Category: Latest Updates

German rebar suppliers to the construction industry are acting more and more desperately to maintain their high utilisation levels, at the cost of unprofitable prices.

“Distributors and benders everywhere are in panic about losing business,” one observer, himself a manager of a bender company, tells Kallanish. “They have become used to the high level of work in recent years; they cannot imagine working at normal utilisation without extra hours,” he says. “I find this a very troublesome development.”

His view is shared by a large distributor, who notes that sales to customers are being signed without covering the intake costs. “You hear offers of €1,000/tonne [$999], cut and bent, for fear of not securing an order if you ask for more,” he observes.

This stands against intake prices for rebar of €1,000-1,050/t, at which domestic mills sold throughout the summer. The discrepancy has been aggravated by the most recent, sudden price dip at mills, bringing delivered prices down to €865/t, comprising a base price of €600 plus the size extra of €265.

Business might still work best in rural areas, “but not in the metropolitan areas, where competition for projects is running really hot,” one manager notes (see separate construction story).

Christian Koehl Germany

Automakers Geely Holding Group and Renault Group are to form a 50-50 joint venture company to develop, manufacture and supply hybrid and internal combustion engine powertrains globally.

The new entity will be a standalone global supplier of propulsion system solutions, producing hybrid propulsion systems and developing carbon free and low-emission technologies from five global research and development centers, the automakers said Nov. 8.

The JV company is planned to have 17 powertrain plants globally with a combined capacity of more than 5 million/year of internal combustion, hybrid and plug-in hybrid engines and transmissions, allowing it to offer solutions for 80% of the global ICE market, they said.

The new company was expected to represent revenues of Eur15 billion ($15 billion) globally from its onset, Renault said at its Capital Market Day in Paris.

Besides Renault and Geely, the new JV company was expected to supply customers including Dacia, Lynk & Co, Mitsubishi Motors, Nissan, Proton and Volvo Cars, Geely and Renault said, adding the JV could also possibly offer powertrain technologies to third-party car brands in the future.

“As Renault Group accelerates with its Renaulution transformation to capture value on the entire new automotive value chain, we are pleased to have agreed plans for an ambitious partnership with Geely to keep developing the ICE and hybrid engine technologies that will remain a critical part of the automotive supply chain for decades to come,” Renault Group CEO Luca de Meo said.

“Today’s agreement with Renault Group will enable the creation of a global leader in hybrid technologies to provide highly efficient advanced solutions for automakers around the world,” Geely Holding Group Chairman Eric Li said.

At its Capital Market Day, Renault also said it planned to expand its Alpine brand globally, it planned to launch light commercial vehicles in partnership with an unnamed OEM and that it had accelerated or extended its partnerships with technology companies Google and Qualcomm Technologies to develop a software-defined vehicle.

Geely buys Volvo’s 33% stake in Aurobay

Separately, Geely has bought Volvo Cars’ 33% holding in Swedish powertrain engineering company Aurobay, which was carved out as a stand-alone business in 2021, Volvo said Nov. 8.

It did not provide financial details on the transaction but said the proceeds would be used for Volvo to become a fully electric company, including its new electric motor production line in Skovde, Sweden. The deal was expected to close before the end of 2022, subject to regulatory approvals.

Volvo’s divestment of the holding allowed it to fully exit its participation in the development and manufacturing of ICE vehicles and was part of its transformation into a fully electric vehicle manufacturer, it said.

However, Aurobay would remain a strategic partner to Volvo and the sole provider of hybrids and mild-hybrid powertrains during its transition to fully electric production by 2030.

“As we continue to execute on our strategy, transactions like this will be an important supplement to our investments and partnerships for the future,” Volvo Cars CFO Johan Ekdahl said.

The auto market is a major consumer of steel, with Platts, part of S&P Global Commodity Insights, assessing domestic HRC prices in Northern Europe at Eur650/mt ex-works Ruhr Nov. 7, down 29.5% since the start of 2022.

— Jacqueline Holman

Low global long steel demand is not expected to improve in the coming months, making operating under current conditions unsustainable, with more steel mill closures possible, the International Rebar Producers & Exporters Association said in its latest short-term outlook released Nov. 7.

Energy cost uncertainty and demand destruction had led to order cancellations, Irepas said, adding that demand for ferrous materials had slowed down considerably as industrial outlooks lost visibility.

“Customers are delaying purchase decisions while Chinese traders are shorting the market,” Irepas said, adding that mills were in trouble and even those in Asia were “entering the red zone.”

Prices were under pressure from aggressive Far East and Southeast Asian mills, Irepas said, adding that Gulf Cooperation Council countries were also offering low prices, making it impossible for Turkish producers to compete in the long products market.

“The Turkish market has become a battlefield for some exporting countries like Russia, India and China for some other products,” it said.

In China, iron ore prices had fallen to two-year lows amid renewed fears of more COVID lockdowns, Irepas said.

Platts, part of S&P Global Commodity Insights, assessed the 62% Fe Iron Ore Index at $87.95/dry mt CFR North China on Nov. 7, down 26% since the start of 2022.

The US and the EU markets were protected and not part of the competition in the global market, Irepas said, making competition high elsewhere, particularly in the Middle Eastern and Far Eastern markets, while freight rates were the only factor limiting competition in faraway markets.

“Freight rates are becoming more predictable, which may be considered as good news for the market,” Irepas said, adding logistic costs were slowly moving towards “normal” but were still at high levels.

Irepas described the current situation in the global long products market as unstable, with more negative news coming from the Russia-Ukraine war making outlook for the first quarter of 2023 also unstable and negative.

“The January-March period may be worse than the height of the pandemic, driven by lower prices in Asia and continuing impacts from the ongoing war in Ukraine,” Irepas said.

— Cenk Can

The European hot-rolled coil market remained quiet on Friday November 4 with minimal trading activity reported because destocking among buyers was still not accomplished, Fastmarkets has heard.

Fastmarkets calculated its daily steel HRC index, domestic, ex-works Northern Europ, at €647.50 ($632.99) per tonne on November 4, up by €1.25 per tonne from €646.25 per tonne the previous day.

The latest calculation of the index was down by €12.25 per tonne week on week and down by €100.00 per tonne month on month.
Traded volumes remained low in the region, with distributors and steel service centers still being more focused on selling their expensive stocks of HRC, rather than purchasing new volumes.

Producers’ estimates of achievable prices were closer to €650 per tonne exw in the region, while buyers gave lower indications at €630-650 per tonne exw.

“It is hard to say what the price is when no trading is going on,” a steel mill source in the region told Fastmarkets.

In the face of challenging market fundamentals, ArcelorMittal has announced one more blast-furnace stoppage, at Fos-sur-Mer in France, Fastmarkets reported.

At the same time, several trading sources reported that the producer was purchasing steel slab from Brazil and other areas to keep its hot-rolling mills working.

Market sources agreed that more steelmaking output cuts in Europe were needed to balance supply and demand.

Fastmarkets’ calculation of its daily steel HRC index, domestic, exw Italy was €665.00 per tonne on Friday, up by €5 per tonne from €660.00 per tonne on Thursday.

The latest calculation of the Italian index was down by €12.00 per tonne week on week and down by €83.75 per tonne month on month.

Italy’s HRC market was more balanced, sources said, because the production cuts there had been more substantial than in Northern Europe.

“For the first time in years, we have a situation in which Italy’s HRC is traded at a premium compared with the Northern European market. We clearly can see the effects of the steelmaking reductions in Italy,” a source at a steel service center in Italy said.

Offer prices from Italy’s integrated mills were reported at €670-700 per tonne exw, while re-rollers’ offers were at similar levels of €660-680 per tonne exw.

Italian producers were reluctant to give discounts, citing reduced volumes and “biting” costs.

Trading activity in Italy’s market was also quiet. Buyers were still holding back, with the overstocking problem persisting.

Cheap import offers were also adding pressure on the domestic price.

Notably, HRC offers from Japan for January shipment were reported at €600 per tonne CFR.

Offers from other suppliers in Southeast Asia were reported at a similar level of €600-610 per tonne CFR.

“China has been really aggressive recently,” a trading source in Italy told Fastmarkets, “so suppliers from Southeast Asia are trying to increase their presence in the European market.”

– Julia Bolotova

German steel producers and traders expect prices to soften over November amid weak demand and weak energy costs, according to data from S&P Global Commodity Insights’ monthly steel sentiment survey.

In the survey, market participants were overall bearish on pricing over the month, with the November index at around 35 points, down from approximately 41 points in October.

Traders and stockholders seemed more bearish regarding the near-term price trends with an index at 30 points compared to the index of 40 points in October, while the index for producers stood at about 40 points for November, compared to approximately 42 points in October.

“I think the mills had a really good start of the year and they figured out that even with current low prices and weak demand it would be better to fill production lines even if they cut prices further,” one flat steel distributor source said.

Platts, part of S&P Global, assessed TSI North European hot-rolled coil flat on the day at Eur650/mt ex-works Ruhr Nov. 3.

“Prices will be more stable in November,” one European long steel producer said. “It might be too early to expect prices to start moving up. We just want to see some positive sentiment from the customers, but I don’t think that we as a producer will be able to lower prices soon.”

“But we are hoping for a stability in energy prices. As you know, there has been a lot of correction in energy levels and they had been moving down because of all the interventions from the [European] governments, so I am hoping that trends will stabilize,” the source said.

Platts assessment of TSI Northwest Europe rebar dropped Eur10/mt to Eur850/mt ex-works Nov. 2. Platts assessment of European medium sections price (category 1, S235 JR) was flat Nov. 2 at Eur1,250/mt delivered.

Market participants expected production levels to be stable as European mills continued to operate at low capacity.

The index for production outlook stood at around 45 points for November, compared with approximately 28 points in October, indicating that production levels were expected to be stable without any indications for a significant increase in mills’ operating capacity. With 50 points on the index indicating a stable trend, the production outlook for trading sources stood at around 40 points, compared with 35 points for October. The index for producers’ sentiment stood at 50 points for the month, compared with approximately 21 points in October, indicating producers expected the current level of production capacity to be stable in the near term.

The long steel producer expected production levels to be stable at lower capacities as mills continued to try to operate at low energy timings, he told S&P Global.

Inventory expected to soften

The overall index for German inventory sentiment stood at approximately 33 points, compared with around 43 points in October. Some producers expected a dip in inventory levels during the month, deviating from traders’ flat expectations, according to the survey.

The index for steel producers for November stood at around 30 points, compared with 50 points in October. Traders’ expectations were unchanged with the index stable month on month at 35 points.

“I think most restocking activity in November is over, so I am not expecting much change in inventory levels,” the long steel producer said, noting that, according to market reports, stockholders were currently reporting inventories worth two month’s levels.

— Rabia Arif, Benjamin Steven

Domestic prices for heavy plate were under pressure from low demand in the week to Nov. 4, while Italian rerollers accepted lower prices and German mills held offers stable.

Platts assessed Italian heavy plate down Eur25/mt week on week at Eur875/mt ex-works Italy.

Tradable value has been reported at Eur850-900/mt ex-works, and bids have been heard at Eur850/mt ex-works.

Distributors have shown little interest in heavy plate purchases due to sufficient inventories and traditional destocking by the end of the year. Some sources said buyers have started to show interest in material that would be delivered in January-February 2023.

“Demand for plate is low as stockholders have enough material, but the situation is not too bad,” an Italian reroller said. “There are some inquiries for first-quarter delivery.”

Slab prices, in the meantime, have also moved down due to lower offers from Asia.

Offers of the semifinished products from China have been heard at $560-$590/mt CIF Italy and from Indonesia at $580/mt CIF Italy. Unconfirmed offers from Indonesia have also been reported at $540/mt CIF Italy.

A supplier from Iran has also been offering slab at $540/mt CIF Italy. Interest in the material has been limited despite the low price.

Platts assessed import slab into the benchmark Italian market at $575/mt CIF Nov. 4, down by $25/mt week on week.

In Northern Europe, German mills have been holding from trading in spot market and preferred to focus on long-term contracts and projects.

Platts assessed heavy plate in Northern Europe stable week on week at Eur1,000/mt ex-works Ruhr, reflecting achievable prices and offers.

A Scandinavian reroller continued to give competitive offers — of about Eur930-940/mt delivered Germany for s355jr plate. Some buyers, however, have been avoiding the material as Russian slabs have been used as feedstock.

Platts is part of S&P Global Commodity Insights.

— Maria Tanatar, Benjamin Steven

Domestic prices for hot-rolled coil were fairly stable Nov. 4 across Europe as trading activity remained limited.

Platts assessed hot-rolled coil in Northwest Europe stable day on day at Eur650/mt ex-works Ruhr Nov. 4.

Two mill sources reported offers at Eur650-660/mt ex-works Ruhr. Another producer estimated tradable value at Eur650/mt ex-works Ruhr.

A service distributor reported offers at Eur650/mt ex-works Ruhr. And a trader source reported achievable prices at a similar level.

A majority of Northern European steelmakers were reported to offer HRC with delivery time from four to six weeks, indicating that they have not filled order books for this year.

Demand has remained weak as distributors have been struggling to reduce high inventories. Demand from end consumers, in the meantime, have also been reduced, according to market sources.

“End-users are functioning, at slower pace, but they are alive,” an Italian source said. “The problem is stocks. We will not see any activity until stocks decrease. And it takes time. Big mills should have cut capacities during summer, but they didn’t, so we need to wait longer.”

On Nov. 4, ArcelorMittal said it planned to temporarily shut one of its two 2 million mt/year blast furnaces at the Fos-sur-Mer plant in France.

Platts assessed domestic HRC in Italy at Eur650/mt ex-works Nov. 4, down Eur5/mt day on day.

The assessment was based on tradable values reported at Eur650/mt ex-works Italy.

— Maria Tanatar, Benjamin Steven

European seamless steel tube producer Tenaris expects higher shipments in the fourth quarter, driven by pipeline projects and additional pricing gains that will also increase sales.

Overall, the company was advancing pipeline activity to support oil and gas developments, mainly in Argentina and the Middle East, Tenaris said in its Q3 earnings report.

Drilling activity had increased in 2022, with further increases forecast, it said, particularly in the Middle East and offshore with global demand for oil country tubular goods (OCTG) expected to surpass pre-COVID levels in 2023.

“In an environment of high geopolitical and macro-economic risk, global economic growth is slowing, and energy prices have come off their recent highs,” the company said.

“Conditions in the energy industry, however, remain supportive for an increased level of investment, with low levels of spare capacity and inventories, uncertainty about the impact of further sanctions on Russian exports and a renewed focus on energy security around the world.”

Q3 tube shipments fell 4% quarter on quarter but rose 15% year on year to 856,000 mt. Of these, shipments of seamless tubes, the core business of the company, dropped 8% quarter on quarter, but were up 11% on the year to 750,000 mt.

Q3 welded tubes shipments rose 41% quarter on quarter and climbed 49% year on year to 106,000 mt.

Tube net sales rise

In Q3, total tubes net sales increased 8% quarter on quarter to $2.83 billion, which was also up 76% year on year, as pricing gains more than compensated lower quarter-on-quarter shipments, which were affected by lower deliveries to pipeline projects and seasonal factors.

North and South American sales increased 11% and 30%, respectively, quarter on quarter to $1.76 billion and $600 million, while sales fell in other countries compared to Q2.

In North America, sales increased thanks to higher OCTG prices throughout the region and higher OCTG shipments in Canada, while in South America, Tenaris said there were higher OCTG sales to offshore projects in Guyana and higher sales for pipelines in Argentina.

In Europe, however, sales declined 27% from Q2 to $190 million due to lower sales for offshore line pipe projects and of industrial products, the company said.

In the Middle East and Africa, sales dropped 10% on the quarter to $234 million on lower sales in Saudi Arabia and lower sales of high alloy products in the UAE, while sales in Asia Pacific fell 31% to $46 million due to the discontinuation of sales from NKKTubes in Japan and lower sales in China.

To produce seamless tubes, Tenaris uses iron ore as its main raw material.

Platts, part of S&P Global Commodity Insights, assessed the 62% Fe Iron Ore Index at $95.95/dmt CFR North China at the end of Q3, up from $116.45/dmt at the start of the quarter.

Platts assessed the 62% Fe Iron Ore Index at $83.75/dmt CFR North China Nov. 3, up 29.9% since the start of 2022.

— Annalisa Villa

Due to its international diversification in Europe and the USA, steel distribution group Klöckner & Co is more optimistic about its business than many other German or European steel companies these days.

“In our customer sectors, we see some normal softening of activity, but not a curve of recession,” ceo Guido Kerkhoff said during a telephone conference when presenting third-quarter results. “The call-offs are going fine, as far as we see.”

He noted that the outlook for 2023 is overshadowed by insecurity, especially for the company’s home country of Germany. Klöckner is more optimistic about business in the USA and even Switzerland, which together account for 60% of its sales volume.

“The price deterioration in the USA arrives in our books with a delay because we have a lot of contract business there,” Kerkhoff explained.

Despite the free-fall of spot prices in the third quarter, revenue was still 16% up year-on-year, to €2.37 billion ($2.35 billion), while volumes fell by only 3.5%, to 1.15 million tonnes. As the company reported earlier (see Kallanish 12 October), its Ebitda was massively lower y-on-y, from €277m to €16m, due to an inventory write-down. As a reaction to the significant steel price deterioration, it actively enforced an inventory correction to mitigate risk exposure, Klöckner stated.

Digital sales, which the group has been cultivating for the last three years, were slightly down y-on-y to 43%, following a pandemic-related boost seen in 2020/21. Also, Klöckner’s product mix lately leaned in favour of processing services, especially in the USA. Apart from those factors, “digital sales are in no way stagnating, let alone falling back,” Kerkhoff said.

Christian Koehl Germany

A scrap export ban from the European Union to non-EU countries would strongly impact European companies in scrap collection and supply causing job losses, Italian trade association Assofermet says in a note sent to Kallanish. Environmental and authorisation issues would also arise, being linked to the progressive increase of unused scrap that would impose a limit on scrap production. It adds that lower-grade scrap collection requiring high processing costs would stop entirely.

The association’s comments add to concerns that have been recently voiced by other associations such as German BVSE and VDM regarding the importance of protecting free scrap trade between the European Union and outside countries.

Scrap within the Union is structurally redundant and in surplus compared to the market requirements of EU steelmakers and EU scrap consumption continues to be lower than collection, Assofermet notes.

From 2005, steel production in Europe has been steadily decreasing, falling from 182.3 million tonnes to 152.6m/t in 2021 with a low level of 132.2m/t registered in 2020 due to the global pandemic.

Last year, with the EU’s steel output standing at 152.6m/t, 87.9 m/t of ferrous scrap was remelted, and 19.5m/t was left unused. According to the global principles of the circular economy, the surplus must continue to be exported. From 2005 to date exports of ferrous scrap have increased by about 12m/t because production of crude steel in the EU has fallen by about 30 m/t. Also since 2005, scrap imports into the EU have been steadily decreasing, thanks to the abundance of scrap supply within the EU, Assofermet concludes.

Natalia Capra France