Category: Latest Updates

The European Parliament’s environment committee voted on Tuesday in favour of further accelerating Emissions Trading System (ETS) free allocations. European steelmakers association Eurofer voiced its concerns over the vote. The proposal is now set to be voted on by the European Parliament in June where further changes could be applied.

The committee voted to end carbon ETS free allocations by 2030, and substitute them with the Carbon Border Adjustment Mechanism (CBAM). The previous proposal involved a total cancellation of ETS free allocations by 2036.

“The Environment Committee missed the opportunity to develop an ambitious framework that would both allow deep cuts in CO2 emissions and secure manufacturing and jobs in Europe. In their current form, these extreme proposals approved by a tight majority risk disrupting all this without any additional gains for the climate if emissions are just leaked abroad,” Eurofer director general Axel Eggert says in a note sent to Kallanish.

“Our industry has very ambitious plans to reduce emissions by more than one third by 2030. This would be a truly new industrial revolution requiring massive capital investment of over €30 billion and decarbonised energy and hydrogen in unprecedented quantity. Climate legislation needs to accompany this transition with balanced measures and realistic timelines rather than impose disproportionate costs that overburden companies before they can even implement their decarbonisation plans,” Eggert concluded.

Emanuele Norsa Italy

European steel association Eurofer on May 17 asked the European Parliament to “fix” what they are calling a “disruptive vote” on the European Commission’s proposed reforms to the Emissions Trading System, or ETS, and Carbon Border Adjustment Mechanism, or CBAM.

On May 17, the European Parliament’s environment committee backed the European Commission’s proposed reforms to the EU ETS and CBAM, ahead of a full parliament vote in June, which will be followed by negotiations with the EU member states later in the year.

According to Eurofer, the decision to reduce free allocation by 40% for transitioning plants would be impossible to implement in just three years.

Eurofer called “an abrupt ETS free allocation phase out of CBAM” affecting the sector and said that there is no solution for exports competing with production from countries that do not have the same strict climate legislation as the EU.

“The Environment Committee missed the opportunity to develop an ambitious framework that would both allow deep cuts in CO2 emissions and secure manufacturing and jobs in Europe,” Eurofer’s Director General Axel Eggert said in a statement.

“In their current form, these extreme proposals, approved by a tight majority, risk disrupting all this without any additional gains for the climate, if emissions are just leaked abroad,” he added.

According to Eurofer, the steel industry will risk losing at least 20 million tons of exports worth Eur45 billion ($47 billion).

The parliament’s environment committee adopted five reports under the EU’s so-called Fit-for-55 package, which seeks to deliver on the bloc’s 2030 emissions goal.

The association stressed how cutting emissions by more than one-third by 2030 is a real “industry revolution” that required funds and legislation to sustain it.

“… climate legislation needs to accompany this transition with balanced measures and realistic timelines rather than impose disproportionate costs that overburden companies before they can even implement their decarbonization plans,” said Eggert.

EU carbon allowance prices for December 2022 delivery rose as high as Eur92.75/mtCO2e ($97.71/mt) May 17, the highest since Feb. 24. That compared with Eur89.56/mtCO2e at the close May 16, according to S&P Global Commodity Insights data.

Platts HRC in Northern Europe was down Eur50 May 17 at Eur1,100/mt ($1,158.74/mt) ex-works Ruhr, according to data from S&P Global.

— Annalisa Villa

Turkish hot-dipped galvanized coil producers will object to the European Commission’s decision May 10 to impose definitive antidumping duties on HDG imports into the EU from Russia and Turkey, sources told S&P Global Commodity Insights May 17.

One of the producer sources said they have already filed an appeal with the commission.

“A negotiation with the EC will be held on Friday this week. We will express our objections to the Commission decision. We are hoping that the duty rate will be removed following this negotiation, as we are thinking that our dumping rate [was] calculated wrongly by taking into account … our galvalume exports in that period,” the source said.

A manager of another Turkish coated coil producer said all of the Turkish coated coil producers will object to the commission’s decision soon, adding that they expect the commission to change the decision in favor of Turkish mills.

The definitive antidumping duty rates, expressed by the EC on the CIF Union border price, customs duty unpaid, were put on Turkish producers as follows on May 10: MMK Metalurji 10.6%, Tat Metal 2.4%, Tezcan Galvaniz 11.0%, other cooperating Turkish companies 8.0% and all other Turkish companies 11.0%.

Interested parties are being granted a period within which they can make representations subsequent to the EC’s latest disclosure.

The dumping duty decision by the EC has raised the price pressure and uncertainties in a sluggish market environment, and has widened a large Turkish coated coil producer’s hot-rolled, cold-rolled and coated coil discounts to other domestic mill offers, a producer source said.

According to an advertisement published in some newspapers on May 15, the company has started offering hot-rolled coil at $799-$829/mt EXW, cold-rolled coil and hot-dip galvanized coil at $899/mt EXW and color-coated coil at $999/mt, notably lower than other domestic mill offer prices.

Confirming this, a source at the company told S&P Global that the aim is to reduce their stocks.

“The [summer] promotion received notable interest from the market. There is a daily maximum amount of 100 mt on each booking. However, buyers could book 100 mt every day until the end of the promotion,” the source said May 17.

Although other Turkish mills didn’t pull down their HDG offer prices to the same extent, a manager of a large Turkish coated coil producer said 0.50 mm thick HDG prices could be available at $960-$970/mt EXW for large tonnages, a more than a $50/mt decline on the week.

S&P Global Commodity Insights’ weekly assessment for 0.50 mm thick HDG was at $1,030/mt EXW on May 13.

A service center manager said he had received an offer for 2 mm thick HDG from a Turkish producer at $920/mt on May 16, adding that due to the sharp decline seen in prices, some traders have started to face serious losses.

The manager expects prices to rebound in the coming weeks with the return of Chinese mills with higher prices.

“Delayed demand in China during COVID-19 lockdowns could support prices,” he observed.

— Cenk Can

Hot-rolled coil prices in Europe fell further May 17, with one mill source describing the market in “freefall.”

Platts HRC in Northern Europe was assessed down Eur50 on the day at Eur1,100/mt ex-works Ruhr.

Northern sources reported offers on a range of Eur1,100-1,200/mt ex-works. Buyers were heard as rejecting offers at the Eur1,200/mt mark, with negotiations starting at Eur1,150/mt ex-works. A German mill was heard as offering at Eur1,050/mt ex-works, although sources were unable to confirm whether offers were representative of the wider market.

Mill and buy-side sources considered prices of Eur1,100/mt as achievable on the day, although most buyers refrained from restocking as prices continued to fall on the bearish trend.

“There’s no purchasing at all, we’re trying to sell out material as stocks are strong and prices are reducing – inventories across the market are too high and there’s no availability to store new stock anywhere,” a Danish distributor said. “It would only hurt us to buy right now.”

The source expected mills to cut production to suit market demand as buyers pushed to deplete stock levels before devaluation.

A mill source expected buyers to wait until September for substantive purchasing, expressing concern that price direction and muted demand would render current production levels unsustainable.

A second mill source agreed, citing communication of unspecified production cuts to customers. According to the source, production cuts now presented the only means to combat the negative price trend.

Reduced demand was heard extending into the import market, where competitive offers could not stimulate buyers to order material, given longer lead-times into October and market uncertainties. Import offers were heard on the day at Eur920-950/mt CIF Antwerp ex-South Korea and Egypt, with South Korean offers reported as particularly aggressive.

In South Europe, the Platts HRC was assessed down Eur50 at Eur1,000/mt ex-works Italy, according to S&P Global Commodity Insights data.

Offers were reported by market sources at Eur1,000/mt ex-works, with one trader source seeing prices close to the floor.

“Last week demand was zero, this week the market started moving with at least some deals done,” the trader said. “I think buyers have realized that prices are close to bottom, and they are unlikely to move down much further.”

A second distributor source disagreed on both demand and price direction, seeing prices as susceptible to further pressure from sliding import offers.

“The market is totally frozen — no enquiries, no prices,” the distributor said. “Buyers may return in June to restock but the war and the lockdown in China bring too many uncertainties. HRC imports could slide as far as Eur900/mt and drive the domestic market down further.”

Import offers were heard on the day at Eur900-950/mt CFR Italian ports ex-India and Turkey.

— Benjamin Steven, Maria Tanatar

ResponsibleSteel, the non-profit multi-stakeholder organisation, has appointed Annie Heaton as its new chief executive, effective 13 June, Kallanish notes.

Heaton has worked at ArcelorMittal, shaping the company’s sustainability agenda during the last eight years. Prior to that, she worked for non-profit organisations such as ActionAid and Save the Children.

“Annie joins us from a senior sustainability role with a major international steelmaker, and founding RS member, ArcelorMittal. Her appointment comes at a critical and exciting time for ResponsibleSteel; our membership is growing, steelmaking sites are being audited and certified, and the world’s first standard for certification of steel products is nearing completion and being prepared for launch,” says ResponsibleSteel chairman Gerry Tidd.

ResposibleSteel members include global steelmakers, consumers, partners of the steel supply chain and associations.

Emanuele Norsa Italy

Eurofer has joined a number of energy-intensive industry associations to call on the European Parliament to retain free carbon emissions allowances ahead of the upcoming vote on the Emissions Trading Scheme (ETS) and Carbon Border Adjustment Mechanism (CBAM).

In a letter seen by Kallanish, the associations stress the need to set realistic benchmarks related to decarbonisation, in order for them to remain technically and chemically achievable. This should be accompanied by sufficient free allocation levels of ETS allowances.

Carbon prices have jumped by 700% in four years, reaching levels originally predicted only for 2030, the letter continues. As a consequence, a more cautious interaction between ETS free allocations and the implementation of CBAM should be taken into consideration.

“Free allocation should remain conditional to the sole criteria of exposure to risks of carbon leakage. Additional conditionality criteria create a further administrative and financial burden and could create the conditions for the materialisation of the carbon leakage risk that was meant to be avoided by the free allocation,” the letter explains.

“We recommend not to support amendments which do not provide a realistic business case for the successful transition of manufacturing industry in Europe,” the associations add.

The new CBAM system is still being discussed, but proposals have been officially submitted to the EU Parliament. It should become effective from 2023, with a transition period lasting until the end of 2024 – originally planned for 2025. The CBAM proposal includes a phase-out of existing free ETS allocations that could be concluded as early as in 2028.

Emanuele Norsa Italy

Scrap prices in Italy continue to decline this month as the war in Ukraine, Covid-19 pandemic flare-up in China, freight disruption and high costs of energy are causing uncertainty on the wider international arena, says Italian trade association Assofermet in its monthly market report sent to Kallanish.

The month of May is surrounded by “enormous doubt”, the association comments. Mills’ cautious attitude to scrap purchases and a sudden halt in deliveries due to their full scrap yards are supporting the weak pricing.

Last month, the Italian government started discouraging scrap exports towards countries outside the EU. Sellers are now obliged to notify the Ministry of Economic Development (Mise) of each export deal. Merchants consider this a form of “bullying” from mills aimed at keeping scrap within the country (see Kallanish 24 March). Italian traders are meanwhile seeing their activity restricted, on the one hand, and are also selling little on the domestic market because of the low volumes required this month by local producers.

Scrap grade new arisings E8 is currently “almost completely unsaleable”. In less than two weeks, prices have lost over €100/ tonne ($104). Cheaper demolition grades are currently more popular.

Given the strong scrap price decline in Italy, appetite for hot-briquetted iron is almost zero, the report points out. The association has also registered a strong price decline for pig iron both in Italy and internationally, particularly for Russian-origin material. Ukrainian pig iron is meanwhile coming back to the Italian market at higher values but with limited volumes.

Natalia Capra France

The US and EU said May 16 they will cooperate on efforts to strengthen the global semiconductor chip supply chain, which has hindered manufacturing in multiple industries since early 2021, as part of a collaborative agenda tied to their joint Trade and Technology Council.

The two governments said they would “work towards guiding principles, complementary and joint actions, and cooperation to mitigate risks and to advance the resilience of US and EU supply chains, while confirming our commitment to avoid unnecessary barriers to trade, which could negatively affect the production or export opportunities of the United States and European Union,” according to a statement.

These actions will proceed “in recognition of the positive contribution of transatlantic trade to resilient supply chains, and of our shared vulnerabilities to critical supply chains for semiconductors, critical minerals, clean energy and pharmaceuticals,” they added.

To achieve a stronger chip supply chain, the US and EU said they will promote private sector efforts to increase transparency in the semiconductor value chain, enhance cooperation to provide early warning of semiconductor shortages and work “to avoid subsidy races” by advancing common goals for incentives.

The agenda released by the Trade and Technology Council also outlined plans for addressing Russia’s invasion of Ukraine, international trade, responsible technology deployment and cybersecurity, among other issues.

The US-EU Trade and Technology Council is chaired by US Commerce Secretary Gina Raimondo, US Trade Representative Katherine Tai, European Commission Executive Vice President Margrethe Vestager and European Commission Executive Vice President Valdis Dombrovskis.

The focus on the semiconductor supply chain complements a string of previous efforts enacted by the US under the Biden administration to bolster chip supplies.

The US Commerce Department and the Malaysian Ministry of International Trade and Industry said May 11 they signed a memorandum of cooperation to strengthen semiconductor supply chain resiliency and promote sustainable growth.

The White House and US lawmakers have also continued to press Congress to pass the Bipartisan Innovation Act, which includes $52 billion in investments to promote new domestic semiconductor production capacity.

— Nick Lazzaro

China’s oversupplied steel market could soon see some relief as the downtrend in demand is expected to bottom out in the near term, industry sources told S&P Global Commodity Insights May 16.

China’s daily pig iron output hit a record high in April at a time when the market faced tepid demand, keeping steel markets under pressure.

While oversupply in China’s steel market is unlikely to ease at least this month, some industry sources were becoming optimistic about the demand outlook, expecting the downfall to bottom out in the near term.

Improved demand outlook is expected to mostly stem from China’s latest move of reducing property loan interest rates by 0.2 points for first-home buyers May 15, indicating that the country has shifted from deleveraging to supporting the property sector.

Although this move will not reverse the downward trend in property sales or new home starts in the near term, it signals more supportive policies to be introduced to prevent uncontrolled default by cash-strapped developers, which will ease any further squeeze on steel demand.

More importantly, measures to tackle the COVID-19 situation would soon start showing results, leading to smoother logistics movement within the country, sources said.

The pandemic-induced social restrictions and lockdowns in China were the major reasons behind the slump in April’s economic data, and were also hampering stimulus measures in infrastructure, property and manufacturing sectors.

Some market sources believed as soon as logistics and travel can return to normal, China’s fiscal and monetary policy will help begin to accelerate infrastructure investment and manufacturing production.

China’s retail goods consumption will also improve in tandem, which, in turn, would also assist recovery of manufacturing steel demand, sources said.

Robust steel output

China’s pig iron output in April reached 76.78 million mt, averaging 2.55 million mt/day, up 10.80% on the month, National Bureau of Statistics data showed May 16.

April’s figure was unchanged on a yearly basis, as NBS revised the pig iron output in April 2021 from 75.97 million mt to 76.78 million mt.

China’s crude steel production in April was still 5.20% lower on year at 92.78 million mt, but the daily output rose 8.60% on the month to 3.09 million mt, breaching the 3 million mt level for the first time since July 2021.

China’s pig iron and crude steel output in the first four months totaled 280.30 million mt and 336.15 million mt, still 9.40% and 10.30% lower on the year, respectively, according to the NBS data.

Some market sources expected China’s pig iron and crude steel output in May to be at similar levels of April.

China’s electric arc furnace, or EAC, steelmakers were seen reducing their steel production owing to loss-making market conditions. However, output cuts were barely reported at integrated steelmakers that use a blast furnace and a converter route, as they were still posting thin profits or only marginal losses, according to sources.

As the suspension and restarting of blast furnaces is costly, marginal losses do not push steelmakers to cut pig iron and crude steel production.

Languishing steel demand

China’s COVID-19 resurgence in April exacerbated a slowdown in the property sector, leading to adverse effects on overall steel demand greater than on steel production.

China’s property sales value, now a major channel for funding property construction, fell 38.80% on the year in April, declining further from a 17.70% year-on-year drop in March, according to the latest NBS data.

The year-on-year decline in housing starts also worsened to 44.20% on the year in April from a 22.20% decline seen in March.

China’s infrastructure investment rose 3% on the year in April, but the rate largely slowed from the 8.80% year-on-year growth in March.

Major steel consumers in the manufacturing sector also saw a year-on-year decline in April, with vehicle production down 43.50% on the year.

However, May 16, Shanghai released its timetable for lifting lockdowns that began in late March, indicating that the city and the entire country may gradually return to normalcy soon, which would unlikely affect construction and manufacturing activities further, market sources said.

— Staff

Market participants reported increased acceptance from Northern European buyers to lower hot-rolled coil pricing as mills mulled production cuts on reduced demand and high input costs.

Platts assessed HRC in Northern Europe at Eur1,150/mt ex-works Ruhr May 16, stable on the day. In the South, the HRC price fell Eur15/mt to Eur1,050/mt ex-works Italy.

In Northern Europe, market participants held more clarity as to tradable levels with deals reported from several sources.

Multiple traders confirmed deals heard at Eur1,150/mt ex-works Ruhr with an offer heard at Eur1,200/mt ex-works. A service center source also reported the trades, speculating prices as low as Eur1,100/mt ex-works as achievable in the near term due to gaps in mill orderbooks.

“I think, on average automotive demand went down by around 20%, so the mills should have more HRC and other flat steel available,” a Dutch service center source said. “We heard that automotive negotiations have started, but I think prices will reduce significantly in the coming months – either that or mills drastically reduce production.”

A German trader source shared the sentiment, seeing demand as reduced into the mid-term, with buyers waiting for prices to stabilize at lower levels.

“It’s clear, producers are keen to sell and are looking for orders. The longer the customers wait, the cheaper the price will be – the only chance to stop the cycle is to cut production,” the source said.

A similar aversion to purchasing was heard in the import market, with offers heard on the day at Eur940-960/mt CIF Antwerp.

Buyers were heard using competitive import levels in negotiations with the EU mills, but non-EU booking remained scarce due to long lead times and logistical risks.

“With delivery times hitting August-September, buyers simply won’t order in expectation of lower and lower prices – restocking has not started yet,” another trader said.

The source disagreed with other sources’ stances on price direction, seeing “no real reason why the price should fall any further”.

Raw material prices are high, energy costs are tremendously high, and inflation is already at 7.50%.”

In South Europe, offers were heard at Eur1,150/mt and Eur1,050/mt ex-works Italy.

A distributor source cited achievable prices at Eur1,050/mt ex-works Italy, seeing a negative sentiment in the market with prices to potentially decrease as far as pre-war levels when prices were in the Eur800-900/mt range.

Import offers were heard in a range of Eur900-950/mt CFR Italian ports. However, with lead times now extending into October, a trader source reported minimal interest from buyers.

The source expected buyers to return to the market in late May-early June, saying service center buyers would be particularly prudent in purchasing given strong profits realized in recent months.

According to the trader, service center costs were covered as far end of the year, with relevant buyers unwilling to take any risks in the current geopolitical climate.

— Benjamin Steven, Maria Tanatar