Eurofer calls for implementation of Draghi’s EU Economic Competitiveness Plan
A new, nearly 400-page report from former ECB president Mario Draghi outlining steps to revive EU economic competitiveness should be integrated into the upcoming Clean Industrial Deal and urgently implemented, says European steelmakers association Eurofer. The report says the EU faces “slow agony” unless it catches up with competitors.
The report, which aims to boost EU investment by €800 billion ($881.7 billion) per year, recognises a number of steel-relevant issues.
The phasing out of free allowances and the replacement of the current Emissions Trading System (ETS) with the Carbon Border Adjustment Mechanism (CBAM) entail high delocalisation risks. Additional fixes are needed to make CBAM effective, coupled with close monitoring to avoid circumvention and resource shuffling, a solution for EU exports and the extension of CBAM to downstream sectors, Eurofer says in a note sent to Kallanish.
Despite the growing share of renewables in the grid, households and businesses do not yet benefit from low energy prices, it continues. The European steel industry expects urgent measures that lead to this objective in the short term.
“There are insufficient financial incentives and resources for the industrial transition, as the EU Innovation Fund alone is not enough, while only a fraction of ETS revenues is currently invested in the decarbonisation of energy-intensive sectors such as steel,” Eurofer points out. Support is needed for both capital and operational expenditure via the earmarking of ETS allowances. The Hydrogen Bank and Carbon Contracts for Difference should also be used to support the transition.
The introduction of a minimum quota in public procurement and auctions for locally produced clean tech products and components is strongly recommended.
Moreover, the EU should maintain a flexible trade defence policy to react quickly to market distortions while also working on structural solutions.
“Economic growth in Europe has been weak compared to the US and China for a long time, but the sense of urgency around economic reform outside of crises was lacking,” ING Bank says of Draghi’’s report. “In recent years, the global context around the economy has changed. The energy crisis, increased global competition and geopolitical risks have exposed threats to the European economic model, resulting in a louder wake-up call for change.”
“Getting political support for the proposed plans will be the biggest challenge in the current political climate. The European parliamentary elections already indicated that the political mood in Europe is rather shifting to less Europe instead of more Europe,” ING warns.
Adam Smith Poland
European CRC, HDG prices slide on poor demand
Weak demand from key end-user industries, especially the automotive and construction sectors, kept trading quiet in both the cold-rolled coil and hot-dipped galvanized steel markets across Europe, Fastmarkets understands.
In Italy, one supplier offered CRC at €680-690 ($750-761) per tonne delivered, equivalent to €670-680 per tonne ex-works, but no transaction was reported in the assessment week.
Lead times were reported within four to six weeks.
Buyers’ estimates of tradeable prices were heard at €650-660 per tonne ex-works.
Fastmarkets’ weekly price assessment for steel cold-rolled coil domestic, ex-works Southern Europe was €660-670 per tonne on Wednesday, down by €20-30 per tonne from €690 per tonne last week.
Sources pointed out that the European market for commodity-grade CRC was dominated by imports due to a price disparity.
“Some Asian suppliers struggle to sell [hot-rolled coil] to Europe anymore because of new safeguard rules or looming anti-dumping cases, so they compensate by increased CRC sales,” a buyer in Italy said.
Offers from Japan and South Korea for late-October shipment CRC to Southern Europe were heard at €625-635 per tonne CFR in the week to Wednesday.
Meanwhile, in Italy and Spain, offers for HDG were heard at €700 per tonne delivered, which nets back to €690 per tonne ex-works.
Buyers’ estimates of achievable prices were heard around €670-680 per tonne ex-works.
Trading for HDG was also very slow. Buyers said they had sufficient stocks, considering weak order intake from end-user sectors, and therefore were postponing bookings.
Fastmarkets’ price assessment for steel hot-dipped galvanized coil domestic, ex-works Southern Europe was €680-690 per tonne on Wednesday, down by €10-20 per tonne from €700 per tonne on September 4.
Import offers from Vietnam and India were reported at €690-705 per tonne CFR to Italy and Spain in the assessment week.
A booking of HDG with 0.5 mm thickness and Z100 coating was reported at $775 per tonne CFR to the Iberian market about two weeks earlier.
Published by: Julia Bolotova
German mechanical engineering sector lowers 2024 forecast
Production in Germany’s mechanical and plant engineering sector fell well short of expectations in the first seven months of 2024, reporting a decline of 6.8% year-on-year, says industry association VDMA.
“The economy was rather disappointing in this period. Although we had not expected a recovery, we had banked on a sustained stabilisation at a low level,” says VDMA chief economist Ralph Wiechers. This failed to materialise: incoming orders and numerous business sentiment indicators suffered significant setbacks, he adds. VDMA has therefore reduced its production forecast for full-year 2024 from a 4% decline to an 8% drop on-year.
According to economic research institute IFO, machine capacity utilisation at companies was 79.4% in July. The figure is significantly below the average range – 84.4% to 89.1% – and therefore well below the so-called comfort zone, VDMA emphasises.
Incoming orders in the first seven months were 11% below the previous year’s figure in real terms. While there were signs of a trough in both foreign and domestic orders up to and including April, “the picture changed for the worse from May onwards”, Kallanish hears from Wiechers.
He cautions that a noticeable improvement in the situation is currently not expected, in view of uncertainty in the global economy, due for example to wars and trade disputes. “Assuming that incoming orders will bottom out towards the end of this year, we will have to prepare for downturns in downstream production compared to the previous year for at least the first half of 2025,” he predicts.
Wiechers nevertheless sees a silver lining in that inflation might continue to fall almost worldwide. “There is therefore a legitimate chance that positive monetary policy will stimulate the economy at the end of the year and over the course of 2025,” he concludes.
Christian Koehl Germany
UK demand to improve, 2025 restocking gradual: panellists
UK steel demand is likely to improve from sectors such as construction in 2025, but restocking will be gradual, Kallanish heard from panellists at the UK Metal Expo in Birmingham on Wednesday.
“We are seeing pockets of improvement in underlying demand, particularly in construction, so we’ve seen some construction projects which were previously delayed being restarted, which is good,” said Christiane Taylor, pricing manager, Tata Steel UK.
“The PMI indices in Europe reflect the lower level of activity we see in mainland Europe, so the UK is in a better macroeconomic position,” she added.
This improvement in sentiment was also echoed by another panellist.
“It’s probably been a year and a half of subdued demand in the UK, but the PMI improvement and reduction in interest rate – we’ve initially already seen an increase in enquiries in the construction sector also,” noted Mike Nielsen, commercial manager, Salzgitter Mannesmann UK. This is likely to be “companies preparing ready for next year, with lots of projects on pause due to high finance costs, and [we] expect those to gather pace as we go into next year.”
Despite orders not immediately increasing following the positive PMI reading, 2025 looks more optimistic, he added.
”2025 should see some upward trajectory on demand. I think it should gradually get better but, currently, it’s still tough,” lamented Tom McDougall, commercial director, All Steels Trading.
He also noted ongoing destocking due to high interest rates, which have made borrowing expensive, while demand levels and falling prices have also contributed to people looking to lowering their stock levels.
However, he also spoke of concerns over the speed at which demand could increase.
“You’ve got to hope we don’t have the same situation we had post Covid where you get an almost fake level of demand, overbuying again, and that flops back on itself, so hopefully people will have learnt from that situation and people will gradually increase stock levels,” he added.
Taylor agreed that stocks are currently low, but there could be restocking as demand increases. “There has been a trend maybe towards leaner stocks, and right now, service centres are holding off restocking … but maybe a little longer than planned, so when we see the sentiment change again, there will be a need to restock more, which could help with the apparent demand over the next few months,” she noted.
As a result of the leaner stocks, there is opportunity in the market. “There are pockets of issues in terms of finding relevant stocks; this is where stockholders, in general, can make a bit of money if they think they might be the only player out there with those stocks, but stock levels are definitely down,” McDougall concluded.
Carrie Bone UK
Stainless trader criticises Belgian Customs for ‘arbitrary’ conduct
The European Commission’s numerous new market protection measures have led to increasing bureaucracy and rising costs for importing companies, says Gerber Group, a German-based trader of stainless steel.
In an opinion article in its newsletter, The Stainless Espresso, the group deems the new measures “unnecessary” and notes they overburden European customs authorities. “This overburdening of the EU customs authorities, as is currently the case in Belgium, for example, unfortunately gives the fatal impression of official arbitrariness,” Gerber says in the piece seen by Kallanish.
Belgian customs clearance, especially, does not have the appropriate care or the necessary expertise, and often refers to lawyers and courts, the group claims. “This has even gone so far that important documents that are required for imports are no longer even checked and the anti-dumping customs hammer is simply swung straight away,” it notes.
Gerber tells of a recent case in which Belgian Customs simply arbitrarily changed the customs code when importing Taiwanese stainless steel without carefully checking the facts. The authority then asked for high anti-dumping duties from the receiving importer.
The “piquant detail” is that these are specifically the anti-dumping duties from the EU’s new and “questionable” anti-circumvention proceedings against flat rolled stainless steel imports from Vietnam, Turkey and Taiwan, Gerber notes.
Belgian Customs could not be immediately contacted for comment.
Gerber notes this is an not isolated case, pointing at reports in July that incorrect TARIC codes were used by EU customs authorities and anti-dumping duties were levied unlawfully.
Christian Koehl Germany
Tata Steel UK gets $654 million government grant to fund green transition
The grant, which was formally signed on Wednesday September 11, was obtained under the former Conservative administration, but details are yet to be finalized and remain subject to negotiations with the new Labor government.
The investment is part a Tata Steel’s £1.25 billion plan overhaul the Port Talbot facility. The company will invest additional £750 million.
“The new assets will reduce the UK’s entire industrial carbon emissions by 8% (and Port Talbot’s by 90%) while setting a benchmark in circularity, utilizing UK scrap,” Tata Steel said in its announcement.
Tata Steel Europe’s decarbonization plan for the Port Talbot steelworks includes the construction of a new electric-arc furnace (EAF) with 3.2 million tonnes per year capacity — which is expected to come online in 2027 — replacing two blast furnaces (BFs) with total capacity of 5 million tpy of crude steel.
A spokesperson for Tata Steel, however, told Fastmarkets previously that the capacity of the new EAF was comparable to the current hot metal output from Port Talbot.
BF4 will be decommissioned by the end of September 2024 and BF5 was decommissioned in June.
The company has already launched a public consultation on specific activities and is working closely with the authorities to apply for planning approvals by November 2024.
“The supply chain arrangements [are] in place to serve customers through the transition period until the EAF is commissioned,” Tata steel said,
Market sources told Fastmarkets they expect the company to use imported slab and slab produced at its own assets in the Netherlands to feed the hot-strip mill in Port Talbot.
UK steel industry to become more energy-intensive
In the past year, two key UK steelmakers, British Steel in England and Tata Steel in Wales, announced ambitious plans to replace their old BF-basic oxygen furnace-based steelmaking capacities with EAFs.
EAFs could be a strong alternative to the prevailing integrated steelmaking business model in the UK given the country’s large surplus of steel scrap and the lack of domestic consumers for such material, Fastmarkets understands.
But industry sources see high energy prices as a threatening factor that could undermine British steelmakers’ competitiveness.
Sources said that the share of electricity costs in EAF-based steelmaking is about 15-20%, while for the BF-BOF route it is only about 4%.
“To meet these [decarbonization] ambitions, the next step on the path to growth will be government action to deliver affordable electricity prices. UK Steel’s analysis, released this September, found that UK steel producers pay up to 50% more than competitors in France and Germany, adding £37 million to the UK steel sector costs. With a switch to more EAFs, it is expected that the sector’s electricity consumption will roughly double,” UK Steel, the trade association for the country’s steel industry, said in a statement seen by Fastmarkets.
For example, in 2023, the average non-household electricity price paid by UK steelmakers was about £113 per MWh. In Germany and France, the corresponding price was around £61 per MWh.
“To ensure that their significant investment yields returns for our nation, the [UK] government must now also deliver the right business environment. Steel businesses need competitive electricity prices, access to good quality steel scrap and fair competition from international trade,” UK Steel director general Gareth Stace said.
UK steel sector in figures
The latest UK Steel report shows that UK steel production hit a new low of 5.6 million tonnes in 2023, down from 6.1 million tonnes in 2022.
UK production in 2022 had already reached the lowest level since the Great Depression, but it dropped further by 6% in 2023.
Primary steelmaking in the UK is represented by British Steel, Tata Steel and Celsa.
British Steel has installed capacity of 4.3 million tonnes per year of pig iron and four BFs at its ironmaking site in Scunthorpe, in northeast England. The company produces sections, wire rod, rail, beam and plate. Of the four BFs at the site, only two are still operational, according to industry sources.
British Steel also plans to switch to EAFs by 2025.
Tata Steel’s Port Talbot produces hot-rolled and cold-rolled coil, as well as tubes.
Celsa Group in Cardiff, also in south Wales, has two EAFs with total capacity of 1.2 million tpy. The company focuses on long steel production.
Published by: Julia Bolotova