Day: 29 June 2021

The European Commission has formally published rules governing steel import safeguards into the European Union for the next three years: leaving safeguards in place for all 26 steel product categories, subject to annual review. The extended safeguard, which pits traders and consumers against mills, will officially run from July 1.

Largely expected by the market, the new regulations differ from the previous system in that the annual tariff rate quotas used to govern imports will henceforth be expanded by 3% annually, instead of the previous 5% annual increase.

The EC has extended the safeguards due to what it perceives is a continuing “fragile financial situation of the Union steel industry.” The EC notified the World Trade Organization on June 11 of its intention to extend safeguards, which was approved by member states on June 18.

The European federation of steel producers, Eurofer, welcomed the extension. “The conditions that required the launch of the safeguard initially are still very much present – including global steel overcapacity and US Section 232,” said Axel Eggert, Eurofer director general.

The current safeguards were put in place July 2018 to protect the EU market against trade flow deviation following the US’ imposition of Section 232 tariffs on steel imports in March of that year.

‘End of free trade’

While widely expected and welcomed by steelmakers, the extension has not found favor with traders, who foresee further upwards pressure on prices in a market suffering from acute material tightness in some product areas.

“I understand that this decision is made to support mainly the steel industry and not the end users,” one EU trader said. “It will keep the price very high and feed steel price inflation, and volatility. If you add onto this all the anti-dumping investigations you could think that we’re living the end of free trade, where everybody wants to protect his steel industry; as we know already this doesn’t work.”

One Italian steel buyer called the extension “a disaster… EU mills won’t be able to offer all the products we need…this year has been an awful year for their service with unbelievable delays and abnormal speculation: we are really worried for coming months.”

Both flat and long steel products prices reached their highest-ever in Europe this year, as they also did in the US. Steel buyers have been vocal on the prices increases but also on the difficulty in finding material.

Prices at historical highs

According to Platts’ price analyzer, prices in EU moved to their highest historical level. On June 21 Platts Benchmark Ruhr ex-works hot-rolled coil price reached a record Eur 1,190/mt, easing just slightly to the June 28 assessment of Eur1,187.50/mt. EU rebars also reached their highest ever level in June, to Eur 817.5 mt delivered.

Euranimi, a Brussels-based steel consumers’ association that represents the “middle of the supply chain” (importers, distributors, traders and processors), said that “it finds incomprehensible that the EU chooses to ignore what is going on downstream and sticks to a protectionist logic that is no longer justified in a context of blatant material shortage and exceptionally long delivery times that are the cause of ever-increasing prices.”

“The economic reality of this decision will be that countless European steel processing companies, that are already today in dire need of material, will receive only a fraction of their steel requirements, delivered to them much later and at a much higher price. Euranimi fails to understand why such measure is deemed to be favorable to the European economy.”

In its safeguards document the EC argued that “the Commission found that the steel prices increases recently observed on the Union steel market cannot be imputable to, or be the result of, the Union steel safeguard because similar such high prices also prevail on worldwide markets and large volumes of free-of-duty TRQs remain nevertheless unused available under the safeguard.”

Concerning the material shortages, it said that “the problems of supply experienced after demand rebounded were transitory and that the return to operation of idled facilities by the Union industry, which is underway, should thus help ensuring that normal pre-pandemic steel supply conditions are re-established in a reasonably short timeframe.”

— Annalisa Villa, Amanda Flint, Rabia Arif

North European HRC prices were heard slightly lower June 28 following a recent increase in mill offers last week, with the pricing gap between North and South widening as more imports entered the Italian coils market, sources told S&P Global Platts.

North European HRC prices were assessed Eur2.50/mt lower at Eur1,187.50/mt ex-works Ruhr June 28, and in the Italian market, HRC prices were stable at Eur1,130/mt ex-works Italy.

The pricing gap between Northern and Southern Europe now stands at almost Eur60/mt, and is expected to increase as more imports initially booked during April-May are expected to enter the Italian market during the summer, giving the impression of higher stocks.

The announcement of a Eur30/mt increase on HRC from ArcelorMittal was not a complete surprise to the market, with higher offers from mills already heard several days prior.

“Before ArcelorMittal announced this [offer increase], sellers were selling for Eur1,200/mt and higher,” a German mill source said. “The problem is no one has anything to sell.”

The mill source added Q4 transactions were possible between Eur1,170-1,200/mt for 3000 mt, though there were limited volumes available, with customers now inquiring for Q1 volumes.

Despite the cautiousness exercised among buyers, sell-side market participants remain optimistic that European steel prices will see no downside due to the lack of available steel, limited stocks and the fact suppliers remain well-booked for the next half of the year.

One German car manufacturer was heard to have restarted production, according to the same mill source, which suggested that the automotive slowdown would not last long.

“The auto issue, nothing dramatic, full order books, have problems with raw materials. But Volkswagen stopped their vacation and they are not trying to produce,” the mill source said.

In the Italian market, prices were heard to be stable after falling Eur5/mt June 25, with high storage levels and an influx of newly arrived imports another bearish factor.

“There are a lot of orders from imports that will arrive in the summer,” an Italian service center source said. “For the moment, Italy mills aren’t interested to sell cold-rolled coil and hot-dipped galvanized, but in my opinion the situation could change in Q4.”

— Amanda Flint

French stainless producer Aperam has increased July alloy surcharges for its austenitic range of flat stainless steels for Europe by €70/tonne ($83) on average versus the previous month, Kallanish learns from the company.

The surcharge for grade 304 (1.4301) has gone up from €1,865/t in June to €1,910/t effective 1 July. For grade 316 it has increased from €2,675/t this month to €2,928/t next month. Grade 309S, a heat-resistant stainless steel used in high-temperature applications, has hiked from €2,509/t in June to €2,558/t from 1 July. The surcharge for the most popular ferritic grade, 409, has risen from €725/t in June to €764/t, the company reveals.

Offers for nickel cash buyers were at $18,611/t on 25 June. Values were at $17,125/t on 25 May, Kallanish notes.

Natalia Capra France

GFG Alliance says restructuring steps taken so far will enable it to pay back creditors following the collapse of lender Greensill Capital. Among other things, the group has focused on securing feedstock supply for its European downstream coil plants and is selling non-core UK units.

Since being set up in May, Liberty Steel’s Restructuring and Transformation Committee (RTC) has evolved a new strategy. Liberty will be focused on core business units, including InfraBuild and Liberty Primary Metals Australia (LPMA) in Australia, and the Liberty Ostrava and Galati steelworks in Europe.

Liberty plans to merge its Liège-Dudelange and Magona coil processing plants into the Liberty Galati organisation. The Romanian steelworks will become their primary hot rolled coil provider, to ensure sustainable feedstock supply. The closer link to the downstream plants will allow Galati to offer a wider product range to customers in Central and South Eastern Europe, Liberty says.

The first supplies of HRC from Galati are expected to arrive at the downstream plants within the next few weeks, allowing them to restart their lines soon afterwards.

Renaud Moretti, chief executive of Liberty Steel Downstream in Europe, will now report into Paramjit Kahlon, Liberty ceo of Primary Steel and Integrated Mining.

Liberty continues to assess a sales process for its UK aerospace and special alloys steel business in Stocksbridge, which would allow it to focus on developing Rotherham into an electric arc furnace-based 2 million tonnes/year capacity plant. The UK operation is also seeing personnel changes and exploring the future of the Engineering business (see separate story).

Besides securing financing from White Oak Global Advisers to repay LPMA’s Greensill debt and reaching an agreement with Greensill Bank’s administrators for an amicable resolution, Liberty has submitted refinancing memoranda for its European operations.

In a note sent to Kallanish, Liberty chief restructuring officer Jeffrey S. Stein says: “We are aware of the significant challenges facing the group but are pleased that we are making good progress to refinance, repay creditors and refocus the group on our core assets. Much remains to be done but we are optimistic that a vibrant, well-funded, profitable and sustainable business will emerge as we systematically restructure and transform the group.”

Adam Smith Germany

European stainless hot and cold rolled coil prices are continuing to increase together with values for sheet and other coil derivatives including tube, market sources tell Kallanish.

The shortage, particularly for flat products, is worsening due to very high demand and very low import tonnages. Producers in Asian countries are only selling to their traditional customers, accepting no new clients. Limited CRC and HRC sales windows are opening and closing fast from Asian producers, particularly from Taiwan. This is failing to compensate for short supply from European producers.

The sector is going through a period of “open prices”, sources observe. Sellers of both coils and sheets are not quoting, but nevertheless still bagging a large number of orders that bear no quotes. Since base and alloy values are changing constantly almost every week, it has become widely accepted for prices to be specified shortly before the time of delivery.

At present, buyers in all European countries consider the most important thing is securing supply to satisfy their full order books. Prices are not a concern. All coil increases are or will be applied to derivatives before delivery. A source comments that such an “open price” market anomaly has now become normal.

A source says mills are putting customers on waiting lists due to shortages. “It is the first time that something like that happens,” he comments. “If a customer asks for 1,000 tonnes, the mill will allocate 300 tonnes. Prices for coils are calculated on base plus alloy surcharges but producers do not know what base prices and alloy surcharges will be in three to four months, so they give indicative prices that will certainly change, or prefer not to quote at all.”

Stocks in Germany are said to be particularly low. Southern and Eastern European distributors and sellers however report a similar situation in their own respective markets.

CRC for October and November delivery is quoted at €3,300/tonne ($3,940) and about €120-130/t less for HRC – this is for larger tonnages, sources say.

While volumes have not particularly increased compared to previous years, margins and prices remain high throughout the value chain. Most companies will this year exceed their annual financial targets, sources agree.

Natalia Capra France