Day: 17 July 2020

China’s gross domestic product expanded 3.2% year on year in the second quarter, signaling the economy is back on its growth path after a 6.8% contraction in the first quarter, as crude throughput and steel production rose along with the output of goods and services amid COVID-19 containment measures.

The National Bureau of Statistics, or NBS, on July 16 released a series of economic indicators that showed some recoveries in April-June economic activities.

However, market sources and analysts said the GDP growth in Q2 reflected mostly a rebound in the production of goods and services rather than actual recovery in demand and consumption. The country’s GDP for the first half of 2020 registered a 1.6% year-on-year contraction.

“The GDP growth is now stored to become inventory as exports fell, and little increase in domestic consumption [was seen] amid the heavy flood after coronavirus,” a Beijing-based economist said.

China’s crude oil throughput rose 5.7% on the year in Q2 compared with a 4.6% year-on-year decline in Q1. The throughput level in June reached an all-time high of 14.14 million b/d, up 9% from a year earlier, NBS data showed on July 16.

The high throughput was primarily driven by the country’s record high crude imports in recent months, with both state-run and independent refiners taking full advantage of low oil prices in Q2.

The aggressive crude purchases in recent trading cycles were predominantly price-driven, and not related to fundamental changes in consumer and industrial fuel demand, market sources and analysts said.

Several sources with state-run Sinopec and PetroChina’s refineries said their oil product tanks were all full.

Meanwhile, the country’s crude steel output growth accelerated in Q2 to 1.6% on the year, up from 1.2% year-on-year growth in Q1. This was driven by the recovery in infrastructure and property construction, as well as traders buying on expectations of a further improvement in the infrastructure and property sector in the second half, sources said.

Also, the value of Chinese goods exports fell 0.2% in Q2 from the same period last year, compared with a 6.5% year-on-year decrease in Q1, NBS data showed.

Moreover, the country’s retail sales value registered a 3.9% year-on-year decline in April-June compared with a 19% plunge in Q1, suggesting end-users’ consumption has not fully recovered.

S&P Global Ratings forecast China’s GDP to grow 1.2% and 7.4% in 2020 and 2021, respectively.

“The economy is healing, helped by building stimulus and a buoyant property market. However, policy-led infrastructure investment will need to hand over to private demand, especially consumption, if the rebound is to take hold next year,” S&P Global Ratings said in a report.

Like S&P Global Platts, S&P Global Ratings is a division of S&P Global Inc.

— Analysts Oceana Zhou, Zhang Jing

Ahead of a July 17-18 meeting of EU leaders in Brussels on the bloc’s long-term budget and recovery plan, the European Steel Association (Eurofer) called for extra support for the steel industry and its supply chains.

“Eurofer welcomes the recovery plan, but calls on leaders to take additional, immediate measures to ensure a quick and sustainable economic resurgence. The EU recovery fund should focus investment on sectors most affected by the pandemic and that have the ambition to significantly reduce their [carbon dioxide] emissions by 2030,” the trade association said in a statement.

“The recovery plan proposal focuses on investment in digitization and the green transition from 2021 to 2024,” said Axel Eggert, director general of Eurofer.

“However, policymakers should focus the recovery plan on investment in sectors most affected by the pandemic, that are exposed to a high risk of carbon leakage, and that have the ambition to significantly reduce their CO2 emissions by 2030,” he said.

“We are asking for clear support from the European Council for an initiative on low carbon emission industry. Backing should be given independently of the location of the respective sites in Europe, to avoid competitive distortions. One way to do this is to allow other EU and national funds to supplement the recovery plan,” he added.

The trade group also called for “additional, short-term emergency measures” for sectors strongly impacted by the pandemic. Such measures should work to prevent dumping or a sudden surge of steel imports, offer incentives to stimulate demand and consider potential changes to the EU Emissions Trading System.

In its recent “Green Deal for Steel” proposal, Eurofer said hydrogen-based steel production costs would be anywhere between 35% and 100% higher than today’s carbon-based production on a metric ton of steel produced basis.

— Len Griffin

Italian steelmakers’ association Federacciai notes a small recovery in the latest production figures compared with those from the most critical lockdown months of March and April.

However, “…our outlet markets such as the automotive and construction sectors are still going through a difficult patch with very concerning figures,” Federacciai president Alessandro Banzato says in a note sent to Kallanish. “As the various measures implemented by the government have not yet been put in place in Italy, it is also difficult to say whether a more substantial recovery will happen in the coming months.”

In the first five months of the year domestic crude steel production stood at 8.3 million tonnes, down -21% year-on-year. Output fell -5% on-year in January, was stable in February, slumped by -40% in March, -42.5% in April and -16.3% in May, the association says.

Banzato has this week been reconfirmed the head of the association until 2022, Kallanish notes.

Eurofer has asked European leaders to take immediate action to support a steel sector recovery. This comes ahead of the European Council meeting taking place on Friday.

“You do not wait to extinguish a fire until the house has burned down – and the European economy cannot wait until 2021 to start rebuilding either,” Eurofer director general Axel Eggert says in a note sent to Kallanish. “EU leaders must therefore consider additional, short-term, emergency measures for strongly impacted sectors, such as steel and its value chains.”

Eurofer wants measures put in place to make sure a potential surge in imports does not materialise. In addition, incentives to stimulate demand should also be implemented (see Kallanish passim).

“Actions should comprise immediate measures against dumping or sudden surges of steel imports, incentives to stimulate demand in the downstream value chain, and a force majeure clause for the EU Emissions Trading System to ensure that the level of free allocation post-2020 is not negatively impacted by the indirect effects of the COVID19 pandemic,” Eggert observes.

Eurofer calculates steel demand during the crisis has fallen by up to -50% given the sharp drop in activity in steel-using sectors, such as automotive, construction and mechanical engineering.

Production at European mills remains down by -25%, with orders impacted by nearly -35% since mid-March compared to the same period of 2019.

Eurofer once again criticised the safeguard system for steel in Europe, noting it “…is unlikely to ward off the threat of import surges once EU demand returns.”

“If the EU does not find a solution to preserve its industry using the means immediately at its disposal, it will not be able to lead the green transition in the future,” Eggert concludes.

In June this year, new car registrations totaled 949,722 units in the European Union (EU), decreasing by 22.3 percent compared to 1,222,942 units in June 2019, according to the latest figures issued by the European Automobile Manufacturers’ Association (ACEA). “Although dealerships opened for business again after lockdown measures were lifted, consumer demand did not fully recover last month,” the ACEA underlined.

All 27 EU markets posted significant declines in June, except France with a 1.2 percent rise. The largest year-on-year decrease was recorded in Spain, with registrations falling by 36.7 percent. Registrations also fell by 32.3 percent in Germany and by 23.1 percent in Italy, year on year.

Meanwhile, in the first half of the year, new passenger car registrations in the EU decreased by 38.1 percent year on year. Registrations declined in Spain (-50.9%), Italy (-46.1%), France (-38.6%) and Germany (-34.5%) compared with the same period in 2019.

According to the latest report issued by the association of European steel and metal distributors EUROMETAL, in the first five months of the current year steel shipments to end-user segments by European flat steel service centers (SSCs) decreased by 22.8 percent year on year. In May, strip mill product shipments declined by 38.5 percent year on year, while they had decreased by 50.8 percent year on year in April.

The negative trend in SSC shipments was accompanied by higher SSC stock indices. When expressed in days of shipments, stocks at EU-based SSCs reached 102 days in May this year, compared to 70 days in May 2019.

In the first five months this year, sales by multi-product and proximity steel stockholding distributors were lower for almost all products of their portfolios. Only rebar shipments were higher. In the first five months, total shipments dropped by 13.6 percent year on year. In May alone, all steel product shipments by the distributors decreased by 32.9 percent year on year.

Expressed in days of shipments, stock volumes of multi-product and proximity steel stockholding distributors amounted to 97 days of shipments in May this year, compared to 76 days in May 2019.

Flat steel product shipments from EU steel service centers fell 22.8% in January-May compared with the same period in 2019, as lockdowns to combat the COVID-19 pandemic took their toll on industrial activity, the European Federation of Steel, Tubes and Metals Distribution & Trade (EUROMETAL) said July 16.

Steel distributors, service centers and traders supply around 80 million mt/year of steel, tubes and metals, accounting for more than 60% of supplies to end-users in EU manufacturing and construction industries, EUROMETAL said.

In May alone, strip mill flat steel product shipments plunged 38.5% year on year, which compared with an even sharper fall of 51.9% for April, the distributors’ group said. Lower shipments led to higher stocks, with flat products inventories at EU steel service centers soaring in May to the equivalent of 102 days in May 2020, compared with 70 days in May 2019.

While EUROMETAL does not specify volumes, the association releases an index for stock levels with the average of 2015 equivalent to 100. On this basis, the EU steel service center index of stock volumes did drop to 103 in May 2020, compared with 118 in the same month last year.

In May 2020, shipments by stockholders and distributors of EU multi-product & proximity steel, including long steel construction products, fell by 32.9% year on year to the equivalent of 97 days in May 2020, compared with 76 in May 2019.

Stock volumes index of EU Multi-Product & Proximity Steel Stockholding Distribution registered at 88 in May 2020, compared with 101 in the year-ago month.

The World Steel Association forecast last month that global steel demand would decline 6.4% overall in 2020 from 2019 levels, although demand in developed economies is expected to drop by a much sharper 17.1%.

Highlighting the weakness of the steel market, ACEA, the association of the European automotive producers, one of the key industrial sectors for steel, said July 16 that in June registrations of new passenger cars in the EU totalled 949,722 units, a drop of 22.3% compared to the same month last year.

— Annalisa Villa

Italian reroller Metinvest Trametal has agreed a loan facility with Italy’s Cassa Depositi e Prestiti (CDP) for Eur15 million, according to Metinvest, a vertically integrated group of steel and mining companies.

The six-year loan facility, with a two-year grace period, is being issued under an Italian government program guaranteed by SACE, the state export credit agency, and Metinvest Trametal will use the funds to carry out its capital expenditure plans.

On April 8, the Italian government approved the Eur200 billion Decreto Liquidita state emergency support program, under which CDP and other financial institutions and banks offer companies capital financing guaranteed by SACE.

The program provides businesses with medium-term and long-term financing to support investments and activities in Italy following the COVID-19 pandemic.

“Despite these challenging times, Metinvest remains focused on developing a sustainable business in Europe by investing in its asset base, IT modernisation and the new HSE requirements caused by the COVID-19 pandemic. Such financing will help enhance Metinvest Trametal’s product quality, production volumes and business efficiency. In turn, this will ensure the group’s continued ability to meet customers’ needs while improving its financial and operational performance,” Metinvest CEO Yuriy Ryzhenkov said.

Metinvest Trametal is located in San Giorgio di Nogaro, in northeastern Italy. Its rolling mill has an annual production capacity of 600.000 mt of high-quality, hot-rolled plates for use in shipbuilding, pipe manufacturing and for other industrial purposes, primarily using slabs produced at the group’s steelmakers in Ukraine.

— Annalisa Villa