Day: 3 August 2021

Brazil overtook the US as ArcelorMittal’s largest country in terms of sales in the first half of 2021, following the divestment last December of ArcelorMittal USA. Sales in top European markets also came storming back in H1, Kallanish notes.

Notwithstanding the lower US revenue, sales in Brazil soared 118% on-year to $3.97 billion in H1. US sales were at $3.4 billion, down 39%. Germany was third, with sales surging 50% to $3.02 billion, while Italy stormed into fourth, with a 78% leap to $2.67 billion. This left France and Poland fifth and sixth respectively with $2.49 billion and $2.33 billion, up 72% and 50%.

Having soared last year, sales in China came crashing back down, by 48% in H1 to $397 million. Chinese economic activity remains robust but the pace of growth has moderated amid diminishing policy support, ArcelorMittal says.

China’s GDP growth recovery versus 2020 continues to be driven by investment – fixed asset investment continues to follow pre-pandemic trend, the steelmaker says. “Past-focus in infrastructure investment has been supporting the output of a number of mid-stream manufacturing industries and imports of raw materials,” it comments.

“While growth is expected to slow in the second half of 2021 as investment – particularly in infrastructure and real estate – weakens, household spending and corporate investment will likely overtake real estate, infrastructure and exports as the driver of growth,” it adds.

Adam Smith Germany

Seaborne iron ore markets slumped further on Monday as the decline at the end of last week was joined by falling steel futures prices on Monday. China’s leadership expressed concern over the economy over the weekend, and sentiment has been hit across several markets.

The Kallanish KORE 62% Fe index collapsed $10.62/t to $186.18/dry metric tonne, the lowest level since April. The Kallanish KORE 65% Fe index fell $10.45/t to $220.14/dmt cfr, and the KORE 58% Fe index dropped $13.22/t to $152.77/dmt cfr. 170,000 tonnes of PB Fines sold at a floating price, while 90,000t of Newman Fines sold at $183.9/t with a laycan in 26 August-4 September.

On the Dalian Commodity Exchange September iron ore settled down CNY 21/t at CNY 1,042/t ($161.28/t), while on the Singapore Exchange September 62% Fe futures settled up $1.25/t at $178.05/t. The same contract for 65% Fe and 58% Fe futures settled up $1.09/t at $209.09/t, and down $8.45/t at $144.80/t respectively.

Although mills were still holding scrap purchasing prices level, or even increasing slightly, billet prices slumped alongside finished steel market sentiment. 6mm+ heavy scrap delivered to mills in the Yangtze River Delta inched CNY 3/t higher over the weekend to CNY 3,794/t on Monday. In Tangshan, billet prices dropped CNY 50/t over the weekend and another CNY 50/t on Monday to CNY 5,170/t.

China’s Politburo held its quarterly meetings last week and a statement released over the weekend expressed concern over the economy. Expectations of slowing economic growth in the second half-year have pushed the Politburo to urge the speeding up of issuance of special purpose bonds. The rhetoric is a break from moves to control credit levels and has been taken as a sign that the economic slowdown is more serious than China’s leaders expected.

Tomas Gutierrez UK

The damage and impairments caused by heavy rain on the Ruhr will put extra pressure on coil supply, observers point out.

At this moment, however, roughly a fortnight after the rain, it is still too early to put a figure on missing or delayed volumes, or resulting price increases. Some warehouses were hit by the waters themselves, and are occupied with clearing the damage before getting back to business. Others, without irony, said the disaster at least came at a relatively convenient time – in summer, when business is slow anyway.

Offers from northwestern European mills are too scarce to be tangible. The market leader has not yet topped the call it gave in June, when putting hot rolled coil at €1,200/tonne ($1,425) ex-works, assuming it is available.

Some other northwestern mills came out with offers of up to €1,260 in July. Such rumours were dampened by the rain, but not necessarily unrealistic, if set against offers from elsewhere. According to a Scandinavian processor’s buyer, the latest offer from Eastern Europe was “easily above €1,200”.

An Austrian service centre buyer gives a more moderate opinion. He sees a wider range of prices from third countries, starting at €1,100. Quite possibly, he is exposed to cheaper offers altogether due to the proximity to Italy.

Bargains could however be possible even for buyers from further afield. One Ruhr-based manager tells Kallanish of a recent deal he struck for cold rolled coil from Italy for delivery in November at €1,180/t. This is a far shot from the €1,300 asked for by the market leader, and considered realistic by most observers – even in Austria.

Christian Koehl Germany

Most Italian long product mills will implement maintenance stoppages starting this week as the holiday season starts for the sector’s traditional August break, sources close to the mills tell Kallanish. Together with steelmakers, scrap merchants in the country will also perform maintenance lasting for 2-3 weeks.

Merchant bar producer Beltrame will stop between 6 and 22 August, and Riva on 7-29 August. Rebar maker Feralpi will meanwhile only stop for a week on 16-22 August, and on 9-15 August at its Calvisano subsidiary. The steelmaker is said to have full order books, particularly for the export market.

Duferco will shut down on 13-22 August, Alfa Acciai on 5-22 August, and Valsabbia will implement stoppages starting at the end of this week until 29 August. Dalmine will also shut down on 8-22 August, sources say.

The longs market in Italy languished in July, with reduced demand and declining scrap prices. Distributors and rebar buyers adopted a wait-and-see attitude and some sellers complained about not reaching their sales targets for the month. Prices remained mostly stable last month, with some price decline for wire rod driven by strong import pressure (see Kallanish passim).

Natalia Capra France

NLMK has completed the environmental modernisation of steel production at its Lipetsk site, the company says.

The warranty tests confirmed that dust emissions at BOFshop No.2, which accounts for more than 60% of the total steel production at the site, have been reduced by 2.5 times. 

The upgrade made it possible to increase the productivity of the shop by 15% to 10 million tonnes/year of steel, while simultaneously reducing the impact on the environment, Kallanish notes. Total investments amounted to over RUB 29 billion ($398 million).

Within the framework of the project, two converters and gas exhaust ducts were reconstructed, and a new gas cleaning system was installed. This allows to capture up to 99.9% of dust.

This project is part of a four-sided agreement on cooperation in the field of environmental development between NLMK, the Russian Ministry of Natural Resources and Environment, Rosprirodnadzor and the Lipetsk Region Administration, signed in the summer of 2019. To date, Lipetsk has implemented five of the nine projects planned until 2024.

As part of the comprehensive environmental modernisation, it also became possible to use co-gases from the steelmaking industry as a secondary energy resource for generating electricity at the new power plant, NLMK says. The launch of the power plant in 2023 will reduce greenhouse gas emissions by 650,000 t/y.

NLMK expects Russian demand will stay supported in the third quarter on seasonal demand, boosted also by infrastructure projects (see Kallanish passim). The group’s Q2 consolidated revenue grew 44% on-quarter to $4.14 billion, with sales in NLMK’s home markets rising 1% to 2.8mt.

Svetoslav Abrossimov Bulgaria

European hot-rolled coil prices were heard to be stable Aug. 2 as sources told S&P Global Platts that customers were reluctant to buy new material amid a gradual lowering in Italian HRC prices, as well as lack of demand and cheaper imports.

The holiday period has meant very little activity in the market and uncertainty around buyers awaiting previously booked material and expecting higher prices in the near term.

“The market is dead,” a Benelux service center said. Europe “is more or less on complete holiday.”

Cheaper import prices were also making their way into Europe at Eur990/mt CIF Italy for larger quantities from the Far East, though one Italy-based service center source said the risk was “very high” because of the removal of the Chinese tax rebate.

“This decision will have an important impact on trading companies and customers,” the source said.

While European activity was steady, sources have said that robust automotive demand will return in the year’s last quarter, and therefore cold-rolled coil and hot-dipped galvanized prices were expected to remain mostly stable.

“Without material from Asia, the automotive industry will need more in September,” the same Italy-based service center source said.

Sources said it was difficult to know where transaction prices were because of the lack of buying over the summer, but they noted that southern mills were particularly worried about cheaper imports prices given their hard stance on keeping pressure on prices.

Platts assessed North European HRC prices stable at Eur1,165/mt ex-works Ruhr Aug. 2 and in Southern Europe, prices remained at Eur1,060/mt ex-works Italy.

— Amanda Flint

The European hot-rolled coil steel to raw materials price spread edged lower in July as higher coking coal, iron ore pellet and scrap prices limited gains from record monthly HRC spot prices.

The Northwest European HRC-steel raw materials spot spread moved down to Eur758/mt ($900/mt) in July from Eur761/mt in June, according to estimates by S&P Global Platts on Aug. 2.

In the second quarter, the European HRC spread averaged a new record high Eur695/mt, up 61% from Q1, on the back of higher steel prices.

A recovery in steel prices has led margins to strengthen in the past year, while spot prices have turned down from record levels. Platts Northwest European HRC prices averaged at a new high of Eur1172.64/mt ex-works in July, while on July 30, the spot price was assessed at Eur1165/mt ex-works, below the daily high of 1,190/mt ex-works assessed on June 25.

The rise in spot prices for commodity-grade HRC continue not to be fully reflected in sales and deliveries for steelmakers due to earlier negotiated terms, and flat steel prices remain stronger than long steel products.

ArcelorMittal, Europe’s biggest steelmaker, said Q2 results did not reflect the full improvement in steel to raw materials spreads due to pricing lags in orders, which will result in a positive effect on Q3. The typical lower seasonal demand and pricing is “expected to be less pronounced then normal,” the company said July 29.

“As a business, we have not seen the full impact of spot pricing,” ArcelorMittal CEO Aditya Mittal told analysts July 29. “The contract lag effects will come in the second half.”

Because of timing lags, realized prices are expected to continue to rise in all steel segments, while at the same time, costs are also rising, ArcelorMittal CFO Genuino Magalhaes Christino added.

Actual steel margins depend on realized steel sales volumes, with the mix of pricing and terms in sales and orders under contracts.

Even with higher raw materials costs, the fuller realization of higher steel prices should expand profitability in Q3, Christino said.

Iron ore pellets, scrap and coking coal costs delivered in Northwest Europe and basis Rotterdam port rose further in July after gains in June. Atlantic blast furnace contract pellet premiums moved up in Q3, assessed by Platts at $77.50/dry mt in July, from $65/dmt in June.

China, US spreads

In China, the spread between HRC export prices and iron ore and coking coal costs fell further to $384.35/mt FOB basis in July from $390.94/mt in June.

Chinese steel prices have seen smaller gains through the latest cycle, compared with prices in Europe and the US. China HRC prices made a recovery in July from June, while coking coal and coke costs remain high, and benchmark iron ore prices were little changed over July, at a high level.

US HRC to Midwest shredded scrap spreads rose further to a fresh record of $1,370.51/st in July from $1,232.16/st in June. Stronger US steel prices continue to build on spreads, with Midwest shredded scrap pricing little changed from June.

In Europe, spot HRC spreads remain close to record levels, and a fall in spot iron ore import prices in China at the end of July could support margins longer term. Platts HRC-raw materials spread of Eur761/mt for June was the highest since at least April 2016 — when the spreads were first tracked by Platts.

European reference steel raw materials costs increased in July with iron ore and met coal costs, with scrap per ton of crude steel rising to Eur415/mt in July, exceeding Eur400/mt for the first time, according to Platts estimates.

EU mills ran at lower daily pig iron and steel rates in June than in May after a run of monthly increases from Q2 2020, according to World Steel Association data. The data may show signs of operational bottlenecks and limited raw materials for further expansions, at higher costs.

Iron ore prices in China, used as a benchmark for global contracts, fell 1.2% month on month to average at $211.99/dmt CFR China in July. Spot lump premiums in China fell to 58.14 cents/dmtu, or around $36.34/dmt in July, 15% lower than June’s record premium.

Coking coal prices on a delivered net forward basis into Rotterdam rose 18% from June to average at $226.76/mt CFR Rotterdam in July. Premium low-vol coking coal prices netforward to Rotterdam had risen 75% since April.

Regional northern European shredded scrap prices rose 4.6% to Eur452.50/mt delivered basis in July, with gains in European scrap adding to costs.

Platts steel to raw material price spreads are indicative margins that do not account for inland logistic costs, power, natural gas or other blast furnace and steel-making inputs such as ferroalloys, anodes and refractories. Costs to operate sintering and coke plants are not included.

A HRC-raw material spread of Eur250/mt is said to be close to typical operating breakeven for commodity grade steel at regional blast furnace mills, operating facilities at higher capacity utilization. In 2019, the spread averaged Eur241/mt.

Breakeven levels in Europe are partly dependent on logistics costs and raw material configurations.

Platts European HRC spreads are based on commodity-grade flat steel specifications. Contract steel sales may have additional grade and specification-based premiums, and terms may lag spot indexes.

Producers with higher grade steel portfolios may be less exposed to commodity-grade steel margins against underlying steel raw materials costs.

— Hector Forster

US raw steel capability utilization increased the week ended July 31, the American Iron and Steel Institute reported Aug. 2.

The raw steel capability utilization rate rose to 85%, up from 84.6% the previous week.

Production increased by 0.4% to 1.876 million st during the week ending July 31, up from 1.868 million st the previous week, according to the data.

Last week’s production was up 39% compared to the same week a year earlier, when capability utilization was at 60.3% and production totaled 1.35 million st.

Adjusted year-to-date production through July 31 totaled 54.6 million st, with a capability utilization rate of 80%. The total is 19.1% higher than the 45.8 million st produced during the same period last year, when the utilization rate was 66.7%.

Last week’s production totaled 156,000 st in the Northeast, 632,000 st in the Great Lakes region, 199,000 st in the Midwest, 815,000 st in the Southern district and 74,000 st in the Western region.

The tonnage data is estimated, compiled from weekly production data provided by 50% of domestic producers, combined with monthly production data for the remainder.

— Ingrid Lexova

Massive wildfires in southern Turkey and country-wide power cuts occurred Aug. 2 in Turkey’s largest cities – including Ankara, Istanbul, Izmir, Bursa and Adana – turning market sentiment negative.

As power cuts arising from the huge heat-related increase in electricity consumption in recent weeks ended incrementally as of noon Aug. 2, no notable effect has been reported in steel mill output.

The number of people who lost their lives due to the 129 wildfires across 32 cities in Turkey since July 28 rose to eight as of Aug. 2, while firefighters continued to battle for a sixth day to contain the fires, the country’s agriculture and forestry minister said.

Although a total of 122 wildfires out of 129 have been brought under control, blazes continued to threaten some residential areas in Southern Turkey. Some new wildfires were also reported in different regions of Turkey on Aug. 2.

Rebar prices decline by $15-$20

The Turkish rebar market entered the new week with mill price cuts in this sentiment.

Some Turkish long steel producers, including major longs maker Icdas, pulled down their lira-denominated 12-32 mm domestic rebar list prices by $15-$20 to $700-$720/mt EXW on Aug. 2, depending on region and tonnage, due to slow demand and ongoing declines in imported scrap prices.

S&P Global Platts assessed Turkish imports of premium heavy melting scrap 1/2 80:20 on July 30 at $467.25/mt CFR, down $2.25/mt on day. The index has dropped $29.75/mt over the past month, down from $497/mt CFR on June 30.

Some further declines could be seen in imported scrap prices in the coming days, amid slow finished product demand, according to sources.

Some Turkish stockists 12-32 mm rebar offer prices also declined in this sentiment below $700/mt ex-stock on Aug. 2.

— Cenk Can