China may see less stringent steel output controls in 2023 even as cuts widen

China’s Hunan and Shanxi provinces recently announced steel output cut plans for 2023, and the country’s largest steelmaking hub Hebei is expected to make a similar move soon, sources told S&P Global Commodity Insights Aug. 29.

However, despite widening cuts, overall government-mandated production curbs are expected to be less stringent in 2023 than in 2022, limiting any major upside for Chinese steel prices for the rest of the year, they said.

Central China’s Hunan and northern China’s Shanxi plan to reduce their crude steel output in 2023 by around 1.9 million mt and 3 million-4 million mt, respectively, from 2022 levels, sources said.

Hunan and Shanxi produced 13.21 million mt and 34.51 million mt of crude steel output over January-June, both down by 3% on the year, respectively, according to the National Bureau of Statistics.

As of Aug. 29, the NBS is yet to release provincial output data for July.

In order to achieve their annual output cut goals, Hunan and Shanxi will have to reduce their daily crude steel output over July-December to around 60,000 mt and 140,000 mt, respectively, down by 13,000 mt and 50,000 mt from levels in the first half of 2023, S&P Global calculations based on NBS data showed.

Some Hebei-based mill sources said they are yet to receive government output cut orders as of Aug. 29, but they said as the biggest steelmaking hub, the province will sooner or later carry out government-mandated output cuts.

Hebei produced 116.24 million mt of crude steel output in the first half of 2023, up 4.5% on the year, NBS data showed.

The province’s daily crude steel output in the second half needs to fall by 19%, or 120,000 mt, from the first half average, to keep 2023 output on par with 2022, according to S&P Global calculations.

“But even if Hebei and more regions announce output cut plans in September, it remains unclear whether mills will implement output cuts strictly … currently the market consensus is that China’s steel output cut will be carried out loosely this year, and there is not enough time for any ambitious steel output reduction for the rest of 2023,” a Shanghai-based market participant said.

Some market sources said the domestic steel market had been trending downward since late July on market expectation that China’s crude steel output might stay comparatively high in the coming months.

Platts assessed Chinese domestic rebar prices in Beijing at Yuan 3,711/mt ($510/mt) on Aug. 28, down by Yuan 155/mt from late July, S&P Global data showed.

Other output control plans

On July 24, China’s largest steelmaker Baowu Steel Group received a government order to keep its 2023 crude steel output within 2022 levels, according to company sources.

Also, state-owned Shandong Iron & Steel plans to carry out maintenance on a major blast furnace at its subsidiary Laiwu Iron & Steel in September-October, which will reduce pig iron output by around 5,000-6,000 mt/day, company sources said this month.

Author Jing Zhang, Market Specialist – Metals

German EAF production continues slide

Crude steel output at German mills in July was virtually on par with the corresponding month of 2022, but the divergence between the oxygen and electric arc furnace routes accelerated, Kallanish notes.

With a total of 2.958 million tonnes, July production was only 0.5% lower year-on-year, according to the monthly statistics of steel federation WV Stahl. However, while oxygen-route production rose by 6% to 2.264mt, that of EAF mills dropped by 17% to 694,000t. WV Stahl speaks of a “dangerous downtrend” for EAF mills, especially, involving lower emissions but relatively higher costs amid high national electricity prices.

On top of this, EAF mills serve industries that have come most under pressure. For one thing, the slowdown in construction is challenging the country’s five rebar mills, which are allegedly extending their production breaks this summer, sources say.

Although business was thought to be better for those EAF mills serving sophisticated bar qualities, the most recent half-year figures have proved otherwise. Production at Swiss Steel, with its four mills in Germany at subsidiary Deutsche Edelstahlwerke (DEW), plunged by 20% in H1, largely due to lower sales in the automotive industry.

This is in contrast to the automotive business of oxygen-route mills, supplying strip products, which has somewhat recovered lately, hence their y-on-y increase in output. Against that, business for special bar qualities for combustion engines is suffering, caused by the rise of electric car production, which requires fewer steel components like those made by Swiss Steel/DEW.

In the first seven months of the year, German crude steel output totalled 21.485mt, a drop of around 5% from the corresponding 2022 period.

Christian Koehl Germany

Spanish scrap, rebar markets expect September price hike

The Spanish scrap and rebar markets have started the last week of August with sluggish activity. Prices remain unchanged, while demand is practically non-existent during the last days of the country’s summer holiday period, sources tell Kallanish.

“The market has begun very calmly the week, although both scrap collectors and rebar sellers expect prices to start moving,” one source observes. “The recovery in activity expected in September should lead prices up. These have remained flat since July.”

However, the positive perspective on the recovery of the Spanish scrap market is not unanimous. “Domestic prices will follow the logic of the international market, not because an improvement is expected to be confirmed in Spanish demand,” a market participant comments. He confirms that most of the large mills have finished their maintenance periods, but they have no intention of starting September at high production rates.

“Scrap purchases are slightly down compared to last year at this time. Levels for lower grades are expected to rise between €10-20/tonne in the next few days,” a collector says. “However, lower output from steel mills due to disappointing industrial activity and poor performance in the construction sector could undermine the expected recovery.”

New arisings grade E8 scrap is offered at €360/t delivered. Both E40 and demolition-quality grade E3 stand at €345-350/t, while E1 is at €300/t on the same basis.

Meanwhile, rebar suppliers in southern Spain confirm they have registered very low sales in August, with demand mainly for small domestic activities. Since mid-July, they are offering 16mm material at €320-325/t ($346.05-351.46) base. Including €262/t size extras and €23/t loading expenses, transaction values are at €605-610/t ex-works. Some offers have also been heard at €600/t delivered for 16mm rebar.

Todor Kirkov Bulgaria

Credit insurer Atradius expresses concern for German steel

Atradius, the world’s second-largest credit insurer, has observed a weakening of the German steel industry this year and sees continued trouble in connection with the overall industrial transformation.

Atradius’ German branch observes that results and forecasts of mills and downstream customers have become cloudier, after relatively good results in the two previous years. The prior period was buoyed by a catch-up effect following the Covid-19 interruption. While this observation is not all new, Atradius adds the perspective of the credit insurer. It states that payment failures of borrowers in the first half have gone up notably, in numbers as well as in volume.

“Our underwriters report that companies keep stretching their due dates for payment in their purchasing activities,” Kallanish hears from Atradius country director Frank Liebold. “Companies are obviously worried about their liquidity, and try to get more leeway,” he adds.

Due to the transition from combustion to electric engines, many automotive suppliers are facing troubles for which they cannot compensate with other sales. “Especially small and medium-sized steel and metals users are troubled by lower demand, because they often serve defined customer groups, and cannot easily divert into other sectors,” Liebold says (see related story).

Christian Koehl Germany

German fabricators bemoan weak first half of year

Production activity at Germany’s steel and metals fabricating companies suffered in the first half of 2023, and the outlook is not optimistic either, according to their federation WSM.

In comparison with the first half of 2022, production has waned by 1.9%, Kallanish learns from WSM, which represents some 5,000 companies, mostly small and medium-sized enterprises (SME). WSM notes that SMEs are especially hard-hit by the economic slowdown. “The automotive industry is slowly recovering, but its suppliers are falling behind,” says WSM’s economist Holger Ade.

Ade refers to a poll held by the federation in which 47% say they are looking ahead with concern. Only 8% have expressed optimism. WSM indirectly blames the political pressure on industries to accelerate the technical transition towards net-zero steelmaking. “It is a cocktail of challenges that is toxic for industries,” Ade says.

Managing director Christian Vietmeyer emphasises the responsibility of policymakers to rejuvenate confidence among SMEs, which he says are the drivers of German wealth. He reiterates the call for controlled electricity prices, which is a main cause of concern for the country’s manufacturing industries.

Christian Koehl Germany

Post-summer prospects gloomy for long steel market in Poland amid slow construction

Domestic prices for steel rebar and wire rod in Poland were stable week-on-week on Friday August 25 amid quiet trading, industry sources told Fastmarkets, with bearish expectations for September because of the low consumption.

Fastmarkets’ weekly price assessment for steel reinforcing bar (rebar), domestic, exw Poland, was 2,630-2,650 zloty ($637-642) per tonne on Friday, unchanged since August 18.

Sources reported an offer from one local producer at 2,650 zloty per tonne CPT, which would be equivalent to about 2,630 zloty per tonne ex-works.

Another mill in the country was hoping to achieve slightly higher prices of 2,680-2,700 zloty per tonne CPT, which would net back to about 2,650-2,680 zloty per tonne ex-works.

There was still limited trading in the Polish rebar market, and sources had low expectations of a price rebound in September.

“Demand [for rebar] is low and there will not be many chances for any pick-up this year. The construction sector is very weak – there are no new projects,” a trading source said.

Local producers were reported to be trimming output to balance supply and demand, but industry sources doubted that this would help to keep prices up.

“Mills can try to intimidate the market with output cuts, but I don’t think they will be successful in the end. There is no demand [from end-users],” a second trader said.

In the secondary market, rebar prices were reported at 2,700- 2,750 zloty per tonne CPT, largely flat week on week.

Wire rod
Fastmarkets’ weekly price assessment for steel wire rod (drawing quality), domestic, delivered Poland, was 2,750-2,800 zloty per tonne on Friday, stable week-on-week.

The assessment was based on a few deals reported at 2,750-2,760 zloty per tonne CPT and offers from local mills heard at 2,800 zloty per tonne CPT.

Sources said that producers in Poland were considering raising their offer prices for September, but nothing has been announced officially yet.

Market participants believed that there was no room for any price rise in the wire rod market, given persistently poor demand.

Import wire rod offers to Poland were limited by vacation absences. European suppliers were expected to come back to the market with new offers next week.

One Ukrainian supplier was offering mesh-quality wire rod at €570-585 ($618-634) per tonne from stock, depending on tonnage.

At the same time, one source said that another Ukrainian supplier was offering wire rod around €530 per tonne DAP, which would net back to about €560-565 per tonne CPT.

Published by: Julia Bolotova

HRC market in Europe questions post-holiday price direction

The European market for steel hot-rolled coil was quiet on Friday August 25, with buyers digesting recent price rises and waiting for more producers to come back to the market with new offers, industry sources told Fastmarkets.

Fastmarkets calculated its daily steel hot-rolled coil index domestic, exw Northern Europe at €643.75 ($697.81) per tonne on Friday, stable day on day.

The index was up by €7.50 per tonne week on week but down by €13.13 per tonne month on month.

Few suppliers were active in the market due to summer holiday absences, but earlier this week a leading European steelmaker increased its offer prices to €700 per tonne ex-works for October-delivery HRC.

Sources expected other major mills in Europe to increase their offers to similar levels shortly. But some German suppliers were still offering coil with October lead times at €640-650 per tonne ex-works in the week to Friday.

No transactions have been reported at €700 per tonne ex-works so far, and most buyers considered that price “not workable,” claiming that they could not increase prices in the secondary market.

“Demand [for HRC] remains very weak,” a distributor said. “And the September rebound that mills hope for seems to be unlikely. Only the automotive industry is performing more or less steadily [while] other end-user [steel] sectors are in decline.”

Fastmarkets’ calculation of its daily steel hot-rolled coil index domestic, exw Italy was €635.00 per tonne on Friday, up by €1.67 per tonne from €633.33 per tonne the previous day.

The Italy index was up by €5.00 per tonne week on week, but down by €5.00 per tonne month on month.

Italian market sources estimated tradeable values for September-October rolling HRC around €630-640 per tonne ex-works. But no official offers have been announced by local mills yet due to summer maintenance closures.

Before the stoppages, target prices heard from Italian integrated mills were around €700 per tonne ex-works.

Buyers, however, suggested that achieving such prices would not be possible in the near term, given the slow consumption and the availability of cheaper imports.

“Starting in October, the European market will be flooded by imported coil booked at rather competitive prices,” a trading source in Italy said.

Fresh overseas coil offers were coming mainly from India and Turkey for November-December delivery, at prices that were quite high and therefore uncompetitive — around €630-640 per tonne CFR.

Published by: Julia Bolotova

Blastr explores pellet plant site in Norway

Blastr Green Steel has signed a letter of intent for an alternative location for its pellet plant to supply feedstock to its ultra-low CO2 steel plant being developed in Inkoo, Finland.

Blastr has selected Lutelandet industrial area on the west coast of Norway, as a potential location to be developed for the company’s pellet plant. The LOI includes an area sublease agreement between Blastr and Lutelandet Offshore Site & Drydock (LLOF), which develops and manages the Lutelandet industrial site and port. The LOI also covers a cooperation between Blastr and Htwo-Fuel to secure grid and power capacity. Established in 2021, HTWO-Fuel AS aims to make hydrogen available as fuel for maritime shipping traffic along the west coast of Norway and produce green ammonia.

The plant will employ around 120 people and generate a substantial number of indirect jobs and economic activity in the surrounding area, Kallanish learns from the Finnish start-up.

Blastr says the pellet plant is a key part of its integrated green steel value chain which has the potential to deliver more than 90% reduction of Scope 1-3 C0₂ emissions compared to conventional steelmaking.

“Lutelandet is a highly attractive site for the production of feedstock to our steel plant with industrial infrastructure already in place, access to a North Sea deepwater port, and clean renewable energy from hydropower and nearby wind farms,” says Hans Fredrik Wittusen, ceo of Blastr Green Steel.

Christian Koehl Germany

Bulgarian second-quarter steel performance weakens

Bulgaria’s steel industry saw its main indicators fall during the second quarter, Kallanish notes. Crude steel and finished products output each decreased compared to the previous three months and year-on-year, the Bulgarian Association of Metallurgical Industries (BAMI) says in its latest quarterly report.

Crude steel output reached 133,300 tonnes in Q2, down 14,800t over January-March and 11.1% weaker compared to the same period of last year. First-half crude steel production reached 281,400t, down 2.3% over January-June 2022.

Meanwhile, finished products output fell by 11,900t on-quarter to 260,000t, and was also 18.1% less on-year. Of this volume, long steel production was 199,300t, down 2.2% over the previous quarter and 20% lower y-o-y.

Q2 flat steel output reached just 60,700t, a decrease of 19.3% and 10.9% over Q1 and on-year, respectively.

Six-month rolled products output totalled 538,900t, 10.4% fall y-o-y.

Bulgaria’s April-June steel exports rose by 32,200t on-quarter to 210,200t but was 7.2% lower when compared to the 226,400t shipped abroad in Q2 2022. Long steel exports represented 154,000t of overall shipments. H1 exports reached 388,200t, which was 8.9% down y-o-y.

Domestic demand, meanwhile, slowed in the period. Q2 steel sales were 54,700t, a decrease by 28.8% q-o-q and 11.5% on-year, respectively. Six-month sales totalled 131,500t, or 1,000t more over H1 2022, BAMI confirms.

Todor Kirkov Bulgaria

German metals union prepares for wage negotiations

Germany’s IG Metall union has given an early indication of its claims in the next round of regular wage talks with the steel industry. Kallanish understands that the talks will start in November.

Although it does not put a figure to its claims yet, the union alludes to general objectives that workers demand more money and shorter working hours. It cites a poll conducted among 11,000 workers to that effect. The upcoming round covers the northwestern and the eastern chapter of the union, including the main mills of the big groups thyssenkrupp, Salzgitter and ArcelorMittal.

The projected technical transformation of the German steel industry is one new aspect taken into consideration by the union, as it will lead to a reduction of jobs at steel mills. “Future plants will be run with fewer staff, as the blast furnace route will be converted from coke to hydrogen,” says Nils Knierim, one of IG Metall’s negotiators. This is why the union proposes a reduction of working hours, possibly to 32 per week, a key theme in order to maintain jobs.

The last collective bargaining in June 2022 resulted in the strongest wage increase in 30 years, amounting to 6.5%. That agreement runs for 18 months, ending 30 November 2023.

Christian Koehl Germany