Action needed to accelerate ‘green iron corridors’: RMI
There is a clear business case for top importer regions Europe, Japan, and South Korea to establish “green iron corridors” for the sourcing of competitive low-emission metallics from regions with more favourable criteria for production, says the Rocky Mountain Institute (RMI).
“Current subsidies will unlock cost reductions for hydrogen-based iron production in developed countries today, but ultimately the supply chain will be optimised around competitive renewable energy resources,” RMI says in a note seen by Kallanish.
Looking at subsidies, iron ore quality and management, shipping distances, and renewable resources, RMI has developed a model to identify cost-competitive regions for green metallics supply. The modelling confirms the lowest-cost export options with high-grade iron ore co-located with favourable renewable energy resources and enabling policies can produce iron at $390/tonne – comparable to recent global prices.
These export locations include the US – due to IRA subsidies and tax credits – South Africa, Canada – with tax credits – Mauritania, Australia, Brazil, and Chile. They could be paired with importers with strong steelmaking capacity, reliance on iron ore imports, and demand for green hydrogen to meet energy security and decarbonisation targets.
“Transporting finished green iron sees both cost and energy savings compared to transporting hydrogen and ore separately,” RMI observes.
It would help importers lower costs and enable a faster transition for their steel sector, helping to avoid some of the domestic hydrogen-based DRI production infrastructure spending that is required for 1.5°C alignment.
“At least $5.5 billion has been allocated to ten commercial-scale hydrogen-ready DRI facilities by government funds in Europe, but even with these generous subsidies companies are struggling to reach final investment decisions, citing high costs for domestic hydrogen as a financial barrier,” RMI notes.
While the iron can be imported, domestic steelmaking activities can be maintained, and these make up approximately 75% of the iron and steel direct jobs, it adds.
“In Europe, the combination of committed buyers demanding green steel who are willing to pay 20-30% premiums for green products and implementation of carbon taxes makes a strong business case for establishing these trade corridors sooner rather than later,” RMI says.
As free emissions allowances are phased out and CBAM phased in, steel made, for example, in Germany from the lowest-cost green iron imports compared to domestic fossil-based steel with projected ETS carbon taxes will be a roughly similar cost in 2028. In 2030, it will be significantly cheaper, the institute observes.
“Action is needed across the value chain to make this [green iron corridors] a reality: governments must show intent, steelmakers in importing regions must show appetite, and iron producers and iron ore miners in exporting regions must begin laying the investment foundations,” RMI concludes.
Adam Smith Poland
Italian distribution sector reports negative outlook
The Italian distribution sector forecasts declining volumes in the second quarter compared to the same period last year.
While flat and long steel producers are trying to increase values, consumption downstream continues to be sluggish, sources in the sector tell Kallanish.
Some distributors reported a volume decline in Q1 of between 4% and 5%. The first quarter was “saved” for most companies by reasonable shipments in January and February. “Since March, the slowdown is tangible. Margins were also acceptable in the first two months of the year but have deteriorated since March. In certain regions of northern Italy, April was not bad in terms of volumes but it was slow in other parts of Italy, particularly the south,” one source comments.
Margins remain under pressure. “It is a disaster for flat products, namely welded tubes and sheets. Prices are not managing to increase and tube discounts remain high … Some re-rollers are trying to reduce discounts but it is a tough fight. The only way to stimulate demand and prices is to cut capacity. The overcapacity is causing a strong pressure on distributors’ margins,” another source says.
While producers of coil and derivatives are trying to push up values, distributors are continuing to ask for discounts. Month-on-month, sheet and tube prices are stable. Tube discounts remain at 38-39 points with re-rollers trying to decrease by at least two points. Hot rolled sheets are hovering at €690-700/t ($743-754) ex-works.
On long products, steelmakers are also talking about price increases but face resistance from distributors. This month, hikes are expected for beams and merchant bar, while producers of wire rod and rebar have communicated increases to customers but have had a tepid response so far.
Merchant bar and beam prices also remain mostly stable at €700-710/t and about €750-770/t delivered respectively. “Since the Tube&Wire in Dusseldorf, we have not really worked in Italy because of the bank holidays. If some demand comes back, it will be from Monday 6 May,” a source states.
A purchasing group says its outlook for volumes and margins in Q2 remains negative. It expects poor consumption and buyers’ fear of committing to persist. “The latest Eurofer report is very close to the reality we are living. Europe is going through a recessive phase which will last the entire year. Price increases only have the effect to slow the slide but will not bear fruit,” it concludes.
Natalia Capra France
German stockholders’ sales fall in Q1 2024
Sales by Germany’s stockholding distributors in the first quarter totalled 823,000 tonnes, which is 12% lower than in the corresponding previous-year quarter, Kallanish learns from their federation, BDS.
The difference is even more pronounced when looking at the most recent month of the statistics, March, when sales were only 817,00t, compared with 1.05 million tonnes in March 2023.
Looking at the main product groups, the drop was less steep in the category of flat products than for long products. Sales of flat products in Q1 fell by not quite 7% to 522,000t. Against that, long products plummeted by 22% to 298,000t.
This reflects the slowdown of business in construction, the main customer sector of long products like rebar and structural steel, which deteriorated further throughout 2023. The segment was also affected by a peaking of power prices last year, as most long products are made at electric arc furnace mills.
The total tonnage also considers “other products” like wire rod.
Inventories at the end of March stood at 1.96mt, which was considerably below the 2.23mt seen a year earlier. Flat product inventories were at 1.29mt versus 1.4mt last year, while longs were down from 779,000t to 646,000t.
Christian Koehl Germany