Day: 16 September 2022

European steel producer ArcelorMittal has cut its hot-rolled coil (HRC) offer for November delivery by €40/t to €810/t.

The move comes at a pivotal moment for a market that is desperately trying to understand which will be the biggest driver of price going forward — low demand or high costs.

ArcelorMittal has shut around 6mn-7mn t/yr of flats-oriented crude steel capacity in response to weaker buying and rising costs. Market participants suggest more cuts could be needed given weaker offtake from certain sectors, such as the auto industry.

There is widespread belief in the market that other producers need to take crude and rolling capacity off line to support prices. Attendees at EUROMETAL‘s Southern European conference in Milan, Italy suggested the high cost, low demand environment could persist for some time.

ArcelorMittal was the first to increase prices and some other steel mills followed suit, although their resolve has faded quickly in response to weak apparent demand.

Mills throughout northern Europe have become more flexible on price in the last week or so, underlining the weakness in their rolling programmes.

How the market perceives and reacts to ArcelorMittal’s move could help determine price direction in the coming months. If buyers welcome the move and place tonnes, acknowledging that the mill is “giving back” some of its profit from recent years, the market could stabilise. But if they view the move as capitulation and opt to continue withholding purchases, other mills will likely reduce their prices and an ugly battle for tonnages — similar to 2019 — could ensue.

Imports also have a key role to play in determining price development. Offers have increased since flooding affected shipments from Posco’s Pohang mill in South Korea. A few large-scale buyers booked third-country tonnes to fill the supply gap around €700/t cif and slightly below. But overall sentiment remains shaky, with raw materials such as scrap softening. European mills have been operating their coke ovens at full capacity to generate gas enabling them to reduce costly purchases of external energy. But with blast furnace utilisation rates reducing, and likely needing to fall further, coke inventories could build and lead to excesses and more cost deceleration. While energy prices remain high, they are exceptionally volatile. The headline Dutch TTF everyday natural gas assessment droppedbelow €200/MWh on 15 September, down from a peak of €308/MWh on 26 August.

By Colin Richardson

Steel distributors and service centres in Europe hope domestic steelmakers will continue to limit output until the market returns to a level of balance between supply and demand, Kallanish heard from executives gathered at EUROMETAL’s Thursday meeting in Milan.

Cesare Viganò, head of ArcelorMittal CLN Distribuzione Italia, said European steelmakers started cutting output later than was expected. “We knew the challenges existing from May and action to reduce supply should have been taken a little earlier,” he noted.

Other executives at the event agreed with Viganò’s position. The general consensus was that these production cuts should continue until at least the end of this year, when apparent steel demand could look slightly better.

Apparent steel demand is currently suffering in Europe, mainly due to overstocking in the distribution sector. According to EUROMETAL, at the end of June, the index of stock volumes for flat steel service centres in Europe reached 107, versus 71 in June 2021. Market observers believe that until destocking in the distribution sector is completed, the European steel market will not see sentiment increasing firmly; this goes also for prices.

Andrea Gabrielli, head of Gabrielli Group, confirmed that July was very slow for the flats distribution sector – slower in fact than July 2020. “Historically, July is a month of good activity for our sector, but now apparent demand is blocked,” he noted.

As widely reported by Kallanish in recent months, European steelmakers announced a series of production curbs, including temporary stoppages of blast furnaces and electric arc furnaces. These stoppages are linked to record-high energy costs, but they are also justified by the need to limit supply in an overstocked market.

“During the next months, the challenge for prices of coil products, for example, will also come from imports. It is likely that when the market will be capable to see higher domestic prices accepted, we will have the arrival of lower-priced import offers,” a source at the event added.

According to Kallanish, domestic HRC in Italy is currently traded with a premium of some €70-80/t on imports offers.

Emanuele Norsa Italy

Italy’s largest flat steel producer Arvedi is expected to stop production at its mill in Cremona, northern Italy, in the week of Sept. 19 due to high raw materials costs, sources told S&P Global Commodity on the sidelines of the EUROMETAL event in Italy Sept 15.

Arvedi restarted production in the week beginning Sept.12 after a week-long stoppage and previously halted production for four weeks during summer, a source close to the company confirmed to S&P Global.

Arvedi operates two electric arc furnaces, or EAFs, in Cremona, namely EAF No. 1 with production capacity of 1.4 million mt/year of crude steel, and furnace No. 2 with an expanded capacity of 2.6 million mt/year since 2021.

The company has also decided to stop production at one of the two EAFs at its AST Arvedi plant in Terni and other cold lines from Sept. 16 for two weeks, union and market sources confirmed to S&P Global. The two EAFs in Terni have a combined capacity of around 1.1 million mt/year.

An Arvedi spokesperson declined to comment when contacted by S&P Global.

“The fact that Arvedi is halting three out of four its EAFs for few days has really shown the doldrum of the market,” a distributor executive at one of the largest Italian service centers told S&P Global.

Union sources also confirmed that, due to the low demand, Italian flat steel producer Acciaierie d’Italia was working at low capacity utilization with two blast furnaces, BF1 and BF4, running after BF2 was idled in July. These sources said the company is producing 10,000 mt/day of pig iron from the two BFs, compared to the previous 15,000 mt/day.

This was confirmed by Acciairie d’Italia spokesperson to S&P Global.

Steelmakers across Europe are cutting production to sustain prices in moves that steel distributors and service centers hope will continue to rebalance demand and re-stabilize margins, market participants said during the EUROMETAL event.

Platts assessed hot-rolled coil in South Europe down Eur5/mt Sept. 15 to Eur760/mt ex-works Italy, according to S&P Global data.

— Annalisa Villa