European HRC prices ‘likely reached rock bottom’, but trading remains thin
Fastmarkets calculated its daily steel HRC index, domestic, exw Northern Europe at €611.46 ($650.01) per tonne on October 25, up by €0.46 per tonne from €611.00 per tonne on October 24.
The index was down by €5.42 per tonne week on week and by €20.42 per tonne month on month.
Most market sources agreed that prices have hit rock bottom and further drops are unlikely due to mounting costs at mills.
Trading in the spot market remained slow and buyers continued to postpone their restocking.
“The market is quiet and silent. I think everybody is waiting, but at the same time it looks like the market has bottomed out,” a steel service center source in the region told Fastmarkets.
Despite mills’ attempts to increase offers slightly, market sources saw prices as largely flat with indications of tradeable values at around €600-620 per tonne ex-works.
This compares with target levels voiced by some integrated mills at €630-645 per tonne ex-works for November/December-delivery HRC.
Deals were scarce with most buyers tending to book small volumes to cover urgent needs.
Market sources suggested that larger distributors were postponing purchases until a major industry trade fair in Stuttgart, Germany, in early November.
“Blechexpo might be a trendsetter, but as long as the market is quiet I think nobody will buy more than is needed and won’t speculate,” a trading source said.
Output cuts implemented by several European producers during the fourth quarter could lead to price rebounds when buyers start booking January-delivery tonnages, some sources said.
“There is little hope for a real demand rebound this year,” a distributor in Germany said. “But stocks are trending lower and buyers will need to return for volumes.”
“I think the pick-up in apparent buying can support some short-term minor price rises, but nothing booming can be expected since consumption is still weak,” the distributor added.
Fastmarkets’ daily steel HRC index, domestic, exw Italy was €600 per tonne on October 25, unchanged from a day earlier.
The index was up by €9.12 per tonne week on week, but down by €21.67 per tonne month on month.
Italian mills tried to increase their selling prices for November/December-delivery HRC to €620-630 per tonne ex-works, but no transactions were reported at these price levels.
Buyer estimates of tradable prices were at €580-600 per tonne ex-works.
But producers were rejecting bids below €600 per tonne ex-works, according to most sources.
In the downstream market, HR sheet was traded at €670-700 per tonne delivered, but some sources reported lower transactions at €660 per tonne delivered.
“Some steel service centers are being very aggressive with sales to end users, which also puts pressure on prices. The gap between HRC and cut-to-length material should be at least €100. So, sales [of HR sheet] at €660 are suicidal,” a second distributor said.
Further price declines for HRC in the nation were considered unlikely by market sources due to rising input costs at mills. A strong price rebound was also seen as unlikely due to slow demand from end users.
“Stabilization [of HRC prices] is the most likely scenario for the next couple of weeks,” a second trading source told Fastmarkets.
Meanwhile, the market for overseas coil remained quiet. Asian suppliers maintained HRC offers at around €580-600 per tonne CFR to Italy for January shipment.
Bids for such material were no higher than €550 per tonne CFR, but suppliers were not ready to cut prices.
“EU ports are full and EU buyers don’t want to do risky business; not only the price but also the risk of paying duties cools demand for imported HRC,” a third trading source said.
300m t/y more scrap needed for green transformation
Speaking at a Bureau of International Recycling (BIR) conference attended by Kallanish in Abu Dhabi this week, Davide said steel demand and production would slowly increase until 2050. Demands for low-carbon steel mean steel mills hope to reduce carbon emissions by 70-90%.
The switch towards electric arc furnaces (EAFs) would double their share of production by 2050 and include a significant increase in direct reduced iron (DRI) production of 245 million tonnes/year, he adds.
More than an extra 300 million tonnes/year of scrap would be needed to feed the additional EAF production in the transition to green steel, BIR also reported.
From Davide’s speech, the company expects to see 18% of of global steel production from DRI EAF, 38% from scrap EAF and 44% from BOF. This implies steady increases for DRI EAF and scrap EAF scrap from 8% and 23% in 2020. Production from BOF will shrink by 26 percentage points by 2050 from 70% in 2020. Global steel production will be in the range of 2-2.5 billion tonnes/year by 2050, the data shows.
Global scrap availability should reach over 1.2 billion tonnes/year by 2050, with the biggest increase coming from obsolete scrap, which shows the rising importance of the control of scrap sourcing, processing and utilisation.
European HRC prices flatten despite mills’ bullish attempts at rises
In Northern Europe, integrated mills were pushing offers toward €635-645 ($674-685) per tonne ex-works for HRC, with lead times of four to six weeks.
Market sources pointed out, however, that some German producers were delaying order deliveries.
At the same time, buyers’ estimates of tradeable values were no higher than €600-620 per tonne ex-works.
One source reported hearing a transaction at less than €600 per tonne ex-works in the region, but this was not confirmed by other sources.
“Cost-wise, HRC prices should be no lower than €640 per tonne ex-works,” a mill source told Fastmarkets.
“The problem,” a steel service center said, “is that mills still have December- and even November-delivery HRC which nobody needs. Buyers will start restocking for January-delivery somewhere around November.”
Several sources suggested that larger distributors were postponing purchases until a major industry trade fair in Stuttgart, Germany, in early November.
Fastmarkets calculated its daily steel hot-rolled coil index, domestic, exw Northern Europe, at €611 per tonne on October 24, up by €1 per tonne from €610 per tonne on October 23.
But the index was down by €7.57 per tonne week on week and by €18.79 per tonne month on month.
Output cuts by some steelmakers in Europe in recent weeks have yet to have an effect on the market.
“It is likely that we will see some spikes in apparent steel demand in the first quarter [of 2024], and then the tighter supply will support price rises,” a trading source said. “So far, the HRC market is rather oversupplied.”
In Southern Europe, meanwhile, Fastmarkets’ daily steel hot-rolled coil index, domestic, exw Italy, was €600 per tonne on October 24, down by €2.50 per tonne from €602.50 per tonne the previous day.
The index was up by €7.29 per tonne week on week but down by €18.54 per tonne month on month.
Offers of HRC for November-December delivery from local mills in Italy were heard at €620-630 per tonne ex-works, while buyers’ estimates of the tradable price were reported at €580-600 per tonne ex-works.
But mills were reluctant to sell for less than €600 per tonne ex-works, sources said.
Market sources indicated slightly better activity in Italy, with some distributors and steel service centers feeling the need to restock, but “nothing was booming,” Fastmarkets heard.
Asia-origin HRC imports for January shipment were on offer to Italy at around €580-600 per tonne CFR, mainly from Vietnam, South Korea and Japan, stable week on week.
Eni, Snam CCS project to help decarbonise steel
Italian energy companies Eni and Snam’s carbon capture and storage (CCS) project in Ravenna, Italy, will serve Italian and European hard-to-abate sectors such as the steel industry. European energy-intensive industries will prefer to store their CO2 in Italy rather than other facilities in Europe, a source close to Eni tells Kallanish.
The project will store CO2 in depleted gas reservoirs off the coast of Ravenna. In 2022, Eni and Snam signed an agreement to create an equally owned joint venture and develop Phase 1 of the Ravenna CCS project, which will be launched in 2024. This includes the capture of 25,000 tonnes of CO2 emitted from Eni’s natural gas treatment plant in Casalborsetti.
“Once captured, the CO2 will be piped to the Porto Corsini Mare Ovest platform and injected into the homonymous depleted gas field in Ravenna’s offshore,” the firms explain in a project presentation.
While CCS projects have been developed globally, this represents the first Italian effort and aims at decarbonising the entire hard-to-abate production cluster in the Po Valley. It will also target other Italian regions and countries in the Mediterranean area.
The Ravenna CCS hub’s phase two is scheduled to start in 2027 and aims to store 4 million t/year of CO2. Of this, 1mt will come from plants owned by Eni and the remaining 3mt will be reserved for other industrial emitters. Eni and Snam say they are in talks with hard-to-abate industries in the region including steel and have signed a letter of intent with four polluters in the Ravenna industrial area.
“Total storage resource in the Adriatic is estimated at 500 million tonnes, giving the possibility in subsequent development phases to increase storage capacity to more than 10 million tonnes/year, covering the decarbonisation needs of additional clusters,” the project presentation concludes.
Natalia Capra France
Danieli foresees challenging two years ahead
Danieli forecasts a global fall in steel demand for the fourth quarter as well as first half of next year, with the possible exception of India, Southeast Asia and the Middle East, Kallanish notes.
In its report for the fiscal year through June 2023 (FY23), the Italian equipment maker says it is preparing “for the market downturn of the next two years or so”, but forecasts a lower impact on the specialty steel sector.
Thanks to significant investments aimed at cutting emissions and improving product competitiveness and quality, Danieli’s plantmaking division has a strong order backlog, the firm observes.
While it vows to continue investing in innovation and digitalisation of the steelmaking process, the company has registered growing international success for its MIDA mini-mills technologies such as the Digimelter, which replaces the traditional EAF technology. Also in demand are direct casting-rolling for flat (QSP-DUE) and long (QLP) products.
These technologies, also adopted by competitors, have opened up several opportunities, particularly in Europe. “On the contrary, in India and China, where not enough gas is available, coal-based blast furnaces continue to be installed, although utilising innovative technologies that allow for reducing CO2 emissions,” the report affirms.
In FY23, Danieli posted €4.1 billion ($4.3 billion) revenue and €424 million Ebitda. For FY24, Danieli forecasts €4-4.3 billion revenue with Ebitda of €400-430m.
Specialty steel producer Acciaierie Bertoli Safau (ABS), Danieli’s steelmaking division, is planning to verticalise and acquire a scrap collection company, while continuing to pursue its investment of €650m to reach annual production of 2.3 million tonnes.
The steelmaker plans more investments in its upstream and downstream facilities besides its future acquisition of a scrap merchant. This follows the entry into production of ABS’ QWR 4.0 wire rod mill and the new high-quality ore-grinding ball production plant last year.
ABS posted FY23 turnover of €1.1 billion with €58.8m Ebitda. The production sold during the year reached approximately 1.2mt, a 10% decline compared to the previous financial year.
In July, ABS completed the purchase of scrap company Rott-Ferr, in line with its verticalisation strategy. The scrap firm has an annual scrap collection capacity of approximately 100,000 tonnes.
Natalia Capra France
German construction ‘nears collapse’, awaits state support impact
Germany’s construction industry continues suffering from a slump in demand for apartments and residential housing, which is putting pressure on construction material and labour pricing.
According to national construction federation Hauptverband der Deutschen Bauindustrie, the price for new constructions in August this year saw a downturn for the first time since 2020. The federation also notes a shift of activity from newbuilding to complementary works in existing buildings. The considerable decline in orders and permissions for new buildings has a direct effect on pricing for all services. “Companies are making price concessions to keep their staff in work,” says Bauindustrie managing director Tim-Oliver Müller.
“If prices continue not to cover the costs any more, a wave of bankruptcies could be looming,” he warns. In fact, cases of bankruptcies in the first half of 2023 rose by about 40% year-on-year. Revenues no longer cover costs. One of four companies active in new residential housebuilding are not breaking even, which is the highest ratio since 2011. In the first eight months of the year, the number of permissions issued for residential units fell by 28% in comparison with the first eight months of 2022.
The downturn is tracing through to ancillary trades which depend on construction. “Construction is a key sector for all trades, and it is just about to completely collapse,” warns Jörg Dittrich, president of the German Confederation of Skilled Crafts and Trades (ZDH).
Consumers are scared off by skyrocketing prices for real estate over recent years, rising interest rates for loans, and too much bureaucracy. Federations keep calling on the government to facilitate procedures and to deliver incentives. They appreciate that a recent measure, the “Construction Package” (Baupaket), points in the right direction.
However, one buyer of construction materials including reinforcing steels warns it will take time until the measures takes effect. “It is a good gesture and will have a positive impact, but for another half a year we will not see movement,” he tells Kallanish.
German rebar mills recently dared to announce a hike in base prices, four months after they bottomed slightly above the line of €300/tonne ($319). Most deals will have been done at around €320-330, which plus size extra of €265 translates to a delivered price of €585-595/t. Following a buying spree in late September, mills are now utilised and trying to fetch €350/t or more for new orders. It remains to be seen if the elevated prices will be upheld in the next buying wave, presumably in December or January.
Observers in both Germany and Austria tell of a fierce price war among benders of rebar, which are selling at lower than intake prices, thereby confirming the concerns expressed by German industry representatives.
Christian Koehl Germany
Polish domestic rebar prices down on weaker demand, wire rod steady
Rebar
Last week, mills were offering rebar at prices in the range of 2,800-2,850 zloty ($665-676) per tonne CPT, which would net back to about 2,780-2,820 zloty per tonne ex-works, buyer and consumer sources told Fastmarkets.
Similar figures were shared by another distributor source, who estimated mills’ offers in the range of 2,830-2,850 Polish zloty per tonne CPT, which would net back to 2,810-2,820 zloty per tonne ex-works.
But workable prices for rebar were about 2,800 zloty per tonne CPT, which would net back to 2,780 zloty per tonne ex-works, according to the majority of sources.
Deals have been concluded at even lower prices, however, albeit for large quantities. Notably, during the assessment week, a transaction for around 1,000 tonnes of rebar was reported at 2,750 zloty per tonne CPT, which would net back to 2,730 zloty per tonne ex-works.
In the secondary market, rebar prices were reported around 2,820-2,830 zloty per tonne CPT. Distributors were compelled to reduce their offers from 2,850 zloty per tonne CPT, reported last week, because such prices turned out to be unsustainable.
“Traders stopped buying because they had purchased enough, and although construction projects slowly started to pick up, soon they will be frozen [to a standstill] because of the winter season,” a distributor source told Fastmarkets.
Similar concerns were shared by another buyer source. “The main concern is that demand is too weak already,” this source said. “And it usually slows down in the fourth quarter of the year due to the winter cold.”
Consequently, Fastmarkets’ weekly price assessment for steel reinforcing bar (rebar), domestic, exw Poland, was 2,730-2,810 zloty per tonne on October 20, down by 20-50 zloty per tonne from 2,780-2,830 zloty per tonne the week before.
Some market participants were optimistic about the future after the recent parliamentary elections in Poland. Three opposition parties that promised to restore democratic standards in the country together won more than 54% of the votes. This put them in a position to form a coalition majority.
“If the Polish government becomes democratic again, there are chances that the country will benefit soon from EU funds. This will give a boost to many infrastructure projects, of which there are very few now,” a distributor source told Fastmarkets.
The first positive effects from the elections were already obvious, according to another consumer source, because the Polish zloty was becoming stronger.
According to online currency converter Oanda.com, on October 23, the Polish currency was trading at 4.46 zloty to €1, and 4.21 zloty to $1. On October 16, when the first exit polls were announced from the election, it was 4.53 zloty to €1, and 4.31 zloty to $1.
In comparison, on September 25, it was trading at 4.61 zloty to €1 and 4.33 zloty to $1.
“The Polish zloty is getting stronger, and this means that imports will become more competitive,” a consumer source told Fastmarkets. He was also optimistic about the development of the construction sector, saying that some residential projects have started.
Wire rod
Polish mills offered wire rod about 3,000-3,100 zloty per tonne CPT in the week to October 20, sources told Fastmarkets. But the market would not accept prices of more than 3,000 zloty per tonne CPT.
The workable price varied in the range of 2,800-2,900 Polish zloty per tonne CPT, according to the market sources.
Deals for small and medium tonnages were reported around 2,850 zloty per tonne CPT during the week.
But demand was still comparatively low. “It is a ‘dead’ season now,” a distributor source told Fastmarkets. “Customers have purchased the quantities they needed for October, and are waiting for November offers. Demand is a little bit better, but I do not see any restocking, and [construction sector] activity is still weak.”
Fastmarkets’ weekly price assessment for steel wire rod (drawing quality), domestic, delivered Poland, was 2,800-2,900 zloty per tonne on October 20, unchanged from the previous week.
In the import sector, overseas wire rod suppliers to Poland also attempted to push up their prices. According to a distributor source, all mills wanted to increase their prices to at least €610 per tonne CPT for mesh-quality wire rod.
A deal for “a few hundred tonnes” of mesh-quality wire rod from Ukraine was reported at €575 per tonne DAP during the week to Friday, however.
Offers of similar material from Moldova were heard at €615 per tonne CPT.
Slow demand inhibits trading in European HRC market
Fastmarkets calculated its daily steel HRC index domestic, exw Northern Europe at €610 ($646.20) per tonne on Monday, down by €3.13 per tonne from €613.13 per tonne on Friday October 20.
The index was down by €4.75 per tonne week on week, and down by €19.79 per tonne month on month.
Trading remained slow in the Northern European HRC market.
Despite mills attempting increase prices, these increases were not realized due to weak demand.
“Mills are hungry for orders at the moment and can offer a four-to-six-week delivery period. Restocking could begin again in November for January delivery,” one trader source said.
Even the smallest price increases for HRC are difficult to push through given the lack of demand, buyer and mill sources said.
In the week to October 20, offers were reported at around €635-645 per tonne ex-works from integrated mills in Northern Europe.
Meanwhile, buyers’ estimates of achievable levels were no higher than €600-620 per tonne ex-works.
Despite production cuts having been initiated to rebalance supply-demand dynamics, these cuts have not yet had an effect on the market due to low consumption and high stock levels, sources said.
In Southern Europe, the corresponding daily steel HRC index domestic, exw Italy was €602.50 per tonne on Monday, up by €5.83 per tonne from €596.67 per tonne on October 20.
The Italian index was up by €7.50 per tonne week on week, but down by €16.04 per tonne month on month.
Producers in the region were offering coil at €620-630 per tonne ex-works for late November-December delivery, while buyer’s estimates of tradeable levels were reported at €590-600 per tonne ex-works.
Import HRC offers were scarce on Monday.
Asia-origin HRC imports for end-December shipment were on offer to Italy at €600 per tonne CFR.
Published by: India-Inés Levy
Hubs to supply mature markets ‘green’ DRI: Woodmac
Mature markets with higher carbon prices will move from importing finished steel from more emissions-intensive producers, such as China and India, to importing green direct reduced iron to manufacture low-emission steel using electric arc furnaces. The Middle East, Australia and Brazil will meanwhile emerge as DRI export hubs, says Wood Mackenzie.
The EAF share of global steel production will increase from the current 28% to almost 50% by 2050, according to the base-case scenario, requiring at least 550 million tonnes of new EAF capacity. The required investment will be as much as $130 billion, Woodmac says in a new report seen by Kallanish.
DRI’s share of total metallics demand will rise from 6% currently to 13% by 2050, with production growing nearly five times faster than total metallics demand, to 320mt, it continues.
The consultancy expects almost half of all DRI produced by 2050 to be hydrogen-based. As new processing hubs emerge, by 2050, almost 25% of DRI supply will be traded, compared with just 7% now.
Europe, China, Japan and South Korea will be the epicentres of green DRI demand as they move to decarbonise.
The Middle East and Australia will see the share of renewables in their power mix exceed 50% and 75%, respectively, by 2050. Availability of land and attractive renewable power costs should support delivered hydrogen prices of $2-3/kg by 2050.
The Middle East boasts ample low-cost gas supply through to 2050, supporting gas use for blending with green hydrogen. Australia has significant undeveloped gas resources.
Australia’s iron ore will require smelter technology to achieve DR grade, while Brazil has high-grade ore but faces operational challenges at mine sites. The Middle East meanwhile imports ore feedstock from both and will see Vale set up metallics mega hubs going forward. The region already has the DRI technological edge.
Woodmac expects the industry to face a gap of around 200mt of high-grade ore supply by 2050.
In the EU, producing EAF steel using imported Middle Eastern DRI will be up to 15% cheaper than making steel using locally manufactured DRI. Woodmac expects the EU to be the largest importer of DRI globally, accounting for over a third of total trade by 2050.
China is likely to look to a mix of imported and locally produced DRI. While imports from the Middle East will be more competitive, China is also likely to invest at home to support its massive domestic steel sector.
Woodmac expects DRI capacity to double over the next three decades, requiring up to $80 billion of capital investment.
“The increased use of scrap through recycling is the final part of steel’s decarbonisation jigsaw,” the consultancy says, but as the cost of greener steel rises, quality will take precedence over quantity. Technology and streamlining the scrap supply chain will be necessary to limit impurities in scrap.
Mature economies will emerge as future scrap hubs as well as key markets for DRI imports.
For China, recycling offers a huge potential advantage for local steelmakers. But scrap availability will only gather pace in the latter half of the forecast period, as the majority of China’s construction boom ‒ a major source of scrap as buildings are demolished ‒ has taken place since the 2000s and has a lifespan of 30 to 50 years, Woodmac concludes.
Adam Smith Poland
Liberty pauses hot metal production in Europe
Liberty Steel has idled one blast furnace each at its Ostrava and Galati steelworks, bringing to a halt its hot metal production in Europe.
Its blast furnace at the Dunaferr works in Hungary was idled in the summer.
Ostrava’s BF no.3 has been stopped for two weeks from 23 October due to weak steel demand across Europe on account of macroeconomic issues. During the stoppage, the firm will carry out a short programme of care and maintenance to increase the stability and reliability of the furnace, an Ostrava spokesperson tells Kallanish.
Full employment will be maintained, while customers’ orders will still be produced as the relevant rolling mills will remain in production using pre-prepared stock.
The Galati steelworks’ BF no.5 has been stopped due to severe weather in the Black Sea and “dramatically” low water levels on the Danube River. This has impacted the delivery of enough raw materials to safely run the furnace, a Galati spokesperson observes. The firm plans to restart the unit later this month.
Last month, Ostrava began the closure of its VKB 11 coke oven, one of three at the works, due to inefficiency and growing unprofitability amid overcapacity in the market (see Kallanish passim). Over the summer, Galati received approval from a local Belgian court to acquire the coil rolling mills of Liberty Liège.
Adam Smith Poland