Category: Latest Updates

After weeks of a buying freeze due to the coronavirus pandemic, the Moscow steel market is recovering, allowing Russian steel producers to seek price hikes, sources said June 19.

The rebound is particularly visible in rebar, which after “two lost months” is seeing buyers coming back to restock, a trader said.

In April-May, when the Moscow area was impacted the most by COVID-19 and construction activity was stopped or restricted, rebar prices fell Ruble 3,500/mt ($50/mt) to Ruble 25,500/mt ($367) CPT Moscow, without VAT, according to S&P Global Platts’ weekly assessment.

But on June 19, Platts put its rebar assessment at Ruble 26,400/mt, up Ruble 900/mt.

“The demand is gradually returning in the domestic rebar market amid phased withdrawal of the self-isolation regime,” a rebar producer said. He cited recent sale prices at Ruble 33,000/mt CPT Moscow, with VAT, or Ruble 26,400/mt, without VAT.

Two buyers confirmed the transaction prices for June contracts at Ruble 33,000/mt ($475/mt), adding that offers for July went up to Ruble 33,500-34,000/mt ($482-$489/mt), CPT Moscow, with VAT.

Compared to rebar, hot-rolled flat products demand was picking up more slowly, explained by high inventories still held by stockholders and end-users. Therefore, the price rebound in the flats market has been modest so far.

On June 19, Platts’ weekly HRC and HR sheet assessments were at Ruble 31,150/mt and Ruble 31,750/mt, CPT Moscow, without VAT, respectively, both up Ruble 150/mt week on week.

The new asking prices for HRC from one Russian producer were pegged at Ruble 38,000-38,500/mt ($547-$554/mt) CPT Moscow, including 20% VAT, a large volume buyer said. He expected sales to close at Ruble 37,500-38,000/mt.

A Moscow-based trader cited the latest HR sheet prices at Ruble 40,500/mt ($582/mt), including VAT. A distributor noted that prices over Ruble 40,000/mt ($575/mt) were not workable yet as this was the level paid by end-users in the retail market.

He expected purchases from Russian mills to close at Ruble 39,500-39,800/mt ($568-$572/mt) CPT Moscow, including VAT. He estimated there was still potential for prices to climb another Ruble 1,000-1,500/mt ($14-$22/mt).

— Wojtek Laskowski

Turkish mills’ steel exports to the European region fell by 1.2 million mt year on year in the first five months of 2020 to 2.3 million mt, down from 3.5 million mt exported in the same period the previous year, mostly due to trade barriers and the COVID-19 pandemic. Turkish mills will focus more on export destinations like South East Asia, West Africa and Latin America in the coming months, said Adnan Aslan, chairman of Turkish Steel Exporters’ Union (CIB).

Drawing attention to the EU’s recent protection measure moves, Aslan also noted that they will continue to use all their legal rights against the EU’s moves.

The European Commission recently 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, as Platts has reported.

Turkey informed the World Trade Organization on May 25 that custom duties could be imposed on steel imports from the EU in response to the EU’s imposition of additional measures against imports of Turkish steel.

Turkey has 30 days to suspend, change and impose the stated additional duties following the notice, according to article 8.2 of the Safeguard Measures agreement. Turkish market sources are expecting a presidential decree in this regard to be published within a week.

Turkish mills’ overall steel exports volumes declined by 17.8% in the first five months of 2020, due to pandemic, however some recovery has started in export volumes as of June amid normalization efforts in trade globally.

“Due to the pandemic, we have entered a new period specific to supply chain. In that period, it is hard to export to the whole of the world as before. While we are giving more priority to our domestic sources, we should also pay sufficient attention to exports. In this regard, we will focus on export markets like South East Asia, West Africa and Latin America, where steel demand is rising,” Aslan said.

Drawing attention to the historically high level of liquidity and the low level of interest rates, the chairman of CIB also said: “Action plans by countries to change shrinkage to growth during the COVID-19 pandemic are inevitable.”

— Cenk Can

Konsorcjum Stali (KS), one of Poland’s top steel distributors, has delisted from the Warsaw Stock Exchange, Kallanish notes.

This follows an agreement last year by a group of KS’s shareholders to acquire the remaining shareholding of the distributor after their joint stake exceeded 90%.

KS’s consolidated revenue fell -7% on-year in 2019 to PLN 1.69 billion ($426 million) and net profit slumped -62% to PLN 16.5m.

According to the latest published volume figures, in the first half of 2019 KS’s steel product sales declined -5% on-year to 219,900 tonnes. In full-year 2018 sales rose 7% on-year to 682,000t, with domestic sales accounting for 99.45% of revenue.

The firm has three reinforcement fabrication plants with a combined capacity of 15,000 t/month. It also has two steel structures plants and a coil service centre. This is in addition to 13 sales offices around Poland. Its main suppliers are Celsa Huta Ostrowiec, CMC Poland and Riva Stahl.

ArcelorMittal Italia chief executive Lucia Morselli says the company intends to comply with the agreement signed on 4 March with the Italian government for the relaunch of former Italian steelmaker Ilva.

This is in response to the latest declarations by Prime Minister Giuseppe Conte and economic development minister Stefano Patuanelli that ArcelorMittal’s latest industrial plan for Ilva is “…unacceptable.” These comments triggered speculation that the steelworks could be nationalised through state financial body Invitalia (see Kallanish passim).

In a televised interview seen by Kallanish, Morselli says there was “…a good climate” at the meeting between the company and authorities earlier this week. The government becoming a shareholder in the steelmaker could be done in the presence of ArcelorMittal, and it would support the plant’s relaunch, she added.

However, the allocation of shares between the public and private partner has yet to be decided, Morselli continued. She also reiterated the need to make 3,150 redundancies and cut the former Ilva workforce from 10,700 employees to 7,500. She did not mention, however, the 1,600 employees on furlough from the previous administration.

The Covid-19 crisis has compromised future demand forecasts. “European steel production has decreased by -50% while 40% of steelmaking facilities are still closed in Europe,” Morselli explained.

ArcelorMittal Italia has asked the Italian government for a grant of €200 million ($225m) and a loan of €600m that the company will pay back in two years following the finalisation of the sale. Morselli also stated that the company is respecting the roadmap for the environmental plan, and by 2023 it will have invested €1.2 billion. “Ilva will be saved. It is already saved,” Morselli concluded.

Turkey’s largest integrated steel producer, Oyak Maden Metalurji Group (Erdemir), could reach full capacity in the coming weeks, depending upon market conditions, as the company’s Iskenderun-based mill, Isdemir, restarted production at one of its blast furnaces following maintenance work, S&P Global Platts learned from a company source on June 18.

The group’s first quarter crude steel capacity usage was around at 93%, Platts observed from the company’s Q1 report. Capacity usage of the company, however, fell in April and May, amid the COVID-19 pandemic and the maintenance work at the Isdemir blast furnaces that began in the second week of April.

Following the maintenance work, the company restarted the Isdemir BF in line with the recovery seen in steel markets as of the end of May, amid business normalization efforts globally, a company source informed Platts on June 18.

Erdemir Group could gradually reach full capacity again at its Erdemir and Isdemir works in the coming weeks, as the market sentiment harmed by the COVID-19 pandemic has begun to show strong recovery signs in recent weeks, especially in the domestic market.

Turkish mills’ hot-rolled coil pricing rose around $35-$40/mt in the last two weeks and offers exceeded $450/mt ex-works for domestic sales and $440/mt FOB for exports for August rollings. However, there were doubts among some market participants that Turkish mills’ new HRC offer prices will be accepted in export markets, especially in Europe, as domestic prices in the EU region were generally lower than Turkish mills’ current offer prices.

Isdemir is planning to disassemble its fourth blast furnace, which is currently closed, and to build a new one on the same site in 2021, as Platts has reported.

Isdemir produces hot-rolled coil, rebar and wire rod with a liquid steel capacity of 5.3 million mt/year. Erdemir Metalurji Group’s total crude steel production capacity is 9.1 million mt/year.

— Cenk Can

Beltrame, the largest European merchant bar quality (MBQ) bar producer, still sees a challenging 2020 ahead due to the “repercussions of the pandemic emergency,” but remains confident about maintaining its market leadership..

“Having gone through a crisis in the past, not without sacrifices but successfully, has taught us to protect our people as much as possible while continuing to create value,” said company President Antonio Beltrame.

Last year was characterized by three quarters of positive dynamics with extreme volatility in the fourth quarter during which the company confirmed the strength of its brand of products and services, Beltrame said.

Beltrame Group sales volumes in 2019 were in line with 2018 at over 2 million metric tons. The company last year posted net revenues down by 11.3% year on year to Eur1.1 billion and adjusted EBITDA of Eur74 million against Eur113.7 million in 2018.

Sales of merchant bars, the core business of the company, were in line with the previous year, despite recording a drop in profitability to Eur57.2 million compared to the Eur81 million registered in 2018. Sales volumes benefited from greater proximity to customers thanks to the production alignment created in Italian and French factories, according to the steelmaker.

There was a 3.5% increase in construction steel sales volume from Beltrame’s Swiss mill in Geralfingen, which saw reduced margins due to the reduction in commercial margins of the sector and energy costs. Profitability stood at Eur16.1 million (adjusted EBITDA), down from Eur24.3 million in 2018.

The crisis in the automotive sector impacted Beltrame’s special bar quality (SBQ) bar business at its Romanian mill in Calarasi, which recorded shipping volumes of 109,000 mt and sales revenues of Eur78.3 million, down from Eur102.6 million in 2018.

— Annalisa Villa

Dear Mr Hogan,

As it is of your knowledge, EUROMETAL is an association of distributors and steel service centres across Europe, our members are the national federations, or companies that work in the downstream steel activities. EUROMETAL is in full favour of fair trade, against artificial state support for companies, and we believe on the free competition as the vector that drives the best return for the society.

During these last years, especially these last quarters, we have seen many new regulations being issued by the European Commission (EC) regarding trade constraints against most imports of different steel products. We are very much aware that this is a well-known topic to you and your team. We understand the circumstances and the findings that took the EC to conclude with tariffs and trade restrictions in some of the cases. However, we are of the belief that there is a point in which we consider we should rise our voice to be heard.

We do not question that an industry that has such strategical weight as the steel production needs to be taken into consideration. But to our view, the EC should also be caring about the steel users and steel consuming industries. There will be no market for the steel production if there is not a market of consumers.

Among all these steel users and consumers there is a myriad of small and medium size companies that do not have the means to demand their particular issues to be resolved by the EC and your department, they have made their life and future based on the day-to-day competition, many times against big corporations that could enforce their power in the market to the very limits.

We trust in you to take into consideration the interests of all the steel users and distributors in order to protect the future of this industry, and to help us to secure a future for the communities we work at and for. Protecting the steel producers, even if needed in many aspects, is not the only way to defend the interests of all the Europeans. Only with a strong sector of steel end users and consumers can we consolidate the industry we need to look with hope to the future. We offer you our support to find a way forward.

Daniel Guinabert (Director General)                                   

Fernando Espada (President)

US President Trump and his administration are working on a tentative infrastucture investment plan with an estimated budget of $1 trillion, Kallanish reports.

According to anonymous sources close to the administration, a preliminary version of the plan is currently being prepared by the US Department of Transportation. This version of the plan would reserve most of the allocated money for conventional infrastructure works, like roads and bridges. However, this plan also includes technological investment spending, including 5G infrastructure and rural broadband.

The tentative proposal comes as bipartisan support for infrastructure investment continues to grow. Back in March, at the height of the Covid-19 pandemic, both President Trump and US House of Representatives Speaker Nancy Pelosi floated potential infrastucture bills as a way to curb the economic downturn caused by the virus and to spur job growth as shelter-in-place orders were put into effect. Prior to these talks, House Democrats unveiled a $760 billion five-year infrastructure plan in January.

Currently, the FAST Act of 2015, an existing US infrastructure funding law, is up for renewal by the end of September. Sources say that the administration intends to use the renewal procedure for the FAST Act to push for a broader package.

US Steel Kosice (USSK) has restarted a blast furnace after completing maintenance planned for summer but brought forward due to the weak market, a company representative tells Kallanish.

“Due to the pandemic, we made a decision to pull our Q3 outages into Q2 while we are at what we believe to be the bottom of the market,” the spokesman says. The outage was completed last week and the unit ramped up.

This means the Slovakian steelmaker has returned to operating with two of its three blast furnaces after idling 125,000 net tonnes/month capacity pig iron capacity BF no.2 last summer due to higher costs and lower demand in Europe. The firm says it is “…looking forward to demand returning to restart the third blast furnace.”

It is not, however, looking forward to the safeguard review proposed by the European Commission. “Once again, the government in Brussels by their actions has shown they do not support the home steel industry, and all of our employees and the employees of the many businesses that depend on the European union steel industry,” the spokesman explains. “The Covid pandemic has crippled the manufacturing sector, and the demand for steel in the EU is down 50%, and the EC continues to allow unfairly traded imports to flow in.”

EU member states approved the steel safeguard quota revision proposal presented by the European Commission at the end of May to the World Trade Organisation (see Kallanish passim). The biggest changes proposed have been the calculation of all country-specific quotas on a quarterly basis as well as changes to the way residual quotas can be used. Hot rolled coil quotas are also set to be strongly impacted as they will be moved from global to country-specific.

USSK reported a -25% on-year slump in deliveries in the first quarter to 801,000 net tons. Raw steel capacity utilisation fell -24% to 882,000nt, giving a capacity utilisation of 71% versus 94% a year earlier.

The COVID-19 pandemic may have given additional impetus and momentum to protectionism in steel markets, which has been rising steadily around the world since the global financial crisis of 2008-09 and looks set to continue that way, World Steel Association Director General Edwin Basson said in an interview with S&P Global Platts June 17.

The pandemic has broken some supply chains which may become more regional, less global and potentially less efficient, the worldsteel director said. Governments therefore need to take care not to introduce unilateral measures to protect industry that will unbalance the so-called “level playing field” in global steelmaking, Basson told Platts’ commodities reporters.

“I think we may very well see a continued shift towards that (protectionist activities in steel markets),” he said. “We are seeing a rollback on this globalization idea… intensifying from way back just after the great financial crisis. What we see now is not a new trend. The pandemic may have put some additional impetus or awareness. This process of rolling back free markets has been in place for a decade or more.”

Worldsteel is one of the world’s largest industrial associations, whose members represent around 85% of global steel production.

“The best market is one that is as free from interference as possible,” Basson said, noting that protection of producers always ends up costing someone something, whether that is a government or a consumer, and generally pushes commodity prices up. “What we need is a rule-based system, with principles such as those of the World Trade Organisation, which makes the position clear: where we run into trouble is where we have unilateral actions.”

Because the European Union markets make use of WTO rules, the European Commission’s current review of steel import safeguards will also abide by the principles, even though some will be for this and others against, he said.

“The European process makes use of these rule-based approaches within the WTO. And therefore, I think we have to live with it. Whether we like it or not, it’s going to take place.”

Carbon border tax

Worldsteel supports the EC’s proposed carbon border tax adjustment – a carbon tax on imports into the EU of products including steel – on the basis of WTO principles, “because that allows continued trade between different regions that are making steel and using steel to continue to take place against a clear set of rules,” Basson said.

An important aspect of the border tax is that it puts a cost on carbon, which most of society has never paid for in the past, he noted. “This cost of carbon, I think, is going to be the big change coming into the pricing structures going forward,” he said.

2050 carbon neutrality in doubt

COVID-19 has not necessarily made the steel industry’s attitudes “greener” because the sector has already been working on green steel projects for a long time, said Basson, who considers steel quite green compared to some other industries. “If you measure it in terms of CO2 per tonne (on average 1.8 tonne CO2 emissions per tonne of steel produced), steel is much more competitive than most of its competing materials,” he said.

However, while everyone is talking about the use of hydrogen-based steelmaking as the preferred route to net-zero carbon steelmaking, Basson said that the high cost of producing hydrogen means “it could take a decade or more” for this to become a viable option for the sector: in the EU for instance studies have indicated energy capability might have to be nearly doubled in order to make hydrogen viable.

“The steel industry globally still fits within the 2 degrees C scenario,” the worldsteel director said, however adding: “I am hesitant to say the industry and particularly the industry in Europe will be at a carbon neutral position by 2050, because this depends on a bunch of factors that are not really in the steel industry’s control at the moment.”

Steel to benefit from infrastructure drive

Steel is likely to continue to be viewed as vital for modern society and its infrastructure and has come out less badly in the current pandemic than sectors such as hospitality, hard hit by social distancing rules, Basson said.

The steel industry is likely to be further supported by “the incredible amount of government support” made available to economic systems, which worldsteel estimates at around $12 trillion globally, equivalent to almost 15% of global GDP, part of which is expected to go into steel-intensive infrastructure or infrastructure renewal. Globally around 52% of steel production is used in construction, he said.

Even though in terms of expected global GDP the decline this year is forecast to be worse than at the time of the global economic crisis “we don’t see a much more significant drop in steel demand this time around…..essentially, we could say, per unit of GDP, this drop is less steel intensive than what we’ve seen previously,” he said.

“We have seen, whether it was in the mining industry, in the steel industry, the more automated that the industry has been the less the production drop was as a result of this pandemic,” he said.

— Diana Kinch and Annalisa Villa