Europe's steel-raw materials spread slips in July after Q2 record

The Northwest European HRC-steel raw materials spot spread moved down to Eur758/mt ($900/mt) in July from Eur761/mt in June, according to estimates by S&P Global Platts on Aug. 2.

In the second quarter, the European HRC spread averaged a new record high Eur695/mt, up 61% from Q1, on the back of higher steel prices.

A recovery in steel prices has led margins to strengthen in the past year, while spot prices have turned down from record levels. Platts Northwest European HRC prices averaged at a new high of Eur1,172.64/mt ex-works in July, while on July 30, the spot price was assessed at Eur1,165/mt ex-works, below the daily high of 1,190/mt ex-works assessed on June 25.

The rise in spot prices for commodity-grade HRC continue not to be fully reflected in sales and deliveries for steelmakers due to earlier negotiated terms, and flat steel prices remain stronger than long steel products.

ArcelorMittal, Europe's biggest steelmaker, said Q2 results did not reflect the full improvement in steel to raw materials spreads due to pricing lags in orders, which will result in a positive effect on Q3. The typical lower seasonal demand and pricing is "expected to be less pronounced then normal," the company said July 29.

"As a business, we have not seen the full impact of spot pricing," ArcelorMittal CEO Aditya Mittal told analysts July 29. "The contract lag effects will come in the second half."

Because of timing lags, realized prices are expected to continue to rise in all steel segments, while at the same time, costs are also rising, ArcelorMittal CFO Genuino Magalhaes Christino added.

Actual steel margins depend on realized steel sales volumes, with the mix of pricing and terms in sales and orders under contracts.