Day: 24 October 2022

European steelmakers have been struggling to sell this year’s delivery hot-rolled coil amid low demand from both distributors and end-consumers, market sources said on Oct. 21.

Platts assessed hot-rolled coil in Northwest Europe stable on day at Eur660/mt ex-works Ruhr.

A Northern Europe-based service center reported transactions at Eur650-670/mt ex-works Northern Europe.

Other market participants generally reported tradable values on a range of Eur650-670/mt ex-works Ruhr for near-term trades. Two distributors reported offers at Eur700/mt ex-works Ruhr. One of the sources said that the offer was for the first quarter of 2023 delivery coil and that for December delivery material prices were lower.

Buyers have been showing little interest in coil delivered in December due to a focus on destocking by the end of the year, following the traditional cycle. Buyers have high inventories that they have been struggling to reduce due to low steel demand from end consumers, particularly the automotive industry.

Demand for first-quarter delivery HRC has also been muted, as a lot of distributors have enough material in stocks until February-March. Additionally, an uncertain outlook on steel consumption and energy costs did not support buyers’ interest.

“Demand would not recover in a couple of months,” an Italy-based service center said. “Nobody is willing to buy a single ton, particularly as mills are trying to fill order books for near-term and to offer this year delivery.”

In order to protect domestic prices, European steelmakers started to offer export to Turkey in an endeavor to reduce domestic availability.

Offers and deals for HRC from Europe have been reported in Turkey at Eur630-650/mt CIF.

“European mills are actively trying to export volumes to ease pressure on domestic prices and fill rolling program to keep equipment running,” a Northern Europe-based distributor said. “We need production cuts, those implemented were not enough.”

Platts assessed HRC in Italy down Eur10 on day to Eur680/mt ex-works Oct. 21.

Italian mills have been offering HRC at Eur700/mt ex-works, but market participants estimated achievable prices at Eur670-690/mt ex-works.

“Italian mills are aiming for Eur700/mt ex-works for HRC, but I think you can easily get Eur670-680/mt ex-works,” a second Italy-based service center said. “And it seems that with such demand Italian mills will soon decrease prices further reaching same level as German mills – Eur650/mt ex-works”.

Some market sources expressed concerns that domestic HRC prices have not reached bottom tier. This was due to the recent energy costs reduction and the fact that some integrated mills sell energy obtained from blast furnace and coking battery gases to compensate low finished steel prices.

“Energy costs have moved down recently so mill have room for further decrease,” a third Italy-based source said. “And taking into the account that some integrated mills sell energy from either blast furnaces or coke batteries, so that gives them opportunity to cut coil prices even further.”

Platts is part of S&P Global Commodity Insights.

— Maria Tanatar, Benjamin Steven

Flat steel product prices still have room to correct down in the last quarter of 2022. The start of 2023 also looks like it will remain weak, but stabilisation is possible towards the second half of the year. This was the general consensus of the panel on pricing trends during Kallanish Flat Steel 2022 in Istanbul on Thursday.

There are numerous factors behind the current price decline. Most significant are China’s weak domestic demand, driven by its slowing real estate market and zero-Covid policy, war in Ukraine, and safeguarding measures by developed economies, such as Section 232 in the US.

Mammoth energy supply price increases in Europe and Turkey, caused by the sanctioning of Russian hydrocarbon supplies, are adding unbearable margins on production costs that are already among the highest in the word. This is making them uncompetitive against Asian suppliers, whose costs are unaffected but local demand is weak on economic challenges and China’s stifled demand growth.

Demand in the EU remains lacklustre, also affected negatively by the ongoing energy crisis and war on its doorstep. The looming or, in some observers’ opinion, already present recession, is sucking out optimism and consumer confidence, reducing demand further.

Mills are cutting production to battle low demand and reduce losses, while decarbonisation momentum is already in full swing and is pushing standards and costs further up still. In this extremely challenging, difficult time, the major economies are not expected to start recovering in less than 18 months, according to speakers, but as ever, there are factors that could spur a new growth cycle almost overnight, they added.

The return of Chinese demand growth would be the strongest upside factor, but a truce between Ukraine and Russia is another, eagerly awaited one. Alternatively, deeper output cuts are anticipated in Turkey and the EU, and a difficult two years ahead, followed by the new growth cycle.

Katya Ourakova UK

The increased cost of EU carbon allowances is creating a widening gap between EU steel prices and import prices from suppliers in countries not burdened by carbon regulations. This means there might be an opportunity for imports into the EU, says EUROMETAL president Fernando Espada.

Huge increases in electricity costs are meanwhile driving long steel prices in the bloc so high that there may also soon be imports seen in this segment, Espada said at Kallanish Flat Steel 2022 in Istanbul on Thursday.

EU mills are “facing a crisis”, Espada observed. “Distributors have to be careful.” There may currently be opportunities to import, but if the import prices are so much lower than values from EU domestic mills, “we may kill our own suppliers”.

He also added that since steel prices soared earlier this year and have now come down dramatically, distributors are having to sell at prices lower than the cost of their stock, which is a “problem”. There is not much that can be done, but distributors are “defending prices as much as we can”.

Asked about the EU’s safeguard duties, Espada added it is “nonsense” to expect the European Commission to remove these unless the US first removes Section 232.

The panel also keenly discussed the prospects for increased scrap use in steelmaking amid decarbonisation.

Espada said there is not enough scrap in the world to electrify all steel production. Scrap is “the new gold”, and surging demand for the material will push up prices. To ensure production of sufficient steel volumes, direct reduced iron will also need to be used as a feedstock.

Danieli vice president key account Andrea Diasparro, however, pointed to the fact integrated plants will also start using more scrap in their BOFs, which will have a huge impact on scrap prices. This will allow these mills to reduce carbon emissions, control scrap prices and kill off the EAF competition, he added.

International Tube Association Gunther Voswinckel meanwhile pointed out that numerous alloy steels cannot be produced using EAFs, and that either integrated or DRI-based plants are required.

Adam Smith Poland