Category: Latest Updates

Seaborne iron ore prices rebounded on Friday after their cliff-edge dive on Thursday. Expectations for prices remain confused, but Friday suggested they were settling into a new range.

The Kallanish KORE 62% Fe index regained $8.36/tonne to $140.73/dry metric tonne cfr Qingdao. The Kallanish KORE 65% Fe index increased $7.26/t to $165.48/dmt cfr, but the KORE 58% Fe index appreciated only $3.70/t to $118.90/dmt cfr. 170,000t of PB Fines sold at $136.90/t with a laycan of 25 September-4 October.

On the Dalian Commodity Exchange, January 2022 iron ore settled down CNY 10.5/t at CNY 765/t ($117.71/t), while on the Singapore Exchange September 62% Fe futures settled up $8.03/t at $138.63/t. The same contract for 65% Fe and 58% Fe futures settled up $7.31/t at $156.96/t, and down $1.76/t at $120.33/t respectively. In Tangshan, billet was flat at CNY 4,880/t.

Recovering steel and iron ore futures prices on Friday helped reassure the market that the sell-off on Thursday was too far, too fast. After taking another big step lower, prices are now again expected to settle into a new level. Views are mixed on whether any further step down in prices is needed, but with every step down the previous sense that ore was overpriced has faded.

Across 35 Chinese ports iron ore stocks increased 1.68 million tonnes to 120.33mt, according to a count by SMM. This was despite lower deliveries into stocks. Mills restocking needs were low last week, and restrictions or maintenance reduced demand in Tangshan and Jiangsu. Some mills restocked a little after the sharp drop in prices however.

Tomas Gutierrez UK

Automotive companies are again stopping production due to the shortage of semiconductors, which has been going on for almost a year.

German carmaker Audi, part of the Volkswagen Group, will stop production at its headquarters in Ingolstadt and in Neckarsulm from Monday until the end-August due to lack of semiconductor deliveries, the company confirmed to Kallanish.

In September, the carmaker will be forced to significantly cut the production schedule.

“Our goal is to resolve bottlenecks as quickly as possible and to catch up as far as possible on vehicles that have not been built during the course of the year and the top priority is processing the high order backlog,” Audi says.

Russian carmaker AVTOVAZ is forced again to change the production schedule for the working week starting on 23 August due to the continuing shortage of chips from Bosch. “All three lines for the production of cars at the Tolyatti plant will be stopped throughout the week,” the enterprise says.

The work schedule for the week starting 30 August will be drawn up early next week. However, Avtovaz said that this problem will likely continue during the rest of the year.

The global semiconductor shortage has also hit this week Toyota Motor. Japan’s largest carmaker will reduce production in the country by 40% from 22 August to 17 September. The latest problem come after outbreak of Covid-19 infections in chip plant in Malaysia.

Last week, semiconductor shortages forced Nissan and Volvo to halt some production sites (see Kallanish passim).

Global semiconductor demand for automotive will be supported by a recovery in the automotive industry, higher semiconductor content in electric vehicles and sustained strong demand for consumer electronics and industrial goods, says Fitch Raitings.

Earlier this month, Japan-based semiconductor manufacturer Renesas said it expects semiconductor shortages for the automotive industry will continue until the middle of next year.

Global automotive production could rebound 7-9% on-year in 2021 but will be hampered by supply chain frictions, mainly the lack of semiconductors for OEMs, ING Bank said previously.

The disruption will cost automakers 3.8 million units in lost production in 2021, noted Fitch Ratings.

Svetoslav Abrossimov Bulgaria

Rising metal prices, labor shortages and challenging logistics have continued to support prime aluminum and ferrous scrap grade prices as post-consumer aluminum scrap and obsolete ferrous scrap spreads have widened at a faster pace because of the greater availability of material.

With hot-rolled coil prices holding at a record high and as US aluminum Midwest transaction prices just off record highs, mill margins have continued to increase significantly throughout 2021.

Demand for these products and secondary alloys remains solid, even as automakers’ semiconductor chip shortages and lack of staff at plants challenge nonferrous and ferrous market participants.

These were among the prevailing trends this week in S&P Global Platts’ new low-carbon metals spreads and ratios – a suite of eight price references launched Aug. 13 that allow users to compare low-carbon feedstocks with traditional higher-carbon inputs.

The new spreads and ratios – underpinned by existing Platts assessments in hot-rolled steel, pig iron, scrap, iron ore and aluminum from the US, China, Turkey and the Black Sea region – were launched in response to market participants’ requests for tools to help quantify costs, manage risk, and support opportunities associated with the expansion of carbon-reduction strategies and increasing regulation.

Electric-arc furnace mill margins supported

Long lead times and rising producer prices have supported rising spot hot-rolled prices, even as imports continue to increase in an effort to fill the gap from domestic supply shortfalls, outages and planned maintenance.

Margins for electric-arc furnace mills in the Midwest have continued to rise during the week ended Aug. 20, as HRC spot prices continue to make new highs and as prime scrap prices were steady. Shredded scrap prices have been under pressure as exports have fallen, with Turkey as the major destination for US scrap exports. Shredded export prices are down 14% from the June highs. The Platts HRC-MW No. 1 busheling scrap spread was $1,328.39/st and HRC-MW shredded scrap spread also rose to $1,477.95/st. Margins have risen 99% and 129%, respectively.

The Midwest busheling scrap to shredded scrap differential held at $167.50/lt Aug. 20, as Midwest prime scrap prices were unchanged in August. The melting rate of busheling has supported the differential, but as mini-mills look into evolving technologies to better utilize obsolete scrap, market sources expect that spread to narrow.

Along with planned mill outages, prime scrap demand was expected to fall in September, increasing the availability of material.

Looking forward to the September scrap buy-week, Midwest suppliers see tradable values down $20/lt from the August price of around $650/lt, with shredded scrap prices holding up slightly better.

As the auto sector slowdown has kept busheling tight, and as the market eyes future scrap consumption from EAF capacity expansion, demand for flat-rolled steel has continued to outpace supply as prices remain higher for longer.

Long lead times and rising producer prices have supported rising spot hot-rolled prices, even as imports have continued to increase in an attempt to fill the gap from domestic supply shortfalls, outages and planned maintenance.

New scrap tightens

Strong EAF demand saw new scrap tighten and become more valuable compared with iron ore, expanding the ratio.

The China import HRS101 scrap to iron ore price ratio was at 4.13 on Aug. 20, up from 2.82 on July 21, as 62% Fe iron ore prices have declined by 37.6% from July highs as demand outlook weakened from bearish China steel data. HRS101 scrap prices increased 21.8% since the start of the year, averaging $584.57/mt CFR through Aug. 20 and $592/mt CFR in July. China domestic delivered HMS scrap prices also firmed in July and August from January.

Black Sea pig iron export prices to Turkey HMS scrap dipped to a 1.18:1 ratio on Aug. 20, just below July’s average. US pig iron imports to Midwest Busheling scrap delivered prices were unchanged at a 0.92:1 ratio on the same day, as spot pig iron prices have fallen faster than obsolete and prime grades. US mils remained quiet, awaiting lower pig iron offers. Activity has also slowed in Brazil and Eastern Europe.

Mill, secondary smelter demand remains firm

The spread between Platts P1020 US Midwest Transaction priced and UBCs narrowed to 64.64 cents/lb on Aug. 19, from 67 cents/lb on Aug. 12, or 56% of MWT value.

Imports of UBCs continue to rise, up almost 50% year to date through June, according to the latest US Census Bureau data, to keep up with the shift in more beverages to aluminum cans and the rising percentage of recycled material used to make each can, though class scrap from can making has displaced demand for used beverage cans.

Secondary smelter spreads have also widened even with firm A380 prices, the differential has strengthened as US P1020 all-in prices have hovered around record highs.

The MWT/A380 spread dipped to 30.14 on Aug. 19. Demand for alloys remains solid even as some market sources cited some cancellations or orders being pushed back from their customers that are more tied to automotive. That slack has been picked up by other customers looking to fulfill shortfalls from other orders because of competing smelters limiting production amid summer maintenance.

Rising input costs, such as copper and silicon, continue to support such alloys as 356 and A413.

The mill-grade mixed low-copper clips, or MLCCs, spread to MWT has fallen to 63.14 cents/lb on Aug. 20, from around 47.50 cents/lb June 21. Primary aluminum prices fell slightly during the week.

— Nick Ruggiero, Karen McBeth

Asian stainless cold-rolled coil prices dropped further in the week to Aug 20, amid weakened market sentiment on declines seen in nickel prices and Chinese domestic market.

S&P Global Platts assessed 304 grade 2 mm 2B stainless CRC at $3,050/mt CFR East and Southeast Asian ports on Aug. 20, down $50/mt on the week.

Nickel prices dropped to below the $19,000/mt mark during the week, with the official nickel cash price on the London Metal Exchange settled at $18,476/mt on Aug. 19, down $1,064/mt week on week.

Chinese domestic market saw further declines over the week, in line with the major fall in upstream raw material prices. Spot market fell by some Yuan 600-700/mt ($92-$108/mt) in the spot market in southern China, market sources said.

“The broad steel market saw strong volatility this week. Sentiment is bearish and it’s yet to see a clear outlook now,” said a Chinese trader.

Major mills haven’t announced the new export offers, while overseas buyers were not keen to book amid a falling market. Although Chinese prices, around the $3,000/mt FOB for immediate delivery cargo, remained competitive, sellers were cautious due to the ongoing concerns about potential export duty, said another trader. It remained doubtful whether export duty would be implied soon, he said.

The most actively-traded September stainless steel contract on the Shanghai Futures Exchange was at Yuan 17,640/mt on Aug. 20, down Yuan 600/mt, or 3.3%, on the week.

The European hot-rolled coil market showed little activity in the last stretch of the summer holiday period with market participants assessing possible movements in the next weeks, sources told S&P Global Platts Aug. 20.

The Italian market is expected to come back over the course of the week beginning Aug. 23 but sources said it would be unclear how much demand would pick up initially.

“Stocks are increasing, sales are going down, prices are falling. We have to be careful that stocks don’t grow too fast, we decided to buy as little as we can and keep our selling prices,” said a German stockholder.

The source reiterated previous comments from market participants that increasingly more factors would point towards an easing of material tightness in the HRC market with the restart of Salzgitter’s blast furnace that had been out since 2019, while HBIS Group Serbia Iron & Steel (formerly Zelezara Smederevo) also said they would go back to a two blast furnace operation later this year.

Workable levels were heard in the Eur1100-1150/mt EXW Ruhr range and at Eur1020-1050 EXW Italy.

The Platts daily assessment for Northern Europe dropped by Eur5/mt to Eur1140/mt EXW Ruhr, while the Southern European assessment dropped by Eur5/mt as well to Eur1040/mt EXW Italy Aug. 20.

Another buy-side source said most in the distribution sector would still be on holiday or coming slowly back to the market in Northern Europe and that first talks with mills showed little price move expectations for the coming weeks. A UK steel service center source said however that one European mill said it would raise prices in September for January shipment.

The import market for HRC was heard quiet, but a Russian offer was heard into the UK market at GBP 930-940/mt DDP West Midlands for October shipment.

— Laura Varriale

Fitch Ratings has affirmed Japan-based semiconductor manufacturer Renesas’ long-term issuer default rating (IDR) and senior unsecured rating at BBB- and removed the ratings from rating watch negative (RWN). The outlook on the long-term IDR is stable.

“The stable outlook reflects our view that Renesas total debt with equity credit/operating Ebitda will improve to below 3.0x – the level above which Fitch may consider negative rating action – in 2022 on a June 2021 equity issuance and stronger operating performance,” the credit rating agency says in a note seen by Kallanish.

Fitch forecast Renesas’ like-for-like revenue to rise by around 20% in 2021.

“The strong growth will be supported by a recovery in the automotive industry, higher semiconductor content in electric vehicles and sustained strong demand for consumer electronics and industrial goods,” it claims.

The current global chip shortage also supports Renesas’ pricing power, and strengthens its ability to pass cost increases on to customers, the rating agency added.

“Global semiconductor content in the automotive segment is likely to rise on greater adoption of electric vehicles and autonomous driving,” Fitch says. “We believe Renesas could acquire another company in the medium term to expand its technological capability and product portfolio. The proposed acquisition of Dialog will be the company’s third major acquisition within five years, reflecting its aggressive M&A strategy.”

Earlier this month, Renesas said it expects semiconductor shortages for the automotive industry will continue until the middle of next year (see Kallanish passim).

The global semiconductor shortage has also hit this week Toyota Motor, the company says. Japan’s largest carmaker said Thursday it will reduce production in the country by 40% from 22 August to 17 September. The latest problem come after outbreak of Covid-19 infections in chip plant in Malaysia.

This week, Russian carmaker AVTOVAZ resumed some production sites after a hold in July due to semiconductor shortages. However, it said that this problem will likely continue during the rest of the year.

Last week, semiconductor shortages forced Nissan and Volvo to halt some production sites.

Global automotive production could rebound 7-9% on-year in 2021 but will be hampered by supply chain frictions, mainly the lack of semiconductors for OEMs, ING Bank said previously.

The disruption will cost automakers 3.8 million units in lost production in 2021, noted Fitch Ratings.

Svetoslav Abrossimov Bulgaria

On Tuesday, thyssenkrupp Steel put its meltshop 2 back into operation after modernisation measures, Kallanish is told by the German company.

The furnace is part of its largest steel mill in Duisburg with an annual capacity of 5.4 million tonnes. It took a downtime period parallel to the ongoing relining of blast furnace 1, the hot metal of which is mainly processed into crude steel in meltshop 2. The scheduled downtime did not cause any additional production losses, the company claims.

The focus of the modernisation was the replacement of the ladle transport crane inside the workshop, which has a dead weight of 830t and transports the ladles filled with 265t of molten steel from the converter to the continuous caster.
 
With this investment in plant availability, thyssenkrupp Steel keeps optimising its production portfolio to future markets and profitable steel grades. This includes, for instance, ultrahigh-strength multi-phase steels, grades with high surface quality and steels for e-mobility.

Christian Koehl Germany

Seaborne iron ore prices collapsed on Thursday, falling sharply below expectations. Weak steel demand, production restrictions and a lack of support from overseas markets have all weighed on prices. 

The Kallanish KORE 62% Fe index slumped a record $25.55/tonne to $132.37/dry metric tonne cfr Qingdao, the lowest level since November 2020. The Kallanish KORE 65% Fe index fell $19.35/t to $158.22/dmt cfr, and the KORE 58% Fe index dropped $18.40/t to $115.20/dmt cfr. About 170,000t of Carajas Fines traded on COREX at a floating price.

On the Dalian Commodity Exchange, January 2022 iron ore settled down CNY 46/t at CNY 775.5/t ($119.44/t), while on the Singapore Exchange September 62% Fe futures settled down $18.56/t at $130.60/t. The same contract for 65% Fe and 58% Fe futures settled down $25.09/t at $149.65/t, and down $2.50/t at $122.09/t respectively.

Scrap prices are belatedly responding to the decline in steel and iron ore prices as most mills begin to lower there purchasing prices for scrap delivered to their plants. 6mm+ heavy scrap delivered to mills in the Yangtze River Delta dropped CNY 32/t to CNY 3,726/t. Tangshan billet prices dropped more substantially by 100/t to CNY 4,880/t.

Iron ore sentiment had already been impacted by spreading restrictions on crude steel production, which had first set prices falling. The weaker economic outlook for China in the second half of 2021 was then signalled by the politburo and confirmed with July economic data released last week. Now, combined with the adjustment of expectations within China, the US Federal Reserve has also adjusted its expectations for credit conditions outside China. Iron ore prices could no longer resist the enormous downward pressure.

Now that prices have fallen so dramatically however, traders are not certain where prices will settle. Some expect further declines as the demand situation in China deteriorates. Others however say that prices have dropped too quickly and are due a correction upwards. Chinese steel demand is expected to bottom out shortly, and economic pressure could mean steel output also stabilises, they note.

Tomas Gutierrez UK

With the summer slow period on its way out, the European market is looking onwards to a possible settlement of the Section 232 steel tariff dispute on November 1, which could restore the flexibility of vital trade routes between Europe and the US, compliant with WTO regulations.

Should the tariff on European steel exports be abolished, domestic buyers fear another surge in local steel prices at a time when hot-rolled coil prices are still above Eur1100/mt ex-works Ruhr, and European domestic stock levels remain exceptionally tight.

The US and EU had previously agreed to work together in resolving a metals trade dispute, following from the former’s Section 232 steel and aluminum tariffs against European exporters by the end of the year, according to a joint statement released following the US-EU Summit June 15.

Reaching a settlement could prove difficult, however, with steel tariffs an integral component of the US steel industry, particularly in heavy-producing states like Ohio, Pennsylvania and Indiana.

There is currently no US steel quota system in place, while steel safeguard measures are firmly entrenched in the domestic European market. From July 1, the European steel safeguards were extended by a further three years and included only a marginal 3% increase to existing quota allowances.

EU steel market reacts, concerns build

Reactions to the potential removal of the Section 232 tariffs have been mixed from sources, with sell-side participants keen to capitalize on the arbitrage to the US, whereas higher domestic prices could spell financial trouble for buyers already struggling to extend credit limits.

“The elimination of 25% import tax for EU material into the US might lead to higher export from Europe and price increase here. All those with access to good logistics would benefit,” a German distributor said.

In the Benelux, a service center source said the Section 232 tariffs posed a “real threat” to Europe, but said higher domestic prices were necessary to finance green steel making.

“I think it’s the ambition of the EU to keep prices high in order to finance the transition to CO2-neutral steel melting; otherwise, the EU and individual states will have to subsidize enormous amounts to keep the steel industry in house,” the source said. The source added that China was watching the situation very closely.

If the tariff were to be scrapped, a Benelux buyer also agreed to the possibility of inflated European prices, but said it was unlikely the Biden administration would be easily swayed.

“I have the feeling [President] Biden has the same policy as Trump – America comes first – only he says it in a friendlier way!” the buyer said.

Former President Trump initiated a 25% steel tariff and 10% aluminum tariff on metal imports from most countries under Section 232 in March 2018. The tariff was imposed following Commerce’s investigation which found that surging steel and aluminum imports posed a national security threat.

Mills were mostly optimistic about the tariff discussions, having chosen to withhold raising their prices in anticipation of a possible Section 232 removal. Regardless, European producers are not in a rush to initiate another pricing surge, with current market dynamics working in their favor, a Benelux distributor source said.

“Mills are maintaining prices. They have good orderbooks, the month of September is sold. So, unless something significant like a decision on Section 232 happens, I don’t expect any change,” he said.

S&P Global Platts assessed North European HRC prices stable at Eur1,145/mt ex-works Ruhr August 19, and in Southern Europe, prices were steady at Eur1,045/mt ex-works Italy.

Since the start of the year, HRC Ruhr prices have climbed Eur480/mt, and in Italy, HRC prices have increased by nearly Eur390/mt.

A Turkish service center manager told Platts he didn’t expect the removal of Section 232 to have a serious upward effect on prices, as bearish sentiment has begun to dominate the global steel market sentiment in recent weeks, amid falling raw material prices.

“The effect of the Section 232 removal on prices could be short-lived amid the easing of the availability issues in the global market. Supply options widened. Indian producers are already in the market and Vietnamese producers are ready to enter both the EU and US with competitive prices. These suppliers could change the game plan,” he said.

US market perspective on Section 232 mixed

US market sources were also discussing outcomes from a potential resolution of the dispute.

“I am not convinced that there will be an immediate impact if EU is excluded from Section 232,” a US based trader said. “Everyone is talking about Nov. 1 for the date of a potential solution, but I believe there would be a 60- to 90-day transition period.”

The trader added that such decision would pull European prices higher but did not see it as a “game changer” for US pricing due to limited European idled capacity that could be brought back online in the short run.

Some buy-side sources, however, doubted the impact would be limited as they started seeing more European volumes getting booked in the US. Early August, buy-side sources started reporting HRC transactions at around $1,600/st and CRC transactions at around $1,800/st from at least two separate European mills. Prices were on Great Lakes DDP port basis with November arrival times.

Those import deals were still at a significant discount to US sheet prices. Platts US HRC index was at $1,901.75/st and CRC index at $2109.50/st on Aug. 18, both on ex-works Indiana basis.

— Amanda Flint, Ali Oktay, Rabia Arif, Cenk Can

Tosyali Algerie, which produced more than 2.23 million mt of direct reduced iron (DRI) in 2020, a world record for a single direct reduction module, has continued investments to reach its 8.5 million mt/year capacity target in Algeria, according to Fuat Tosyali, CEO of Turkey’s Tosyali Holding.

Algeria was a net importer of rebar and wire rod when Tosyali started production in 2013 with initial capacity of 1.2 million mt/year of rebar. A 600,000 mt/year wire rod facility was added in 2015 and in 2018, Tosyali added 2.2 million mt/year of liquid steel for the production of billets, two rolling mills, and a 4 million mt/year pelletizing plant.

The company’s rebar production capacity is currently at 3.2 million mt/year. Tosyali also started production in early 2019 at its 400,000 mt/year helical submerged arc welding pipe mill, Tosyali Algeria Pipe.

The company also began the construction of a hot-rolled coil mill in Algeria with a capacity of 2 million mt/year, which is scheduled to start production at the end of 2022.

“Our value-added steel investments at our Algeria mill are continuing. We have already started the fourth phase of our investment plan. When all phases of our investments are completed, we will become a large industrial plant with a capacity of 8.5 million mt,” the CEO said. “We became prominent in the global competition with the technology that we are using. With the DRI technology, we are producing one of the world’s most green and environmentalist steels.”

Tosyali Holding is also continuing its value-added steel investments in Turkey. The company’s new 3.5 million mt flat steel mill is scheduled to start production at the end of 2022, Platts learned.

— Cenk Can