Market questions omissions in EU seamless pipe review
The European Commission has initiated an expiry review of anti-dumping measures on Russia-origin imports of seamless pipe and tube of an external diameter up 406.4mm and carbon equivalent value (CEV) of 0.86.
The request for a review, submitted in June by the European Steel Tube Association (ESTA), “is based on the grounds that the expiry of the measures would be likely to result in recurrence of dumping and recurrence of injury to the Union industry,” states the Commission official journal entry seen by Kallanish.
According to informed sources, the review should have covered Ukraine, which was included in the previous case with Russia and which is exporting high volumes of seamless pipe to Europe. However, for geopolitical reasons related to the Ukraine war, the Commission decided to exclude Ukraine.
“It seems very odd that AD measures versus Ukraine originally in the same case as Russia are not showing in the same review,” one well-placed market source comments. “It cannot be explained by economical reasons as EU Customs import statistics are showing that imports originating in Ukraine were the largest in volume until summer 2022 … Ukraine’s exports to Europe are only second to China which made a huge leap in volumes between 2021 and 2022,” the source continues.
“Meanwhile, imports originating in Russia are very limited, first because of AD measures in place, and because of the total ban on trade due to the sanctions enforced on Russia. It is indeed very peculiar that EU authorities would be willing to go against Russia that does not represent any real threat but no action is taken to against Ukraine which is importing huge volumes into the EU, totally unchecked as all trade measures [anti-dumping and safeguard] have been lifted for Ukraine since June 2022,” the source adds.
The source says the Commission is ignoring the main threat represented by China, which doubled its export volumes to Europe in a year. “Does it make sense to attack Russia … leaving the two main sources of import, China and Ukraine, without any investigation?” the source asks.
According to Eurostat data, in 2020 Ukraine exported to the EU 97,409 tonnes of seamless pipe with diameter up to 406.4mm, in 2021 it shipped 101,579t and in 2022 this was 99,217t. In the first half of 2023 the country supplied 44,826t to Europe.
In 2020, China exported 78,414t to the EU and in 2021 it was 74,741t. In 2022 the figure jumped to 128,940t, while in H1 this year China already shipped 129,570t.
Imports from Russia are almost non-existent thanks to the measures in place.
Natalia Capra France
ArcelorMittal Fos-sur-Mer blast furnace to remain idled
ArcelorMittal Méditerranée will temporarily shut down one of its two blast furnaces at Fos-sur-Mer, Kallanish learns from a company spokesperson. Blast furnace number 1, which is currently idle for technical reasons, will not resume production following maintenance, until market consumption improves.
“The demand situation will be reassessed by the end of the first quarter of 2024. During this period, adaptation measures will be put in place, with priority given to staff training and measures to ensure the long-term viability of the industrial facilities. Maintaining continuity of service for our customers remains our priority,” the spokesperson comments.
ArcelorMittal Méditerranée is continuing to invest in decarbonising the site and ensuring its long-term viability. This includes the future installation of an electric arc furnace, as well as the ongoing construction of a ladle furnace for €73 million ($77m), which will increase the use of recycled steel.
The new EAF will be operational from 2027 and will replace one blast furnace by the end of the decade. ArcelorMittal has two blast furnaces at Fos-sur-Mer.
The French government will support the overall project with an investment of €1.7 billion. ArcelorMittal and the French government signed last year a strategic partnership for these investments (see Kallanish passim).
Natalia Capra France
EU coil centres feel pressure to sell off
As coil prices from northwestern European mills remain weak, but apparently will not sink much further, the deterioration downstream is more severe, market players point out.
“It is not the mills nor demand that determines the market and prices, but the distributors and service centres, pressured by the necessity to clear inventories and generate cash,” one Ruhr-based service centre (SSC) manager tells Kallanish. “You need continuous liquidity, otherwise you might run into insolvency even though your annual balance sheet is fine,” he explains.
Sales levels from SSCs and distributors have reached a critically low level, due to the slowdown in business among their customers, of which many have introduced short working. According to the manager, 60% of the total coil volume for end users goes via distributors, and 40% is sold from mills directly. “It is hard to tell who started the dumping, if it was the mills or the distributors,” he says.
In line with many others in Germany and Austria, he sees mill prices for hot rolled coil at between €600 and €640/tonne ex-works ($638-680). “This means €660 delivered for service centres, and many are selling off for €680,” which means making a loss in view of an SSC’s costs for processing services, storing, transportation and others.
According to an Austrian source, a realistic price would be €720/t for HRC to cover all costs. In southern Germany, too, “I hear prices of under €700 for HRC cut and slit, and below €800 for CRC,” he observes. Normally, SSCs need a premium of €60-70/t to break even, but ideally try to fetch €100, if times allow, players say.
Christian Koehl Germany
EUROFER calls for robust EU-US Global Arrangement to address steel industry’s existential challenges
The EU-US Summit planned for 20 October in Washington should pave the way for a global solution to tackle the two existential challenges facing the steel industry worldwide: non-market excess capacity and carbon intensity. Only a strong, international binding agreement can adequately respond to a new global context where government-fuelled, carbon-intensive excess capacity has reached 600 million tonnes, urges the European Steel Association.
“We expect to have an interim agreement to be announced by Commission President Ursula von der Leyen and US President Joe Biden, outlining an ambitious framework that will provide clear guidance and include the substantive elements of the Global Arrangement on Sustainable Steel and Aluminium (GASSA). The details will need to be worked out in the coming months”, said Axel Eggert, Director General of the European Steel Association (EUROFER). “The GASSA should be an international agreement binding transatlantic partners with a common vision while also remaining open to other like-minded countries with closely aligned trade policies and measures. Individual actions taken in isolation cannot have a global impact on excess capacity and decarbonisation”, he added.
Recently, the OECD expressed grave concerns about the deterioration of the global steel market, where excess capacity has now surpassed 600 million tonnes – more than the total OECD steel capacity. This excess capacity is mainly found in Asia, the Middle East and North Africa. Furthermore, new non-market capacity expansions are primarily focused on very carbon-intensive, traditional coal-based furnaces. Another 150 million tonnes of steel capacity are set to become operational by 2026, while global steel demand is expected to remain weak. “This new capacity alone, locking-in CO2 emissions for decades, will result in more CO2 emissions than the entire EU steel industry combined, erasing all of the EU steel industry’s emission reduction efforts up to 2050 in just three years”, stressed Mr. Eggert.
Today, the global steel industry is responsible for over 10% of global CO2 emissions, to which EU steel production contributes only a fraction (6% of total global steel emissions). If the global steel industry and other large industrial emitters are not decarbonised by 2050, the UN climate target of staying below a 1.5 or even 2-degree Celsius increase will not be achieved.
“The GASSA is a unique – and perhaps the only – opportunity to reach substantial emission reductions in the global steel industry”, emphasised Mr. Eggert. “The EU steel industry is currently in the most vulnerable situation, having lost around 30 million tonnes of sales in the EU and foreign markets over the past decade. We need an effective GSSA to transition towards carbon neutrality and support the EU’s strategic autonomy objective in a sustainable manner. Traditional trade instruments are fit for purpose, but their purpose is not to address global non-market excess capacity, while the Carbon Border Adjustment Mechanism (CBMA) has still to prove its effectiveness to level the playing field”, he concluded.
Source: eurofer.eu
NLMK Belgium requests sanctions suspension on Russian slab in exchange for green investments
- Proposed EAF to become NLMK’s second in Europe
- Work underway to turn Verona into low-carbon mill
NBH, jointly owned by Russia’s NLMK and Belgian government-affiliated investment fund Wallonie Entreprendre, has asked the European Commission to prolong for four years an exemption from EU sanctions that are in place for the import of NLMK’s Russia-made slabs. The respective quota is set to expire just under a year from now on Sept. 30, 2024.
NBH is considering to invest NLMK’s revenue from these slab supplies to captive European rerollers in a steelmaking decarbonization project — construction of an EAF that would become the second within the NLMK group in Europe.
An NLMK spokesperson did not respond to a request for comment.
The EU suspended buying most Russian ferrous metals as part of sanctions against the country for its invasion of Ukraine, but the eighth sanctions package introduced sanctions-deferring quotas for the imports of 7.5 million mt of Russian slab and just over 570,000 mt of billet from October 2022 through the end of September 2024.
NLMK supplies the majority of its Novolipetsk-made merchant slabs to NBH mills under a quota averaging 312,000 mt/month, which effectively makes up the whole of the Russian slab quota.
“NLMK filed a request for quota prolongation due to limited slab availability [in Europe],” a German distributor said.
Feedstock shipments from Black Sea to the EU had dropped due to the combined effects of sanctions and the Russia-Ukraine war in February 2022, and European rerollers producing heavy plate were forced to buy slab from as far away as Asia to replace material that had traditionally been delivered from Ukraine and Russia.
Slab volumes coming from Asia, Brazil and other alternative origins would not be sufficient to saturate the EU market after the Russian quota expires and NLMK stops exports from October 2024, several market participants said.
NLMK Belgium Holdings is now requesting a prolongation until fourth-quarter 2028, according to the source, with the revenue that NLMK accumulates for these supplies to be potentially invested in a new EAF for green steel production, although no further details were available at this stage.
NBH is already working to refit the existing EAF at its ingot and plate plant NLMK Verona in Italy with a view of obtaining low-carbon steel.
NLMK Verona’s full capacity allows for the production of 350,000 mt/year of crude steel and 450,000 mt/year of finished products, but its real output before the war, when NLMK published operational updates, used to be half that much — 175,000 mt/year of salable products, including special steel plate for medical and energy equipment.
Last month, NLMK finalized the sale of its Russian long-rolled steel mills to Industrial Metallurgical Holding. The sold business unit comprises EAF mini-mills in Kaluga, near Moscow, and in the Urals and is capable of making up to 3.7 million mt/year of crude and 3 million mt/year of rolled steel products. The proceeds, although undisclosed, could enable NLMK to consider investments of scale elsewhere.
Author Katya Bouckley, katya.bouckley@
European HRC prices decrease on day amid steelmaker needs to fill orderbooks
- Import offers noncompetitive
- European distributors attempt to destock at low prices
Platts assessed domestic prices for hot-rolled coil in South Europe down by Eur10 on the day at Eur585/mt ex-works Italy on Oct. 11.
Deals have been reported at Eur590-595/mt delivered Italy, the equivalent of Eur580-590/mt ex-works Italy.
“[The mill] needed to fill order books for this year and they accepted lower prices,” a trader said. “This is their regular tactic in bearish market, particularly when demand is low.”
Other suppliers in Italy have not accepted lower prices, but they have also been reported to have no volumes to sell.
Interest in the imported coil has been low, as the prices have been uncompetitive compared with domestic prices, taking into the account additional costs. In addition, lead times for imported coil have been significantly longer then for the material from European mills.
As a result, Europe-based buyers have been switching from overseas material to domestic HRC.
Platts assessed imported prices for hot-rolled coil in South Europe down Eur10 on the day at Eur590/mt CIF Italy on Oct. 11, reflecting offers for coil originating from Asia heard at Eur580-600/mt CIF Italy.
Demand has remained low due to both reduced steel consumption from end users and sufficient stocks of distributors. Several sources said that mills have been competing with low offers of HRC from distributors’ stocks due to restocking by the year end.
Platts assessed domestic prices for hot-rolled coil in Northwest Europe unchanged on the day at Eur610/mt ex-works Ruhr on Oct. 11.
Deals have been heard at around Eur610/mt ex-works Ruhr and tradable values at Eur600-630/mt ex-works Ruhr.
Platts is part of S&P Global Commodity Insights.
Author Maria Tanatar, maria.tanatar@
Lower electricity grid charge compensation disappoints UK Steel
UK Steel says it is disappointing the disparity between UK and French and German electricity prices will remain after the UK government confirmed a 60% compensation for industry from electricity grid network charges. However, it adds the move is a step to addressing higher electricity prices that hamper UK steelmakers’ competitiveness and ability to attract investment to decarbonise.
The UK government published its Network Charging Compensation (NCC) scheme on Wednesday following a consultation with industry on network charges. This is part of its British Industrial Supercharger programme announced in February. The consultation received 29 responses from stakeholders, including energy-intensive industries (EII) companies, business representative organisations, trade associations, energy suppliers and others.
The government had initially been consulting on compensation of up to 90%, the level provided by other European governments.
“The government notes that a number of EIIs recommended over 80 to 90% in compensation, citing international comparisons. However, the government’s view is that the 60% compensation offered will ensure that eligible EIIs will receive an average electricity price reduction of £24 to £31/MWh once all the measures in the Supercharge are implemented. This level of reduction will bring industrial electricity prices down to an internationally competitive level,” a UK government note says.
“There is a shared ambition between the Government and industry for the British steel sector to transition to net zero, clearly demonstrated by the recent steel sector investment announcement from the Government,” UK Steel director general Gareth Stace says in a note sent to Kallanish.
“While it is clearly disappointing that a disparity in electricity prices will remain after partially compensating the steel industry for its network charges, we look forward to working with Government to address this and deliver competitive industrial power prices,” he adds.
The government now intends to legislate with a Statutory Instrument in spring 2024 to enable changes to be made to calculations and for savings to start to materialise from April 2024. The EII NCC Scheme and EII Support Levy are scheduled to commence in 2025.
Adam Smith Poland
Coil market needs production curbs: Italian buyers
Italian service centres’ customers are registering a significant slowdown in demand for their products, which is impacting the entire value chain amid continued stagnation.
Several countries, including Germany, and industrial downstream sectors such as white goods, agriculture and construction are registering low demand, even below pre-pandemic levels.
Coil buyers remain on the fence, as does the entire value chain, Kallanish learns from market participants. EU safeguard quotas and long lead times make imports from Asian sources unattractive. This is however doing nothing to balance supply with demand. “The only thing that may shake the market is if European producers cut output significantly. At one point, we will have import offers for January boarding and if production cuts happen in Europe, a shortage may stimulate buyers to purchase a little more than one truckload,” a source comments.
ArcelorMittal is rumoured to have decided to idle one blast furnace out of two in Fos-sur-Mer. Contacted by Kallanish, the company declined to comment. If implemented, the shutdown would add to the maintenance stoppages at ArcelorMittal Hamburg and Bremen, and help the market to address the current issue of overcapacity.
Other European producers are also mulling production stoppages, but Italian steelmakers are instead said to be slowing production, with no outright stoppages scheduled for the moment.
In Italy, domestic hot rolled coil values are stable on-week, hovering at €610-620/tonne ($647-657) base delivered for November lead times, sources suggest. All European producers are quoting very short lead times.
The situation is similar for cold rolled coil or hot-dipped galvanised coil. CRC is said to be at €720-730/t, with import offers from Asia at €670/t cfr Italy and domestic demand very weak. Domestic HDG values are also flat so far at €750/t base ex-works on average.
Natalia Capra France
LME Week green steel panel: 5 key questions answered by experts
To comply with an eventual 2050 target of net zero emissions, European steelmakers have been heavily investing in the decarbonization of their operations and are starting to produce steel using methods that reduce carbon dioxide emissions.
Fastmarkets has launched four green steel prices in 2023 to assess the price differential against traditional flat steel prices, create transparency for the industry and support investment decisions needed to reduce emissions.
MB-STE-0904 Green steel domestic, flat-rolled, differential to HRC index, exw Northern Europe, €/tonne
MB-STE-0905 Green steel base price, HRC exw Northern Europe, daily inferred, €/tonne
MB-STE-0907 Green steel import, differential to HRC index, cfr Vietnam, $/tonne
MB-STE-0908 Green steel base price, hot-rolled coil cfr Vietnam, weekly inferred, $/tonne
Fastmarkets talked to three green steel experts in Europe, highlighting the major priorities and challenges for this evolving market.
The panelists are:
Jaap-Jan Aardenburg, distribution marketing manager at Tata Steel in Europe
Stephan Flapper, head of sales, marketing and outbound logistics at H2 Green Steel, Sweden
Erik van Doezum, ING global steel lead and head of metals, mining & fertilizers, Germany
How critical an incentive is transparent premiums for green steel as mills invest in greener technology?
Stephan Flapper: It’s important to be able to claim a premium as the investment in electrolysis, direct reduction and electrification of steel plants are significant. The premium should be tied to the emissions as we still see a fair amount of players claiming green even though they are using substantial volumes of fossil energy such as natural gas in their processes. What we hope though is that our case can act as the first real proof point for the commercial viability of green basic materials production, and it’s based on a green premium and early offtake agreements. The approach that we have taken to working with both investors and lenders is something we truly hope can be a precedent setting for others and that our project finance package, green premium and equity round will inspire many more projects across hard-to-abate industries, both investors, established companies and green field startups.
Erik van Doezum: Premiums are important for green steel producers to overcome higher costs. Obviously, transparency for that will simplify matters for both buyers and sellers. However, this is a very nascent market with no “real” green steel being available yet on the market. As such, price finding will differ in every situation and creating a benchmark is arguably too early. However, I do not think this will hold back the development of green steel projects. There are plenty of projects out there that see great opportunities in the green steel market even without transparent premiums.
Jaap-Jan Aardenburg: There will be premiums, of course, which will be based on the actual needs of CO2 reduction of the customer and this will differ of course per product.
Many OEMs feel little pressure to buy green and they deem current premiums too high. What factors will fuel the demand for green steel in the upcoming years?
EVD: I am not sure I agree with this statement. Arguably, currently there is one advanced greenfield green steel project out there (H2G Green Steel), and they have announced offtake contracts for the supply of green steel. As such, I do not think we can make the statement that demand is not there. With companies beyond automotive also making ambitious statements with regards to reaching net zero and intending to partner up with their suppliers this demand will only increase. As simple economics here drives the pricing discussion, I can imagine that many companies are playing coy as to what they are willing to pay. However, it is my strong conviction that in reality green steel supply will run behind demand for the next 10 years, and as such premium price setting power will be held by the suppliers.
JJA: We do not agree with that [statement in the question]; there is an absolute realism that green steel requires a premium. OEMs, including their model, are multi-year projects requiring long-term planning, but the demand is there, the planning is there, not yet large volumes required.
SF: What we see is actually that demand is already high. We have already pre-sold close to half of our initial volumes in 5 to 7-year binding agreements with customers. The demand is driven by companies that have high sustainability focus and most of them have signed up for Paris Climate Agreement-aligned Science Based Targets. They are in many cases already compensating for their carbon emissions, and think it makes more sense to pay and then get the green product, rather than to pay to offset emissions. Naturally the phase out of the free allowances to the incumbent steel industry will also fuel the demand for green steel.
How do you see green steel production evolving across global regions in the next five years? Which regions/countries will be notable?
JJA: Europe is with its fit for 55 [EU commitment to reduce new greenhouse gas emissions by at least 55% by 2030] in the lead, but we should not forget the developments in both China and North America. Local legislation (stimulating demand and supporting conversion) rules will play a driving role. But transforming steel production is a multi-year journey [requiring] investments, technology and capacity.
SF: Green steel production will likely center around the areas in the world where there is plentiful access to renewable electricity. Or at least the production of green HBI [hot-briquetted iron] will. We see that the Iberian Peninsula, Brazil, Canada and parts of the US are interesting and we are already looking into projects there. The European steel industry seems to be the frontrunner to invest in green steel technology, but the availability of green hydrogen at low cost in Europe is limited. We therefore expect that more investments will be planned to produce green hydrogen and green HBI in other parts of the world.
EVD: Green steel is changing the paradigm of steelmaking. Previously access to iron ore and coking coal was key. If we believe that hydrogen-based reduction is the key solution until we have figured out direct electrolysis (as I do), steel companies will need access to renewable electricity (or its derivative, hydrogen) and high-grade iron ore in order to be competitive in this market. As such, places that have cheap renewable electricity will be at an advantage, at least when it comes to the reduction of iron. Therefore, I expect significant iron production to move to places like Northern Europe, Southern Europe and the Middle East and North Africa regions. Steel companies in Europe, Korea and Japan will have to make difficult strategic choices about where to produce iron going forward.
To be commercially viable, green steel needs a sufficient supply of green hydrogen and renewable energy at competitive prices. What is required to accelerate widespread adoption of green hydrogen for steelmaking in Europe?
SF: Europe needs to build out its production of fossil-free electricity. However, the volumes needed for large-scale electrolysis to produce the green hydrogen are significant. Therefore, it makes sense to place the most energy-intensive operations close to where the electricity is available and can be built out. A build out of production of green HBI could then feed rebuilt steel mills where the blast furnaces are removed in favor of electric arc furnaces.
EVD: The answer is simple, abundant and therefore cheap renewable electricity! However, obviously that is not simple at all. Even if European governments would be able to over the next decade or so install sufficient renewable electricity to decarbonize the steel sector, this would not solve the problem as our economies will experience a general stark increase in electricity demand. For electricity there will be several choices to be made. For instance between hydrogen production and developing EV charging networks. And even if we choose that hydrogen should be the priority, do we then prioritize iron production over fertilizers? These are not easy questions and what we really need is clear choices by politicians about what our strategic objectives really are. Subsequently, these need to be translated to clear and effective policies that can drive economic and strategic choices by companies and consumers. Unfortunately, at this juncture it seems we are still quite far removed from such a state.
JJA: Very clear availability of green electricity, both in generation and network to produce green hydrogen. The good thing, when we speak about DRI [direct-reduced iron] production, this can be fueled with natural gas as well, or in mix with hydrogen already saving substantial amount of carbon
What kind of leadership is needed to grow green steel production and drive consumption, and where will it come from?
EVD: Economics will drive the growth in green steel production. As mentioned, I believe the example set by H2GS shows that there is already demand for green steel. This will only increase going forward as steel buyers set more ambitious decarbonization targets. Governments can support demand as well by requiring green steel to be used in government procurement projects. I am quite convinced that one or two companies being successful at producing and marketing green steel will create a snowball effect in the industry. There are several regions where the production of green steel should be economically viable. In other places, as mentioned above as well, governments also will have to decide on what their priorities are and set policies accordingly.
JJA: The will to change entrepreneurship to take responsibility for the future and [e-framework], not letting yourself be distracted too much from short term disruptions.
SF: The industry transformation to green steel is a huge opportunity for the steel industry. By using near-zero [emission] steel, producers can reduce the footprint of their products substantially and this goes not only for automotive, but it is also valid for construction products, domestic appliances and many, many other products. Green steel also becomes more competitive compared to other materials from a footprint point of view. The technology is available and the great advantage that steel has is that the whole supply chain, design, processing and tools used are not different for green steel to brown steel. The risk of changing to green steel therefore is very low, as long as you have access to green steel. We need leadership in the steel industry that drives change by explaining the benefits of near-zero steel to end manufacturers, rather than to point to future costs of brown steel. Leaders that show the opportunity how near-zero steel can help product manufacturers to reduce the footprint of their products and increase their value towards its customers. Leaders that engage with their customers, understanding their markets and their customers’ customers and help educate and explain the benefits of using near-zero steel to the end markets.
Published by: Julia Bolotova, Janie Davies
Soft landing likelihood increases, fragmentation threatens commodities: IMF
Global economic growth is forecast to slow to 3% this year and 2.9% in 2024, a 0.1 percentage point downgrade for 2024 from July projections, says the International Monetary Fund (IMF), Kallanish notes.
The likelihood of a “soft landing” has increased, in other words, the bringing down of inflation without a major downturn in activity, especially in the US.
The US surprised on the upside, with resilient consumption and investment, while euro area activity was revised downward. Many emerging market economies proved quite resilient and surprised on the upside, with the notable exception of China, facing growing headwinds from its real estate crisis and weakening confidence, the IMF says in its October World Economic Outlook.
The resolution of the US debt ceiling standoff in early June and the containment of banking sector risks in March have decreased severe downside risks. However, downside risks now stem mainly from China’s growth slowdown due to the stress in the real estate sector. “Also on the downside, commodity prices could become more volatile again amid climate and geopolitical shocks financial markets could re-price if greater inflation persists,” says IMF chief economist Pierre-Olivier Gourinchas.
The WEO report points to the need for countries to push back against divisive forces leading to geoeconomic fragmentation – or the move towards building exclusive trading blocs by putting up barriers to trade and cooperation.
Commodity markets are particularly vulnerable in the event of fragmentation, which has accelerated since Russia’s invasion of Ukraine. Commodity production is often highly concentrated because of natural endowments, and many commodities are difficult to substitute in the short term. Further fragmentation of commodity markets – which had been on the rise even before the war in Ukraine – could cause large price changes and more price volatility, the IMF observes.
“The fragmentation of mineral markets could also make the clean energy transition more costly and lead to lower-than-needed investment in renewable energy and electric vehicles,” the report states. “Taken together, the findings present yet another argument for multilateral cooperation on trade policies. At the very least, agreements on a ‘green corridor’ for critical minerals … would safeguard the global [goal] of averting climate change.”
Adam Smith Poland