Category: Latest Updates

Moody’s outlook for the global metals and mining sector has turned negative, reflecting expectations that aggregate Ebitda will contract for the largest companies during the coming 12 months.

Steel prices remain above historical averages, but their recent plunge will significantly reduce steelmakers’ Ebitda and cash flow, the credit rating agency says.

Prices have softened due to supply-chain disruptions reducing global demand; Covid-related lockdowns and weaker residential construction reducing consumption in China; and inflationary cost pressures and higher interest rates weighing on sentiment and economic growth.

“Higher costs will likely keep prices above historical averages in some regions but may not keep profit margins at an elevated level. That is because producers are investing in ultra-low emissions upgrades and less-polluting production technologies, consuming more scrap and less-polluting metallics which could result in higher prices for these materials, and incurring increased carbon and higher energy costs,” Moody’s says in a report sent to Kallanish.

Significant capacity additions will also increase competition in the US and could lead to further price declines, it adds.

Iron ore producers’ Ebitda will meanwhile weaken with prices. Prices will remain in the lower half of Moody’s medium-term price sensitivity range of $80-125/tonne during the coming 12 months. Weakness in global steel production, particularly in China, and seasonally higher production volumes in Australia and Brazil will squeeze prices and, consequently, Ebitda for major iron ore producers, the agency observes.

In contrast to most base metals, iron ore inventories are increasing and premiums for higher quality iron ore are narrowing, an indication of surplus in the main markets.

“Metallurgical coal producers’ earnings, while also remaining elevated, will decline more than thermal producers’. That is because prices have already fallen materially from record levels as end-market demand weakens from the steel sector, particularly in China because of the country’s property-market slowdown,” Moody’s concludes.

Adam Smith Poland

Sweden’s H2 Green Steel said Sept. 23 that it has partnered with Greeniron H2 to achieve further emissions reduction and increased circularity in the former’s plant at Boden in Northern Sweden.

Greeniron H2 is a Swedish startup focused on cost efficient CO2-free reduction of metal oxides to pure metals. Its hydrogen-based CO2-reduction process will be used to recycle iron residuals and waste from H2 Green Steel’s operations.

Greeniron H2 will place its furnaces on H2 Green Steel’s site in Boden, where residuals such as oxidized scale and waste materials from the production will be collected and refined with green hydrogen through Greeniron H2’s patented process. Up to 150,000 mt of waste and residuals will be collected and recycled every year, and the output will comprise value metals that can be cycled back into the steelmaking process.

The agreement between the two aims to set a model steel plant for the future by addressing the circularity of iron materials.

H2 Green Steel is developing a green hydrogen powered steel plant in Boden, northern Sweden, which will have an initial production of 2.5 million mt/year from 2025, potentially increasing to 5 million mt/year by 2030.

— Ekaterina Bouckley

European domestic prices for hot-rolled coil remained stable on Sept. 23 due to limited trading activity caused by distributors’ high stocks and slow demand from end consumers.

In addition, high production costs have restricted steelmakers’ ability to give discounts.

Reduced production rates and some equipment stoppages implemented by European producers, including ArcelorMittal, Arvedi and Liberty Steel, have not been sufficient to balance reduced supply and demand. Market participants expected that more steelmakers would choose to stop equipment to support domestic prices.

“It is only a matter of time before we will see more capacity shutdowns, as demand is weak and it will take time before distributors manage to decrease their coil stocks,” a Northern Europe-based source said.

Meanwhile, a steelmaker said that, with each furnace stopped, supply and demand get closer to a balance.

“I think that mills will stop more meltshops and more producers will choose to temporarily idle rolling capacities,” the steelmaker said.

Platts assessed hot-rolled coil in Northwest Europe at Eur735/mt ex-works Ruhr on Sept. 23, unchanged day on day.

German mills have held prices for buyers within the country at Eur750-760/mt ex-works Ruhr minimum. However, some mills have been trading in other European countries at Eur700-730/mt ex-works Ruhr.

Such strategy allowed the mills to protect prices in Germany and also not to cause further drops in other countries. Taking into the account the delivery costs, the prices have been close to those available from local mills, sources said.

Platts assessed hot-rolled coil in southern Europe stable on day at Eur750/mt ex-works Italy Sept. 23. The assessment was based on offers and achievable prices heard at Eur740-780/mt ex-works Italy.

Platts assessed South European imported HRC at Eur710/mt CIF on Sept. 23, unchanged on the day.

The majority of the market sources reported offers for HRC from Asia and Turkey, including anti-dumping duties, at Eur700-730/mt CIF Italy. One source, however, said that Far East mills have reduced offers to Eur670-680/mt CIF Italy. The information has not been widely confirmed in the market.

Platts is part of S&P Global Commodity Insights.

— Maria Tanatar

Near-term scrap futures contracts on the London Metal Exchange saw gains over the week to Sept. 22, while weekly trading volumes decreased.

Platts, part of S&P Global Commodity Insights, assessed the September contract up $2.50/mt week on week at $360.50/mt, while the October contract jumped $14/mt to $361/mt. The November contract gained $8/mt to $360/mt, while the December contract rose $3.50/mt week on week to $358.50/mt.

The backwardation over the September-October portion of the curve shifted into a soft contango, suggesting some futures traders expect scrap prices to strengthen slightly in the physical market in the near term.

The October-December portion of the forward curve shifted into backwardation, suggesting expectations of slightly softening prices into the fourth quarter.

Spot prices for physical imports of premium heavy melting scrap 1/2 (80:20) increased $1/mt week on week to $350/mt CFR Turkey on Sept. 22, following a fresh Baltic-origin deal. Turkish mills were aiming for lower levels for scrap imports, while sellers sought higher prices.

Despite the relatively low volume of domestic finished steel sales and continued soft demand in Turkey, deepsea recyclers pushed for sharply higher CFR Turkey prices, amid anticipation of some Turkish mill restocking, and alternative bulk cargo demand to Asia and Latin America.

“All we can say with any amount of certitude is that the downtrend is most likely over, [but] we can’t yet predict a stronger market,” one EU recycler said.

Weekly LME scrap futures trading volumes over the week to Sept. 22 totaled 53,110 mt, down from 100,470 mt for the week ended Sept. 15.

Near-term rebar futures contracts also saw strong gains over the week to Sept. 22.

Platts assessed the September contract up $8/mt week on week at $669.50/mt, while the October contract jumped $24.50/mt to $670/mt. The November contract rose $14.50/mt to $661.50/mt, while the December contract increased $17/mt week on week to $660.50/mt.

The near-term backwardation over the September-October portion of the forward curve shifted into a soft contango, suggesting that futures traders expect prices in the physical market to remain firm in the near term.

The backwardation over the October-December portion of the forward curve strengthened, suggesting expectations of a downward price trend for rebar in the physical market into the fourth quarter, albeit still at elevated levels.

Turkish physical rebar export prices gained $5/mt week on week to $675/mt FOB on Sept. 22, as Turkish mills raised offers while scrap supply tightened. Sources also reported some small volume sales to Israel and Yemen.

Some domestic rebar sales were also heard, amid restocking prior to an expected weakening in the Turkish lira following the Turkish central bank’s decision to cut benchmark interest rates by 100 basis points to 12% on Sept. 22, despite inflation running at a 24-year high.

One Iskenderun mill source sold 2,000-3,000 mt at $700/mt ex-works Sept. 21. Sources also reported domestic rebar sales totaling around 40,000 mt at $685-$690/mt ex-works.

Rebar futures weekly trading volumes in the week on the London Metal Exchange totaled 25,460 mt, up from 16,470 mt in the week ending Sept. 15.

The daily outright spread between Turkish export rebar and import scrap was assessed at $325/mt Sept. 22, up $4/mt week on week.

Elsewhere, the LME Indian shredded scrap contract, which settles basis the Platts CFR Nhava Sheva shredded scrap assessment, traded 150 mt on week to Sept. 15. The contract has seen a total volume of 7,410 mt traded since its launch in late July 2021.

— Rabia Arif, Viral Shah

Tata Steel and Hardt Hyperloop have signed a contract to use Tata’s low carbon steel product Zeremis Carbon Lite in the Hardt Hyperloop high-speed, sustainable transportation system in a bid to reduce energy consumption and transport emissions, Tata said Sept.23.

The official supply agreement has been officially signed after Tata announced the delivery of the first batch of the new steel product made for Hyperloop in July.

The companies will now field test the first tubes made using the certified low-carbon steel in the European Hyperloop Center in Groningen, the Netherlands, Tata added.

Tata joined forces with steelmaker POSCO in 2020 to work on development of steel grades customized for building strong, lightweight spirally welded pipes for Hyperloop that can withstand an internal low air pressure with sufficient rigidity.

The ultimate goal of the collaboration is to achieve a 50% weight reduction compared with conventional tube technology, which Tat said it aims to achieve by developing new steel qualities and creating new pipe designs.

“The hyperloop technology is more environmentally friendly than flying or driving, as it requires much less energy and thus almost no CO2 per kilometer traveled,” Tata Steel Nederland’s head of Marketing Engineering, Huib Simon, said in statement.

Hyperloop uses 10x less energy than road transportation or aviation, and the shift to this technology will allow for the saving of 1 billion mt of CO2 emissions annually by the mid-century, according to Hardt.

— Ekaterina Bouckley

Yesterday the 1st UK Steel Forum took place in London at the iconic Ironmongers’ Hall, with links to the iron trade for over 700 years.

This event co-organized by EUROMETAL and the 5 trade associations BCSA, BIRFA, ISTA, NASS and UK Steel brought together 85 participants.

Our president Fernando Espada started the event by welcoming all the participants and praising the result of a common organization of several associations united for the benefit of the entire steel industry.

The meeting continued with the UK, Europe and the World economic outlook presented by Matt Watkins from CRU and trade data on UK production and imports in 2022 with outlook 2023 presented by Steve Andrews from ISSB.

During the afternoon, Gina Swenters and Peter Larose from the Conti-Lines Group drew attention to the problems caused by Covid and the conflict in Ukraine in the logistics sector and Gabriele Coppo, partner of law firm Van Bael & Bellis based in Brussels and London, addressed the latest developments in international trade relevant to the UK steel sector.

The event concluded with a dialogue between Julian Verden (Stemcor) and Gareth Stace (UK Steel) highlighting and summarizing the main issues affecting the UK Steel Industry and advocating collaboration between the associations to better defend and protect it.

Global crude steel production totaled 150.55 million mt in August, down 3.0% year on year, although it was 1.1% higher than July’s six-month low, according to World Steel Association data published Sept. 22.

This brought total production for the first eight months of 2022 to 1.25 million mt, down 5.2% on the year.

China produced 83.9 million mt in August, up 0.5% from a year ago and rising 3.0% from July’s six-month low, making up 55.7% of total global crude steel output.

This brought January-August steel production in China to 693.2 million mt, down 5.7% year on year.

The world’s second-largest steel producer India also saw production grow 1.2% year on year in August to 10.2 million mt, which was also up 1.7% month on month, the data showed.

India’s cumulative January-August output also rose 7.1% to 83.5 million mt, according to worldsteel.

Japan’s August production was 7.3 million mt, down 7.4% on the year but up 0.2% from July’s six-month low, with January-August output down 5.2% on the year to 60.7 million mt.

US output in August of 7 million mt was down 7.1% year on year but up 1.1% on the month, taking January-August production to 54.9 million mt, down 3.7% year on year.

Russia was estimated to have produced 5.9 million mt in August, falling 5.5% from August 2021 and down 1% from July, bringing its estimated January-August output to 48.9 million mt, down 5.8% on the year.

South Korea produced an estimated 6.1 million mt of crude steel in August, down 0.4% year on year and 0.1% lower month on month, with the eight-month volume down 3% on the year to 46 million mt.

Europe January-August output down 7.3%

For Europe, including the UK and Turkey, crude steel production fell 14.8% on the year in August to 13.3 million mt, which was also down 9.1% from July to the lowest monthly volume since April 2020, the data showed.

Europe’s January-August volume was 126.13 million mt, dropping 7.3% on the year.

Germany, the largest steel producer in Europe, saw its crude steel production fall 2.3% on the year in August to 2.9 million mt, which was also down 3.3% on the month to a two-year low, as high energy costs dented demand and the auto sector remained impacted by the ongoing semiconductor chip shortage.

In January-August, Germany produced 25.4 million of crude steel, down 4.8% year on year, the data showed.

Domestic prices for hot-rolled coil in Europe have been weakening since the second half of March on low demand, with Platts assessing domestic HRC prices in Northern Europe at Eur740/mt ex-works Ruhr Sept. 21, down 19.7% since the start of 2022, according to S&P Global Commodity Insights.

Turkey August production down 21% on year

Turkey’s August output also fell 21% year on year to 2.8 million mt, according to the data, although this was up 3.8% from July’s volume. Eight-month production was down 8.8% on the year to 24.4 million mt.

Brazil produced 2.8 million mt in August, down 11.3% year on year, but up 0.6% from July, while Iran’s monthly output was at 2.1 million mt, up 64.7% on the year and 2.6% higher than the previous month.

Brazil’s January-August production fell 4.5% on the year to 23.1 million mt, while Iran’s output for the eight-month period rose 7.8% to 19.5 million mt.

August production of pig iron from 38 countries was 106.3 million mt, down 3.8% year on year, the data showed, while direct reduced iron produced worldwide amounted to 8.7. million mt, up 13.0% year on year, the data showed.

Pig iron output over the January-August period totaled 865.15 million mt, down 5.3% year on year, while DRI production for the period rose 6.9% on the year to 73.4 million mt.

Crude steel data covers the 64 countries that report to worldsteel, accounting for about 98% of the world’s crude steel production.

— Jacqueline Holman

Ukrainian mining and steel company Metinvest is studying options for the construction somewhere in the EU of a plant to process the company’s iron ore into direct reduced iron (DRI) and then convert it into steel, according to Metinvest CEO Yyriy Ryzhenkov, with Italy or Bulgaria seen as the likeliest options.

Initially, Metinvest had been considering expanding rolling capacity at its plate and coil mill Ferriera Valsider in the province of Verona, Italy, or building a finishing facility to process slab shipped from Azovstal Iron and Steel Works in Mariupol, in east Ukraine’s Donetsk Oblast, which is currently under Russian occupation.

Now, with Azovstal slabs unavailable for the foreseeable future, the company is looking at shipping iron ore to the EU instead, converting it into DRI and then smelting it into steel. Routes for iron ore transportation into the EU that are already in place could be expanded if necessary, Ryzhenkov said in an interview with local media. The company confirmed his comments following a request by S&P Global Commodity Insights.

In early 2022, Metinvest said it intended to replace the majority of its blast furnaces and basic oxygen furnaces at its two Mariupol-based steelworks — Azovstal and Ilyich — with electric arc furnaces by 2040, with the first EAF and at least one DRI module expected online by 2030.

With eastern regions of Ukraine being occupied and investments in industrial upgrades elsewhere in Ukraine deemed unrealistic for the time being, Metinvest is looking for ways to offset its slab capacity losses.

In Q2 2021, the company allocated $1 billion to revamp its rolling operations at Ilyich and contracted Italian engineering company Danieli to supply a 1.6 million mt/year cold-rolling, galvanizing and color-coating complex. The company also intended to complete the construction of the air separation plant at Ilyich and to rebuild de-dusting systems at Azovstal’s BOF shop.

At this stage, it is not clear though whether those investment commitments could now be switched to secure different equipment for the potential EU plant, which would turn Metinvest’s iron ore into high value-added steel products.

The company had already been developing the production of DR-grade pellets at its Central iron ore mining and beneficiation complex (GOK) in Dnipropetrovsk region, eastern Ukraine, since 2020, with 2021 output reaching 2.2 million mt, and before the war it was looking to set up a 5 million mt/year capacity DR-grade pellet plant at its Severny, or Northern, GOK too. However, although Severny has recently tested the production of high-quality pellets, as a prerequisite of improving it further to DR-grade material, implementing the project in full requires investments, and these will not be possible while the war is ongoing.

To feed its re-rolling mills outside Ukraine — in Bulgaria, Italy and the UK — Metinvest continues to sourcing third-party slabs, including from Southeast Asia and the EU, where it purchases semis from Italian flat steel producer Acciaierie d’Italia.

In addition, the company has developed production of rolled slabs at its 49%-owned Zaporizhstal iron and steel works in Zaporizhia, south Ukraine, which processes ingots supplied by long-rolled steel producer Kamet Steel, based at Kamianske in Ukraine’s Dnipropetrovsk region.

— Ekaterina Bouckley

Decarbonising the steel and iron ore industry by 2050, in line with the Paris Climate Agreement, will require $1.4 trillion of investment and revolution across every stage of the value chain, Wood Mackenzie says.

This presents an urgent challenge and enormous opportunity, Kallanish reads in the consultancy’s research report.

The report points to the industrialised world’s reliance on steel, with 2.2 billion tonnes of production required to meet global steel demand by 2050 – a 15% increase from 2021.

From iron ore mining to steel manufacturing, the industry is highly carbon intensive. Iron and steel production emit a combined 3.4 billion t of carbon annually – equal to 7% of global emissions.

“Decarbonising the steel industry is a staggeringly big task. To meet Wood Mackenzie’s 1.5°C accelerated energy transition scenario by 2050, steel emissions must reduce by 90% from current levels. There is an urgent need to act now to decarbonise the iron and steel sectors. Business as usual is no longer sustainable,” says Malan Wu, research director at Wood Mackenzie and lead author of the report.

Wood Mackenzie’s shows $800-900 billion will be essential to abate carbon from existing steelmaking infrastructure, such as setting up new hydrogen-based direct reduced iron and electric arc furnace plants.

“Mining companies will need to play an active role in cutting their operational emissions as well as invest in new high-grade mines and green pellet capacities to feed green steel. In turn, this will require five times the current supply of high-grade pellet feed, an equivalent to 750 million tonnes, translating into an investment of $250-300 billion,” the consultancy says.

To achieve net zero by 2050, it says three-quarters of steel production will have to use low-carbon technologies, requiring the commercialisation and uptake of new technologies such as DRI and molten oxide electrolysis running on renewable energy.

Switching to clean energy will also require around 2,000 gigawatts of dedicated renewable generation capacity, equivalent to two-thirds of current global renewable generation capacity.

“A hydrogen ecosystem will also need to be developed for green steel, as decarbonisation will require around 50 million tonnes per annum of competitively priced green hydrogen, with commercial viability versus conventional steelmaking routes requiring green hydrogen supply at $2/kg,” Wu adds.

The report warns that these measures will still fall short of emissions targets, necessitating an incremental $200-250 billion investment in carbon offset measures, such as carbon capture, utilisation and storage (CCUS). The industry will need to capture and store 470 million tonnes of carbon to reach 2050 emission targets.

Green premiums are also inevitable, given new technologies and low carbon feedstocks are likely to inflate steel production costs by 15-20%. Steelmakers will pay approximately $100/tonne by 2050 to align themselves to a 1.5 °C goal by 2050, according to Wood Mackenzie estimates.

Siew Mung Tan Malaysia