Day: 20 July 2021

Belgian wire specialist Bekaert anticipates strong demand in the second half of the year and lower inventory valuation impact thanks to the expected flattening of raw materials prices, Kallanish notes.

The company, however, says it “remains cautious about supply chain interruptions and other challenges posed by the Covid-19 pandemic.”

While it will release its H1 financial results on 30 July, based on “preliminary and unaudited” financial statements, Bekaert expects to reveal a particularly strong financial performance in the half.

The high margins of its finished product were due to the strong market rebound from the Covid-19 pandemic, structural improvements in the firm’s business portfolio and performance, and “a very strong positive inventory valuation impact driven by the price increases of raw materials”, Bekaert adds.

According to preliminary H1 results, revenue stood at €2.3 billion ($2.7 billion), up 30% from H1 2020 and back to pre-Covid-19 levels.

Natalia Capra France

European construction output in May approached a new record level, according to Eurostat figures.

The monthly index for production in the construction sector, issued since the beginning of 2015, reached in May a level of 113.2 for the EU27 and 111.7 for the Euro area. These levels are only slightly below the previous record levels reached in January 2020 – before Covid-19 – at 113.4 for the EU27 and 111.8 for the Euro area, Kallanish notes.

The index is based on a value of 100 in January 2015.

The recovery of the construction sector in Europe has been very strong since summer 2020. In April 2020 extended lockdowns across Europe dragged the Eurostat index down to 84.2 and 77.2 for the EU27 and Euro area respectively.

Market sources are reporting construction activity is continuing to perform very strongly in Europe. When they are released, June levels might well mark a new record level for the sector.

Emanuele Norsa Italy

Vanilla Steel, a German-based marketplace, has revealed a seed funding campaign with the aim to recruit new talent to support growth, expand to new geographies and invest in new product functionalities.

The company says it raised $4 million, in a funding led by June Fund and backed by existing investors such as Seedcamp and Mustard Seed Maze, it tells Kallanish.

Launched in 2020, Vanilla Steel is building a secondary market for excess steel, material that is in overstock and has no direct customer attached to it. Headquartered in Berlin, it facilitates transactions through weekly online auctions, in which steel suppliers can find buyers in a competitive bidding process. It claims it is already present in 50 countries with more than 100 steel suppliers who have listed 90,000 tonnes of steel during its first year of operation.

“The steel industry faces challenges that can be solved efficiently via an independent digital platform. We aim to bring more simplicity and smart data to the steel industry,” says co-founder Alexis Ducros.

Christian Koehl Germany

In the wake of the flooding caused by heavy rains in Germany, several companies have decided to declare force majeure, among them thyssenkrupp Steel.

The status was declared because supply chains are disrupted to an extent that scheduled delivery cannot be guaranteed until further notice. Notably, the actual production facilities were harmed only to a minor extent, Kallanish learns from thyssenkrupp.

“The flood disaster in Germany has so far had only a very minor direct impact on thyssenkrupp’s sites. In isolated cases there was minor damage due to water ingress, such as failures of IT infrastructure or air conditioning units,” the company states.

However, disruptions on rail lines have cut off supplies of starting material to individual locations; shipments to customers are also affected.

The declaration has also been heard from cold-roller companies located in the region of Hagen, where main train lines were still inaccessible by Monday evening. The works of Risse + Wilke Kaltband, for example, on Wednesday was evacuated by the fire department, and production brought down. The facilities were largely unharmed.

Still, the company expresses worry about its supply chains, especially on the input side.

“Some suppliers and transport companies themselves have been suffering damage, so that we cannot predict how bad the repercussions will be on our deliveries,” it writes.

Christian Koehl Germany

US hot-rolled coil prices continued moving higher on July 19 as transactions at $1,840-$1,850/st were reported recently with limited supply options for the near future.

The daily Platts TSI US HRC index rose by $14 to $1,839.25/st on an ex-works Indiana basis.

Some market sources lately noted a rising number of import offers in the marketplace and saw that as a major threat for pricing outlook. Others, however, did not see rising imports cause a significant change in the current supply-demand imbalance by the end of the year.

“I’m not too worried about imports disrupting the current market and plummeting pricing any time soon,” a Midwest service-center source said. “It might become a bigger factor come Q1.”

The service-center source also noted worsening global logistics issues and anticipated delays in the arrivals of those imported products. “I started to hear this a week or two ago and picked up a little steam last week that the sheet market might find its tightest availability come Sept/Oct, meaning the worst might still be ahead of us,” he added.

Another Midwest service-center source echoed firm pricing sentiment: “I think it can make it through Q1 with outages and lack of imports.” He said that they were still able maintain their margins even with higher replacement costs.

Some end-users were running with almost no inventory and were in danger of stopping their operations due to a lack of steel, according to the second service-center source.

A third service center source reported a 1,000-st transaction at $1,850/st for September production of an integrated mill.

“It is still not easy to find spot tons out there,” a fourth service-center source said. “It feels like prices are about to peak but we have already failed many times at those predictions in the last six months.”

A fourth service-center source was hesitant in booking any spot orders at above $1,800/st but was not succeeding in finding availability below that level from domestic mills either. They were exploring their options in import markets and received an offer at $1,610/st DDP Houston from Serbia with November arrival time.

A fifth service-center source, meanwhile, was becoming more cautious about spot purchases: “We are seeing more tons available, so we are being cautious as can be, and dealing only with trusted suppliers. Virtually we are not buying anything for stock. If our buy doesn’t have a customer agreement behind it, we’re not buying.”

A European and a Canadian mill was offering at $1,580/st DDP Great Lakes port with an October or November delivery time, according to the fifth source.

— Ali Oktay

Steel industry changes based on regional market developments such as carbon emissions market regulations and import safeguards may increasingly complicate pricing of coking coal and steel raw materials under global benchmarks and premiums.

Steel industry market participants are closely viewing the EU’s Carbon Border Adjustment Mechanism announced on July 14. Turkey has announced a formal green plan as a roadmap to cut emissions, which could help its industries limit the burden of competing with EU industry sectors under the CBAM. Commonwealth of Independent States producers — many which have mines and are vertically integrated – are mulling over how CBAM may impact strategic operations, investments and sales structure.

The effect of carbon prices on existing steel business models may see various implications in acceptable pricing mechanisms for coking coal, said the CEO of trader Xcoal Energy & Resources at the Platts Singapore Coking Coal Conference on July 15.

“How will we price coal, when there’s going to be a mix of sales revenues for our customers subject to CBAM,” Xcoal CEO Ernie Thrasher said in a keynote at the webcast conference. “The result of that may be that a ‘one size fits all’ pricing mechanism needs to evolve into almost custom orientated negotiations, discussions with customers.”

New pricing agreements may adapt pricing terms to allow the customer to make a profit, but also for mining companies to recover sufficient capital to have sustaining capex to provide returns to their investors and shareholders, Thrasher said.

Xcoal supply coals globally, and has customers in the EU, as well as steel exporting countries outside the region, and is a major US coking coal exporter to Asia.

The EU is planning to introduce the CBAM in 2023 and for the mechanism to be fully in place in 2026. The system will be based on trading in certificates, using emissions data.

Steel and aluminum will be included in CBAM, affecting steel from countries such as the UK, Ukraine, Russia, Turkey, Egypt, India and China.

While coking coal, iron ore and metallics will not be included in CBAM, the effect of benchmarking emissions could lead to impact on trade flow and pricing for steel.

Already, iron ore contract pellet premiums negotiations have seen more protracted quarterly pricing negotiations, with blast furnace pellet settlements reported by miner Vale said to no longer act as a global reference.

Europe’s large pellet market largely negotiates based on different terms to the rest of the world, and takes into account steel and freight market conditions, and substitution available in sinter and lump.

A buyer said July 19 Q3 pellet settlements in Europe have largely yet to conclude, with offers unlikely achievable, after Vale reported global settlements for Q3 blast furnace and DR-grade pellets in early June at higher levels from Q2.

Vale has limited BF pellet availability for Q3, with some buyers unable to secure tons, according to market source.

With Europe’s steel industry preparing for CBAM costs and unable to fully realize production volumes to capture high spot prices after the COVID-19 pandemic, regional factors may limit a quick take up of higher pellet premiums. With necessary investments to lower emissions, European demand for DR-grade pellet may grow by 2025, complicating long-term planning.

— Hector Forster

Disruption of steel shipments due to the intense flooding in Germany’s Rhine-Ruhr region has further intensified logistics issues for that country’s steel businesses, with Thyssenkrupp the latest declaring force majeure and market sources July 19 citing transport disruptions.

“There are problems everywhere,” said a mill source. “The DB Cargo main railhead is in Hagen. Barges can’t go [on the Meuse River] because of the high water. Parts of the railway are missing. Trucks were difficult to get; now it’s even worse.”

In comments to S&P Global Platts, a Thyssenkrupp spokesman said July 19: “We have to wait to see how the situation develops on the logistics side.”

The steelmaker declared force majeure on July 16, according to a letter to customers, saying it was unable to deliver pre-material between the company’s sites. Steel deliveries to customers are also disrupted, it said.

“Length and scale of the disruption and the effects are not known at this point,” the company said in the letter.

Thyssenkrupp is the biggest steelmaker in Germany, shipping 2.7 million mt of hot- and cold-rolled material between January-March of this year. The company’s biggest site is in Duisburg, at the junction of the Rhine and Ruhr, with several processing sites in the area. Barge shipments of raw materials on the Rhine are not affected by the floods, the spokesman said.

An ArcelorMittal spokesman, meanwhile, told Platts July 19 that logistics are hampered at several locations but that production would be running “near normal.”

One of ArcelorMittal Germany’s main sites is also in Duisburg.

Germany’s biggest stockholder, Kloeckner, has previously said it has not been affected by the floods and delivery delays, and that subsidiary Becker Stahl did not have any “noteworthy” problems.

Cold-roller Bilstein, based in Hagen, declared force majeure July 14 following the flooding of its production facilities as well as closed railway lines used to receive material to process.

Although market participants said the current backlog in order books at mills and the ongoing shipment delays since last year are expected to intensify material tightness, spot prices have not been affected.

The daily Platts assessment for HRC stood at Eur1,170/mt EXW Ruhr July 19, slightly up by Eur4/mt on-day but plateauing overall for some weeks following rapid price rises on material tightness earlier in the year to all-time highs at Eur1,190/mt EXW Ruhr recorded in June. Prices were at its lowest ever recorded in June last year at Eur396.50/mt EXW Ruhr after demand collapsed during the first wave of the pandemic.

The floods came at a time when the market started to quieten down for the summer with little spot buying activity. Some sources believe the intensified delays in shipments could bring some upward pressure to prices once the market will be back from the summer holiday in early September.

— Laura Varriale