Day: 7 April 2022

Meeting increasing demand from the highly metals-intensive process of decarbonisation will require substantial capital allocation to the production and recycling of these metals, says BHP. The additional steel demand created will more than offset waning demand from fossil fuel industries.

However, investors will need to engage constructively with the sector to help drive down emissions from the production of metals by ensuring clean energy alternatives beat carbon-emitting technologies.

“Significant technological progression will be required to feasibly and affordably address the emissions from industrial activity, notably steelmaking,” among others, BHP says in a joint report with asset-management firm LGIM.

“If rapid technological progress does not occur, then these harder-to-abate sectors would have to explore the viability of decarbonising at considerable cost and potential delay, both at the individual plant level and via broader infrastructure requirements, by deploying known but very expensive technology options, such as the deployment of green hydrogen direct reduced iron steelmaking,” the report seen by Kallanish continues.

Besides servicing traditional sectors, metals producers will need to “provide the material building blocks of the hardware required to radically reconstitute how we produce energy and use land,” the report observes. This will include wind turbines and carbon capture infrastructure, and result in climate adaptation and rising material intensity.

In the coming 30 years, cumulative demand for metals is expected to grow substantially compared with the prior 30 years. In the 1.5°C scenario that BHP described in its Climate Change Report 2020, demand for iron ore and coking coal is forecasted to increase by 1.8 and 1.5 times respectively.

“Steelmaking raw materials do a little better than one might think in the scenario – with an uplift over traditional crude steel ranges due to additional demand from extra wind turbines and carbon distribution pipelines, which should be more than enough to offset a loss of steel demand from the fossil fuel industries as their output falls in the long run,” the report states.

Adam Smith Germany

From its plant in Belval in Luxembourg, ArcelorMittal is supplying “XCarb”-certified sheet piling to one of Norway’s largest and most important fishing ports, Kallanish hears from the company.

Local company Pelagia Egersund Seafood is currently expanding its fishing port in Egersund. The construction of the new port infrastructure will be based on a circular cell structure using more than 2,000 tonnes of AS500 straight sheet piles from ArcelorMittal Belval.

The sheet piles for this project are made from 100% recycled steel and with 100% renewable electricity, ArcelorMittal claims. They carry the group’s proprietary XCarb recycled and renewable manufactured label.

XCarb has a global warming potential of 370 kilogrammes of CO2 equivalents per tonne of steel externally, certified by the EcoSheetPile Plus EPD. Life cycle assessment shows that the embedded carbon footprint of EcoSheetPile Plus is only one fifth of that achieved by ArcelorMittal’s competitors, the company claims.

Christian Koehl Germany

The Lloyd’s Joint War Committee (JWC) has added all Russia’s territorial waters to the listed areas of war, piracy, and terrorism hazards, the marine insurance advisory board says in a statement.

The move obliges all shipowners to notify their insurers of a proposed voyage to the listed area, and gives significant grounds to insurers to deny the cover or negotiate the premiums appropriate to risks costs.

Steel suppliers from Russia are already facing severe complications with shipping non-sanctioned products to export markets, as some destinations do not accept Russian vessels, flags, or/and captaincy. The EU confirmed on Monday it will ban Russian vessels from its ports, with very strict exceptions. This means suppliers, already squeezed by existing restrictions, will face even tighter shipping conditions and higher premiums, Kallanish notes.

Most recently, before the addition of all Russia’s territorial waters to the listed area by Lloyd’s JWC, shipping of a medium-sized pig iron cargo to Italy from the Black Sea was quoted at $140/tonne. This is compared to around $40/t before Russia’s invasion of Ukraine on February 24.

The majority of Western shipowners have already left the Russian freight scene, with Lloyd’s move expected to expand that number further. Russia has a relatively small fleet compared to the size of its international maritime trade. Its largest shipbuilding company – United Shipbuilding Corporation – was sanctioned by the West in February.

Katya Ourakova UK

Flat product prices will not collapse despite the standoff between sellers and buyers in the markets for Italian coil and its derivatives, distributors tell Kallanish.

Suppliers say they are selling high volumes at prices “never seen before”. The month of March was strong in terms of sales thanks to the return of stocking by distributors and short supply. The slowdown in the flats market is seen as necessary after record sales and shipping activity throughout the entire value chain last month.

While a slight downward correction is expected for coils and derivatives from the March peak, flats are not expected to fall dramatically because of the current shortage of certain high-grade material. This is a consequence of the lack of ferroalloys imports from the CIS, which is causing steelmakers to lower production of qualities such as heavy plate 355. This grade is currently absent from the Italian market and subject to very strong demand.

Distributors say their sales activity became quiet last week but it has picked up this week. “The high-earners today are those with a large stock and a full range of flat products,” a source comments. This includes tubes, sheets and plates.

A mid-sized distributor says he shipped over 50,000 tonnes of finished products in March. Both producers and distributors say they have full order books. For sheets and plates, steelmakers are quoting lead times well into June, and for coils into July.

Natalia Capra France

Going into April, prices for coil products have flattened in northwest Europe after the leaps seen since the start of the war in Ukraine. Some observers question whether the leaps were justified in the first place, while others believe the current levels are realistic.

It seems those levels are still the point of orientation – €1,400/tonne ($1,528) for hot rolled coil, €1,500/t for cold rolled coil, and €1,550/t for galvanized coil. A mill source claims that these are the prices achieved at present, with higher levels possibly achieved the further you go north. “I think the market has accepted the price hikes, and that we are at a good balance of supply and demand,” he tells Kallanish, adding that his mill has occasionally achieved €1,600/t for galv.

A Belgian trader concurs in principle, stating that €1,500-€1,550 is the range for galv when concluding for a full quarter. Southern Europe does not really offer lower prices. “We are concluding for April only, at a price lower than €1,500,” he says, meaning the firm is not in the market for deals beyond this month.

Neither side foresees noticeable movement in either direction. While the mill source assumes “stability”, the Belgian manager speaks of a “waiting mode”. This leaves room for other interpretations. Two German buyers find the levels given above are not realistic, as they are too high, and that they will not buy at these values.

A manager at one of the major German distribution groups speaks of a possible “turning point” for prices to fall, but does not see it materialising. There are “too many controversial factors in the market”, he finds.

Christian Koehl Germany

Global merchant slab prices have softened, as new supply sources became established into the Mediterranean, and despite the ongoing absence of Ukrainian supply. Russian slab is available, but buyers, even in the countries with no sanctions, are becoming more reluctant to buy it, as trade is increasingly difficult amid new sanctions, Kallanish learns from market participants.

From around $1,000/tonne fob China in mid-March, offers of Chinese slab have declined to around $880/t fob this week, amid a tangible increase in the number of traders’ offers. Also available is Iranian, Indonesian, Malaysian and Vietnamese slab, with the latter heard selling to Europe at $950-1,060/t cfr, depending on destination and grade, and possibly including Turkey.

Italy, the most dependent on imported slab in Europe, is understood to have booked from all the above destinations, with one mill booking in excess of 400,000 tonnes of Asian slab, securing enough supply to last a quarter.

The increase in availability of slab at relatively low prices has already reflected on the flat products market, plunging it into stagnation. This had initially been attributed to a major overheating of prices and demand on feared shortages of feedstock supply.

Although fears over slab shortages have been alleviated in Europe, talk of the possibility of extra Chinese export duties is taming buying interest somewhat, traders note. But Russian material is still not in great demand, and is unlikely to gain traction any time soon, as the country’s military conduct in Ukraine is leading to tightening sanctions. This hints at more difficulties in receiving and paying for material.

A new, fifth round of EU sanctions banning Russian vessels from its ports is likely to cause further complications even for intercompany supplies of Russian material to Europe, traders say.

Russia is redirecting some of its slab volumes to Asia, with one large lot sale to China heard at an incredibly discounted $700/t cfr in the past week. This would net back to around $650/t fob Russian Far East, traders advise.

In the western hemisphere, slab offer indications have also softened, but sales have been sparse due to the absence of short-term availability and US producers’ adjusting expectations for third-quarter flat product pricing. Nearest Brazilian slab availability is for August loading.

Katya Ourakova UK

The European Union is preparing a fifth round of sanctions against Russia. These could further impact the steel sector on account of the proposed ban on Russian coal imports and Russian vessels arriving at EU ports.

Last month, Europe banned the import of Russian finished steel products covered by EU safeguard measures. Now, the European Commission is proposing “a ban on Russian vessels and Russian-operated vessels from accessing EU ports”, further limiting the possibility to trade ferrous products such as semis and raw materials.

President von der Leyen said this week the decision to ban coal imports from Russia into Europe is designed to cut another important revenue source for Russia, worth €4 billion ($4.4 billion) per year. According to Wood Mackenzie Europe receives some 30% of its metallurgical coal imports from Russia. A ban on imports would therefore have a direct immediate impact on prices and availability for European steelmakers, Kallanish notes.

As for thermal coal, Russian supplies represent 70% of total European coal imports, meaning that energy producers in Europe will need to find alternative sources and electricity prices could soar further.

In early March, Wood Mackenzie anticipated that “Russia would not be able to quickly make up for a loss of European [coal] demand by pivoting to Asia and China due to limited eastbound rail capacity”.

Emanuele Norsa Italy