Day: 14 November 2022

Stainless steel distributors have started restocking in recent weeks, but prices have remained flat amid persistently slow real demand, Fastmarkets heard during the week to Friday November 11.
Fastmarkets’ weekly price assessment for stainless steel cold-rolled sheet 2mm grade 304 transaction domestic, delivered North Europe was €3,200-3,400 ($3,312-3,519) per tonne on Friday , unchanged week on week.

Significant restocking has not been happening since around May because of bloated inventories that can be traced to the initial weeks of the war in Ukraine.

Amid the disruption to supply chains at the start of the war and the accompanying price jump, distributors built up stocks as much as possible to secure volumes and lock in prices before they climbed any further.

But demand then crashed and until recently, these high inventories and poor real demand have weighed on the market to the extent that most European stainless mills have initiated some degree of production cuts.

While end-user demand has not changed significantly, distributors have begun to restock in November, indicating that inventories have been largely cleared.

The restocking has not involved large tonnages, however, and the increased demand from distributors has not had any effect on prices.

Real demand is expected to remain at current levels until 2023, and perhaps even for the first half of the year.

It was heard, but no not confirmed, that one European mill was planning to undertake extra melting in December in preparation for a significant shutdown in March.

Published by: Ross Yeo

Persistent oversupply has continued to limit trading activity in the European hot-rolled coil market, sources told Fastmarkets on Monday November 14.Fastmarkets calculated its daily steel HRC index, domestic, ex-works Northern Europe at €641.25 ($663.69) per tonne on Monday, down by €3.75 per tonne from €645 per tonne on Friday.

The latest calculation of the index was down by €9.17 per tonne week on week and down by €58.75 per tonne month on month.

Several distributors in the region reported tradeable values for HRC at €630-640 per tonne EXW, and even €620 per tonne EXW in some cases.

Local integrated mills reported higher price levels at €650 per tonne EXW.

Most producers in the region were still able to offer December rolling coil and were holding back from offering January production.

“It is not a question of price; it is a question of demand. Until demand recovers, it makes no sense to talk about price,” a mill source said. “We can keep lowering  prices, but it won’t help to increase sales, because buyers don’t need [HRC],” he added.

Buyers, meanwhile, continued to hold back from trading, making only hand-to-mouth purchases to cover urgent needs.

Distributors and steel service centers were focused on reducing their inventories before the end of the year.

As a result, sources said they expect more price drops before the year ends.

Fastmarkets’ calculation of its daily steel HRC index, domestic, exw Italy was €620 per tonne on Monday, down by €5 per tonne from €625 per tonne on Friday.

The latest calculation of the Italian index was down by €46.25 per tonne week on week and down by €80 per tonne month on month.

HRC offers from local mills were reported at €630-640 per tonne delivered on Monday, which nets back to €610-620 per tonne EXW, sources said.

Italian mills adjusted offers downward late in the previous week in the face of low demand and import pressure, but it did not help to spur buying activity, sources said.

Italian mills were reportedly still able to offer HRC with December delivery to the market, which indicated they may be having difficulty filling their order books.

Import HRC offers from Southeast Asia were heard at €570-590 per tonne cfr, unchanged from Friday.

Published by: Julia Bolotova

Spain-headquartered steelworks dust processor Befesa has announced that it plans to invest around €500 million ($510.8m) in projects to capture the growing opportunities that the decarbonisation and electric vehicle trends are generating in the steel and aluminium industries.

The 5-year Sustainable Global Growth Plan (SGGP) will enable the company to add between €125-155m to Ebitda, it claims.

“Our investments will support electric arc furnace (EAF) steel production growth, triggering increased residues recycling volume in the markets where Befesa operates,” the company says. ”As a clear enabler of the transition to a low-carbon economy, we are well positioned to seize these significant growth opportunities by expanding our recycling capacity.”

The SGGP involves nine projects across Europe, the US and China. These include the upgrade of facilities, growing their capacities, as well as the building of new plants in existing markets and expansion of activities in China.

Befesa expects to present the SGGP in Q4 2022, Kallanish notes.

Todor Kirkov Bulgaria

ArcelorMittal Europe saw steel shipments slashed by 6% and 11% on-year and on-quarter respectively in the third quarter to 7.08 million tonnes due to weaker demand, Kallanish notes.

Crude steel production was down 12% on-year to 8mt due to significantly lower apparent demand and curtailed production in light of higher energy prices. It was also down 3% on-quarter.

Given the weaker macroeconomic conditions and order book, high energy and carbon costs and rising imports, the company announced further, more significant, production curtailments commencing in Q4 – in France, Spain, Germany and Poland. These are designed to bring supply in line with addressable demand, it says.

The European unit reduced gas consumption by 30% in Q3. It says that at current spot levels, natural gas cost per tonne is expected to be lower in Q4.

The firm notes European spot hot rolled coil prices not covering the fixed costs of marginal producers. The impact of destocking in Europe is significant, particularly in the second half of the year, and expected to lead to a contraction of apparent consumption by up to 7% in 2022.

The reduced shipments contributed to a drop of 5% and 20% on-year and on-quarter respectively in Q3 sales to $10.69 billion, while operating income was only $158 million versus $1.93 billion in Q3 2021 and $2.06 billion in Q2 2022.

Ebitda plunged 61% on-quarter to $931m due to the impacts of lower steel shipments, negative price-cost effect, higher energy costs (approximately $0.3 billion higher compared to Q2, with higher market prices partially offset by hedges in place) and negative forex translation impact ($0.1 billion). It was also down 58% on-year.

Average steel selling price fell 11% on-quarter but actually rose 5% on-year in Q3 to $1,150/tonne.

Adam Smith Poland

French and Luxembourg domestic scrap prices are flattening in November in an on-month comparison. This is mostly due to the poor availability of old scrap while new arisings E8 is available. Merchants in the country report a lower intake, particularly of sheared and shredded scrap E40.

The European price landscape however looks patchy, with some countries increasing scrap prices this month. Italian and Spanish scrap prices are decidedly increasing between €10-20/tonne ($9.9-19.8/t) depending on each mill and grade as both Italian and Spanish mills are looking for material both on the domestic and other European markets.

In Austria, contracts for old scrap are also flattening, prices for new scrap are decreasing €15/t. Germany is going through a similar situation with mills and merchants negotiating flat on-month prices for old scrap and some €10-15/t decrease for new scrap, which is largely available, sources tell Kallanish. So far, French and Luxembourg domestic shredded E40 grade is pegged at €355-360/t delivered on average. The mixed E8 grade remains flat at €360/t on average. Demolition E1C and E3 are on average at €310-315/t and €340-345/t delivered respectively this month, sources suggest.

The French market however continues to stagnate this month. Sellers report lower sales volumes due to mills’ production stoppages to balance demand and supply. A large supplier talks about a general slower activity.

Meanwhile, scrap prices in the Benelux have declined slightly compared to last week, despite ongoing supply issues. Exporters’ dock prices were mostly at around €290/t delivered in Belgium and €300/t in the Netherlands on Monday, down €5-10/t from last week. Weak flow of material, however, continues to be an issue, as exporters are struggling to source scrap even at €300/t (see Kallanish 7 November).

Natalia Capra France

Countries representing over half of global GDP have launched a package of measures at the UN Climate Change Conference in Egypt to speed up decarbonization in power, road transport and steel, scale up low-carbon hydrogen and accelerate a shift to sustainable agriculture.

The actions agreed under the “Breakthrough Agenda” established at COP27 in Glasgow in 2021 build on measures agreed at the summit.

“Since we launched the Breakthrough Agenda at COP26, the world has changed and we are facing a perilous geopolitical and economic situation,” the UK’s COP26 President Alok Sharma said in a statement Nov. 11. “That only makes international collaboration more urgent.

“Now, it is vital for all to deliver and demonstrate real progress as we move forward. This is integral to achieving the 2030 goal of making clean technology affordable, available and accessible to all.”

The actions are supported by the G7, European Commission, India, Egypt and Morocco, amongst others.

A series of multilateral agreements include actions on:

— Common definitions for low-carbon steel, hydrogen and sustainable batteries.

— Phasing out polluting road vehicles, consistent with the Paris agreement, with “significant” backing for 2040 globally and 2035 in leading markets.

— Ramping up large-scale net-zero emissions industrial plants and hydrogen valleys and cross-border power grids.

— Strengthening financial and technological assistance to developing countries to support energy transitions.

Platts, part of S&P Global Commodity Insights, assessed the cost of producing renewable hydrogen via alkaline electrolysis in Europe at Eur15.18/kg ($15.60/kg) Nov. 10 (Netherlands, including capex), based on month-ahead power prices, down from a peak of over Eur30/kg at the end of August.

Global passenger electric vehicle sales in September of 915,000 units accounted for 14% of total light duty vehicle sales, according to S&P Global Commodity Insights’ monthly EV Essentials report.

With data available through nine months, China was on track for year-end EV sales of over 6.7 million vehicles, an annualized global market share of 27.8%.

S&P Global projects that by the end of 2022, EV sales in the US alone could approach 750,000 vehicles, with 2023 seeing sales eclipse one million vehicles for the first time ever.

Further actions in the cement and buildings sectors are expected to be added to the Breakthrough Agenda in 2023.

Coalition of the committed

The model seeks to drive climate change mitigation through “coalitions of committed countries,” rather than relying on global consensus.

“The Breakthrough Agenda provides a practical platform for partnerships between countries and across industries that will be essential to rapidly scale commercially viable solutions for climate progress,” UAE Minister of Industry and Advanced Technology and Special Envoy for Climate Change Sultan Ahmed Al Jaber said in the statement.

The Breakthrough Agenda was established at COP26 in Glasgow in 2021, by 45 world leaders representing over 70% of global GDP, providing a framework for governments, businesses and civil society to join up and strengthen actions each year in key emitting sectors.

The leaders agreed to review progress annually, with the first such review published in September 2022 warning that an “international collaboration gap” threatened to delay net-zero by decades.

The COP27 announcement Nov. 11 comes in response to the report’s recommendations.

— James Burgess

Swedish steel producer Ovako said Nov. 11 that it has secured an environmental permit for a hydrogen electrolyzer to lower carbon emissions from steel production as early as mid-2023.

The electrolyzer, Sweden’s largest, is due to start production of green hydrogen using renewable power “before the summer of 2023,” a company statement said.

The Land and Environmental Court in Ostersund Nov. 7. approved the environmental permit related to the investment at Ovako’s Hofors electric arc furnace-based works, it said.

Ovako, which has offered net-zero steel products since 2022, will use the hydrogen for heating steel bar products at its rolling mill. This will enable lower-emissions steel supplies, and progressively help reduce the volume of voluntary carbon permits the company is procuring in the market to offset Scope 1 and 2 emissions.

“The new hydrogen plant in Hofors will make Ovako the first in the world to heat steel with hydrogen prior to rolling, and is the next major step towards carbon neutral steel production by replacing LPG with fossil-free hydrogen,” Ovako said.

Ovako expects the volumes will also support hydrogen supply for trucking, and is investing on a 17 MW electrolyzer in conjunction with truckmaker AB Volvo Group, Hitachi Energy, H2 Green Steel and Nel Hydrogen, it said.

Stockholm-based new entrant H2 Green Steel plans to use green hydrogen to produce steel from raw materials at sites in Sweden and in Spain. Trials are ongoing to test hydrogen as a replacement for natural gas at direct reduction iron plants, which can produce a metallic iron for steelmaking from iron ore.

Ovako, which is owned by Japan’s Nippon Steel Corp., uses ferrous scrap as its main feedstocks, and already purchases renewable power for its EAF-based operations.

“The conversion to hydrogen will enable Ovako to reduce its CO2 emissions for steel production in Hofors by 50% from already low levels,” it said.

“The plan is for local hydrogen production to be used in all of Ovako’s units where steel is rolled by 2030, provided that there is a good supply of fossil-free electricity.”

— Hector Forster

Both domestic and import prices for hot-rolled coil declined in Italy on Nov. 11 as producers gave discounts to stimulate deals.

Platts assessed domestic southern European HRC down Eur15/mt on day at Eur635/mt ex-works Italy.

Although official offers remained at Eur640-650/mt ex-works, a big Italian steelmaker was reported to make deals for bigger volumes of coil at Eur600-630/mt ex-works.

Tradable value has been heard at Eur620-630/mt ex-works and bids at Eur610-620/mt ex-works.

“It seems that some mill decided to reduce prices to sell bigger volumes before they would stop production in December,” an Italian distributor said. “I do not think you can get such low prices for small volumes, but if a pipemaker decides to buy a bigger lot, I think the price of Eur600/mt delivered is achievable.”

Two sources also reported transactions at Eur600/mt delivered Italy, but both said that they were uncertain about the information.

Import offers from Asia have also moved down from offers heard earlier this week at Eur600/mt CIF Italy to Eur570-585/mt CIF Italy. The new offers, however, have been made through international traders, according to market sources, and the new offers directly from Asian mills are likely to become available next week.

Strengthening of the euro against the US dollar combined with weak Far East flat steel markets supported the decline, sources said.

Platts assessed import southern European HRC down Eur10/mt on day at Eur590/mt CIF Italy on Nov. 11.

Demand remained limited due to sufficient inventories of distributors, seasonal destocking by the year end and weaker steel consumption by end-users continued to add downward pressure on HRC prices.

Several market sources, however, said that more distributors have been active in the market at the end of the week as distributors need to secure some volumes for January.

Although the demand revival is likely to be short-lived, domestic HRC prices in Europe are unlikely to drop further down, according to market sources. The positive effect from production cuts and high production costs are expected to contribute to the price stability, market participants said.

Platts assessed hot-rolled coil in Northwest Europe stable on the day at Eur640/mt ex-works Ruhr on Nov. 11.

Two producer sources reported tradable value at Eur640-650/mt ex-works Ruhr each.

Two traders estimated achievable prices at Eur640/mt ex-works Ruhr and at Eur640-650/mt ex-works Ruhr, respectively.

A service-center source reported tradable value at Eur650/mt ex-works Ruhr and offers at Eur700/mt ex-works Ruhr and at Eur720/mt ex-works Northern Europe.

Platts is part of S&P Global Commodity Insights.

— Maria Tanatar, Benjamin Steven

European hot-rolled coil producers are struggling to fill their order books, while buyers are delaying purchases due to full stocks and downbeat sentiment, sources told Fastmarkets on Friday November 11.

Fastmarkets calculated its daily steel HRC index, domestic, ex-works Northern Europe at €645 ($649.75) per tonne on Friday, down by €3.33 per tonne from €648.33 per tonne on Thursday.

The latest calculation of the index was down by €2.50 per tonne week on week and down by €73.75 per tonne month on month.

Several transactions for small volumes of HRC were reported in the region at €630-650 per tonne EXW by buyer sources.

Meanwhile, producer sources in Germany indicated the workable level at €650 per tonne EXW minimum, claiming that this price is already very close to the cost line.

Most producers in the region were still offering December-rolling coil to the market.

Mills were reluctant to give firm offers for first-quarter production HRC in light of the weak market fundamentals.

“Producers’ idea is to increase prices for January-February production, but it is unrealistic for the moment because there is lack of demand,” a distributor in the region said.

Meanwhile, buyers still believe there is room for a price decline owing to extremely poor demand and oversupply in the market.

Notably, steel-service centers and distributors across Europe are still struggling to reduce the level of inventories ahead of the year-end.

Fastmarkets’ calculation of its daily steel HRC index, domestic, exw Italy was €625 per tonne on Friday, up by €5 per tonne from €620 per tonne on Thursday.

The latest calculation of the Italian index was down by €40 per tonne week on week and down by €90 per tonne month on month.

One buyer source reported a transaction by a local mill at €620 per tonne CPT, which nets back to €600 per tonne EXW.

Producers in the nation, meanwhile, reported the minimum offer level at €650 per tonne EXW.

Distributors in the nation estimated the achievable price level between €620 and €650 per tonne EXW, depending on volume.

Import HRC offers also inched lower at the end of the week.

Notably, HRC offers from Japan and South Korea to Italy were heard at €570-585 per tonne CFR, compared with €600-620 per tonne CFR earlier this week. Producers from Southeast Asia were able to offer coil with January shipment to Europe.

– Julia Bolotova

The European Commission is currently working on a scheme to block finished steel products rolled from Russian slab in non-EU countries, says Yuriy Rudyuk of law firm Bael and Bellis.

A regular speaker at the events of steel distributors/traders association EUROMETAL, Ruduk at the International Steel Trade Day in Antwerp last week gave an update on some significant moves planned at the EU level.

As of 30 September next year, the import and purchase ban will be expanded to non-Russian steel products “processed in a third country incorporating iron and steel products originating in Russia,” an EC text reads.

“That will mean a major change,” Rudyuk emphasised, noting that many re-roller companies outside the EU are already worried, and starting to look for sources elsewhere. An opposite effect could occur as well in “a pendulum-like rush for available quotas” before the ban takes effect, he cautioned.

This is a new angle of looking at imports in Europe, but has been increasingly prevalent in the US already, Kallanish heard Rudyuk say at the conference. The perspective has been successfully enforced already in fields like parts for bicycles which are restricted for import but then assembled by third parties in countries not covered by restrictions.

It is not only regarding Russian or Belorussian slab. The EU is currently also investigating processing operations in Turkey of imported hot-rolled stainless steel slabs from Indonesia for possible antidumping duty circumvention practices.

Participants at the conference noted that such detours via re-rolling constitute a business model of its own. In the above example, “slab from Indonesia to the EU might decline, but at the same time stainless coil from Turkey might increase,” one said.

Christian Koehl Germany