Day: 18 June 2020

US President Trump and his administration are working on a tentative infrastucture investment plan with an estimated budget of $1 trillion, Kallanish reports.

According to anonymous sources close to the administration, a preliminary version of the plan is currently being prepared by the US Department of Transportation. This version of the plan would reserve most of the allocated money for conventional infrastructure works, like roads and bridges. However, this plan also includes technological investment spending, including 5G infrastructure and rural broadband.

The tentative proposal comes as bipartisan support for infrastructure investment continues to grow. Back in March, at the height of the Covid-19 pandemic, both President Trump and US House of Representatives Speaker Nancy Pelosi floated potential infrastucture bills as a way to curb the economic downturn caused by the virus and to spur job growth as shelter-in-place orders were put into effect. Prior to these talks, House Democrats unveiled a $760 billion five-year infrastructure plan in January.

Currently, the FAST Act of 2015, an existing US infrastructure funding law, is up for renewal by the end of September. Sources say that the administration intends to use the renewal procedure for the FAST Act to push for a broader package.

US Steel Kosice (USSK) has restarted a blast furnace after completing maintenance planned for summer but brought forward due to the weak market, a company representative tells Kallanish.

“Due to the pandemic, we made a decision to pull our Q3 outages into Q2 while we are at what we believe to be the bottom of the market,” the spokesman says. The outage was completed last week and the unit ramped up.

This means the Slovakian steelmaker has returned to operating with two of its three blast furnaces after idling 125,000 net tonnes/month capacity pig iron capacity BF no.2 last summer due to higher costs and lower demand in Europe. The firm says it is “…looking forward to demand returning to restart the third blast furnace.”

It is not, however, looking forward to the safeguard review proposed by the European Commission. “Once again, the government in Brussels by their actions has shown they do not support the home steel industry, and all of our employees and the employees of the many businesses that depend on the European union steel industry,” the spokesman explains. “The Covid pandemic has crippled the manufacturing sector, and the demand for steel in the EU is down 50%, and the EC continues to allow unfairly traded imports to flow in.”

EU member states approved the steel safeguard quota revision proposal presented by the European Commission at the end of May to the World Trade Organisation (see Kallanish passim). The biggest changes proposed have been the calculation of all country-specific quotas on a quarterly basis as well as changes to the way residual quotas can be used. Hot rolled coil quotas are also set to be strongly impacted as they will be moved from global to country-specific.

USSK reported a -25% on-year slump in deliveries in the first quarter to 801,000 net tons. Raw steel capacity utilisation fell -24% to 882,000nt, giving a capacity utilisation of 71% versus 94% a year earlier.

ArcelorMittal has confirmed it is currently working to secure the operation one blast furnace at its Fos-sur-Mer site beyond July, Kallanish learns from a company statement.

Workers at the site organised a demonstration this week against the possible complete closure of steelmaking activity. The company responded confirming it aims to keep steelmaking operational during the coming months.

Since 23 March one of the two blast furnaces at the site has been temporary idled. Rumours have circulated that the second furnace would also be stopped during the summer, but a firm plan is not yet in place.

A direct consequence of the Covid-19 crisis has been the collapse of demand: So far in Europe, activity has only recovered by 50%. The situation is all the more difficult for the European steel industry as it is exposed to low-cost steel imports, despite ArcelorMittal’s calls for aid from the European Union to ensure fair competition, the firm comments.

“This deep and lasting crisis that we are going through is therefore causing concern, as in most companies today,” the company continues. “We assure all site employees, subcontractors, elected officials and residents of the territory of our utmost commitment to find solutions to preserve the future of the company.”

“Even if the level of orders remains low, our commercial and operational teams are working to record and produce punctual orders, and thus allow business to remain at 50%, as has been the case since March 23,” ArcelorMittal says. “We repeat that we work day after day to keep a blast furnace in operation beyond July.”

European hot-rolled coil markets in both southern and northern Europe saw some positive price gains June 17, but visibility remains unclear, sources told S&P Global Platts.

An Italian rolling mill source said the market continued to stabilize with limited opportunity for lower prices going forward.

“We are feeling that there is no possibility for lower prices from here, there should be an increase in prices as all mills are in the worst position now – we recalculated the profitability budget and its now in a tragic position.”

The daily Platts TSI index for HRC southern Europe increased Eur1.50/mt to Eur392.50/mt EXW S.Eu, while the daily Platts TSI index for northern Europe went up Eur1.50/mt to Eur398/mt EXW Ruhr.

Most buyers across the European coils market continue to only buy what they need with most deals heard around 100-500 mt over the last weeks.

The continued uncertainty puts buyers off committing to either import material or larger volumes.

“We buy small quantities as we also sell small quantities, it’s not the normal levels we are used to,” said a Benelux steel service center source.

“We try to keep purchasing at the minimum if possible,” said the Benelux source, adding that they were trying to sell from their stocks as much as possible. “The only thing I can confirm is that demand is not picking up.”

A German service center source said liquidity pressure was increasing at stockholders and service centers.

“Stockholders are under pressure to sell material. They do have lower stocks now than in the months after the 2009 financial crisis but they are still pushing material into the market due to liquidity needs,” he said.

According to the source it was possible to buy from stockholders de-coiled sheets cut to length at or below current mill offers for new production coils, highlighting the distressed position that some businesses were now in.

“There is a two-tier market almost now, those that will make immediate payment and take delivery as agreed, versus those that will agree [on] price then ask extended payment terms and also try to delay taking delivery – even some will come back and try to renegotiate the agreed price lower afterwards – desperate measures,” the German source said.

With Europe’s demand muted, western European mills continued to search for business outside Europe to fill their order books.

Following recent bookings to China from a European mill, the trader said that volumes, albeit small, have been bought by Canadian buyers for HRC, according to a German trader.

— Len Griffin, Laura Varriale

The COVID-19 pandemic may have given additional impetus and momentum to protectionism in steel markets, which has been rising steadily around the world since the global financial crisis of 2008-09 and looks set to continue that way, World Steel Association Director General Edwin Basson said in an interview with S&P Global Platts June 17.

The pandemic has broken some supply chains which may become more regional, less global and potentially less efficient, the worldsteel director said. Governments therefore need to take care not to introduce unilateral measures to protect industry that will unbalance the so-called “level playing field” in global steelmaking, Basson told Platts’ commodities reporters.

“I think we may very well see a continued shift towards that (protectionist activities in steel markets),” he said. “We are seeing a rollback on this globalization idea… intensifying from way back just after the great financial crisis. What we see now is not a new trend. The pandemic may have put some additional impetus or awareness. This process of rolling back free markets has been in place for a decade or more.”

Worldsteel is one of the world’s largest industrial associations, whose members represent around 85% of global steel production.

“The best market is one that is as free from interference as possible,” Basson said, noting that protection of producers always ends up costing someone something, whether that is a government or a consumer, and generally pushes commodity prices up. “What we need is a rule-based system, with principles such as those of the World Trade Organisation, which makes the position clear: where we run into trouble is where we have unilateral actions.”

Because the European Union markets make use of WTO rules, the European Commission’s current review of steel import safeguards will also abide by the principles, even though some will be for this and others against, he said.

“The European process makes use of these rule-based approaches within the WTO. And therefore, I think we have to live with it. Whether we like it or not, it’s going to take place.”

Carbon border tax

Worldsteel supports the EC’s proposed carbon border tax adjustment – a carbon tax on imports into the EU of products including steel – on the basis of WTO principles, “because that allows continued trade between different regions that are making steel and using steel to continue to take place against a clear set of rules,” Basson said.

An important aspect of the border tax is that it puts a cost on carbon, which most of society has never paid for in the past, he noted. “This cost of carbon, I think, is going to be the big change coming into the pricing structures going forward,” he said.

2050 carbon neutrality in doubt

COVID-19 has not necessarily made the steel industry’s attitudes “greener” because the sector has already been working on green steel projects for a long time, said Basson, who considers steel quite green compared to some other industries. “If you measure it in terms of CO2 per tonne (on average 1.8 tonne CO2 emissions per tonne of steel produced), steel is much more competitive than most of its competing materials,” he said.

However, while everyone is talking about the use of hydrogen-based steelmaking as the preferred route to net-zero carbon steelmaking, Basson said that the high cost of producing hydrogen means “it could take a decade or more” for this to become a viable option for the sector: in the EU for instance studies have indicated energy capability might have to be nearly doubled in order to make hydrogen viable.

“The steel industry globally still fits within the 2 degrees C scenario,” the worldsteel director said, however adding: “I am hesitant to say the industry and particularly the industry in Europe will be at a carbon neutral position by 2050, because this depends on a bunch of factors that are not really in the steel industry’s control at the moment.”

Steel to benefit from infrastructure drive

Steel is likely to continue to be viewed as vital for modern society and its infrastructure and has come out less badly in the current pandemic than sectors such as hospitality, hard hit by social distancing rules, Basson said.

The steel industry is likely to be further supported by “the incredible amount of government support” made available to economic systems, which worldsteel estimates at around $12 trillion globally, equivalent to almost 15% of global GDP, part of which is expected to go into steel-intensive infrastructure or infrastructure renewal. Globally around 52% of steel production is used in construction, he said.

Even though in terms of expected global GDP the decline this year is forecast to be worse than at the time of the global economic crisis “we don’t see a much more significant drop in steel demand this time around…..essentially, we could say, per unit of GDP, this drop is less steel intensive than what we’ve seen previously,” he said.

“We have seen, whether it was in the mining industry, in the steel industry, the more automated that the industry has been the less the production drop was as a result of this pandemic,” he said.

— Diana Kinch and Annalisa Villa