Category: Latest Updates

Thyssenkrupp Group made a good start to its new fiscal year, with significantly better order intake, revenue and earnings in the first fiscal quarter through December 2021. This was driven mainly by steelmaking unit tk Steel Europe and distribution unit tk Materials Services.

These divisions each lifted December-quarter revenue by 39% year-on-year – tk Steel Europe to €2.7 billion ($3.1 billion) and tk Materials Services to €3.3 billion. The increase was achieved despite lower shipments due to the disruption in automotive industry output, with tk Steel deliveries down 6% to 2.28 million tonnes and tk Materials down 9% to 1.18mt.

For the distribution unit, adjusted Ebit of €219 million was also significantly above the prior-year level of €5m. Notably, the order intake here in the December quarter rose by as much as 50%, to €3.7 billion.

Regarding the massive increase in energy costs in recent months, thyssenkrupp AG chief financial officer Klaus Keysberg said during a conference call on Thursday that these are being “partly handed down, partly compensated by measures”. He noted that this has been considered in the group’s altogether positive outlook for the near future. “Forwarding these costs is a key theme for the management,” he said during the call attended by Kallanish.

At tk Materials Services, the main emphasis of activities will be on sharpening the network of locations in North America. In the December quarter, it drove forward major investment projects at sites in the USA and Mexico. In Europe, it plans the expansion of the Veghel location in the Netherlands, with the objective of further consolidating the network in the Benelux region. Its mid-term planning envisages warehouse shipments of more than 6mt worldwide.

Christian Koehl Germany

Traders tell Kallanish they have been receiving more merchant slab enquiries so far this year, but availability remains tight, making it difficult to satisfy customers’ requirements. Increasing power costs are driving some mills to consider importing slab instead of making crude steel, the practice that was widespread in the 2000s.

CIS merchant slab suppliers have been developing their downstream capacities throughout the last decade, and ended up with significant flat rolling capacities of every type – plate, hot rolled coil, sheet – in Europe and the US. Since flat products demand went through the roof after the first Covid-19 lockdowns in 2020, these producers have been sending more slab to their own mills, reducing available merchant availability. At the same time, they have also been expanding downstream capacity in Russia and Ukraine, curbing availability further. 

Ukraine’s Metinvest did commission a new 2.5 million tonnes/year continuous slab caster at its Mariupol Ilyich Iron and Steel works in the first quarter of 2019, but it also re-rolls the bulk of its output at the relatively new 1700 rolling mill. This balanced out supply of pig iron, but merchant slab availability has not increased much, especially considering Metinvest’s slab requirements in Italy. Supply issues with coking coal in Ukraine in the past six months also restricted production somewhat.

NLMK, the largest CIS merchant slab supplier, also reduced its availability in 2021 on the renewal of slab shipments to its US assets, and higher in-house requirements both in Russia and Europe. Other, relatively opportunistic Russian suppliers such as Severstal and MMK are also not seen offering slab due to seasonally high demand for their flat products now.

Brazil is continuing to supply the US and the region. The recent rain season has not hampered production volumes drastically, but it tightened output and shipments. No Brazilian slab was seen in the eastern hemisphere in the past year, save for one lot, due to ample demand in the west and high prices, driven by America’s strong flats market. European and Turkish re-rollers were seen enquiring for Brazilian slab this year, and some tonnages may be sold, depending on regional demand and prices, traders muse.

Meanwhile, Turkey, one of the largest merchant slab buyers, has not been importing as much as it used to (see separate article) due to high prices and higher reliance on domestic production instead of billet. Overall, the trend is likely to continue. With all the extra capacity coming on stream in Turkey, slab will probably become like billet – imported more when the price spread works, and less when it does not. Power prices are likely to remain an issue, so mills will remain on the lookout for slab, especially as scrap and iron ore prices are not showing signs of letting up.

Katya Ourakova UK

Seaborne iron ore prices have leapt over the $150/tonne mark for the first time since 1 September 2021. Fundamentals have outweighed concerns of regulatory intervention, wiping out the losses of the previous day.

The Kallanish KORE 62% Fe index jumped on Thursday by $5.10/t to $150.67/dry metric tonne cfr Qingdao. The Kallanish KORE 65% Fe index increased $5.62/t to $179.81/dmt cfr, while the KORE 58% Fe index inched $0.76/t higher to $124.43/dmt cfr.

On the Dalian Commodity Exchange May iron ore settled up CNY 6.5/t at CNY 802.5/t ($126.13/t), while on the Singapore Exchange March 62% Fe futures settled up $7.33/t at $152.94/t. The same contract for 65% Fe and 58% Fe futures settled up $6.96/t at $179.84/t, and up $2.34/t at $127.04/t respectively.

Both scrap and billet prices are also appreciating. 6mm+ heavy scrap delivered to mills in the Yangtze River Delta gained CNY 11/t to CNY 3,652/t. In Tangshan, billet prices were up CNY 20/t to CNY 4,690/t.

Iron ore and steel prices have rapidly brushed aside concerns from the National Development and Reform Commission that prices were increasing too rapidly. The seasonal recovery in steel demand and a recovery in steel output after the Olympics and meetings in Beijing mean iron ore consumption is only expected to increase. By attempting to reassure markets that the real estate sector will not be allowed to collapse, the NDRC itself undermined its attempts to control iron ore prices, by boosting speculation that demand will be strong.

FMG has meanwhile said it plans a 5.4-gigawatt renewable energy power hub in the Pilbara to power its operations and fulfil its net zero targets for 2030. The Uaroo Renewable Energy Hub would include a solar farm and up to 340 wind turbines, as well as a battery storage system. The company expects this to reduce its scope 1 and scope 2 emissions by 1.5 million tonnes/year.

Tomas Gutierrez UK

European HRC prices continue on an upward trend as more contract demand and bookings limited forward spot availability. Steel mills and service centers cited higher offers in both Northern and Southern Europe, fueled by rising raw material costs and decarbonization initiatives. Market participants believe end-user demand for steel from key consuming industries will pick up in the near term, with the exception of automotive.

In the Italian market, a service center source reported a pickup in daily demand alongside confirmed deals on the day, while Northern Europe had “weak” liquidity as buyers held too much stock given reduced project demand, a buyer source reported.

The spread between Northwest European and Italian ex-works HRC prices now stands at Eur80/mt on the day, as offers picked up more aggressively in Italy and the south of Europe. Leading South European mills plan to further increase headline offers up to Eur950/mt by as soon as next week, a distributor source added.

Lower steel production and higher-priced and limited imports further supported the market and new offers, a steel distributor source said.

Platts assessed North European HRC prices stable at Eur980/mt ex-works Ruhr and in Southern Europe prices were assessed at Eur900/mt ex-works Italy Feb. 10.

— Catherine Brown

The European Commission’s Carbon Border Adjustment Mechanism – currently at the stage of a proposal being discussed by the European Parliament – could be counterproductive if it doesn’t provide a solution for EU exporters of steel and other products impacted, said speakers on a virtual webinar organized by Euractiv, a Brussel-based policy events organizer, on Feb 9.

It’s currently unclear whether exporters will be able to apply for continued free allocations under the EU’s Emissions Trading Scheme (ETS) or rebates as from 2030, and what is acceptable under World Trade Organisation rules, said Oliver Sartor, senior adviser, industry, at Agora Energiewende, a Germany-based energy industry thinktank. Some EU industrial sectors export 25% of their production, and companies will be exposed if a dedicated export protection system isn’t put in place, he said.

“We need solutions for exports,” said Alex Eggert, director general of European steel association Eurofer. “The European steel industry exports 20 million mt every year, worth almost Eur20 billion, and if it’s not done right we could lose these exports over time as this cannot all be put on the internal market.”

There is the risk of capacity reductions and structural problems in the EU steel industry if no provision is made for exporters, he said. “We should look into reducing emissions, not jobs.”

The CBAM needs to be totally effective before free allocations are phased out, Eggert underscored. The carbon levy at the border will start only in 2026 and it may take 2-3 years to see whether it is working, so it is important to keep free allocation at the same level it is today during this period, Eggert said. According to current proposals the free ETS allowances will be phased out from 2026, over a 10-year period during which the CBAM will be progressively introduced, in line with WTO principles.

Eurofer is asking both the EU Member States and the European Parliament to ascertain that the system really works before ETS free allocations are phased out to prevent carbon leakage as well as higher export costs, he added.

Eurofer estimates the additional direct carbon costs for the steel industry – with the combined effect of the CBAM and the free allocation phase out – will be of nearly Eur14 billion ($16 billion) in 2030.

Eggert added that Eurofer’s proposal to keep free allocations at the current level supports the entire steel industry chain, including downstream industry, and that the association is working with its lawyers to see how this may be achieved to be compatible with WTO rules.

Maria Elena Scoppio, the EC’s director of indirect taxation and tax administration, described the CBAM as “the external impact of ETS,” designed to tax a product’s carbon content rather than exclude products from certain countries and is “purely a climate-regulatory instrument.”

Judith Kirton-Darling, deputy general secretary of global trade union organization IndustriAll, said it is important to make sure that the CBAM does not end up penalizing the least developed countries. IndustriAll supports greater funding from the ETS going into the Just Transition and Innovation funds, taking the social dimension into account, and potentially also to be used partially outside Europe.

Carbon price ‘game-changer’

Current carbon prices at near Eur100/mt are a “game changer” for EU industries including steel, boosting costs, webinar participants agreed. Miapetra Kumpula-Natri, a member of the European Parliament, said that while carbon at this price level is a “challenge” it is also a signal to investors seeking a stable price which will give an indication of what decarbonization and equipment costs may be, and will also help boost incomings to the modernization and innovation funds. “We’re not very surprised at this price,” she said.

Eurofer’s Eggert said he sees free allocation as key to helping the EU steel industry to boost its decarbonization efforts, noting that before 2018 the carbon price of less of Eur10/mt “did not help to decarbonize the industry.” The industry is also studying the exact definition of what “green steel” is, to launch a methodology, while green steel is already being produced by the sector, he said.

The CBAM will measure only direct emissions of a product, said the EC’s Scoppio.

Importers will need to prove if carbon costs were levied in the country of origin to be able to lower the level of the CBAM applied, she said.

Webinar participants agreed that it would be excessively difficult to calculate products’ indirect emissions under the scope of the CBAM at the current stage. However, if indirect emissions aren’t eventually included in the mechanism, this could lead to circumvention, Sartor claimed.

— Diana Kinch and Annalisa Villa

Voestalpine Group achieved very good profit in the three fiscal quarters that ended on 31 December but notes it was not left unhurt by the surge in raw materials and energy costs.

“The question here is, to what extent we can forward the prices to the market,” chief executive Herbert Eibensteiner said during a conference call on Wednesday attended by Kallanish. He let on that the company is optimistic it can indeed hand down the additional costs in its steel product prices, but was not specific about the extent.

The “enormous surge” in energy costs came especially in the third fiscal quarter, so Eibensteiner’s comment implies that prices, especially on the spot market, should increase. He did not say so explicitly, and referred to the company’s big share of long-term contracts. “There will be a time lag, owed to the different durations of the contracts,” he said.

Regarding the largest sector with such contracts, the automotive industry, voestalpine believes that production at carmakers has bottomed out. “The demand for cars is undiminished,” and the trough was, after all “not due to a lack of demand, but of supply”, Eibensteiner pointed out.

According to the company’s Q3 report, its steel prices climbed through to the end of the reporting period, due to its specific contracting structure. Its direct reduction plant in Texas, for example, profited from good demand for steel in North America.

Christian Koehl Germany

Italian sections prices are flattening month-on-month, while sales activity is sluggish mostly due to the current high level of prices putting off buyers, Kallanish hears.

The largest sections mill in the market is quoting and obtaining orders at €670-680/tonne ($766-777) for the first category of beams. Prices increase by €20/t for each subsequent category. Contract prices remain this week at €670-675/t base ex-works. Including €380-390/t average size extras, contract prices for the first category of sections are hovering at €1,050-1,070/t ex-works, depending on volumes, sources suggest.

Meanwhile, merchant bar prices are also flattening compared to last week at €510-520/t base ex-works. Including size extras, values stand at €930-940/t ex-works. Sellers are unwilling to negotiate despite the weak demand, particularly for merchant bar. Buyers continue to purchase back-to-back. In January, sellers reported some restocking as distributors reached the end of last year with low stocks.

Distributors say that because of the current high prices, activity downstream is slow and many end-users are putting off their purchases or changing selling strategies.

Natalia Capra France

The continued increase in Emissions Trading System (ETS) costs for European steelmakers is raising further concerns over the future of European steel exports in the coming years.

In a webinar organised this week by Euractiv, Axel Eggert, director general of Eurofer, said current plans to phase out ETS free allocations as the market prepares for the implementation of a Carbon Border Adjustment Mechanism (CBAM) could significantly hamper European steel exports.

“European steelmakers export some 20 million tonnes of steel every year; we need to make sure we are not losing these exports going forward,” he warned at the meeting attended by Kallanish. The steel sector is already suffering from a shortage and high costs of ETS carbon permits, he continued, adding that phasing out free allocations by 2023 will increase the pressure further.

Eggert noted that a significant reduction of exports could lead to increasing oversupply of steel within Europe and the need to reduce output and close capacities.

Members of the European Parliament participating on the same Euractiv panel confirmed that risks exist for European exports and that a solution needs to be found to secure the competitiveness of European exporters in the global market.

ETS prices have in February surpassed the level of €95/tonne ($109). In February 2021, prices stood at €38-40/t. The European Commission plans to gradually phase out ETS free allocations as CBAM is implemented during 2023-2035. The phaseout of free allocations is worrying European steelmakers.

Emma Wiesner, Member of the European Parliament, nevertheless stressed that if the free allocation phaseout is slowed down or stopped, there is a risk of not rewarding the frontrunners in the current transition towards carbon-free industrial production and steelmaking.

Emanuele Norsa Italy

The Spanish steel sector saw both steel production and scrap melting decrease on-month and on-year in December 2021, Kallanish notes.

According to Spanish steelmakers’ association Unesid, the local steel industry produced around 858,000 tonnes of crude steel in December. This was 26.2% less than November output of 1.16 million tonnes and down by 4% year-on-year. According to Unesid data, December saw the lowest monthly crude steel production in 2021.

Spanish full-year 2021 output totalled 14,184,000t. Unesid did not disclose a comparison with 2020 volume in its latest report, but taking worldsteel figures into account, the annual growth is estimated at 27%.

Spain used 604,000t of ferrous scrap for steelmaking in December, down 35.3% month-on-month. This volume was also 60,000t or 9% less over the same month in 2020. Cumulative scrap usage was 11,138,000t, representing 78.5% of total crude steel production in 2021.

Todor Kirkov Bulgaria

Stainless steelmaker Outokumpu expects first-quarter financial performance to continue the positive trend seen throughout 2021.

The company notes that newly received orders during the current quarter already reflect higher stainless steel prices and “more than offset the increase in energy and consumable prices”.

The company’s consolidated 2021 sales surpassed €7.7 billion ($8.8 billion), up 37% year-on-year. Ebitda exceeded €1 billion versus only €101 million in 2020. “In an exceptionally strong market environment, we delivered our best annual financial results in recent history,” Outokumpu chief executive Heikki Malinen says in a report seen by Kallanish.

Stainless steel deliveries reached almost 2.4 million tonnes in 2021, up 13% y-o-y.

“Throughout the year, our mills have been running at full capacity … All business areas provided solid results in 2021 and development in realised stainless steel prices has been favourable. We have had logistical challenges throughout the year as the global supply chains have been under pressure. Our teams have worked very hard to overcome the difficult situation,” Malinen concludes.

Emanuele Norsa Italy