Day: 16 March 2022

Italian steelmaker Acciaierie d’Italia is implementing an energy surcharge that will be applied retroactively, Kallanish learns from a source within the company.

Electricity and gas costs are strongly impacting producers’ margins in Italy as the country is completely dependent on energy imports. Last week, most Italian mills idled their hot-end areas mostly due to the escalating cost of gas as a result of the war in Ukraine, Kallanish notes.

Acciaierie d’Italia will apply the energy surcharge on all contracts agreed before 10 March. The surcharge will be calculated based on the average between the gas price at the time of the order and the gas price at the time of shipping.

Another major European producer told its clients this month it is applying additional energy surcharges to contracts already agreed and other flat product makers are mulling similar retroactive increases.

Natalia Capra France

The London Metal Exchange (LME) will resume nickel trading at 08:00 GMT on Wednesday and apply upper and lower price limits to all outright contracts in all base metals on all execution venues.

The LME suspended nickel trading on Tuesday last week after nickel prices reached an unprecedented $101,365/tonne (see Kallanish passim).

“Whilst price moves in the nickel market have been a key focus, the LME has observed high levels of volatility across the base metals markets more broadly. Market participants have raised concern regarding the risk of sudden, extreme price moves in other metals, particularly given the geopolitical backdrop,” LME says. The precise levels of the limits for nickel will be confirmed by notice by 14:00 London time on 15 March.

The upper daily price limit for any outright contract will be the previous business day’s closing price for that contract, plus for nickel, at least 5% having previously guided 10%, and will keep under review in light of market conditions.

The LME also confirms the deferral of delivery to 23 March at level of all nickel contracts entered into prior to 16 March and due for delivery between 16 and 22 March inclusive.

“The LME shall undertake heightened monitoring on all trading following the resumption of nickel trading,” it says. “The LME’s review of trading activity and nickel market conditions leading up to the suspension is ongoing, and will be informed by the information obtained under its information gathering powers in the LME Rulebook. If that review indicates that there may have been abusive activity by one or more participants, either on the LME’s market or on the LME in combination with the OTC market, the LME has powers under the LME Rulebook to commence a formal investigation.”

Adam Smith Germany

The UK government has imposed a new round of sanctions against Russian and Belarussian individuals and trade, including steel products, in response to Russia’s invasion of Ukraine.

The UK is to deny Russia and Belarus access to the “Most Favoured Nation” tariff for their exports, thus depriving them key benefits of WTO membership. The initial list of goods – worth £900 million ($1.17 billion) – will now face an additional 35% tariff on top of any existing tariffs, Kallanish notes.

The list includes products that “have been selected to inflict maximum damage on the Russian economy while minimising impact on the UK” and include iron, steel and iron ore. The UK has also banned exports to Russia of luxury products, such as high-end fashion, works of art and luxury vehicles.

Additionally, the UK has widened the list of sanctioned persons, which now also includes Severstal owner Alexey Mordashov.

The measures come in the wake of the EU’s fourth round of sanctions that ban the import from Russia of finished steel products (see separate article).

Earlier this month, the London Stock Exchange suspended trading in 27 companies with links to Russia, including Evraz, Severstal, NLMK and MMK.

Katya Ourakova UK

Giuseppe Pasini, president of Italian-headquartered Feralpi Group, believes current market uncertainties call for the EU to cease scrap exports and review safeguard measures.

The executive said in a webinar attended by Kallanish on Tuesday that he remains more concerned over the raw materials supply tightness created by the ongoing war in Ukraine, rather than energy prices. The problems created by disrupted CIS raw material supply need to be addressed by the EU by limiting scrap exports to third countries.

“We are asking with the local steelmakers’ association to block exports of Italian scrap outside of Europe and we believe the same should be done on a European level,” Pasini observed. “We are experiencing a strategic and economic war and we need to preserve our own internal raw materials.”

Looking beyond raw materials, Pasini also raised the possibility of limiting the scope of existing safeguard measures.

“During a difficult moment such as the one we are living through, steelmakers need to understand the needs of the entire supply chain of the steel industry in Europe and understand that a relaxation of safeguard measures could be necessary,” he commented.

Feralpi operates electric arc furnace-based mills in Italy, Germany and France. Pasini confirmed that last week, as energy prices peaked in Italy, all steelmakers were forced to pause, stop or reduce production temporarily.

On Tuesday, the European Commission confirmed a ban on imports into the EU of Russian steel covered by safeguard measures. Safeguard quotas assigned for products from Russia – and Belarus – are set to be reassigned to other third countries. However, authorities have not yet addressed within the safeguard system the limited capability of Ukrainian mills to ship to Europe.

Emanuele Norsa Italy

Turkey is well placed to provide steel to the EU in the absence from the market of mills in the Commonwealth of Independent States due to Russia’s invasion of Ukraine, according to Ugur Dalbeler, vice president of the Turkish Steel Exporters’ Association and CEO of major steelmaker Colakoglu.

However, Dalbeler also underlined that the conflict was pushing up Turkey’s input costs, with CIS mills typically providing a good deal of raw material and semi-products to Turkey. Rising energy prices have also contributed to higher input costs, Dalbeler added.

“Turkey imports around 7 million mt of raw materials from the CIS every year, which is around 20% of Turkey’s total raw materials imports. We are also importing 7 million mt of semi and finished products from that region, around 50% of Turkey’s total imports of these products,” Dalbeler said.

Although the US and EU have imposed sanctions on Russia following the invasion, Turkey has so far adopted a neutral approach.

S&P Global Commodity Insights assessed the Platts price for Turkish imports of premium heavy melting scrap 1/2 (80:20) at $655/mt CFR March 14, stable on the day at its highest ever level since the assessment began in early 2010.

The assessment has jumped $148/mt from $507/mt CFR on Feb. 23.

Billet prices in Turkey have also surged to over $900/mt ex-works in the same period, while the Platts assessed CIS export billet was at $836.50/mt FOB Black Sea March 14, up $5/mt from March 11.

“Even if Turkey doesn’t impose sanctions against Russia, Turkey’s slab costs will also be affected negatively due to EU and US’ precautions,” Dalbeler said.

Highlighting that Turkey had been importing around 250,000 mt of HRC from CIS mills, Dalbeler predicted some short-term supply issues, adding that alternative supply sources — including China, South Korea, Japan, India and Vietnam — could emerge.

“However, in line with the additional 6 million mt HRC capacities to come online in the mid-term, all of these [steel input] tonnages could be met with domestic sources,” Dalbeler said.

“The EU may remove, suspend quotas in this sentiment or may change country quotas to a global quota, as Turkey becomes the only alternative that Russia was exporting in the nearby geography,” Dalbeler said.

— Cenk Can

EU hot-rolled coil buyers and end-users expressed growing frustration March 15 as mills passed production cost hikes downstream.

With mill offers steadily increasing, market participants expressed concern on the day for end-user profitability, especially considering the retroactive imposition of surcharges on concluded contracts.

“Customers are complaining daily about increasing prices, and new energy surcharges aren’t helping at all,” a service center source said. “We’re in a dangerous and challenging area — revising contracts risks credibility.”

A mill source confirmed concerns further upstream, reporting that inquiries as to the status of orders was “constant,” with customers anxious that orders would not be fulfilled because of energy and supply disruptions.

Some Northern European mills continued to return to the market week beginning March 14, with deals confirmed on the day as high as Eur1,500/mt. The deals were concluded for limited volumes and offered to longer-term customers — confirming reports that those holding established relationships with mills could better access the available material on the market.

Sentiments on future price direction varied, with one distributor source predicting current levels as near peak.

“I don’t see the demand for these higher levels continuing,” the distributor source said. “If you need material immediately, then yes, you’ll pay a higher price, but with demand gone from key industries like automotive, I don’t think further increases are likely long term.”

A mill source was less optimistic:

“Anything is possible, but prices already rose 300 to 400 euros in the last weeks without any uptick in demand — the increases we are seeing are based on speculative factors like whether material is guaranteed or at least likely to arrive.”

S&P Global Commodity Insights assessed the TSI for HRC for Northern Europe up Eur75 on the day at Eur1,400/mt ex-works Ruhr. HRC in Southern Europe was assessed up 10 at Eur1,310/mt ex-works Italy.

— Benjamin Steven