North European hot-rolled coil (HRC) futures have firmed dramatically in recent days following strength in the underlying physical market.

On the CME Group’s North European HRC steel (Argus) contract, an October-November strip traded at €453/t today for 500 t/month, while a September-December spread went through at minus €10 (€445-457) for 500 t/month. A December-first quarter spread also concluded at minus €10 (€457-467) for 1,500 t/month and 500 t/month. This amounted to 5,000t of trades, a new daily record for the embryonic contract, which launched in March this year.

These trades followed a stronger settlement on Friday, with September rising €6/t to €443/t, October up €9/t to €450/t, and November and December up €10/t to €452/t and €453/t, respectively.

The underlying Argus northwest European has been on the up this month, rising from €410.50/t on 3 August to €442.50/t last Friday. Mills have hiked their offers in a bid to return to profitability, with costs for primary raw material iron ore booming. A lack of imports, and firmer real and apparent demand, have also helped mills realise stronger prices.

Leading European steelmaker ArcelorMittal is offering at €500/t for October-December, while a German producer has also increased its offer to around €480/t on the same basis.

Concern over capacity restarts

While the market has been bullish, much of this is predicated on reduced supply, as well as demand recovering. Some mills will have to bring some capacity back, with demand outstripping supply, but if the majority of Europe’s idled capacity returns, price gains could reverse quickly.

Liberty Ostrava announced last week it was bringing its 1.2mn t/yr blast furnace 2 back on line, while Voestalpine is also restarting the smaller furnace at its Linz site in Austria.