Day: 7 September 2022

Associations representing European ferrous and non-ferrous metals producers and miners, among other European groups, are demanding urgent and effective action at EU level on gas and electricity prices, according to a joint letter sent to European Commission President Ursula von der Leyen.

The letter from energy intensive industries, signed by Eurofer, Eurometaux, Earomines and Euroalliages, among others, comes ahead of an extraordinary meeting of the EU Energy Council on Sept. 9.

“We call on the European Union to urgently introduce EU-wide measures aimed at limiting the price of natural gas and also measures designed to disconnect electricity prices from gas prices,” the letter said.

The letter, seen by S&P Global Commodity Insights, was also signed by EU associations representing chemical, cement, ceramic, clay and lime industries and producers of fertilizers and vaccines.

It also recommends adjusting the crisis state aid framework to the new reality.

Market volatility and soaring European gas prices are having destructive consequences on industrial users of gas and electricity and are also destabilizing the electricity market, the letter said.

With the Dutch TTF gas spot price peaking at Eur334/MWh two weeks ago, “which is 15 times its pre-crisis level, 10 times more than US prices and well above prices in Asia,” any semblance of a normal market has lost, the letter said.

Recent weeks have seen a significant number of industrial plants suspending operations or reducing production in Europe, with further curtailments expected in the weeks to come, according to Eurofer.

“These massive plant curtailments will increase Europe’s dependency on third markets for strategic supply chains and will drastically increase global carbon emissions,” the letter said.

“For many industries there is currently no business case to continue production in Europe, nor visibility and certainty for investments and further developments.”

Impact on plants

Slovakia’s US Steel Kosice has idled one of its three blast furnaces for 60 days, although the move is associated with scheduled maintenance.

Long steel products maker Stahl Gerlafingen in Switzerland said Sept. 4 that it would reduce its operating hours during October to December in response to the sharply rising energy prices.

Elsewhere, ArcelorMittal said Sept. 2 that it would temporarily shut three blast furnaces this month at three mills in the EU — in Bremen, Germany, Gijon, Spain and Dunkirk, France, due to weak demand in the European market and surging energy and emissions costs.

And German steelmaker Salzgitter told S&P Global that it has made all necessary preparations to operate its plants economically, taking into account demand for its products as well as the market in general.

However, a spokesperson for Austrian steel company Voestalpine said the company is “not planning or implementing any production shutdowns due to energy prices,” Orders remain stable and the company has high stocks of raw materials to prepare it for what will be a difficult autumn, she said.

Tata Steel’s IJmuiden steelworks on the Dutch North Sea coast has also not implemented any output cuts.

A few plants producing ferro alloys — more energy-intensive products than steel — have curtailed production, according to market sources, but none of those companies have confirmed any cuts.

The European steel industry is not alone in being buffeted by high energy prices.

Several aluminum producers in Europe have been reducing output or halting production at smelters, including shutdowns at Norsk Hydro’s Slovalco smelter in Slovakia, Alro’s alumina facility in Romania and Damco Aluminum Delfzijl Cooperatie’s Farmsum plant in the Netherlands.

There has also been a 33% curtailment at Alcoa’s Lista smelter in Norway, a 20% production cut at France’s Aluminium Dunkerque, and reduced output at Alcoa’s San Ciprian alumina refinery in Spain. Hydro also decided to keep smelting pots at its Husnes and Karmoey plants in Norway offline after normal maintenance due to lower aluminum demand.

In August, global aluminum rolling and recycling company Speira said it was considering cutting output further at its 160,000 mt/day Rheinwerk aluminum smelter in Germany, which had been operating at a rate of 140,000 mt/day, because of high power costs.

A spokesperson for aluminum rolling and recycling company Novelis said that with regard to the company’s operations in Europe it is working closely with its network operators, authorities and trade associations for scenario planning should it be required to slow or interrupt its aluminum recycling and/or rolling due to a shortage of natural gas supply. The are preparatory measures as natural gas is currently flowing, the spokesperson said.

— Ekaterina Bouckley, Jacqueline Holman, Charles Thompson

Turkish rebar export prices were assessed stable Sept. 6 as European buyer demand remained an exception in a weak wider market.

Platts assessed Turkish exported rebar prices at $670/mt FOB Sept. 6, unchanged day on day.

Offers from Turkish mills heard during the day were $680-$710/mt FOB, with the latter being considered unworkable for buyers, according to a Turkish trader.

“There is no rebar price,” the trader said. “Nobody is buying, and nobody is selling. The offers from the mills are only there on paper.”

Instead, buyers were heard to be targeting as low as $640/mt FOB.

Some European buyers have expressed interest in importing Turkish rebar — despite the possibility of having to pay a 25% safeguard duty — as the supply of finished steel in Europe becomes limited due to the ongoing energy crisis reducing steel mill production, according to sources.

The EU tariff-free import quota for Turkish-origin rebar in Q3 was immediately exhausted July 1, with the upcoming Q4 tariff-free quota totaling 90,856.92 mt set to open Oct. 1. The Q4 quota was also expected to be exhausted quickly.

“I believe we’re hearing some bookings from Europe at the moment because the availability in Europe is very tight at the moment,” a second Turkish trader said. “Everyone is taking precautions and importing regardless of the quota, just in case they cannot afford to produce themselves.”

“Everyone is uncertain about the future. It’s either import now or accept heavy production costs throughout the winter.”

However, market sources also told Platts that European buyer sentiment in certain regions was more cautious, as traders considered the risks of importing in the current market climate.

“Spanish buyers can’t take the risk of large shipments right now, but they also cannot afford to wait either,” an EU trader said. “They’re interested in buying smaller quantities. But Italy has decided to stop importing completely until their cost structure becomes clearer.”

A second EU trader also described customer disinterest in purchasing rebar amid the ongoing energy cost crisis, and said: “We are not in the market. We are currently not being pushed by our customers to offer new material at this time.”

Turkish rebar exporters also face competition from billet as European buyers weighed the benefits of switching to roll billet to produce finished steel to save on electricity costs, according to sources.

A deal for steel billet totaling 30,000 mt was booked Sept. 2 by European buyers at $515/mt FOB Indonesia.

Platts assessed Turkish imports of premium heavy melting scrap 1/2 (80:20) Sept. 6 at $379.75/mt CFR, down $7.25/mt day on day.

— Abdi Salad

Tradable ranges inched higher in the European hot-rolled coil market Sept. 6, with costs again central to the rationalization for increasing prices.

Platts assessed hot-rolled coil in Northwest Europe up Eur10/mt on the day, at Eur770/mt ex-works Ruhr.

A mill source reported deals at Eur780-820/mt delivered Ruhr ex-Italy, seeing the North European tradable level at Eur780/mt ex-works Ruhr.

Prices at the higher end of the range were attributed to customers in need of material in the short term, wary of increasing prices, though overall demand remains limited.

Buyers expressed mixed sentiment on tradable ranges and price direction, with both acceptance and resistance to the uptrend heard on the day. Indications from the buy-side were heard in a range of Eur750-800/mt ex-works Ruhr.

“I think all accept that increases are necessary and that current prices are unsustainable,” a trader source said. “It’s tough to see how demand will improve in the next few months. However, prices may increase … I don’t see the quiet market as non-acceptance from buyers so much as a lack of need for material and fear of uncertainties.”

A mill source reported the same, achieving higher prices despite the low-demand market.

“I’ve never seen prices rise on no demand, but it does seem like customers are somewhat accepting … the increase,” a mill source said. “If prices continue to rise, it’s possible demand will come back a little, but it’s hard to see the economic situation improving at the moment.”

Some distributors thought differently, however, with one doubting the survivability of the price increase.

“Prices are always determined by offers and subsequent demand, never by costs,” the source said. “Without a pickup in activity at these price levels, the increase cannot hold.”

In the South European market, the tradable range continued to tighten, with buyers’ indications of achievable prices moving up slightly. Eur760/mt ex-works Italy was now only perceived as workable on large tonnages, with offers at Eur800/mt ex-works seen as increasingly firm on mill exposure to rising energy costs.

“I think these Eur800/mt offers have to be regarded as firm especially given production cuts across the market,” a mill source said. “To relax negotiable prices would be to undermine efforts to establish survivable margins.”

The import market was heard active on the day, with buyers looking to secure volumes at currently available offer levels in anticipation of further increases.

Offers were heard into the Italian market at Eur700-710/mt CIF ex-Far East on the day, with the Platts assessment moving up in kind, to Eur695/mt CIF South Europe.

The Italian domestic HRC assessment was up Eur5/mt on the day, at Eur765/mt ex-works Italy.

Platts is part of S&P Global Commodity Insights.

— Benjamin Steven