Day: 26 October 2022

The continuing deterioration of the EU economy following Russia’s invasion of Ukraine and the energy crisis is leading to a recession severely impacting industrial sectors. The steel market outlook has worsened for both the second half of 2022 and 2023, with steel demand receding more strongly than expected (-3.5% for this year and -1.9% for next year). Yet, imports penetration persists at historically high levels.

“All downside factors have remained in place and even exacerbated, especially skyrocketing energy prices, which lead to unbearable production costs. This has entailed a further cut in apparent steel consumption and a significant downward revision of steel-using sectors’ output in the EU for the remainder of this year and supposedly for the first half of next year”, said Axel Eggert, Director General of the European Steel Association (EUROFER). “Even more worrying is the persistent high level of distortive steel imports into the EU in such a context. We risk heading towards significant industrial capacity destruction in Europe, if emergency trade measures reflecting the precarious situation of some critical industries in Europe are not taken”, he added.

After the rebound experienced throughout 2021 (+16.3%) following the pandemic, in the second quarter of 2022 apparent steel consumption’s positive trend came to an end with a marked drop (-4.8%), down to 38.6 million tonnes. Negative performances are predicted to continue throughout 2022 and at least up to the first half of 2023, consolidating the prospect of a deeper-than-expected annual recession in apparent steel consumption this year (-3.5%, previously estimated at -1.7%) and also in the next (-1.9%). These would be the third and the fourth steel consumption recessions respectively in five years.

EU steel market overview

Weak demand strongly impacted domestic deliveries. They recorded a sharp decrease in the second quarter (-7.1%), confirming the negative trend started at the beginning of 2022 (-0.1%) and reversing 2021’s direction (+11.9%).

By contrast, imports into the EU continued to grow, although at a slower pace (+1.6%, after +28.5% in the first quarter), with import penetration persisting at historically high levels.

EU steel-using sectors

Steel-using sectors’ output proved to be more resilient than initially foreseen in the second quarter of 2022 (+5.7%), owing to the carry-over effect of the post-COVID rebound of 2021 (+8.4%). Favourable developments were observed in the construction, mechanical engineering and transport sectors, in particular automotive. This should secure growth for 2022 (+1.9%).

However, the increasing impact of the Russian aggression against Ukraine and the hike in energy prices are expected to weigh heavily during the end of 2022 up to the first quarter of 2023 at least. This has contributed to a downward revision of steel-using sectors’ output in 2023 (-0.9% compared to the previous +2.2%). This could be the second recession in Steel Weighted Industrial Production (SWIP) in ten years, after the one experienced in 2020 due to the pandemic.

Domestic prices for hot-rolled coil remained unchanged in Europe Oct. 25, though market participants expected further price declines amid oversupply concerns.

Platts assessed hot-rolled coil in Northwest Europe at Eur650/mt ex-works Ruhr Oct. 25, stable day on day.

The majority of buyer and mill sources reported tradable value at Eur650/mt ex-works Ruhr.

Some buyers, however, said that they were unable to achieve such prices and have been receiving official offers at Eur735/mt delivered Germany or at Eur700/mt ex-works Northern Europe. However, those sources acknowledged that prices around Eur650/mt ex-works could be achieved on firm bids for large tonnages.

End-users and distributors suffer from high stocks of coil booked earlier this year at high prices. Distributors have been failing to get margins on their sales or to destock needed volumes. This, combined with general uncertainty in the market caused by the current economic and geopolitical situation, has forced buyers to hold back from restocking.

Some buyers say they have enough material in stocks to avoid new purchasing until mid-first quarter 2023.

As widely agreed at the EuroBLECH 2022 trade fair in Hanover, Germany, buyers say that further production cuts are needed to balance supply and demand. The capacity reductions already introduced by the European mills were deemed insufficient to bring balance to the market, especially as related to German production.

In addition, taking into account the recent decline of energy costs, sources say mills have room to give additional discounts. The majority of the sources anticipated prices settling at Eur600/mt ex-works Northern Europe in the near term, while some believe prices will move below the Eur600/mt mark.

“Mills are definitely covering their costs,” a German distributor said. “Otherwise they would have not been able to move prices down as rapidly as they did in October.”

Platts is part of S&P Global Commodity Insights.

— Maria Tanatar, Benjamin Steven

Nordic steelmaker SSAB plans to stop operations at one blast furnace in Finland next month, while Germany’s Thyssenkrupp will stop a hot-rolling mill in Bochum for about a month and Italian steelmaker Arvedi plans a longer-than-usual holiday stoppage in December, Fastmarkets heard during the Euroblech Trade Fair in Hanover, Germany, on Wednesday October 26.
SSAB will stop the BF in Raahe, which has capacity for 1.25 million tonnes per year, in mid-November for about for 6-8 weeks, Fastmarkets heard. The outage was brought forward in order to reduce output during the fourth quarter in the face of weak steel demand.

The company operates two BFs in Raahe with combined capacity for 2.5 million tpy of pig iron. The company produces hot-rolled coil and plate in Raahe.

Meanwhile, Thyssenkrupp, which was one of the few steelmaker which had not announced any output cuts during the current energy costs crisis, will stop a 4.4 million-tpy hot-rolling mill in Bochum for one month starting in December, Fastmarkets heard.

Arvedi will extend its planned maintenance in December by one week, Fastmarkets heard. The company will stop operations on December 19 for at least 14 days, several sources said.

Market sources expected the announced output cuts to help to balance the oversupplied HRC market in Europe in the coming months.

“That’s what the market needs right now – to reduce the volumes. There is no other way to balance supply and demand,” a steel service center in Germany told Fastmarkets.

Italian re-roller Marcegaglia also plans to stop its flat-steel rolling and tube welding facilities in Italy for one week in November and two weeks in December, Fastmarkets heard. The exact dates and assets affected have yet to be announced. But sources suggested that the company will stop all its lines in Italy – in Ravenna, San Giorgio di Nogaro, Gazoldo degli Ippoliti, Boltiere, Lomagna, Casalmaggiore and Forli.

HRC prices in Europe have been declining almost non stop so far in the second half of 2022 due to both insufficient demand from end-user sectors and overstocking at buyers.

Fastmarkets’ latest calculation of the daily steel HRC index, domestic, ex-works Northern Europe, was €670.00 ($664.09) per tonne on October 25, unchanged from the previous day.

The latest calculation was, however, down by €13.75 per tonne week on week and by €95.00 per tonne month on month.

(This story was updated to include new information about Marcegaglia, and with the addition of the table, neither of which were available at the time of initial publication.)

Published by: Julia Bolotova

European hot-rolled coil prices were stable to slightly weaker in a low-volume market on Wednesday October 26, with European producers planning more production cuts in the fourth quarter, Fastmarkets understands.More European producers plan to reduce HRC output because they expect demand to remain low in an oversupplied market.

The production cuts might help to balance supply and demand, sources said, but it will take some time before the output cuts have any discernible effect.

Buyers and mills have different views on market developments at the moment, however.

Producers expect buyers to come back to the market to book first-quarter 2023 volumes in December, with that rebound in activity and the announced output cuts expected to push up HRC prices.

Conversely, buyers only expect to see limited restocking in December because of still-high stock levels.

“I think we will need to restock for [HRC] with delivery in the mid-first quarter [of] 2023 at the earliest,” a steel service center source told Fastmarkets.

Fastmarkets calculated its daily steel hot-rolled coil index domestic, ex-works Northern Europe at €666.25 ($660.37) per tonne on Wednesday, down by €3.75 from €670 per tonne on the previous day.

The latest calculation is down by €3.75 per tonne week on week and by €97.08 per tonne month on month.

Transactions were reported in the region at €650 per tonne exw, while offers for HRC with December lead times were heard at €670-685 per tonne exw, sources said.

After the index was published, a trading source in Benelux reported a deal at €630 per tonne exw from the integrated mill in the region, but this was not widely confirmed by other sources.

One distributor source reported an offer of €735 per tonne delivered in Germany from an integrated mill, equivalent to about €685 per tonne exw.

Steel mills have started negotiations with end users for long-term contracts for 2023, but no deals have been concluded yet because the gap between offers and bids remains too wide.

Buyers’ price ideas for the 2023 first-half contracts were around €680-700 per tonne exw, while producers were aiming for a minimum of €800 per tonne exw, sources said.

“The half-year price doesn’t work in such a volatile market. We’ve moved to quarterly contracts with some customers during [the Covid-19 pandemic, and] I think this will, eventually, become more common,” a mill source told Fastmarkets.

Fastmarkets’ calculation of its daily steel hot-rolled coil index domestic, exw Italy was €685 per tonne on Wednesday, down by €10 per tonne from €695 per tonne on Tuesday October 25.

The latest calculation of the Italian index is up by €10 per tonne week on week but down by €78.41 per tonne month on month.

Offers from integrated mills in Italy were reported at €680-720 per tonne exw, sources said, while bids from stockholders and tubemakers were reported at €650-570 per tonne exw.

The market in Italy was also quiet on Wednesday, with buyers delaying restocking.

Import HRC offers from Japan and South Korea came in at €620-630 per tonne cfr Italy, but bids were reported at €600-610 per tonne cfr. There also were unconfirmed reports of Japan-origin HRC for mid-first-quarter 2023 delivery at €620 per tonne cfr in the week to Wednesday.

Published by: Julia Bolotova