Day: 6 May 2022

Steelmakers’ association Eurofer has drastically cut its forecast for EU steel demand growth due to soaring energy prices, ongoing global supply chain disruption and the Ukraine war shock.

Apparent steel demand is now seen contracting 1.9% year-on-year in 2022, after a 15.2% y-o-y jump in 2021. In its previous forecast issued in February, before the Russian invasion of Ukraine, Eurofer projected a 3.2% demand growth this year.

The biggest fall in demand should be seen in the second quarter, after which the market should stabilise and then start recovering going into 2023, Eurofer indicates.

If the outlook is confirmed, 2022 will be the third year of apparent steel consumption contraction registered during the four years between 2019 and 2022. “In the current context, amid a worsening energy crisis and shortages in raw materials, we cannot exclude a new recession or a stagflation scenario,” Eurofer director general Axel Eggert says in a note sent to Kallanish.

“Apparent consumption is set to recover in 2023 [by 5.1%], but the overall evolution of steel demand remains conditional on very high uncertainty which is likely to continue to undermine demand from steel-using sectors,” the association notes.

EU imports last year jumped back to the record levels seen in 2018. Over full-year 2021, imports of finished products jumped 35% y-o-y, after the drop of 15% seen in 2020.

“Throughout 2021, the EU’s total trade deficit amounted to 1.5 million tonnes,” Eurofer says. This figure includes semi-finished steel. The biggest trade deficit was recorded with Russia, at 593,000t. Now, trade with Russia is almost completely halted due to the European Commission’s ban on imports of Russian finished products and sanctions on most Russian steelmakers.

Emanuele Norsa Italy

Ryerson notes the price gains made in the first quarter of 2022 as critical to their successful figures, notes Kallanish.

Net income for the company in Q1 equalled $163.6 million. In 2021, the first quarter income came in at $25.3m.

Ryerson’s first-quarter revenue for the year is $1.75 billion, an increase of 14% from 2021’s Q1 revenue of $1.53b.

“Our record revenue of $1.75 billion in the first quarter was driven by average selling price gaining 2.3% to $3,312 quarter-over-quarter and volume growth of 11.4% to 528,000 [short] tons sold,” said ceo Eddie Lehner.

Ryerson is optimistic about the sustainability of its success. The company is outperforming Metal Service Center Institute projections for North America, it says.

Kristen DiLandro USA

Mills in some European countries are having issues with carrying out repair and maintenance on production lines due to a shortage of required spare parts.

“The availability of our production units is impaired because we have problems receiving the spare parts we need. They were pledged to be delivered, in early April, but now will come only sometime in May,” Kallanish learns from a mill manager. This means that at least one production line at the electric arc furnace-based mill is confined to run at 80% of scheduled output, he adds.

This development adds to the existing shortage of input materials – particularly of Russian and Ukrainian origin – and of truck drivers for haulage.

“We do not understand the cause for it, but the technical suppliers are not as fast as they used to be,” the manager says. Of course, the parts need to be tailor-made and manufacturing them takes time, but that does not explain the over-proportionate delays, he says.

He even links the situation with the Covid-19 lockdown in Shanghai, where the port is crammed with vessels that cannot be charged, and the problem filters through to the railway line from China to Europe. “Even for a washing machine you have to wait for months at the moment,” he observes.

The problem was addressed already last year by German machine tool builders’ association VDW. It observed that new machines can only be delivered with delays due to missing parts, especially electronic components, thereby affecting supply of machines to steel companies, mainly processors.

Christian Koehl Germany

Eurofer has halved its forecast for EU steel-using sectors’ output to 2% on-year growth in 2022. This is the result of the rapid deterioration of the global industrial and economic outlook due to the war in Ukraine, coupled with ongoing and worsening supply chain issues. Output growth will rebound to only 2.3% the following year due to very high uncertainty, likely continuing over the next year.

Domestic appliances will be the biggest drag on growth this year, with output expected to fall 3.3%.

Construction sector output should increase 2.3% in 2022, following its 5.9% rebound in 2021. Rapid growth, supported by post-Covid-19-lockdown recovery and governmental support schemes, lost momentum in the fourth quarter last year due to global supply chain problems and increasing scarcity of construction materials.

Civil engineering is expected to provide the strongest contribution to the construction sector’s performance this year. This segment will also be supported by EU-wide public policies, such as NextGenerationEU.

However, “the impact of these publicly-funded construction schemes is becoming increasingly uncertain due to multiple downside factors that are casting shadows on the overall economic outlook,” Eurofer says in a report seen by Kallanish. “In particular, the shortage of construction materials is becoming a source of concern.”

Automotive industry output should meanwhile grow 4.9% in 2022 after 3.8% growth in 2021. Q4 2021 saw a consecutive quarter of output decline, however. The continued supply chain issues experienced over the summer of 2021 increasingly resulted in shortages of components and semiconductors, rise in energy prices and production costs, and slowdown in global trade, Eurofer observes. The outbreak of war in Ukraine has exacerbated the already depressed outlook.

Growth in 2022 is expected to be largely due to the rebound in output of some major economies, mainly Germany, after consecutive slumps from 2019 to 2021.

“Uncertainties around the implementation of EV and delays in the launch of new models – many hybrid or fully electric – and lack of facilities (recharging points, etc.) have proven unsupportive factors of consumer demand and have also delayed investment decisions by carmakers,” Eurofer says.

“Full recovery in global trade and external demand from major markets such as the US, China and Turkey will remain a key factor for EU car exporters, but this is not likely to materialise as long as the uncertainty linked to the war in Ukraine and global supply chain disruptions persist,” it concludes.

Adam Smith Germany

European finished steel exports to the United States are bucking the trend of overall export decline from the continent to third countries, Kallanish learns from the latest data published by Eurofer.

In the fourth quarter of 2021, exports of finished products from the EU to the US jumped 43% on-year, thereby re-establishing the US as the third-largest importer globally of European finished steel, after Turkey and the UK.

In full-year 2021, 2.2 million tonnes of finished products were exported to the US by European steelmakers, up from 1.6mt in 2020. The figure could well increase further this year after the implementation from January of the US-EU trade deal that will swap US Section 232 tariffs for a tariff-rate quota system.

In 2021, European steelmakers exported less than 20mt of finished products, down marginally from 2020 levels. Back in 2012, the continent was exporting over 30m t/year of products, Kallanish notes.

The negative trend seen during the last ten years for finished steel exports has impacted most destinations. The US is among the few markets that could well increase trade with Europe in the medium term. Between 2014 and 2018 Europe was exporting 3-3.5mt/y of finished steel products to the US, according to Eurofer data.

Emanuele Norsa Italy

BMW Group delivered 596,907 vehicles to customers in the first quarter of 2022, down 6.2% from an all-time high in Q1 2021, due to limited availability of components and large-scale lockdowns in China, the German automaker said May 5.

BMW’s Q1 sales of electric vehicles surged 27.7% on the year to 89,669 units, with battery EV sales more than doubling on the year to 35,289 units.

Generally higher demand for EVs has boosted battery raw material prices. The Platts seaborne lithium carbonate and lithium hydroxide assessments from S&P Global Commodity Insights surged 121.9% and 152.4%, respectively, since the start of 2022 to $75,000/mt CIF North Asia and $80,000/mt CIF North Asia on May 4.

BMW said the BMW iX3 and the MINI Cooper SE were the highest selling EVs in Q1, with sales at 11,200 and 8,925 units, respectively.

The company said its BMW i7 luxury sedan, the BMW iX1 and the BMW i3 would expand its BEV range in China in 2022.

The automaker said BEVs were on track to make up at least 10% of its sales volume in 2022.

BMW already has 15 fully electric models in production in 2022, covering around 90% of its current segments. The company aims to have more than 2 million BEVs on roads by 2025.

The automaker was upping the pace of its e-mobility ramp up and accelerating the transformation toward sustainable mobility, BMW Group CEO Oliver Zipse said.

“And with our holistic approach to reducing CO2 emissions from our vehicles throughout the value chain, we are making an effective contribution to combatting climate change,” he said.

BMW’s sales in the Americas rose 2.9% year on year to 99,169 units in Q1, with sales in the US up 3.7% at 80,974 vehicles.

In Europe, the company’s sales fell 7.8% on the year to 220,393 units in the quarter, with sales in Germany, its largest market, down 4.1% at 60,098 vehicles.

Sales in Asia dropped 7.9% to 265,065 units, due to renewed COVID-19 restrictions in China, where sales declined 9.2% to 208,953 vehicles.

The BMW brand delivered 519,796 vehicles to customers in Q1, down 7.3% on the year. MINI Q1 sales rose 1.1% on the year to 75,487 vehicles, due to increased interest in the MINI Cooper SE EV and MINI Countryman plug-in hybrid models, which together accounted for over 17% of total MINI sales.

The group sold 1,624 Rolls-Royce motor cars in Q1, up 17.7% year on year, mainly due to growth in sales of the Ghost and Cullinan models.

— Jacqueline Holman

Alternative-powered vehicles continued to gain market share from diesel- and gasoline-powered, internal combustion engine automobiles in the first quarter in the European Union, data from the European Automobile Manufacturers’ Association showed May 5.

The automotive sector is a key industry for steel producers. On average, 900 kg of steel is used per vehicle. Automotive is also a major consumer of zinc, aluminum alloys, copper, stainless steel, platinum, palladium and rhodium and also battery materials, including nickel, cobalt and lithium.

Platts assessed Northwest European hot-rolled coil at Eur1,260/mt, or $1,330.43/mt, ex-works Ruhr May 4, up 36.7% since the start of 2022.

Hybrid-electric vehicles represented 25.1% of total passenger vehicle registrations in the European Union in Q1, up from 20.9% in Q1 2021, while battery-electric vehicles almost doubled their market share year on year to 10%, surpassing plug-in hybrids, which accounted for 8.9% of the EU market. Diesel- and gasoline-powered vehicles still dominated the market, with a combined share of 52.8% during the quarter.

Gasoline and diesel vehicles

The EU’s Q1 diesel vehicle registrations fell 33.2% year on year to 378,009 units. The market share of diesel-fueled vehicles shrank 5.3 percentage points year on year to 16.8%. Diesel registrations in France fell 44.1%, Italy 39.2%, Spain 30.8%, and Germany 20.2%.

The market share of petrol vehicles contracted to 36.0% in Q1, from 40.8% a year ago, with petrol vehicles the most popular choice in the market and registrations of 808,039 units.

Alternative-powered vehicles

BEVs registrations surged 53.4% year on year to 224,145 vehicles in the EU in Q1, with some EU markets showing a triple-digit gain. Registrations in Spain jumped 110.3%, France 42.7% and Germany 29.3%. Italy was the only EU market to post declines in BEV registrations of 14.9%, while Romania recorded an increase of 408%.

PHEV registrations slipped 5.3% year on year in the EU during the quarter to 199,107 units.

HEVs were the most common fuel type after petrol in the EU, with Q1 registrations up 5.3% year on year at 563,030 units. The EU’s registrations of natural gas vehicles slumped 56% year on year in Q1 to 6,289 units.

LPG-fueled vehicle registrations jumped 48.6% year on year to 67,717 units in the quarter.

— Annalisa Villa

New car registrations in the UK totaled 119,167 units in April, dropping 15.8% year on year as supply chain shortages continued to constrain deliveries, according to data released May 5 by the Society of Motor Manufacturers and Traders.

The April volume was also 51.1% lower than March’s volume.

“The worldwide semiconductor shortage continues to drag down the market, with global geopolitical issues threatening to undermine both supply and demand in the coming months,” SMMT CEO Mike Hawes said.

The auto sector was facing further economic headwinds, the SMMT said, with rising inflation due to rising energy and fuel costs, and further supply chain and other uncertainties arising from the global political situation and the effects of the Russian invasion of Ukraine.

Automakers were doing what they could to deliver the latest low and zero emission vehicles, Hawes said, urging buyers to consider placing orders as soon as possible to benefit from incentives, low interest rates and reduced running costs. Grants for BEVs are set to be in place until at least early 2023.

“Accelerating the transformation of the new car market and the carbon savings demanded of road transport in such difficult times requires not just the resolution of supply issues, however, but a broader package of measures that encourages customer demand and addresses obstacles, the biggest of which remains charging anxiety,” Hawes said.

BEV sales up 40.9% on-year

Battery electric vehicles sales for the month were 12,899 units, up 40.9% year on year, but down 67.2% from March’s record 39,315 units.

The BEV market share was 10.8% in April, up from 6.5% a year ago, but down from March’s 16.1% share to the lowest share level since July 2021.

Higher EV demand has boosted battery raw material prices. The Platts seaborne lithium carbonate and lithium hydroxide assessments from S&P Global Commodity Insights surged 121.9% and 152.4%, respectively, since the start of 2022 to $75,000/mt CIF North Asia and $80,000/mt CIF North Asia on May 5.

Sales of plug-in hybrid EVs fell 32.8% year on year and 59.8% month on month to 6,449 units, taking a market share of 5.4%, down from 6.8% in April 2021.

The market share of hybrid EVs climbed to 11.7% in April, up from 8.3% a year ago, with sales at 13,951 units, a 18.3% year on year jump, but down 49.7% from March’s volume.

The UK government plans to ban the sale of new gasoline and diesel cars by 2030.

Meanwhile, the market share of petrol and diesel internal combustion engine vehicles moved above 50% for the first time since October 2021, accounting for a combined 51.5% of total new passenger car sales in April.

Petrol cars continued to hold the largest market share at 45.8% or 54,633 units, although this was down from 50.3% a year ago. The volume dropped 23.2% year on year and 46.6% month on month, according to the SMMT.

Diesel vehicles’ market share was steady from March at 5.6%, but down from 9.9% a year ago, to 6,725 units, down 52% on the year and 51% lower than March’s volume.

2022 outlook revised

The SMMT revised its market outlook for 2022 lower due to the ongoing impact of supply chain constraints and broader macro-economic factors, it said.

It now expects 1.72 million new passenger vehicles to be registered in 2022, down from the previously expected 1.89 million outlook.

While this would still be a 4.5% rise on 2021’s volumes, it highlighted the effect of the semiconductor shortage on supply and anticipated impacts from rising living costs, The SMMT said.

It also downgraded its outlook for plug-in vehicles, with BEV registrations expected to be 289,000 units, down from 307,000 units, PHEVs at 144,000, down from 163,000, and HEVs down from 198,000 to 193,000.

Overall, plug-in EVs are expected to make up 25.2% of total registrations in 2022, with BEVs alone due to comprise around one in six new cars on the road, the SMMT said.

The Ukraine war was complicating supply chain challenges that were already lingering from the pandemic and the rising cost of living was adding further uncertainty for the automotive industry, KPMG UK Head of Automotive Richard Peberdy said in a May 5 note.

“Yet in the face of weakening consumer spending power and rising fuel and energy costs, car sales demand has remained relatively robust so far this year, compared with the very limited supply,” he added.

— Jacqueline Holman

Steel consumption in Europe could contract by almost 2% this year as a result of soaring energy prices, ongoing disruptions to supply chains and the shock of the war in Ukraine, European steel association Eurofer said May 5.

In its forecast early February, Eurofer had expected EU steel consumption to grow by 3.2% year on year in 2022 and by 1.7% in 2023. But now a market contraction — which would be the third in the space of four years — looks to be likely, Eurofer said.

“The evolution of the steel market for 2022 and 2023 remains subject to a high level of uncertainty, which is likely to continue to undermine demand from steel-using sectors”, Eurofer Director General Axel Eggert said in a statement.

High uncertainty is set to last at least until the end of 2022, depending on developments around Russia’s invasion of Ukraine and its consequences for global supply.

“In the current context, amidst a worsening energy crisis and shortages in raw materials, we cannot exclude a new recession or a stagflation scenario,” Eggert said.

In line with the updated forecast, steel consumption in Europe is set for a 1.9% decrease this year, followed by a 5% recovery in 2023. It strongly rebounded in 2021 (+15%), after the 10.7% slump in 2020.

The growth in EU steel end-user sectors’ output over 2022 is now expected to halve to 2%, down from 4% forecasted in early February. In 2023, it could inch up comparably, by 2.3%, according to Eurofer.

Last year marked a 7.3% post-pandemic rebound in total output in steel-using sectors despite soaring energy prices in the second half of the year, component shortages and lower run rates especially in the automotive sector.

On May 4, Platts assessed Northwest European hot-rolled coil price at Eur1,260/mt, or $1,330.43/mt, ex-works Ruhr, down Eur5 on the day.

— Ekaterina Bouckley

EU HRC prices remained lower as buyers reportedly monitoring trade flows over price negotiations as a demand marker.

Hot-rolled coil in Northern Europe was assessed down Eur10 at Eur1,250/mt ex-works Ruhr. HRC in the South was also down on the day, at Eur1,160/mt ex-works Italy.

Sources reported a continuation of the waiting trend characterizing the market recently, with buyers sitting on strong inventories, and mills keen to keep prices high against rising production costs.

A buyer source reported mills as “desperate” for orders given reduced demand and cancellations from the automotive industry.

“Mills suggested full capacities for Q1-Q2 on automotive orders and rising energy costs, and even when those contracts were cancelled they were optimistic on demand recovering to fill the gaps. Now, however, demand is still gone and mills are desperate for new orders – we’ve been told we could still secure Q2 volumes if desired,” the source said.

The source considered Eur1,200/mt ex-works as achievable on larger volume bids.

A trader source confirmed the flat steel market as “dead silent,” reporting buyers as focused more on trade flows and stock levels than speculative pricing due to continued downstream demand and strong buyer inventories.

“Buyers are monitoring stock movement over prices. Overall demand is not bad, the market is just a bit stuck now. A lot of import material arrived in the first quarter so buyers need to evaluate the pace at which stocks are depleting before they make any fresh deals.”

Various sources expected buyers to return to the market by the end of May to restock.

While end-user demand was reported as relatively strong, sources were more pessimistic about the prospects of the automotive industry.

Mill and buyer sources shared pessimism for long-term demand for automotive, in response to talks that a large automotive plant would return to the Italian market in the near-term.

“We may see short-term demand pick-up to cover orderbooks, but I don’t see end-consumers as in any real position to stimulate the industry in the long-term. The cost-of-living crisis is going to get worse before it gets better – who’s investing in a car in this market?” said the mill source.

— Benjamin Steven, Maria Tanatar