Day: 25 March 2021

Please see a link to a letter from European Commission Executive Vice-President Valdis Dombrovskis, addressed to EUROMETAL.

Circular economic impacts will supress an estimated 483 million tonnes of steel demand by 2040, with “remanufacturing” seen growing as increased raw materials costs make steelmaking more costly, says worldsteel director, safety environment and technology Andy Purvis.

Remanufacturing – returning a product to at least its original performance levels – will extend the service life of steel, which reduces demand for new steel. At €14 billion ($17 billion), the value of remanufacturing is a lot less than other circular economy activities, particularly recycling, but it has growth potential. It is generally well-suited to high-value technical products, Purvis said at this week’s International Iron Metallics Conference 2021 attended by Kallanish.

Besides raw material costs, another remanufacturing growth driver will be the use of new fiscal instruments that could improve remanufactured goods’ competitiveness, such as carbon pricing and tax reduction. Moreover, regulatory and social trends are expected to support greater acceptance.

There are barriers, however, such as unfavourable customer attitudes towards perceived “second-hand” products, and step changes in drivetrain technologies. The internal combustion engine remains king, and the move to electric vehicles will represent a discontinuity – there will be no market for existing combustion engines as the market goes through this transition, Purvis pointed out. Electric drivetrains will meanwhile be less steel intensive in the future.

Despite this, new simpler drivetrains represent one of the highest potential new products for manufacturing, as do wind turbines.

Worldsteel expects the value of remanufacturing to grow, albeit from a low base. In 2018 European auto remanufacturing was estimated at around €8 billion, versus the €500 billion gross value of the German carmaking sector. Its value could however grow to €30 billion by 2050. The total size of the four remanufacturing sectors could grow to €29-47 billion by 2050.

The cumulative volume of retained steel from remanufacturing to 2050 is seen at 20-31mt. The total circular economic impact on steel demand is therefore small but with potential to grow, Purvis concluded.

Adam Smith Germany

Frank Koch will become chief executive of Swiss Steel Group from 1 July, Kallanish learns form a company note.

Koch’s appointment was announced in principle late last year, although the date for the start in the position was not clearly given (see Kallanish passim). Koch was hired by Swiss Steel while holding the top post at Germany’s Georgsmarienhütte Negotiations between the two SBQ steelmakers apparently dragged on, as initially 1 January 2022 was given as the date for his transfer.

Since 2008, Koch has been responsible for various functions within GMH. Earlier, he was employed by thyssenkrupp units, and also with Deutsche Edelstahlwerke, which are now part of Swiss Steel.

Christian Koehl Germany

The OECD Steel Committee plans to accelerate creation of a comprehensive database on government support to steel producers in large steel-producing economies, the committee said March 24.

Such subsidies and other support measures have led to distortions in steel trade flows and contributed to trade tensions, the OECD says.

OECD members have agreed to resume collecting subsidy data on the world’s largest steel-producing jurisdictions, including jurisdictions where recent data on increasing production has raised concerns about potential government support, the committee said in a March 24 statement.

State-owned enterprises, with their activities in domestic and international steel markets, are potentially creating market distortions, the committee said. Members now aim to better understand the market context of cross-border investments by SOEs and to shed light on the financing and support measures provided to them. The organization did not confirm which countries received subsidies and how much.

European countries have singled out Turkey and China as receiving state help for their steel mills. SOEs are an important component of the Chinese economy. It is not also clear if the OECD database includes state aid to help companies decarbonize. The European Union has outlined a well-publicized green deal to help companies achieve carbon neutrality by 2050 and is now working to put in place a carbon adjustment mechanism for imported steel products into the EU.

The OECD reiterated the importance and need for steelmaking capacity reductions, while supporting workers affected by plant closures. The latest available data from the OECD shows that global steelmaking capacity increased to 2.45 billion mt in 2020. In addition, the gap between global steelmaking capacity and crude steel production increased to 625.4 million mt in 2020.

The OECD committee underlined that a number of planned capacity increases are premised on expectations of strong increases in future demand, with many investments supported by governments and not driven by market considerations.

Analysts contacted by S&P Global Platts said overcapacity definitely exists but is not “felt by the market at the moment,” as there is a shortage of steel products in some areas, causing some prices to reach historical high levels.

On this point, an OECD spokesperson said: “Product prices have increased recently, but the extent to which they have differs across steel products and regions. Prices of key steelmaking raw materials have also increased sharply, which has worked to weaken average profit margins in the steel industry.

“Also important is to note that structural overcapacity remains very high in the industry, and needs to be addressed to promote longer-lasting stability and viability of the global steel market.”

The OECD Steel Committee met virtually March 18-19 and March 22-23. The committee has 25 members (Austria, Belgium, Canada, the Czech Republic, Finland, France, Germany, Hungary, Italy, Japan, Korea, Luxembourg, Mexico, the Netherlands, Poland, Portugal, the Slovak Republic, Slovenia, Spain, Sweden, Switzerland, Turkey, the UK, the US and the EU). In addition, five associates (Brazil, Kazakhstan, Romania, Russia and Ukraine) and seven participants (Argentina, Bulgaria, Egypt, India, Malaysia, South Africa and Taiwan) bring their perspectives to the committee’s work. A number of other economies also participate in some steel committee meetings as invitees.

— Annalisa Villa

European domestic steel sections prices increased over the week to March 24, as producers raised offers following increases in domestic EU scrap prices.

Platts’ European medium sections price (category 1, S235 JR) was assessed at Eur735/mt delivered March 24, up Eur15/mt on week.

One European mill source told Platts that they have increased their mill offers to Eur740/mt delivered. “This week we are not accepting anything below that level. We are seeing some demand at these levels. But buyers are only buying what they strictly need,” he said.

One distributor source in the Benelux region reported a deal for 1,000 mt at Eur740/mt delivered, adding that demand is good at the moment.

Another distributor source, however, noted that prices are almost stable putting a tradable value for medium sections at Eur710-Eur720/mt delivered.

“Mills in Europe expect scrap prices to go up in April, but I am a bit surprised because international scrap is going down a lot,” he told Platts.

Platts assessed Turkish imports of premium heavy melting scrap 1/2 (80:20) March 24 at $415/mt CFR, down sharply from a recent high of $462.50/mt CFR on March 8.

In Northern Europe, S&P Global Platts’ March assessment for Northern European domestic shredded scrap was Eur365-370/mt delivered, up on the month from Eur330-335/mt delivered in February.

The source also expects demand to slow down a little in the near term as Easter holidays approach. In addition, with the month of Ramadan expected around mid-April and different levels of lockdowns currently being imposed in various European countries, he thinks that the market might get a little quieter.

— Rabia Arif

German flat steel stocks dropped further to historically low levels in February on persistent material shortage, data from German steel stockholder association BDS showed.

Flat steel stocks across the German distribution sector dropped 2.6% month on month to 1.11 million mt, continuing a 33-year low. The year-on-year drop stood at 8.2%.

Sales of flat steel dropped 10.3% month on month to 569,928 mt following a more buoyant market in January that saw some pick-up in sales. Sales were down 3.3% year on year.

The low stock levels lay the current material shortage for flat steel bare.

Market participants reiterated that material availability was favored over price and buyers were scrambling to source volumes.

S&P Global Platts daily assessment for hot-rolled coil, assessed at Eur800/mt ($954/mt) EXW Ruhr March 23, was on a par with the all-time high last seen in 2008. Offers for the product have been heard up to Eur850/mt.

“The situation is quite desperate in cold-rolled coil and dot-dipped galvanized. And in HRC it can also evolve into desperate now,” a German stockholder said.

Mills continued to have long lead times into August, with sources saying mills have been very selective in taking new orders to manage supply chains.

The stock levels for long steel built again in February. Long steel inventory levels rose for the second consecutive month, by 6% to to 792,925 mt. Compared to February 2020, however, levels were 3% lower.

Long steel sales saw an 0.8% month-on-month drop to 242,815 mt, and a 15% year-on-year drop.

— Laura Varriale

The Italian government is actively working to authorise as soon as possible the payment of the first instalment of €400 million ($472m) towards the relaunch of the Taranto steelworks, says state investment vehicle Invitalia.

This comes in response to ArcelorMittal’s announcement this week of further production cuts at the Taranto site following Invitalia’s failure to provide funds within the agreed timeline (see Kallanish 23 March).

ArcelorMittal signed last year a binding agreement with Invitalia to form a 50-50 public-private partnership to operate Taranto. Invitalia agreed to invest in ArcelorMittal’s Taranto operating subsidiary, AM InvestCo, in two tranches. The first investment of €400m was to be made by 5 February 2021.

In a letter to ArcelorMittal obtained by Kallanish, Invitalia states: “With regard to your specific allegations, we reiterate that the amount to be used for the investment must be provided to Invitalia by the Ministry of the Economy and Finance.” The signatory of the letter, Invitalia chief executive Domenico Arcuri, adds the firm is waiting for the assessment of the responsible ministry.

Meanwhile, ArcelorMittal Italia has reportedly told unions it will not go through with the further production cuts announced this week, although this has not yet been put in writing.

Natalia Capra France

French stainless producer Aperam has slightly decreased its April alloy surcharges for its austenitic range of flat stainless steels for Europe by over €20/tonne ($23) compared to last month, Kallanish learns from the company.

The surcharge for grade 304 (1.4301) has gone down from €1,846/t in March to €1,822/t effective 1 April. For grade 316 it has gone from €2,629/t this month to €2,607/t for April. Grade 309S, a heat-resistant stainless steel used in high-temperature applications, has decreased from €2,511/t in March to €2,452/t next month. The surcharge for the most popular ferritic grade, 409, has risen however from €635/t this month to €690/t from 1 April, the company reveals.

Nickel prices for cash buyers have steadily decreased in recent months. Offers for cash buyers were at $19,352/t as of 24 February and reached $16,526/t on 23 March, Kallanish notes.

Natalia Capra France