Day: 28 September 2022

Many Italian steelmakers are restarting production due to a small gradual recovery in apparent demand and a decree, called “Aiuti ter,” issued to help energy-intensive companies such as steelmakers and large re-rollers.

A number of Italian electric arc furnace-based steelmakers stopped production in August due to high energy costs and low demand, although most resumed intermittent production in September.

Meanwhile, only one blast furnace-based steelmaker, Acciaierie d’Italia, was running at a low capacity with two blast furnaces, BF1 and BF4, producing after it idled its BF2 in July.

Sources said the company was producing 10,000 mt/day of pig iron from the two blast furnaces, compared to the previous 15,000 mt/day.

It is easier for EAF-based steelmakers to temporarily shut in production, as they can be switched off easily, while blast furnaces require time and manpower to shut down, restart and operate.

The Aiuti ter decree provides a tax credit for companies to purchase of electricity and natural gas. The tax credits rose from 25% to 40% for energy- and gas-intensive companies and will cover costs for October and November.

The decree was one of the last acts of the Draghi government, with Giorgia Meloni of the rightwing party Fratelli d’Italia, Brothers of Italy, elected from Sept. 26.

According to the political party’s manifesto, Meloni will establish a crisis unit on energy and it will try help push for recovery in the infrastructure and automotive industries.

The manifesto is not that detailed and business industry sources, including steelmakers, told S&P Global Commodity Insights that they were assessing the new government, and in particular who from the coalition would be given key roles.

Meloni leads the largest party in a center-right alliance with Silvio Berlusconi’s Forza Italia and La Lega, the League party.

Having the majority, she will be able to decide without much pressure from allies, who to put in the Economic and Development Ministry and there are expectations that she will put in a technical minister with a similar agenda to the Draghi government.

Meloni has also spoken out strongly in support of the Western line about Ukraine and has said Italy will stay in Europe.

“Let’s put in this way, when industrial people met few weeks ago at the Ambrosetti Forum, at the annual international economic conference held in Cernobbio that brings together heads of state, ministers and business people to discuss current challenges to the world’s economies, when she spoke no one was terrorized by her views – in fact you can see there was not a bad reactions in the market,” a steel company source who attended the forum told S&P Global.

Platts assessed HRC in southern Europe at Eur750/mt ex-works Italy Sept. 26, down Eur650/mt from the intra-year peak reached on March 24, S&P Global data showed.

— Annalisa Villa

Nine large companies, including European steel rerollers and traders, have written a joint letter addressed to the European Commission Sept. 27 underlining the risk “of sanctioning input materials for the rerolling business model in Europe.”

There would be “consequences of a potential import ban on semi-finished steel products,” such as slabs, billets, and blooms from Russia, according to the letter, seen by S&P Global Commodity Insights.

Market source said the letter is in response to some European steel producers who have written to the EC calling for sanctions on Russian semi-finished product imports and trade measures in the form of antidumping or anti-subsidy duties.

The EU previously banned imports of finished steel from Russia as part of wider sanctions following its invasion of Ukraine. Some semi-finished and raw material suppliers in the EU have also been hit by those sanctions on specific Russian companies and individuals.

The EC did not immediately respond to S&P Global’s request for comment.

More than 80% of the EU’s steel semi-finished steel products come from Russia and Ukraine, according to the letter.

“But today due to the temporary stoppage of the Ukrainian plants, there is no other real option for substituting the supply with alternative producers (in 2022 the supply from Russia has also reduced due to sanctions against individual Russian companies),” the letter said.

Europe and third country producers, such as China, Brazil, and India, among others, could not ensure a stable supply of necessary feedstock in terms of sizing or pricing, the letter said, adding that, “available alternatives to the Russian semi-finished steel products include a few sanctioned steel producers in Iran and several producers in the Americas that are fully booked for the needs of the US and Mexican markets.”

The letter said new steelmaking and casting capacity in Europe that can produce semi-finished products, such as slabs, billets, and blooms, for independent rerollers would take at least three to four years to install and require large investments.

If the EC bans Russian semis, EU rerollers will have “no other alternative than to substantially reduce their facilities’ production level or shut down operations in the worst-case scenario,” resulting in unemployment and price spikes.

Any ban could also jeopardize the EU’s green transition and further exacerbate the region’s exposure to foreign gas, as some EU rerollers are among those supplying the renewable energy sector.

The Platts weekly FOB Black Sea slab price assessment stood at $445-$455/mt Sept. 23, declining 23% from $580-$590/mt at the beginning of 2022. Russian slab and flat-rolled steel exporters mainly target the Turkish market, with their slab prices lower than the competition, according to S&P Global.

Platts, part of S&P Global, assessed import slab in Southern Europe at $600/mt CIF Italy Sept. 23, down $35/mt week on week, and plate in Southern Europe at Eur1,000/mt ex-works Italy Sept. 23, unchanged on the week.

— Annalisa Villa, Maria Tanatar

Spain’s automotive sector saw production recover on-year in both July and August. Exports also moved up, supported by better market conditions, Kallanish notes.

National automotive association Asociación Nacional de Fabricantes de Automóviles y Camiones (Anfac) released July and August figures jointly due to the summer seasonality.

“This growth is mainly due to the slight improvement in the supply of [input] materials that is allowing the factories to recover their production capacity and export levels,” Anfac observes. “The sector, however, remains affected by the microchips crisis and costlier materials. The recent announcements of new production stops show that we must wait for the evolution in the coming months to be able to affirm that the recovery is on the way”.

Output in July and August reached 152,351 units and 111,824 units, respectively. This was an on-year growth of 8.3% and 65.6%, respectively. Eight-month production amounted to 1.39 million vehicles, down 1% over the same period last year.

Meanwhile, a recovery in sales in major markets boosted Spanish vehicle exports. These were 131,397 units in July and 108,957 in August, up 10.5% and 72% respectively on-year. Spanish eight-month exports fell by 1.8% over January-August 2021 to 1.19 million vehicles.

“Although shipments improved, the industry continues to be affected by problems in the production chain and uncertainty in the main European markets due to high inflation rates and the unstable economic situation,” the association explains.

European markets represented 69.1% and 67.5% respectively of Spanish deliveries in July and August, Anfac data show.

Todor Kirkov Bulgaria

More Acquisitions plc has agreed to acquire 100% of the issued share capital of Megasteel Limited, a UK distributor of steel for the pre stressing and post tensioning of concrete products.

The transaction will be valued at £49.5-63 million ($53.5-68m). It remains subject, amongst other things, to completion of customary due diligence.

The proposed acquisition will constitute a reverse takeover under the Listing Rules. More Acquisitions intends to publish a prospectus of the enlarged company, and to apply to have its ordinary shares admitted to the Official List and to trading on the London Stock Exchange’s Main Market. Megasteel will thus become a publicly traded company without going through an initial public offering.

“We have built Megasteel over the last 30 years to be one of the biggest suppliers in the UK of prestressing wire and strand, a product used in almost every construction project in the country, and we have been considering a listing of the business for many years. We are pleased to be working with More Acquisitions as the vehicle that will enable us to do this,” Megasteel chief executive Nigel Roberts says in a note seen by Kallanish.

In its financial year ended 31 October 2021, Megasteel made audited pre-tax profits of £3m on turnover of £19.7m.

Megasteel also operates a sub-contract engineering business based in Malmesbury, Wiltshire, having acquired Sweetnam and Bradley Limited in 2019. Sweetnam and Bradley support several clients including Renishaw plc, Siemens plc, Rotork plc and the London Underground.

Adam Smith Poland

Hungarian steelmaker Dunaferr is counting on government support to ensure its long-term survival amid the energy crisis in Europe. In the short term, it is in urgent need of coke to restart the blast furnaces and prevent them from getting damaged, the firm says in its latest newsletter.

The producer shut down one blast furnace in late August and then the second in mid-September due, it said, to the “unexpected” refusal by supplier Donau Brennstoffkontor GmbH to deliver coke feedstock (see Kallanish passim).

“Dunaferr continues to try to persevere, intends to fulfil its contractual obligations and continues to employ staff,” the firm says. “In the short term, the resumption of coke delivery is an essential condition for this, but in the medium and longer term, the only possibility of survival in the industry crisis situation may be state intervention.”

Despite the firm’s unsettled ownership situation, it has ensured its operation and financing through several partnership agreements in the last two years. After the downturn caused by the Covid crisis, it was able to hold on and take advantage of the market recovery “to the best of its ability”, the company states. “However, the Ukrainian-Russian war, the energy crisis affecting Europe, and logistical difficulties have now put Dunaferr in a situation that the group of companies is unable to cope with alone.”

Electricity prices rose to €700/MWh in August and the price of natural gas rose more than tenfold in 1.5 years. “In order to be able to manage this drastic increase in energy prices, the company would have to sell a tonne of hot rolled steel products at a price of €1,200-1,300, while the current market price of €750/tonne is significantly below that,” the steelmaker says.

Adam Smith Poland

Saarstahl Ascoval in Saint-Saulve, the French subsidiary of SHS/Saarstahl Group, plans to halve its output starting next month due to increasing energy costs, union sources confirm to Kallanish.

The mill will turn off its electric arc furnaces for a few days per week over the next three months. This adds to the list of French long and flat steel producers, including Ascometal and ArcelorMittal, cutting output significantly to save on energy bills and balance demand and supply (see Kallanish passim). The French steel market is going through a period of low demand and falling prices for both flats and longs, in line with the current international downturn.

Last year, Saarstahl completed the takeover of Liberty Steel’s Ascoval and the Hayange rail unit. It renamed the Hayange and Saint-Saulve steel plants to Saarstahl Rail and Saarstahl Ascoval respectively.

The German group is investing €7 million ($6.7m) this year into Ascoval to reduce the site’s carbon footprint and boost efficiency. The group’s long-term goal is to produce top-quality carbon-neutral steel at the Saint-Saulve site.

The SHS/Saarstahl Group employs approximately 1,500 people in France.

The firm did not respond to request for comment before press deadline.

Natalia Capra France

A group of European re-rollers under the name of EU Reroller Forum has sent a letter to European authorities to express opposition to a potential ban on Russian-origin semi-finished steel imports into the EU.

While reaffirming their support in favour of the EU’s political and economic measures against Russia, the re-rollers believe that extending the sanctions to semis would only harm the European industry, rather than hit the Russian economy.

“The lack of supply for re-rollers would hamper the EU’s ability to build [among others] new wind installations and improve energy independence, while the semi-finished steel products [slabs, billets, and blooms] would be immediately redirected to other regions and with a 1% share of steel semis in total Russian exports, the potential ban would not have any tangible impact on Russia,” the letter seen by Kallanish explains.

European steelmakers have been lobbying the European Commission to extend the ban on Russian steel to semi-finished products. By doing so, they are “using political arguments in what is essentially an economic and competitive issue”, the letter explains.

“Re-rollers help balance the demand and supply of finished steel producers. The sector accounts for 8% of total EU flat steel output – almost 10 million tonnes – providing for more than 30,000 direct and indirect jobs in the EU,” the group explains.

European re-rollers have historically relied on Ukraine and Russia for 80% of their feedstock supply. Alternatives to these origins are scarce; supply from other third countries is often not competitive due to high prices and logistics costs. Iran could be a competitive partner, but supply from there has also been hit by sanctions.

“European integrated producers are currently temporarily idling blast furnace capacities and argue that they could replace imports – however, in the previous five years, less than 5% of semi-steel products purchases for re-rollers have come from EU producers. Under normal market conditions, there is no incentive for EU producers to supply semi-products to their EU re-rolling competitors. In some periods, big EU integrated producers use imported semis themselves to support their needs for additional steel making,” the letter signatories explain.

The EU Reroller Forum includes Marcegaglia, Pittini, Officine Tecnosider, Laminoirs Des Landes, Vitkovice Steel, Network Steel, Duferco, Dunaferr and NBH (the NLMK Belgian Holding).

Emanuele Norsa Italy

Energy costs are unlikely to sink notably anytime soon, and German steelmakers will be struggling to hand them down to customers, says Peter Fertig, analyst at Frankfurt-based MBI Infosource. Steel prices could peak above today’s values, but the way down could be steeper.

Since shortly after this year’s price peak induced by the invasion of Ukraine, order intake has continuously remained below output, with mills’ negotiating power weakening continuously. “Order intake has been diminishing like butter in the sun, and a recovery of demand is not in sight,” Fertig said at MBI’s annual Stahl Tag conference on Tuesday, attended by Kallanish. New orders for flat products could remain low, or even fall further, he cautioned.

Regarding the extreme energy costs, “there will not be much room for decreases now, and in the long run they will remain higher than in previous years,” he observed. In normal times, mills used to hand the costs down in full, or even imposed a premium when energy prices rose, but nowadays they are facing losses, he added.

Due to the merit-order principle, electricity prices are tied to natural gas prices, which have become more critical since supplies from Germany’s main source, Russia, were reduced. The merit-order principle defines the market price for electricity by the most expensive production route, namely gas power plants. This is an economic principle “which you can abolish only by blocking gas-based electricity altogether, but then we are missing the flexibility of supply sources,” he said.

According to Fertig’s “quantitative model”, the average German price of hot rolled coil in 2023 might peak at €925/tonne ($889), above the current average of close to €800. His worst-case scenario sees the price sinking to €375, with a most likely base scenario still below today’s price, at €650. Cold rolled coil premiums over HRC could see a range of €75-175.

Rebar, which has long benefited from relatively healthy construction activity, at best could peak at little above today’s price, at €1,100/t, but will more likely drop to €760, or in the worst case sink to €450. Prices for wire rod will range slightly above those for rebar, according to Fertig’s forecast.

Christian Koehl Germany