Category: Latest Updates

Reiner Blaschek is the new chief executive of ArcelorMittal Germany, succeeding Frank Schulz who retired at the end of 2021. Blaschek has held the position since the beginning of the year already, Kallanish understands, but the group announced the appointment only this week.

Schulz had been with the company and its predecessors for more than 37 years. He is a native of Frankfurt-on-the-Oder, the city next to which the East German government built steel town Eisenhüttenstadt in 1951. The mill’s original name was EKO (Eisenhütten-Kombinat Ost), which it kept when it later became a unit of Cockerill-Sambre, which was then acquired in the late 1990s by France’s Usinor. Some big-time mergers later, it was renamed to ArcelorMittal Eisenhüttensadt.

Blaschek has a university degree in process technology, and has been with the steelmaker and its predecessor companies for 25 years. He worked for the group in France and Brazil, and was head of flat steel distribution in northern Europe. In addition to his new position, he will remain the ceo of the strip mills in Eisenhüttenstadt and Bremen.

Christian Koehl Germany

The US and UK have reached an agreement on steel and aluminium trade to replace Section 232 measures. US imports of UK-origin steel will from 1 June be subject to the in-quota rate under the applicable tariff rate quota (TRQ) for UK steel, allowing for 500,000 tonnes/year of tariff-free imports. The steel must be “melted and poured” in the UK.

The UK has agreed to provide to the US an attestation in the case of any producer owned or controlled by a company registered in China or a Chinese entity that exports steel to the US under the TRQs. The attestation will be based on an annual strategic audit conducted by an independent third party, to ensure there is no market distorting practices by that producer in the UK that would materially contribute to non-market excess capacity of steel.

Although not specifically mentioned, this point is thought to refer mainly to British Steel, which was acquired by China’s Jingye Group in March 2020, Kallanish notes.

The audit will include an assessment of the steel producer’s and its – if any – UK parent company’s financial records, including any subsidy provided by any government controlled or directed entity in China.

The attestation must be provided by 1 December each year, failing which the US reserves the right to temporarily deny access for the UK steel producer to the in-quota rate for the applicable TRQ.

The US-UK agreement also includes customs cooperation, trade remedy cooperation, shared monitoring of trade, and cooperation on non-market excess capacity and carbon intensity. Both countries will continue measures such as antidumping, countervailing duty, and safeguard measures, and consult each other regarding import surges.

In return, the UK will suspend the additional tariffs imposed on US goods in response to the Section 232 action.

UK Steel director general Gareth Stace says the deal “removes long-standing export barriers and opens up access to this important market once more”. He adds: “Without this agreement UK producers would have remained at a significant competitive disadvantage in US markets to competitors in the EU and Japan, with their exports severely curtailed. From June, UK steel producers will benefit from tariff-free access to customers across the US – from the Atlantic to the Pacific.”

Adam Smith Germany

Italian plate prices have continued to escalate in recent contracts, in line with increasing slab values and energy costs. Producers are seeking strong increases for new orders but some are still not quoting, sources tell Kallanish.

Some mills are delaying orders due to disrupted slab procurement. They are waiting to receive slab bought in March mostly from the Far East. While before the Russia-Ukraine war they were quoting May lead times, delivery times now stretch well into the third quarter.

Demand throughout Europe for S235, the very basic grade, and premium 355 grade is strong, and apparent demand has rebounded in the Italian market with distributors and end-users restocking.

Domestic plate contracts have increased some €200/tonne ($220/t) compared to last week and are hovering at €1,500-1,650/t for S235, with €50/t added for the premium 355 grade, sources suggest.

Some producers are now quoting at €2,000/t ex-works for the basic 235 grade, Kallanish hears. Distributors are buying and selling sizeable volumes at high prices, and reporting a high turnover.

Natalia Capra France

Shipments by Brazilian independent flat steel distributors and service centers fell 3.7% on the year to 312,300 mt in February, according to data released March 22 by the national flat products distributors association Inda. Shipments remained fairly stable during the month from 298,500 mt in January

Purchases from associated distributors fell 8.7% on the year and 2.8% on the month to 293,800 mt in February.

Flat product inventories in the Brazilian distribution network totaled 811,300 mt, down 0.8% from January. The average inventory turnover was 2.7 months of supply.

Finished flat steel imports rose 48.6% on the year to 151,520 mt in February, excluding slab, mostly from China (81.3%), followed by South Korea (8.3%).

Imports of slabs stood at 441 mt in February. In January, slab imports reached 578,200 mt, mostly from Russia.

According to Carlos Loureiro, executive president of Inda, mills should enforce the price increase on flat steel expected for April, set at about 20% divided throughout the month, as the exclusion of Russia and Ukraine from the market affected prices.

“Either prices rise or mills would be selling below direct costs [of purchasing slabs]. Although the domestic market demand is not high, mills have no difficulties exporting,“ said.

— Jose Guerra

Offer prices by Turkish mills for hot-rolled coil have remained relatively stable in recent days, as domestic demand has slowed and buyers focus on lower-priced import options, after HRC climbed by $400/mt in a month in the wake of Russia’s invasion of Ukraine.

Turkish mills have instead focused on the export markets, as the increase in EU quotas is expected to support Turkish mills’ export volumes and prices in the coming weeks, sources told S&P Global Commodity Insights March 22.

The European Commission decided to allocate Russia’s quota to other countries on March 15 after it banned Russian steel imports. As a result, Turkey’s quota for hot-rolled sheets and strips rose to 430,246 mt for the second quarter of 2022 from 323,200 mt in the first quarter.

The sharp rise in HRC prices at Turkish mills, however, spurred notable buying interest in Chinese-origin HRC in Turkey. Turkish buyers booked around 400,000 mt of HRC from China in the last three weeks at competitive prices as low as $980-$1,010/mt FOB, sources said.

“Turkish mills’ HRC offer prices, which rose to $1,300 mt EXW as of the previous week, aren’t yet accepted by the domestic market, as lower imported offers are available,” a manager at a major Turkish pipe producer told S&P Global March 22.

“We also heard that Turkish mills’ HRC offers at around 1,300/mt FOB haven’t yet been accepted by European buyers, as Indian- and Japanese-origin HRC offers are competitive,” he said.

However, he said he is expecting these levels to be accepted in the coming weeks as some availability issues could emerge.

A manager at a Turkish HRC producer said EU buyers who booked some cargoes in previous weeks have refrained from booking new position cargoes in recent days.

A level of $1,250/mt FOB has already been accepted by EU buyers amid an antidumping duty on Turkish HRC, he said, while $1,300/mt FOB has also been accepted in some markets outside the EU.” Indian, Japanese, Koeran, Taiwanese and Egyptian producers are effectively in the EU market, while Chinese mills are actively selling to Turkish and Egyptian markets, he said.

Highlighting that traders had begun to face problems getting letters of guarantee from banks, a service center manager told S&P Global March 22 that trade activities have remained very slow in recent days.

“I don’t think that HRC prices over $1,250/mt could be easily accepted by the domestic market,” he said.

— Cenk Can

Global crude steel production fell 5.7% on-year in February to 142.68 million tonnes due to reduced output in Asia, the EU and CIS. Production also fell 9% versus January, Kallanish notes.

Chinese production is estimated to have dropped 10% on-year in February to 74.96mt, but Indian output was confirmed up 7.6% to 10.06mt. Japanese and South Korean output fell 2.3% and 6% respectively to 7.3mt and 5.16mt. Vietnamese output rose 2.6% to 1.84mt.

EU27 production inched down 2.5% to 11.67mt. Although German output rose 3.8% to 3.22mt, Italian production fell 2% to 2.05mt. French output inched up 0.5% to 1.13mt but Spanish production plunged 13.5% to 941,000t.

Turkish output dropped for a third consecutive month, by 3.3% to 2.95mt.

US production nevertheless continued to increase but growth slowed further to 1.4%, giving 6.4mt, while Brazilian output fell 6.9% to 2.68mt.

CIS output fell an estimated 5.8% to 7.72mt, with Russian output estimated down 1.4% to 5.8mt and Ukrainian production confirmed down 18% to 1.37mt. CIS output figures, especially for Ukraine, will be drastically impacted from March onwards following Russia’s invasion of Ukraine on 24 February.

Global crude steel output in January-February thus fell 5.5% on-year to 299.43mt.

Adam Smith Germany

Pressure on the market from disrupted supply can be eased only by increasing European steel production, temporarily lifting safeguard measures to allow more imports, and ending the war in Ukraine, says the Polish Union of Steel Distributors (PUDS).

Steel supply has been notably disrupted in the EU in recent weeks, both as a result of limited imports and domestic production. Even before the outbreak of war in Ukraine, the cost of inputs – electricity, gas and raw materials – saw unprecedented growth. This led some producers to limit production to periods of lower electricity rates or stop altogether and bring forward planned maintenance.

At the same time, automotive industry buyers have curbed their offtake. If this trend were to reverse, this would put even more pressure on supply, PUDS observes.

The war in Ukraine has exacerbated this situation. As a result, EU steel imports have ceased from Ukraine, Russia and Belarus, which combined account for 25% of the Polish import market. There is a big question mark over how this supply gap is to be filled. Ukraine meanwhile accounts for almost 50% of EU slab imports, and their ceased supply is already translating into reduced rolling mill output in Italy, France and Belgium.

Poland imported 13 million tonnes of steel in 2021 amid apparent steel consumption of 15mt, exports of 5.4mt and crude steel production of 8.1mt. The majority of imports came from EU countries, “but amid the same problems for the steel industry all over Europe, there is no possibility to quickly compensate for the supply gap with other origins,” PUDS chief executive Iwona Dybal says in a note seen by Kallanish. “Also not known are the consequences of changing global steel and raw material trade flows, which the war will cause in the long term.”

Steelmakers and therefore later distributors temporarily stopped taking new orders and offering product. They are now trying to wait out the uncertainty by “offering a future steel price based on hedged cost positions”, Dybal observes. “Both mills and distributors are primarily focused on the fulfilment of long-term contracts, meaning the availability of steel for spot purchases in recent weeks has been limited.”

Soaring steel prices could see distributors as well as end users experience problems in fulfilling long-term contracts, and could lead to further problems with steel availability, since many buyers “will likely increase orders due to fears over future availability and prices of material,” Dybal concludes.

— Adam Smith Germany

More Indian steelmakers could retrospectively increase prices in existing contracts after one major steelmaker did just that this week due to raw material supply shortages that have significantly increased costs, Indian market sources tell Kallanish.

Owing to surging coking coal and ferroalloys prices, Indian mills are planning to invoke force majeure clauses and renegotiate short and long-term contracts with customers. The recent hike in coking coal prices has made it difficult for mills to supply finished steel at January/February contract prices.

“Due to the global geopolitical situation, there is a problem of short supply of raw materials and that too is at a very high price,” Bhushan Power and Steel informed its customers in a note. “This is a force majeure situation … The net impact of this coal and iron ore price increase is coming to INR 25,250/tonne ($331). We request you to accept [the price hike] and continue the same [contract].”

The steel company has requested its customers to finalise their decisions by 25 March, after which the firm will procure raw materials and start contracted production accordingly.

It could not be contacted for comment before deadline on Tuesday.

The coking coal crisis has also impacted production at other major steel producers. One local trader says: “Other steel companies might invoke force majeure in the coming days on soaring coking coal prices.”

The force majeure is expected to impact all bookings done by Indian steelmakers in January and February for April shipment. Bookings for hot rolled coil were done in January at around $730-740/t fob India and in February at $830-870/t fob India. There majority were destined to Turkey, the Gulf Cooperation Council and Europe.

Hard coking coal quotes are currently hovering at around $670-675/t fob Australia.

Sayed Aameer India

Pressure on the market from disrupted supply can be eased only by increasing European steel production, temporarily lifting safeguard measures to allow more imports, and ending the war in Ukraine, says the Polish Union of Steel Distributors (PUDS).

Steel supply has been notably disrupted in the EU in recent weeks, both as a result of limited imports and domestic production. Even before the outbreak of war in Ukraine, the cost of inputs – electricity, gas and raw materials – saw unprecedented growth. This led some producers to limit production to periods of lower electricity rates or stop altogether and bring forward planned maintenance.

At the same time, automotive industry buyers have curbed their offtake. If this trend were to reverse, this would put even more pressure on supply, PUDS observes.

The war in Ukraine has exacerbated this situation. As a result, EU steel imports have ceased from Ukraine, Russia and Belarus, which combined account for 25% of the Polish import market. There is a big question mark over how this supply gap is to be filled. Ukraine meanwhile accounts for almost 50% of EU slab imports, and their ceased supply is already translating into reduced rolling mill output in Italy, France and Belgium.

Poland imported 13 million tonnes of steel in 2021 amid apparent steel consumption of 15mt, exports of 5.4mt and crude steel production of 8.1mt. The majority of imports came from EU countries, “but amid the same problems for the steel industry all over Europe, there is no possibility to quickly compensate for the supply gap with other origins,” PUDS chief executive Iwona Dybal says in a note seen by Kallanish. “Also not known are the consequences of changing global steel and raw material trade flows, which the war will cause in the long term.”

Steelmakers and therefore later distributors temporarily stopped taking new orders and offering product. They are now trying to wait out the uncertainty by “offering a future steel price based on hedged cost positions”, Dybal observes. “Both mills and distributors are primarily focused on the fulfilment of long-term contracts, meaning the availability of steel for spot purchases in recent weeks has been limited.”

Soaring steel prices could see distributors as well as end users experience problems in fulfilling long-term contracts, and could lead to further problems with steel availability, since many buyers “will likely increase orders due to fears over future availability and prices of material,” Dybal concludes.

Adam Smith Germany

US hot-rolled coil futures on the London Metal Exchange pulled back slightly from recent highs during the week ended March 21 but traded steady, as rising input costs have triggered price increases from steelmakers, supporting futures further down the curve.

The structure of the forward curve tightened but still held at wide contangos as futures retreated from recent highs. Spot prices were stronger as US steelmakers announced price increases and service centers were committed to only buying what they needed to fill demand gaps in inventories, as buying activity slowed during the week with the higher mill offer levels.

The March contract settled at $1,165/st March 21, up $32.50 on the week.

The April contract settled at $1,477.50/st, up $10 from the March 14 close and up $262.50 from the start of the first quarter. Spot prices have recovered some of their recent losses, but were still down by $200 during the same period.

The spreads tightened during the week as trading volumes were steady week-on-week, and spot prices were firmer during the March scrap buy week, settling at $1,300/st March 21, up $80 on the week.

The spot-to-three month spread narrowed but remained in contango, last settling at $242.50/st. Second-quarter contracts started to receive support, and bids for spot volumes continued around the $1,300/st-$1,400/st level as mills scrambled to secure raw materials amid concerns of a possible disruption after Russia’s invasion of Ukraine.

The contract’s volumes saw 470 st trading. More than 632,000 st have traded since the contract’s launch in 2019.

Spot prices in the physical market have recovered as inventories, which have been the main driver of a price correction, remained at elevated levels, and some physical traders and importers have stopped quoting future tonnage due to uncertainties around input costs.

The average mill lead time for HRC ticked up to 4.7 weeks amid availability from several mills, according to S&P Global Commodity Insights data.

— Nick Ruggiero