Category: Latest Updates

The European hot-rolled steel coils market remained firm Sept. 10, with returning automotive demand and extending lead-times expected to support prices, sources told S&P Global Platts.

The Platts TSI hot-rolled coil index was calculated Sept. 10 at Eur476/mt ($565.34/mt) ex-works Ruhr, unchanged on the day at its highest mark since March 25.

Cold-rolled coil gained Eur1.50/mt from Sept. 9 and was assessed at Eur532.50/mt ex-works Ruhr, a level last seen on April 23.

In Southern Europe, HRC added Eur0.50/mt on the day and was assessed at Eur471.50/mt ex-works South Europe, the highest since July 10 2019.

A Benelux-based trader said sentiment in the market was more positive after the recent price hikes from mills, with mill order books from the automotive industry “a lot better,” despite the fact that car sales were somewhat “contradictory.”

“Car sales in August were still 10-15% below that of the previous year, but the forecast for demand is much better. Mills are happy because their order books are filled until the end of the year for the automotive sector,” the trader said.

The same source however was unsure what the drop in iron ore prices would entail, as this is correlated to crude oil prices.

“Iron ore prices have come down and oil prices decreased by 10% in the last week, so this will have some effect, as when oil decreases, it suggests an economic slowdown,” the same trading source warned.

Platts assessed its IODEX 62% iron ore index at $126.30/dmt CFR North China Sept. 10, down $0.90/dmt on day. Firm demand from Asian steel producers saw the IODEX assessment reach $130.80/dmt on Sept. 3, its highest mark since January 2014.

The trader also said mills were planning to increase capacity, which would mitigate the longer lead times of 10-12 weeks currently present in the market.

“We missed some business because we were a little too high in our pricing, and lead times are so long, so it’s not been easy,” the trader lamented.

According to the source, 20 blast furnaces are scheduled to restart during the middle of September.

An Italy-based service center source said he was now bullish for the market with HRC increasingly likely to reach Eur500/mt EXW Italy in the short term.

“Everything is moving so rapidly, every day offers are withdrawn and then increased the next day by another Eur10 and imports are not a viable option so higher prices have to be accepted by the buyers,” he said.

“As a buyer myself I can see it is becoming difficult to source anything other than domestic material – stocks in the market are low and service centers have to buy every day.” Order intake in September has started well with better-than-expected August and July demand further reducing inventories at Italian service centers.

Continued strength in Asian markets is expected and this will support the recovery in Europe, the source said, adding, ” We could easily reach Eur500/mt for HRC in Italy if China continues to consume.”

— Len Griffin, Amanda Flint

A German steel merger between Thyssenkrupp and Salzgitter has been rejected by Salzgitter’s CEO Heinz Jörg Fuhrmann in an interview, the content of which was confirmed by Salzgitter to S&P Global Platts Sept. 10.

A tie-up between the two German companies has been the preferred option for Thyssenkrupp union members and employees as Thyssenkrupp searches for a partner or buyer for the struggling steel unit.

Fuhrmann however put an end to the discussions in a Reuters interview, saying there would not be any “advantages” in a merger and that even Thyssenkrupp as the biggest German steel producer and Salzgitter as the third biggest German steelmaker combined would not become a “champion” on the global steel market.

Salzgitter has repeatedly stressed the need for consolidation in the European steel market due to excess capacity while steel demand was stagnant, but said it would not be involved in any talks.

An option for future cooperation would however be the production of low CO2 pre material. Fuhrmann highlighted there would not be current plans to cooperate, but Salzgitter would be “open for meaningful approaches”.

Salzgitter and Thyssenkrupp currently own semis producer HKM together with France’s Vallourec.

Thyssenkrupp announced a revival of a possible steel merger in May without disclosing who the potential partners were. Merger talks between Thyssenkrupp and Tata Steel collapsed in 2019 and were seen as unlikely to be restarting as long as it remains uncertain what will happen to Tata’s Port Talbot mill in Wales.

Thyssenkrupp’s major shareholder Cevian endorsed Swedish steelmaker SSAB for a takeover or partnership with Thyssenkrupp earlier in July, saying the company would be “best suited” for the steel unit. Market speculations and media reports have been mounting ever since with sources saying that SSAB would be a likely — but not necessarily popular — candidate for a possible tie-up.

— Laura Varriale

As demand from South Europe, which showed a significant recovery in June, slowed in July amid volume quotas, Turkish mills’ hot-rolled coil imports were around 70,000 mt lower than the previous month at 286,000 mt. This export figure was, however, 4.8% higher on year.

Quotas have been restricting Turkish steel exports to Europe in recent months. Turkish mills’ 2020 exports to the EU are expected fall by around 30% from 2019. As the European Commission has also launched anti-dumping and countervailing duty investigations into imports of certain hot-rolled flat products from Turkey, following a request by European steel association Eurofer, the cautiousness among European buyers has increased in recent weeks.

Egypt became Turkey’s main HRC export market in July, amid slower demand from Europe. Shipments to Egypt reached 89,200 mt, roughly triple on year and significantly higher than the 4,400 mt exported in the previous month.

Spain was Turkey’s second largest HRC export destination in July at 46,300 mt, lower than 56,200 mt exported in the previous month, while exports to Italy totaled 37,350 mt, significantly lower than 145,000 mt exported in June 2020.

Turkish mills also exported 28,100 mt of HRC to Bulgaria in July, while exports to Iraq totaled 16,700 mt.

Turkey’s other main HRC export destinations in that month were: Algeria (11,100 mt) and Belgium (10,300 mt), the latest data showed.

— Cenk Can

Some 34% of blast furnaces idled during the peak of the Covid-19 pandemic are being restarted, UBS bank says in a new steel and iron ore market analysis published this week. The trend is set to continue further.

The bank calculates 72 blast furnaces were idled globally in response to the downturn in demand due to the coronavirus, meaning a capacity of some 132 million tonnes/year was temporarily curtailed. European steelmakers were the most active in idling BFs, stopping 20 of them; in Asia 19 were idled and in North America 17.

Of the idled furnaces globally, 22 are restarting. “In our opinion, this is not a surprise given the time constraints of hot idling and as demand is picking up,” UBS says in a note seen by Kallanish. “We expect most idled BFs to restart by end-20; this is needed for pig iron production ex-China to be flat h/h in 2H.”

The report notes that some furnaces were restarted because of demand recovery, while others need to be taken back into operation to avoid compromising their long-term production. “Some furnaces need to open up otherwise they will cool and block the furnace, rendering it inoperable,” the bank explains. “Steelmakers plan how long they want furnaces to run at zero and charge just the right raw materials for that length of time.”

Typically, the minimum length a BF is banked is approximately three months due to economics, while the maximum is around six months, after which it is hard to sustain the heat, UBS points out.

The steel market is recovering strongly following the Covid-19-pandemic-induced lows seen in spring, but steelmakers should not restart furnaces too early and pressure the market. So says the International Rebar Exporters and Producers Association (Irepas) in its latest short-range outlook sent to Kallanish.

Most mills outside China are suffering with depressed production and financial performance, while winter may bring a second wave of the Covid-19 pandemic. Ongoing political uncertainties are further clouding the outlook, although regional markets are performing well and prices are firming up.

European cut and benders are seeing demand rebound, with only a few projects on hold. However, they took in too many orders at low prices earlier this year during the worst period of the coronavirus – expecting prices to collapse – and are now confronted with stable-to-rising prices due to increasing raw material costs, Irepas says.

Demand in North America has also returned, with costlier raw materials and imports supporting US steel prices. However, the second pandemic wave will curtail further increases.

Brazilian capacity utilisation has rebounded to 60.5% from 48.5% in June, but steelmakers’ plans to raise utilisation further by increasing exports will be difficult due to excess capacity and protectionist measures.

The strong market recovery means inventories in the supply chain need to be replenished. The rebound is being driven by China, where investment activities and stimulus measures are generating demand and making China a net steel importer. Competition in the market remains intense, however, particularly in Asia where price changes of $1/tonne can swing the focus of buyers to supplies of a different origin.

“Service centres in Europe and the US have been low on stocks and, with any sign of an uptick, those stocks are being replenished with higher transaction prices resulting,” Irepas observes. “The increase in prices that has followed the rise in raw material prices is positive for those who have sufficient stocks for September.”

“The key here is that steel producers should not be misled by the current demand into firing up more of their furnaces, which could exert more supply pressure on the market during winter,” the association adds.

European steel producer ArcelorMittal is restarting its Sestao electric-arc furnace (EAF) in Bilbao, Spain for October deliveries.

Sestao has a nameplate production capacity of around 1.8mn t/yr of hot-rolled coil (HRC) and 600,000 t/yr of pickled material, but was operating at a fraction of this when it was shut in March.

Market participants suggest it may have been manufacturing around 300-350,000 t/yr of HRC and 160,000 t/yr of pickled and oiled coil.

The furnace can restart quite quickly as it is an EAF, with market participants suggesting it produces “best in class” coil. It will produce around 100,000 t/yr on start-up.

Sestao is being restarted to alleviate the supply gap caused by the reline of ArcelorMittal’s Ghent blast furnace in Belgium, which will take around four months.

ArcelorMittal could not officially confirm Sestao’s restart.

By Colin Richardson

Italian steel producer Arvedi will restart production at its largest electric-arc furnace, No 2, idled since early August for upgrading, at the beginning of the week starting Sept. 13, an executive close to the company confirmed to S&P Global Platts on Sept. 8.

Arvedi is the second-largest Italian producer of flat products and it has two EAFs: No. 1 has 1.4 million mt/year of crude steel capacity and was installed in 2018 by Primetals technologies to replace an existing EAF, and No. 2, for which the recent upgrade is intended to make more cost efficient and to increase its capacity to around 2.8 million mt/year of crude steel from 2.2 million mt. The revamped EAF was built in 2008 by Tenova and the upgrade work were planned months ago. The EAF was supposed to restart production at the beginning of September, but it will restart just few days later than scheduled because of a small fire caused by a short circuit in the plant’s cooling tower.

“The absence of Arvedi in the market has helped even more the coils prices to increase, there is recovery in the steel demand in Italy and overall in Europe,” a market source said. “In Italy, in particular Ilva in Taranto, is still producing at its lowest historical production (3.5 million crude steel a year) so Arvedi will benefit now by the increased demand and higher prices.”

Platts HRC EXW Southern Europe increased by Eur43.50/mt since May 1, when prices were at Eur417/mt base ex-works.

Arvedi is not a listed company, according to its latest 2019 financial statement the Italian steel producer registered last year an increase in volumes by 1.5% year on year to 4.3 million mt of steel products with earnings that reached Eur2.76 billion in 2019 down by 10% year on year on lower margins.

The company is focused also to reduce its emissions and last year invested Eur180 million, mainly to become carbon free in few years. From 2007 to 2019 Arvedi invested in total Eur2.04 billion to relaunch and re-modernize the mill.

— Annalisa Villa

ArcelorMittal Italia is carrying out maintenance and renovation work at its main Taranto plant despite speculation it will break the lease contract for the former Ilva. The company completed the replacement of converter exhausts at meltshop no.2 during the August summer break, Kallanish learns from company sources.

Workers in the maintenance department and contractors from the area of Taranto were employed to complete the complicated installation of 26 tonnes of structure at a height of 90 metres. The new exhausts will last for 20 years, the company explains.

Talks continue between the government and ArcelorMittal in an effort to find an agreement, retain the Italian investment and weather the current demand crisis linked to the Covid-19 pandemic. The company will extend temporary layoffs for most of its Taranto employees for a further nine weeks starting this month. The layoff extension has been granted by the government to all Italian companies in response to the pandemic crisis (see Kallanish passim).

Trade unions, meanwhile, remain concerned by the fact the mill is still working at minimum utilisation, with 2020 expected to see crude steel output of below 4 million tonnes.

Around 22 blast furnaces are currently being restarted by steelmakers around the world, as steel demand picks up and also for operational reasons, analysts from UBS said in a Sept. 8 report.

The restarts represent around 34% of the total blast furnace capacity that was hot-idled or temporarily halted due to COVID-19, and the rest can be expected to restart by year-end, according to the report.

“This is not a surprise, given the time-constraints of hot idling and as demand is picking up,” said analysts led by Myles Allsop. “We expect most idled BFs to restart by end-20; this is needed for pig iron production ex-China to be flat h/h in 2H.”

A total of 72 blast furnaces around the world with capacity of 132 million mt of crude steel were hot-idled or banked in 2020 as a result of COVID-19-related factors, said UBS, citing research from CRU.

According to the research from both UBS and CRU, the idled BFs were located 31 in Europe of which 8 have now restarted; 26 in North America of which 6 have restarted; 13 in Latin America of which 4 have restarted; 46 in Asia of which 16 have restarted, and 15 in the rest of the world of which 6 have restarted.

Some steelmakers are restarting furnaces in response to demand, which has partially recovered from April lows, but remains down around 30% year-to-July, according to UBS. However, others are reopening their furnaces because otherwise these will cool and may get blocked and inoperable, the analysts said.

“Typically the minimum length a BF is banked is around three months due to economics and the maximum is around six months (after which it is hard to sustain the heat),” they said.

Companies that have curtailed blast furnace output this year include ArcelorMittal, voestalpine, Thyssenkrupp, Vallourec, Salzgitter, US Steel, SSAB, Ferreira di Servola, Isdemir, Liberty, AK Steel, Nucor, Stelco, Usiminas, Gerdau and CSN, UBS reported.

Impact on iron ore

Prices for iron ore, a key ingredient for blast furnace steelmaking, are likely to fall over the next six months on greater Brazilian supplies and inventories, despite expectations of greater demand from steelmakers bringing BFs back on stream, according to UBS.

The analysts expect prices for 62% Fe iron ore fines delivered to China to fall back to $85/mt in 2021, after touching a six-year high of $130/mt last week, “with Brazilian supply recovering faster than global steel production,” they said.

“Iron ore inventory at Chinese ports rose 2 million mt w/w after having been stable for the previous five weeks; they are now at highest level since Apr-20,” UBS said. “Inventory on vessels outside the key iron ore ports in N China are down 1 million mt w/w but remain high at 17 million mt (average since Jan-18 is around 6 million mt) due to port congestion following changes to customs protocols and poor weather.”

Scrap tightness

In a separate research note, analysts from Macquarie Bank said that scrap flows, including for steelmaking, have collapsed post-lockdown. Ferrous scrap is typically used in electric arc furnaces rather than blast furnace steelmaking.

“As global economic activity recovers post-lockdown, markets become increasingly aware that scrap supply options are no longer adequate to meet recovering demand, requiring a lift in the buying rate of primary supply,” said Macquarie analysts led by Tom Price.

“Virus controls severely limited the scrap collection process,” they said, noting that copper and zinc refining have a relatively low dependency on scrap flows (less than 20%) while aluminum, lead, nickel and steel markets are heavily scrap dependent, which has resulted in a rising price trend.

S&P Global Platts assessed Turkish imports of premium heavy melting ferrous scrap 1/2 (80:20) at $302/mt CFR on Sept. 8, up $2/mt on day, to match the previous 2020 high of $302/mt CFR reached on Jan. 7.

— Diana Kinch

German steelmaker Thyssenkrupp has cancelled the group’s attendance at major industry fair Wire & Tube in Germany amid unknown developments of the pandemic and infection risks, the company said Sept. 8.

The event is due to be held Dec. 7-11 in Düsseldorf after already been postponed from March when the pandemic started to hit Germany.

“The cancellation is a reaction to the unforeseeable further development of the corona pandemic and the infection risks associated with it. Thyssenkrupp is foregoing the face-to-face event to protect customers and employees,” the company said in a statement.

Thyssenkrupp’s cancellation comes amid market chatter at major European mills pondering whether to pull out of this year’s trade show in order to save costs after being hit with cash flow problems and general concerns over travel restrictions and safety.

After the postponement of the Euroblech fair to 2021, the Wire & Tube is set to become the only major industry event planned in Europe in 2020.

Wire & Tube organizer Messe Düsseldorf has not responded to S&P Global Platts’ request for comment on whether the event will go ahead as planned in December.

The fair is held every two years and is one of the major trade shows in Europe for the flat and long steel industry. In 2018, the Wire & Tube fair attracted more than 71,000 visitors.

— Laura Varriale