Day: 22 August 2023

Author Eklavya Gupte, eklavya.gupte@spglobal.com

Carbon prices under the EU Emissions Trading System fell slightly in midafternoon trading Aug. 18 after rallying earlier in the week aided by resilient demand amid strong technical signals and tighter auction volumes.

EUAs for December were trading at Eur88.02/mtCO2e ($95.71/mtCO2e) as of 3:53 pm BST (0753 GMT) on Aug. 18, down Eur0.92/mtCO2e from the previous day’s settlement, but up 1.5% from Aug. 11, Intercontinental Exchange data showed.

Platts, part of S&P Global Commodity Insights, assessed EUA contracts for December delivery at Eur88.69/mtCO2e on Aug. 17, compared with Eur84.90/mtCO2e on Aug. 10. This was the highest price since July 28, Platts data showed.

After a slow start in August, EUAs rose steadily midmonth as investment funds continued to increase their net shorts.

Halved auctions and warmer weather forecast for Europe have pushed prices higher, said carbon trader Belektron in a recent note.

“A strong clearing price was aligned with increased net short position of investment funds, which sparked the buying activity,” the note said.

High electricity prices supported by warmer weather along with elevated gas and LNG prices due to the threat of an LNG workers strike in Australia were also contributing to a bullish sentiment.

Some traders and analysts expected prices to reach Eur90/mt next week, but they also warned that the strength could be temporary due to bearish economic indicators.

“I now personally expect the carbon price to reach Eur91-92/mtCO2e within the next few days, before consolidating in this region and progressively retract itself by responding to fundamental bearish signals,” a Brussels-based carbon trader said.

He added that fragile industrial data from the EU, high interest rates, and weak macroeconomic data from China were also contributing to “a medium-term significant bearish potential for the price of carbon emissions.”

Q1 emissions fall, CBAM details issued
Recent Eurostat data showed that EU greenhouse gas emissions totaled 941 million mtCO2e in the first quarter of 2023, down almost 3% from the same quarter the previous year.

“This decrease took place simultaneously with a 1.2% increase in the EU’s GDP in the first quarter of 2023, compared with the same quarter of 2022,” the bloc’s statistical agency said in a statement Aug. 16.

Emissions in Q1 2023 decreased in almost all EU countries, compared with the same quarter of 2022, except for Ireland, Latvia, Slovakia, Denmark, Sweden and Finland. The largest declines in GHG emissions were observed in Bulgaria, Estonia and Slovenia. Emissions in Q4 2022 were 938 million mtC02e, down 4% from Q4 2021, the data showed.

The European Commission has issued much-awaited details on the reporting obligations and methodology governing its Carbon Border Adjustment Mechanism.

In the transitional phase of CBAM, to run from Oct. 1, 2023, to Dec. 31, 2025, traders will only have to report on the emissions embedded in their imports without paying any financial adjustment.

Under the regulation, importers will need to report on the quantity of imported goods, direct and indirect emissions embedded in them, and any carbon price due for those emissions, including carbon prices due for emissions embedded in relevant precursor materials.

For electricity, for instance, the reporting entity must provide an emission factor used for exported electricity, expressed as mtCO2e per MWh.

For steel goods, the identification number of the specific steel mill where a particular batch of raw materials was produced must be provided.

Member states can apply financial penalties ranging from Eur10/mtCO2 to Eur50/mtCO2 of unreported emissions if the reporting entity has not taken the necessary steps or provided incorrect or incomplete information.

Meanwhile a CBAM Transitional Registry, an electronic database, is to ensure the efficient implementation of reporting obligations.

The goods covered by CBAM are iron, steel, cement, aluminum, fertilizers, electricity and hydrogen, as well as indirect emissions under certain conditions. The mechanism is to be phased in from 2026 to 2034, in step with the phaseout of free allowances in the EU ETS.

The purpose of the tax is to reduce the risk of carbon leakage, and to encourage importer nations to apply their own carbon markets and so limit CBAM impacts on their traded goods.

Author Euan Sadden, euan.sadden@spglobal.com

German monthly crude steel production was approximately 2.96 million mt in July, down 0.5% year on year and marking a second consecutive month of weakening production, the country’s steel association Wirtschaftsvereinigung, or WV Stahl, reported Aug. 21.

The July total was 1.1% lower than June owing to a slowdown in industrial production and subdued market demand.

Crude steel output produced in July using blast furnaces (BF) increased 6.1% year on year to 2.26 million mt, while output from electric arc furnaces (EAF) dropped 17% to 694,000 mt.

From January to July, crude steel production produced by EAF fell 11% on the year to 6.31 million mt, while production using BFs decreased 1.1% to 15.24 million mt.

Pig iron production saw an increase of 4.8% year on year to 2.08 million mt, with the year to end-July up 0.1% to 14.25 million mt.

Hot rolled coil production in the month of July fell 6.3% year on year to 2.54 million mt. From January to July coil output dropped 5.7% to 18.77 million mt.

In July demand for coil decreased due to subdued market demand and the presence of significant volumes of imported products awaiting custom clearance.

Platts, part of S&P Global Commodity Insights, assessed domestic hot-rolled coil prices in Northern Europe at Eur625/mt ex-works Ruhr Aug. 18, down 27% since March 30.

Author Maria Tanatar, maria.tanatar@spglobal.com

European steelmakers are expected to increase hot-rolled coil prices in September despite slow demand, sources said Aug. 21.

Trading activity remained limited on the day due to a seasonal slowdown, but the demand was unlikely to increase significantly in September, when both buyers and sellers will resume trading, sources said. As a result, the anticipated rise in offers is unlikely to be successful.

“The mills will try to increase prices, as they usual do when market starts to recover,” a Northwest Europe-based service center said. “But the demand is not strong enough to drive prices up.”

In addition, a large volume of imported HRC — around 500,000 mt, according to estimations of the sources — on the way to the EU and awaiting customs clearance at European ports also put pressure on domestic prices. As a result, the fourth-quarter safeguard quota was expected to be exhausted in a few days after Oct. 1.

Domestic prices were partially supported by production cuts caused by scheduled maintenance at some of the European plants.

Platts assessed domestic prices for hot-rolled coil in Northwest Europe up Eur10 on the day at Eur635/mt ex-works Ruhr on Aug. 21.

Tradable values and deals have been reported at Eur630-650/mt ex-works Northwest Europe.

Platts is part of S&P Global Commodity Insights.

Several associations and trade unions in Germany’s energy-intensive industries have issued a unanimous call to policymakers for a decision on how to make electricity affordable for industrial users, Kallanish notes.

Along with Wirtschaftsvereinigung Stahl, the federations and unions of glass, chemicals, construction materials and nonferrous metals have formed the Allianz pro Brückenstrompreis – Alliance for a Bridge Electricity Price.

“The transformation to climate neutrality requires massive amounts of green electricity – and it must be affordable,” says WV Stahl manging director Kerstin Maria Rippel. She notes that Germany’s electricity costs are two to three times higher than those of European and international competitors. “This hits the companies in the steel industry hard, which are currently taking giant steps towards decarbonisation. That is why we need a bridge electricity price – not permanently, but for the transition,” she maintains.

The members of the alliance represent a total of more than 1.1 million employees in over eight thousand companies. According to a recent brief study, a total of up to 2.4 million jobs and some €240 billion ($261 billion) in added value depend on the companies in energy-intensive sectors.

The members of the alliance are pleading for a quick solution to the current debate on a bridge electricity price. They point to the looming risk of site closures, job losses and relocations to other countries.

Christian Koehl Germany

A venture named HyIron has started up what it says is so far the world’s largest hydrogen-based direct reduction plant for the production of green iron, in Lingen, Germany.

HyIron is combined of TS Group from Aachen and LSF Energy from Paderborn. TS Group describes itself a pioneer in technical solutions in the field of fuel cells, batteries, and industrial furnaces, while LSF Energy has many years of experience in the generation of renewable energies.

HyIron’s associated partners in the project are energy group RWE and tubemaker Benteler Steel/Tube. The plant is located on the site of RWE’s branch in the Emsland region in Lower Saxony, chosen for its high density of hydrogen projects.

The partners are pondering the use of sponge iron in steel production from 2024, Kallanish understands. This will be melted down with steel scrap and further processed into steel. Benteler Steel/Tube wants to use the steel produced in Lingen to make low-CO2 tubes. The first step in the research project is to produce 1 tonne/hour of iron using green hydrogen.

In Namibia, HyIron is currently setting up industrial-scale production of iron ore with the support of the German economy ministry. “In the long term, we will be able to produce there up to 2 million tonnes/year of iron for the German steel industry. Here in Lingen, we are already using iron ore from Namibia to optimise the process and the product,” says Stephan Köhne, managing partner of HyIron.

The process uses a proprietary gas-tight rotary kiln in which the hydrogen reacts completely with the oxygen in the iron ore and converts it into direct reduced iron. In the future, the green hydrogen for HyIron will be produced in RWE’s 14-megawatt pilot electrolysis plant, which is expected to start operating directly next to the direct reduction plant at the end of 2023.

Christian Koehl Germany

Scrap prices in the Benelux continued their upward trend throughout last week, exceeding the €300/tonne threshold.

Exporters’ dock prices in the Benelux were pegged mostly at around €295-305/t ($320-331.5) delivered on Monday, up from €285-290/t a week earlier.

Exporters seem reluctant to commit to large tonnages due to the slowdown in Turkish demand towards the end of last week. On the other hand, suppliers, having high-priced material in their stocks, are trying to keep their offers firm at around €300-305/t levels, due to the limited supply in the region.

One Benelux supplier tells Kallanish: “Steel supply is still tight. Suppliers that have high-priced material in their stocks are thus refusing to sell at below €300/t. The prices can be balanced only if the flow increases at lower prices.”

Turkish mills, after booking a large amount of imported scrap in the last two weeks and covering their urgent requirements, slowed their scrap demand amid unsupportive steel sales. The latest bookings for HMS 1&2 80:20 in Turkey were concluded at $368.5-370/t cfr from the EU and at $370-372/t cfr from the Baltic and US. A supplier tells Kallanish that Turkey booked almost 25 deep-sea cargoes recently.

Most market participants in Turkey think the scrap price rises have come to an end for now unless Turkey sees a significant improvement in steel sales this week. Some even think that scrap prices will start falling again due to the availability of many unsold cargoes in the market versus Turkey’s frozen demand.

In India, offers for containerised shredded were at around $435/t cfr Nhava Sheva on Monday following the latest bookings at $430-432/t cfr. Scrap demand from Indian mills remains strong.

Burcak Alpman Turkey

Buyer sources in the hot-rolled coil market were bearish regarding future price direction. At the same time, mill sources reported greater optimism regarding post-holiday opening prices.

Fastmarkets calculated its daily steel hot-rolled coil index, domestic, exw Northern Europe, at €634.58 ($689.68) per tonne on Monday, down by just €1.67 per tonne from €636.25 on August 18.

The index was also down by €10 per tonne week on week and by €21.67 per tonne month on month.

Buyers and mills remained largely absent from the market because of summer holiday closures.

Activity was expected to rebound toward the end of August and beginning of September when mills reopen following closures, sources said.

Buyer sources estimated tradeable levels in Northern Europe to be around €630-640 per tonne ex-works for September-rolling coil.

Fastmarkets’ calculation of its corresponding daily steel hot-rolled coil index, domestic, exw Italy, was €630.00 per tonne on August 21, unchanged from August 18.

The Italian index was down by €3.68 per tonne week on week, and down by €8.33 per tonne month on month.

The Italian market was seasonally quiet, with trading close to nil.

Buyer estimates were in the region of €620-640 per tonne ex-works, close to trading levels before the holiday season began.

Offers for November/December-delivery HRC from Asian mills were reported at €600-610 per tonne CFR to Italy on Monday.

Published by: India-Inés Levy