Day: 17 May 2022

ResponsibleSteel, the non-profit multi-stakeholder organisation, has appointed Annie Heaton as its new chief executive, effective 13 June, Kallanish notes.

Heaton has worked at ArcelorMittal, shaping the company’s sustainability agenda during the last eight years. Prior to that, she worked for non-profit organisations such as ActionAid and Save the Children.

“Annie joins us from a senior sustainability role with a major international steelmaker, and founding RS member, ArcelorMittal. Her appointment comes at a critical and exciting time for ResponsibleSteel; our membership is growing, steelmaking sites are being audited and certified, and the world’s first standard for certification of steel products is nearing completion and being prepared for launch,” says ResponsibleSteel chairman Gerry Tidd.

ResposibleSteel members include global steelmakers, consumers, partners of the steel supply chain and associations.

Emanuele Norsa Italy

Eurofer has joined a number of energy-intensive industry associations to call on the European Parliament to retain free carbon emissions allowances ahead of the upcoming vote on the Emissions Trading Scheme (ETS) and Carbon Border Adjustment Mechanism (CBAM).

In a letter seen by Kallanish, the associations stress the need to set realistic benchmarks related to decarbonisation, in order for them to remain technically and chemically achievable. This should be accompanied by sufficient free allocation levels of ETS allowances.

Carbon prices have jumped by 700% in four years, reaching levels originally predicted only for 2030, the letter continues. As a consequence, a more cautious interaction between ETS free allocations and the implementation of CBAM should be taken into consideration.

“Free allocation should remain conditional to the sole criteria of exposure to risks of carbon leakage. Additional conditionality criteria create a further administrative and financial burden and could create the conditions for the materialisation of the carbon leakage risk that was meant to be avoided by the free allocation,” the letter explains.

“We recommend not to support amendments which do not provide a realistic business case for the successful transition of manufacturing industry in Europe,” the associations add.

The new CBAM system is still being discussed, but proposals have been officially submitted to the EU Parliament. It should become effective from 2023, with a transition period lasting until the end of 2024 – originally planned for 2025. The CBAM proposal includes a phase-out of existing free ETS allocations that could be concluded as early as in 2028.

Emanuele Norsa Italy

Scrap prices in Italy continue to decline this month as the war in Ukraine, Covid-19 pandemic flare-up in China, freight disruption and high costs of energy are causing uncertainty on the wider international arena, says Italian trade association Assofermet in its monthly market report sent to Kallanish.

The month of May is surrounded by “enormous doubt”, the association comments. Mills’ cautious attitude to scrap purchases and a sudden halt in deliveries due to their full scrap yards are supporting the weak pricing.

Last month, the Italian government started discouraging scrap exports towards countries outside the EU. Sellers are now obliged to notify the Ministry of Economic Development (Mise) of each export deal. Merchants consider this a form of “bullying” from mills aimed at keeping scrap within the country (see Kallanish 24 March). Italian traders are meanwhile seeing their activity restricted, on the one hand, and are also selling little on the domestic market because of the low volumes required this month by local producers.

Scrap grade new arisings E8 is currently “almost completely unsaleable”. In less than two weeks, prices have lost over €100/ tonne ($104). Cheaper demolition grades are currently more popular.

Given the strong scrap price decline in Italy, appetite for hot-briquetted iron is almost zero, the report points out. The association has also registered a strong price decline for pig iron both in Italy and internationally, particularly for Russian-origin material. Ukrainian pig iron is meanwhile coming back to the Italian market at higher values but with limited volumes.

Natalia Capra France

The US and EU said May 16 they will cooperate on efforts to strengthen the global semiconductor chip supply chain, which has hindered manufacturing in multiple industries since early 2021, as part of a collaborative agenda tied to their joint Trade and Technology Council.

The two governments said they would “work towards guiding principles, complementary and joint actions, and cooperation to mitigate risks and to advance the resilience of US and EU supply chains, while confirming our commitment to avoid unnecessary barriers to trade, which could negatively affect the production or export opportunities of the United States and European Union,” according to a statement.

These actions will proceed “in recognition of the positive contribution of transatlantic trade to resilient supply chains, and of our shared vulnerabilities to critical supply chains for semiconductors, critical minerals, clean energy and pharmaceuticals,” they added.

To achieve a stronger chip supply chain, the US and EU said they will promote private sector efforts to increase transparency in the semiconductor value chain, enhance cooperation to provide early warning of semiconductor shortages and work “to avoid subsidy races” by advancing common goals for incentives.

The agenda released by the Trade and Technology Council also outlined plans for addressing Russia’s invasion of Ukraine, international trade, responsible technology deployment and cybersecurity, among other issues.

The US-EU Trade and Technology Council is chaired by US Commerce Secretary Gina Raimondo, US Trade Representative Katherine Tai, European Commission Executive Vice President Margrethe Vestager and European Commission Executive Vice President Valdis Dombrovskis.

The focus on the semiconductor supply chain complements a string of previous efforts enacted by the US under the Biden administration to bolster chip supplies.

The US Commerce Department and the Malaysian Ministry of International Trade and Industry said May 11 they signed a memorandum of cooperation to strengthen semiconductor supply chain resiliency and promote sustainable growth.

The White House and US lawmakers have also continued to press Congress to pass the Bipartisan Innovation Act, which includes $52 billion in investments to promote new domestic semiconductor production capacity.

— Nick Lazzaro

China’s oversupplied steel market could soon see some relief as the downtrend in demand is expected to bottom out in the near term, industry sources told S&P Global Commodity Insights May 16.

China’s daily pig iron output hit a record high in April at a time when the market faced tepid demand, keeping steel markets under pressure.

While oversupply in China’s steel market is unlikely to ease at least this month, some industry sources were becoming optimistic about the demand outlook, expecting the downfall to bottom out in the near term.

Improved demand outlook is expected to mostly stem from China’s latest move of reducing property loan interest rates by 0.2 points for first-home buyers May 15, indicating that the country has shifted from deleveraging to supporting the property sector.

Although this move will not reverse the downward trend in property sales or new home starts in the near term, it signals more supportive policies to be introduced to prevent uncontrolled default by cash-strapped developers, which will ease any further squeeze on steel demand.

More importantly, measures to tackle the COVID-19 situation would soon start showing results, leading to smoother logistics movement within the country, sources said.

The pandemic-induced social restrictions and lockdowns in China were the major reasons behind the slump in April’s economic data, and were also hampering stimulus measures in infrastructure, property and manufacturing sectors.

Some market sources believed as soon as logistics and travel can return to normal, China’s fiscal and monetary policy will help begin to accelerate infrastructure investment and manufacturing production.

China’s retail goods consumption will also improve in tandem, which, in turn, would also assist recovery of manufacturing steel demand, sources said.

Robust steel output

China’s pig iron output in April reached 76.78 million mt, averaging 2.55 million mt/day, up 10.80% on the month, National Bureau of Statistics data showed May 16.

April’s figure was unchanged on a yearly basis, as NBS revised the pig iron output in April 2021 from 75.97 million mt to 76.78 million mt.

China’s crude steel production in April was still 5.20% lower on year at 92.78 million mt, but the daily output rose 8.60% on the month to 3.09 million mt, breaching the 3 million mt level for the first time since July 2021.

China’s pig iron and crude steel output in the first four months totaled 280.30 million mt and 336.15 million mt, still 9.40% and 10.30% lower on the year, respectively, according to the NBS data.

Some market sources expected China’s pig iron and crude steel output in May to be at similar levels of April.

China’s electric arc furnace, or EAC, steelmakers were seen reducing their steel production owing to loss-making market conditions. However, output cuts were barely reported at integrated steelmakers that use a blast furnace and a converter route, as they were still posting thin profits or only marginal losses, according to sources.

As the suspension and restarting of blast furnaces is costly, marginal losses do not push steelmakers to cut pig iron and crude steel production.

Languishing steel demand

China’s COVID-19 resurgence in April exacerbated a slowdown in the property sector, leading to adverse effects on overall steel demand greater than on steel production.

China’s property sales value, now a major channel for funding property construction, fell 38.80% on the year in April, declining further from a 17.70% year-on-year drop in March, according to the latest NBS data.

The year-on-year decline in housing starts also worsened to 44.20% on the year in April from a 22.20% decline seen in March.

China’s infrastructure investment rose 3% on the year in April, but the rate largely slowed from the 8.80% year-on-year growth in March.

Major steel consumers in the manufacturing sector also saw a year-on-year decline in April, with vehicle production down 43.50% on the year.

However, May 16, Shanghai released its timetable for lifting lockdowns that began in late March, indicating that the city and the entire country may gradually return to normalcy soon, which would unlikely affect construction and manufacturing activities further, market sources said.

— Staff

Market participants reported increased acceptance from Northern European buyers to lower hot-rolled coil pricing as mills mulled production cuts on reduced demand and high input costs.

Platts assessed HRC in Northern Europe at Eur1,150/mt ex-works Ruhr May 16, stable on the day. In the South, the HRC price fell Eur15/mt to Eur1,050/mt ex-works Italy.

In Northern Europe, market participants held more clarity as to tradable levels with deals reported from several sources.

Multiple traders confirmed deals heard at Eur1,150/mt ex-works Ruhr with an offer heard at Eur1,200/mt ex-works. A service center source also reported the trades, speculating prices as low as Eur1,100/mt ex-works as achievable in the near term due to gaps in mill orderbooks.

“I think, on average automotive demand went down by around 20%, so the mills should have more HRC and other flat steel available,” a Dutch service center source said. “We heard that automotive negotiations have started, but I think prices will reduce significantly in the coming months – either that or mills drastically reduce production.”

A German trader source shared the sentiment, seeing demand as reduced into the mid-term, with buyers waiting for prices to stabilize at lower levels.

“It’s clear, producers are keen to sell and are looking for orders. The longer the customers wait, the cheaper the price will be – the only chance to stop the cycle is to cut production,” the source said.

A similar aversion to purchasing was heard in the import market, with offers heard on the day at Eur940-960/mt CIF Antwerp.

Buyers were heard using competitive import levels in negotiations with the EU mills, but non-EU booking remained scarce due to long lead times and logistical risks.

“With delivery times hitting August-September, buyers simply won’t order in expectation of lower and lower prices – restocking has not started yet,” another trader said.

The source disagreed with other sources’ stances on price direction, seeing “no real reason why the price should fall any further”.

Raw material prices are high, energy costs are tremendously high, and inflation is already at 7.50%.”

In South Europe, offers were heard at Eur1,150/mt and Eur1,050/mt ex-works Italy.

A distributor source cited achievable prices at Eur1,050/mt ex-works Italy, seeing a negative sentiment in the market with prices to potentially decrease as far as pre-war levels when prices were in the Eur800-900/mt range.

Import offers were heard in a range of Eur900-950/mt CFR Italian ports. However, with lead times now extending into October, a trader source reported minimal interest from buyers.

The source expected buyers to return to the market in late May-early June, saying service center buyers would be particularly prudent in purchasing given strong profits realized in recent months.

According to the trader, service center costs were covered as far end of the year, with relevant buyers unwilling to take any risks in the current geopolitical climate.

— Benjamin Steven, Maria Tanatar