Day: 13 August 2020

Chinese steel futures and seaborne iron ore prices were fluctuating on Wednesday amid some uncertainty. Iron ore was adjusting to longer processing times for imports from Australia, Kallanish notes.

On the Shanghai Futures Exchange the October rebar contract closed CNY 10/tonne higher than Tuesday at CNY 3,805/t ($547/t), while the same contract for hot rolled coil closed CNY 28/t higher at CNY 3,900/t. In Tangshan, billet prices slipped CNY 20/t to CNY 3,420/t.

The Kallanish KORE 62% Fe index gained $0.38/t to $121.32/dry metric tonne cfr Qingdao. The Kallanish KORE 65% Fe index increased $0.06/t to $128.97/dmt cfr, but the KORE 58% Fe index slipped $0.61/t to $106.39/dmt cfr.

On the Dalian Commodity Exchange, January 2021 iron ore settled down CNY 20.5/t at CNY 819.5/t, while on the Singapore Exchange September 62% Fe futures settled up $1.11/t at $116.32/t. The same contract for 65% Fe and 58% Fe futures settled up $0.99/t at $125.72/t, and up $0.44/t at $105.27/t respectively.

Markets were volatile on Wednesday even though prices did not move far from their starting points. One trigger for uncertainty was the increase in time it takes to acquire permits for commodities imported from Australia. Effective from 11 August, imports from Australia will take 11 days to receive import permits. Cargos were reportedly being affected on Wednesday.

The impact on prices is uncertain, but in the short term it is likely that a slowdown in deliveries of cargos into port stocks will support prices.

SBQ steelmaker Schmolz+Bickenbach was severely affected by the Covid-19 pandemic in the second quarter, as lower steel demand translated into reduced sales volumes and revenue.

“The biggest impact came from the extensive shutdowns of major European automobile manufacturers and their suppliers,” says chief executive Clemens Iller.

S+B reported a -38.1% on-year decrease in Q2 sales to 301,000 tonnes, Kallanish notes. This was most pronounced for quality and engineering steel, whose shipments fell -42.3% on the back of the sharp decline in demand from the automotive industry.

Volumes also fell in the stainless steel and tool steel segments, but with less sharp declines of -28.3% and -22.2% respectively. The average sales price/tonne of steel was €1,561 ($1,839) versus €1,662 in Q2 2019. This fall is mainly attributable to lower base prices as well as lower scrap and alloy surcharges than in the previous year.

S+B’s revenue declined -41.8% on-year to €469.9 million. The decline was most pronounced in the quality and engineering segment, at -50.1%. Revenue from stainless steel was down by -33.6 %, and for tool steel by -34.2%. Geographically, all regions and countries suffered a double-digit decline in revenue. Adjusted Ebitda was negative €45.8m, against positive €40.5m a year earlier.

The company previously told Kallanish new, stricter EU steel import rules are restrictive for every country outside the EU, including Switzerland. “Their effect was greatly mitigated by Covid-19, as demand collapsed,” it said. “Therefore, with this low demand, we currently have no problem with more stringent import conditions, but as soon as this changes, Swiss Steel will have to look again at the permissible quarterly quantities.”

Despite the slight increase in customer activity from May, demand is returning extremely slowly. A cautious, very limited recovery will not emerge until Q4, S+B concludes.

Dutch flat steel service centre Noviostaal confirms the outlook for flats prices in Europe remains positive. This is thanks to a recovery of activity in key markets and the need for mills to widen their low margins.

The company says in its newsletter published this week it is receiving indications that automotive production in Germany, France and Italy is recovering faster than expected. It also adds that Sweden is already registering pre-coronavirus economic activity levels.

The expected recovery in demand together with persistent low margins for European mills suggest prices for flat products will continue to move up further into the fourth quarter. “In summary, it can be said that all signals for a price increase are green and we assume that we will have to deal with higher steel prices in the coming months,” Noviostaal observes.

According to Kallanish price series, hot rolled coil in northern Europe recovered €20/t ($24) since the beginning of July to €420/t ex-works base last week. Noviostall confirms this and indicates mills are pushing for a further €30-40/t increase for new orders, with some targeting yet further price hikes for Q4.

Swedish scrap prices marked the first recovery in August since the middle of April, Kallanish learns from national scrap association Järnbruksförnödenheter AB (JBF).

Each month, JBF publishes the applicable price changes for Swedish scrap grade No.11, which is offered to the supplier contracted for supplies during the following month. The association has signalled for an August recovery of SEK 70/tonne ($8.04/t).

Prices slipped in July after two months of stability in May and June. According to Kallanish price series, most European scrap indicators show prices have been on a new upward trend since early July, supported by stronger levels in the Turkish market. However, this week sentiment has turned in Turkey.

Swedish grade No.11 scrap is equivalent to scrap grade HMS1, or E3 in European steel scrap specifications.

The European HDG market was relatively stable Aug. 12 with further improvements seen in automotive demand, sources told S&P Global Platts.

The Platts TSI HDG index was assessed at Eur520/mt ex-works Ruhr Aug. 12, unchanged week on week.

In southern Europe, HDG rose Eur5 on the week and was assessed at Eur493/mt EXW S Europe, its highest mark since May 20.

A German service center source confirmed recovering demand from automotive original equipment manufacturers and truck manufacturers.

“There is some restocking in the market as from March to June [during the] lockdowns there was inventory depletion, so they must restock as inventories are at a low level,” he said. After three months of complete closure, truck manufacturers in particular are now enjoying fuller order books that will support activity for the third quarter, the source said.

“Automotive order intake is better but not yet at preCOVID-19 levels,” he said adding that recent price gains achieved in the hot-rolled coils market will lift galvanized prices in the coming weeks.

A Benelux-based service center source said the outlook for HDG was unclear in the short term. While there was now reduced import volumes available in the European market, this will be offset by the return of Liberty to production, the source said, adding: “for HDG it’s unclear on what will happen.”

A Benelux-based trader said construction demand continued to be strong in Northwest Europe.

“Automotive trend is a little better, slowly of course, not the level of demand we want, but it’s slowly starting again and construction doing well in Benelux — a lot [of investment] going into real estate,” he said.

With the majority of market participants in southern Europe on holiday, the current market level was unclear, said an Italy-based rolling mill source.

An Italy-based distribution source said there was increased pressure on cold-rolled and hot-dipped galvanized material due to the sluggish return of automotive demand, but added that it was felt “mainly on galvanized products.”

— Len Griffin, Amanda Flint