Day: 18 August 2021

Cognor benefited from the continued steel demand recovery and still higher prices in the second quarter. Revenue surged 57% on-year in Q2 to PLN 716.1 million ($184.5m), while net profit soared 260% to a new quarterly record of PLN 78.8m.

In the first half of 2021 the Polish steelmaker’s overall sales rose 4.3% on-year to 432,972 tonnes. Finished product sales increased 4% to 271,329t but semi-finished steel deliveries fell 17% to 79,807t. Scrap sales rose 21% to 81,836t.

H1 revenue surged 42% to PLN 1.3 billion and net profit ballooned 406% to PLN 124.7m, Kallanish notes.

Spreads widened thanks to the faster increase in steel prices then scrap prices, while costs reduced due to the lower consumption of some input materials following the completion of investments to increase efficiency.

The firm’s Huta Stali Jakosciowych (HSJ) unit saw exports comprise 56.5% of H1 sales, while at Ferrostal Labedy they accounted for only 11.4%. Buyers Wobi-Stal and Sambud-2 accounted for over 10% each of Ferrostal Labedy’s sales.

Adam Smith Germany

The onset of hydrogen-based steelmaking will increase scrap use in steelmaking, thereby reducing overall iron ore demand, although the pellet market will expand rapidly, says Wood Mackenzie. Coking coal will meanwhile remain an indispensable feedstock for steelmakers in India as the country’s steel demand outpaces its ability to decarbonise, Kallanish notes.

Carbon emissions in the steel sector must fall by 75% from today’s levels to limit global warming to within 2C, says the research company. This means reducing global steel emissions from over 3,000 million tonnes of carbon dioxide equivalent in 2020 to just 780mt CO2 by 2050. This will pose a major challenge, especially to rapidly growing developing economies, as the steel industry will need to balance managing rising demand and pressure to decarbonise.

Wood Mackenzie says five things need to happen for the steel sector to achieve a 2C warming pathway. These include doubling scrap use in steelmaking, trebling direct reduced iron production and use, reducing global average electric arc furnace emissions intensity by 70%, and reducing blast furnace-basic oxygen furnace emissions intensity by 30%. Lastly, 45% of residual carbon emissions (around 500m t/year) must be captured and stored.

This presents a huge opportunity for DRI. “Although the rise in scrap consumption would lead to total iron ore demand falling by 24% below our base case, the market for pellet products would expand by 35%,” says Rohan Kendall, head of iron ore research. This would boost DRI trade. Australia and Brazil could be well positioned to produce H-DRI for export. China and Europe would be key DRI importers.

To achieve scrap use growth, scrap recycling rates would have to increase from 80-85% to 95%. India and China scrap supply chains would require substantial development which would contribute to displacement of iron ore demand, notably taking effect post 2030.

Annual metallurgical coal demand is seen halving from Wood Mackenzie’s base case scenario to 622mt by 2050. Seaborne metallurgical coal trade would fall, although domestic coal in China would bear the brunt of declines.

“Seaborne imports would be all but eliminated during the 2040s in China, leaving only a nominal volume of the highest-quality coking coals imported to coastal mills,” says metallurgical coal principal analyst Anthony Knutson. India, on the other hand, would double its import requirement to 123m t/y.

“PCI demand comes under great pressure in a 2C scenario falling by 50% or 37mt as hydrogen injection rates increase,” Knutson adds.

A successful rollout of carbon capture and storage would provide an opportunity for continued use of metallurgical coal in steelmaking as emissions captured via this pathway are from BF/BOF steelmaking, Wood Mackenzie concludes.

Adam Smith Germany

Production at Russia’s Krasny Oktyabr (Red October) decreased in July compared with the previous month, the company says. It amounted to 16,691 tonnes of stainless steel, down by 24.8% on-month, Kallanish notes.

In June, production was 24,900t of stainless steel (see Kallanish passim).

Red October nevertheless managed to maintain its leading position in the production of stainless steel in the first half of the year. Moreover, it is consistently the leading Russian exporter of stainless steel, with a 22.4% share in Russian stainless exports, according to national special steel association USSA.

The Volgograd-based steelmaker produced 207,990t of stainless steel in 2020, up by 2% on-year.

In July, the plant began the repair of heat-treatment furnaces in the rolled processing shop (see Kallanish passim). The equipment will return to service after a three-year downtime and two furnaces are planned to be commissioned in August.

Heat-treatment furnaces are used for the processing of high-quality rolled steel, which is marked with “QT” – heat-treatment quenching and tempering – and mostly exported.

Thanks to the commissioning of the furnaces, the throughput of the plant will increase, and the workshop will be able to fulfil a larger number of orders for this type of product, the enterprise said earlier.

In June, the company successfully produced reworking shaped and rectangular billet from hull steel, which will be used in the construction of military ships for Russia’s navy.

Svetoslav Abrossimov Bulgaria

India will become the world’s largest steel exporter in the coming years, surpassing China, on the back of its capacity expansion, global steel demand, and China’s export restrictions, according to Jindal Steel and Power (JSPL) managing director V.R. Sharma.

“India is seeing a massive capacity expansion, expected to get commissioned in over four to five years,” Sharma said in an exclusive interview with Kallanish. “China, on the other hand, is reducing exports to fulfil its domestic demand, making a clear space for India to become the global steel exporter. The whole world is working on a stimulus package to develop infrastructure, which ultimately creates a huge steel demand in the coming years.”

India should not see the ASEAN countries as competitors, Sharma explained. “China is not exporting anything, the Philippines is not exporting anything, neither Malaysia nor Thailand. Although there can be exceptions, but India is supplying steel to these nations,” he observed. “All these countries have their domestic demand and we don’t see them exporting in the coming future.”

JSPL is eyeing the expansion of its Odisha-based steel unit’s capacity and a new project installation in Andhra Pradesh. “We are entering into the hot rolled coil segment, with a steelmaking and rolling mill capacity expansion of 3 million tonnes/year at our Odisha-based unit. The expansion will be partly a greenfield project and partly a brownfield project. The company will be investing INR 21,000 crore [$2.82 billion] and the project is likely to get commissioned in March 2023,” Sharma commented.

“The Andhra Pradesh project will be installed in the port-based city of Krishnapatnam. The company is very much keen to install the unit near the port for the ease in import of raw materials and minerals. The project will have a 3m t/y steelmaking capacity and is likely to get commissioned through the fiscal year 2026,” he added.

In line with the government’s production-linked incentive (PLI) scheme for specialty steel, JSPL is working on producing specialty steel to serve Indian Railways. “JSPL congratulates the Government of India for their initiative on reducing imports of specialty steel by introducing the PLI scheme. JSPL has taken two keen projects out of the PLI scheme, which includes the grade 1175 heat-treated rails project used for deploying high speed and heavy load tracks. Another project being the production of 1080 grade head hardened rails used for metro rail services,” Sharma concluded.

Sayed Aameer India

China’s crude steel output fell 8.4% year on year to 86.79 million mt in July, marking the first month of year-on-year decline since April 2020, National Bureau of Statistics data released Aug. 16 showed, but was still outpaced by a decline in demand from the property and infrastructure sectors.

Crude steel output averaged 2.8 million mt/day in July, down 10.5% from June and also marking the lowest level since April 2020, the NBS data showed.

Pig iron output at 72.85 million mt averaged 2.35 million mt/day in July, down 7% from June and down 8.9% year on year.

Market sources were expecting iron and steel output to decline further in August, but had mixed views on the price outlook for the rest of 2021.

A fall in construction steel demand from the property and infrastructure sectors, which accounts for around 50% of China’s total steel consumption, has outpaced the decline in output since July, resulting in steel inventories reaching the second highest volume on record in mid-August, market sources said.

As a result, China’s rebar price fell 3% between July 26 and Aug. 16, when it stood at Yuan 5,310/mt.

Floor space for new home starts fell 21.5% year on year in July, while infrastructure fixed asset investment or FAI fell 10.5% over the same period, according to Platts calculations based on NBS data.

Over January-July, China’s crude steel output was up 8% year on year at 649.33 million mt, the NBS data showed. Pig iron output rose 2.3% over the same period to 533.5 million mt.

Property new starts edged down 0.9% on the year over the seven-month period, while infrastructure FAI rose 4.6%, although slowing from 7.8% year-on-year growth in H1, according to Platts calculations based on NBS data.

Outlook uncertain

Some market sources expected China to continue efforts to deleverage its property sector and address hidden local debt risks behind infrastructure projects in coming months.

As a result, construction steel demand was expected to decline in H2 from a year earlier, while construction-related manufacturing segments such as excavator and heavy truck building were also expected to slow down, according to market sources.

“The trend of Chinese steel prices in H2 will largely depend on how aggressively China implements steel output cuts, but so far nobody is sure about timetables and scales,” one market source said.

In a bid to ensure that calendar 2021 output is on par with 2020, China’s crude steel production over August-December would have to decline by 48 million mt or 10.4% on the year to 416 million mt, or 2.72 million mt/day.

Some market sources said it would be challenging to achieve, as there were more than 500 steelmakers in China and coordinating output cuts among them was a complex task.

They expected China’s steel output cuts to increase in the fourth quarter as construction activity in northern China’s is pared back to reduce air pollution ahead of the Winter Olympics in Beijing and Zhangjiakou in February.

“The only certainty in the Chinese steel market may be that steel prices will fluctuate greatly in H2,” one source said.