Day: 17 September 2020

Eurofer supports the bold target issued by the European Commission of reducing some -55% of EU CO2 emissions by 2030, but remains concerned over possible further cuts to Emissions Trading Scheme (ETS) allowances.

The Commission this week confirmed it has revised upwards its target for emissions reduction, bringing it to 55% below 1990 levels by 2030. The steel sector agrees with this target, going as far as indicating that carbon neutrality will be achieved by 2050. However, Eurofer says a set of measures is needed to support the transition.

Eurofer has asked the Commission to assure the steel sector “…support for investment in innovation and roll-out the creation of a market for green materials, the availability of the appropriate renewable energy sources, an international level playing field, and the application of the EU trade defence instruments without inhibition against third country trade distortions.”

In addition, Axel Eggert, director general of Eurofer, has expressed concerns over the possibility of increasing the reduction factor of EU ETS and cancelling allowances. “This would expose the sector to higher carbon costs at a time when low-carbon investments are desperately needed,” he says in a note seen by Kallanish.

Italian re-roller Marcegaglia is investing to improve energy self-sufficiency at its Ravenna and Gazoldo degli Ippoliti plants in northern Italy.

The firm is constructing a cogeneration plant at each site dedicated to the production of electricity, steam and hot water. It will thereby be able to produce 35.2MW of captive power to supply Ravenna and 21.4MW to supply Gazoldo degli Ippoliti plant, Kallanish learns from the company.

“Marcegaglia continues its commitment to enforce important technical improvements and technological innovations in order to enhance the group’s productivity while maintaining a strong focus on environmental sustainability,” the company says.

For its high-efficiency combined heat and power plants, Marcegaglia chose the Wärtsilä 31SG natural gas engine technology, which guarantees clean combustion and extends maintenance intervals, it says. This makes it possible to replace the boilers that currently provide the heat required by the plants, contributing to the reduction of CO2 emissions.

Last week the firm contracted Danieli to revamp galvanising line #1 at its Ravenna site, which will increase furnace throughput (see Kallanish passim).

The revamp of the furnace at the Ravenna plant will increase the production of hot rolled products up to 160 tonnes/hour. The work includes upgrading the combustion system, with a consequent reduction of pollutant emissions (Nox) and specific fuel consumption.

Both projects are scheduled for delivery at the beginning of 2021, Marcegaglia concludes.

As compared to June, in July this year the production of durable goods was up by 4.7 percent in the euro area and by 4.8 percent in the EU-27, while the production of capital goods increased by 5.3 percent in the euro area and by 5.6 percent in the EU-27, both month on month. In the same month, output of non-durable consumer goods rose by 3.9 percent in the euro area and by 2.8 percent in the EU-27, both month on month. In July this year, the production of intermediate goods was up by 4.2 percent in the euro area and by 3.9 percent in the EU-27, while the production of energy increased by 1.1 percent in the euro area and by 1.3 percent in the EU-27, all month on month.

Among the member states, in July the highest month-on-month increases were registered in Portugal (11.9%), Spain (9.4%) and Ireland (8.3%), while the highest decreases were recorded in Denmark (4.9%), Latvia (0.8%) and Belgium (0.5%).

As compared to the same month of 2019, in July this year production of capital goods moved down by 10.4 percent in the euro area and by 10.2 percent in the EU-27. In the same month, production of durable consumer goods was down by 3.8 percent in the euro area and by two percent in the EU-27, while production of intermediate goods fell by 9.3 percent in the euro area and by 8.7 percent in the EU-27, all year on year. In the given month, production of non-durable consumer goods declined by 1.9 percent in the euro area and by 2.5 percent in the EU-27, while production of energy declined by 6.2 percent in the euro area and by 6.6 percent in the EU-27, all on year-on-year basis.

In July, the highest year-on-year increases were registered in Ireland (15.6%), Poland (0.9%) and Latvia (0.1%). The highest year-on-year decreases among the member states, were recorded in Denmark (13.6%), Germany (11.6%) and Portugal (9.6%).

Ukrainian steel production fell 6.6% on the year to 13.68 million mt in January-August due to weak demand and falling prices on world markets, Ukrmetallurgprom, the country’s steel making industry association, reported Sept. 16.

Ukraine’s production of rolled steel fell by 2% on the year to 12.27 million mt in January-August, pig iron output fell 1.2% to 13.55 million mt and output of steel pipes and tubes dropped by 26.9% to 540,000 mt, Ukrmetallurgprom said.

“The results of the steel sector performance for eight months of 2020 indicate that the industry remains in a difficult situation caused by the crisis on the world steel market, exacerbated by the coronavirus pandemic,” Ukrmetallurgprom said in a statement. “The main reasons for the decline in production, along with global quarantine, are lower prices and reduced demand for steel products.”

In January-August Ukraine’s coke output decreased by 6% on the year to 6.46 million mt.

Ukraine increased production of sintered iron ore by 0.8% on the year to 21.28 million mt in January-August. Ukraine is one of the world’s largest producers of iron ore.

In January-August, Ukraine’s metallurgy sector consumed 1.24 Bcm of natural gas, down 2% on the year, while power consumption decreased by 5% on the year to 7.35 TWh, the association said.

As of Sept. 11, 18 of the 21 blast furnaces in Ukraine were in operation, the association said. Six out of eight open-hearth furnaces, 10 out of 16 converters, five out of 15 electric arc furnaces and 16 continuous billet casting machines out of 17 were also in use.

In August alone Ukraine produced 1.83 million mt of steel, down 5.7% from August 2019, Ukrmetallurgprom said.

Over the same period, production of rolled steel increased to 1.63 million mt from 1.54 million mt, but output of pig iron fell to 1.81 million mt from 1.83 million mt.

In 2019, Ukraine’s steel output fell 1.4% on the year to 20.8 million mt, according to Ukrmetallurgprom.

— Alexander Bor

European galvanized market pushed higher Sept. 16 with increasingly tight availability amid rapidly recovering demand driving prices higher,, sources told S&P Global Platts.

The Platts TSI HDG index was assessed at Eur568/mt ex-works Ruhr Sept. 16, Eur18/mt higher week on week and its highest level since April 15.

In Southern Europe, HDG rose Eur2 on the week and was assessed at Eur550/mt ex-works South Europe, its highest mark since May 31, 2019.

A Central European mill source said better than expected order intake from the Automotive sector now meant there would be extremely limited volumes remaining for the spot market.

“We received so many orders from the automotive industry so material they did not take in the spring they take again now, so its compensation quantities,” he said. “It is not that business is booming just that they need to build cars they did not in the spring time.”

An Italy-based mill source said that demand was now at a good level however he was not certain how sustainable the demand would be.

“Yes we are running but don’t know how long the demand will last so the point is production can be fine but how many cars can be sold? Demand now is absolutely good and they are back in the market,” he said.

A Central European service center source said he was seeing good demand from premium automotive segment but that declining disposable incomes would limit consumer demand.

“Unemployment forecasts are saying that people will not be in a position to buy new cars,” he said. “At the moment we are seeing good demand which is the backlog generated during the three-month closures of assembly lines in the spring time.”

— Len Griffin, Amanda Flint

The typical flow of hot-dipped galvanized steel imports into Europe from Asia has dried up over August and September despite plenty of safeguard quota allowances being available, with material fetching better prices in Far East markets than in the European market.

However, with the recent recovery in European prices, a sizeable portion of the category 4b import quota for Asian producers untouched and just over two weeks left until the new safeguard quota allowance is made available Oct. 1, sources are expecting imports to return to the market at some point.

This is complicating the near term picture and adding to mounting European oversupply concerns, as more local capacity is expected to return from maintenances or COVID shutdowns this month.

An Italian service center source said he still didn’t expect to see any import volumes in October, but noted it would be “really difficult this moment to give a forecast on prices. I’m sure imports will come back because it’s impossible that they will decide to stay out [of Europe] for much longer.”

However, the same source said that “for the moment we see absolutely nothing coming into the EU from South Korea or India. They’re staying out of the market and choosing to remain in Asia where there are higher domestic prices.”

The Platts TSI HDG index was assessed at Eur550/mt ($652/mt) ex-works Ruhr Sept. 9, up Eur4/mt on the week, and in Southern Europe HDG was assessed at Eur548/mt ex-works, up Eur12/mt. In China, HDG export prices were assessed at $613/mt FOB Shanghai.

Options for imports of hot-dipped galvanized material for automotive use under category 4b are fairly ample, specifically tariff quotas for South Korea, India, Taiwan and other “non-country specific” destinations.

China, however, has nearly exhausted its quota with just 9,022 mt left (7%) as of Sept. 16. Once a quota balance dips below 10%, importers are obliged to deposit with customs authorities a 25% bank guarantee to cover any potential duty liability.

Taiwan’s quota balance stood at 30,386 mt as of Sept. 16, or 94% left of its available allowance, and India’s allocation is also relatively high at 46,482 mt, or 60% of its quota balance left.

India’s largely unused balance is in keeping with import behavior seen at the end of 2019, when the country had an unused balance of 45%.

An Italian mill source said he had heard that hot-dipped galvanized material from India could be due for delivery into the EU for November, but said that because of “higher international prices and the current Italian [pricing] situation, no one wants to buy from imports.”

The source added, “If you buy now from imports, galvanized material will not be guaranteed [for arrival] until next year.”

Meanwhile, a Central Europe-based trader said exporters were fetching better prices in other markets, with Indian producers — one of the largest suppliers to Europe — “completely out” since June.

The European Commission data also showed the “non-country specific” quota now stands at 24,647 mt, or 30% left, with 1,366,551 mt awaiting allocation at European ports.

In the fourth quarter of a year, named countries that have exhausted their own allocations — notably China and South Korea — are permitted to utilize the “non-country specific” available balance.

For material falling under category 4a — material mostly used for non-automotive applications — the “non-country specific” quota balance currently sits at 173,040 mt or 35% still available for import.

South Korea’s quota allowance for category 4a material is nearly used up, with just 946 mt or 2% still available for import as of Sept. 16, with India having exhausted its 54,409 mt allowance as of Aug. 18.

A Benelux-based service center source also said that hot-dipped galvanized material was “significantly under pressure” in Europe due to limited supply and long lead times, reopening the possibility of imports.

“If EU delivery times extend to 13-14 weeks, imports could make sense,” he said.

— Amanda Flint

Spanish long steel supplier Celsa Group is considering applying to the Spanish government rescue fund to help overcome the impact of the Covid-19 crisis on its business, Kallanish notes.

“The company is currently studying carefully the conditions disclosed by the solvency fund and whether to take advantage of the temporary public aid offered to strategic companies, which as a consequence of the pandemic need additional financing on a temporary basis,” Celsa says in a note.

Celsa is trying to secure €200 million ($237m) from the fund, according to media reports. In order to obtain financial support, as required by the Spanish government, the steelmaker needs to demonstrate its economic situation was viable to the end of 2019. It also needs to show Covid-19 has had a highly negative impact on its activity or employment, at the national or regional level.

Russian steel consumption will recover to pre-Covid-19-pandemic levels no earlier than mid-2021, says MMK deputy general director for sales Sergey Ushakov. Consumption in January-July decreased by -8.4% on-year.

After passing the lowest point of recession in the second quarter, consumers are adapting rapidly to the changed working conditions and striving to restore the previous way of work, Ushakov says.

“The most likely scenario for the further development of the situation is a prolonged recovery of the market,” Ushakov comments. “This includes state support for national projects, support for mortgage lending and apartment construction, a programme for renewing the Russian Railways, for the machine-building sector and stimulating the automotive industry.”

MMK also plans to develop a new sales strategy, since its supplies to large metal trading groups, regional traders and small and medium companies are consistently strong. About 50-60% of sales are accounted for by independent companies.

Product is being sold by its own distribution network – MMK Trading House (TD) – which is reaching out to consumers with whom the steelmaker does not have direct contracts due to the low-tonnage orders, Kallanish notes.

TD has a developed warehouse network consisting of 30 sites in Russia, as well as five divisions in Kazakhstan. It works also with small businesses and is developing market niches, including the segment of high-strength and wear-resistant rolled products.

Since 2014, MMK’s sales through its own trading house have grown by 31%.