Category: Latest Updates

European steelmakers are dissatisfied with the results of the European Commission’s steel safeguard review, which they suggest does not account for the crisis environment caused by Covid-19.

Many of the measures lobbied for by the European steel association (Eurofer) on behalf of its steel-producing members were unacceptable to the European Commission.

The drastic temporary quota reduction requested by Eurofer was dismissed by the commission, which viewed the 75pc request as an import ban that could provide direct price control to domestic producers.

It also lacks the legal ability to alter the quota volumes originally allocated, although it has almost halved the amount of Turkish material that can be imported through its country-by-country quota. Overall quota volumes were almost untouched, besides the theoretical limits imposed on hot-rolled coil even these allow countries not included within the scope of the review to sell abundant tonnages into Europe.

Countries without their own specific quota are not limited to 30pc of the quarterly other countries quota for any period, despite large exporters being able to access only 30pc of the residual quota in the last period. European mills had hoped this percentage cap would also be reduced, or that large sources would have no access to the quota.

The commission also refused to reduce further its quota liberalisation from 3pc to 1pc, as requested by Eurofer, or to prevent rollover of unused quota from one period to the next. This in effect means that should importers have cargoes arrive that could be hit with a 25pc tax, they can hold them over and clear customs as soon as the new quota opens.

Legally, the safeguard is intended to avoid market-disruptive import increases and deflection that injure the union industry, rather than help cope with a demand depression, although it did state that Covid-19 and its impact was within the purview of the review.

Eurofer recently held a call to discuss its unanswered and unaccepted views with members, and member states are set to vote on the commission’s proposal on 12 June. Should they reject the proposal, it would mean business as usual, with safeguards functioning as they have been since the previous review in September 2019.

By Colin Richardson

Stability returned to the European steel coils market on Tuesday, with prices unlikely to decline further, sources said.

A Nordic-based buyer noted that Korean mills were desperate to move their stock into Europe given lack of demand in their home region, and said, “they have a lot of unused capacity and they want to get rid of it.”

Domestic European prices have bottomed out, according to the same source, who said mills are now trying to maintain some sort of stability in price levels.

“One of the reasons mills aren’t reducing prices is that they didn’t see any effect from the buying side. [From Korean exporters] they have reached the bottom for material that will be delivered in September, but they have announced from their side that prices won’t be lowering anymore,” the source said.

He also said that the summer period would “hit people a lot more” and that lack of demand would last until mid-August.

“The automotive has been hit — they’re not selling or producing, so this a major factor, I’ve lost all confidence in the automotive industry. We have ongoing orders for older contracts but this week will be slow. If things don’t pick up by next week, they won’t pick up until August,” he said.

A Benelux service center source lamented the current lack of transparency in prices due to limited buying activity, and that mills were unable to lower their prices.

“It’s such a weird situation — we’re seeing very different prices because of the lack of transactions, and many mills can’t stop production, adding to the supply,” he said. “If they decrease any more it will damage their organization.”

An Italy-focused trader said that there was currently a wider gap in pricing between Italian domestic steel producers.

“Two markets now exist in Italy, one mill is cheaper for HRC but with limited range, so if they don’t have what you want, you will have to pay more — if you have an existing contrast in place from the end of last year then you will get cheaper on a base-plus contract.”

The trader said that the market in Italy was still weak but that activity levels would improve in June and July.

The Platts TSI hot-rolled coil index was calculated unchanged June 2 at Eur412/mt ($460.41/mt) ex-works Ruhr, and cold-rolled coil was assessed Eur512.50/mt ex-works Ruhr, gaining 50 euro cent day on day.

In southern Europe, HRC slipped 50 euro cent lower on the day and was assessed at Eur395/mt ex-works South Europe, its lowest level since September 2016.

— Len Griffin, Amanda Flint

After slowing heavily in March, activity by companies in the French construction sector again deteriorated significantly month-on-month in April, according to a report from l’Institut National de la Statistique et des Études Économiques (Insee) monitored by Kallanish.

In April almost all business managers of building firms with more than 10 employees were pessimistic about the general outlook of the sector although they were rather confident in January. Many more companies than in the previous month have anticipated a decrease in their activity for the next three months. Also, significantly more business managers than in March have indicated a decrease in their activities over the last three months, the report says. 

In April, more building companies than in January have reported a lengthening of payment periods from their clients. “The corresponding balance has sharply increased and has reached his highest level since April 2015… That goes hand in hand with a degradation in their cash-flow position”, the report concludes.

Marcegaglia is to revamp its 4-hi plate mill in San Giorgio di Nogaro, Italy. The revamp will be carried out by Italian equipment maker Danieli Automation Service.

To better improve plant results, the contract includes also the upgrading of the furnace automation system. This will improve the yield and enhance the slab temperature uniformity. Consumption of natural gas will also be reduced. Danieli Automation Service Team is specialized in tailored solutions for improving performance at older automation systems, Kallanish learns from Danieli.

Marcegaglia is also improving its coating system for pre-painted steel products and widening its product range in the flat stainless steel division. Thanks to the purchase of a new cut to length line and to better meet the stainless steel market demand Marcegaglia Specialties is adding a new range of hot rolled stainless steel sheets, with a width of 2,000mm and thicknesses up to 12mm, in 304L, 316L and 316Ti grades.

The Spanish steel sector says expressed its concern that working at less of half of its usual capacity will be unsustainable beyond a few months. The activity was sharply impacted by the Covid-19 outbreak in April, registering a record low, the Spain`s steelmakers’ association Unesid says in a note seen by Kallanish.

“The size of the deterioration of the sector is serious and requires explicit support with measures to maintain its more than 60,000 jobs as well as steel manufacturing activity that is basic in certain regions of the country,” Unesid warns. The steel-consuming sectors need to return to their pre-confinement activity, either by promoting private demand, as with automobiles, or directly through public actions, as in construction, the association proposes.

The European steel sector awaits actions from the European Commission and a review of safeguard measures. “The Commission’s first proposal benefits only a few products. A more general and far-reaching action is needed, also reflecting for the future since these measures will be extinguished in 2021,” Unesid demands. “The EU industry produces under much more demanding environmental standards than those from outside the region and develops an important capacity for innovation with a commitment to climate neutrality before 2050,” the association explains.

The Spanish steel sector produced 626,000 tonnes of crude steel in April, a drop of -52% year-on-year. As a comparison, in a typical July or December, when activity is usually most reduced, Spanish output ranges from 900,000t to 1 million tonnes. The lowest monthly production registered during the last financial crisis in 2008/09 was 725,000t, according to Unesid.

The fall in output was seen in almost all steel products, although it was greater in the automotive sector, which was practically halted in April. Only tinplate output continued at its usual rate given its need in the food industry.

Turkish steel output has fallen due to the coronavirus crisis, and so have both imports and exports. With the European Union moving to further restrict imports from Turkey, Turkish steel groups are lobbying for retaliatory measures to balance any impact on the country’s steel trade balance, Kallanish notes.

Turkish crude steel production in April dropped -26.3%% year-on-year to 2.3 million tonnes, with January-April output down -0.1% on-year, according to the Turkish Steel Producers’ Association (TCUD).

April finished steel consumption was 1.4mt, down -44.1% on-year. Consumption had increased by 42.3% in the first quarter, but growth has slowed to 15% in January-April due to the sharp fall in April.

Exports decreased -21.6% in April to 1.5mt, and -27.7% in value terms to around $1 billion, due to the coronavirus impact on the international steel market. January-April exports decreased -14.4% to 6.6mt, and -18% to $4.7 billion.

April imports fell -54.6% to 563,000t, and by -47.8% in value to $504 million. Over January-April, however, due to the 33.3% increase in imports in the first quarter, imports still increased 5.6% to 4.2mt, though by value they were down -4.6% to $3.1 billion.

Over the January-April period, the ratio of exports to imports decreased to 148:100 from 172:100 in the year-earlier period.

Turkey’s January-April steel exports to the EU fell -44.4%, while HRC exports fell -47%. Steel imports from the EU, on the other hand, increased by 6.5%, according to TCUD.

“Despite the current situation with the EU, The European Commission (EC) is continuing its initiatives to prevent steel imports from Turkey,” says TCUD general secretary Veysel Yayan. “Despite the ongoing protectionist measures against Turkish steel, the EU has initiated an antidumping investigation against Turkish HRC on May 14, and Eurofer has applied the commission for a CVD investigation against the same product.”

“Recently, on May 29, in the notification sent by the EU Commission to the World Trade Organization, it is understood that the EU will further restrict the conditions for the coming period, increase its approaches that target our country predominantly, and this will cause our exports to the EU region to decrease significantly,” says Yayan. He underlines the need for an immediate protectionist measure in response from Turkey.

On May 25, to provide balanced foreign trade and minimize the negative effects of EU practices on bilateral trade flow, Turkey announced that for some steel imports from the EU, there will be additional import duties that vary between 9%-17%.

Yayan says that the Finance Minister’s statement regarding a change in imports, excluding products that are not produced locally, are welcomed and gave hope for the future.

“However, as soon as this was announced, we have observed some attempts to invalidate this decision,” says Yayan. He adds, “it is obligatory to stop the companies that want to continue importing for their own benefits, in order to avoid the destruction of our economy and our industry during the most difficult days of our country while world’s most developed countries’ practices are obvious to protect their own industries.“

Global crude steel production decreased -13% on-year to 137mt in April. Four-month production fell -4.1% on-year to 581mt.

The European Commission is proposing a number of changes in the EU steel import tariff quota system, according to a notification to the World Trade Organization dated May 29.

The notification does not mention reduction of the actual quotas set earlier but instead suggests changes focused on making the import flow more evenly spread out between quarters and protecting some of the smaller export countries from being crowded-out from the residual quota by bigger countries.

The adjustments are resulting from the earlier review of the existing tariff-rate quota system following substantial changes in market circumstances.

“Nobody could foresee…the COVID-19 pandemic could make the world economy suddenly plunge in the most severe recession since at least the global financial crisis of 2009. The magnitude and sharpness of the economic shock has been brutal in terms of output, fixed investment, lay-offs, and demand,” the EC stated.

The EC singled out hot-rolled coil and sheet, proposing bringing back the country-specific quotas after a period of the global quota in place. Those countries are Russia, Turkey, India, South Korea and Serbia. A cap of 30% share will nevertheless continue applying to the use of the residual quota in the fourth quarter to prevent crowding-out effects.

The first general adjustment suggested in the notification moves all country-specific quotas from annual to quarterly in order to ensure “a more stable flow of imports and minimize the risk of undue import surge during the remaining duration of the measures,” as stated in the notification document.

“The good thing is that some quantity is allocated for each quarter so the Turkish [rebar] quota won’t be gone in the first two months and then quiet for 10 months. But on the other hand, there will be more speculation and there is only a quarter available as of July 1 so this is going to put out a lot of uncertainty whether you import in time because the allocation will be lower. Everyone will try to get the material in the first 2-3 weeks. If the yearly quota [starting July 1] for Turkey was 300,000 mt you could assume that it was safe to import in July and August but now it is not gonna be like that,” a European rebar importer commented.

The second adjustment is meant to ensure that the smaller exporting countries, which use the global quotas, are not crowded out by those exporters enjoying country-specific quotas. In addition to keeping the unlimited access to the residual quotas in some product categories the EC proposes new restrictive regimes for certain products.

The first regime, bans exporters of organic coated sheets, non-alloy wire rod, gas pipes and cold-finished bars, with country-specific quotas, from using the residual volumes entirely during the quarter ending June 30, 2021.

The second regime limits the access to the residual quota for country-specific exporters during that quarter to only those volumes exceeding the average quota used by the smaller supplying countries during the four quarters. This would apply to stainless hot-rolled plates, merchant bars and light sections, rebar, stainless bars and stainless light sections, stainless wire rod, hollow sections, seamless stainless tubes and pipes and non-alloy wire.

Another suggestion by the EC is to split the large welded tubes category into two, separating those used in large engineering projects from those that are not. This measure is proposed to ensure the availability of large tubes for any large-scale engineering project in the EU.

The proposed changes, if adopted, should be in place starting July 1 but after a consultation period through June 11.

— Wojtek Laskowski

Turkish mills’ slammed the European Union’s new import quota system, is expected to reduce Turkey’s hot-rolled coil exports to that region, describing it as contradictory to World Trade Organization free trade rules.

According to the EU’s notification to the WTO, it will impose a country-specific quota on HRC imports as of July 1, instead of a global quota, which is expected to especially impact Turkey’s exports.

Turkey shipped more than 3 million mt of HRC to the EU region during a 12-month period to July 2019, while the country’s HRC shipments fell to 1.5 million mt during July 2019-March 2020 period, annualized to 2 million mt.

With the new quota regulation, Turkish mills can only ship 1.37 million mt of HRC to the EU region during the July 2020 to July 2021 period, a sharp on-year decline in export volumes.

According to the EU’s notification to the WTO seen by S&P Global Platts, Turkey can export 344,890 mt of HRC to the EU region in the quarter starting July 1; 344,890 mt in the quarter starting October 1; 337,393 mt in the quarter starting January 1, 2021, and 341,141 mt in the quarter starting April 1, 2021.

Drawing attention to the ongoing decline in Turkish mills’ steel export volumes to the EU in recent years, due to the quotas, Ugur Dalbeler, CEO of a major Turkish HRC producer and a director of the Turkish Steel Exporters’ Union (CIB), told Platts on June 1 that with this new move the European steel sector showed its desperation and negative attitude against Turkey.

“This move is definitely against the WTO rules and politically motivated. With this decion, the EU steel sector became a government-regulated sector as it is losing its competitiveness,” Dalbeler said, adding that the latest quota review increased their mistrust in the European Commission’s decisions.

The EC recently launched an anti-dumping investigation into imports of certain hot-rolled flat products from Turkey following a request by European steel association Eurofer. The association also filed a complaint at the beginning of last week with the EC requesting a countervailing duty (CVD) investigation against allegedly subsidized hot-rolled coil imports from Turkey.

As a reply to these moves Turkey informed the WTO on May 25 that customs duties could be imposed on steel imports from the EU, in response to the EU’s move for additional measures against EU imports of Turkish steel.

Turkey is planning to impose duties ranging from 9% to 17% on some flat-rolled products, non-alloy bars and angles from the EU region, under HS codes: 7208, 7209, 7210, 7211, 7212, 7214, 7215 and 7216, in an effort to balance trade between the parties.

— Cenk Can

The new proposed changes to the safeguard system published in a note sent to the World Trade Organisation by the European Commission last week will mainly limit sales of Turkish and Indian HRC, Kallanish notes.

According to the new rules, HRC quotas will now be calculated quarterly and the largest importers will be assigned a specific country allocation. As a result volumes for Turkish and Indian suppliers will be impacted significantly.

Turkey will be able to sell slightly less than 350,000t of HRC each quarter into the European Union. In 2019 the country sold over 230,000t/month of HRC in Europe on average, according to Eurofer data. While the reduction in sales from Turkey was already visible during the first part of 2020, the new rules, together with the ongoing investigation on possible AD duties will significantly impact trade.

India, on the other hand, will receive from the beginning of July a tariff-free quota of slightly less than 170,000t each quarter. Last year the country sold to Europe around 70,000t/m of HRC.

Meanwhile Russia will slightly benefit from the changes proposed, as it will become the country with the largest tariff-free quota allocation for the period July 2020-June 2021. Russian suppliers will be able to sell to Europe over 410,000t each quarter. In 2019 the country sold on average 115,000t/m of HRC, being the second largest supplier to the EU despite being subject to AD duties.

Polish distributor Bowim says the Covid-19 pandemic impact could hamper its earnings in the second quarter, while its costs could be affected by its use of state programmes designed to support firms through the crisis.

Bowim’s consolidated shipments fell -1% on-year in the first quarter to 131,367 tonnes due mainly to sheet sales declining -4% to 48,490t. Pipe and profile sales rose 4% to 26,296t and rebar sales were up 10% to 23,687t.

Consolidated revenue fell -10% in Q1 to PLN 314.8 million ($78.7m), although the firm turned to a net profit of PLN 2.3m versus a loss a year earlier of PLN 2.7m.

The lower sales were due to reduced steel prices and the impact on demand towards the end of Q1 of the Covid-19 pandemic. Thanks to securing new markets and expanding product range, the sales volume decline was limited, the firm says.

Prices were depressed by weaker demand from the EU automotive industry, which increased competition among the EU’s sheet suppliers to find new buyers.

“From March 2020, the Polish economy began to lose momentum due to the start of the ‘lockdown’,” Bowim says in a report seen by Kallanish. “A slump in trade and the clothing industry was observed already at the end of the month. March was the first month in which everyone began to be affected by restrictions.”

“Distributors and customers were unsure of the future and so they stocked up inventory in the fear of the Covid-19 pandemic worsening, difficulties in transport and delivery deadlines,” the firm says. “Steel products trading changed – companies introduced new safety measures, such as shift rotation systems and limitations to contact between people. Increased order traffic, as well as high load capacity at processors had a positive impact on the results of many companies.”