Day: 25 August 2022

Steel plate prices in Northern Europe declined further in the week to Wednesday August 24 amid slow demand, while those in Italy were flat due to the summer lull, market sources told Fastmarkets.
Northern Europe
Some integrated steelmakers in Germany have continued to lower their offers in order to secure deals in quiet market conditions.

Notably, plate sales were reported at €1,120-1,140 ($1,114-1,134) per tonne exw in Germany during the week to Wednesday.

“German mills have to find new orders, but demand is still too low,” a trading source in Germany said.

Some bids for German plate were reported at €1,085-1,100 per tonne exw, however no deals were reported at these levels.

Mills in Germany were able to offer plate with October delivery, market sources said.

As a result, Fastmarkets’ weekly price assessment for steel domestic plate, 8-40mm, exw Northern Europe, was at €1,120-1,140 per tonne on Wednesday, down by €20-60 per tonne from €1,140-1,200 per tonne on August 17.

But market participants did not rule out further price drops in the region due to overstocking and slow end-user demand.

“Distributors are overstocked, especially when it comes to commodity grades. At the same time, prospects for [steel plate] consumption are not so great with the recession and energy crisis in Europe,” a trading source in the Benelux area said.

Poland-origin plate was offered to the south of Germany at €985-1,000 per tonne cpt, with some transactions at the lower end of the price range heard during the assessment week.

Italy
Italy’s market was seasonally quiet with prices seen as flat in the seven days to Wednesday.

Both mills and buyer were largely out of the market and were expected to only come back in September.

The last plate deals done in the nation before the summer closures were at €930-970 per tonne exw.

As a result, Fastmarkets’ price assessment for steel domestic plate, 8-40mm, exw Southern Europe, was €930-970 per tonne on Wednesday, unchanged from the previous week.

Post-summer expectations among mill sources and buyers were quite mixed.

Producers in Italy were mulling post-holiday price rises to account for surging production costs, while buyers were skeptical about potential increases due to slow demand and availability of cheaper imports.

Published by: Julia Bolotova

August 24 marks six months since the beginning of Russia’s unprovoked invasion in Ukraine on February 24. Here, Fastmarkets highlights the major changes the global steel market has faced as a result of the war.

Ukraine
The loss of control over two large mills based in Mariupol (Azovstal and Illych Steel, which belonged to major Ukrainian steelmaker Metinvest) as well as logistical and procurement problems resulted in a massive drop in Ukraine’s steel output.

According to the World Steel Association (Worldsteel), the country produced 4.82 million tonnes of crude steel in January-July 2022, down by 62.14% from 12.73 million tonnes produced over the same period last year.

At the same time, Ukrainian steelmakers have faced port blockades and seizures by Russian forces.

According to a map published by the UK ministry of defense on August 22, all major ports on the Sea of Azov, as well as the port of Kherson, which has a river connection with the Black Sea, are controlled by Russia. Meanwhile, the major Black Sea ports remain blocked for all vessels except those shipping grains and associated products and fertilizers, including ammonia, in accordance with a recent deal made with the Russian government.

There have been discussions in political circles that steel products may be included in the grain deal, too, in exchange for the easing of western sanctions against Russian steel, which could help enliven steel export shipments. Nothing official has been announced yet, however.

As a result of the port blockages, Ukrainian steelmakers have had to use alternative options for transporting their products, but those are not sufficient to maintain decent export activity. Some alternative routes include the delivery of goods to Europe by truck and rail, as well as shipments from Black Sea ports in Romania and Bulgaria and from Baltic Sea ports in Poland.

“Before the war, Ukrainian business exported 80% of ferrous metals and 70% of iron ore through the ports of Odessa and Mykolaiv,” Volodymyr Tkachenko, the head of Kiev branch of ArcelorMittal Kryvyi Rih, was quoted as saying in media reports.

“The available railway crossings are able to let through not more than 1,900 cars per day, while the country’s export capacities need a minimum 3,400 cars per day,” Olexandr Kalenkov, the president of national steelmakers’ union Ukrmetallurgprom, said in the same publication.

Russia
Steel output in Russia also decreased during the reviewed period.

Over the first seven months of the current year, Russia produced 41.43 million tonnes of steel, down by 6.96% in a year-on-year comparison, according to Worldsteel.

In August, though, an official from Russia said that “there is also a significant decline in domestic consumption. As a result, the steel industry’s capacity utilization has dropped to 80% from an average of 93%.” He added that the capacity utilization rates for Magnitogorsk Iron & Steel Works and for Severstal stood at 62% at 72% respectively.

The drop was mainly driven by the effects of western sanctions imposed against the country for its invasion in Ukraine.

The European Union only seven packages of sanctions against Russia, including general sanctions that hit banking, insurance and shipping services as well as those which hit the steel industry and some of its main participants directly.

For example, sanctions against Severstal’s owner Alexey Mordashov – combined with a ban on finished steel shipments from Russia to the EU – pushed Severstal, which was Russia’s main flat steel supplier to Europe, out of this market and forced the steelmaker to concentrate on the domestic market or look for support in alternative outlets. Before the war, the company was mainly concentrated on lucrative finished steel sales in Europe, but recently it had been heard offering slab in Turkey and Asia at comparatively low prices.

The western sanctions significantly reduced the number of buyers willing and able to touch products made in Russia.

Turkey, Mexico, China and Taiwan became the main outlets for Russian exports. And while the number of potential buyers decreased, prices also started to fall, creating significant pressure for the global market.

Russia used to export 40% of its steel production.

“It is clear that part of the export market is closed for us,” Vladimir Lisin, the main shareholder in the country’s Novolipetsk Iron & Steel Works (NLMK), said.

Neither NLMK, nor its shareholders, have yet been hit by direct sanctions.

“There is also a decrease in activity in the Russian market, [and] a surplus of 40% has been created [which traditionally used to be exported], out of which [only] 10-15% can still find the outlet,” he said. “Where does the rest to go? The domestic market has never consumed so much.”

In the first half of 2022, NLMK reported a 1-million-tonne fall in sales from the level predicted. According to the company’s forecasts, the entire Russian metallurgy industry will lose 30-50% of its budgeted sales because of the country’s war on Ukraine.

Mounting pressure on prices
As the initial shock from the war – and an accompanying surge in steel product prices – has waned, Russian prices started to fall as suppliers tried to attract customers despite the sanctions.

This stimulated competition globally, particularly in semi-finished steel segment (billet and slab account for the largest portion of Russian steel exports), which in its turn had a negative effect on the finished steel market.

For example, as of August 24, Fastmarkets’ steel billet index export, fob Black Sea, CIS averaged $521.33 per tonne in the month to date, down by 22.44% from an average of $672.20 per tonne in February.

“Sanctions against Russian products created a new market for them, which depreciated Turkish long steel prices,” one Turkish source said.

Fastmarkets’ price assessment for steel reinforcing bar (rebar), export, fob main port Turkey averaged $641.60 per tonne in the month to date, down by 14.02% from an average of $746.25 per tonne in February.

A United Arab Emirates-based producing source said that cheap Russian billet pressured Iranian billet prices, which in its turn prompted domestic buyers to reduce asking prices for rebar.

Fastmarkets’ weekly price assessment for steel billet, export, fob ports Iran averaged $448.88 per tonne to date in August, down by 23.38% from $585.88 per tonne in February.

“Russia is offering very low prices, some say even dumping to markets where they were not sanctioned yet, like in the Far East, Turkey, the Middle East and Africa,” one trader from Turkey said.

By volume, the most-exported final steel product from Russia has been hot-rolled coil.

Fastmarkets’ price assessment for steel HRC, export, fob Black Sea, CIS averaged $540 per tonne fob in the month to date, a drop of 39.66% compared with the February average of $895 per tonne.

The price assessment for steel HRC, import, cfr main port Turkey – the key typical destination for flat steel exports from Russia – averaged $591.67 per tonne in the month to date August, falling by 35.47% compared with $916.88 per tonne in February.

Meanwhile, in Europe, Russian war against Ukraine caused a wave of a panic-buying during February-March, with prices for flat and long steel surging dramatically, reaching the new historic peaks and breaking the records set in summer 2021.

For example, Fastmarkets’ calculation of its daily steel hot-rolled coil index, domestic, exw Northern Europe averaged €1,278.50 per tonne in March 2022, up by €326.49 per tonne from €952.01 per tonne in February and up by €489.60 per tonne from €788.90 per tonne in March 2021.

Market sentiment, however, has soured recently, mainly due to slowing end-user demand and overstocking that resulted from the earlier panic-buying.

Notably, automotive output in Europe has declined due to acute component shortages that are not expected to be resolved until the end of 2022, sources said.

As a result, Fastmarkets’ most recent calculation of its daily steel hot-rolled coil index, domestic, exw Northern Europe was at €720 per tonne on August 24, down by €247.14 per tonne from €967.14 per tonne on February 24.

Trade flow changes
The disruption of trade flows was another major effect of the war on the global steel market.

In particular, the disappearance of Ukraine from the export market has opened opportunities for European and Asian suppliers.

In 2021, Italy imported 2.39 million tonnes of slab; Ukraine was its top supplier, accounting for 73.6% of that total, followed by Russia.

Once Ukraine stopped exporting slab to the country, buyers turned to suppliers from Asia – namely, India, China and Indonesia – to fill the gap.

A similar situation has been noted in the plate market.

“Our regular buyers of plate in Europe, and in the Middle East and North Africa region, I suggest were impacted the most because we had a large market share,” one supplier from Ukraine said, adding that these volumes have since been replaced with material from Asian and European suppliers.

Fastmarkets discontinued its price assessment for steel heavy plate, 8-50mm, export, fob Black Sea, CIS (MB-STE-0013), due to a substantial reduction in market activity.

“The pig iron market in the United States was impacted a lot as well, because Ukraine and Russia covered around two-thirds of its import pig iron supply,” the Ukrainian supplier said. “Buyers there refused Russian pig iron completely, while we [Ukrainian suppliers] still can ship rather limited tonnages.”

Pig iron buyers in the US have been forced to cut their pig iron consumption and increase their hot-briquetted iron (HBI) consumption. At the same time, US pig iron bookings from Brazil intensified in March.

“Every single tonne of pig iron which could be produced in Brazil was produced, even those producers who normally focused on billet supply have been selling pig iron,” one supplier of pig iron from Brazil said.

And while the western world was looking for substitutes for Ukrainian and Russian volumes, Russian suppliers found support in Asian customers.

Low prices and comparatively few problems with handling payments at banks turned Taiwan into a regular importer of semi-finished steel and HRC from Russia’s Far East in April and May.

Shipments of semi-finished steel products to Taiwan from Russia jumped to 162,699 tonnes in May, according to Taiwanese customs figures, up by 57.4% year on year from 103,363 tonnes in May 2021. Russian semi-finished steel products accounted for 59.3% of all arrivals in May, up from 35.3% a year earlier.

Russian exports to Taiwan have mostly been concluded by traders based in either China or the UAE and have taken place despite Taiwan’s strong ties with the United States, according to sources.

China – which remains a very close ally with Russia despite the war – also has imported significant volumes of Russian semi-finished steel.

China imported 239,496 tonnes of steel slab in June, up 917% year on year. Some 122,423 tonnes of that total were purchases from Russia, according to Chinese customs statistics.

On the other hand, the war has led to a reduction in trade between Russia and another US ally, the Philippines. The main difference between the situation with Taiwan and that with the Philippines is that most Filipino banks still refuse to handle Russian cargo, making payment very difficult, according to market sources.

The Philippines imported zero tonnes of semi-finished steel from Russia in May, down from 23,930 tonnes in May 2021, according to customs stats. April semi-finished steel import volumes were 68,469 tonnes, down from 134,962 tonnes in April 2021.

Growing production costs in Europe
The price uptrend in the European energy market that started in autumn 2021 has continued into 2022, with the situation getting even worse after February 24.

For example, in July 2021 average electricity prices in Italy were around €400 per MWh, up from about €271 per MWh in June 2022 and sharply up from €103 per MWh in July 2021, according to local energy service company Gestore dei Mercati Energetici (GME). During the week ended August 21, average electricity prices in Italy surpassed €500 per MWh.

On August 5, the European Commission approved a plan encouraging EU member countries to voluntarily reduce gas consumption by at least 15% between August 2022 and March 2023.

While there is no evidence that countries will self-impose energy restrictions, if this did happen, energy prices would keep going through the roof. This in turn would force steel mills to increase prices, Fastmarkets has heard.

But European steel market fundamentals have been too weak recently to support a price rise, sources said.

Notably, overstocking – coupled with contracting end-user demand – has been pushing flat steel prices in Europe down in recent months. As a result, European mills might be faced with the need to cut output further or even stop operations completely.

“In theory, the gas rationing suggested by the European Commission [may] result in even more capacity being put offline,” a trading source told Fastmarkets.

Starting in June 2021, an increasing number of European flat steelmakers have been reducing output in order to balance demand and supply and spare flat steel prices from a sharp downtrend.

Still, despite those efforts, the downtrend in Europe’s hot-rolled coil market resumed in August, with prices continuing to sink.

Effects on Middle East markets
The Egyptian steel market has been affected by the war between Russia and Ukraine in several aspects, according to sources.

The war resulted in “lower availability of billet even with low prices, combined with scarcity of foreign currency to pay for procured material,” according to an Egyptian trader.

Egypt has been suffering from a shortage of foreign currency recently, Fastmarkets understands.

“Sanctions [on Russian steel] added difficulties on payments, and freight rates skyrocketed backed by fuel high prices,” the trader said.

Furthermore, the war resulted in “lower export tonnages from Egypt to the European Union, due to lower demand backed by higher energy costs. The war affected the energy costs, and this affected the local production, especially lower raw materials stocks. As a result, local production in Egypt is hand to mouth only now – prices not reflecting the actual costs,” the trader said.

Turkey’s steel sector has also been directly affected because of low-priced imports from Russia, Turkish sources told Fastmarkets.

“The crisis has been affecting Turkey deeper every day. Turkey’s crude steel output decreased by 13% in June and 20% in July. Turkish exports decreased by 6.5% in the first six months of 2022, and decreased by about 8.5% by the end of August,” Ugur Dalbeler, chief executive officer of Turkish steelmaker Çolakoglu and vice president of the Turkish Steel Exporters Union (ÇIB), told Fastmarkets.

“The upcoming period seems to be even worse. Many companies stopped importing raw materials and intermediate products from Russia because these companies have relations with the EU and the US. They have to buy from other sources at a higher cost. On the other hand, Russian producers cannot export their products to many countries because of sanctions, so they export to Turkey at prices with about 50% discount. This results in big losses for Turkish producers and the outlook for the fourth quarter seems much worse,” Dalbeler said.

“Another danger is that Turkish products may be subject to investigations on circumventing sanctions, and new sanctions may be imposed on Turkish steel. The only way to avoid this is to impose sanctions on Russian steel like the sanctions imposed by the EU and the US,” Dalbeler added.

Notably, a Turkish trader claimed that the European Commission imposed anti-dumping duties on Turkish hot-dipped galvanized coil because the substrate used for some HDG produced in Turkey is of Russian origin.

Published by: Vlada Novokreshchenova, Julia Bolotova, Serife Durmus, Lee Allen, Marina Shulga
Elina Virchenko in Dubai also contributed to this report.

CIS crude steel production decreased in July, according to the latest worldsteel data monitored by Kallanish.

Regional output amounted to an estimated 6.4 million tonnes, down by 29% year-on-year. During the first seven months of 2022, crude steel production was 50.5mt, down 18.8% on January-July 2021.

Russian production in July is estimated to have been at 5.5mt, down by 13.2%. Cumulative steel output was 41.4mt, a decrease of 7% over the same period last year.

The second-largest producer in the region, Ukraine, saw July crude steel output drop to only 281,000 tonnes, down by 85%. The country’s year-to-date output totalled 4.82mt, down 62%.

This is the result of Ukrainian steelmaking coming to an almost complete standstill due to the Russian invasion of Ukraine since 24 February. In April, most Ukrainian steelmakers resumed production, but at low capacity utilisation and amid huge logistical problems, including for exports (see Kallanish passim).

The third-largest steel producer in the CIS over January-July was Kazakhstan with an estimated output of 2.5mt, down by 4.9% compared with the same period last year.

Belarus meanwhile saw crude steel output in the seven months reach 1.06mt, down by 21.5% on-year.

Russia remained in fifth place in the ranking of top ten global steel producers in June, worldsteel data shows. However, Ukraine dropped to 36th place.

In March, the European Council agreed to adopt the EU’s fourth round of sanctions against Russia (see Kallanish passim), thereby banning imports from Russia of those steel products currently under safeguard measures. The ban is expected to impact some €3.3 billion ($3.38 billion) of steel exports from Russia.

The safeguard quotas assigned to Russia and Belarus have been redistributed among other nations. There is hope among EU steel buyers that, with Ukrainian steel capacity gradually coming back on line, imports from this country could pick up again. In May, the EU and US removed tariffs on Ukrainian steel for one year.

Svetoslav Abrossimov Bulgaria

Salzgitter AG and Primetals Technologies have signed a contract for the engineering, supply and erection of the first electric arc furnace (EAF) and the development of technical infrastructure at the strip mill in Salzgitter, Germany. The group had earlier released an amount of €723 million ($718m) for its long-term project SALCOS (SAlzgitter Low CO2Steelmaking) at its strip making unit Salzgitter Flachstahl.

The EAF is an AC module with three electrodes and will have an annual capacity of around 1.9 million tonnes of crude steel. It will be capable of smelting sponge iron and steel scrap along with various additives in less than 50 minutes, Kallanish hears from the steelmaker. The crude steel will then be refined using the existing plant, cast in slabs, rolled and processed. Plant assembly will commence at the end of 2024, production is slated to start at the end of 2025.

The scope of the order also extends to the necessary ancillary modules. These include dust extraction units including heat recovery, water management, electrical compensation to stabilise the network, and material handling equipment for alloying agents and additives. The waste heat generated by the process will largely be converted into steam and fed into the “steelworks network” to be reused in other parts of the works.

The goal of SALCOS is, in three stages between now and 2033, to convert the integrated steelworks entirely to low-CO2 crude steel production. Two direct reduction plants and three electric arc furnaces will be built to successively replace the blast furnaces and converters.

Christian Koehl Germany

The UK tax agency has confirmed that any shipments of steel under ‘Category 17’ from Great Britain to Northern Ireland for the rest of the current quarter will face a 25% safeguard duty, according to a letter shared with Kallanish by UK Steel.

“It is beyond farcical that UK producers are now prevented by these tariffs from selling goods to customers in their own country,” notes UK Steel director general Gareth Stace. Northern Ireland, despite being part of the UK, will be subject to EU safeguard duties because there can be no hard border between Northern Ireland and the Republic of Ireland. Material moving onto the island of Ireland is therefore deemed to be at risk of entering the European Union unmonitored.

Her Majesty’s Revenue and Customs has advised traders that to avoid the EU’s safeguard duties when shipping steel to the UK, traders must apply for the global quotas under the safeguard scheme. This would allow them to avoid duties. It also notes that the global quota for Category 17 in the current quarter has already been used up, and so all shipments will be taxed until at least 1 October.

Category 17 covers HS codes 72163110, 72163190, 72163211, 72163219, 72163291, 72163299, 72163310, and 72163390 and mainly includes u, I, and h sections.

“To add insult to injury, EU steel producers can continue to export these goods tariff-free throughout the UK, but we can no longer do so in the opposite direction. Consequently, much steel that would have been supplied from UK steel producers will now have to come from the EU. At a time of looming recession, this is surely madness,” Stace adds.

Tomas Gutierrez UK

While rebar prices in northwestern Europe seem to have stabilised with little prospect of dropping much further, some players are already again tempted to speculate.

The issue is well-known among distributors. The erratic and irrational leaps of the first half-year have not necessarily taught all players to be more cautious. Some distributors returned quickly to betting on falling prices, in defiance of the current geopolitical and economic turmoil (see Kallanish 28 July).

“Some have apparently learned nothing from the chaos of the recent months,” one observer says. He tells of downstream offers for rebar cut & bent that are virtually on par with the current restocking price for material from German mills.

Their base prices are now at €750-800/tonne ($749-799/t), and plus the size extra of €265/t translate to €1,015-1,065/t, with coil material fetching another €20/t on top, in both base price and size extra.

Most market observers expect prices to pick up, although this may still take several weeks going forward. In any case, distributors with low offers will likely lose money when restocking soon – or have already lost money on inventories bought for a serious €1,400/t in April.

“They try to snatch jobs, but that way cause harm to a healthy price structure on the market,” the observer says.

A similar behaviour also caused turmoil elsewhere upstream, when in March many Italian mills took irregular production breaks on account of extreme energy prices. Such stoppages did not occur at most other European mills, and the observer suggests that the pain for Italian mills came as a consequence of speculation on the electricity stock exchanges earlier on.

“They banked on falling prices, and they lost,” he says.

Christian Koehl Germany

Market participants said they saw production cuts as necessary to stabilize the bear market, with spiraling discounts doing little to stimulate trading.

S&P Global Platts assessed hot-rolled coil in Northern Europe down Eur10/mt Aug. 24 at Eur700/mt ex-works Ruhr.

Producers reported deals at Eur700/mt ex-work Ruhr, confirming the assessed level, with buyers agreeing the price was representative of the current market.

However, overall trade remained limited, with little uptick in demand as a result of mill discounts. Despite declining prices, buyers were reluctant to further inflate high stocks, preferring to wait.

Market sentiment was general confusion about mills chasing business iteratively lower, with cash flow and sustainability of production floated as potential factors by sources. A mill source offered the same, warning of sales below costs on the current price direction.

“European mills are shooting themselves in the knee trying to attract buyers with lower prices — regardless of how low they go, there is no demand,” the source said. “Steelmakers will have to cut production soon. Otherwise, sales will continue further into loss territory, with subsequent closures anyway.”

A second mill source lamented poor sales volumes against rising costs, estimating a sustainable margin at Eur760/mt ex-works Ruhr.

Achieving this level is another question, however, with offers heard available from an integrated German mill at sub-Eur700/mt ex-works Ruhr on the day.

Distribution sources saw production cuts and a substantial increase in prices as necessary to stabilize the market, though with inventories the primary barrier to purchasing, there was doubt about whether any demand revival will be seen the rest of the calendar year.

In South Europe, the market continued to wait for mills to resume production before speculating as to September price levels or activity, with the Platts assessment stable at the same Eur700/mt price level ex-works Italy on the day.

— Benjamin Steven, Maria Tanatar

The European Union’s steel sector performance in the first quarter of 2022 confirms a marked slowdown from the positive trend observed in 2021, reinforcing bleaker prospects for the rest of the year, European Steel Association Eurofer said Aug. 24.

Regional apparent steel consumption is expected to fall for the third time in four years, this time by 1.7%, while steel demand prospects remain highly uncertain, fuelled by the ongoing energy crisis, inflation, supply chain disruptions and Russia’s war in Ukraine. Import penetration has remained considerably high, the Brussels-based association said in a market outlook report.

Apparent steel consumption is set to recover in 2023 (up 5.6%), but demand overall remains subject to high levels of uncertainty among steel-using sectors. This uncertainty is set to last at least until the first quarter of 2023, conditional upon developments in the Russia-Ukraine war – which are unforeseeable at the time of writing – and its impact on global supply chains, Eurofer said.

“A gloomier outlook for the steel market for the rest of 2022 is consolidating and will most likely have spill-over effects also on 2023,” said Axel Eggert, Eurofer director general. “We have been facing skyrocketing energy prices and bottlenecks in supply chains for almost a year now, and the dire consequences of Russia’s invasion of Ukraine for half a year. Yet, there is no sign that uncertainty will ease any time soon, while steel imports in the EU are still significant: this is detrimental for a healthy EU steel industry.”

Despite a substantial 15.2% on-year growth in apparent steel consumption in 2021, followed by milder 6.5% growth in Q1 2022, to a total of 37.1 million mt in the quarter, this volume is still below the prepandemic peak of 2018, Eurofer said. A declining trend is expected for the rest of 2022, resulting in a moderate recession and in a further halving of output growth in steel-using sectors, where production is expected to grow just 1.1% this year, it said.

Market participants told S&P Global Commodity Insights Aug. 24 that they saw production cuts as necessary to stabilize the bear market, with spiraling discounts doing little to stimulate trading. Platts assessed hot-rolled coil in Northern Europe down Eur10/mt Aug. 24 at Eur700/mt ($697.40/mt) ex-works Ruhr. Platts is part of S&P Global Commodity Insights.

The price peaked at Eur1,460/mt March 18, shortly after Russia’s Feb. 24 invasion of Ukraine sparked fears of market tightness.

Market overview

Growth in domestic deliveries was nearly flat on year in Q1 (up 0.2%, after a 1.2% rise in Q4 2021), mirroring the sluggish demand seen since the second half of 2021, according to the association’s report. By contrast, 2021 deliveries had rebounded sharply, rising 11.3% over levels in 2020, which saw a COVID-19-related slump of 9.6% from 2019.

Imports into the EU continued to increase significantly in Q1, rising 28.8% on year, although this was a slower pace than in the fourth and third quarter of 2021 (up 43.4% and u[ 47.7% on year, respectively). Despite a limited rise (up 0.4%) in the second quarter, import penetration over recent quarters has remained significantly high, the association maintained.

EU steel-using sectors

A more nuanced picture emerges for steel-using sectors in Q1, Eurofer said. The overall output figure is markedly positive (up 4.9% on year), which was higher than the previous quarter’s performance (up 2.6% on year), scoring the fifth consecutive year-on-year growth.

However, a closer look at individual sectors shows an uneven reality, it said.

“The favorable conditions experienced by construction, mechanical engineering and transport were able to offset the negative results of automotive and domestic appliances, which were hit first by the current global challenges,” the report said.

“However, the unfavorable conditions stemming from Russia’s ongoing war in Ukraine, with worsening supply chain issues, energy crisis and high production costs, are expected to negatively impact in the next quarters also on those sectors which were spared so far.”

For this reason, the steel-using sectors’ output for 2022 has been revised downward by half compared to Eurofer’s previous forecasts, and is now seen rising 1.1% on year versus the previous growth projection of 2%, it said.

— Diana Kinch

Domestic prices for cold-rolled coil and hot-dipped galvanized coil have dropped over the week ended Aug. 24 as steelmakers struggled fill orderbooks.

Platts assessed domestic HDG prices in Northern Europe at Eur850/mt ex-works Ruhr, down Eur30 week on week.

Offers for the material have been heard at Eur860-900/mt ex-works Northern Europe. Both buyers and sellers estimated tradable value at Eur800-900/mt ex-works Ruhr, with a majority of sources indicating Eur850/mt ex-works as an achievable price.

Platts assessed CRC in Northern Europe at Eur815/mt ex-works Ruhr, stable day on day and down Eur55 week on week.

Two steelmakers estimated tradable value for CRC in Germany at Eur800-850/mt ex-works. However, a buyer reported offers at Eur820/mt ex-works, and he said that the mills were ready to give discounts if they would have received firm bids.

Demand from distribution in Europe has been low, as the buyers have full stocks of coil and have been avoiding fresh bookings in the bearish market. In addition, spot buyers have been concerned that destocking has been slower than they had expected, and they preferred to stick to a wait-and-see approach, at least until the second half of September, when both price trends and demand expectations should become clear.

Against earlier expectations, the automotive segment is unlikely to show substantial recovery in H2 2022 due to ongoing issues with components supply and the unfavorable global economic situation, market sources said.

“Currently demand is tragic, buyers have high stocks, automotive claims that they will require more steel, but they will end up taking less steel that they have announced, as usual,” a third steelmaker said. “Current finished steel prices combined with production costs is a disaster.”

“Mills cut prices but that failed to trigger higher market activity,” a Northern Europe-based service center said. “It seems that further steel production reduction is the next step the mills will have to take, as demand remains the main problem. Buyers have full inventories as they panic bought too much coil after was start in Ukraine.”

Some market participants, however, have been more optimistic in their outlook on steel demand from carmakers, but steelmakers continued to cut spot prices.

“Outlook for automotive industry is cautiously positive, demand should be better,” a German trader said. “The mills are so desperate to sell material that they are ready to go below costs in some cases to complete a sale.”

Platts assessed South European CRC at Eur800/mt ex-works Italy on Aug. 24, down Eur75 week on week, and assessed domestic HDG at Eur820/mt ex-works, down Eur60 over the week.

Market participants estimated achievable prices at Eur800/mt ex-works for HDG. Offers for Italian HDG were reported at Eur830-840/mt ex-works, and a tradable value was heard at Eur800/mt ex-works Italy.

Italian mills had not yet resumed production following summer maintenance.

Rising energy and other costs, combined with weak finished steel prices, would require actions from European steelmakers. Market sources said the mills would need to reduce output and needed to review surcharges.

Some producers have already tried to introduce an energy surcharge for CRC, and others have been evaluating such actions due to a sharp rise of energy prices in the EU.

For HDG, some sources said that, due to high prices of zinc, mills needed to review extras for coating.

“Currently that would not be accepted and extras for hot-rolled and CRC should also be revised as well on higher ferroalloys costs and rising energy costs,” a Northern European mill source said.

Market participants believed that it would be challenging to review surcharges upward while a downtrend was in full force in Europe.

Platts is part of S&P Global Commodity Insights.

— Maria Tanatar, Benjamin Steven