Metinvest focuses on Europe, ore shipments fall: Dankova
Metinvest’s steel enterprises are operating at 65-75% of their capacity as of November, says company financial director Yulia Dankova.
“Our mining and processing plants are now operating at 35-40% of their capacity,” she tells Ukraine-based dsnews.ua. “In general, in the first half of 2023, the company produced more than 1 million tonnes of steel, 4.75mt of iron ore concentrate and more than 3mt of coal concentrate. As a result of the war, Metinvest lost control over two large plants in Mariupol and suspended production in Avdievka.”
Before the war, the Mariupol plants supplied companies abroad with semi-finished products, and coal concentrate went from the US to Ukraine, she adds. “Currently, Metinvest’s assets in Italy, the UK and the US operate as independent enterprises. The company’s coal mines in the US have shifted product sales to domestic and export markets, and rolling mills are buying semi-finished products on the open market,” she explains.
Since the Black Sea ports, through which raw materials and metal products were traditionally exported to Asia and Europe, are blocked by Russia, the company had to build new logistics chains, Kallanish notes.
“We now supply raw materials to European countries by rail, and ship by sea from eight European ports in Poland, Croatia and Romania. The company has completely reoriented all metal exports to the European market,” Dankova observes. “However, compared to steel products, the situation with the export of iron ore is much worse. Due to the impossibility of exporting raw materials by sea, the company is forced to significantly reduce utilisation of the Kryvyi Rih mining and processing plants.”
Currently, raw materials are exported through western border crossings to consumers in Europe and onwards to European ports, but overall export volumes are significantly lower than pre-war due to high costs for transportation, she notes.
“After the first ships with grain and metal left Ukrainian ports, there was cautious optimism that Ukraine would be able to restore full-fledged exports, but this is not a stable route yet and we cannot count on it for the moment,” Dankova concludes.
Earlier, Metinvest said it plans to import electricity in the winter, because blackouts are unavoidable in Ukraine amid Russian air strikes and shelling (see Kallanish passim).
Svetoslav Abrossimov Bulgaria
Salzgitter sees mixed tubes business performance, Trading suffers
In the first nine months of a difficult year so far, Salzgitter’s Steel Processing unit, which covers tube and plate activities, actually lifted revenue by €127 million on-year to €1.684 billion ($1.8 billion). However, order intake suffered a drop of €446m to €1.74 billion, Kallanish hears from the German steelmaker.
Salzgitter’s portfolio covers one of the widest ranges of tubes in Europe. Reviewing the year so far, it notes that the realignment of the European energy market aims at securing the supply of natural gas and hydrogen and carbon disposal. This constellation gives rise to huge medium- and long-term market requirements for the large-diameter pipe of Europipe, its joint venture with Dillinger, Salzgitter says.
Inquiry activity for medium-diameter line pipe proved stable at the start of the year, but deteriorated markedly over the course of the second quarter. Demand for the tubes of Mannesmann Grossrohr GmbH (MGR), which was already weakening in the first half of the year, thus dwindled further as the year progressed. The precision tubes market, too, was characterised by weak economic momentum.
Of Salzgitter’s other divisions, the most noticeable drop occurred in Trading, with sales down by €1.1 billion to €2.56 billion, and order intake by €501m to €2.36 billion. The losses occurred due to lower margins in stockholding distribution, whereas they remained stable in international trading, the company notes.
Shipments in this division dropped from 2.86 million tonnes to 2.36 million tonnes. Amid average inventory prices declining with a time lag, stockholding distribution delivered a negative result. Against that, stable margins were achieved in international trading and at the Universal Eisen und Stahl Group (domestic plate distribution), but could not compensate for the losses in stockholding distribution.
Christian Koehl Germany
Italian car output decreases
Italian passenger car production decreased in August following an upward trend until July, Kallanish notes from local carmakers’ association Associazione Nazionale Filiera Industria Automobilistica (Anfia) preliminary data.
Italian car production fell year-on-year by 8.2% in August to 13,251 cars. However, it increased by 20.7% on-year in the first eight months of 2023 to 360,313 units.
By comparison, German output also increased significantly in the first eight months, by 28% to 2.7 million units, and by 15% to 266,800 cars in August. The UK recorded a decrease in August of 9.7% to 45,052 cars but a 11.8% hike to 571,671 units in January-August. Spain’s August car production fell 24.9% to 71,417 but increased in January-August by 13.7% to 1.2 million cars, Anfia points out.
“The automotive production sector is in the context of industrial production and the overall Italian economy still decreasing compared to last year’s levels: in August 2023, the industrial production index as a whole closed 4.2% down compared to August 2022,” Anfia says in a report.
According to service centre sources in Italy, demand for coil from the automotive sector has been weakening since July, adding to the already weak European demand.
Italy has 23 car production plants. Spain has 17 plants, France 31 and Germany 42.
Italian passenger car output hiked 6.6% y-o-y in full-year 2022 to 473,149 units. Last year, Italy produced 796,394 vehicles in total, including cars, vans and trucks.
Natalia Capra France
How Ukrainian steel industry is integrating into EU
Ukraine must ensure economic integration on its way to EU. Domestic business should be adapted to the new conditions and be able to benefit from them. What exactly these conditions will be is the subject of heated discussions. We have recently heard certain statements from our European partners about the need to regulate grain supplies for Ukraine’s accession to the EU, so it is not known what other issues may arise in other sectors of the economy.For Ukraine’s steel industry, the issue of European integration has a long history and we can say that the domestic steel industry is already part of the European industry. But there are certain challenges and a long way to go to overcome them.
Ukrainian steel industry was integrated into European production chains even before the war
Indeed, it can be said that the European market was «home» for Ukrainian steel producers. Before the war, the share of sales to the EU was about 35%, compared to 20% in the domestic market. However, trade integration was not due to, but in spite of, economic policy of EU, as import restrictions were actively imposed on the EU market.This stimulated the development of another form of integration, namely vertical integration. Ukrainian steel companies were forced to build vertical integration with European rolling mills. As a result, Metinvest Holding acquired plants in Italy (Ferriera Valsider, Metinvest Trametal) and the United Kingdom (Spartan UK). ISD Corporation included plants in Hungary (Dunaferr), Poland (Huta Czestochowa) and Bulgaria (Promet Steel). The scheme of work was that Ukrainian plants supplied semi-finished products (slabs, square billets) from which European plants produced rolled products.This interaction was beneficial for both Ukrainian producers and European consumers. Ukrainian producers were able to utilize their own iron ore mining and steelmaking capacities, while European consumers received products to meet their own needs.Vertical integration also worked in the other direction. Ukraine’s largest steel enterprise is owned by ArcelorMittal, a global company with its headquarters in Luxembourg. Until 2005, the plant was known as Kryvorizhstal, and now it is called ArcelorMittal Kryvyi Rih (AMKR) in honor of its parent company. AMKR supplies pig iron, square billets and iron ore concentrate to the Group’s other EU operations.
The war has created a need to find new forms of integration
But the war broke the existing cooperation schemes. Initially, back in 2014, the ISD actually ceased to exist. And after a full-scale invasion, Ukraine lost control over Azovstal and MMK named after Ilyich, which exported more than 2.3 million tons of slabs per year to the EU. Accordingly, European factories that are part of Metinvest are forced to look for other opportunities for purchasing slabs.By the way, the issue of restarting the slab market in the EU is quite acute after the loss of supplies from Ukraine. Market erosion is possible due to the shortage of semi-finished products. A significant part of European rolling mills continue to buy Russian-made slabs. This situation distorts competition on the EU market, as Russian suppliers try to give “reputational” discounts. And this is precisely what prevents access to the market of other suppliers of slabs that cannot compete on price with Russian ones. Such a closed circle.It is possible to correct this situation by creating an additional domestic offer on the slab market. One of the possibilities is a new plant on the territory of the European Union, which will work on Ukrainian iron ore raw materials. It is this idea that the “Metinvest” group, which has announced plans to build a new plant in Italy in partnership with Danieli, is trying to implement. The new metallurgical plant would help increase the loading of Ukrainian mining and processing plants due to the production of DR pellets. So far, this project has not received the necessary permits, there is a certain bureaucratic red tape.Needless to say, the Europeans are not keen on seeing Ukrainian business in their market. Another example is when Metinvest Holding tried to buy Dunaferr in July 2023. The attempt failed due to the position of the Hungarian government, which did not allow the company to participate in the tender. However, if the deal had gone through, it would have been beneficial for both parties. Ukrainian mining and beneficiation plants would have been able to increase production meeting the needs of the Hungarian plant, and Dunaferr would have continued to operate. But Liberty Steel, which became the new owner of Dunaferr, suspended steel production at the plant in August 2023 for 3 months.
The EU has become more open to trade cooperation
On the other hand, the war has contributed to the development of trade integration between Ukraine and the EU. Back in June 2022, the European Union suspended protective import quotas and anti-dumping measures for Ukrainian steel products. And today we see that domestic companies are developing their business and opening steel service centers in the EU. The EU has become the main export market for Ukrainian steelmakers since the war began, with the share of exports to the EU increasing for all types of products.Trade integration also works in the EU-Ukraine direction. European companies are actively interested in the Ukrainian market. More than one company has already expressed its intention to open representative offices and service centers in Ukraine. Opening steel service centers is a way to attract new customers and deepen cooperation.But again, the risks of trade partnership remain. For example, the EU abolished duties on steel products, realizing that there would be no significant supplies from Ukraine during the war. But after the war is over, the situation may change, as European countries are very pragmatic about protecting domestic producers. The process of Ukraine’s accession to the EU may be lengthy, and possible reintroduction of trade restrictions will hinder economic integration. At the same time, Ukraine is unlikely to protect its market from European suppliers. This means that Ukraine’s market will remain open. This is an important area for future diplomatic work.
Climate issues have a significant impact on the future of Ukrainian integration
A separate factor that may hinder the European integration of steelmakers is climate issues and the green energy transition. What climate commitments Ukraine will make to join the EU is an important discussion that is currently taking place. The outcome of this discussion will determine the future of the steel industry in Ukraine.In particular, the introduction of a carbon payment mechanism for importers to the EU (CBAM) could lead to the fact that the pig iron segment in the EU, where Ukraine has a share of about 50%, could cease to exist and be replaced by hot briquetted iron from the Middle East or Russia. Ukraine does not produce these products. Along with the loss of 1.5 million tons of pig iron supplies, CBAM could lead to the loss of an additional 1.6 million tons of semi-finished and finished steel products.Over the past 20 years, climate policy in Ukraine and the EU has been asynchronous. Therefore, Ukrainian enterprises should have access to European decarbonization funds. Otherwise, in 5-10 years, Ukrainian companies may not be ready for economic integration into the EU market.But at the same time, we have areas for mutually beneficial cooperation in the decarbonization of steel production. European plants need DR pellets to produce direct reduced iron. Ukrainian enterprises can supply such products. In other words, the EU needs Ukraine to decarbonize its steel industry.Ukrainian steelmakers have a history of European integration that has been fraught with trade barriers. It is positive that the situation is changing for the better. But the main risks in the future are climate-related. Without overcoming them, further economic integration into the EU is impossible.
EU hot-rolled coil prices steady as buyers hug sidelines
The week started Nov. 13 on a steady note for European domestic hot-rolled coil prices as market participants hugged the sidelines awaiting a sense of price direction.
Platts assessed the price of hot-rolled coil in Northwest Europe at Eur 650/mt Nov. 13, stable from the previous session.
“[I] will have better views [about prices] later in the week,” a Belgium-based service-center source said.
Deals were heard concluded for base-grade coils at around Eur640-650/mt basis ex-works Ruhr levels while offers were heard ranging within Eur670-700/mt ex-works Ruhr levels, according to sources.
Buyers were heard holding back from booking large volumes as they remained unsure of demand fundamentals.
Even if mills were keen to hike prices, sellers in the current market were unable to pass down the costs entirely, according to sources.
“[On the] real end, customers’ demand is an issue as the cost-effectiveness of production for them, as well as for factories, continues to limit the potential for price increases,” a distributor source said.
Asian mills in Vietnam and Taiwan were heard offering coils to European buyers at Eur610/mt CIF Antwerp levels, according to sources.
Platts assessed the price of imported hot-rolled coil delivered to Northwest Europe down Eur5/mt from the previous session at Eur610/mt basis CIF Antwerp.
Authors: Rituparna Nath, Laura Varriale
EU and US still hope to reach steel agreement
The two parties failed to reach an agreement in the buildup to their much anticipated summit in Washington last month.
A potential GASSA between the EU and US could represent the first step for a wider global agreement on sustainable steel.
If no agreement is reached by year-end, Section 232 duties from the US will be reimposed on EU steel supplies, Kallanish notes.
Emanuele Norsa Italy
German steelmaker Salzgitter sees continued weak market in Q4
German steel maker Salzgitter expects a continuously weak market environment in the fourth quarter, with the short-term global economic outlook geared more to the downside, amid dwindling demand and a reluctance to invest, especially in Europe and Germany, it said Nov. 13.
In its nine-month results statement, Salzgitter said overall German foreign trade would be particularly hard hit by weak global economic growth.
“While industry is still cushioned by a high order backlog, incoming orders are in a downtrend,” it said. “The weak construction industry and domestic economy emanating from high inflation rates and rising interest rates have in particular placed a burden on the steel industry.”
In the first none month of the year Salzgitter produced 4.4 million mt of crude steel, down from 4.8 million mt in the same period last year. The loss of the production from the relining of Blast Furnace A in August was largely offset through slab stockpiling, slab deliveries from companies within the group, as well as by the reactivation of BF C, it said.
“The economic situation in many of our key markets is currently challenging. In particular, the recessionary tendencies in our home market of Germany placed a burden on earnings strength, especially in the summer quarter,” Salzgitter CFO Burkhard Becker said. “Inasmuch, the result in the first nine months of the financial year 2023 is indeed presentable although discernibly below the exceptional year of 2022.”
Salzgitter’s overall sales in the first nine months of the year dropped to Eur8.4 billion from Eur9.8 billion in the same period last year, due to a downturn in shipment volumes and lower average selling prices of many rolled steel products. It still considered the results as “satisfactory”, mainly thanks to the performance of the Steel Production and Steel Processing business units in the first half of the year and the strong performance of the Technology Business Unit, the company said.
“In these times of economic and political turbulence, we continue to work full steam ahead on rapidly implementing our SALCOS® decarbonization program,” Salzgitter CEO Gunnar Groebler said in the results statement. “To secure and accelerate the transformation of our company, we nevertheless require a clear commitment from policy makers on Germany as a business location and on a resilient primary industry.”
Although the German government last week agreed to lower the electricity tax, further efforts are required as the industry undergoes a capital-intensive transformation and tends with global competition, he said.
Salzgitter’s flagship Salcos projects aims to fully convert the integrated steelworks into low-carbon crude steel production in three stages by 2033.
Author: Annalisa Villa
Italian service centres struggle to increase prices: Assofermet
Considering the several European trade measures on coil imports, Italian steel trade association Assofermet expects coil sales volumes at European producers to increase in the coming months.
Grappling with high energy and raw material costs, EU steelmakers have announced a first step of increases for January delivery, with a second round expected to follow, the association says in its market note sent to Kallanish.
The climate of uncertainty caused by contracting flat steel sales volumes is persisting in the Italian market, as are low margins. End-user concern over weak demand is now compounding service centres’ difficulties with passing on downstream the coil price increases demanded by EU steelmakers. “The [coil] production curbs have not supported sales prices. Due to the contraction of sales volumes, stocks remain at high levels, while volumes ordered from non-EU producers are decreasing,” the note says.
The current weak demand for coil derivatives may only slightly improve during the first quarter of next year. Service centres remain gravely concerned over fulfilling the requirements of the Carbon Border Adjustment (CBAM) regulation. This obliges importers to declare a complex series of data to authorities about the production process, which many non-EU steel mills are not yet able to provide.
“The situation in November promises to be complex: the new conflict at Europe’s doorstep increases uncertainties, particularly regarding energy supplies which weighs heavily on the prices of steel products,” Assofermet says. While demand for coil derivatives remains weak, prices seem to have reached the bottom and, consequently, distributors are now inclined to increase their stocks in view of a possible rebound, the association concludes.
Natalia Capra France
kallanish.com
EU coil contract talks: sides take irreconcilable positions
In the annual negotiations for long-term steel supply contracts, the position of steelmakers and big customer sectors will be wider apart than in previous years, and each side has good reasons for its stance.
Mills find that, in view of increased production costs, driven by raw materials as well as energy prices, steel prices for 2024 need to be higher than those of a year ago; or at least not any lower. Back then, many deals for hot rolled coil were signed at around €800/tonne ($854), with early deals securing a lower price, and later deals a higher one.
Although annual contracts go by a year-to-year comparison logic, the spot price of the time does have an influence. Coincidentally, one year ago, spot levels were similar to now, in the mid-€600s. The big difference is that many anticipated a surge back then, which did indeed materialise with a vengeance, pushing negotiated figures up during the talks.
At present, however, hardly any buyer sees cause to assume a major increase given the poor outlook for demand. Against that, mills are insisting they must lift prices because of hiked production costs. “We need to get more [than last year] to cover our costs, and the automotive buyers need to understand that,” a mill manager told Kallanish at the Blechexpo trade fair in Stuttgart last week. “We definitely cannot go lower.”
“Everybody is aware of the pressure from risen costs for mills; that is out of the question,” a director of a service centre concedes. But the production costs on the one side stand against a lack of demand from steel-using segments.
One manager from a German processor that buys on half-year contracts says that increases are totally out of the question, and he dismisses even the perspective of prices being roll-over. By June, the massive spring surge had slackened, and spot prices were on the way down, then passing the mark of €750. Half-year contracts then would have been mostly around €800-850/t. On that basis, “we want to see a three-digit reduction”, the processor’s manager says.
A manager of a Benelux distribution group adds that customers prefer shorter contracts, of a half or quarter year, because “they want to go only as far as the eyes can see”.
Unsurprisingly then, “talks this year will be very hard”, the mill manager concludes.
Christian Koehl Germany
German steel market expects prices to strengthen, inventory to remain weak in Nov
German steel traders and producers expect steel prices to remain strong in November with mills aiming for higher prices, according to an S&P Global Commodity Insights survey.
The November index for traders’ sentiment stood at 60 points, compared with 62.50 points in October, showed data from S&P Global’s German Steel Sentiment Survey. The index for producers’ sentiment was at 75 points, compared with an October index of 62.50 points, indicating that producers were more bullish on the near-term price trends. The overall index for prices was at 67.50 points, up from 62.50 points for October.
Overall, steelmakers in Europe were aiming for higher prices for steel products. On the flat steel side, sources reported upbeat market sentiment, however, real demand remained low. For hot-rolled coils, sources reported that European steelmakers were trying to maintain limited spot trade activity in efforts to better position themselves for long-term contract negotiations.
“Mills would rather trade less on spot but have prices higher to have an argument in contract discussions,” a mill source said.
Platts assessed domestic prices for hot-rolled coil in Northwest Europe stable day on day at Eur650/mt ex-works Ruhr Nov. 10, showed S&P Global data.
One European long steel producer told S&P Global that mills had been announcing price increases for long steel products amid high production costs. He reported that producers had been successful in booking transactions at elevated levels, while some customers continued to resist higher offers.
The Platts assessment of Northwest Europe rebar was up Eur5/mt week on week at Eur600/mt ex-works Nov. 8. On the other hand, Platts’ assessment of European medium sections price (category 1, S235 JR) was stable week on week at Eur770/mt delivered Nov. 8.
Meanwhile, sources reported that the market might be avoiding restocking activity given weak seasonal demand at the end of the year. One long-steel distributor reported that inventory levels were low and customers might maintain them since demand is usually slow as the year ends.
The overall index for German inventory sentiment showed little improvement, reflecting the market’s expectation of low inventory levels in November, with an index of approximately 36.67 points, compared with 34.38 points in October. The index for steel producers for November was at approximately 33.33 points, compared with 25 points in October. The index for traders’ sentiment stood at 40, compared with 43.75 points for October.
Production levels to remain low
The market reported that European steelmakers might maintain low production levels in November due to different factors, including slow seasonal demand at the end of the year. In addition, sources reported that some flat steel producers might restart production in the coming few months amid concerns that increased availability combined with unchanged real demand would result in a price drop.
The index for production outlook was around 30.83 points for November, compared with 28.13 points for October. The index for traders’ sentiment was at 20 points, down from 31.25 points in October. The index for producers’ sentiment was at 41.67 points, up from 25 points in October.
Author: Rabia Arif