior restocking waves that pushed plate-making slab offers above $600/t cfr Italy have also contributed to the pressure on slab prices this summer.
Demand for domestic HRC has accelerated following quota allocations and anticipated supply shortages. Conversely, high inventory levels at plate buyers have kept them on the sidelines, expecting further price declines.