Day: 1 October 2020

The UK’s new tariff rate quotas for imported steel has no shipping clause, meaning material on the water will be included in the quotas and potentially have to pay up to 25pc duties.

This is despite the UK mirroring much of the European Union’s existing safeguard, which did contain a shipping clause.

The refusal to include a shipping clause is surprising given the duration of lead times on some products. In the coil suite, there is a real threat of duties being applied with offers already out into February-March on cold-rolled coil and hot-dip galvanised steel.

On rebar, it might start a rush for material from Cares-approved suppliers, although participants still have the EU safeguard scheme to contend with until next year.

Some are concerned with the outright quota volumes on certain products, although for most they look broadly in line with recent import trends. On rebar, there may be some allocation issues; sustainable suppliers of Cares-approved rebar are not plentiful, and Turkey and Belarus could have slight issues.

Turkey’s first-quarter 2021 rebar quota of 16,297t looks fair based on the average of first-quarter 2018-19 volumes of 15,689t. But in the first quarter of last year, Turkey imported 21,975t into the UK. Belarus’ January-March quota of 8,249t is slightly below its shipments for the same period of last year, which stood at 11,391t, and 10,000t in the first quarter of 2018.

There is a sufficient quantity in the “other countries” category for rebar, but there are not enough sustainable Cares-approved mills in this segment. Rebar buyers also suggest the historical data do not account for big projects, such as HS2, which could soon be awarded, and mean the quotas need revising.

The other issue is rebar-in-coil, which sits in the general wire rod quota but needs a separate category, according to independent fabricators.

On hot-rolled coil, the other countries’ quota is 46,033t for January-March and 46,544t for April-June. Last year, other countries, except Turkey and EU suppliers, shipped 67,548t into the UK from January-March and 38,661t from April-June. The EU has an allowance of 147,130t in the first three months of 2021 and 148,765t in the next three-month period.

The quotas as announced cannot be amended until July 2021.

By Colin Richardson

Domestic rebar demand has been moderate in Poland following a rather rapid business revival after the summer holidays in Europe. Stocks are reportedly low, while local mills’ prices are at PLN 1970-2070/mt (€434-456/mt) ex-works (excluding 23 percent VAT) in the Polish rebar market. “Also, currently we do not have attractive offers from import sources. Demand has recovered quickly after the summer holiday in Europe and we have been seeing better demand day by day since the beginning of September,” a trader told SteelOrbis.

According to sources, local buyers in Poland have been restocking over the past two weeks, but they are still maintaining their orders carefully due to the effects of Covid-19. However, some sellers are not very optimistic since end-user demand is said to be falling somewhat behind. “Global scrap prices have eased a little bit this week. In the best case scenario, we foresee moderate demand until mid-November and after that we expect slow market activities like in previous years because of the holiday season in the EU,” another trader told SteelOrbis.

At its 88th session held virtually on September 24-25 and 28-29, the Steel Committee of the Organization for Economic Co-operation and Development (OECD) discussed the outlook and the future of the steel sector, growing excess capacity and increasing trade tensions. The committee also discussed the challenges facing the global steel industry and policies to promote adjustment and ensure a fair playing field in the sector. The OECD expressed grave concerns about the deterioration of steel market conditions related to the coronavirus, causing demand and production disruptions that have impacted all economic sectors.

The latest available data from the OECD show that global steelmaking capacity could increase to 2.45 million mt in 2020. The global excess capacity could rise by 41.8 million mt in the current year, mainly supported by new capacities becoming available in the Middle East and Asia. The committee stated that the gap between global production and capacity is expected to reach 700 million mt in the current year, after narrowing between 2016 and 2019. The committee noted concerns that a number of planned capacity increases are premised on expectations of an increase in future demand, including demand in export markets.

In the OECD’s September 2020 Interim Economic Outlook, it is forecast that world GDP will drop by 4.5 percent in 2020, before picking up by five percent in 2021. Most major steel-producing economies have experienced significant contractions in steel production this year due to the coronavirus. The Steel Committee noted with concern the divergence from this global trend in China, where steel production reached record volumes in the first semester of 2020. These developments pose a risk of oversupply in China, exacerbating global imbalances. Besides risks related to the pandemic, the main risks to the outlook include the impacts of growing global excess capacity, supported by government subsidies and investment policies that are putting the long-run viability of producers at risk and should therefore be addressed urgently.

Austrian steelmaker Voestalpine has announced that its subsidiary Voestalpine BÖHLER Edelstahl has built a new special steel plant in Kapfenberg to recover heat and utilize waste heat in order to reduce carbon emissions. The groundbreaking for the plant was held in 2018. The plant will produce around 205,000 mt of ultra high-quality special steel per year, as of 2021.

The new design involves installing heat recovery systems on the vacuum AOD convertor and electric arc furnace. This new process generates even more heat than the new special sheet plant itself needs. According to the company, feeding around 20,000 MWh of this surplus heat into the public heating network allows the municipality of Kapfenberg to reduce its natural gas consumption, resulting in an annual carbon reduction of more than 4,000 mt.

“We are actively striving to achieve environmentally friendly and purposeful production, paired with the conscientious use of valuable resources. That’s why we placed special emphasis on environmental protection when planning our new special steel plant. Air and wastewater treatment plants are state-of-the-art, meeting the most stringent environmental regulations. High-capacity heat recovery systems also help reduce emissions,” Michael Ebner, head of environment & investments at voestalpine BÖHLER Edelstahl, said.

ArcelorMittal has announced a new target to make all its global operations carbon neutral by 2050. This builds on its existing target to cut its European units’ emissions by -30% by 2030 and become carbon neutral by 2050.

In a note sent to Kallanish the company highlights that it is currently pushing forward the use of the hydrogen-direct reduced iron route to produce steel. It is also looking at a “smart carbon” approach in which blast furnaces produce carbon neutral steel through the use of circular carbon and carbon capture technologies.

“We are working on various pilot technologies which have excellent potential,” says ArcelorMittal Europe chief executive Aditya Mittal. “In Hamburg, where we own and operate Europe’s only DRI-EAF facility, we will test not only the ability of hydrogen to reduce the iron ore and form DRI, but also then test that carbon-free DRI in the EAF in the actual steelmaking process.”

“Hydrogen has a lot of potential but given the significant transition cost, we also believe in working on solutions for the traditional integrated route,” he continues. “This essentially follows the bio-energy, carbon capture and utilisation and storage route, which as stressed by both the IPCC and the IEA will be critical to achieving net zero by 2050.”

ArcelorMittal says it believes the “smart carbon” route can deliver results sooner, to limit CO2 emissions already by 2030. Industrial scale production from the hydrogen-DRI route, though, is unlikely to be significant before 2030 due to the current high costs.

Support from authorities globally will be critical to achieving the 2050 goal, the firm says. “We intend to actively engage with governments to chart a way forward that enables the steel industry to make meaningful progress through carefully designed policy that protects against carbon leakage,” Mittal concludes.

Southeast Europe (SEE) crude steel production continued to decrease in January-August, according to the latest worldsteel data monitored by Kallanish. Regional output amounted to 2.243 million tonnes, down by -22.7% year-on-year.

In January-July regional production had fallen -28.7% on-year to 2.002mt.

Serbia was again the largest steel producer among the seven countries of SEE, which also include Bulgaria, Croatia, Slovenia, Bosnia, North Macedonia and Moldova.

Serbia’s production of crude steel totalled 973,000t in January-August, down by -24.1% y-o-y.

This time, the second-largest producer in the region was Slovenia, whose crude steel output fell -17.2% to 359,000t.

The third-largest steel producer Bosnia and Herzegovina saw production of 345,000t, down by -38.2% y-o-y.

Fourth-largest Bulgaria saw its crude steel output down by -25.1% to 310,000t.

The fifth-largest steel producer, Moldova, produced 182,000t, down by -27.7% y-o-y.

Although Serbia’s crude steel production decreased, construction growth provides a positive outlook for the country’s steel industry, according to long steelmaker Metalfer (see Kallanish passim). The Serbian government stepped up construction projects in the run up to the general election, which the ruling party of President Aleksandar Vucic won at the start of summer.

Thyssenkrupp group is realigning its automotive engineering business, in the process cutting back on staff capacity, and potentially looking for partners/buyers.

In the coming months the current System Engineering business unit will be split into two independent business units, Kallanish hears from the group. The aim is to create two independent companies with different product ranges.

One will be an engineering company specialising in body assembly lines which will continue to be managed as part of thyssenkrupp’s automotive supply and service segment (Automotive Technology). The other will combine the current powertrain and battery assembly activities and will be part of thyssenkrupp’s portfolio segment (Multi Tracks).

Going forward, a solution will be found for this business outside thyssenkrupp, either in partnerships or under new owners, the group says. In the process, around 800 jobs will be reduced across both units in the current fiscal year, the company says. The reason for restructuring is a slump in order intake and sales drastically exacerbated by the coronavirus crisis, tk says.

Drozapol says the largest risk for business in the remainder of 2020 is the huge uncertainty surrounding the second wave of the Covid-19 pandemic and the resulting restrictions. These should not however be as drastic as the measures seen in March-May.

The Polish distributor’s consolidated revenue fell -2% on-year in the first half of 2020 to PLN 56.79 million ($14.7m). The firm however turned to a PLN 1.19m net profit versus a PLN 2.35m loss a year earlier.

Purchasing rose 26% to PLN 45.29m as the high inventory levels in H1 2019 meant the firm procured less material last year. Domestic suppliers’ share in overall procurement rose to 44% from 31% in H1 2019, while imports’ share dropped 13 percentage points to 56%, Kallanish notes.

The steel market is counting on a further demand rebound, which began in July, but it is too early to talk about a return to normality, Drozapol says. The dynamic going forward will depend on supply levels and the pace at which EU safeguard quotas are exhausted. The latter has greatly disrupted established supply patterns and impacted the timeliness of deliveries.

2020 was supposed to be a challenging year, albeit less so than 2019, and then the pandemic struck unexpectedly, Drozapol observes. Although they held up for the first few weeks of the second quarter, steel demand and prices fell from May onwards, hampering the firm’s earnings.

Drozapol’s consolidated revenue dropped -20% on-year in 2019 to PLN 123.4m and the firm sunk to a PLN 4.4m loss versus a PLN 220,000 profit a year earlier.

IndustriALL, the European trade union federation, has issued a call to all steel sector workers to join the “Action Day” planned for 1 October.

Workers are set to demand that European authorities take all necessary actions to safeguard jobs in the sector, following the negative impact of the Covid-19 pandemic and persistent threat of unfair imports.

“The European steel sector was already suffering, and the Covid-19 pandemic has further deepened the crisis facing European steel workers,” IndustriALL says in a note seen by Kallanish. “Steel production in Europe has reduced by 40% and new orders have been cut by up to 70-75%. This has greatly impacted workers in Europe, and it is estimated that at least 45% of the workforce are subjected to (or are at risk of) temporary layoffs and reduced working.”

However, the impact of Covid-19 has not affected all countries in the same way, with China able to increase production by 1.3% in the first quarter, the federation adds.

The association has regularly voiced its concerns over the threat posed by imports; it was, for example, among the firm supporters of stricter rules for the EU safeguard system. “We cannot allow that Europe becomes dependent on steel imports because steel is and will remain an essential material,” IndustriALL deputy general secretary Luis Colunga said recently. “Europe needs steel to ensure economic recovery from the Covid-19 crisis and to deliver on its long-term environmental ambitions.”

Northern European hot-rolled coil prices were nearing the Eur500/mt mark Sept. 30 as material tightness leaves little option for buyers than to accept those levels, sources told S&P Global Platts.

Although the distribution sector reported some holding back in purchasing of late, those who need material will have to accept firm offer levels from European mills.

Multiple sources said that EXW Ruhr prices have reached the Eur500/mt level following several rounds of price hike efforts by mills over the past two months, supported by tight material availability and lack of competitive imports. The daily Platts TSI Northern European HRC index increased Eur2.50/mt to Eur498.50/mt Sept. 30.

“Don’t see huge additional upturn, [but it’s] quite a good increase,” a supplier said. “First the stoppages reduced production and second automotive – not suddenly but strongly started ordering, and then in September they got stronger so they needed more material.”

A trading source said there has been some tendency towards a wait-and-see-mode which resulted in temporary price stabilization, but that more increases are likely in mid-November. The source said that inventories across Europe are still low, which will make further purchases necessary for buyers.

Latest figures from German steel stockholder association showed that flat steel stocks rose marginally from July to August to 1.31 million mt. According to the Platts sentiment survey from September, inventories have been predicted to rise slightly, although distributors expected a small decrease.

Material tightness is also apparent in Italy, where HRC prices have been increasing as well, nearing Eur490/mt EXW. Two suppliers have been heard to have delivery problems with lead times lengthening into next year.

“All the main integrated mills are off the market at the moment but we anticipate them coming back to offer for Q1 in the next week or two” said a UK-based source. “This could be timed with the return of the Chinese to the market.”

There have been signs of weakness in the Chinese market with the holiday season approaching, but the UK source expects them to be short-lived.

“As the market is so short of material with extraordinarily long lead times this will continue to have a supporting effect at least on prices and I can only see that prices have more to go in the short term,” the source said.

— Laura Varriale, Amanda Flint