Category: Latest Updates

Russia’s invasion of Ukraine has had a huge impact on the EU steel market and the European Commission should amend its steel safeguard to prevent a further supply squeeze.

The commission is currently conducting a review of the measures, which it started in December. Quotas for some products should be shifted to global, rather than country-by-country, to provide buyers access to sufficient imports.

Between them Russia and Ukraine accounted for almost 20pc of hot-rolled, cold-rolled and hot-dip galvanised strip imports into the EU last year, giving them a sizeable share that will be difficult to replace.

This is not accounting for large slab sales, which are the lifeblood for Metinvest-owned Ferriera Valsider and Trametal, and NLMK’s La Louviere and DanSteel, as well as independent re-rollers such as Marcegaglia. Russian and Ukrainian mills sold well over 4mn t of slab into the EU last year and represent a huge percentage of semi-finished imports overall.

Plate prices and potentially production could be heavily impacted by tighter slab supply, and Russia and Ukraine between them are more than 50pc of the EU import market here.

On other products, the need for a change to quotas is also clear. Take rebar, for example. Russia, Ukraine and Belarus — whose steel is sanctioned — together represented over 45pc of the import market last year, and just under 44pc the preceding year. These sources are for now unavailable, and the energy price spike caused by Russia’s invasion will undoubtedly impact domestic longs supply going forward: an Italian producer has already idled plants in response to higher energy costs, according to market participants.

The absence of Black Sea supply will also increase competition for material from other export markets, such as Turkey. A global quota would allow buyers greater access to material from other markets to compensate for the fall in Russian and Ukrainian tonnages.

Last week the commission said that the Black Sea market remains open and it is unlikely to make changes to its safeguard unless further sanctions are announced. The outcome of the current safeguard review is expected in April, with any new changes effective from 1 July.

By Colin Richardson

US domestic scrap prices, which are expected to settle this week, are likely to follow the ballooning trend seen in the international market amid Russia’s invasion of Ukraine.

Even prior to Russia’s attack, the US market was bullish for March trading, following three consecutive months of declines, but expectations have now exploded as the war in Ukraine is disrupting pig iron shipments from the CIS.

Scrap prices in Turkey increased by more than $120/tonne throughout last week. Turkish mills are receiving steel demand from markets normally served by CIS mills and have therefore increased their scrap requirement, with April-shipment bookings still unfinished. This, coupled with the interruption to CIS pig iron supply, caused scrap prices to jump last week.

Although no bookings from the US are heard, US suppliers are seen targeting to sell at above $650/tonne cfr Turkey.

A US exporter tells Kallanish: “Today’s price will not be valid tomorrow. I am hearing an EU-origin HMS 1&2 80:20 booking at $640/t cfr [Turkey]. If I can confirm this, maybe we will come with $680/t tomorrow. The market is changing by the hour.”

A US domestic supplier says: “Last week we were talking about domestic [scrap] price increases of around $30-40/gross ton. But today, I think prices will rise more than $100/gt. For prime grades, even more.”

One US exporter is heard to have cancelled its shipment to a mill in northern Turkey as the Ukraine war has impacted the Black Sea. There are talks that the vessel will be directed to another mill located in southern Turkey. Some vessel owners are also seen avoiding sailing to the Marmara region.

Later on Monday afternoon, there was a rumour of a US-origin scrap deal being done at $678/t cfr Turkey, though this was rejected by most US suppliers.

Export prices from the US West Coast also increased last week. In Taiwan, offers for HMS 1&2 80:20 container scrap from the US West Coast have increased to above $515/t cfr. Although the market remains bullish over near-term pricing, instability and uncertainty are troubling all market players.

Burcak Alpman Turkey

Long steel producer Pittini Group is idling its three facilities again this week, in Osoppo near Udine, Verona and Potenza, Kallanish learns from trade unions. This follows the initial stoppage and then resumption of activities on 2 March.

The repeated idling is caused by skyrocketing energy costs and difficulty in procuring raw materials, such as ferroalloys and hot-briquetted iron, as a consequence of the Russian invasion of Ukraine. Both the hot-end area and re-rolling facilities are affected by the production halt this time, with temporary layoffs also taking place, a source close to the company confirms.

Meanwhile, other rebar and specialty steel producers are suspending production a few days per week, either reducing shifts from three to one per day or resorting to producing at weekends when energy costs are lower.

Pittini employs around 1,800 workers and has a yearly production capacity of approximately 3 million tonnes across 18 production and logistic facilities. In Italy, the group includes Ferriere Nord, Acciaierie di Verona, Siderpotenza, Pittarc, La Veneta Reti and Siat.

Natalia Capra France

French rebar prices are skyrocketing, in line with other countries, as demand is said to be booming. End-users and distributors are requesting material and stocking up, with some fearing further price hikes.

A “panic-buying” attitude for all reinforcing steel products is now pervading in France, caused by procurement uncertainty and raw material shortages amid the Russia-Ukraine conflict.

Domestic rebar contracts are now at €1,000/tonne ($1,088) ex-works. This includes €260-270/t on average for size extras. Contracted prices for mesh have also increased to €1,050-1,060/t ex-works, sources tell Kallanish.

Cheaper Italian and Spanish material is not being offered in France as producers from these countries are also pushing up their prices. A rebar shortage is expected in these countries due to several production stoppages caused by the Ukraine war’s impact on raw materials supply.

No production stoppages are envisaged in France at present, as producers are well-stocked for scrap and raw materials, Kallanish notes.

Natalia Capra France

Scrap prices in the Benelux have reached €500/tonne ($543) on the back of restricted supply and strong demand.

Benelux exporters, which have been facing limited material inflow for a while and increased their prices sharply last week, have been forced to further increase their dock prices. On Monday, dock prices stood mostly at €480-490/t delivered in Belgium, and increased to €500/t delivered in the Netherlands. Flow, however, is yet to pick up, even at these levels.

A Dutch exporter tells Kallanish: “Domestic suppliers, in expectation of higher prices, are holding material. At €500/t, I could only source 5,000 tonnes today. No one can foresee where the peak will be. I guess they will start selling when prices start to go down.”

A Belgian exporter expects to see €500/t materialise sooner as he is struggling to buy material at €490/t.

In Turkey, sharp price increases are continuing amid strong demand. Following the latest confirmed EU-origin booking at $623/t cfr Turkey over the weekend, European suppliers were seen targeting to sell HMS 1&2 80:20 at above $650/t cfr on Monday.

Although there are talks about a higher-priced – above $640/t cfr – EU-origin HMS 1&2 80:20 booking, the seller and buyer are yet to be confirmed.

Multiple EU-origin bookings were concluded in Turkey last week. Initial bookings at the beginning of the week stood at $517/t cfr levels, while overall through last week prices ballooned by more than $120/t.

One US supplier is heard to have cancelled its previous sale to a Turkish mill in the Black Sea amid the war in Ukraine. A European supplier, meanwhile, is heard struggling to find a vessel to the Marmara region as most ships are also refusing to sail to Marmara due to its proximity to the Black Sea.

Prices in the Indian sub-continent are also increasing, though at a slower pace compared to Turkey. Following the latest containerised shredded bookings at $585-590/t cfr Nhava Sheva, offers are seen to have exceeded $595/t cfr. HMS 1&2 80:20 import prices stood at $530-540/t cfr in the latest bookings, meanwhile.

Burcak Alpman Turkey

Seaborne iron ore prices have surged to their highest since August last year. China’s new GDP targets imply a certain amount of stimulus, while the threat to supply chains is encouraging speculation in higher prices.

The Kallanish KORE 62% Fe index leapt $8.13/t to $157.64/dry metric tonne cfr Qingdao. The KORE 65% Fe index jumped $8.29/t to $188.33/dmt cfr, while the KORE 58% Fe index grew more modestly by $2.49/t to $131.29/dmt cfr.

On the Dalian Commodity Exchange, May iron ore settled CNY 29/t higher at CNY 841.5/t ($133.18/t), while on the Singapore Exchange April 62% Fe futures settled up $9.05/t at $165.88/t. The same contract for 65% Fe and 58% Fe futures settled up $9.85/t at $195.92/t, and up $2.42/t at $134.71/t respectively. 

6mm+ heavy scrap delivered to mills in the Yangtze River Delta jumped CNY 43/t to CNY 3,703/t. In Tangshan, billet prices increased CNY 60/t over the weekend and another CNY 70/t on Monday to CNY 4,810/t.

China is targeting some 5.5% GDP growth this year, the lowest in decades. Even this however will require stimulus, and this is what markets appear to be banking on (see separate article). They have been given additional confidence in this by the global tight commodity supply chain as markets react to the Russian invasion of Ukraine. This has a direct impact on iron ore supply, especially for pellet. It is also having a general inflationary effect through energy prices, which are driving the cost of almost everything higher.

Tomas Gutierrez UK

Russian energy and commodity companies are becoming increasingly isolated in international financial markets, as the London Stock Exchange suspended shares of more companies March 4 following international sanctions on key banks and companies.

The LSE has suspended trade of global depository receipts of more Russian companies, including Novorossiysk Commercial Sea Port and Federal Grid, Russia’s electricity transmission grid, a day after the suspension of major energy and commodity companies including Gazprom, Lukoil, Rosneft, En+ and RusHydro.

“The catastrophic depreciation of the GDRs and their near-inevitable forthcoming delisting is a huge blow to the respective Russian brands, indicating the effective termination of access to western equity capital markets,” George Voloshin, head of the Paris branch of Aperio Intelligence, told S&P Global Commodity Insights late March 3.

The affected companies have operations across crude and refined products, natural gas, power generation, steel and non-ferrous metals, petrochemicals and port infrastructure.

The move would have operational knock-on effects for the companies involved, Voloshin said.

“The dearth of equity capital and the inevitable loss of access to affordable debt funding will leave the brands affected with big operational problems to manage and a lack of realistic opportunities for further growth and expansion,” he said.

For most of the companies involved, “London was the key and often only gateway to the international investor community,” he said. “With their overseas investor base shrinking drastically, the affected Russian brands will have to refocus on the domestic market where, however, unprecedented adverse developments have been underway since Feb. 24.”

GDRs are financial instruments issued by banks that represent shares in a foreign company, allowing them to be traded on a local stock exchange.

“The London Stock Exchange notes the ongoing deterioration of market conditions since 2 March 2022, and in order to maintain orderly markets, the Exchange has suspended the admission to trading […] with immediate effect” of instruments relating to Federal Grid, Novorossiysk Commercial Sea Port and fertilizer company Acron, it said March 4 in a market notice. “The Exchange will continue to keep this situation under review.”

On March 3, LSE issued a similar notice for a range of other companies “further to recent sanctions in connection with events in Ukraine.”

The companies with suspended shares include the following:

• En+
• Global Ports Investments
• Novolipetsk Steel
• Gazprom
• Lukoil
• MMK
• Nornickel
• PhosAgro
• RusHydro
• Tatneft
• Rosneft
• Sberbank
• Surgutneftegas
• Novorossiysk Commercial Sea Port
• Federal Grid
• Acron

— James Burgess

Stainless steel prices are expected to see increases on higher demand, lower supply and higher raw material costs, industry sources told S&P Global Commodity Insights in the week to March 4.

Stainless steel and other steel products have continued their upswing as the global markets recover from the pandemic, with producers having posted their best earnings in recent history last year.

Higher energy prices nevertheless were already an issue in fourth-quarter 2021, with mills having to increase prices. With the additional challenge of the Russian invasion of Ukraine currently, supply of key ingredient nickel was getting limited and pushing energy prices even higher.

The market is already pricing a degree of supply risk as the recent price surge shows, according to a source from a large stainless steel producer.

“According to many analysts, a 30+k scenario is likely if the disruption of supply is fully materialized. We do not have any better knowledge of the price development in a very volatile market,” he said.

Norilsk in Russia is the world’s second-biggest exporter of Class 1 nickel and covers about 50% of the London Metal Exchange stocks. At present, LME holds 80,000 mt of Class 1 nickel. Normally, it holds around 200,000 mt.

Stocks

Stainless steel products are mainly produced with 80%-90% scrap and approximately 10% Class 1 nickel, with both products expected to increase together with higher energy costs.

“With no nickel imports from Russia, we think that nickel stocks in the EU can go very quickly under 40,000/mt. In 2006 when the price of nickel exploded to $55,000/mt, the stocks at LME were precisely at this level of 40,000 mt,” a spokesperson for Euranimi, the European association of independent stainless steel and aluminum importers, told S&P Global.

“Perhaps now can be even worse: Russia/Belarus/Ukraine export 150,000-200.000 mt/year of scrap with 9%-10% nickel to Rotterdam. In round numbers, this corresponds to a production of 200,000 mt tons of stainless steel,” the spokesperson added.

Other sources said although prices can go up mainly on higher energy costs, if the supply of Class 1 nickel becomes particularly tight, “then major producers will become inventive, as they have been in the past to ensure production in support of market demand continues”.

“Nickel can be substituted by manganese in a proportion of stainless steels produced and these manganese-bearing grades represent around 22% of global production currently,” an analyst said.

Exports

Europe produced 6.76 million mt of stainless crude steel in 2019, according to Eurofer data. In term of finished products, Ukraine and Russia have no significant exports of flat products to the EU, but with the exception of seamless tubes and hollow bars. Ukraine exports about 20,000-25,000 mt to EU of bars every year. The remaining approximately 30,000 mt goes as billets to other mills.

Ukraine’s exports of seamless tubes and hollow bars to EU are of sizable volume, a Euranimi spokesperson said.

On top of this, such products are already in short supply in Europe and their imports from Asia are currently either under antidumping restrictions from China or the object of severe customs scrutiny, as a consequence of a report issued by OLAF on alleged circumventions of the AD measures.

The stainless steel sector largely drives global nickel demand, accounting for about 70% of all nickel demand. Alloys take up around 20%, with such demand likely to take the longest to return to prepandemic levels.

The metal is also set to play a pivotal role in energy transition due to the growing market for nickel-cobalt-aluminum batteries used in electric vehicles, which account for around 10% of all nickel demand.

The LME three-months spot nickel price was trading at $29,690/mt as of 1424 GMT March 4 while hitting $30,295/mt in intraday trading. Nickel last closed above 30,000/mt in late-March 2008 at $31,450/mt.

— Annalisa Villa

German authorities have finally approved Tesla’s mammoth $5.5 billion project in Grünheide, in the state of Brandenburg, Kallanish reports.

Both the state and federal governments confirmed on Friday the approval notice was granted with around 400 conditions. This means Tesla can continue its construction works and other activities, but operations will only be allowed to start after “several conditions” are met and checked by responsible authorities.

Such conditions include the installation of measuring devices for air pollutants and precautions for fire protection and accidents. A timeframe for production start-up is yet to be announced by Tesla, following its previous plan to open Berlin Giga last summer.

The final approval covers a project designed to produce up to 500,000 Model Y per year, as well as undisclosed battery manufacturing. It includes aluminium smelting plants and an aluminium foundry; plants for surface treatment, heat generation and storage. The facility also includes an operational wastewater treatment plant, fire brigade equipment house and laboratories and workshops.

“The Tesla approval process is unusual in several ways,” says environment minister Axel Vogel. “In a comparatively short time, the State Office for the Environment [LfU] inspected and approved not just a factory, but an entire industrial area with several large-scale plants and repeated public participation.”

The process started in January 2020 and had several changes along the way. It received 813 objections mostly from environmentalists concerned about its impact on local habitat, water and air. In its 536-page decision, the LfU says Tesla must reforest nearly 318 hectares by year-end and another 319 hectares by the end of 2025. Additionally, the carmaker has to install 90 nesting aids for birds, 60 bat boxes and alternative quarters for reptiles such as sand lizards and smooth snakes.

“The Tesla settlement is a showcase project,” comments economics minister Jörg Steinbach. “Tesla is an investor who was willing to take extensive risks and who in turn also contributed to the acceleration [of investments in the region] … I’m firmly convinced that the Tesla project will have a pull effect for years to come.”

UK blast furnace-based steelmakers say they have contingency plans in place to ensure production remains unaffected amid CIS supply disruption as a result of the war in Ukraine.

Russia’s invasion of Ukraine and subsequent drastic reduction in Ukrainian iron ore and coking coal production, halt to Black Sea export activity and sanctions on Russia limiting trade routes pose question marks over raw materials supply. Many European blast furnace mills rely on feedstock from the CIS for their steelmaking operations.

A British Steel spokesperson tells Kallanish: “We are not reliant on Russia or the Ukraine for supply of our raw materials, therefore we do not anticipate any supply disruptions and continue to operate according to our production plans. Our raw materials procurement teams are assessing the changing global supply chains and trade flows and we have contingency plans in place should this be required.”

Meanwhile, a Tata Steel spokesperson says: “Both Russia and Ukraine are manufacturers and exporters of steel in addition to being suppliers of raw materials including coking coal and natural gas. The tragic events unfolding with the Russia-Ukraine crisis will impact supply-demand dynamics, input costs and the overall global economy. We are continuously monitoring the evolving situation and have contingency plans in place to ensure our customers and stakeholders remain unaffected.”

Various steelmakers in the EU have also said they are thus far unaffected by the situation, with US Steel Kosice saying it has at least 90 days of production’s worth of raw materials in stock, voestalpine also well stocked and Salzgitter having contingency plans to avoid production disruption (see separate story).

Adam Smith Germany