Europe needs investment, level playing field: CMC’s Matt
Europe risks becoming uncompetitive due to overcapacity and lack of investment, CMC president Peter Matt said at the Danieli “Innovaction” Meeting in Udine last week.
Matt believes there is some 700 million tonnes/year of global overcapacity. Although China accounts for a large portion of this, other countries are also contributing. Europe needs to rationalise its output and avoid being invaded by external capacity. The continent needs to create a level playing field, as steelmakers are failing to generate good returns.
“In Poland, today, we know we have low-cost operations and yet we cannot generate a good return because of the capacity challenges in the industry,” Matt observed at the event attended by Kallanish.
The EU needs an industry “that is sound for the long term, that attracts capital and makes money want to come to it … I think the US is a good example of what can happen with levelling the playfield with 232 … Prices have come up for steel and companies are generating their returns, companies, including our own, are investing in the business and all of a sudden you have natural capital coming to this industry and making it strong, as opposed to many other places in the world where you see the industry deteriorating because of the lack of investments and because of poor returns,” Matt concluded.
Emirates Steel chief project officer Hassan Shashaa had a different view on overcapacity. Worldsteel says global production will increase by 1.7% this year to around 1.8 billion tonnes and it will continue to grow. “Is this overcapacity?” Shashaa asked. “Overcapacity will always be there and I don’t think we need to be worried about it … When you look at capacity utilisation, the world never used 100% of its assets. Capacity utilisation has always varied between 75-85%.”
“In China alone, they have 1.2 billion tonnes of capacity but they are rarely producing 900 million … The world will continue to grow. India is now growing at 8% per year. They’re planning to add 300 million tonnes steel capacity over the next 20 years … The world is not going to stop growing and overcapacity has always been there,” Shashaa commented.
CMC Poland’s performance has slumped this year. The steelmaker saw steel shipments plummet 37% on-year in the second fiscal quarter through February 2024 to 275,000 short tons. Merchant bar and other product sales fell 17% to 211,000st, while rebar was down a hefty 65% to only 64,000st. Meanwhile, Emirates Steel is eyeing 15m t/y of DRI capacity in Abu Dhabi and aims to increase steelmaking capacity to 8m t/y (see separate article).
Natalia Capra France
EU to extend safeguards, cap ‘other country’ imports
The European Commission has proposed to extend the EU safeguard measure on steel by a further two years to 30 June 2026. It will also introduce a 15% cap per origin over the “other country” tariff-rate quota (TRQ) for hot rolled coil, to ensure market stability and avoid crowding out traditional suppliers, Kallanish notes.
The surge in imports from certain new origins is related to growing overcapacity in certain regions, as well as to the significant pressure exerted by a strong increase in Chinese exports to certain markets, the Commission says.
The import surge means the category 1 – HRC – other country TRQ has “been consistently exhausted on the first day of the quarter for several consecutive quarters. This has created an imbalance on the market throughout the remainder of those quarters by making available very large amounts immediately, thus generating substantial import pressure,” the Commission adds.
This has caused a stir in the European market.
“Import pressure is particularly acute in this product category as imports continued to gain ground despite an overall substantial drop in steel consumption in the Union. In fact, the market share of imports in this product category reached 30% in 2023, substantially above the average for the product concerned as a whole,” it continues.
The cap ensures import penetration on the first day of the quarter would be limited and allows the most affected exporting countries to still export relevant volumes, the Commission points out.
The same, 15% cap has also been introduced for category 16 – wire rod. “As of the quarter July-September 2023 the composition of origins changed abruptly within the residual TRQ in this product category, with several new origins suddenly exporting very large amounts in the last three quarters. This resulted in a massive reduction of free-of-duty imports from all other exporting countries which used to have a stable presence on the Union market. In fact, some of them virtually stopped exporting under this TRQ,” the Commission notes.
The rate of liberalisation will meanwhile be reduced from 4% to 1%. Data show the liberalisation rate in the past has largely outpaced the evolution of consumption, the Commission explains. While TRQs have been increased by almost 25% since the measure was imposed – including the 5% top-up applicable since February 2019 – consumption decreased 17% over the same period. These opposing trends have therefore significantly widened the gap between the level of TRQs and market demand.
The move will ensure the measure’s effectiveness “in a period where the Union market is suffering significant import-driven tensions, caused by the negative effects of overcapacity and the resulting responses to it across the world, in a context of weak demand,” the Commission notes.
The Commission is also proposing to include Mozambique within the scope of the safeguard measure as from 1 July.
Adam Smith Poland
Liberty Galati idles blast furnace, rolls from stock
Liberty Galati has temporarily idled its hot end to “ensure a profitable and sustainable production”, a Liberty Galati spokesperson tells Kallanish. The blast furnace number 5 at Galati was only restarted in February after being idled last October.
Downstream rolling mills will continue to operate using slab stock, meaning finished product supply can continue.
“This decision is in line with our strategy to adapt to the difficult market conditions and build a mix of finished products that can ensure business sustainability. During this period, we will focus on conducting maintenance and repairs to improve the performance and reliability of the blast furnace and we will focus on consolidating the order book for customers in the profitable market segments. Our teams will continue to work full shifts, as usual,” the spokesperson says.
Adam Smith Poland
Some EU steelmakers consider increasing HRC
Some European steelmakers are mulling increases on hot rolled coil, since the European Commission said it will introduce a 15% cap per origin over the “other country” tariff-rate quota (TRQ) for HRC.
The HRC market remains stagnant in Europe. Before the Commission announcement and considering the very weak consumption for coil and its derivatives downstream, EU steelmakers were bracing for a circa €20/tonne ($21) price decline in June. The latest EU move will further discourage imports from third countries and will leave buyers with no other option but to buy domestic material, sources tell Kallanish.
Steelmakers believe June prices will rebound in Europe by up to €50/t, as stocks are particularly low. Marcegaglia chairman Antonio Marcegaglia told Kallanish on the sidelines of the Danieli event in Udine last week that international coil prices may increase towards the end of the second quarter or beginning of Q3. “Final demand for coils at an international level is rather static. Some consumption rebound is expected but I believe it will be more of a technical restocking thanks to some improved confidence in the relative price stability,” he noted.
The Commission says the surge in imports from certain new origins is related to growing overcapacity in certain regions, as well as to the significant pressure exerted by a strong increase in Chinese exports to certain markets. The TRQ amendment was made after the HRC other country quota was exhausted on the first day of the quarter for several consecutive quarters (see separate article).
HRC prices are stable compared to the beginning of May, with trade limited and confidence on the side of buyers lacking, several sources confirm. Transactions range from €630-640/t base ex-works in Europe, or €650/t base delivered as quoted by a large producer. Price increase announcements are expected in the coming days but the market remains fragile and the hikes are expected to be moderate.
Natalia Capra France
CBAM to change dynamics of global steel trade: Kardemir CEO
Carbon Border Adjustment Mechanism (CBAM) and the EU’s Green Deal are expected to change the dynamics of the global trade in the coming years, as producers’ which will not invest in reducing their carbon emissions will lose their competitiveness due to the new carbon tax burden, Ismail Demir, chairman of Turkey’s largest integrated long steel producer Kardemir said.
“Turkey, which is making half of its exports to the European Union, could not remain out of these regulations,” Demir said in a statement that he made at the company’s 29th Ordinary General Meeting May 30.
Following the announcement of the Carbon Border Adjustment Mechanism (CBAM) by the European Union, Turkey unveiled its ‘Green Deal Action Plan’ in July 2021 as a road map to realize the transformation of Turkey to a more source-efficient and a green economy.
Highlighting that CBAM will directly affect steel, aluminum, cement and fertilizer sectors, Demir said they have focused on low-carbon steel production in recent years.
“In this regard, our studies are ongoing to build our new planned blast furnace with a technology that fits our green steel target,” he said, adding that the new blast furnace will raise Kardemir’s crude steel capacity by 1 million mt/year to 3.5 million mt/year.
Kardemir is aiming to reduce carbon emissions by 15% until 2030 and to become carbon neutral by 2053, the company said, without citing the current carbon emission level of Kardemir.
Kardemir currently has a 2.5 million mt/year liquid steel capacity and produces billet, rebar, wire rod, sections and angles. It has expanded its product range over the last few years to include rails, railway wheels, thick wire rods, and heavy sections.
Turkish mills’ rebar export prices inched lower on May 30, amid lower mill offer prices and lower-priced deals in a slow market.
Platts assessed Turkish exported rebar at $572.50/mt FOB May 30, down $2.50/mt on day, according to S&P Global Commodity Insights data.
Cenk Can
ArcelorMittal Construction acquires insulation panel manufacturer Italpannelli
Steelmaker ArcelorMittal has completed the acquisition of Italpannelli, a specialized manufacturer of insulation panels for roofs and facades, it said in a statement May 31.
The acquisition includes two production sites operated by Italpannelli SRL in in Abruzzo, Italy and Italpannelli Iberica in Zaragoza, Spain.
According to ArcelorMittal, the two facilities operate seven production lines with a capacity of 13 million sq m/year of sandwich panels, serving the Central and Eastern European, French, German, Italian and Spanish markets.
Italpannelli will be incorporated into ArcelorMittal’s construction-focused subsidiary, ArchelorMittal Construction.
The company said the acquisition adds considerable strategic value to ArcelorMittal Construction, including access to new markets and an expanded product portfolio.
The latest announcement marks the second acquisition of Italpannelli businesses by ArcelorMittal, following the purchase of Italpannelli Germany in March 2023.
ArcelorMittal Construction CEO Jean Christophe Kennel said Italpannelli had built a formidable reputation as a high-quality supplier of lightweight sandwich panels and was “highly regarded in the market for its service and delivery.”
Platts, part of S&P Global Commodity Insights, assessed domestic prices for HRC in South Europe at Eur625/mt EXW Italy on May 30, unchanged on the day.
EU HRC prices remain stable even as some mills offer discounted material
European hot-rolled coil domestic prices remained stable on May 31, even as steelmakers offered discounts on extras to keep base price stable and to book volumes for the summer.
“The mills are willing to give discounts on extras to keep base price stable,” a service center source said. “Longer stoppages for summer maintenances are expected.”
The European Commission announced May 30 that it is considering a 15% cap per single country over the Tariff Rate Quota volume initially available in each quarter. Sources said that this would create problems for the buyers, who would either keep booked materials at the port or find other buyers in Africa or Middle east and might also pick up material from European mills if needed.
The buyers “would have to keep some booked material in ports for the next quarter,” a mill source said. “Some say that the buyers would have to turn to other exporters from Africa or the Middle East, but I think that the quota would remain not fully used and buyers will book from European mills if needed.”
Platts assessed domestic prices for HRC in Northwest Europe stable on the day at Eur630/mt ex-works Ruhr on May 31.
Tradable values have been reported at Eur620-640/mt EXW Ruhr and offers have been heard at Eur630-660/mt EXW Ruhr.
Platts assessed domestic prices for HRC in South Europe unchanged on the day at Eur625/mt EXW Italy on May 31.
Tradable values were reported at Eur620-630/mt EXW Italy and offers at Eur630/mt EXW Italy.
European HRC market digests potential safeguards’ effect on domestic prices
Buying activity in the spot HRC market in Europe remained subdued during the week to Friday, with only minimal tonnages purchased.
“The market is still cautious and quiet. Plus, Germany is off on May 30-31 so nothing has been going on in terms of trading,” one German buyer told Fastmarkets.
Offers of July-delivery HRC from integrated steelmakers in Germany were heard around €630-650 ($682-703) per tonne ex-works on Friday, with transactions mainly heard at the lower end of the range.
Sources pointed out that some €10-15-per-tonne discounts were possible in cases of firm bids.
An integrated mill in the Benelux area was targeting €640-650 per tonne ex-works.
Buyers estimated tradeable values at €620-640 per tonne ex-works.
Fastmarkets calculated its daily steel HRC index, domestic, exw Northern Europe at €633.96 per tonne on Friday, up by €0.21 per tonne day on day from €633.75 per tonne.
The index was down by €3.41 per tonne week on week, but up by €1.96 per tonne month on month.
Market sentiment improved following Thursday’s development around steel safeguard measures.
On May 30, the European Commission notified the World Trade Organization that safeguard measures would be extended for two more years, Fastmarkets reported. The Commission also suggested a 15% cap per single country over the residual HRC quota volume, which flustered the EU steel market.
Notably, sources expect the new adjustment to significantly limit HRC imports from Asian suppliers, who are offering the most competitive prices, and reshuffle import trade flows into Europe.
“Adjusted safeguards close the opportunity to negotiate new [HRC] deliveries from Taiwan, Vietnam and Japan for the next few months,” one Italian distributor told Fastmarkets.
“Not to mention that we have around 500,000-600,000 tonnes of HRC of these origins in the pipeline – already ordered, in transition or in production phase. That means when those volumes arrive, we will either have to pay a safeguard duty, or custom clear only part of the tonnages, creating massive stockpiling in port,” the distributor said.
“The [European steel] market is now only digesting the news, but it is clear the import structure will change. Turkish mills have already taken their position to export to the EU,” a buyer in the Benelux region said.
In May, Turkish HRC suppliers became more active in the European market, with sales reported at €600-610 per tonne CFR including the anti-dumping duty. Offers were heard at €610-620 per tonne CFR including the duty.
“Turkish mills have quick shipment versus Asians and no problem with quotas,” a second Italian distributor said.
“In fact, Turkish HRC quotas are chronically underutilized, but that is likely to change as soon as adjusted safeguards come into force,” he added.
The quarterly allocation for Turkish HRC under EU safeguards was 464,083 for the second quarter of 2024, according to EU customs data.
The total available allocation is 1.28 million tonnes, including the transferred amount of unused volumes from previous periods.
In general, sources suggested that reduced availability of cheap imports could potentially support a rebound in domestic HRC prices the medium term.
Meanwhile, in Southern Europe, Fastmarkets’ daily steel HRC index, domestic, exw Italy was calculated at €630.00 per tonne on Friday, unchanged since May 24.
The index was down by €3.33 per tonne week on week, but up by €2.75 per tonne month on month.
There were no major price changes heard in the Italian HRC market on Friday.
July-delivery HRC was offered by one local and one European supplier to the nation at €650 per tonne delivered, which nets back to about €630-635 per tonne ex-works.
Buyer estimates of tradeable values were heard at €620-630 per tonne ex-works, but the lower end was not considered workable by an Italian supplier.
“In Italy, domestic [HRC] supply is pretty much limited to one mill; with cheaper imports from Asia becoming unavailable due to the new safeguards, I see no reason for European mills to step back,” a buyer in Italy said.
India may face indirect brunt of EU restriction on use of residual quota for HRC imports
The EU proposes that, under the residual tariff rate quota (TRQ), no one country may import more than 15% of the total volume available in each quarter.
According to one market participant, this move would lead to Southeast Asian suppliers of hot-rolled coil, such as Taiwan, Japan and Vietnam, sending increased volumes of their HRC exports to India.
“The simple effect of this move by the EU is that higher volumes of Vietnamese and Japanese HRC will hit Indian markets,” he said.
On May 30, the EU notified the World Trade Organization (WTO) that steel import safeguarding measures will be extended for two more years, until 2026, and that it suggested imposing a limit of 15% on the maximum volume that a single country can export under the residual TRQ.
In 2023, HRC imports into Europe from Taiwan totalled 1.25 million tonnes, with 1.16 million tonnes from Vietnam and 1.09 million tonnes from Japan. But the 15% cap under the residual TRQ, if implemented, would restrict HRC supply to Europe from each of these countries to 555,555 tonnes per year.
India is attractive to all HRC exporting countries, particularly in Southeast Asia, because it allows duty-free imports of steel from that region under a free trade agreement.
“The freight costs from these three countries [Taiwan, Vietnam and Japan] to India are far lower than freight to Europe,” an official from an Indian mill said, “and the consumption of steel in India is on the rise. The next-best market [after Europe] for these countries to sell their HRC will be in India.”
The official said that the quota limit for Indian HRC exports to Europe, which is around 170,000 tonnes per quarter, would not show any significant change even if the safeguard measures were extended by the EU for two more years.
Indian mills were currently exporting very little tonnage of HRC to Europe, he added, because a number of mills have made production cuts for repairs and maintenance work on hot strip mills and steelmaking facilities.
“Indian exports of HRC to Europe will be [further] restricted with the implementation of the Carbon Border Adjustment Mechanism [CBAM],” a second market participant said, “while we may have to take more HRC imports from Southeast Asian countries.”