Day: 25 November 2022

German steel products sales in October fell 14% year on year to a 10-month low 743,703 mt while stocks were also lower, steel stockholders’ association BDS said Nov. 25.

The fall coincided with weak end-of-year prospects for the steel market amid expectations of a decline in German GDP in the fourth quarter.

Sales of long products, used primarily in construction, were down 14% to 230,809 mt, with sales of flat products, used in automotive and construction industries, down 8.6% to 467,216 mt.

October sales in all product categories were lower than the average sales recorded in Q3 this year, the BDS data showed.

Germany’s stocks of all steel product categories stood at 2.16 million mt in October, 1% lower than in October 2021, according to BDS, with stocks of long products 1.6$ higher at 792,811 mt while flat products were down 1.2% at 1.33 million mt.

Economic backdrop

The German composite Purchasing Managers’ Index (PMI) for November, published this week, rose 1.3 points to a three-month high 46.4, with manufacturing PMI up 1.6 points to 46.7, as manufacturing firms reported their output fell by less than in the prior month as supply disruptions eased.

Economists at UBS said in a Nov. 25 note that the assessment of Germany’s current economic conditions, by contrast, slipped further to its lowest level since February 2021, supporting the view that GDP will fall in the current quarter, although the recession may be more moderate than originally expected.

“Despite the improvement in the November reading, our ifo [income from operations] business cycle clocks show the overall German economy in the recession quadrant (below-average current conditions and below-average outlook), driven by manufacturing and services,” the UBS economists, led by Felix Huefner, said.

While fears of physical gas rationing in Germany this winter have now eased, uncertainty continues high in the energy-intensive sectors, according to UBS.

Platts, part of S&P Global Commodity Insights, assessed Northwest Europe hot-rolled coil at Eur605/mt ($627/mt) ex-works Ruhr on Nov. 24, down Eur5/mt on the day. The price has fallen 348% since the start of 2022.

Author Diana Kinch, diana.kinch@spglobal.com

Tata Steel says its Dutch integrated plant located in Ijmuiden has been ranked third in the 2022 CO2 intensity benchmark calculated by the World Steel Association.

The full list of the benchmark ranking has not been published officially yet by the organisation, but Tata Steel issued a statement to underline the new milestone reached by its operation, Kallanish notes.

“The CO2 intensity of the steel produced in IJmuiden is around 7% below the European average and almost 19% below the global average,” Tata Steel says, adding the site has made the top five since 2020.

Tata Steel targets complete CO2 neutrality by 2045. “The company plans to switch to green hydrogen-based steelmaking at its IJmuiden steelworks. It targets to commission its first direct reduction plants and electric furnaces by 2030, becoming a producer of large quantities of high-quality green steel and reducing its CO2 emissions by 35-40%,” Tata Steel concludes.

Emanuele Norsa Italy

Spain’s automotive sector continued to recover in October, seeing production and exports rise on-year, Kallanish notes.

The improvement resulted from greater availability of microchips on the market and the flexibility of manufacturers to finish assembling vehicles previously delayed by a lack of parts.

“Despite the slight improvement in recent months, it is still too early to speak of a full recovery,” says national automotive association Asociación Nacional de Fabricantes de Automóviles y Camiones (Anfac). “The industry remains exposed to the microchip crisis and the uncertainty of the war in Ukraine, among other external factors.”

Output in October reached 204,988 units, an on-year growth of 24.2%. Ten-month production amounted to 1.8 million vehicles, or 2.8% more compared to the same period last year.

Meanwhile, a recovery in sales in major markets boosted Spanish vehicle exports. These were 171,769 units in October, up 20.4% on-year. Ten-month exports rose 1.1% over January-October 2021 to 1.54 million vehicles. Although by only a small margin, year-to-date shipments saw growth for the first time this year, Anfac confirms.

Exports represented 83.8% of the country’s total vehicle production in the month, with European markets having a 70.5% share of Spanish deliveries in October, the automotive association’s data show.

Todor Kirkov Bulgaria

The Italian distribution sector has not yet felt the positive trend of surging demand and increasing prices for hot rolled coil. Demand for all coil derivatives remains subdued this week, with sales back-to-back and “seriously depressing prices”, according to service centres and distributors.

Some distributors’ stocks in Italy are said to be low and most companies are in need of buying for the first quarter of next year, which suggests the return in the coming days of some apparent demand. Coil derivatives such as sheet and tube are said to have now reached rock bottom. At current levels, they have become unsustainable and some price hikes are expected on both products possibly next week.

Asian HRC producers stopped quoting in Europe last week due to unsustainably low prices (see Kallanish 22 November newsletter). Imported HRC is expected to become uncompetitive and domestic producers will have to cover the majority of demand in Europe for Q1.

Prices of coil and derivatives in Europe will be supported in the first month of 2023 by lower coil availability due to the current production cuts throughout Europe and uncompetitive import offers. However, distributors argue that significant future price increases may not be absorbed by the weaker European economy and the market risks slowing to a halt again in Q1.

This week may be the last quiet period for sales in Italy before year-end and producers will have the upper hand in negotiations.

Natalia Capra France

ArcelorMittal Kryvyi Rih (AMKR) has critically limited electricity consumption and suspended most production processes due to the latest Russian missile attack on critical infrastructure facilities in Ukraine, Kallanish notes.

The available amounts of electricity are not enough to support production even at 20% capacity, the enterprise claims.

AMKR has temporarily stopped steel smelting and production of rolled products. Currently, only coke batteries No.5 and No.6 remain in operation. Two more coke batteries – Nos. 3, 4 – and blast furnace No.6 are in hot conservation mode.

106 miners, who remained underground due to a blackout at the mine, were successfully rescued and brought to the surface.

According to the company, it will return to normal operation as soon as specialists succeed in renewing Ukraine’s energy infrastructure. “We are grateful to these heroes for their round-the-clock efforts and hard work and to our miners and metallurgists for confirming that we have a steel spine, endurance and strong spirit,” AMKR adds.

AMKR decreased coke production in January-September to 432,000 tonnes, down by 80% on-year. In September alone, output of coke was 46,000t.

In October, the company began the process of shutting down coke oven batteries No.1 and No.2 (see Kallanish passim). Earlier, it restarted coke oven batteries No.5 and No.6 after the units were forced to stop due to the invasion of Ukraine by Russian troops in February.

The plant had been operating with only with one blast furnace, producing 100,000 tonnes/month of products and operating at 20-25% capacity due to coal shortages. It has been shipping products to the ports of Poland and the Baltic countries, from where they are sent onwards to customers.

Svetoslav Abrossimov Bulgaria

Italian rebar prices are see-sawing against the backdrop of poor demand and steelmakers’ price increases of ten days ago.

Local producers pushed up values by some €70-80/tonne ($72-83) this month compared to October. The buyers who spoke to Kallanish, however, confirm they refused to purchase at increased values and one producer confirmed a new order at €500/t base ex-works.

Contract values are showing a slight uptick, hovering in the range of €500-520/t base ex-works. Including size extras, domestic rebar prices have flattened this week at €760-790/t ex-works, with demand reported low. The low point of the range of €480-490/t seen in the past weeks has disappeared. Mesh asking prices are at €620-640/t ex-works base, sources suggest.

While producers increased their values to €580/t base ex-works ten days ago, they have since lowered their expectations and are quoting a more reasonable €520-540/t base ex-works. High stocks are reported throughout Italy as buyers are playing a tug-of-war with producers.

Distributors believe prices will remain in the current range in the first week of December. Steelmakers will implement early stoppages this year for the Christmas holiday break to balance demand and supply. Before idling their plants, they are expected to try again to increase prices with the aim of starting the new year from higher than current levels.

Natalia Capra France

Although the northwest European coil market is still characterised by low demand and order activity, the balance could flip rather suddenly, even if that does not happen till next year.

“Stocks at distributors may still not have fallen sufficiently, but that does not mean that shortages could not occur here and there,” a Dutch observer notes. “For instance, certain qualities, sizes and thicknesses can suddenly no longer be delivered from stockholders because they have not yet received them [from the mills]. This could be because producers have shut down several lines for shorter or longer periods,” he explains.

A buyer of mostly galvanized material at a German fabricator confirms that lead times in some cases are becoming unforeseeably longer: “I wanted to get 400 tonnes on short notice, which was confirmed, but then they could not deliver so far,” he tells Kallanish. “We can place orders for Q1 quite easily still, but if automotive comes back, the mills will raise the bar and possibly won’t deliver to us.”

Automotive and other large customer industries will also soon sit down with mills for negotiations for long-term supply. According to the Dutch manager, mills reportedly want to move to a hot rolled coil base price of at least €800/tonne ($833) and for specific customers, such as cold rolling mills, even €950 to €1,000.

Around the time of the Euroblech fair last month, Kallanish heard similar indications from mills, who were aiming to roll over mid-year prices of above €800. Buyers saw a similar target, with some room for lower-priced deals.

Commenting on the spot market, the Dutch observer underlines that roads may lead either way. “Some insiders are of the opinion that the price recovery will take place in the next quarter, but we cannot yet see clear indicators for this,” he says, pointing at economists’ forecast of a looming recession.

Christian Koehl Germany

Traders in southern Europe have confirmed this week that the coil market seems to be preparing for a slight recovery, as import offers from Asia have been either withdrawn or increased.

A source notes that prices from Japan, South Korea and other Asian suppliers have fallen clearly below production costs in recent weeks. Now, some offers are seen increasing.

“We have received new offers from Taiwan with an increase of $25/t,” a trader tells Kallanish. “Similarly, supply from South Korea is now silent as the market is being assessed.”

One trader says the latest offers he received were at $620/t cfr Italy for hot rolled coil from Asia; another mentions $600/t cfr, still well above the levels of $560-580/t cfr heard until the beginning of last week.

“Mills in Japan and South Korea have decided to hold off for the moment, also to avoid further scrutiny from the European Commission on potential investigations. Meanwhile, domestic European mills are trying to stop the negative trend of prices domestically, while Indian suppliers remain uncompetitive,” a source adds.

Some believe this could be the last possibility for traders to take competitive positions to be delivered in the first and second quarters next year, but the market trend nevertheless remains uncertain.

“Clearly, the market has bottomed, but it is still too soon to confirm that a real recovery is in place. I can say that we have seen sales for prompt-delivery material at docks increasing during the last days, confirming that stocks are finally also exhausted among service centres and distributors,” a trader concludes.

Emanuele Norsa Italy

Market participants were quick to stress the difference between spot and contract settlement levels in the European hot-rolled coil market Nov. 24, as mills continue to trade lower to secure production before the holidays.

Platts assessed hot-rolled coil in Northwest Europe down Eur5/mt on the day, at Eur605/mt ex-works Ruhr.

Sources reported deals at Eur600-620/mt ex-works Ruhr, with most falling toward the lower end of the range amid bearish sentiment.

Offers from South European mills were even heard below the Eur600/mt ex-works level, at Eur600/mt delivered Northern Europe ex-Italy.

Mills were said to be attempting price increases for next year, but distributors were skeptical given a lack of improvement in their sales volumes or prices to end-consumers, and the illusory recovery of apparent demand on first-quarter enquiries.

“Various service centers are trying to improve their prices, but others are struggling, creating a wide gap between what different companies are offering,” one distributor said. “On the mill side, they are attempting higher prices for next year’s deliveries as they’re at costs or below; if they don’t realize a price increase now, they’ll lose Q1 to the downtrend.”

The source expects additional mill closures in the near term, seeing a sustained mismatch between current supply and demand.

“Mills are trying to increase the prices a bit, but I still don’t feel that demand is getting much stronger,” another distributor said. “At least it seems not to be moving much further down.”

In the background, mills have been negotiating long-term contract prices with larger buyers, including in the automotive sector, but both buy- and sell-side sources stressed that current spot transaction levels could not be applied to contracts.

With many mills under their margins and demand at an almost-unprecedentedly poor level throughout H2 this year, steelmakers have had to reduce prices significantly against rising energy costs to sustain production.

Contract price targets were heard at Eur700/mt ex-works minimum on the day from the buy side, with current negotiations heard falling between Eur800-900/mt ex-works.

In the South European market, the Platts domestic HRC assessment was unchanged at Eur600/mt ex-works Italy as buyers digest attempted price increases, with HRC heard offered at Eur630-650/mt ex-works for January delivery.

New import offers were not yet heard after some Far Eastern origins withdrew from the market, besides the now-duty free Indian material, which was still settling in the market.

Buyers were said to be interested in import material given perceived visibility of a price floor in the domestic market.

Platts assessed HRC, CIF South Europe, up Eur20/mt on the day, toward offers heard from trader sources at around Eur610/mt CIF ex-India and Korea.

Platts is a part of S&P Global Commodity Insights.

— Benjamin Steven