The discount on HRC services in the UK is expanding for the Northern EU countries
Hot rolled roll (HRC) prices in the UK have decreased significantly compared to prices in Northern Europe since Tata Steel UK closed its last blast furnace in September 2024.
The HRC estimate in the UK from Argus is trading at an average discount of €62 dollars per tonne ($73 per tonne) to the benchmark HRC index in the northern part of the EU this week. The actual price gap would be even larger, as the UK estimate is valid with additional costs, while the Northern EU index is a baseline and additional costs and shipping costs must be added to it.
Several factors are likely to have contributed to the growing inequality. The gap has widened significantly this year, probably due to the fact that the EU Border Carbon Emissions Control Mechanism (CBAM) has increased the cost of imports into the EU, leading to higher domestic and import prices.
Imports of HRC to the UK have increased significantly since Tata shut down its last blast furnace on September 30, 2024. Imports increased from about 770,000 tons in 2023 to 1.1 million tugriks in 2024 and 1.4 million tons last year.
Import prices to Europe are lower on average than to the UK (see chart). Prices in the UK are somewhat distorted due to the expensive laser cleaning of plates as HRC. But the cost of imports from the UK is usually lower than the cost of production, given the age of Tata's assets and the fact that the country is an exceptionally high-cost jurisdiction for iron and steel production.
Some point to the competitive prices of the local producer as one of the factors depressing the UK market — its prices are currently approaching 540 pounds per ton per day, while some of its partners in the EU are striving, but not reaching 600 pounds per ton per day.
Low sheet prices are also a bigger deterrent in the UK than in Europe, despite consolidation and high-profile failures in the service center market in recent years. In the UK, some decoilers and service centers still sell edged sheet at a price of 540-550 pounds per ton, while in Northern Europe prices are around 635 pounds per ton, and in Southern Europe prices are even higher.
Sources at European factories, complaining about the gap, suggest that they could effectively purchase a roll or sheet in the UK and profitably sell it back to the EU market. Some traders are already switching to the supply of rolled products to the EU from coil, because in some cases dumping duties can be abolished.
The existing gap in prices and supply problems mean that arbitration can be applied for this.