Day: 13 February 2023

Head Manager of Polska Unia Dystrybutorow Stali – about the structure of steel consumption and the factors which affect steel production and demand in Poland

In 2022, steel consumption in Poland significantly decreased. It was mainly caused by the energy crisis, high inflation and disruptions in the supply chain. At the same time, the steel output in the country slowed down as a result of capacity reductions that were witnessed across Europe last year.

Despite this, there is still a wide gap between domestic steel consumption and production. The disparity probably will remain in 2023, however, it is too early to make accurate predictions about its size. The output will be affected by the renovation of the furnace at the local steelwork. Instead, demand will mostly depend on the return of positive investment sentiment.

Polska Unia Dystrybutorow Stali (PUDS) is an organization in Poland, which associates with and supports distributors and processors of metallurgical products.

Piotr Sikorski, the Head Manager at PUDS, spoke with GMK Center about the structure of steel consumption and the factors which affect steel production and demand in Poland.

What was the steel consumption in Poland in 2022? What were the dynamics and volume in the second half of the year?

– It was a challenging year for the Polish steel industry. Even more difficult, as the year before we noted all-time records for the market, so every result looks pale in comparison. The war in Ukraine had a very brutal impact on the Polish economy and, of course, on the steel market as well. Steel consumption in October fell to a level not seen since the lockdowns in the first phase of the coronavirus pandemic. However, the real decrease in consumption was visible practically from the beginning of the year’s second half. The first two quarters compensated only to some extent the general result, and make it less disappointing. In total, we will probably end the year with apparent consumption 2 million tonnes lower than in 2021, i.e. 13.3 million tonnes.

Why did steel consumption decrease in Q3 and Q4 of 2022? 

– There is no single reason for this situation, in fact there is a whole chain of events leading up to the current crisis. No one will be surprised by the fact that inflation, the energy crisis and disruptions in the supply chain lie at its root. The economic recession that has hit Europe has a multifaceted background, which is why it will be even more difficult to reverse its effects. I am afraid that we are also dealing with the overlapping of the economic effects of the pandemic and the war in Ukraine, which means serious problems for many countries, including Poland. Since the beginning of the third quarter, we have been observing a decrease in demand for steel from the main customers, including the most important for the Polish steel market, i.e. construction. Currently, we are dealing with a collapse of mortgage loans, and as a result, many investments have been suspended or postponed. Infrastructural investments also have problems with financing, as Poland has still not received NGEU funds.

Which industries consume the largest volumes of steel products in Poland? Can you describe the structure of consumption by product type?

– Obviously, the biggest consumer of steel goods is the construction sector, which accounts for about 40% of steel products. At the same time, it is the sector that unfortunately suffered the most from high inflation and tightening of credit policy. This is followed by metal products, which account for about one-fifth of the market, and machinery and automotive industry, about 10 percent each. Among the smaller but very important steel users is the white goods industry, which consumes only 5 percent of steel but at the same time is extremely important for the Polish economy. Poland is one of the biggest producer of household appliances and generates demand for steel in cooperating sectors. Although two thirds of the production of the Polish steel industry are long products, nearly 60 percent of consumption are flat products.  Therefore, Poland mainly imports flat products to fully meet the demand.

What was the steel output in Poland in 2022? What production do you expect in 2023?

– In 2022, we witnessed capacity reductions across Europe. Unfortunately, this trend has not spared Poland. In the last quarter of the year, blast furnace no. 3 at the ArcelorMittal steelworks in Dąbrowa Górnicza was shut down. As a result, the production of crude steel in Poland dropped sharply by about 10% compared to the previous year, reaching only 7.5 million tones. In the last months of the year, the year-on-year decline was even as high as 30 percent. The first months of the new year will not bring a significant change, since with the restart of blast furnace No. 3, the renovation of furnace No. 2 will begin. This means that the largest steelwork in Poland will continue to operate at only half of its capacity. It will certainly affect production throughout 2023, which, unfortunately, may be very similar to last year’s.

What is the steel import in Poland? What is the geography of these supplies? 

– Poland heavily depends on steel import, and this hasn’t changed in 2022, even though our main eastern suppliers had to be replaced because of war. In mid-2022, deliveries from Russia and Belarus stopped completely, and from Ukraine halved over the entire year. However, since almost three-quarters of import comes from the European Union, this direction has largely replaced eastern suppliers. Interestingly, there was also an increase in steel imports from Vietnam, Japan and South Korea, and even increased supplies from China – which are not a natural trading partner for Poland, but they represent marginal amounts of steel. The main import directions remain Germany, Czechia and Slovakia, and among third countries – Ukraine.

What steel consumption do you forecast for Q1 and by the end of 2023? What will it depend on?

– Inventories remained low at the end of 2022, but high uncertainty refrained distributors from renewing it. More purchasing activity should be expected in the first quarter, since many distributors have no other choice. Currently, steelworks try to push prices, but the pressure is not supported by stronger demand from end users, therefore it is difficult to say how long it can last. As for the whole 2023, there are still too many question marks to say how the demand for steel will develop. The key condition is the return of positive investment sentiment, which will be difficult to achieve given the current level of inflation and economic situation.

How have the energy crisis and the strengthening of the credit policy affected the steel sector in Poland?

– The main problem is the lack of strong enough demand to overcome other negative anti-growth factors. Of course, the energy crisis has a significant impact on the costs of steel mills, the double or triple price increase had an impact on margins, which, according to analysts, in Polish BOF mills were to fall to EUR 50-190 per metric ton for HRC. It should also be noted that a mild winter, aid programs and a drop in gas prices had a positive impact on producers. However, the volatility of the market situation may still result in the return of these problems very soon. A more important challenge seems to be the return of steel users to higher business activity as soon as possible. As I have already mentioned, there is a complete stagnation on the credit market, and the lack of investment financing means stagnation for many months. Launching new, steel intensive investments is time-consuming and I am afraid that we may find ourselves in an investment hole for quite some time.

Does the Polish Government support the steel industry amidst high energy prices? 

– First of all, there is a compensation scheme for energy-intensive sectors that has been in force for some time and just now, the Council of Ministers adopted the program “Aid for energy-intensive sectors related to sudden increases in natural gas and electricity prices in 2022.” This is a much bigger program, for around 1000 companies to benefit, with a budget of PLN 5 billion. The amount of support will depend on the number of eligible costs incurred by the entrepreneur from February to December 2022. We are talking about the costs of purchasing gas and energy resulting from a price increase higher than 50% compared to the average price in 2021. The program is not perfect, but for a group of companies, especially those on the producing side, will serve as so much needed help.

What else should be done in this context? Does the Association conduct such a discussion with the Government bodies?

– PUDS is involved in many policy consultations and we act as a representative body for steel processing and distribution. As a part of the big industrial sector and only one side of the steel market, it is not always easy to reach with our suggestions but we make everything possible for our voice to be heard.  We must be aware that all businesses are affected by the current situation and seek some kind of relief.

How does the PUDS protect the steel industry’s interests? Can you name examples of such cases?

– We act in many fields to facilitate running the steel business. One of them is to protect our industry’s interests. For more than 20 years we have been involved in many important battles, the most important of which was probably the fight against VAT fraud in steel. But less spectacular cases in which PUDS acts as a support for the steel sector are also important. We also conduct other forms of support, such as research, and market analysis, provide information, conduct training and webinars, and introduce young managers to work in the steel industry, but we also do not forget about networking and integration. We want to be wherever our help may prove useful to entrepreneurs interested in the Polish steel market.

Yevheniia Hubina

Researchers at the UK’s Steel and Metals Institute at Swansea University and the Materials Processing Institute in Middlesbrough are working with global metals and mining companies to develop a process to use hydrogen as a fuel for steelmaking furnaces to cut emissions.

Swansea University said Feb. 9 that the researchers had been using technology based at the Steel and Metals Institute to examine how materials behaved when using hydrogen reduction to remove oxygen from a material.

“If switching to hydrogen from fossil fuels proves feasible, it would slash the carbon emissions from steelmaking,” the university said.

The technology, called a reducibility rig, simulates what happens to materials at very high temperatures in gas-laden environments, it said, which would provide an accurate picture of how hydrogen and other materials behave in the furnace as a first step towards piloting a new type of hydrogen-fueled process.

The work had tested how the technology could work, before the next phase of the project began, Steel and Metals Institute Facilities Manager Mike Dowd said, adding that the reducibility rig had provided a virtual look at how the hydrogen reduction process could work on an industrial scale.

“It means we get a full picture of how materials behave in extreme conditions,” he said, adding that the researchers could also compare hydrogen with carbon-heavy fuel sources.

“With investment, the new hydrogen furnace technology could replace the need for blast furnaces altogether,” Dowd said.

He added that the tools used and the team’s links with industry meant the project could scale up these technologies for commercial use quite quickly.

“This is crucial as we all know that time is of the essence in the drive to cut carbon emissions,” he said.

Currently, iron is reduced in the furnace using carbon monoxide from coke, which attracts the oxygen from the iron ore, but emits large volumes of CO2.

The university noted that 6% of global carbon emissions come from the ironmaking process alone and a single blast furnace produced 5 million mt/year of carbon.

The project is being funded by the UK Department for Business, Energy and Industrial Strategy’s Industrial Fuel Switching Program.

Platts, part of S&P Global Commodity Insights, assessed the weekly UK hot-rolled coil price at GBP730/mt ($883.69/mt) DDP West Midlands Feb. 9, up 18% since the start of 2023.

— Jacqueline Holman

Italian rerollers have increased domestic offers for heavy plate in the week to Feb. 10 due to higher prices for imported slab from Asia.

Transaction prices have also moved up, but they remain below target prices.

Italian mills have been offering plate at Eur950-960/mt ex-works Italy while transactions have been settled at Eur880-920/mt ex-works Italy

Platts assessed domestic prices for heavy plate in South Europe up by Eur25/mt on week to Eur900/mt ex-works Italy on Feb. 10.

“Italian rerollers have consolidated position on plate pricing as they all have to deal with rising slab costs,” a reroller said.

Deals for imported slab from Asia have been heard at $720-$730/mt CIF Italy and offers – at $720-$750/mt CIF Italy. Market sources believe that the exporters will push offers closer to $750/mt CIF soon.

Platts assessed prices for imported slab in South Europe at $725/mt CIF Italy on Feb. 10, up by $5/mt on week.

Full order books of the mills have also been supporting the plate price recovery – only limited volumes for the March rolling material remained available.

Demand, in the meantime, remained moderate as restocking had ended, and smaller volumes have been traded over the week. This, however, is unlikely to harm the bullish mood that has settled in the market, source said.

A Northwest European reroller has been offering plate at Eur1,000/mt delivered in the north EU. Previously the mill had been undermining the price rise with aggressive offers, but now the cheap prices were no longer available.

One of the German steelmakers has been offering plate at Eur1,000-1,050/mt ex-works Ruhr. Other German mill has remained focused on fulfilment of long-term and project orders and had only limited offers at Eur1,100/mt ex-works Ruhr.

Platts assessed domestic prices for heavy plate in Northwest Europe at Eur1,000/mt ex-works Ruhr on Feb. 10, unchanged on week.

In Central Europe, offers of limited volumes from the Czech Republic have been heard at Eur950/mt ex-works and a Polish steelmaker has not been offering any material.

Platts is part of S&P Global Commodity Insights.

— Maria Tanatar, Benjamin Steven

Steelmakers kept offers firm in the European hot-rolled coil market Feb. 10, unwilling to drop prices toward buyers’ relatively stable idea of tradable value.

Platts assessed hot-rolled coil in Northern Europe stable on the day, at Eur765/mt ex-works Ruhr.

While offers in the market remain fairly steady at Eur780-800/mt ex-works Ruhr and Northern Europe – with mills widely heard as attempting to establish prices of Eur800/mt ex-works Ruhr – buyers remain unwilling to pay higher prices having restocked substantially in December-January.

“The coil market is quite confusing at the moment, there were a lot of deals in January which generated strong orderbooks for the mills,” a distributor said. “The market has slowed down now, but the mood is still positive it seems.”

“Mills are clearly aiming higher at Eur800/mt ex-works, but nothing has been booked at these prices yet,” the source added. “Higher import offers give argument to the mills that they should increase domestic prices, but we haven’t really seen a positive turn in demand.”

Buyers generally considered prices of around Eur750-770/mt ex-works Ruhr as workable, with distributors seeing tradable value lower on poor interest.

“Very strange market at the moment,” said a trader source. “I think once this restocking period is over, and in my opinion, it already is, demand is going to be poor.

“You have to be really competitive on prices to get something going.”

Another distributor characterized the market as at a “standstill.”

In the Italian market, buyers were heard as bidding at around Eur740/mt ex-works Italy, though distributors did acknowledge tradable value as higher at around Eur750-770/mt ex-works Italy.

Mill sources confirmed the levels, reporting deals at Eur760-770/mt ex-works Italy.

Platts assessed Italian HRC up Eur10/mt on the day, at Eur755/mt ex-works Italy.

Platts is part of S&P Global Commodity Insights.

— Benjamin Steven, Maria Tanatar

Steel rebar prices in Poland inched downward in the seven days to Friday February 10 amid seasonally slow demand from the construction industry, with a rebound unlikely this month, Fastmarket has heard.
There was almost no trading in the country during the assessment week, with buyers holding back from making deals, citing the low demand from the construction sector, which is the main end-user.

“Demand has generally stopped altogether. Winter and snow are not helping,” a trading source in Poland said.

Offers from local mills of 12mm rebar were heard at 3,330-3,400 zloty per tonne CPT, which would be equivalent to 3,300-3,350 zloty per tonne ex-works, but rare deals for small volumes were heard at 3,300 zloty per tonne ex-works during the week.

“Nobody is buying more than [enough to fill] one truck,” a second trader said.

Another trading source agreed, saying that during the assessment week most of the purchases that were reported were hand-to-mouth.

Fastmarkets’ price assessment for steel reinforcing bar (rebar), domestic, exw Poland, was 3,300 zloty ($747) per tonne on Friday, narrowing from 3,300-3,350 zloty per tonne the previous week/

In general, sources expected rebar prices in the country to remain flat in February, or to correct downward again, because demand was likely to remain lackluster in the short-run.

Italian producers were offering rebar for March delivery to Poland at €700-710 ($752-763) per tonne CPT, but no sales were reported during the week.

Published by: Julia Bolotova

European prices for steel hot-rolled coil were fairly stable on Friday February 10, but market participants told Fastmarkets they expect another round of increases from mills in the near future.
Fastmarkets calculated its daily steel hot-rolled coil index, domestic, exw Northern Europe, at €760.63 ($817.31) per tonne on Friday, down by just €0.37 per tonne from €761.00 per tonne on Thursday.

The latest calculation of the index was, however, up by €6.25 per tonne week on week, and up by €54.17 per tonne month on month from €706.25 on January 10.

Estimates of tradeable values from the buyers’ side for Friday’s calculation were reported between €750 per tonne and €780 per tonne ex-works.

Offers from integrated mills, meanwhile, were reported closer to €770-780 per tonne ex-works for April-May delivery HRC.

A re-roller in the region reported sales of HRC at €740-750 per tonne ex-works for April delivery.

Meanwhile, market sources said that a leading European steelmaker is planning another round of price rises for second-quarter-rolling coil, despite limited activity in the market.

Buyers were cautious about a new round of increases, given that demand from consuming industries has remained subdued, while some steelmakers have been gradually restarting idled capacities, threatening the uptrend.

Notably, in the week to February 6, ArcelorMittal restarted its blast-furnace (BF) A in Gijon, Spain.

In a fourth-quarter 2022 results conference call on February 9, the company confirmed that its Dunkerque site in France is now operating two BFs, compared with one in the fourth quarter. Only BF2, with capacity for 1.4 million tonnes per year of pig iron, is still idle, the company said in the call.

“BF3 was stopped in September for relining, which lasted 6-7 weeks, so it has been operational since late last year,” a spokeswoman told Fastmarkets.

During January, SSAB, ArcelorMittal Dabrowa Górnicza and US Steel Kosice also restarted BFs.

“January prices rises [for HRC] have been achieved thanks to restocking activity and limited supply. Currently, steel service centers cannot increase prices for end users, so I really doubt whether a new round of price rises from mills would be successful,” a buyer in the region said.

Fastmarkets’ calculation of the daily steel hot-rolled coil index, domestic, exw Italy, was €759.17 per tonne on Friday, up by €2.50 per tonne from €756.67 per tonne on Thursday.

The latest calculation of the index was up by €7.92 per tonne week on week, and up by €67.50 per tonne month on month from €691.67 on January 10.

In general, trading was poor in Italy in the latest pricing session, with mainly back-to-back business reported. This was also because buyers had purchased enough material during January and were now holding back from trading and watching the market instead.

One integrated mill in the region was offering HRC at €790 per tonne CPT, equivalent to about €770 per tonne ex-works.

Another producer was using a “case by case” approach, with sales reported at €750-770 per tonne ex-works during the week.

Local mills could offer April-delivery HRC.

Import HRC offers to Europe remained quite high and were limited.

Buyers reported price indications for Indian and Asian HRC at €730-740 per tonne CFR for April shipment, with sales reported at €740 per tonne CFR Antwerp from India in early February.

Turkish mills were out of the market after the powerful earthquakes earlier this week.

Market sources said they expect Japanese suppliers to come back with offers for April-shipment coil next week.

One market source gave an indication of Japanese HRC at €750-765 per tonne CFR, but this was unlikely to be considered workable by European buyers, sources said.

Published by: Julia Bolotova