Category: Latest Updates

High electricity costs are impacting all steelmakers across Europe, both integrated and electric arc furnace-based. On the Iberian Peninsula, EAF-based Megasa is limiting steelmaking activity in Spain and Portugal to periods when conditions are more favourable.

In Spain, the company is evaluating production schedules from day to day. According to local press reports, this has led the company to recently stop production completely on certain days when electricity costs peak, Kallanish notes.

In Portugal, it is halting production during night shifts due to high electricity and gas costs. At the same time, it is calling for the local government to take action in favour of large energy consumers that are bearing the brunt of the energy crisis.

Megasa was unavailable for comment on Tuesday.

In March, Megasa stopped activities at its mills in Spain and Portugal amid the spike in energy prices, but the stoppage was limited to a few days.

During the first seven months of this year, Spain saw crude steel production fall by almost 14% year-on-year to 7.3 million tonnes. This was the second-largest fall recorded in Europe after Finland with 16.5% y-o-y.

Emanuele Norsa Italy

Companies active in the steel industry in Europe are increasingly turning to steel imports from Asia amid spiking energy costs and barriers to imports from the Black Sea region, sources told Fastmarkets on Tuesday September 6.Steel semi-finished products are not subject to import duties or quotas in the EU, while long steel materials from Southeast Asia are seen as replacements for Turkey-origin products, whose costs are also increasing sharply due to the energy prices but which nevertheless routinely take up all of the available EU import quotas.

Asia has become a cheaper market from which to source products, and has not shown any significant energy cost rises because Asian nations are not directly reliant on supplies of Russian gas via the Nord Stream 1 pipeline. Some, such as India and China, have even benefitted from purchasing Russian coal at lower prices in recent months, sources said.

Deals done
Over the past few weeks, semi-finished and long steel sales from Southeast Asia to Europe were estimated to total more than 100,000 tonnes, Fastmarkets heard.

Steel billet was heard sold by blast furnace (BF)-based steel mills in Malaysia and Indonesia at $515-525 per tonne fob recently and will go to buyers in Germany or Poland, according to market participants. At least 30,000 tonnes was sold from Indonesia to Germany and Poland, Fastmarkets heard.

The same BF mill in Indonesia sold a 10,000-tonne cargo to traders late last week at $515 per tonne fob, and this will go to a steelmaker in Turkey, according to sources.

Price arbitrages have been aided by falling costs for bulk freight because ships were widely available. The freight cost for large vessels containing steel shipped from western India to Europe was quoted at $80 per tonne, Fastmarkets heard on Tuesday.

“Buyers in Europe are purchasing billet and finished long steel from Asia because they are worried about steel supply. They may not be able to get steel from their usual suppliers there due to energy costs,” a trader source in Singapore told Fastmarkets on September 5.

European gas prices have soared this year due to the Ukraine-Russia war, with Russian natural gas producer Gazprom shutting the Nord Stream 1 pipeline and cutting off supply to European countries such as Germany. This was widely seen as a reaction to the imposition of trading sanctions on Russian companies and individuals by the west because of their support for Russia’s invasion of Ukraine.

“This is all driven by the [uproar around] energy costs in Europe. The EU cannot allow its own industry to be [destroyed] so I think it will provide subsidies which will stop these steel imports by next month,” a representative of a major Chinese trading firm said.

“EU steelmakers will ask, ‘How can I afford to close my factory?’ It is 100 times more difficult to close factories in Europe than in Asia due to [the difference in] labor laws,” he added.

Europe supports Asia prices
Transactions to Europe and Turkey were helping Southeast Asian BF-based mills to raise their steel offer prices despite tepid import demand in their own region, sources said.

“The Indonesian and Malaysian steel producers are already sold out of October-shipment rebar cargoes, which is why they are not urgently looking to sell rebar into Southeast Asia and can wait for November-shipment negotiations to start,” a fabricator source in Singapore told Fastmarkets on September 5.

Traders said that the major Indonesian mill had increased its offer price for wire rod to $580 per tonne fob this week on account of stable demand, an increase of $10 per tonne from its previous offer, although Asian buyers were not purchasing at that price.

Fastmarkets also heard that the Indonesian steelmaker raised its offer price for 3sp-grade steel billet to $525 per tonne fob on Tuesday, up from $515 per tonne fob last week.

European mills try to raise prices
Energy prices in Europe have been out of control in recent months.

For example, in July 2021, average electricity prices in Italy were around €400 ($397) per MWh, up from about €271 per MWh in June 2022 and sharply up from €103 per MWh in July 2021, according to local energy service company Gestore dei Mercati Energetici (GME). During the week ended August 21, average electricity prices in Italy exceeded €500 per MWh.

In July 2022, the average wholesale price of electricity in Germany exceeded €315 per MWh, nearly four times the price in July 2021. During August, the price for energy in the nation surpassed €500 per MWh for the first time in history, sources told Fastmarkets.

Faced with these unprecedented energy price rises, steel mills have started to increase their prices.

In late August, Europe’s leading steelmaker, ArcelorMittal, announced €50-100 per tonne price rises on all coil products and a €100 per tonne price increase for long steel products

But European steel market fundamentals have been too weak recently to support such huge price rises, especially in the flat steel sector, sources said. European flat steel buyers have been overstocked with commodity grades, while end-user demand from the key automotive industry has been persistently low.

As a result, European mills started to cut their output in an attempt to balance the market.

Notably, ArcelorMittal said recently that it will shut down blast furnaces in Bremen, Germany, and Gijon, Spain, due to the high energy prices and lower demand. It will also shut down the direct-reduction unit at its Hamburg long steel plant – producing wire rod – from the fourth quarter, and will reduce hours for workers at other locations.

“The high costs of gas and electricity are a heavy burden on our competitiveness. In addition, from October, there will be the gas levy planned by the federal government, which will continue to burden us,” ArcelorMittal Germany chief executive Reiner Blaschek said on September 2.

“As an energy-intensive industry, we are [very seriously] affected. With gas and electricity prices increasing tenfold within just a few months, we are no longer competitive in a market that is 25% supplied by imports. We see an urgent need for political action to get energy prices under control immediately,” he said.

Wire rod buyers look for new sources
European non-integrated wire rod processors have been strongly reliant on imported wire rod deliveries.

Since 2016, EU mills have been selling less wire rod in the spot market because they have preferred to process it themselves and sell directly to end-users, sources told Fastmarkets.

The import safeguard measures introduced in 2019 made imports more complicated for European buyers, with several key suppliers constantly exceeding their quota allocations for wire rod.

Among the major wire rod suppliers to the EU are Turkey, Russia, Belarus and Ukraine.

For example, in 2021, total wire rod imports to the EU amounted to 2.8 million tonnes, according to data from regional industry association Eurofer. Of that amount, Turkey supplied 347,730 tonnes (13% of total imports), Russia 330,974 tonnes (12%), Belarus 225,658 tonnes (8%) and Ukraine 194,785 tonnes (7%).

But Russia’s war against Ukraine has changed trade flows drastically.

As a result of the military actions since the invasion on February 24, Ukraine has been cut off from its major sea ports, Odessa and Mariupol, and can no longer export steel products by sea. Ukrainian producers have had to seek alternative routes, such as rail or road deliveries, but the volume of steel exports from the nation has dropped.

In March 2022, the European Commission imposed a ban on imports of finished steel products from Russia and Belarus. As a result, these two countries were granted no new safeguard import quota volumes for the second quarter of 2022.

With those wire rod volumes, as well as material from Ukraine, missing from the market, European buyers are now booking cargoes from countries that do not have individual quota allocations, such as India, Indonesia and Egypt.

Indonesia has increased its wire rod deliveries to the EU significantly. In the first six months of 2022, it exported 65,159 tonnes to Europe, up from 27,162 tonnes for the entire year of 2021.

India has also boosted shipments to the region. In January-June 2022, it delivered 69,158 tonnes to the EU, up from 23,875 tonnes in the full 12 months of 2021.

Published by: Julia Bolotova, Paul Lim, Lee Allen

Following official announcements of price increases last week, northwestern European coil mills appear to be playing back-and-forth games with their offer conditions.

According to a buyer at a fabricator company, a leading mill stated last Friday morning that it would leave the market, and soon thereafter other mills echoed the same. “I was wondering if that was a case for the cartel office to look into,” he quips. The market leader announced it would still sign some deals at previous prices for a limited time frame on Monday, and then refrain from offering until Thursday.

Still, on Monday, the fabricator company would have faced a price premium of €100/tonne ($99) over the values of late August. “We then ended up signing for material from another mill, still at the old price,” the buyer tells Kallanish.

Mills are apparently not as harmonised as it appeared on Friday, and it is touch and go with opportunity windows opening and closing. One big mill group, for example, seems to be more willing to make concessions because it is nearing the end of its business year and likes to have some more deals in its books, the buyer believes.

Still, mills’ attempts at setting deadlines “should make us beware that the mills mean it”, the buyer says. Even if hikes do not hold yet, he believes that sinking prices are unlikely. Like other market sources, he sees hot rolled coil, for example, at between €750/t and €800/t, and not notably shifting above the upper line, as last week’s announcement would have it.

Christian Koehl Germany

Trading in the European hot-rolled coil market remained quiet on Tuesday September 6 despite massive output cuts announced by producers recently.
Fastmarkets calculated its daily steel HRC index, domestic, ex-works Northern Europe at €765 ($758.94) per tonne on Tuesday, up by just €3.33 per tonne from €761.67 per tonne on Monday.

The calculation of the index was up by €30 per tonne week on week but down by €60.83 per tonne month on month.

Producers in the region maintained official offers for HRC at €800-850 per tonne exw. But buyers’ pricing ideas were lower, at €750-760 per tonne exw.

A sale of Italy-origin HRC to Germany was reported at €800 per tonne delivered earlier this week.

Traded volumes, however, have remained limited – buyers are reluctant to accept higher HRC offers against a backdrop of persistently weak end-user demand and poor prospects for steel consumption in Europe given fears of a looming recession.

On the other hand, European producers claimed the price increase was absolutely necessary because production costs have soared recently.

“We will see if the market accepts higher offers; if not, we’d rather stop than do a loss-making sale,” a mill source in Germany told Fastmarkets.

European steelmakers have been gradually reducing output recently to adjust to weak market fundamentals; however, the effects of the production cuts have yet to show up.

Fastmarkets’ calculation of its daily steel HRC index, domestic, exw Italy was €752.50 per tonne on Tuesday, up by €7.50 per tonne day on day.

The calculation of the Italian index was up by €47.50 per tonne week on week but down by €24.50 per tonne month on month.

Official offers from mills in the country were reported at €800-820 per tonne exw, but no trading has been reported at this level so far.

Some buyers estimated the achievable level for HRC in Italy at €740-750 per tonne exw while noting that buying activity has been very weak recently.

The tradeable level for HRC in the nation was closer to €780 per tonne exw, one producer said.

Several sources claimed that Arvedi – one of the major local steelmakers in the region – is mulling production stoppages in case market activity does not pick up.

“Arvedi has stopped hot flow completely in August – they will do the same in September if buyers reject price rises,” a trading source told Fastmarkets.

HRC offers from Asia to Italy were reported at €670-680 cif for delivery at the end of 2022 and early in 2023.

Published by: Julia Bolotova

As air traffic returns to pre-pandemic levels, Austrian steelmaker Voestalpine is seeing a significant increase in orders from the aerospace industry with total contracts through 2030 valued at Eur300 million ($298.62 million).

Voestalpine’s High Performance Metals division secured a contract extension, and several new and extensive orders for the supply of heavy-duty structural parts from US aircraft manufacturer Boeing.

Also, Germany’s engine manufacturer MTU Aero Engines has commissioned Voestalpine to supply over the coming years highly critical forged parts for installation in a variety of aircraft models, including Airbus A320neo.

The aviation market continues its recovery after it almost came to a standstill at the start of the COVID-19 pandemic.

In the April 1, 2021-March 31, 2022, business year, Voestalpine’s revenue in the aerospace segment was around Eur255 million, up from the prior year’s level of Eur180 million.

The High Performance Metals division produces die forgings from titanium alloys, high-alloy steels and nickel-based alloys at the Kapfenberg site, high-tech titanium sheets in Mürzzuschlag, and special profiles for engines in Bruckbach in Lower Austria.

Over the past five years, the company has invested Eur140 million in the aerospace-orientated capabilities at its Austrian sites alone with most of this spent on enhancing product quality, process automation, and digitalization, it said.

— Ekaterina Bouckley

Slovakia’s US Steel Kosice has idled its No. 2 blast furnace of Sept. 4 for a period of 60 days, while Nos. 1 and 3 remain operational.

The company described the move as a planned outage and said it would continue to adjust maintenance schedules according to demand.

Mills have recently cut discounts in order to secure volumes, though the price decline failed to substantially stimulate demand leading into the traditional period of recovery in September post-summer slowdown.

“Price is irrelevant when demand is so low– inventories are the issue, not expense,” a distributor source said.

As such, market participants see production cuts as the best mechanism to realign supply and demand. Reduced demand is primarily motivated by high inventory levels, with extra stocking costs reportedly extinguishing any advantage to be gained on discounted purchasing.

ArcelorMittal recently idled furnaces at several sites, in line with expectations that further output cuts would hit the European flat steel market on rising production, and more specifically, energy costs.

A North European mill source estimated that mills have already reduced production capacities by around 10-15%, on top of existing stoppages.

While production cuts are indeed viewed as necessary to bring supply and demand back into balance, some in the market see foreign imports as claiming a larger market share on competitive pricing while EU production is reduced.

“EU mills can cut capacities, but I don’t see the commission cutting quotas in line any time soon — it’s a golden opportunity for traders,” a mill source said.

Alongside production cuts, mills have announced an increase in offer levels, with the majority of North European mills offering at around Eur800/mt ex-works Ruhr and Northern Europe. Tradable levels are currently uncertain in the low-demand environment as the market digests the recent increase.

Platts assessed hot-rolled coil in Northwest Europe at Eur760/mt ex-works Ruhr Sept. 5, up Eur5/mt on the day, according to data from S&P Global Commodity Insights.

— Benjamin Steven

Associations representing European ferrous and non-ferrous metals producers and miners, among other European groups, are demanding urgent and effective action at EU level on gas and electricity prices, according to a joint letter sent to European Commission President Ursula von der Leyen.

The letter from energy intensive industries, signed by Eurofer, Eurometaux, Earomines and Euroalliages, among others, comes ahead of an extraordinary meeting of the EU Energy Council on Sept. 9.

“We call on the European Union to urgently introduce EU-wide measures aimed at limiting the price of natural gas and also measures designed to disconnect electricity prices from gas prices,” the letter said.

The letter, seen by S&P Global Commodity Insights, was also signed by EU associations representing chemical, cement, ceramic, clay and lime industries and producers of fertilizers and vaccines.

It also recommends adjusting the crisis state aid framework to the new reality.

Market volatility and soaring European gas prices are having destructive consequences on industrial users of gas and electricity and are also destabilizing the electricity market, the letter said.

With the Dutch TTF gas spot price peaking at Eur334/MWh two weeks ago, “which is 15 times its pre-crisis level, 10 times more than US prices and well above prices in Asia,” any semblance of a normal market has lost, the letter said.

Recent weeks have seen a significant number of industrial plants suspending operations or reducing production in Europe, with further curtailments expected in the weeks to come, according to Eurofer.

“These massive plant curtailments will increase Europe’s dependency on third markets for strategic supply chains and will drastically increase global carbon emissions,” the letter said.

“For many industries there is currently no business case to continue production in Europe, nor visibility and certainty for investments and further developments.”

Impact on plants

Slovakia’s US Steel Kosice has idled one of its three blast furnaces for 60 days, although the move is associated with scheduled maintenance.

Long steel products maker Stahl Gerlafingen in Switzerland said Sept. 4 that it would reduce its operating hours during October to December in response to the sharply rising energy prices.

Elsewhere, ArcelorMittal said Sept. 2 that it would temporarily shut three blast furnaces this month at three mills in the EU — in Bremen, Germany, Gijon, Spain and Dunkirk, France, due to weak demand in the European market and surging energy and emissions costs.

And German steelmaker Salzgitter told S&P Global that it has made all necessary preparations to operate its plants economically, taking into account demand for its products as well as the market in general.

However, a spokesperson for Austrian steel company Voestalpine said the company is “not planning or implementing any production shutdowns due to energy prices,” Orders remain stable and the company has high stocks of raw materials to prepare it for what will be a difficult autumn, she said.

Tata Steel’s IJmuiden steelworks on the Dutch North Sea coast has also not implemented any output cuts.

A few plants producing ferro alloys — more energy-intensive products than steel — have curtailed production, according to market sources, but none of those companies have confirmed any cuts.

The European steel industry is not alone in being buffeted by high energy prices.

Several aluminum producers in Europe have been reducing output or halting production at smelters, including shutdowns at Norsk Hydro’s Slovalco smelter in Slovakia, Alro’s alumina facility in Romania and Damco Aluminum Delfzijl Cooperatie’s Farmsum plant in the Netherlands.

There has also been a 33% curtailment at Alcoa’s Lista smelter in Norway, a 20% production cut at France’s Aluminium Dunkerque, and reduced output at Alcoa’s San Ciprian alumina refinery in Spain. Hydro also decided to keep smelting pots at its Husnes and Karmoey plants in Norway offline after normal maintenance due to lower aluminum demand.

In August, global aluminum rolling and recycling company Speira said it was considering cutting output further at its 160,000 mt/day Rheinwerk aluminum smelter in Germany, which had been operating at a rate of 140,000 mt/day, because of high power costs.

A spokesperson for aluminum rolling and recycling company Novelis said that with regard to the company’s operations in Europe it is working closely with its network operators, authorities and trade associations for scenario planning should it be required to slow or interrupt its aluminum recycling and/or rolling due to a shortage of natural gas supply. The are preparatory measures as natural gas is currently flowing, the spokesperson said.

— Ekaterina Bouckley, Jacqueline Holman, Charles Thompson

Turkish rebar export prices were assessed stable Sept. 6 as European buyer demand remained an exception in a weak wider market.

Platts assessed Turkish exported rebar prices at $670/mt FOB Sept. 6, unchanged day on day.

Offers from Turkish mills heard during the day were $680-$710/mt FOB, with the latter being considered unworkable for buyers, according to a Turkish trader.

“There is no rebar price,” the trader said. “Nobody is buying, and nobody is selling. The offers from the mills are only there on paper.”

Instead, buyers were heard to be targeting as low as $640/mt FOB.

Some European buyers have expressed interest in importing Turkish rebar — despite the possibility of having to pay a 25% safeguard duty — as the supply of finished steel in Europe becomes limited due to the ongoing energy crisis reducing steel mill production, according to sources.

The EU tariff-free import quota for Turkish-origin rebar in Q3 was immediately exhausted July 1, with the upcoming Q4 tariff-free quota totaling 90,856.92 mt set to open Oct. 1. The Q4 quota was also expected to be exhausted quickly.

“I believe we’re hearing some bookings from Europe at the moment because the availability in Europe is very tight at the moment,” a second Turkish trader said. “Everyone is taking precautions and importing regardless of the quota, just in case they cannot afford to produce themselves.”

“Everyone is uncertain about the future. It’s either import now or accept heavy production costs throughout the winter.”

However, market sources also told Platts that European buyer sentiment in certain regions was more cautious, as traders considered the risks of importing in the current market climate.

“Spanish buyers can’t take the risk of large shipments right now, but they also cannot afford to wait either,” an EU trader said. “They’re interested in buying smaller quantities. But Italy has decided to stop importing completely until their cost structure becomes clearer.”

A second EU trader also described customer disinterest in purchasing rebar amid the ongoing energy cost crisis, and said: “We are not in the market. We are currently not being pushed by our customers to offer new material at this time.”

Turkish rebar exporters also face competition from billet as European buyers weighed the benefits of switching to roll billet to produce finished steel to save on electricity costs, according to sources.

A deal for steel billet totaling 30,000 mt was booked Sept. 2 by European buyers at $515/mt FOB Indonesia.

Platts assessed Turkish imports of premium heavy melting scrap 1/2 (80:20) Sept. 6 at $379.75/mt CFR, down $7.25/mt day on day.

— Abdi Salad

Tradable ranges inched higher in the European hot-rolled coil market Sept. 6, with costs again central to the rationalization for increasing prices.

Platts assessed hot-rolled coil in Northwest Europe up Eur10/mt on the day, at Eur770/mt ex-works Ruhr.

A mill source reported deals at Eur780-820/mt delivered Ruhr ex-Italy, seeing the North European tradable level at Eur780/mt ex-works Ruhr.

Prices at the higher end of the range were attributed to customers in need of material in the short term, wary of increasing prices, though overall demand remains limited.

Buyers expressed mixed sentiment on tradable ranges and price direction, with both acceptance and resistance to the uptrend heard on the day. Indications from the buy-side were heard in a range of Eur750-800/mt ex-works Ruhr.

“I think all accept that increases are necessary and that current prices are unsustainable,” a trader source said. “It’s tough to see how demand will improve in the next few months. However, prices may increase … I don’t see the quiet market as non-acceptance from buyers so much as a lack of need for material and fear of uncertainties.”

A mill source reported the same, achieving higher prices despite the low-demand market.

“I’ve never seen prices rise on no demand, but it does seem like customers are somewhat accepting … the increase,” a mill source said. “If prices continue to rise, it’s possible demand will come back a little, but it’s hard to see the economic situation improving at the moment.”

Some distributors thought differently, however, with one doubting the survivability of the price increase.

“Prices are always determined by offers and subsequent demand, never by costs,” the source said. “Without a pickup in activity at these price levels, the increase cannot hold.”

In the South European market, the tradable range continued to tighten, with buyers’ indications of achievable prices moving up slightly. Eur760/mt ex-works Italy was now only perceived as workable on large tonnages, with offers at Eur800/mt ex-works seen as increasingly firm on mill exposure to rising energy costs.

“I think these Eur800/mt offers have to be regarded as firm especially given production cuts across the market,” a mill source said. “To relax negotiable prices would be to undermine efforts to establish survivable margins.”

The import market was heard active on the day, with buyers looking to secure volumes at currently available offer levels in anticipation of further increases.

Offers were heard into the Italian market at Eur700-710/mt CIF ex-Far East on the day, with the Platts assessment moving up in kind, to Eur695/mt CIF South Europe.

The Italian domestic HRC assessment was up Eur5/mt on the day, at Eur765/mt ex-works Italy.

Platts is part of S&P Global Commodity Insights.

— Benjamin Steven

Sentiment among French construction companies improved in August compared to July. However, although their outlook on the next three months of activity has improved, companies’ opinion of the past three months’ activity has deteriorated, Kallanish learns from a l’Institut National de la Statistique et des Études Économiques (Insee) report.

In August, production increased again slightly but obstacles continued, caused by global supply disruptions. The same number of companies as in July reported procurement issues are limiting and slowing their output.

However, fewer construction firms than in July say they are facing supply difficulties and will limit their production capacity. “Just over a quarter of business managers consider themselves both unable to increase their production in case of additional orders and facing difficulties due to a lack of personnel … Finally, the share of business managers unable to increase their production and facing supply difficulties has slightly diminished,” the report states.

In August, fewer companies than in July say they will increase their prices over the next three months, but more firms surveyed consider their order books to be higher than usual. With their staff size, building contractors say their order books provide them with 8.7 months of work.

The French rebar market has gone through a weak period over the past two months, with orders limited and mills extending their maintenance stoppages into September to reduce output. Uncertainty is causing buyers to reduce purchases and adopt a wait-and-see attitude.

Natalia Capra France