Year: 2016

The European Commission has clarified that automotive grades are not included in the anti-dumping investigation into imports of Chinese hot-dip galvanized coils.

“Products intended for the automotive industry are excluded from the investigation in light of the exact chemical composition and metallurgical properties of the product concerned as described in the notice of initiation,” an EC source told S&P Global Platts.

The official notice of October 8 caused mass confusion with market players scrambling to clarify what is and is not included.

Jeff Kabel, chairman of the International Traders Steel Association confirmed the group met with EU officials in Brussels last Wednesday but said the talks did not make the matter clear. “From my standpoint we are not clear if auto is included or not,” he said.

Chinese mills do not supply large quantities of automotive galv to the European car industry, although the two mills that supply the most are not named in the investigation, according to Kabel.

The separation of automotive from other industrial grades is particularly interesting as it is widely understood that an attempt in 2007 to dump Chinese HDG failed after objections from the automotive sector.

Peter Brennan, PLATTS

The two big mills in the German state of Saarland have become partners in the steel trading platform Mapudo, which was founded in 2014.

Engineering steel maker Saarstahl and plate maker Dillinger Hütte have invested a one-digit million euro amount through their joint capital venture unit SHS Ventures. Their contribution is shared by two further investors, NRW.Bank and HR Ventures, Kallanishnotes.

With its investment, the SHS group wants to extent its value-added chain, but also give a boost to its internal and external digitalisation. “We want to use the know-how of Mapudo to offer our customers the ideal mix of distribution channels,” says Saarstahl sales chief Klaus Richter, commenting on the ongoing diversification of sales processes.

Mapudo will use the money to improve and expand its platform, and to boost marketing to become more popular, says its managing director Sebastian Grethe, formerly of thyssenkrupp Materials.

Mapudo works like a virtual warehouse in which distributors list their products (see Kallanish passim). Buyers looking for a product will be linked with sellers, and can place their order immediately online. The fee, paid by the stockist, is a one-digit percentage of the transaction price, with a maximum and a minimum cap.

With minimal fanfare for such an important undertaking, the newly-formed Global Forum on Steel Excess Capacity held its first meeting in Berlin on 16 December.

The initiative was agreed to by the G20 leaders at the Hangzhou Summit in September 2016 and further discussed at the OECD steel committee meeting in the same month (see Kallanish passim).

The Forum is chaired by Germany with China and the US as co-chairs. Over thirty steel producing countries are participating, representing over 90% of global steel production.

In its latest monthly report on global crude steel output, the World Steel Association calculates current worldwide crude steel capacity utilisation ratio of its 65 reporting countries in October 2016 at 69.6%. It was 68.2% in October 2015. This already implies more than 30% overcapacity.

China, with currently 50.2% of global crude steel output, has been following its own steelmaking capacity reduction programme throughout 2016. A key element in this is the closing down of unofficial and therefore ‘illegal’ induction furnaces. The Catch-22 here is that, because the production is unofficial, it is unlikely to be recorded in government statistics.

This is probably why, according to worldsteel data, Chinese crude steel output at the end of October was actually up by 4% year-on-year.

Automotive grade hot-dip galvanized sheet is included in the European Commission’s investigation of Chinese coated material, according to a source at an association that received a clarification.

Numerous market players noted confusion over the official notice of the investigation, announced Friday December 9, and whether it excluded automotive grades. Many explained the omission by making comparisons to a previous investigation into Chinese HDG, launched in 2007, that ended without a duty following feedback from the automotive sector.

“An anti-dumping investigation into hot dipped galvanized coil from China will not have a negative impact on the EU automotive industry as the anti-dumping probe will not cover the HDG for the automotive sector”, Axel Eggert, Eurofer general director, told S&P Global Platts.

A lawyer based in Brussels concurred based on the guidelines in the notice. “Looking at the specification market players confirmed to me that the HDG for the automotive is excluded, as was demanded by the strong automotive industry lobby. They lobbied very hard as they needed materials and they have open contracts.”

However, the association source said he had met representatives from the EC earlier this week and they had clarified there was a mistake in the official notice and automotive grades are included. “We do know for a fact that it is included. That was just a mistake in the original specification,” he said.

Another senior market figure agreed the automotive sector had not been excluded. He said the definition “makes no reference to a specific automotive grade HDG. References to an end use destination of steel imports are unknown in the CN codes governing customs definitions of imported steels.”

The distinction is important as, while imported Chinese HDG is generally not used in the automotive sector, there are implications for other suppliers. For instance, Korean producer POSCO (which does sell auto grade to Europe) is said to be reluctant to send big volumes to Europe to avoid being named in an investigation.

It is understood the EC has set a deadline of December 23 for objections to be filed. The European Commission could not be reached for comment.

Peter Brennan and Annalisa Villa

Availability, rather than pricing, appears to be the most crucial driver to current European strip product demand, with service centers making sure they can cover their requirements in the face of tightening supply.

Higher mill offers have been largely accepted by the market despite the difficulties downstream players have in passing the costs on to buyers. While many sources suggest this boost in demand will keep the spot price firm through Q1 of next year, a number say the level is unsustainable and prices will fall in the second half of the year when real demand does not appear.

“Some expect prices to fall in March/April and they might be right, but what are you going to do in Jan/Feb [for Q2 orders]. Lead-times are getting longer, you have contracts to fulfill so you have to pay more on the spot market,” a Benelux trading source observed.

He noted that some service centers had refused to buy as they did not believe the price levels were sustainable, but now they had been forced to accept €550/mt for hot rolled coil from an Italian mill.

Some have pointed to the declining spot coking coal market as a sign that steel prices should drop. The S&P Global Platts assessment for premium low-vol material fell to $252/mt FOB Australia Thursday from a high of around $310/mt.

However, the quarterly settlement price for Q1 looks set to increase strongly from the Q4 contract price with the Japanese mill Nippon Steel & Sumitomo Metal Corp settling for January-February at $285/mt FOB Australia, up from $200/mt for October-December. This contract settlement is the benchmark, generally followed by the European mills.

A German trading source said the raw material prices will become less of a talking point in future negotiations with steelmakers switching their argument from higher production cost burdens to tighter supply.

“A mill told me the main impact is that it seems steel demand is higher in the last month, but it’s only a feeling of the demand it’s not the real demand because some customers are focusing on the lead-times and securing material. In the past it was price first, now it is not. I think in May/June we will talk about real demand and it won’t be so good so we’ll see prices start to decline.”

Peter Brennan, PLATTS

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The European Council – representing the governments of the European Union’s 28 member states – has agreed in principle to modernize the EU’s trade defence measures. In a statement Tuesday it said the proposed regulation “amends current anti-dumping and anti-subsidies regulations to better respond to unfair trade practices. The purpose is to shield EU producers from damage caused by unfair competition, ensuring free and fair trade”.

In particular, it will address concerns from the steel industry by shortening the investigation period and enabling higher duties to be imposed in certain circumstances.

The European Commission, which proposed a series of measures to strengthen the EU’s trade defence system, welcomed the Council’s decision, saying it represented “a major step in adapting our legislation to today’s economic realities”.

Negotiations will now take place between the Council, the Commission and the European Parliament to agree and implement the changes. As Platts has reported, iron and steel products accounted for 14 of the 18 new anti-dumping investigations initiated by the EU in the January-November this year.

Henry Cooke, PLATTS

The European commission has officially opened an antidumping investigation into imports of hot-dip galvanized coil from China. This had been widely expected by the market following the complaint lodged in October by domestic producers.

While provisional measures could be imposed in September 2017, the possibility of the addition of retroactive measures is already making the trade of HDG from China into Europe grind to a halt. It is understood retroactive measures could impact arrivals from the beginning of June onwards, with current new orders expected to arrive in Europe not before the beginning of May.

As previously reported by Kallanish, the investigation was launched before the WTO deadline for classifying China as a market economy in trade cases. This has given the European Commission the opportunity to set the prices in the Canadian market as the base level to which Chinese prices will need to be compared in this latest investigation.

China is in line to export some 2 million tonnes of HDG this year to Europe, well above the 1.7mt exported in 2015, as reported. Traders in Europe commented that currently in the market there isn’t any potential other source capable to replace these imports into the EU, implying therefore that the market might feel a shortage of HDG in Europe as well as tension in prices.

“Going forward these investigations will only increment the risk of delocalisation by manufacturers in Europe importing Chinese steel, and will support a price rise in finished goods for the wider public,” a trader said. “European mills this year are making good margins on their sales and the Chinese imports are only an excuse to protect the market.”

The European Commission has confirmed it will launch an investigation into imports of “certain corrosion resistant steels” from China, more commonly referred to as hot dip galvanized sheet.

The investigation had long been expected in the market, with S&P Global Platts reporting in October sources close to discussions anticipated an imminent probe. In a filing in the European Union official journal Friday, it appears the EC received a complaint on October 25 from Eurofer (the European steel association) on behalf of eight domestic mills.

Imports of coated coils into the European Union rose 49.8% year-on-year in the first nine months of 2016 to 3.42 million metric tons, with Chinese material jumping 86.9% to 1.71 million mt in that time, according to figures published on the Eurofer website.

However, many traders and service centre buyers said the duty was not warranted as Chinese producers typically serve the thinner end of the market, where Europeans are not so active.

Typically Chinese material is around 0.4-0.5mm in thickness, for use in sectors such as construction; whereas European producers tailor output towards the thicker, 2mm, end where demand from the automotive sector is particularly strong and margins are higher. Many argue the measures could result in shortages in certain grades.

The investigation of injury will cover the period October 1 2015 to September 30 2016 and will be concluded within 15 months. Provisional measures may be imposed no later than nine months, although in the recent investigation into Chinese plate and HRC, the EC announced preliminary measures five weeks ahead of schedule.

The specification of the investigations exclude stainless or silicon-electrical steel, limited to flat-rolled products of iron or alloy steel or non-alloy steel; aluminum killed; plated or coated by hot dip galvanization with zinc and/or with aluminum, and no other metal; presented in coils, cut-to-length sheets and narrow strips.

The announcement marks the near completion of trade investigations for Chinese flat products with anti-dumping measures already in place for HRC, CRC and plate.

Peter Brennan, PLATTS