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How the UK and, more broadly, European metals and steel sectors might be impacted by Tuesday’s UK Parliamentary vote on Brexit is still unclear.

The vote may determine whether the UK leaves the European Union with or without a trade deal, whether there will be a new referendum on Brexit or a transition period to exit.

The London Metal Exchange on Monday put out positive notes: stressing that the LME and its clearing house LME Clear will remain in London. The exchange announced in a statement Monday that LME Clear is “confident that it will be able to continue to provide clearing services to all members following the UK’s withdrawal from the European Union,” as a result of a European Commission’s equivalence decision made December 19.

“The LME is taking steps to ensure continued access to LME systems for all its EU member firms,” the LME said Monday.

Uncertainty persists however on whether UK companies will follow EU or other regulations, for instance those of the World Trade Organization. The Minor Metals Trade Association points out that this is a serious problem as regards the EU’s newly-introduced REACH legislation, which obliges companies to register the import and trade of what the EU regards as potentially hazardous chemicals, including some metals oxides, usage of which may be banned if they are not registered: it is unclear if UK companies will need to abide by the stringent REACH rules if Brexit occurs.

Quotas on EU imports of rebar and rod proposed by the European Commission to remedy dumping would be too low if they get confirmed at the levels sent to the World Trade Organization, importers said.

The EC introduced a preliminary quota on rebar last July to avoid material being redirected to the region as a result of the US Section 232 tariff on steel. Any imports beyond the cap attract a 25% tariff.

If the WTO accepts the EC’s proposed quotas, they will be official from early February. Market participants have already calculated that as soon as the quotas are put in place, rebar and rod buyers will likely be the first to fill them.

“I heard that as soon as the quotas were announced around Christmas two mills reported [deals] respectively of 70,000 mt and 60,0000 mt with February arrival from Turkey,” a trader said.

According to the document which the EC sent to the WTO, Turkey will be able to export 117,232 mt of rebar into the EU from February 2 to June 30.

When the December deals were done, Turkish rebar was at $455-$460/mt FOB while EU mills were selling the long product around Eur530/mt [$610/mt] delivered to mills.

“When there is such a big difference in prices [across regions], there is not too much to comment,” a source from a mill said, referring to the size of the quantities purchased.

“Rebar and rod quotas this year are the ones that were fully filled, so there is a need in the market for [a bigger] imports [quota],” an importer said, adding the current quota provisions for those products were insufficient.

That was echoed by other traders who said the quotas were a “present to the European mills” who produce at higher prices than some non-EU producers.

From the perspective of those EU longs producers, the quotas have also created discontent. Some mills pointed out that as soon as a specific country exhausts its quota to export to the EU, it will be able to compete for the residual quota allocated to ‘other countries’ in the following quarter, with Turkey probably taking advantage of that.

“The problem is that the Turkish economy is very weak now and prices are very competitive, so it is a problem considering how close it is to Europe and how cheap the freight costs are,” a source from a large mill said.

“As the proposed safeguards are [designed] now, Turkish exporters will benefit from the residual quotas. They should have designed the residual quotas in a way so that the leftover quota from one quarter will not [be carried over] into the next quarter as this can create also a very speculative approach in the market,” the mill source said.

The new quota system differentiates between countries, with some country-specific quotas applied annually, such as for Turkey, Russia and Ukraine, with other countries using a residual global quota applied quarterly.

From February 2, for example, Turkey would be allowed to trade 171,231 mt tariff-free until June 30, a level likely to be exhausted quickly following the big-volume trades in late December, Turkish and European sources said. The annualized rate amounts to 422,000 mt.

The Turkish wire rod quota stands at 121,331 mt for the same period, annualized to 299,000 mt.

— Annalisa Villa with Pascal Dick

Als mittelständische Stahlverarbeiter, deren Materialkostenanteil bei ca. 60% liegt, sind die Kaltwalzwerke in hohem Maße von der Schutzmaßnahmenuntersuchung der EU betreffend die Einfuhr von Stahlerzeugnissen betroffen. Da die Unternehmen in einem harten internationalen Wettbewerb stehen und vielfach als Automobilzulieferer marktmächtige Kunden haben, ist die ausreichende Versorgung mit Stahl zu international wettbewerbsfähigen Preisen unverzichtbar. Aufgrund enger Geschäftsbeziehungen zu den deutschen Stahlherstellern besteht ein starkes Interesse, eine wettbewerbsfähige Stahlindustrie in der EU zu erhalten. In diesem Sinne lehnen wir das Instrument der Schutzmaßnahmen auch nicht grundsätzlich ab. Allerdings handelt es sich dabei um ein besonders scharfes Instrument, das zur Abwendung massiver und plötzlicher externer Schocks gedacht ist. Entsprechend des WTO-Rechtsrahmens, dem die EU verpflichtet ist, muss daher vor Einführung der Schutzmaßnahmen sorgfältig geprüft werden, ob die hierfür erforderlichen Kriterien erfüllt sind.

Nach unserer Auffassung sind bei den für unsere Industrie relevanten Warenkategorien die vier für die Einführung von Schutzmaßnahmen erforderlichen Kriterien eindeutig nicht erfüllt. Dennoch sind die Erzeugnisse in die am 18.07.2017 verkündeten vorläufigen Schutzmaßnahmen einbezogen worden. Die dazu veröffentlichte Durchführungsverordnung (EU-Amtsblatt L  181/39) sowie aktuelle Meldungen aus Brüssel und nicht zuletzt der Notifizierungstext an die WTO lassen uns befürchten, dass aufgrund des starken Drucks der Stahlindustrie im Zusammenspiel mit übergeordneten politischen Überlegungen die Interessen der Stahlverwender in dem Verfahren nicht angemessen berücksichtigt werden.

Die aus unserer Sicht wichtigsten Gesichtspunkte sind die folgenden:

1. Differenzierte statt pauschale Betrachtung: Das Vorliegen der für Schutzmaßnahmen erforderlichen Kriterien muss differenziert für jede Warenkategorie einzeln geprüft werden. Wie die Kommission in den Anlagen II und III der vorläufigen Entscheidung selbst dargestellt hat, fallen die Importzahlen und die Wirtschaftsindikatoren in den einzelnen Kategorien sehr heterogen aus und müssen entsprechend einzelnen betrachtet werden
2. Entwicklung 2017/2018 muss im Vordergrund stehen: Die für Schutzmaßnahmen erforderlichen „unforeseen developments“ können ausschließlich mit den US-Zöllen auf Stahlerzeugnissen angenommen werden. Die US-Untersuchung wurde 2017 eingeleitet und die Maßnahmen wurden im März 2018 verhängt, so dass die EU-Entwicklungen in diesem Zeitraum auch im Mittelpunkt der EU-Untersuchung stehen müssten. Dagegen begründet die Kommission die vorläufigen Maßnahmen im Schwerpunkt mit der Situation am EU-Stahlmarkt in den Jahren 2013 bis 2016.
3. Kein Importanstieg aufgrund von Handelsumlenkungen bei Flachprodukten: In den Kategorien 1, 2 und 4 zeigen die vorliegenden Eurostat-Zahlen in der EU weder einen signifikanten Importanstieg noch einen eindeutigen Aufwärtstrend.
4. Fakten statt Spekulation bei Handelsumlenkungen: Wie stark die US-Importe infolge der dortigen Zölle sinken werden und welche Mengen davon in die EU umgelenkt werden, ist seriös nicht vorherzusagen. Handelsströme werden von sehr vielen, sich dynamisch ändernden Faktoren beeinflusst.
5. Keine Schädigung der EU-Stahlhersteller erkennbar: Die von der Kommission selbst erhobenen Wirtschaftsindikatoren zeigen in den Warenkategorien 1, 2, 4 und 9 eine äußerst gesunde Lage der EU-Hersteller. Die Kapazitätsauslastung liegt um die 80%, die Gewinnspanne um die 10%. Dies wird bestätigt durch die veröffentlichten Unternehmensergebnisse wichtiger Flachstahlhersteller.
6. Länderspezifische Importkontingente unter allen Umständen vermeiden: Die von der Kommission offenbar ernsthaft erwogene Zuteilung von Importkontingenten auf einzelne Ausfuhrländer auf Basis „historischer Liefermengen“ ist weder erforderlich noch angemessen, um das Ziel „Schutz vor Handelsumlenkungen“ zu erreichen, sondern würde einen großen Schaden für die EU verursachen. Für Stahlverarbeiter ist nicht die Bewahrung „historischer Lieferströme“ entscheidend, sondern die Sicherstellung der Versorgung zu wettbewerbsfähigen Preisen in einem äußerst dynamischen Marktumfeld.

Auf jeden Fall führt das jetzt bei der WTO angemeldete Safeguard-Modell mit einer Mischung aus einer länderspezifischen und einer globalen Quote zu einem extrem komplizierten und bürokratischen Verfahren. Es bleibt nur zu hoffen, dass die US-Administration ein Einsehen hat und die Importzölle auf Stahleinfuhren in die USA komplett – und nicht nur gegenüber der EU – abschafft. Dann wären auch keine Schutzmaßnahmen der EU mehr erforderlich.

Der Beitrag stammt von Martin Kunkel, Geschäftsführer Fachvereinigung Kaltwalzwerke e.V. www.fv-kaltwalzwerke.de

Foto: Martin Kunkel

Der Gastkommentar spiegelt die Meinung des Autors wider, nicht notwendigerweise die der Redaktion von marketSTEEL.

Passenger car production in Italy dipped for the fifth consecutive month in November, Kallanish learns from local carmakers’ association Associazione Nazionale Filiera Industria Automobilistica (Anfia).

Domestic passenger car production registered a heavy year-on-year fall of -27% to 47,000 units in November. In October production also heavily contracted, by -18% y-o-y, as reported.

Over January-November output in the passenger car sector also fell, by -9% y-o-y to 631,000 units, the association says.

Italian passenger vehicle production in 2017 reached 1.14 million units, up by 3.5% compared to 2016, Kallanish notes.

“The current automotive production fall is directly impacting our entire value chain,” an Italian service centre comments. In line with the substantial automotive production slump, “…demand for coils and especially hot-dipped galvanized suffered a great deal over Q4 2018 and domestic prices have weakened significantly,” the source says.

The latest figures published by distributors’ association EUROMETAL reaffirm the downturn of the European steel sector during the second part of 2018. This is particularly so when it comes to the sectors linked to the automotive industry.

In November flat steel service centres (SSC) saw their shipments fall by -4% year-on-year. The drop took overall shipments from SSCs down -2.6% y-o-y during the first 11 months of the year.

As reported by Kallanish, SSCs have been hit by a reduction in demand from the automotive sector across Europe. The only positive indication from EUROMETAL was the fact that stocks at SSCs were also low in November, calculated at an index of 106 compared with 112 in November 2017. The low stocks could well indicate the need of restocking going forward, but this can happen only if demand picks up slightly.

The negative trend in November was also seen at multi-products distributors, which registered a fall in shipments of some -1% y-o-y. Despite the drop in November, aggregated annual data remained positive, up 0.9% y-o-y during the first 11 months of 2018.

A consortium of Izostal and its majority shareholder Stalprofil has won a PLN 40.7 million ($10.9m) contract to supply DN 1,000 coated pipe to Gaz-System, with deliveries scheduled from 1 June to 30 September 2019.

This will be used by the Polish gas pipeline operator to build a 19km pipeline between Poland and Slovakia.

Stalprofil said last November it anticipated Gaz-System to launch in the coming months its third round of investment that will see the construction of around 2,000km of pipeline between 2019 and 2028.

In the third quarter of 2018 Stalprofil’s infrastructure segment, which supplies pipe and services to the gas industry, saw revenue surge 175% to PLN 238.3m and gross profit soar 186% to PLN 24.2m.

Germany’s Hans Dewald GmbH has taken over all shares in Erich Hagelauer GmbH from the Hagelauer family with effect from 1 January 2019.

Both companies specialise in special bar qualities (SBQ), covering engineering steels and bright bar. Dewald is located in Pleidelsheim and since 2015 has been part of the Rottweil-based Lotter Group. The latter oversees various activities at 40 sites in Germany, and in steel mainly deals with distribution and bending of rebar under its own brand name.

The main region of supply for both companies is the southwestern state of Baden-Württemberg and adjacent areas, Kallanish learns from a statement by Dewald. Hagelauer was founded in 1921 in Stuttgart, and will retain Jürgen Hagelauer on its management, together with Dewald’s managing director Jörg Bayer. The two sites together have 70 employees and are equipped with a range of cutting and sawing devices, Dewald says.

Dewald enlarged its handling space and capacity by renting an adjacent space covering 10,000 square metres in 2016 which has been reserved for the storage of large diameters of 300mm and above. The company’s maximum processing diameter so far has been 540mm but it also plans to handle thicker bars.

TRH Group is a producer and supplier of welded mesh with facilities in Liège, Belgium and Sevilla, Spain.

Liège

Phone: +32 4 346 01 19 Email: trh@trh-be.com Web: trh-be.com

Sevilla

Phone: +34 954 286 290 Email : trh@trh-es.com Web: trh-es.com

Econsteel, a company that combines development, distribution and processing of special bar quality steel (SBQ), is about to finalise the expansion it started two years ago. This followed an investment of several million euros.

Now in the final stage, Econsteel is completing a research and development centre in the next two to three months, marketing manager Janna Schroff tells Kallanish. A service centre for cutting material to the sizes required by the customers is already in operation and has been so since last year. It operates three sawing devices, which it plans to increase to six or eight over the coming years.

Although Econsteel is mostly known as a specialised distributor, the original idea when managing director Ralf Schaaf founded the company in 2008 was that of a consultancy on materials for steel consumers. “Many fabricating companies were not up to date regarding the range of possibilities of various steel types, and Mr Schaaf recognised the potential for that sort of information,” Schroff says.

One thing led to another, with customers asking Schaaf to also supply the steels he recommended for further production. More staff were then hired between 2008 and 2010, and a warehouse established in Rottweil in southwestern Germany.

In recent years, “… we have been mainly a distributor, and the original intention of the company shrank into the background,” Schroff explains. Econsteel will now bring this back to the forefront with the dedicated R&D centre, Meanwhile, with the operational service centre, Econsteel is taking on a role of a pre-production facility for its customers, she says.

UK steel service centres are bracing for a difficult first quarter as outsell prices continue to compress and demand softens from integral sectors, such as automotive.

Hot-rolled coil (HRC) arriving at stockholders is priced at £500-550/t ddp West Midlands given the sharp downturn in prices seen over the second half of 2018. Stockholders are reporting they are failing to secure cut sheet business at £535-540/t, meaning a loss based on steel arriving. Offers for new hot-rolled coil production are around £485-500/t ddp for Turkish and western European material, but this will not arrive until later in the first quarter.

Cold-rolled coil prices have unravelled to around £530-535/t ddp from £600-610/t ddp.

Cheaper forward pricing does little to stoke sentiment or support outsell prices. “General day-to-day business is going to be carnage, pretty desperate,” one trader said of the competition between service centres.

Coil availability remains ample, which means no firms are keen to commit to tonnage, and the inventory on the ground is constraining price development.

The first half of the year is seasonally a strong period for the UK steel market, where service centres have good trading months and bank cash for quieter months later in the year. This means the current lack of impetus is all the more worrying, particularly as the European steel safeguard — certainly on HRC — is proving to be something of a damp squib. The quota is 8.6mn t for the July 2019–June 20 period, and 9mn t for July 2020–June 2021, whereas the EU imported 6.7mn t of HRC in 2017. The quota ensures continuity of supply but does not support pricing, at least in the short-term.

News such as Jaguar Land Rover (JLR) cutting staff is exacerbating stockholders’ fears. JLR is heavily exposed to the slowdown in Chinese car buying and the move away from diesel. Ford is also shedding thousands of jobs.

The threat to UK automotive production from Brexit, given the potential disruption to just-in-time supply chains in the event of a no-deal exit from the bloc, could also mean downside for consumption. A steelmaker said demand from the automotive sector in Europe is down by 5-10pc year-on-year so far in the first quarter, and the drop is likely to be stronger in the UK.

Sources are hoping for increases in Asian pricing after the lunar new year when restocking traditionally occurs, which could push up pricing at home and in other primary export regions.