Austrian industry frets over crashing demand
“We see orders declining by as much as 30%, and there is no relief in sight,” says Markus Ritter, representative of WKO’s department for mining and steel, and managing director of rebar mill Marienhütte. He speaks of a “troublesome development in our industry”.
Ritter’s assessment comes on the occasion of the upcoming collective bargaining for wages at mining and steel companies, in which Ritter heads the side of employers. On the labour side, companies are also hurting from wage increases of close to 10% since the previous collective bargaining round, he notes.
“This big surge of wage costs in comparison to our European competitors means a troublesome loss of competitiveness,” Ritter says. At the same time, the steel industry is driven by high energy costs and the technological transition towards low-emission steelmaking. “We need to develop new ways of production, make them economically feasible, and stay competitive at the same time,” he observes. “These challenges can only be coped with when we agree with the unions on a conservative wage agreement.”
He emphasised that the paramount aim of his department in the negotiations is the preservation of Austria as a location for profitable industries.
Christian Koehl Germany
Steel market spirals into deeper recession in 2023, faces growing unpredictability for 2024
Collapsing demand resulting from high inflation and interest rates, exacerbated by conflicts and persistently elevated power prices, is clouding the steel market outlook for 2023. Recession in apparent steel consumption is expected to further deepen (-5.3%) this year, while the anticipated rebound (+7.6%) in 2024 faces geopolitical unpredictability and prolonged economic uncertainty. Imports, despite a declining trend in line with very weak demand, continue to maintain their market share (28%) above historical levels.
“The perspectives for the European steel sector get gloomier every quarter amidst disruptive wars, global tensions, an unresolved energy crisis, high inflation, tightening economic conditions and historically high import shares that are strangling manufacturing. This situation negatively impacts steel demand. It is essential that EU policymakers steer a course which maintains a sustainable industry in Europe and responds to the call of the clean tech value chain – of which steel is a fundamental part – for an EU Clean Industrial Deal and urgent actions to keep Europe in the world’s clean technology race”, said Axel Eggert, Director General of the European Steel Association (EUROFER).
EU steel market overview
In the second quarter of 2023, apparent steel consumption recorded its fifth consecutive slump (-7.6%), totalling 35.6 million tonnes. This volume, although higher than the previous quarter, is still below the levels seen in 2021 and the first half of 2022. This negative trend is expected to continue for at least another quarter, leading to a deeper reduction in apparent steel consumption for the whole of 2023 (-5.2%, previous estimate -3%). This would mark the fourth annual recession in the last five years (-7.2% in 2022). In 2024, a stronger rebound is projected (+7.6% from +6.2%), but that recovery is conditional on still very uncertain positive developments in the industrial outlook and steel demand.
Domestic deliveries followed the same downward trajectory in the second quarter of 2023, declining for the fifth consecutive time (-6.5%). Imports, reflecting the prolonged downturn in demand, continued to fall (-10.2%), but their pace more than halved compared to the first quarter (-26.6%). However, the share of imports out of apparent consumption has further expanded (28%), remaining at considerably high levels in historical terms.
EU steel-using sectors
Against this challenging backdrop, steel-using sectors in the EU displayed unexpected resilience and continued to moderately grow (+0.8%) also in the second quarter of 2023. This was due to the positive performance of the automotive, mechanical engineering and transport sectors, offsetting poor output in domestic appliances, tubes and metalware, along with the ongoing recession in construction (-2.5%), which accounts for 35% of steel consumption. As long as high interest rates impact demand, the recessionary trend in the construction sector is expected to continue.
Steel-using sectors’ growth is projected to halve (+0.6%) in 2023 compared to previous estimates (+1.3%), and to continue to slow down (+0.4%) in 2024, following a likely downturn in the automotive sector.
Source: Eurofer
China’s overcapacity problem returns
Throughout most of 2023, Chinese steelmakers increased steel production. Amid weak domestic demand, this forced Chinese steelmakers to increase exports by 30%, reaching local highs. This situation has once again exposed the problem of excess steelmaking capacity in China.
Although many expect the Chinese authorities to introduce an order to limit the level of steelmaking at the level of 2022, but, apparently, it will not happen, as the Chinese authorities prioritize the goal of achieving GDP growth of 5%, which requires maintaining high performance in the production sector, including in the steel industry.
Unjustified expectations
In the first half of 2023, Chinese steelmakers mainly increased steel output amid expectations of economic recovery after the zero tolerance policy to COVID-19 was abolished from December 2022. In January-September, Chinese steelmakers produced 795 million tons of steel, up 1.7% from the same period in 2022. Everyone expected that there would be more activity primarily in the construction sector. But this did not happen.
This explains why, despite the growth in production, the sentiment of Chinese steelmakers in 2023 was very volatile. The business expectations index (PMI) in China’s steel sector was above or near the 50-point level at the beginning of the year and during the summer, indicating relatively positive sentiment in the industry. In turn, the collapse of the PMI in April-May was due to weak demand and lower prices for steel products despite the peak season.
Waiting for a decline
Despite the overall growth in production in the last 9 months, there has been a month-on-month decline in recent months. In August-September, the monthly decline in steelmaking was about 5% – to 86.4 million and 82.1 million tons, respectively, compared to 91 million tons in June and July.
For the past few years, the Chinese authorities have followed a policy of stabilizing steel production at the previous year’s level. This was presented as measures to reduce greenhouse gas emissions. Earlier it was expected that this year also such restrictions would be introduced, as these intentions of the Chinese authorities were announced at the beginning of this year. However, in fact, there have been no official announcements of steel production cuts so far, except for official directives in a few provinces, such as Tangshan and Yunnan. It is likely that there will be no official industry-wide measures until the end of 2023.
«Decisions on output restrictions in China occur with a certain time lag. The discussion only arises a few months after the emergence of imbalances caused by unreasonably high output volumes. This usually manifests at the end of the year. Whereas traditionally the first half of the year is when output is rising. According to the same scheme, the first half of 2024 again has a chance to be marked by excessive steel output,» says Andriy Tarasenko, chief analyst at GMK Center.
The lack of a centralized order to limit steelmaking may be due to the fact that the priority for the Chinese authorities is now to achieve the GDP growth target of 5%. This requires keeping production performance at a high level. In other words, the pursuit of economic goals forces to abandon administrative restrictions.
Nevertheless, weak domestic demand, which is difficult to push up significantly even by economic incentives, low domestic prices for steel products, high prices for raw materials lead to a drop in margins and force Chinese steelmakers to voluntarily reduce production. For example, steelmakers in a number of Chinese provinces in September-October reduced production of steel products in the construction segment to avoid losses amid low prices and the general weak situation on the construction market.
The rise of exports
This year, Chinese steelmakers are breaking all local records for steel exports. At the end of January-September 2023, Chinese steel companies increased export shipments by 31.8% compared to the same period of 2022 – up to 66.8 million tons.
The dynamics of steel exports showed very high growth during February-May – 40-55% year-on-year, but since June the figure has declined to +/- 30% due to slowing demand from foreign customers. In September 2023, exports totaled 8.06 million tons of steel, down 2.6% from August.
The significant growth of Chinese steel exports was due to insufficient domestic demand and low domestic prices for steel products, as well as the devaluation of the yuan against the dollar, which made Chinese steel products more competitive. In addition, strong demand from some importing countries – in the Middle East, Southeast Asia and North Africa – as well as China’s efforts to promote projects under the One Belt, One Road program contributed to exports.
Until the end of this year, there may be a slight slowdown in export dynamics due to the expected decline in steel production and lower demand from foreign buyers. SteelMint estimates that depending on the absence or presence of measures to reduce steelmaking, exports through 2023 could be around 79.5 million tons or 89 million tons, respectively.
Nevertheless, periods of sharp growth of steel exports from China will appear in the future, as the problem of overcapacity has not gone anywhere, domestic demand in China may be weak for some time, and control over production levels may not be timely.
«China’s overcapacity problem has come to a head with renewed vigor. Every self-respecting researcher of the global steel industry expects a reduction in steel production in China due to objectively declining domestic steel consumption. But this reduction is happening in a painful way for the global steel industry, with overcapacity leading to falling prices and margins around the world. Therefore, it is likely that we may see a new round of protectionism in the industry, similar to what we saw after the previous surge in Chinese exports in 2015,» adds Andriy Tarasenko.
Steel forecasts
SteelMint estimates that if the measures to reduce smelting are not implemented, China’s steel production could end the year 47 million tons (to 1.065 billion tons) higher than last year’s figure (1.018 billion tons in 2022). If the Chinese authorities do introduce a control policy, SteelMint estimates that China could end 2023 with an estimated steel output of 1.011 billion tons, just 7 million tons less than last year. Steel output in Q4 (no more than 300 million tons) could be the lowest this year.
Prospects for 2024 remain uncertain, but the most likely scenario in the association Worldsteel called the continuation of demand growth at the level of 2023 – by 2%, to 939.3 million tons after a decline in 2022 by 2%. This will be supported by infrastructure investment and a likely stabilization in the real estate market.
«The real estate market is expected to stabilize in the second half of 2023 as the Chinese government has taken some measures to stabilize the economy since July. Infrastructure investment growth remained strong in 2023 due to the authorities’ stimulus measures. Infrastructure investment is expected to remain moderately positive in both 2023 and 2024. Assuming the Chinese authorities take additional measures to support the economy, steel demand in 2024 could remain at 2023 levels. There is a downside risk in both 2023 and 2024 if the stimulus effect is weaker than expected,» Worldsteel said in its October report.
Stimulating measures of the Chinese authorities will be a supporting factor for steel production and consumption in China next year. Thus, in mid-October, the Chinese Central Bank allocated the largest since 2020 financial support for banks in the amount of $39.6 billion. In addition, the continuation of high exports and the priority of the Chinese authorities in favor of achieving the planned level of economic growth may have a positive impact on steel production in 2024. The latter excludes measures of administrative restriction of production in the Chinese steel industry.
Source: GMK Center
Revista InfoAcero Octubre 2023
En el siguiente enlace pueden acceder a la edición de Octubre de nuestra revista InfoAcero
Destacamos a continuación algunos de sus contenidos:
- Opinión – D. Gerardo García – Junta Directiva UAHE.
- Evolución del Índice de Precios de Productos Siderúrgicos – UAHE
- Sector Siderúrgico: Previsión a corto plazo demanda de Acero- WoldSteel Association Octubre 2023.
- Resumen 19º Forum Productos Siderúrgicos, Castelldefels – 4 Octubre
- Colaboración ASCEM: “El Acero puede salvarte la vida” – Sr. Joan Carles Codina- Secretario ASCEM
Report: coal-based steelmaking more than double green plans
New plans for coal-based steelmaking capacity are outpacing greener primary steel production methods with only a third of the world’s top 50 producers having announced targets to reach net zero by mid-century, Kallanish notes from a report.
The report was prepared by Global Energy Monitor and Stockholm Environment Institute’s Leadership Group for Industry Transition. It warns that planned coal-based blast furnace capacity worldwide totals 208.2 million tonnes/year, two-and-a-half times greater than the 83.6mt/y in planned primary green iron and steel capacity.
The report also finds that the investments in primary green iron and steel projects are growing, but mostly in developed markets and not fast enough to outpace emissions-intensive technologies.
It notes that the steel sector accounts for an estimated 7-9% of direct global greenhouse gas emissions, and the International Energy Agency has said that carbon dioxide emissions from heavy industries need to drop by 93% in order to reach net zero emissions by 2050.
Yet only 17 of the largest 50 steel producers have publicly committed to achieving net zero by mid-century, despite these 50 producers being responsible for more than 60% of the sector’s emissions.
The 17 producers that have a 2050 net zero goal account for more than a quarter (527mt/y) of global steel production.
Data also show that only two of 50 producers have included Scope 3 emissions calculations in their net zero goals.
The report notes that Scope 3 emissions play a significant role in steelmaking and can account for well over 40% of overall emissions from the sector.
Siew Mung Tan Malaysia
Dillinger supplies plate for Dutch offshore wind farm
Dillinger has supplied around 115,000 tonnes of heavy plate for the Hollandse Kust Zuid 1-4 offshore wind farm, which has just celebrated its official opening.
The wind farm is located 18-36km into the North Sea off the Dutch coast, between the cities of Scheveningen and Zandvoort. The farm is built on monopile foundations stretching 62 to 75 metres long and weighing up to 955t, in water depths reaching 17-28m. Dillinger supplied the heavy plate for these monopile foundation structures in thicknesses ranging from 54-90mm, Kallanish hears from the company.
With 139 turbines and an installed capacity of 1.5GW, Hollandse Kust Zuid is one of the largest offshore wind farms in the world, according to Dillinger. It can supply approximately 1.5 million households with renewable energy each year.
During construction of Hollandse Kust Zuid, the natural surroundings were also included for the first time in the design of the wind farm. These measures include enlarged water holes in the foundation elements that provide shelter for marine life inside the turbines, as well as boulders and stones of various sizes to construct the scour protection.
Artificial rocky reefs have been created on several scour protection systems to make them more attractive to a greater number of fish, crabs, and crustaceans, Dillinger notes.
Christian Koehl Germany
EU needs industrial deal, new VP position: associations
Europe needs a “real and tangible” Industrial Policy covering the full supply chain to ensure it does not drop out of the world’s clean technology race, a host of industrial associations including Eurofer have urged in a letter to EU heads of government.
The industry representatives say the next European Commission must appoint an executive vice president responsible for delivering the EU’s full industrial policy rethink.
Action is required against the threat of further European deindustrialisation and supply insecurity. “Global competition for clean technology and raw materials leadership has intensified. China has established a growing footprint across most clean tech sectors, while the US has taken a decisive step forward with its Inflation Reduction Act,” the associations say in the letter seen by Kallanish.
“All this is happening while Europe’s investment situation has worsened since Russia’s invasion of Ukraine with high energy prices, inflation, and growing supply risks. Europe’s ambitions are heavily challenged – from our wind industry to our electric and fuel cell vehicle supply chains, to our solar and electrolysers manufacturing goals, to our metal and chemicals producers,” it continues.
The associations have asked member state governments to request that the next European Commission delivers an “EU Clean Industrial Deal” competitiveness package in its first 100 days of office.
Industry representatives request five pillars from an EU industrial deal, including for the bloc to make its financial tools much easier to access for companies, learning from the US Inflation Reduction Act. Significant new sources of EU-level funding specifically allocated to clean energy supply chains will be essential. Secondly, the EU’s new rules on fast-tracking permitting for production and deployment need to be enforced at national level, for all cleantech sectors.
Next, the EU must urgently deliver globally competitive energy prices that bring competitiveness and investment certainty to both generators and consumers. This is the key precondition to ensure Europe’s energy transition and the security of energy, metals, and clean technologies supply, the associations observe.
EU industry and trade policies should be designed strategically to support clean tech manufacturing and supply chain goals, including remedying third-country unfair practices, and establishing free trade agreements for raw materials, energy, and technology transfer.
Finally, Europe’s focus on developing full domestic supply chains needs appropriate market incentive measures that reward technology producers for procuring local materials or components, the letter concludes.
Adam Smith Poland
Salzgitter selects Friesen Elektra for renewable energy supply
Salzgitter and utility Friesen Elektra have signed a long-term purchase agreement for power from the “Sande Hybrid Energy Park”, which is currently being built in the Friesland region in Lower Saxony, Germany. The park is scheduled to go online at the start of 2024.
As from May 2024, a permanent supply of around 80MW of green electricity from the park has been secured for Salzgitter Flachstahl, the steelmaker’s strip mill. The already existing “Sande Wind Farm” is currently being expanded with the aim of sourcing energy from wind turbines and photovoltaic systems. In the final stage of construction, the Sande Hybrid Energy Park will deliver an overall output in excess of 120MW, Kallanish learns.
“Green” power from the photovoltaic plants is initially an integral component of Salzgitter Flachstahl’s regular power procurement portfolio, the company notes. The long-term plan aims to harness the power for the production of green hydrogen. At the same time, the agreement includes the option of procuring hydrogen produced locally, it adds.
“Implementing sustainable steel along with energy production is becoming increasingly important not only for us, but also for our suppliers and customers,” says Salzgitter chief executive Gunnar Groebler.
Christian Koehl Germany
Italian rebar makers return to quoting
Some Italian rebar producers are back to quoting at increased prices this week after they stopped sales for ten days due to high production costs. However, uncertainty continues, as do low sales volumes. Producers still have very short visibility, sources tell Kallanish.
Rebar makers are now asking for €330/tonne base ex-works. Transaction values this week however are stable on-week and hovering at €280-290/t ($295-305) base ex-works. Very few transactions for small volumes are reported taking place at €300/t. Including extras, domestic rebar is fetching €540-560/t base ex-works. Domestic mesh is meanwhile being sold at about €370-380/t, also stable on-week. Buyers must add transport and around €300/t size extras.
The hike attempt is meant to stop values from declining further and recover some margins. Distributors and fabricators who spoke to Kallanish say they have some work thanks to infrastructure projects, but larger distributors are seeing their margins squeezed due to the lower sales volumes. One firm says it is beginning to sell its range of long products at below cost and sees the market being particularly quiet.
Natalia Capra France
Steel beams prices in Europe narrow amid weak demand, energy cost concerns
Fastmarkets’ weekly price assessment for steel beams domestic, delivered Northern Europe was €730-750 ($772- 791) per tonne on Wednesday, with the price range narrowing by €10-30 per tonne from €720-780 per tonne a week earlier.
Similarly, Fastmarkets’ weekly price assessment for steel beams domestic, delivered Northern Europe was €730-750 ($772- 791) per tonne on Wednesday, also narrowing by €10-30 per tonne from €720-780 per tonne a week earlier.
Market participants had a gloomy steel demand outlook for the rest of the year, with one trader in northern Europe saying that steel industry companies were struggling due to the lack of trading.
Steel demand in the European Union, as well as in the United Kingdom, is forecast to fall by 5.1% overall in 2023, but growth is expected in 2024, according to Worldsteel.
A second source said they did not expect prices to fall much further due to rising energy costs with the winter season approaching.
The EU is reportedly considering extending an emergency gas price cap that was introduced in February due to uncertainty and concerns over energy costs in the region.
Meanwhile, scrap feedstock prices in Turkey’s bellwether market fell, with poor finished steel sales pulling down the market.
Fastmarkets’ calculation of its daily index for steel scrap HMS 1&2 (80:20 mix) North Europe origin, cfr Turkey was $347.65 per tonne on Wednesday, down by $11.85 per tonne week on week from $359.50 per tonne.
Published by: Holly Chant
