Category: Latest Updates

The decarbonisation of Metinvest’s Ukrainian assets will require $9 billion in the next ten years, says the company’s operations director, Oleksandr Myronenko.

“We understand the company will not be able to implement such a project alone and we will need to attract resources from Western banks,” he noted at the Forbes Ukraine forum last week. “Unfortunately, this option is currently not possible. While the war is going on, it is very difficult to persuade banks to provide any financing for projects in Ukraine, so we plan to start modernisation after the end of hostilities.”

The company is now focused on supporting the Ukrainian assets’ current operations, he added.

According to Mironenko, capital investment this year is projected at $320 million, with operating expenses at about $350m. “These are standard repairs of blast furnaces, sintering machines, maintenance of GZK equipment and development of mine management in Pokrovsk,” he noted.

“We are currently at 65% of base capacity, but we clearly understand that when the hostilities are over and the infrastructure is fully restored, production will need to increase,” Mironenko said. “For this, people and working equipment will be needed, and that is why we are focusing on these two key goals.”

The group plans to build a green steel plant in Italy to compensate for the loss of Mariupol steel production and increase the capacity of Ukrainian mining and processing plants (see Kallanish passim). Metinvest is also eyeing increasing exports to the Middle East and North Africa.

In the first quarter, the group decreased production of crude steel by 5% quarter-on-quarter to 469,000 tonnes (see Kallanish passim). Hot metal output fell 5% to 403,000t. Compared to Q1 2023, Metinvest reduced crude steel output by 4% and pig iron by 10%.

However, the firm observed a surge in Q1 iron ore concentrate production, reaching 4.86 million tonnes, up 36% q-o-q and doubling on-year, after the opening of the Black Sea corridor for exports. Production of merchant iron ore products climbed 41% q-o-q and 100% on-year to 4.4mt. The increases were 31% on-year for pellet and 53% for concentrate as volumes were directed towards external sales.

Svetoslav Abrossimov Bulgaria

Prices of heavy plate from northwest European mills have not gained strength, with some sources saying they have in fact noticed further softening in recent weeks.

“The market keeps getting softer, mills are, so-to-speak, flexible, and willing to reconsider prices in negotiations,” a northern German buyer tells Kallanish. Sales nevertheless remain weak and buyers reserved, he adds. “The eight has fallen,” he notes, meaning S355 grade plate prices have dropped below the €800/tonne ($868) delivered threshold.

This would point at another dip of some €20/t, given that €800 was the lower limit for ex-works quotes. On the import front, he tells of offers at €710/t delivered northern Germany.

It is possible that domestic mills are being more flexible with those buyers who employ mixed, import/domestic sourcing, and more rigid with their loyal customers. A manager of one distribution group who buys only from local mills finds that prices have not moved much in two months, and are still circling at around the €800 mark. “It can be €790 sometimes and €810 at other times,” he says.

An observer from a re-roller mill agrees with the manager. His impression, too, is that the integrated northwestern mills have not given in much, while prices in Italy are softening lately. “Mills there [in Italy] are still anxious to fill their books by summer,” he notes.

All sources agree, however, that they see little cause for a major recovery in the foreseeable future.

Christian Koehl Germany

Celsa will operate its Spanish and French assets as one business unit. The decision follows the company’s plan to optimise resources and improve efficiency.

Celsa France was already integrated with Celsa España at a corporate level, the steelmaker confirms to Kallanish. “The current executive director of Celsa in France, Josep Vilaseca, will be the head of the new business unit. For his part, Carlos Día, general director of the company for Spain, has been named the new commercial director of the Group,” Celsa explains.

The company meanwhile remains tight-lipped about finding a new local partner, which was a requirement set by the Spanish government when the main creditors took control from the Rubiralta family last year. Since Celsa is considered a strategic business, the new owners had to find a local investor by June to take a 20% stake in the group, according to the commitment.

The Spanish press has reported that Sidenor, Megasa, Christian Lay and Gonvarri showed interest and have already contacted Celsa, but the group has indicated it is in no rush to close a deal.

The priority for Celsa continues to be the possible sale of foreign units and the strengthening of its financial position. Potential buyers can bid separately for operations in France, Norway, Poland and the UK.

Market analysts estimate that the value of these units has fallen significantly amid the current uncertainty in the steel sector. Celsa is waiting for conditions to improve in order to complete asset divestments, since 50% of the group’s Ebitda is generated by its operations abroad.

Todor Kirkov Bulgaria

Europe risks becoming uncompetitive due to overcapacity and lack of investment, CMC president Peter Matt said at the Danieli “Innovaction” Meeting in Udine last week.

Matt believes there is some 700 million tonnes/year of global overcapacity. Although China accounts for a large portion of this, other countries are also contributing. Europe needs to rationalise its output and avoid being invaded by external capacity. The continent needs to create a level playing field, as steelmakers are failing to generate good returns.

“In Poland, today, we know we have low-cost operations and yet we cannot generate a good return because of the capacity challenges in the industry,” Matt observed at the event attended by Kallanish.

The EU needs an industry “that is sound for the long term, that attracts capital and makes money want to come to it … I think the US is a good example of what can happen with levelling the playfield with 232 … Prices have come up for steel and companies are generating their returns, companies, including our own, are investing in the business and all of a sudden you have natural capital coming to this industry and making it strong, as opposed to many other places in the world where you see the industry deteriorating because of the lack of investments and because of poor returns,” Matt concluded.

Emirates Steel chief project officer Hassan Shashaa had a different view on overcapacity. Worldsteel says global production will increase by 1.7% this year to around 1.8 billion tonnes and it will continue to grow. “Is this overcapacity?” Shashaa asked. “Overcapacity will always be there and I don’t think we need to be worried about it … When you look at capacity utilisation, the world never used 100% of its assets. Capacity utilisation has always varied between 75-85%.”

“In China alone, they have 1.2 billion tonnes of capacity but they are rarely producing 900 million … The world will continue to grow. India is now growing at 8% per year. They’re planning to add 300 million tonnes steel capacity over the next 20 years … The world is not going to stop growing and overcapacity has always been there,” Shashaa commented.

CMC Poland’s performance has slumped this year. The steelmaker saw steel shipments plummet 37% on-year in the second fiscal quarter through February 2024 to 275,000 short tons. Merchant bar and other product sales fell 17% to 211,000st, while rebar was down a hefty 65% to only 64,000st. Meanwhile, Emirates Steel is eyeing 15m t/y of DRI capacity in Abu Dhabi and aims to increase steelmaking capacity to 8m t/y (see separate article).

Natalia Capra France

kallanish.com

The European Commission has proposed to extend the EU safeguard measure on steel by a further two years to 30 June 2026. It will also introduce a 15% cap per origin over the “other country” tariff-rate quota (TRQ) for hot rolled coil, to ensure market stability and avoid crowding out traditional suppliers, Kallanish notes.

The surge in imports from certain new origins is related to growing overcapacity in certain regions, as well as to the significant pressure exerted by a strong increase in Chinese exports to certain markets, the Commission says.

The import surge means the category 1 – HRC – other country TRQ has “been consistently exhausted on the first day of the quarter for several consecutive quarters. This has created an imbalance on the market throughout the remainder of those quarters by making available very large amounts immediately, thus generating substantial import pressure,” the Commission adds.

This has caused a stir in the European market.

“Import pressure is particularly acute in this product category as imports continued to gain ground despite an overall substantial drop in steel consumption in the Union. In fact, the market share of imports in this product category reached 30% in 2023, substantially above the average for the product concerned as a whole,” it continues.

The cap ensures import penetration on the first day of the quarter would be limited and allows the most affected exporting countries to still export relevant volumes, the Commission points out.

The same, 15% cap has also been introduced for category 16 – wire rod. “As of the quarter July-September 2023 the composition of origins changed abruptly within the residual TRQ in this product category, with several new origins suddenly exporting very large amounts in the last three quarters. This resulted in a massive reduction of free-of-duty imports from all other exporting countries which used to have a stable presence on the Union market. In fact, some of them virtually stopped exporting under this TRQ,” the Commission notes.

The rate of liberalisation will meanwhile be reduced from 4% to 1%. Data show the liberalisation rate in the past has largely outpaced the evolution of consumption, the Commission explains. While TRQs have been increased by almost 25% since the measure was imposed – including the 5% top-up applicable since February 2019 – consumption decreased 17% over the same period. These opposing trends have therefore significantly widened the gap between the level of TRQs and market demand.

The move will ensure the measure’s effectiveness “in a period where the Union market is suffering significant import-driven tensions, caused by the negative effects of overcapacity and the resulting responses to it across the world, in a context of weak demand,” the Commission notes.

The Commission is also proposing to include Mozambique within the scope of the safeguard measure as from 1 July.

Adam Smith Poland

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Liberty Galati has temporarily idled its hot end to “ensure a profitable and sustainable production”, a Liberty Galati spokesperson tells Kallanish. The blast furnace number 5 at Galati was only restarted in February after being idled last October.

Downstream rolling mills will continue to operate using slab stock, meaning finished product supply can continue.

“This decision is in line with our strategy to adapt to the difficult market conditions and build a mix of finished products that can ensure business sustainability. During this period, we will focus on conducting maintenance and repairs to improve the performance and reliability of the blast furnace and we will focus on consolidating the order book for customers in the profitable market segments. Our teams will continue to work full shifts, as usual,” the spokesperson says.

Adam Smith Poland

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Some European steelmakers are mulling increases on hot rolled coil, since the European Commission said it will introduce a 15% cap per origin over the “other country” tariff-rate quota (TRQ) for HRC.

The HRC market remains stagnant in Europe. Before the Commission announcement and considering the very weak consumption for coil and its derivatives downstream, EU steelmakers were bracing for a circa €20/tonne ($21) price decline in June. The latest EU move will further discourage imports from third countries and will leave buyers with no other option but to buy domestic material, sources tell Kallanish.

Steelmakers believe June prices will rebound in Europe by up to €50/t, as stocks are particularly low. Marcegaglia chairman Antonio Marcegaglia told Kallanish on the sidelines of the Danieli event in Udine last week that international coil prices may increase towards the end of the second quarter or beginning of Q3. “Final demand for coils at an international level is rather static. Some consumption rebound is expected but I believe it will be more of a technical restocking thanks to some improved confidence in the relative price stability,” he noted.

The Commission says the surge in imports from certain new origins is related to growing overcapacity in certain regions, as well as to the significant pressure exerted by a strong increase in Chinese exports to certain markets. The TRQ amendment was made after the HRC other country quota was exhausted on the first day of the quarter for several consecutive quarters (see separate article).

HRC prices are stable compared to the beginning of May, with trade limited and confidence on the side of buyers lacking, several sources confirm. Transactions range from €630-640/t base ex-works in Europe, or €650/t base delivered as quoted by a large producer. Price increase announcements are expected in the coming days but the market remains fragile and the hikes are expected to be moderate.

Natalia Capra France

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