Day: 1 July 2021

The US and EU earlier this month committed to working together to address issues stemming from the Section 232 tariffs on steel and aluminum.

But US steelmakers and groups representing the industry don’t expect the metals tariffs to go away completely without implementation of another trade measure, industry executives said at a press conference the Association for Iron and Steel Technology hosted June 30.

“We are talking with the EU to try to find a workable solution here, but you can’t just do away with the [Section 232 tariffs] without replacing it with something,” said Philip Bell, president of the Steel Manufacturers Association. “The EU itself has extended its safeguards for another three years so it would be very unreasonable for them to expect the US not to have something in place to replace the 232s and … that needs to be something that prevents import surges from occurring.”

Bell said he applauds President Joe Biden’s administration for taking a “very measured, total government approach” to the 25% import tariffs on steel that former President Donald Trump put in place March 2018.

“I do think we will see some kind of breakthrough,” Bell said about bilateral talks with the EU. “We need the EU’s help because they have to deal with their own excess capacity and they also have to help us deal with global excess capacity.”

While the Biden administration has committed to discussions with the EU, there is no commitment in place to end the tariffs by the end of this year, said Kevin Dempsey, the CEO of the American Iron and Steel Institute.

Additionally, the Biden administration has committed to maintaining a viable steel industry in the US and that cannot happen if the tariffs are removed, Dempsey said.

“Until we resolve that global overcapacity problem driven by foreign government subsidies, we’re going to face the threat of recurring surges in imports,” he said. “Whenever there is a demand shock, as we’ve seen in the past, the excess steel will flood into the most open market and that’s why it’s critical we maintain an effective measure that prevents new surges.”

Cleveland-Cliffs CEO Lourenco Goncalves said while the tariffs are in place for an indefinite period of time, Section 232 was never supposed to stay in place forever, but the issues that led to its implementation will not go away until solutions are reached to address global excess steel capacity.

“Section 232 was a stop-gap; an emergency measure put in place, and rightfully so, to stop the bleeding and then let’s organize and see where the problem really is,” Goncalves said. “The problem right now is abundantly clear, it’s overcapacity, it starts in China, but it does not end in China.”

Trade tensions heighten for scrap

With electric arc furnace steelmaking on the rise globally, demand for scrap, particularly from China, is going to continue to increase going forward and may bring with it its own trade disputes as countries look to reign in exports, industry executives said.

Russian Prime Minister Mikhail Mishustin signed off June 25 on a decree that will raise the country’s export duty on steel scrap to Eur70/mt or 5%, whichever is greater, up from Eur45/mt, or 5%, currently. The new rate will come in force 30 calendar days from the signature date and will remain in effect for 180 days.

Additionally, the EU has talked about limiting its scrap exports because of the carbon footprint of exporting scrap abroad, Bell said.

With $16 billion in new capacity investment coming online in the US, almost all of it EAF-based, this is going to put even more pressure on US scrap prices, particularly for prime grades, he said.

“With these Russian restrictions that are going to force Turkey to look elsewhere for scrap and guess where they’re going to look, they’re going to look here and that could drive prices up as well,” Bell said.

The US has tools at its disposal to address issues that arise in scrap, whether that would be filing challenges to the restrictions with the WTO, or the implementation of Section 301 tariffs to retaliate against these actions, he said.

Noting the lack of action that has resulted from the OECD Steel Committee in addressing global excess capacity since its creation five years ago, Goncalves said governments need to take a more aggressive approach to issues surrounding scrap.

“I am afraid if you use the same approach that we used to try to resolve the steel overcapacity to resolve the problem of scrap you end up with exactly the same outcome: zero,” he said.

While US scrap supply will continue to be squeezed by increasing demand, one benefit is the mills that are expanding are largely vertically integrated and have their own raw materials operations, Dempsey said. Additionally, an abundant supply of natural gas in the US provides other alternatives for EAF steelmakers, he added.

“I think it’s really critical that we’re looking to develop and increase alternative iron unit supplies in the US now with a number of gas-based [direct reduced iron] facilities in the US,” he said. “I think given our large supply of natural gas and availability of iron ore, further development of that natural resource will be a critical part of the solution for the US.”

— Justine Coyne

Italian distributors of long products are reporting significantly reduced activity. Buyers are said to have cut their purchases because of continuous steep price increases, particularly in longs, which have slowed end-user activity.

Despite the sluggish market, all distributors have already reached their financial targets and will achieve record earnings this year. After very strong activity in May, German demand for imported long products is now slowing down as lower volumes, particularly of beams, are being sold to Germany, sources tell Kallanish.

Merchant bar contract prices are at €450-470/tonne ($534-558) base ex-works, with very few transactions at €500/t base ex-works. Including size extras, prices are at €870-920/t ex-works.

The first category of sections in producers’ asking prices is now at €600/t base ex-works. Including size extras, values are at €980-990/t ex-works but transactions are lagging behind at €950/t ex-works or less.

At present, clients prefer to buy from large distributors rather than producers who continue to compensate for slow domestic sales with strong exports to other European countries.

Natalia Capra France

The European hot-rolled coil market remained quiet with the market looking forward to the July 1 release of import quotas, sources told S&P Global Platts June 30.

Sources said that even though there is anticipation that most of the import material has already been sold that will be cleared at ports from July 1, it would provide a view of how much material is entering buyers’ stocks.

“[June 30] will be a run on volumes at ports. Question is – what will fall under duty, and if yes what agreement is struck on who’s paying? There is an expectation that by [July 2] some country-specific quotas will be filled,” said a German service center source.

The source added that the Russian export duty that will also come into effect July 1 is likely to be workable in Europe and imports from Russia might still be competitive.

In the Northern European domestic market, trading remained quiet with mills booked for spot availability for the remainder of this year and the market not ready yet to start price negotiations for Q1 2022.

Sources expect price fluctuations to continue over the summer as trading is expected to be quiet. Though some expect some more competitive import offers, European mills are unlikely to move positions due to their full order books and backlogs.

“I think mills will rather curb production than lowering prices. [Price] Fluctuation will be there but not on a broader scale,” said a German buyer.

In the Italian market, sources reiterated that buyers were sitting on their hands and import volumes were too small to put serious pressure on domestic prices amid the ongoing supply tightness.

“We don’t either have much to offer, but customers are in wait-and-see mode as summer is starting and most of the needs are already booked,” said a Southern European buy-side source.

The daily Platts assessments for HRC slipped again June 30 to Eur1177.50/mt EXW Ruhr, down Eur2.50/mt, and to Eur1120/mt EXW Italy, down Eur5/mt.

— Laura Varriale

WindEurope, the voice of the European wind energy sector, believes the confirmation of EU steel safeguard measures for a further three years will add to cost pressure for wind turbines and component manufacturers.

The sector uses mainly heavy plate for the fabrication of steel wind towers and non-grain-oriented electrical steel for motors and generators.

“Steel prices have increased dramatically over the past year,” WindEurope chief policy officer Pierre Tardieu says in a note seen by Kallanish. “In some cases they have doubled. Steel is the single most important raw material for the European wind industry. Higher steel prices increase the costs of making towers, gearboxes, nacelles, transformers, and offshore foundations. Last week’s decision to extend steel safeguard measures is unhelpful for a rapid and cost-effective energy transition to renewables.”

WindEurope believes that in the medium-term additional costs may be passed down the supply chain to developers, though this will make it more difficult to deliver continued reductions in electricity prices.

“The economic sustainability of the European wind industry is at risk. Higher costs mean less capital available to invest in state-of-the-art manufacturing and research & development. Under-investment in these areas could cause the European industry to lose the global race for technology leadership in wind energy,” Wind Europe comments.

Emanuele Norsa Italy