Day: 23 October 2024

European prices for steel hot-rolled coil remained broadly stable on Tuesday October 22 amid limited activity because mills were holding back on volumes for the first quarter of next year on the expectation that prices will rebound, sources have told Fastmarkets.
In Northern Europe, offers for November-December delivery coil were reported at €550-570 ($596-618) per tonne ex-works, with €540 per tonne ex-works said achievable for larger volumes.

“Order books are still not as full as mills wish, so for Q4 [2024] volumes they can still be flexible with price on a good tonnage,” a trading source in Germany said.

Sources reported some pick up of activity since the beginning of October amid “very limited restocking.”

“We got more inquiries last week [week ended October 18] and [are] selling more  [HRC]. [Demand] is not booming, but we’ve definitely recovered from the low,” a mill source in Northern Europe said.

Market sentiment was cautiously optimistic despite subdued end-user demand, and producers hoped to achieve higher prices for HRC with lead times in the first quarter due to expected restocking and limited availability of imports.

“Mills are not actively offering HRC for January-February delivery now; they certainly expect to achieve higher prices, but are still assessing the market, and so do buyers,” a stockholder in Germany said.

Sources suggested that European mills might cut output in November-December in an attempt to balance demand and supply.

“So far, European mills have produced enough [crude steel] to claim their carbon credits for the next year. It is very likely that they [European mills] will curb the output in the end of the further quarter 2024,” a second trader said.

As a result, Fastmarkets calculated its daily steel HRC index, domestic, exw Northern Europe at €553.75 per tonne on Tuesday, up by €0.62 per tonne from €553.13 per tonne the previous day.

The index was down by €0.63 per tonne week on week and by €2.71 per tonne month on month.

For January-delivery coil, some suppliers voiced offers at €580-600 per tonne ex-works, which was not considered workable for the spot market so far.

Sources said that European mills were also trying to push spot prices higher ahead of negotiations of long-term contracts with end users for the next year.

“Mills are in the tricky position. The gap between the spot and contract market is too high, so automakers ask for up to €200 per tonne discount for the first half of 2025 contracts. That would be a disaster for the mills,” a buyer source in the Benelux area said.

Long-term contracts with original equipment manufacturers in the automotive industry for the second half of 2024 were closed at €730-750 per tonne – and even at €700 per tonne in some cases – in contrast with €800 per tonne in the first half of the year.

Meanwhile, in Southern Europe, Fastmarkets calculated its corresponding daily steel HRC index, domestic, exw Italy at €548.13 per tonne on Tuesday, down by €3.12 per tonne from €551.25 per tonne on the previous day.

The Italian index was down by €0.62 per tonne week on week and by €9.37 per tonne month on month.

In Italy, November-December delivery HRC from a local producer was on offer at €580 per tonne delivered, which would net back to €570 per tonne ex-works.

Sources, however, estimated tradeable values for small tonnages at no higher than at €560 per tonne delivered (€550 per tonne ex-works). For bigger lots it was still possible to get €540 per tonne delivered (€530 per tonne ex-works), several sources said.

Trading was also limited in Italy.

“Demand [for HRC] is still weak and stock levels are still high,” a stockholder in the nation said.

In the secondary market, cut-to-length HRC was still available at around €620-630 per tonne CPT, stable since mid-October.

Meanwhile, the market for imported HRC was largely quiet due to uncompetitive prices, and because of trade restrictions in place.

Notably, November-shipment HRC from Turkey was offered at €580-590 per tonne CFR to Italy, including the anti-dumping duty.

From Asia, offers were reported at €560-570 per tonne CFR to Italy.

“Imports are simply not workable – that’s one of the reasons behind European mills’ bullishness. In the first quarter 2025, a lack of import [HRC] will start to be visible in the market and European mills will have the upper hand in negotiations,” a buyer in Italy said.

Published by: Julia Bolotova

Thyssenkrupp Steel and carmaker Volkswagen Group have signed a Memorandum of Understanding (MoU) for the supply of carbon-reduced steel from Thyssenkrupp’s future direct-reduction (DR) plant in Duisburg, thus dispelling rumors about a cancellation of the green steel project, the German steelmaker announced on Tuesday October 22.
The new DR plant was scheduled to go into operation in 2027, with the supplies to Volkswagen expected to start in 2028, Thyssenkrupp said in a press release seen by Fastmarkets.

The steelmaker did not give more details on what volumes of carbon-reduced steel would be delivered under the MoU, or the period of the arrangement, but added that the supplies would be gradually expanded.

The MoU was expected to help Volkswagen Group to decarbonize its supply chain and become carbon-neutral by 2050. Currently, 15-20% of an electric vehicle’s lifetime emissions were accounted for by the steel used in its construction, Thyssenkrupp added.

Thyssenkrupp Steel’s Duisburg site has production capacity for around 11.7 million tonnes per year of pig iron from four blast furnaces (BFs), and around 11 million tpy of crude steel. But recorded shipments from these steel assets have not exceeded 9.0-9.5 million tpy in recent years.

The site produces hot-rolled coil, cold-rolled coil, hot-dipped galvanized coil, and pre-painted coil, according to Fastmarkets’ information.

Thyssenkrupp already had plans to replace one of the four blast furnaces at its Duisburg site with a direct-reduction plant and two downstream smelters in 2027. This would allow the company to make its first steps toward carbon-neutral steel production.

The other three BFs will gradually be replaced with climate-friendly alternative technologies by 2045.

The new DR plant will have capacity for 2.5 million tpy. The company also planned to be able to produce around 5 million tpy of low-carbon steel by 2030.

Thyssenkrupp has been awarded €2 billion ($2.2 billion) in German state funding for its green steel transformation project.

The DR plant at Duisburg will be powered by green hydrogen, which is seen as a strategic renewable fuel in Europe. This will allow the company to significantly reduce its carbon footprint compared with conventional steel production, Thyssenkrupp said.

The company added that production from the plant would initially be ramped-up using natural gas as a reducing agent but that it would gradually be converted to hydrogen.

The carbon-reduced steel produced by the Duisburg plant will be marketed under the company’s Bluemint brand.

Cost increases expected with new DR plant
Construction of the Duisburg DR plant could cost more than initially expected, Fastmarkets understands.

“The executive board of Thyssenkrupp Steel Europe AG has informed the supervisory board… about expected cost increases. The situation is currently being reviewed, based on this information,” a spokesperson told Fastmarkets.

Despite this, the company was assuming that the DR plant project would go ahead under the given framework conditions, the spokesperson added.

At the beginning of October, German media sources claimed that Thyssenkrupp was considering the project’s cancellation.

“[But] Thyssenkrupp remains committed to its green transformation and climate-neutral steel production,” the spokesperson said. “There is no way around the decarbonization of CO2-intensive steel production in the long term.”

Potential cost increases for the DR plant would have no effect on the confirmed federal and state subsidies, the spokesperson added.

Demand for green steel sluggish in Europe
Demand for flat steel products was still limited across Europe, and this was influencing the green steel market, Fastmarkets understands.

Demand for carbon-reduced and green steel was heard mainly on a project-by-project basis from automotive or construction companies, which need to meet requirements for decreased CO2 emissions in their products, industry sources have told Fastmarkets.

“The green steel market is just evolving in Europe, and trade volumes are small, but we expect [demand] to surge in the coming years, driven by legislation,” a mill source in Northern Europe said.

There was no common standard or official definition for “green steel” in Europe yet.

Fastmarkets’ own methodology, however, defines European green steel as: “Steel produced with Scope 1, 2 & 3 emissions of a maximum 0.8 tonnes of CO2 per tonne of steel.”

Fastmarkets’ latest weekly assessment of its green steel domestic, flat-rolled, differential to HRC index, exw Northern Europe, remained at €100-200 ($108-217) per tonne on October 17, unchanged since September 5.

Published by: Julia Bolotova, Darina Kahramanova

Mike Hawes, chief executive of the Society of Motor Manufacturers and Traders (SMMT), has called for the inclusion of purchasing incentives and support for the automotive sector in the upcoming UK budget, Kallanish reports.

Hawes says the UK Budget on 30 October is an opportunity to remedy poor consumer confidence and help support the transition to electric vehicles with purchase incentives and infrastructure investments.

He recommends the UK government cuts VAT on EVs and public charging, delays certain VED changes and invests in charging infrastructure.

Hawes adds the recent launch of the UK’s industrial strategy, and green paper, “presents a fresh opportunity to turbocharge UK industrial and economic growth”.

He adds the opportunity for the automotive sector to deliver an economic boost of more than £50 billion ($65 billion) during the next decade will not be available forever, with global competition fierce with countries seeking to attract new investment.

“Fast-tracking the delivery of new technology skills, green infrastructure and strengthened trading relationships are all fundamental. Crucially, so is a healthy domestic market for zero emission vehicles, given the type of investment we have secured in the past year or so and the undoubted commercial benefit for manufacturers of making close to where you sell,” he says.

“We look forward to working with government, therefore, to help steer its industrial strategy and the once-in-a-generation manufacturing transition it can deliver – but our markets must transform alongside it,” he adds.

“We cannot do one and not the other. If we succeed, the benefits are huge: new jobs and skills across all parts of the country; thriving innovation in all vehicle sectors, which support so many other UK industries; cleaner air and quieter streets; and economic growth that benefits everyone,” Hawes concludes.

SMMT reported September new car registrations saw their highest level since 2020, driven by massive EV manufacturer discounting, but figures were still almost 20% below the levels seen pre-Covid.

Battery electric vehicles accounted for 20.5% of the market share in September, plug-in hybrids took 8.9%, while hybrid electric vehicle had 14.2%. Despite a decline in petrol and diesel registrations, together they still accounted for 56.4% of buyer’s choice.

UK vehicle production stood at 1.02 million units in 2023, well below the 1.3 million produced in 2019.

Carrie Bone UK

The European Commission says it has approved, under EU State aid rules, a €128 million ($139m) Swedish measure to support SSAB in decarbonising its steel production, Kallanish learns.

Sweden notified the Commission of a €128m measure to support SSAB’s project to transition from its current coal-based steel production process in Luleå.

The Commission says in a statement that the aid will take the form of a direct grant and come from the Just Transition Fund.

These funds will support the accelerated transition for the installation of its electric arc furnace, equipment for secondary metallurgy and a caster. The EAF will use scrap and direct reduced iron produced using renewable hydrogen, with a capacity of 2.5 million tonnes/year of green slab.

The measure will accelerate the project by three years and the new installation is envisioned to start producing green steel as of 2029.

The funding allows for significant carbon emission savings versus three years of operation using fossil fuels.

The Commission adds that the project will help to end dependence on Russian fossil fuels while also helping to meet the demands of policies such as the European Green Deal, the Green Deal Industrial Plan and the REPowerEU Plan.

SSAB has committed to share the technical know-how gained through the project with industry and academia, while a claw-back mechanism will also be in place, if the project generates extra net revenue.

Carrie Bone UK

CMC expects a $35-40 million annual CO2 credit gain to boost its Polish mill’s Ebitda on-quarter in the first fiscal quarter through November, while underlying financial performance will remain similar, Kallanish notes.

Although Polish demand has improved and regional mills shown supply discipline, this has been offset by increased import flows from neighbouring countries, the steelmaker notes.

CMC Poland’s deliveries fell 18% on-year in the August quarter, the final quarter of CMC’s 2024 fiscal year, to 319,000 short tons, dragged down by a 35% drop in rebar sales to 98,000st. Market conditions were consistent with the previous quarter and remained challenging, the firm notes.

Average selling price inched down 2% to $667/st, while cost of scrap utilised dropped 4% to $383/st. Metal margin was flat at $284/st.

Net sales fell 19% to $222.1 million but adjusted Ebitda loss narrowed 88% to $3.6m. The latter was driven entirely by cost management actions, which overcame the drop in shipment volumes with no change in margins over scrap, CMC points out.

Long steel consumption remained substantially below historical levels.

Green shoots are however emerging in the European market, CMC says in its earnings presentation. The residential construction market is recovering; new housing permits and the number of units under construction have rebounded strongly. Demand should be supported by the expected release of €65 billion to Poland from the EU Recovery and Resilience Facility.

In the fiscal year through August 2024, CMC Poland’s shipments slumped 29% on-year to 1.23 million st, with rebar almost halving to 364,000st and merchant bar and other products down 17% to 870,000st. Net sales fell 36% to $848.6m and adjusted Ebitda declined 54% to $22.5m.

Adam Smith Poland

 

Italian rebar makers are mulling increases for November of approximately €30/tonne ($32.49) compared to current quotes. Last week, one producer also communicated increases to customers, but it has so far not been imitated by other mills.

The steelmaker, which is timidly communicating hikes, is reported to be asking for €310/t base ex-works, but all other steelmakers are quoting €280-290/t base, according to buyers and sellers who spoke to Kallanish.

Activity remains slow, with customers only buying back-to-back. There are no signals that price increases will be sustained, an agent and construction company confirm.

Contract values have remained relatively consistent in recent weeks. Current transactions in the domestic market are occurring at approximately €270-280/t base ex-works. Including additional size extras at an average cost of €260/t, current values in Italy are hovering this week at €530-540/t ex-works. Domestic mesh stands at approximately €380/t, not accounting for transport costs. An extra fee of €300/t applies for size extras, sources suggest.

Mills are experiencing financial pressure due to elevated scrap and energy costs, coupled with narrow profit margins. A number of producers are planning on implementing stoppages with temporary layoffs. The 1 November bank holiday will be used to execute a week-long production halt for some mills. One longs producer will implement a stoppage next month of as long as three weeks.

A source indicates that while halting production is not the preferred option, it represents the sole practical method to reduce costs. Another source suggests the price of scrap, although diminished, remains excessively high. In southern Italy, especially, mills are overpaying for scrap, resulting in almost non-existent margins. “The only viable option is to halt production and attempt to raise prices,” the source comments.

Natalia Capra France