Category: Latest Updates

Importers of hot-dip galvanized coil into Europe are set to face a series of new challenges from the beginning of July, as the new rules related to safeguard measures come into force.

Participants of this week’s Kallanish Europe Steel Markets 2022 conference in Milan voiced their concerns over the inclusion of HDG imports from Vietnam in the safeguard system.

According to Eurofer data, Vietnam supplied last year into Europe over 900,000 tonnes of hot-dip galvanised material, most of which was coil. These were exempted from safeguard measures, but from July 2022 they will be included in the global 4a sub-category for safeguard measures.

Before 2017, imports of Vietnamese hot-dipped galvanised materials into Europe were virtually zero. 2018 saw a record volume of slightly below 250,000t, according to Eurofer.

“We knew Vietnam was going to be included in the safeguard system, but the decision to not change the general tariff rate quota allocation for the 4a sub-group will have a big impact on the market. Vietnam imports will be competing with Turkish volumes to use the available quotas. During the last quarters, the general quotas for this product were already being fully used during the very first days,” commented Paolo Sangoi, head of Assofermet Acciai.

Gamma Trade’s Alessandro Fossati confirmed Sangoi’s view and added that the biggest problem will be noticed by Italian buyers of HDG.

Russian-origin imports are now banned as part of the Ukraine war-related sanctions against the country, while Turkish HDG imports are set to be levied with the newly-announced definitive anti-dumping duties of 8-11%, for all suppliers excluding Tatmetal (2.4%).

Emanuele Norsa Italy

The European Commission plans to introduce global quotas for some products and prolong steel safeguard measures to 2024, it said in a document sent to the World Trade Organization on May 30.

The Commission also updated the list of developing countries and added Vietnam to the other countries quotas, according to the document seen by S&P Global Commodity Insights.

The proposed measures would come into effect July 1 following the traditional yearly safeguard review cycle.

For product categories 7, which includes quarto plates, and 17 — including angles, shapes and sections, the EC has proposed to substitute country-specific quotas with global quotas. The main reason behind the decision was that Ukraine had historically represented around 33% of total volumes imports in each category. After Russia’s attack on Ukraine, however, export of those products to the EU stopped.

On May 24, the EU adopted a regulation allowing for temporary trade liberalization for some Ukrainian products in the wake of the ongoing war, which has halted the application of the steel safeguard measure for the time being.

As Ukrainian producers are unable to produce or ship the two product categories now, the EU authorities decided that this could result in shortage of the products.

The EC has considered setting the yearly level of liberalization of import quotas at 4%, up from 3% a year before and this would also come into effect from July 1.

The same global quota will apply on product category 8 — stainless hot-rolled flat steel and category 25A — large welded tubes.

Among other changes, hot-dipped galvanized steel imports (categories 4A and 4B) from Vietnam would be added to the global quotas list, in line with the updated list of developing countries.

— Maria Tanatar

The European Commission has notified the WTO of the result of its latest review of the EU safeguard system. Some limited changes to the system will be implemented effective 1 July, Kallanish learns from an official release.

The biggest change relates to the liberalisation rate of tariff-rate quotas (TRQs). As of July, these will increase by 4%, against a previous liberalisation rate set at 3%. “The Commission considered that, at this point in time (after four years of measure), a slightly higher level of liberalisation year-on-year should be envisaged in order to encourage the domestic industry to continue its adjustments, while being mindful not to undermine the effectiveness of the measure,” the note says.

Additionally, the Commission has taken the decision to cancel country-specific quotas for both heavy plate and angles, shapes and sections. As a result, these sub-categories will only have one quota available, for all countries.

“In these two product categories, Ukraine has historically been an important exporter (representing around 33% of total quotas in each of these categories) and it has consistently used its quotas at rather high levels. However, the Commission observed that since the military aggression of Russia against Ukraine, there have been virtually no imports of these two categories from Ukraine into the Union. This suggests that Ukraine is currently unable to produce and/or export these products in any meaningful volumes to the Union market,” the Commission explains.

“Under these circumstances, and having analysed the quota use by other exporting countries subject to the measure, the Commission considered that there would be a risk of potential shortage of supply for Union users in these categories if it did not take any action,” the note adds.

During the review, the Commission also looked into the list of developing countries exempted from the measures. The list of such countries has been updated. The most important change will be the inclusion of countries such as Vietnam in a number of TRQs for products including HDG (see separate story).

Finally, some changes will also be implemented to the utilisation of residual quotas during the last quarter of the year, Kallanish notes.

“In addition, the European Union also assessed whether any of the changes to the US Section 232 measure had any effect to the EU safeguard measure requiring an adjustment. The European Union concluded that the changes to the US Section 232 measure did not justify any adjustment to the EU Safeguard measure. Therefore, because no adjustments are proposed in this respect, the detailed reasoning on this section will be included in the legal act that is currently subject to EU’s internal decision-making and which will be published before 1 July 2022,” the note concludes.

Emanuele Norsa Italy

The EU, US, UK and Canada’s decision to lift import duties previously imposed on Ukraine may not lead to a significant increase in Ukrainian steel and raw materials exports, says GMK Center chief Analyst Andrii Tarasenko.

Export logistics in Ukraine remain restrictive and the situation is compounded by steelmakers’ difficulties in importing 4-5 million tonnes of coking coal previously provided by Russia and now supplied partly by Poland, Tarasenko said at Monday’s Kallanish European Steel Markets 2022 conference in Milan.

The bottlenecks created by grain cargos and global pressure to export grains are providing further obstacles to steel exports. However, if Russia allows foreign countries to provide a military escort for grain cargos leaving Ukrainian ports, this may also ease steel exports, Tarasenko commented.

Before the war, Ukraine was the world’s second-largest pig iron exporter, the fourth-largest iron ore supplier, the third-largest semi-finished products exporter and the sixth-largest supplier of hot rolled coil. Steel and pig iron production was concentrated in four cities, at the now-lost Mariupol plants; Zaporizhshia, about 50km from the frontline; ArcelorMittal’s Kryvyi Rih; and Dnipro, which is far from the hostilities but a target of periodical shelling.

Since March, Ukraine has lost over 40% of pig iron and 100% of slab and plate exports, and over 1 million tonnes of iron ore exports mainly to China, Tarasenko affirmed. Steelmakers in the country are trying to resolve the current logistical issues by planning for exports from the Constanta seaport in Romania. However, despite its proximity, Constanta has limited capacity and strong competition from grain cargos.

Another route is by railway through Poland to Baltic ports with larger capacities, but this is extremely expensive. Shipping iron ore through Baltic ports costs $100/tonne. In March and April, Ukrainian companies doubled their railway exports to the EU. However, bottlenecks have become the norm because of the limited capacity of European railway and port infrastructure, which is unprepared for such high volumes of cargo.

Natalia Capra France

Technologies to decarbonise steelmaking require greater use of clean energy, scrap and green raw materials; however, supply of these continues to be limited, creating uncertainty over whether steelmakers can meet EU decarbonisation targets. So said participants at the Kallanish Europe Steel Markets 2022 conference in Milan on Monday.

“The way the steel sector’s production to become CO2 net-zero passes from the increase in natural gas use in the short term to getting completely hydrogen supplied in the long term,” commented ArcelorMittal climate change head Stephane Tondo. “The decarbonisation of primary steelmaking remains the key for reaching our reduction in emissions target”.

The transition from blast furnace method to DRI technology also requires a greater share of scrap and new sourcing of clean energy, he observed.

“Securing scrap and renewable power will be critical, since other sectors are also trying to procure regular supplies. The access to electricity is seen as the centre of the battle,” Tondo observed.

ArcelorMittal’s objective to transform 32 million tonnes of its steel output in Europe, however, is also facing legal and funding issues. “Our investments in decarbonisation projects are surpassing €10 billion, and we need the support of local governments and national funds to carry out this process,” Tondo appealed. He confirmed the steelmaker is already discussing the support with some countries where ArcelorMittal has a presence.

Meanwhile, Gilles Calis, managing director of Steel Consult International, estimated that the short-term solution to the carbon-neutral way should be led by raising scrap use rates in the BOF, while decreasing reductants through hydrogen and coke gas injection, plastics, waste and biomass charging. In the long-term, hydrogen-based DRI technology will play the main role.

“Europe has a scrap surplus of around 20 million tonnes/year that is currently exported. In the near future, this excess of material is likely to be used within the region, by both integrated mills in their BOFs and by scrap-based EAFs, as scrap becomes a more valuable ‘green’ raw material in the region,” Calis noted. Integrated steel mills face huge challenges in their decarbonisation processes, he added.

“DRI using green hydrogen has an operational cost of up to 50% higher than BF/BOF steel. It is not just the cost of H2 that is more expensive, but also the need to use mainly expensive raw material as pellets,” Calis said.

Other hurdles include natural gas cost and availability, competition with other sectors for green energy supplies and its availability and reliability. “Progress has been slow so far, but emissions are expected to decrease more steeply in the future. However, zero-carbon production will require much more time beyond 2035,” Calis observed.

“The phasing out of free allowances and extra fast-rising CO2 prices as a result of the European Commission Fit for 55 package of regulatory proposals of 55% net reduction in greenhouse gas emissions by 2030, if going ahead as proposed, will lead to much higher Emission Trading System (ETS) costs of between €100-300/tonne steel produced, even if EU mills proceed with their decarbonisation plans,” he explained.

Meanwhile, Max Hettler, sustainability director at Metalshub and consultant at Boston Consulting Group, said European mills are facing difficult decisions, while decarbonising the steel supply chain requires close collaboration, starting from mining, through investors and end-users. “Green steel starts in the procurement department. Supply chain decarbonisation requires collaborative engagement,” he commented. Transparency on Scope 3 emissions becomes increasingly important and mandatory for selling green steel products, he added.

“Supplier readiness to provide CO2 data varies drastically, and steelmakers need to collaborate in order to drive progress. Meanwhile, their internal sustainability, procurement and sales departments often seem disconnected. Everyone acknowledges Scope 3 as a key topic, but many are still hesitant to act,” Hettler concluded.

Todor Kirkov Bulgaria

Plate and hot rolled coil prices will bottom and stabilise in the near term amid improved global demand, says head of Metinvest Western Europe Roberto Re.

The “red line” for HRC prices is approaching for European producers due to the high cost of gas and energy. “I think that prices during the month of June can somewhat change, maybe not in the sense of a complete trend inversion, but also thanks to the international demand resumption, as we expect better demand from China and the USA,” Re said at the Kallanish Europe Steel Markets 2022 conference in Milan on Monday. “We believe prices will stabilise, which will also cause apparent demand to restart.”

However, there will be no going back to pre-pandemic levels. International trading limitations are resulting in a “structural change” that is seeing the regionalisation of prices, Re observed. In the next 3-4 years, Europe may see quite high prices driven by the future post-war reconstruction of Ukraine.

The steep March price increase followed by the rapid decline seen in recent weeks has halted apparent steel consumption. In Italy, state infrastructure projects have been suspended due to escalating construction material prices.

Ukraine’s Azovstal and Ilyich plants are meanwhile severely damaged but “we will never work under any legislation that is different from Ukrainian”, Re pointed out. The company has no plans to restart production in Mariupol as the area has been taken over by Russian forces. The firm has however restarted Zaporizhstal which produces billet for its European re-rolling facilities, particularly Promet Steel in Bulgaria. Metinvest’s Kametstal plant was meanwhile the only steelmaker to maintain operations in Ukraine in March during the Russian invasion.

Zaporizhstal is currently facing some logistical issues but trying to reach 50% capacity for the production of HRC. Metinvest’s other European mills are Trametal and Ferriera Valsider in Italy, and Spartan UK in Newcastle.

All the flat steel mills are currently going ahead with production. Despite the disruption in semis’ supply, Metinvest succeeded in running Valsider until 25 April and Trametal until 11 May. Promet Steel was idled to give the steelmaker time to re-establish billet deliveries from Kametstal, while output at Spartan UK was reduced.

The Italian units are currently undergoing maintenance works due to slow slab deliveries. Trametal is scheduled to restart in the next ten days and Valsider towards the end of June.

“We’ve changed our supply chain completely. We have become re-rollers again,” Re observed. Trametal was a slab re-roller souring from the merchant market before Metinvest purchased the mill.

Metinvest needs around 160,000 tonnes/month of slab to run all its European units. Towards mid-March, European non-integrated re-rollers such as Marcegaglia and Technosider in Italy, and Laminoir des Landes in France, went to the global market to procure high volumes of slab. This caused a speculative bubble, particularly for material from the Far East.

After the outbreak of war in Ukraine, the main sources of global slab supply were countries such as Malaysia, Indonesia and China. The supply chain is now easing, with some more price stability and a larger pool of suppliers including steelmakers from India, Brazil, South America, China and Indonesia, Re said. However, quality is the issue, not volumes, he added.

“Our idea in Europe is to make an important investment in steel production,” Re stated. In an interview with Italy’s RAI television network earlier this month, Metinvest owner Rinat Akhmetov said the firm is going ahead with its plan to build in Italy a new 2 million tonnes/year flat products steel mill supplied by equipment maker Danieli (see Kallanish passim). It may however have to amend its plan of sourcing slab for the new mill from its Ukrainian steelworks.

Natalia Capra France

French stainless steel producer Aperam has decreased alloy surcharges in June, for the first time in 2022, for its austenitic range of flat stainless steels for Europe. This follows a series of increases. Surcharges have fallen by some €400/tonne ($430) on average versus May, Kallanish notes.

The surcharge for grade 304 (1.4301) has gone down from €3,656/tonne in May to €3,239/t, effective 1 June. For grade 316, it has fallen from €5,338/t to €4,748/t next month. Grade 309S, a heat-resistant stainless steel used in high-temperature applications, has also seen its value decrease from €5,328/t in May to €4,406/t. The surcharge for the most popular ferritic grade, 409, has gone down only slightly from €1,180/t to €1,174/t in June, the company reveals.

Offers for nickel cash buyers reached $32,825/t on 26 April and fell to $27,850/t on 27 May, Kallanish notes.

Meanwhile, Outokumpu has also decreased its surcharges for June. The new figure for grade 304 (1.4301) is €3,219/t, down from €3,844/t in May.

Natalia Capra France

Turkish mills’ sections exports in the first quarter of 2022 hit 500,000 mt, up 12% year on year, as market diversification supported export volumes, according to the latest monthly Turkish Statistical Institute data sent to S&P Global Commodity Insights.

Morocco was Turkey’s top sections export destination in Q1 at 49,300 mt, up 48% on the year, while Egypt became the second largest export destination at 37,000 mt, up 67% year on year.

Turkish mills’ sections exports to Canada reached 33,500 mt, sixfold higher than Q1 2021, while exports to Romania totaled 26,200 mt, up 85%.

Other top export markets in Q1 were the UK at 25,800 mt, Israel at 22,300 mt, Peru at 16,500 mt, Senegal at 13,500 mt, Yemen at 13,400 mt, Greece at 12,200 mt, Malaysia at 12,000 mt, Dominican Republic at 10,800 mt, Argentina at 10,500 mt and Bulgaria at 10,000 mt.

The revenue generated from the exports also climbed year on year on globally higher steel pricing.

Turkey’s long steel export prices rose notably throughout Q1, especially after the collapse of the CIS region’s supply chain after Russia invaded Ukraine.

Turkish mills’ rebar export price rose to $970/mt FOB on March 24, $280/mt higher than the Dec. 31 assessment, according to the Platts assessment from S&P Global, although prices have gradually declined to $760/mt FOB on May 27, due to slowing demand and lower imported scrap prices.

— Cenk Can

Global CO2 reduction policies are here to stay and demand for “greener” steel will significantly increase in the coming years, EUROMETAL president and Layde Steel managing director Fernando Espada said at Monday’s Kallanish Europe Steel Markets 2022 conference in Milan.

The impact of CO2 regulations on steel is causing a permanent change, affecting electricity prices because of emission rights and the cost of electric arc furnace steelmaking. Increasingly more customers are asking for low-carbon steel products and are ready to pay a premium, as well as accept the longer lead times.

“At the end of the day … if you, as a consumer, want the material to be CO2 neutral, you will have to pay more because the entire supply chain needs to accept the change. We are seeing this already with electric cars,” Espada explained.

On the current changing price trends and demand slowdown in Europe, he said the price increases seen since mid-2021 originate from China’s decision to abolish tax rebates on steel exports. Such a move has reduced exports from China to the rest of the world by 20%.

“What we are seeing today is a realignment in the market. We will have to reallocate production because China is not going to flood it [the global market] anymore and that is really the fact that explains, in my opinion, what is happening with prices in Europe,” Espada observed.

China is to embark on Xi Jinping’s prosperity programme, a middle-class growth plan. The country does not intend to emit carbon for the sake of producing low-value products for export. “If China continues with an added-value policy, wealth sharing, oligarchic control, and middle-class growth, if it leaves behind its role of cheap producer for the rest of the world, the balance in many different markets will be broken, not only in steel,” Espada opined.

If China continues to export less, new capacities will have to be built in Europe according to the needs of each country. This however will take time as Europe is now threatened by a high inflation rate that may launch a stagflation cycle, Espada concluded.

Natalia Capra France

EU heavy plate prices remained stable on the week May 27, with holidays in Northern Europe limiting transactional activity and some initial restocking reported in the Italian market.

Platts plate in Northern Europe was assessed stable at Eur1,650/mt ex-works Ruhr May 27.

With mills focused on supply long-term projects, presence in the spot market remained limited. Market participants reported no offers heard on the day from Northern mills.

In the South European market, prices also remained stable, assessed at Eur1,450/mt ex-works Italy.

A mill source reported a degree of demand revival on the day, particularly compared to other flat steel products, as buyers looked to restock depleted inventories.

“Plate prices are stable, we are seeing some demand revival due to restocking,” the source said. “Overall, plate is and has been doing fine, especially compared to hot-rolled coil.”

A second mill source saw the majority of demand as yet to return, predicting more substantive restocking in the coming weeks.

“I think most are still in wait-and-see,” the source said. “There’s a big difference between today’s prices and those seen in past weeks – everyone as been evaluating the market as it moves and trying to understand if it’s the right moment to start purchasing and restocking. The moment will have to come in the next two weeks, but we’ll see a stabilization until then.”

The latest import slab prices into Southern Europe were reported at $820/mt CIF Italian ports ex-India, unchanged on week. With slab material panic-booked at higher prices in the wake of Russia’s invasion of Ukraine and now reaching Italian re-rollers, sources reported limited room for prices to decline on current input costs.

— Benjamin Steven