IREPAS in Berlin : Weak demand, great uncertainty and aggressive Asian exports
The 90th meeting of IREPAS (the International Rebar Exporters and Producers Association) was held in Berlin on April 28-30 in conjunction with the SteelOrbis Spring’24 Conference.
There were 104 representatives from 41 different producers among the 445 registered delegates from a total of 57 different countries. There were also 91 registrations representing 52 different raw material suppliers.
At the opening of the conference, Murat Cebecioglu, chairman of IREPAS, emphasized that demand in the global long steel products market continues to lag behind supply. He added that the situation was getting worse because of China’s aggressive export policy and that Chinese exporters would continue to be aggressive, which of course would drive other Asian exporters to be aggressive also.
The IREPAS chairman said the situation in the global long steel products market is deteriorating, adding that there is huge uncertainty on what the next couple of quarters will bring for the global long products market, where it seems the situation will be extremely difficult.
On the last day of the conference, producers of long steel products, as well as traders and raw material suppliers, shared the conclusions reached at their special committee meetings regarding the current situation in the markets with the general participants at the event.
Raw Material Suppliers at IREPAS: General market mood hopeful for improvement
Jens Björkman, the chairman of the raw material suppliers committee, summarized the committee meeting findings regarding the general situation in the global steel and raw material markets, noting that the markets have been struggling this year compared to the past few years amid the worsening of economies due to high inflation and interest rates. However, he stated that the general mood is hopeful for a return to something slightly more forward-looking and optimistic.
Regarding Western countries, he stated that high interest rates and inflation have been putting pressure on scrap generation in the US and the EU, and added that the interest rates in the EU are expected to be cut during the spring. With the anticipated increase in scrap demand due to electric arc furnace investments especially in the US, Canada and Europe, Mr. Björkman noted that scrap flows will change significantly in the next 10 years, regionalizing scrap generation where scrap demand is high. In addition, he stated that steel producers have started to look for alternatives to scrap like pig iron, HBI and DRI to cover their needs for raw material. Indicating that scrap generation in Europe is down by 15-50 percent depending on the part of the region, Björkman said that, with the Carbon Border Adjustment Mechanism (CBAM), European scrap suppliers will try to keep scrap volumes within the regional market, reducing scrap exports from the region especially to Turkey, which operates mostly with electric arc furnaces and has significant demand for scrap.
Looking at China, noting that the country’s economy was expected to rebound after the Chinese New Year holiday but that these expectations did not materialize, he stated that China’s economy is going through a period of normalization. Meanwhile, pointing out that before the recent rebound iron ore prices had fallen to $100/mt CFR in the first quarter this year from the higher-than-expected level last year of $120/mt CFR, he said that the factors contributing to the price drop included high iron ore inventories at Chinese ports, slow demand and lower steel production. He concluded by saying that the market in China is adjusting to the lack of recovery of demand after the Chinese New Year holiday, adding that he expects iron ore prices to remain at quite high levels.
Traders at IREPAS: Global demand to be supplied locally, market conditions lead to regionalization
F. D. Baysal, the chairman of the traders committee, stated that there is demand globally but that it will be supplied locally, adding that ongoing trade tensions, global conflicts and political instability have changed trade routes, resulting in regionalization.
Looking at the other factors that lead to regionalization, Mr. Baysal expressed the view that the EU’s safeguard measures will be extended for another two years and that its quota volume adjustment will be minimal if any. Regarding the EU’s Carbon Border Adjustment Mechanism, he stated that it will put pressure on other countries, especially on blast furnace-based producers.
Remarking that Turkey’s export markets have been limited due to the US safeguard measures, the EU quota restrictions and the geopolitical tensions in the Middle East, the chairman of the traders committee stated that there are still some export opportunities for the country, including Syria, Iraq, eastern Europe, Africa and possibly Yemen. In addition, noting that the shipping crisis in the Red Sea has affected freight rates and container shipments a lot more than bulk shipments, shipments had to be shifted from containers to bulk, leading to additional costs.
Looking at China, Baysal said that the low steel demand in the country amid cancelled infrastructure projects has resulted in an increase in the country’s exports, with China dominating the global market with its lower prices and higher quality of steel, leading the strong competition. He also cited the Chinese Metallurgical Industry Institute’s prediction for a 1.7 percent drop in China’s steel demand in 2024, after a 3.3 percent decline in 2023, while further noting that China’s steel export volume increased by 14 percent year on year in the first quarter, though the value of its steel exports during this period was down by 20 percent year on year.
Producers at IREPAS: Low demand and Chinese exports weigh heavily on global steel market
Murat Cebecioğlu, chairman of IREPAS and also chairman of the producers committee, shared with participants the conclusions reached by producers regarding the current situation in the markets. He said that the GCC region is more optimistic in terms of business given the big infrastructure projects in the pipeline there, while market conditions in Egypt are getting better and better as the country’s currency issue has mostly been resolved, though the Suez Canal crisis remains a challenge. In some EU markets, the economy is picking up and inflation seems to be under control, while in others demand still remains quite low.
Commenting on the situation in China, the hot topic at the conference, Mr. Cebecioğlu said that Chinese exports will definitely affect the global market negatively and will reach high levels as they did back in 2015. However, this time the number of export markets is limited because of protectionism and Chinese exports will be more problematic in terms of competition. He went on to say that, apart from China, Malaysia, Indonesia and Vietnam are also exporting heavily and competing with each other. This will affect other suppliers and, as one of the biggest long steel exporters, Turkey is already feeling the effects, the chairman of the producers committee noted. Chinese exports are also taking a toll on the EU market, which is also struggling with very low demand especially in the northern part of the region.
Other exporters to the EU have to deal with quota measures as well as the Chinese competition. Cebecioğlu said the EU will most probably extend its quotas for another two years and, with new suppliers such as the GCC and North Africa, things will be tough this year before picking up and getting better next year.
Responding to a question regarding how Turkish mills managed to increase production in the first quarter of the current year, the committee chairman said that, in terms of sales, the first quarter this year was much better than the corresponding period last year. Turkish mills were able to sell considerable amounts to the EU and, with the quotas opening up, they had a window for exports. Commenting on the reconstruction works in Turkey’s southern region which was devastated by earthquakes last year, Cebecioğlu stated, “Construction activity has already started in the region, and it is mainly the mills in the region that are benefitting from all this. Since export activity is very low, this gives these mills a little bit of a break, and also funding should not be a problem as these projects are being financed by the government.”
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Austria’s steel production rebounds in March, flat on-year
Austria’s steelmakers increased crude steel production in March compared with the previous month, according to worldsteel data.
Output amounted to 680,408 tonnes, up by 13.4% from February but almost flat year-on-year, Kallanish notes. Austria remained in 21st place in the ranking of top ten global steel producers in March, worldsteel data show.
In January-February, the country produced 1.89 million tonnes of steel, up 0.7% on-year.
Overall EU output in March decreased by 13.4% on-year to 11.6mt. In the first quarter, steel production was 7.5% less on-year versus January-March 2023 at almost 33mt.
In April, Austria’s largest steelmaker, voestalpine, has launched production of what it says is the world’s first high-quality “greentec” wire rod from hydrogen-reduced pure iron and scrap at its site in Donawitz (see Kallanish passim).
It has the goal of researching the use of hydrogen to reduce fine iron ore. In the future, the resulting hot sponge iron could be melted down in an electric arc furnace or used to produce hot-briquetted iron.
Earlier, the steelmaker placed an order with Primetals Technologies for an 850,000 tonnes/year capacity electric arc furnace to be implemented at its site in Linz. Startup is scheduled for 2027. An EAF of the same capacity, supplied by Danieli, is planned in the same timeframe for Donawitz.
In 2023, Austria’s commerce chamber, Wirtschaftskammer Österreich (WKO), expressed concern over the crash in demand and orders for commodities in the country (see Kallanish passim). WKO saw orders declining by as much as 30%, with no relief in sight.
Svetoslav Abrossimov Bulgaria
British Steel secures Scunthorpe EAF planning permission
British Steel has been granted planning permission to build an electric arc furnace at its Scunthorpe headquarters, following approval by North Lincolnshire Council.
The steelmaker was granted planning permission last month to build the other proposed EAF at its Teeside site (see Kallanish passim).
The firm remains in talks with government over support, despite fellow UK steelmaker Tata Steel UK being guaranteed £500 million ($629m) of government funding last September. Government representatives are reported to be concerned that British Steel has not yet submitted plans which would allow it to receive a similar subsidy.
“It is crucial we now secure the backing of the UK Government … We are committed to working with the UK Government and need to reach an agreement quickly,” says British Steel president and chief executive Xijun Cao.
The steelmaker said late last year its proposed £1.25 billion transformation to EAF steelmaking could see commissioning potentially by end-2025.
Adam Smith Poland
European coil producers consider increasing prices
European coil producers are mulling increases. Market sources tell Kallanish some are considering a €20/tonne ($21.4) hike. According to several buyers and sellers, import prices from Asian suppliers are not decreasing anymore and offers are ticking up in some cases to the level of €600/t cfr southern European port.
In Italy, hot rolled coil producers are pushing up prices for new contracts by an average of €20/t and asking for €660-670/t base delivered, depending on volume. Demand has been quiet in all markets this week as several executives are on holiday in European markets due to Labour Day. Next week in France and other European countries, demand is also not expected to resurface owing to the 8 and 9 May bank holidays, as well as the 10 May bridge and school holidays.
Sources at EU producers are aware that consumption remains limited and believe the price uptick will benefit margins in the entire supply chain. A service centre in Italy reports increased demand downstream but at low prices. This is putting strong pressure on margins and causing companies to lose money.
European steelmakers’ lead times are reported at between June and July. At present, HRC prices in Europe are at €630-640/t base ex-works, with the low point of the range seen in southern Europe.
Import prices are hovering at around €600/t cfr northern and southern European ports, or slightly below depending on volume and quality. Some producers in countries such as India and South Korea are not quoting HRC for Europe. Buyers are lamenting the long lead times. Turkey seems to be the most attractive supplier at present in terms of delivery time and prices, but quality issues are being reported. Turkish producers are offering material at €610-620/t cfr Italy duty paid.
Producers in the EU are slowing output, but no stoppages are officially planned. According to a source, the only way to address the issue of tight margins and stalled prices throughout the value chain is to cut output.
Natalia Capra France
Steel destocking ends in Europe but customers still cautious, ArcelorMittal says
ArcelorMittal added that apparent demand had improved slightly in the first quarter of the year, January 1-March 31, but it still reflected the lackluster economic backdrop. Despite that, the company reasserted its forecast that apparent steel consumption in Europe would grow by 2-4% in 2024.
ArcelorMittal predicted the same growth for the European market in its fourth-quarter report and full-year 2023 results.
In its latest financial report for the first quarter of 2024, the company added that European steel price spreads have somewhat normalized from the unsustainably low levels of the previous quarter.
Fastmarkets’ daily steel hot-rolled coil index, domestic, exw Northern Europe, confirmed that trend because the average price of such material for the first quarter of 2024 was calculated at €721.30 ($770.16) per tonne, compared with €651.08 per tonne for the last quarter of 2023.
The improved apparent steel demand in January allowed European steelmakers to secure price rises in the spot market. But sluggish real steel demand affected the apparent demand and, since the beginning of February, HRC prices in Europe have been decreasing repeatedly.
Apparent demand in European flat steel market only started to show signs of improvement in late April, and into early May, following nearly three months of pricing downtrend.
Thus, in the second half of April 2024, producers in Europe were expected to begin to seek higher prices, with cautious restocking and an uptrend in imports supporting bullish sentiment.
ArcelorMittal Europe’s key indicators
ArcelorMittal’s crude steel production from its European operations reached 7.60 million tonnes in the first quarter of 2024, compared with 6.54 million tonnes in the previous quarter.
The company’s steel shipments increased in the first quarter of the year to 7.24 million tonnes from 6.41 million tonnes in the fourth quarter of 2023. Higher figures were achieved mainly thanks to improved apparent demand in the region at the beginning of the quarter.
Sales in the first quarter of 2024 increased by 18.4% to $7.8 billion, compared with $6.6 billion in the previous quarter.
“[This was] primarily due to the improved shipment volumes, following the end of destocking, which affected the previous quarter,” the company said.
According to ArcelorMittal Europe, the average steel selling price for the first quarter of this year was $945 per tonne, up by $10 per tonne from $935 per tonne in the fourth quarter of 2023.
The operating income of the European division of the company reached $69 million in the first quarter of the year, compared with an operating loss of $4 million in the fourth quarter of last year. According to ArcelorMittal, the improved financial result was due to the higher steel shipment volumes, offset in part by higher costs.
The same factors influenced ArcelorMittal Europe’s earnings before interest, taxes, depreciation and amortization (Ebitda), which increased by 21.1% to $343 million compared with $283 million in the fourth quarter of 2023.
Sustainable development
ArcelorMittal expected that demand for its low-carbon steel would grow globally.
“Sales of our XCarb® product, which can have a carbon footprint as low as 300kg CO2 per tonne, reached 229,000 tonnes in 2023, and are expected to more than double in 2024,” the company said.
But according to Fastmarkets’ sources, the overall demand for steel with reduced carbon dioxide emissions remained comparatively low in Europe, mainly driven by the automotive and construction industries. The biggest uptake of the material was in the Nordic states, the Benelux region and Germany.
Fastmarkets’ most recent weekly assessment of the green steel, domestic, flat-rolled, differential to HRC index, exw Northern Europe, was €150-250 per tonne on April 25, unchanged since mid-December.
“Maintaining our position as the lead supplier of low-carbon steels is a clear priority, and the planned ramp-up at Sestao [in Spain], along with the new [electric-arc furnace] in Gijon [also in Spain], which will break ground imminently, will both have an important role to play,” chief executive officer Aditya Mittal said.
“Meanwhile, our XCarb recycled and renewably produced steel will be on show to the world during the Paris Olympics,” he added, “in both the Olympic and Paralympic torches and in the Spectacular, which will be erected on the Eiffel Tower.”
According to Fastmarkets’ information, ArcelorMittal Sestao has installed capacity for about 2 million tonnes per year of crude steel. The plant also produces hot-rolled strip steel.
The Sestao mill produces recycled and renewably produced (RRP) steel, a high scrap-content product made via EAFs that use 100% renewable energy.
Carbon dioxide emissions at Sestao are around 0.5 tonnes per tonne of steel produced, compared with 2.1 tonnes of CO2 per tonne of steel produced via the traditional blast furnace route.
As ArcelorMittal previously reported, its 1.1 million tpy EAF in Gijon will become operational in the first half of 2026. At that time, the site will be able to switch to producing low carbon-emissions steel for the long products sector.
Contracts for the construction of the new capacity were signed in November last year.
According to Fastmarkets’ information, ArcelorMittal operates two BFs in Gijon with total capacity for 4.65 million tpy of pig iron. The Gijon steelworks has capacity for about 600,000 tpy of heavy plate, 600,000 tpy of wire rod, and 400,000 tpy of steel rail.
The company started low-carbon heavy steel plate production in Gijon in July 2023.
Published by: Darina Kahramanova
Import green steel not hydrogen, ‘deindustrialisation misleading’
Countries with limited potential for renewable power generation could fare better by importing low-emission steel from overseas rather than importing hydrogen to feed domestic ironmaking, according to a new study seen by Kallanish.
According to the Potsdam Institute for Climate Impact Research (PIK), such countries would save around 20% of costs for green steel if they import from countries where renewable energy is cheaper.
Philipp Verpoort, lead author of the study published originally in Nature Energy, names steelmaking regions like the EU, Japan and South Korea, as those which could save 18-38% in costs by employing this strategy. “Focusing on downstream production and refinement could be a cheaper and more robust strategy for securing competitiveness,” says Verpoort.
The scientists looked at the green value chains of three primary basic materials: steel, urea and ethylene. They argue that an electricity price difference of €0.04/kWh ($0.04) can be expected by 2040 in favour of locations like Australia, Chile and South Africa.
Apart from the immediate cost savings, the study also discusses other factors that will influence investment decisions by companies, such as benefits of short and integrated value chains, reliability of supply chains, quality requirements, and public subsidies.
The “deindustrialisation” label in this regard “is both inaccurate and misleading”, notes Falko Ueckerdt, co-author of the study. ”It is only the first few steps of the long value chains of energy-intensive basic materials that will likely be relocated.”
He claims that the shift presents a potential win-win scenario, as industrialised countries can focus on their economic strengths by specialising, for example, in making green steel from sponge iron and then further processing it.
Christian Koehl Germany