Category: Latest Updates

China’s crude steel output fell 8.4% year on year to 86.79 million mt in July, marking the first month of year-on-year decline since April 2020, National Bureau of Statistics data released Aug. 16 showed, but was still outpaced by a decline in demand from the property and infrastructure sectors.

Crude steel output averaged 2.8 million mt/day in July, down 10.5% from June and also marking the lowest level since April 2020, the NBS data showed.

Pig iron output at 72.85 million mt averaged 2.35 million mt/day in July, down 7% from June and down 8.9% year on year.

Market sources were expecting iron and steel output to decline further in August, but had mixed views on the price outlook for the rest of 2021.

A fall in construction steel demand from the property and infrastructure sectors, which accounts for around 50% of China’s total steel consumption, has outpaced the decline in output since July, resulting in steel inventories reaching the second highest volume on record in mid-August, market sources said.

As a result, China’s rebar price fell 3% between July 26 and Aug. 16, when it stood at Yuan 5,310/mt.

Floor space for new home starts fell 21.5% year on year in July, while infrastructure fixed asset investment or FAI fell 10.5% over the same period, according to Platts calculations based on NBS data.

Over January-July, China’s crude steel output was up 8% year on year at 649.33 million mt, the NBS data showed. Pig iron output rose 2.3% over the same period to 533.5 million mt.

Property new starts edged down 0.9% on the year over the seven-month period, while infrastructure FAI rose 4.6%, although slowing from 7.8% year-on-year growth in H1, according to Platts calculations based on NBS data.

Outlook uncertain

Some market sources expected China to continue efforts to deleverage its property sector and address hidden local debt risks behind infrastructure projects in coming months.

As a result, construction steel demand was expected to decline in H2 from a year earlier, while construction-related manufacturing segments such as excavator and heavy truck building were also expected to slow down, according to market sources.

“The trend of Chinese steel prices in H2 will largely depend on how aggressively China implements steel output cuts, but so far nobody is sure about timetables and scales,” one market source said.

In a bid to ensure that calendar 2021 output is on par with 2020, China’s crude steel production over August-December would have to decline by 48 million mt or 10.4% on the year to 416 million mt, or 2.72 million mt/day.

Some market sources said it would be challenging to achieve, as there were more than 500 steelmakers in China and coordinating output cuts among them was a complex task.

They expected China’s steel output cuts to increase in the fourth quarter as construction activity in northern China’s is pared back to reduce air pollution ahead of the Winter Olympics in Beijing and Zhangjiakou in February.

“The only certainty in the Chinese steel market may be that steel prices will fluctuate greatly in H2,” one source said.

NLMK has extended the suspension of production at BOF shop No.2 at its flagship Russian Lipetsk works until 21-23 August to enable additional works on the oxygen distribution unit, the company says in a statement sent to Kallanish.

The BOF shop No.2 was halted after the pipework supplying oxygen to the shop was damaged in an incident on 9 August. The repair works were supposed to take 48 hours, with around 46,570 tonnes crude steel output loss based on its nameplate capacity of 8.5 million tonnes/year in 2020.

The BOF No.2 oxygen supply was eventually reinstated after five days, but the need for further infrastructure enhancements was identified, postponing the full relaunch. The firm is yet to provide full output loss volume.

The newly reconstructed BOF shop No.2 is projected to produce 10m t/year once the equipment and processes are fully established. It has been producing at the initial capacity of around 8.5m t/y thus far this year. Enabled by reconstruction, dust emissions at BOFshop No.2, which produces around 60% of Liptesk’s crude steel, are reduced by 2.5 times.

Katya Ourakova UK

EU finished steel imports surged 44% on-year in the second quarter to 2.5 million tonnes, reflecting improved demand across the EU and the low base effect, says European steelmakers’ association Eurofer. Intake from Russia and Turkey rose 38% and 7% respectively, while supply from Ukraine soared 106%.

Flat and long product intake rose 46% and 34% respectively in Q2. Hot rolled wide strip was the most-imported product at 939,000t, followed by hot-dip galvanized coil at 506,000t. Long products represented 21% of imports.

EU exports to third countries slumped 30% to only 494,000t, with flats and longs declining 33% and 24% respectively. Exports to number-two market the US fell only 3%, but those to number-one market Turkey dropped 40% and to number-three market Switzerland by 19%. Exports to China fell 37%.

The EU’s total steel product trade deficit (finished plus semis) amounted to 1.3 million tonnes/month over Q2, mostly due to the “exceptional” rise in imports in May and June, compared to 912,000 t/m in Q1, Eurofer observes in its latest quarterly report sent to Kallanish. For finished products, the Q2 trade deficit was 1.7mt versus 367,000t in Q1.

The biggest trade deficits were with Russia (364,000t), Ukraine (243,000t) and Turkey (232,000t). The trade position with Turkey had improved from Q1 2019 to Q4 2020, reaching an all-time low of 21,000t. However, the trade deficit with Turkey has started to increase again since Q1 2021, reaching 232,000t in Q2, Eurofer says.

Adam Smith Germany

EU27 apparent steel consumption rose 0.9% on-year in the first quarter to 36.3 million tonnes, reflecting further recovery from last year’s Covid-19 shock, while domestic EU deliveries rose 1%. Imports from outside the EU meanwhile fell 2.5%, the ninth consecutive quarterly drop, says European steelmakers’ association Eurofer.

The association sees the bloc’s overall end-use output rebounding 9.3% on-year in 2021, with growth slowing to 4.6% in 2022.

EU end-use sector output recovery continued in Q1 despite considerable problems in the global supply chain, particularly for the automotive sector – rising transportation costs, rising fuel costs and shortage of components, Eurofer observes. End-use output growth rebounded 2.6% in Q1, the first quarterly increase since Q3 2019.

“Industry in the EU has recovered the output loss experienced during the pandemic, but activity remains exposed to fragility and risks, due to persisting uncertainty around vaccination plans and the ongoing consequences of the pandemic, which is not yet over,” Eurofer says in its latest quarterly report sent to Kallanish.

Industrial output is likely to continue to grow and to gain further ground over the second half of 2021, provided there are no further shocks. Growth in 2021 and 2022 is seen at 8.6% and 4% respectively.

Real steel consumption however fell 0.6% in Q1, the eighth consecutive quarterly drop. It is expected to recover 7.9% on-year in 2021 after the counter-cyclical destocking process seen throughout 2020 came to an end in Q1.

“Government investment and public expenditure are expected to play a rather robust, countercyclical role and could provide a strong contribution to the growth of domestic demand, although the most visible effects will only be visible from 2022,” Eurofer says of the macroeconomic scenario.

Adam Smith Germany

July data shows Chinese demand fell further from June, and that steel output fell on-year for the first time in 2021. Demand has been hit by weak construction activity in excess of the normal summer slowdown, and reduced output has not yet been enough to match the reduction in consumption, Kallanish notes.

At 86.79 million tonnes, crude steel output was down 8.4% year-on-year, and 7.55% month-on-month in July, according to the National Bureau of Statistics (NBS). Over the first seven months, crude steel output is now only 8% higher at 649.33mt, after increasing 11.8% over the first half.

Apparent steel demand was also down thanks to the lower output. Apparent demand was at 78.781mt in July, down 13.49% y-o-y and 6.63% m-o-m. Over seven months, at 588.77mt, apparent demand is now up 5.82% compared to this time last year.

The growth in inventory levels slowed down in July, but did not stop, and the inventory rate deteriorated significantly. Adjusting for inventory change, end user demand was down 7.9% y-o-y, and fairly constant m-o-m at 76.99mt. Taking into account the longer month however, end user demand was down 3.26% m-o-m at 2.484m t/d. Over the first seven months, end user demand is 7.54% higher on-year at 557.397mt. This also meant the July 2021 inventory rate (inventories/demand) was up from 107.5% last month and 100.62% in July 2020, at 111.14%.

Tomas Gutierrez UK

The EU’s apparent steel consumption is expected to return to pre-pandemic levels this year and continue growing in 2022 ,driven by the continued improvement in demand from steel-using sectors, European steel association Eurofer said Aug. 16.

After a difficult period that was impacted considerably by the pandemic, consumption is set to increase by 11.2% this year, reaching 143 million mt, and then to grow “more moderately” by 3.7% in 2022 to 149 million mt.

EU steel consumption in 2020 plummeted by 10.6% to 129 million mt, after a drop of 5.3% registered in 2019 to 144 million mt, the association said.

That followed a record-high year in 2018, when apparent consumption was 152 million mt.

“The loosening of COVID measures over the third quarter of 2020 allowed industrial activity to restart, with a considerable rebound in output compared to the record lows seen in the preceding quarter,” Eurofer said.

The recovery continued – at an even faster rate – over the fourth quarter of 2020 and up to the first quarter of 2021, driven by a faster-than-expected demand especially from domestic appliances and automotive sectors.

The fourth quarter of last year registered growth in apparent consumption (+3.6%), the first quarterly growth in apparent consumption since the fourth quarter of 2018. This trend continued over the first quarter of 2021.

Domestic deliveries by EU steel suppliers increased year-on-year in the fourth quarter of 2020 by 4.6%, after eight consecutive quarterly drops, reflecting the improvement in demand within the EU. Positive developments were also observed in the first quarter of 2021, albeit at a lower rate (+1%), the association said.

Total imports of finished products into the EU marginally increased year-on-year in the first quarter of 2021 (+2%) after a drop of 5% in Q4 2020. This was the first increase since the third quarter of 2019. Imports surged considerably over the second quarter (+44%), “mirroring improved demand across the EU but also — to a limited extent — due to the comparison to the low levels recorded in the second quarter of 2020,” Eurofer said.

Imports were volatile across 2020 and in early 2021, continuing a trend seen in 2019. In the second quarter of 2021, the main countries of origin for finished steel imports into the EU market were Turkey, Russia, South Korea, India and Ukraine, which together accounted for 78% of total EU finished steel imports.

— Annalisa Villa

Turkish mills’ section exports in the first half exceeded 1 million mt, as market diversification supported mills’ export volumes. According to the latest monthly Turkish Statistical Institute (TUIK) data observed by S&P Global Platts, Turkish mills’ sections exports through June totaled 1.03 million mt, up 14.5% on year.

Peru became the largest importer of Turkish sections in H1 at 72,900 mt, up more than fourfold on year, while exports to Colombia reached 55,500 mt in that period, more than double on year.

Morocco became one of other largest importers of Turkish sections in that period at 66,900 mt, up 11% on year, while Turkish mills’ sections exports to Egypt totaled 62,400 mt, down from the 102,000 mt in the same period the previous year.

Turkish mills’ also exported 39,200 mt of sections to Canada in the six-month period, while Turkey’s section exports to Malaysia totaled 37,000 mt.

Turkish sections exports to the EU region remained generally low in January-June while exports to the US totaled 18,000 mt.

Turkey’s other sections export markets in H1 were: Israel (36,500 mt), Argentina (31,700 mt), UAE (22,400 mt), Senegal (21,000 mt), Iraq (20,500 mt), Greece (20,400 mt) and Yemen (18,500 mt), the latest data showed.

— Cenk Can

“Gray” steel will eventually be obsolete in Europe as “green” steel gains competitiveness, said Gunnar Groebler, CEO of German steelmaker Salzgitter, a pioneer in the development of hydrogen steelmaking.

“In the short term we expect higher prices, or price premiums, for green steel in the EU due to added green value to the customer and a supply shortage up to the mid 2020s,” Groebler told analysts on a H1 company results call.

“In the medium- to long-term the price premium will diminish following increased supply. There will be higher competitiveness of green vs. gray steel due to CO2 regulations and rising prices generally. Eventually gray steel will be obsolete in Europe due to price pressure on the gray steel given oversupply vis a vis demand.”

For these reasons Salzgitter believes “green steel is marketable, fundable and economically viable… we see strong interest from customers for green steel produced via the hydrogen route,” the CEO said.

The steelmaker is already developing so-called “green” steel and will ship low volumes of this product to vehicle maker Mercedes Benz for structural body parts production this year, Gunnar said.

It is also commissioning 30 MW capacity at its own wind power installations and working together with miner Anglo American on optimizing iron ore products to supply DRI plants to reduce carbon footprint.

Hydrogen initiatives

Salzgitter continues with ambitions to achieve its first hydrogen-based steel production by end-2025 under its SALCOS initiative.

The steelmaker has joined the GetH2 initiative as part of a consortium of seven companies in various industries which plan to together reduce emissions by 60 million mt in 2030, said Groebler on the call.

The company is building a hydrogen-based direct-reduction plant at Salzgitter and is also involved in a consortium which is undertaking a feasibility study into construction of a 2 million mt/year DRI plant at Wilhelmshaven, a deepwater port on Germany’s North Sea coast which also involves construction of an upstream hydrogen electrolyzer.

“There is strong political support to develop this area,” Gunnar said. The consortium has applied for innovation funding backing from state sources for this project that could potentially provide Eur900 million ($1.06 billion) or above 50% of its total cost, he said, adding that there was no clear timeline yet for this project to go ahead.

The SALCOS initiative aims to reduce Salzgitter’s own CO2 emissions of 8 million mt/year at present by 30% by 2025, by 50% by 2030 and by up to 95% by 2050, with use of DRI installations, an electrolyzer, and greater EAF capacity, eventually phasing out BF usage, Gunnar said. Use of natural gas will be phased out as green hydrogen becomes available and viable.

“We have applied for EU and federal and state programs to get support of the first phase (of the SALCOS plan, up to 2025),” he said. A binding response on the financing requests may come by early 2022, he added.

— Diana Kinch

US hot-dip galvanized and cold-rolled coil prices maintained their levels on Aug. 12 as domestic mills were still mostly able to book volumes of those products at $2,100/st and above.

The daily Platts TSI US HDG-HRC index rose $12.75 over the week to $2,117/st, while the daily Platts TSI US HDG-CRC index was down by $2.50 at $2,109.25/st within the same time frame. The daily Platts TSI US CRC index moved higher by $4.50 over the week to $2,100.25/st.

Market sources continued noting displaced HDG volumes due to automotive shutdowns but those transactions were not taking place at discounted prices.

“HDG is still the tightest product in the market,” a Midwest service center source said. “If I find HDG availability, it is much easier to find a buyer compared with HRC.”

The service center source said he was able to place orders of HDG with HRC-substrate at $2,100/st and HDG with CRC-substrate at $2,120/st from a Midwest mini-mill for late September production.

Multiple buy-side sources confirmed those levels and some buyers reported HDG with HRC-substrate transactions from the mill as high as $2,140/st.

A southern US mill source anticipated current supply-demand conditions would be sustained through year-end.

“Service center inventories moved up a little last month but they are still low. Imports are rising, but I still think the planned outages cover much of these two issues,” the source said.

The mill source saw supply disruptions the dominating factor for pricing outlook. He started quoting their CRC and HDG availability for October at a minimum of $2,100/st and saw little availability in Q4 as they will run planned outages at the hot strip mill and galvanizing lines.

Another Midwest service center source said he was able to book 300 st of CRC from an integrated mill at $2,100/st.

A third service center source’s transacted level was higher, at $2,140/st for 300 st of October production from a southern mill, and emphasized that those volumes were all that he could get from the mill. He added that he paid the same price for a small-sized order of HDG with HRC-substrate from a Midwest mini-mill.

A Midwest buyer was able to take advantage of displaced automotive volumes from an integrated mill. He reported a transaction of HDG with CRC-substrate at $2,110/st for about 1,000 st from an integrated mill for October production. That price was $20/st above what he paid for a similar-sized order from the mill two weeks prior.

The spread between prices for HDG with HRC-substrate and HRC was at $218.75/st on August 12, according to S&P Global Platts pricing data. Domestic mills continued capturing large premiums for value-added sheet products despite some recent openings related to the auto slowdown.

The combined Platts TSI price index uses a volume-weighted-average calculation – according to TSI’s standard – to determine value on an ex-works Indiana basis.

— Ali Oktay

A strike at German railway operator Deutsche Bahn is jeopardising the already difficult recovery of the economy, several economic organisations have warned.

The strike was started on Tuesday by train drivers union Gewerkschaft Deutscher Lokomotivführer (GDL) and is announced to last until 13 August.

“Companies now need stability and planning security,” says Steffen Kampeter, head of the Federation of German Employers’ Associations (BDA). “Therefore, reliable freight transport is indispensable for strengthening the still fragile economic upswing,” he says in a statement retweeted by steel federation WV Stahl.

According to calculations by the Institute of the German Economy (IW) and the experience of past strikes, the GDL strike could be expensive for many companies that depend on deliveries by rail. The costs would depend above all on the duration of the strike. It will take about three to four days until the companies clearly feel the consequences of the strike, the institute says. According to empirical values from previous GDL strikes, the daily losses for companies could amount to up to €100 million ($117m).

Steel transportation by rail has seen extra impairment already by the flood that hit especially the Ruhr region three weeks ago, Kallanish notes.

Christian Koehl Germany