Downstream struggles as EU HRC soars: Tube Düsseldorf
Sentiment in the flat downstream segment is decidedly cautious this week according to sources at the Tube and Wire trade show in Düsseldorf.
They are describing a market weighed down by unreliable downstream demand and the difficulty faced by service centres and re-rollers in passing hot rolled coil (HRC) price increases through to customers.
The market mood at the show appears two-tiered: producers with a broadly positive outlook and preparing further price increases, while the manufacturing sector is grappling with demand weakness and financial pressure, overwhelmed by the geopolitical uncertainty, Kallanish notes.
No further coil price increase announcements are expected during the event, according to multiple sources. However, mills are said to be readying additional hikes to be implemented around the time of the European Commission’s new safeguard announcement.
One steelmaker source tells Kallanish that demand is not exceptional, but order books are filling steadily, adding there is no urgency to sell. No price increase is being considered at present, the source confirms, as the market continues to gradually absorb recent HRC hikes. European HRC prices are currently stable week-on-week at €700-720/tonne ($825.01-848.59/t) base delivered or ex-works depending on order size.
According to traders, the level of import transactions remains low as only large processors are continuing to buy globally. Import offers for service centres have dried up, with buyers staying away from the import market due to CBAM charges and the approaching new safeguard measures. The sole exception is cold rolled coil, where structural European shortages are forcing buyers to continue sourcing on a ddp basis at €860-880/t on average.
Service centre sources report improved margins despite unreliable demand, supported by rising sheet prices. Many are still depleting stocks of lower priced HRC purchased on the import market ahead of the CBAM implementation, providing several months of financial relieve.
However, the uncertainty emerging in Dusseldorf is that service centres will now need to reassess their HRC costs on the basis of more recent purchases, meaning their selling prices will have to move higher. Hot rolled sheets are currently at €770-780/t delivered on average, but with the market leader quoting HRC at €750/t for Southern Europe and the current lower imports, margins will soon come under pressure and profitability is at risk for many service centres.
Author: Natalia Capra
NASS to close; ISTA to absorb name rights
The National Association of Steel Service Centres (NASS) is to close, with the International Steel Trade Association (ISTA) being passed exclusive rights to its name, Kallanish learns from a joint statement.
Ian Darby, NASS director general, says “it is with deep regret” that the association, which was established in 1927, has come to an end in its current format. He notes the “challenging” financial viability of the organisation since he became director general in May 2023.
“It is with deep sadness that I could not reverse the trend of falling subscriptions to keep the organisation going to its 100th year,” he adds.
ISTA has been granted full and exclusive right to the use of the NASS name. In a statement, ISTA says it is “most honoured to have been passed by NASS the great names of both the National Association of Steel Stockholders and the National Association of Steel Service Centres.”
ISTA is to reach out to all existing NASS members and invite them to join the association, which has more than 100 members, including traders, downstream manufacturers, service centres, stockholders, fabricators, shipowners, port handlers, and insurers. These members account for approximately 25% of imports into the combined UK and EU market.
ISTA says it has built a sound relationship with the Trade Remedies Authority with regards to current safeguarding and anti-dumping investigations. It is closely liaising with the DBT and government ministers with regard to the replacement of safeguarding from 1 July.
UK steel industry associations are continuing to evolve, with the North Eastern Association of Steel Stockholders (NEASS) rebranding as the National Steel Association (NSA) last year. NSA says it is the largest steel trade association membership in the UK & Northern Ireland. Membership has been growing, now reaching more than 170 members, up from 100 last year.
Author: Carrie Bone
ETS needs revision, critical for energy independence
The European Emissions Trading System (ETS) needs to be adapted to ensure the cost of decarbonisation can be borne by industry and security of supply is not jeopardised, according to a Euractiv panel discussion held in Brussels on Wednesday.
“We must not give up the free allocation in ETS to sectors exposed to carbon leakage,” secretary of state at Poland’s climate and environment ministry Krzysztof Bolesta warned during the discussion monitored by Kallanish. “This is the best and proven way to actually protect their competitiveness and make sure that they don’t have a big incentive to leave Europe.”
ETS has received increasing attention in the weeks since the Middle East conflict erupted and lifted global energy prices, further impacting European industry’s already shaky competitiveness. Free allowances have started to be phased out since 1 January and are scheduled to disappear by 2034, unless the European Commission amends the timeline as part of its ETS review, expected in July.
Italian, Austrian and Czech steelmaking representatives have been particularly vocal in recent months about the need to delay the phase-out.
“The linear [free allocation] reduction factor needs to be a bit lowered to give industries more space and time to decarbonise. So, there’s still room in the system towards 2050; we don’t need to close the system in the late 2030s because then companies don’t know what to do,” Bolesta continued.
EU climate policy has converged firmly with industry and security concerns. “It is existential for Europe, not just for protecting the climate, but even maybe more so for economic competitiveness reasons, that we continue this transition,” said director general of DG CLIMA, European Commission Kurt Vandenberghe. “It’s getting fossil out of our system as quickly as possible, but in a cost efficient manner that does not jeopardise our security of supply.”
The ETS revision will be part of an overall revision of the post-2030 framework for EU energy and climate. “The line that we will follow is very clear. We keep the direction, we stay the course, but we make it less prescriptive. It has to be really a big machine to drive investment and innovation, so that we modernise on the energy system, and that we have a renewal of our industry in Europe.”
ETS nevertheless remains crucial as a driving force for energy independence. Only a few months ago, “the narrative was quite different … where it was not so clear this consequence of the over reliance that we have on fossils”, said deputy director & head of policy, Bellona Europa Lina Strandvåg Nagell. “And that seems to be a mistake we’re doing as a society repeatedly, where we make the rules for the good times, and we forget why we were actually doing them in the first place.”
Any revision to the system should not punish the first movers who have already spent big sums on decarbonisation, she added.
The system would benefit from the establishment of an institution to govern the ETS price, “like a central bank … essentially the MSR [Market Stability Reserve] but equipped with some new powers”, suggested Bolesta. Vandenberghe countered saying “the mood is not for creating new institutions of any kind”, but that the rules-based management of the MSR will ensure credible pricing.
The Commission supports the inclusion of international carbon credits in the European climate policy framework, but there will be “strict conditions on the integrity of these credits” to ensure they can be trusted, he added.
There is meanwhile “no hesitation” that nuclear energy “will play a big role” in the EU’s energy mix by 2050, he continued. The Commission will use part of the Innovation Fund to help finance the development of small, modern reactors in Europe. CCUS will also be required, he added.
“We don’t do climate policy for the climate only anymore. It’s really for industry and security. Secondly, there will be no green transition with red finance numbers for business, but it will also be no black numbers for business if there is no green transition,” Vandenberghe concluded.
Author: Adam Smith