Day: 1 December 2022

Market fundamentals remained weak in the Southern European rebar market in the week to Wednesday November 30.
Subdued demand and an uncertain outlook continued to inhibit trading activity.

Input costs such as scrap and energy prices have risen through late November. Further price declines would result in prices becoming unworkable for mills because producers would be selling below cost, Fastmarkets heard.

Most market participants said that they felt that the price floor has been reached.

Italy
Depressed consumption resulted in there being few trades in the Italian rebar market.

Fastmarkets’ price assessment for steel reinforcing bar (rebar), domestic, exw Italy, was €810-860 ($839-890) per tonne on Wednesday, stable week-on-week.

Slow demand and a wait-and-see attitude among market participants resulted in there being few trades.

“Demand remains low,” one trader source said, “[and] is likely to stay the same until the end of the year. The future is uncertain, but we forecast that the first few months of 2023 will be difficult.”

“Demand is very slow currently,” another buyer source said. “The general feeling in the market is that conditions are going to remain the same until the end of the year.”

Production cuts have yet to significantly affect prices due to the depressed demand. Some mills were said to be intending to extend Christmas production stoppages longer than usual.

Market sources remained pessimistic regarding the effect that such extended stoppages would have on prices, given that supply still dramatically outweighs demand.

But future infrastructure projects could boost prices in the new year, sources said.

“I think prices will remain stable for the remainder of the year,” one buyer source told Fastmarkets. “The market is calm, and we are waiting to see what infrastructure projects the new government [in Italy] will invest in next year.”

Spain
Weak demand resulted in few trades being agreed in the Spanish rebar market, Fastmarkets heard.

Energy and scrap price increases may boost prices, sources added.

Mills cannot continue to offer discounted prices if input costs are rising, Fastmarkets heard.

Fastmarkets’ price assessment for steel reinforcing bar (rebar), domestic, delivered Spain, was €730-760 per tonne on Wednesday, stable week-on-week.

International scrap prices affect the prices of all long steel products. Scrap prices remained flat through early November, but have begun to rise since the middle of the month.

Fastmarkets’ daily calculation of the index for steel scrap, HMS 1&2 (80:20 mix), North Europe origin, cfr Turkey, was $361.44 per tonne on November 30, up from $344.65 per tonne a week earlier.

Published by: India-Inés Levy

European domestic steel sections prices continued to fall week on week Nov. 30, as mills cut offers further to attract demand.

Platts assessed European medium sections (category 1, S235 JR) down Eur40/mt at Eur985/mt delivered on Nov. 30. The assessment has fallen Eur265/mt since mid-September, Platts data showed.

A deal for 1,000 mt was booked Nov. 28 at Eur970/mt (S235 JR, Cat 1) delivered Benelux, by a distributor source, while a second distributor source said Eur1,000/mt delivered was considered workable, but only for delivery by end-December.

“We have received the message that mills may increase prices as they are expecting higher costs in January, so mills have two options — to cut production or raise prices,” the second distributor source said.

Meanwhile, Northwest European domestic rebar prices fell sharply amid poor demand. Platts assessed TSI Northwest Europe rebar down Eur32.50/mt on the week at Eur752.50/mt ex-works on Nov. 30.

The assessment is now well below the Eur822.50/mt delivered level seen on Feb. 23, prior to the outbreak of the Russian invasion of Ukraine. Following the outbreak of the war, EU domestic rebar prices eventually rose to an all-time peak of Eur1,340/mt delivered on March 30, before falling steadily for the rest of the year.

“The [rebar] price now is a political price to try and break open the market and see some activity but the price does not even cover the cost of production for rebar — and scrap costs are also increasing,” one sell-side source said, citing offers at Eur765-775/mt delivered.

The source added that December delivery of rebar was difficult amid the short working month due to holidays, and that he was advising customers to buy at current prices for January or February delivery, rather than wait, as he expected prices to go up

One Italian mill source indicated that German domestic rebar prices were as low as Eur745-750/mt delivered in the local market, adding that offers for Italian-origin rebar at Eur750/mt delivered were of little interest to German buyers.

“But this is the bottom of the market, buyers also understand this — we can’t go lower than this as energy costs are rising, and scrap is rising,” the Italian mill source said.

Platts is part of S&P Global Commodity Insights.

— Viral Shah

The European hot-rolled coil market was described as in a transitional stage Nov. 30, as market participants expect price increases on flat products in the near term.

Both the North and South European markets described accelerated demand this week, with depleting distributor inventories motivating first-quarter purchasing.

“I’m hearing generally that service centers are reaching their bare minimums and so are looking to build stock,” said a North European distributor. “Offer prices are up very slightly and many see the floor, so I think we’ll see some buying at these levels followed by price hikes next week.”

Mill sources confirmed the sentiment, with some withdrawing from the market to assesses willingness to pay higher prices from next week.

“We’ve sold the last of our volumes at the current price level of Eur600-610/mt ex-works,” said a mill source. “At the moment we aren’t offering until next week as we’re expecting a price increase.”

While some perceived opportunity to secure volumes at the previously reduced price level, even below Eur600/mt ex-works North and South Europe, the most competitive of offers were generally accepted as withdrawn from the market.

“The market is in a transitional period,” said a German distributor. “I’m hearing that in some cases mills are taking back old offers and withholding new offerings, and there’s definitely resistance to the lower levels now.”

A Northern mill source confirmed expectations of an uptrend given recent stock clearance from steelmakers and provided some clarity on lower prices heard in the market.

“In general, I think we’ll see increases from next week, but its always possible to see some stupid prices left over,” said a Northern mill source. “Some are still in stock clearance, and some must continue to produce as otherwise they’ll lose ETF rights, so in some cases the arguments to sell lower are still there.”

Platts assessed hot-rolled coil in both North and South Europe stable, at Eur610/mt ex-works Ruhr and Italy.

Platts is part of S&P Global Commodity Insights.

— Benjamin Steven

Order intake in Germany’s construction industry in September was down 23% on the corresponding 2021 month, Kallanish learns from construction association Hauptverband der Deutschen Bauindustrie (Bauindustrie).

This marks an aggravation over August, when the association already lowered its forecast for full-year 2022, but the year-on-year dip was still only 5%. For the first nine months, the y-on-y dip is 7%, in nominal terms, as the figure is price-adjusted and does not yet consider cancellations that took place in the meantime, the association notes.

“The revenues in September were nominally still higher, but were eaten up in full, and beyond, by the price increases,” says Bauindustrie’s managing director, Tim-Oliver Müller. “In real terms, they sunk by 8% in September, and by nearly 5% in the first nine months. Lower demand is having a more and more negative effect on production,” he details.

In a poll carried out by the national trade and commerce chamber, 60% of construction companies expected a negative trend for their business in the next 12 months, while only 3% had reason to see an improvement. Müller has accused the government of stepping on the brake on infrastructure investment, which he says means a brake on the entire German economy.

Meanwhile, rebar prices appear to have relatively stabilised after they dropped by nearly €100/tonne ($103) in a matter of one week in early November. This brought the base price from domestic mills to €600/t, which plus the size extra of €265 translates to €865 delivered.

Sources say prices did not fall noticeably in the course of November and might remain sitting where they are, but could soften slightly more before the business year ends. “Mills might concede another €10-30, but not massively,” a northern German buyer says.

Christian Koehl Germany

The French rebar market continues to stagnate, with order intake low and buyers adopting a wait-and-see attitude. Prices are steady on last week but have lost over €100/tonne ($103) since early November.

In the south of the country, particularly, values have been dragged down by competitive import offers from Spain, distributors report. The French market is currently one of the slowest in Europe. In neighbouring countries, Italy and Germany, markets are also quiet but prices are higher and some limited volumes are being sold regularly every week. In France, November has not brought the usual restocking for the end of the year, and no restocking is expected in December, Kallanish notes.

Including size extras, domestic contracts are at an average of €700-720/t delivered, sources suggest.

On a brighter note, 2022 has been a record year for all players throughout the value chain despite the slow fourth quarter. Sources expect a hard Q1 next year, with a big question mark over energy prices. December production plans will depend on increasing energy costs, which are forecast to skyrocket in the coming days. If this happens, local producers may be forced to shut down production earlier than expected this month.

Natalia Capra France

Italian contract prices for scrap imports from Germany, France and Eastern Europe are expected to remain stable month-on-month in December, with some €5-10/tonne ($5.1-10.3) increase on certain grades in short supply.

While Italian demand for imported material is strong, local mills’ production plans for December remain unclear. They will all implement longer maintenance stoppages to balance demand and supply, but they have yet to officially communicate dates to their suppliers. Some are considering shutting down from 16-19 December until business resumes after the Christmas holiday on 9 January, Kallanish hears.

The main issue remains increasing rail freight tariffs in Germany and Austria, whose rail operators are asking for a 40% and 30% increase respectively effective 1 January. Local scrap merchants and steel companies are trying to negotiate a two-month delay and a more moderate increase but nothing has been agreed so far. Both scrap suppliers and steel mills will be hit by the move, together with many Italian steelmakers selling coil and long products in Germany and Austria.

If the 40% increase is implemented, Italian steelmakers will have to pay an eyewatering figure of €55/tonne for scrap transport from southern Germany to northern Italy, up from the current €40/t. According to some scrap sellers, the rate increase in Germany will ultimately be agreed at about 30%, but this still represent a significant hike in transport for Italian mills.

Scrap import contracts are negotiated toward the first or second week of each month with material delivered until the first ten days of the next month. Italian mills will therefore be obliged to pay rising freight rail transport in the first ten days of January for contracts agreed in December.

Germany is a prolific scrap supplier to Italy. Italian steelmakers say they cannot afford to only buy scrap on the domestic market and will need to continue to import from other European countries. Sellers and buyers are currently trying to find solutions.

To make things more complicated, truck transport rates from Germany and Austria will also increase from 1 January. Scrap is often shipped to Italy from Stuttgart or Munich by truck using intermodal transport. Material travels to the railway connection by truck. It is then charged onto trains and discharged in a northern Italian station such as Milan or Verona where another truck provided by the supplier will deliver scrap to the mill’s yard. Suppliers who use this type of transport will also have to absorb the German freight increases, Kallanish notes.

This month, French and German suppliers are reporting limited old scrap availability, like last month, and a lower intake of grades such as shredded E40 and sheared scrap. One German supplier also reports limited E8 new arisings availability.

Last month, import contracts from France and Germany to Italy for E8 mixed grade were done at €360/t, E40 at €370/t, E3 at €355-360/t and the lower E1 grade at €315-320/t, all on a delivered basis. From Eastern European countries, Italian mills paid €355-360/t for the mixed E8 grade, about €300/t delivered for E1, €370/t for E40 and €330-340/t for E3, sources suggest.

Natalia Capra France