Category: Latest Updates

The European hot-rolled coil market showed further price stability July 29 as buying activity became more muted because of full order books and expectations of greater capacity coming into the market from imports, sources told S&P Global Platts.

Most buyers and distributors were waiting for material booked several months prior to be delivered, with order books already full for the year. Longer delays because of the severe floods in Germany and the Benelux countries were another factor contributing to the wait-and-see mode in the market, with buyers cautious of needing to wait even longer for already late orders.

“We are waiting for material to come in,” a German distributor said. “This was impacted by the floods. Trucks and trains can’t come through their usual routes. We don’t order now because we have enough. Sales are down, inventories are increasing. That’s why we don’t have necessity to buy.”

Travel logistics in Europe were still in dire straits, with a critical lack of available train wagons and trucks made worse by the flooding.

“They have produced the material on stock but they can’t get it to us,” the distributor said of mills. “It makes no sense to order new material.”

Steel capacity was also heard to be increasing, with greater availability from imports, specifically from Serbian mills and Brazilian producer Usiminas.

In the Italian market, market activity was already starting to slow ahead of August, when most steel outlets close for the holidays.

Most volumes changing hands were committed to contracts, with few spot transactions and the expectation of further softening on the horizon.

“We’ve had [cheap] offers from Korea, and then rerollers from Italy have also offered some discounted prices to customers,” a European mill source said. “We’ve been having stable prices, don’t see anyone with big deals.”

July was also reportedly a good month for sales in Italy, with stockpiles also relatively high and inquiries for Q1 material having already started.

“Customers are pushing for price decreases and are not buying,” an Italy-based trader said. “I am happy because they will pay more later. The gap between imports, Italian and European mills is still very high, but I have the feeling that customers didn’t buy much from imports.”

Overall, Italian sentiment pointed toward a decrease in prices, less demand and the possibility of more capacity available, with one major European mill having restarted a blast furnace and now heard to be offering competitive prices.

— Amanda Flint

Klöckner & Co generated record Ebitda in the first half of the 2021 financial year of €401 million ($477m), according to preliminary figures.

For the third quarter, too, the German-based steel distribution group says it expects operating income to be significantly stronger “than previously expected by the market”. In an ad-hoc release, it gives a range of €200-230m for Q3.

The group keeps cashing in on the continued positive dynamic of steel prices in its main markets, Europe and the USA. It also cites extremely strict networking capital management.

Notably, the flood damage in various German areas have not diluted Klöckner’s outlook. Although the company is headquartered in Duisburg on the Ruhr, none of its warehouses were flooded, a spokesman tells Kallanish. This applies also to mega service centre Becker in nearby Bönen, which was erroneously mentioned in some daily reports, he emphasises.

For the full year, the company now forecasts to achieve Ebitda of €650-700m, which it says is also above the previous market expectation. This would mark the group’s best operating full-year income since its initial public offering in 2006.

Klöckner’s statement continues a series of ad-hoc releases it has published throughout this year. In the course of both the first and second quarters, it announced upward corrections to its initial guidance.

Christian Koehl Germany

ArcelorMittal says it has signed a binding agreement with Condesa Tubos for the acquisition of the 67% shareholding it does not own in the Spanish welded tube manufacturer, Kallanish learns from the steelmaking giant.

ArcelorMittal has had a 33% participation in the company since February 2016, as a result of its restructuring within the framework of the so-called “Phoenix Project”. The balance of shares is owned by banks Santander, BBVA, CaixaBank, Kutxabank, Bankinter, Caja Rural de Navarra and Banco Sabadell.

“As part of this agreement, Spain’s Zalaín Transformados, Cold Profile and Condesa Fabri plants, as well as Germany’s SRW Schwarzwälder Röhrenwerk, will become part of the ArcelorMittal Europe – Tubular Products structure,” the steelmaker says. With the acquisition, ArcelorMittal will expand its market presence with a wide range of high-added-value products.

The acquisition now awaits approval from Spanish authorities, and other closing conditions, ArcelorMittal adds.

Todor Kirkov Bulgaria

NLMK has restarted production at its Belgian rolling mill of La Louviere since last weekend. The mill declared force majeure last week following a fire at the site.

“We have resumed the ramping up of the HSM [hot strip mill] and are already seeing benefits from the new capabilities as a result of the upgrade project,” an NLMK spokesperson tells Kallanish. “We are doing all we can to mitigate the impact on our customers.”

NLMK Louviere has a production capacity of some 1.7 million tonnes/year of hot rolled coil, currently being lifted by the latest investments at the site.

Emanuele Norsa Italy

ArcelorMittal has further improved its outlook for European steel demand, as the market continued performing strongly during the second quarter.

The group now expects regional demand to recover 13-15% year-on-year in full year 2021. The previous forecast was for 7.5-9.5% growth, Kallanish notes.

“Looking forward, we see the demand outlook further improving into the second half and have therefore upgraded our steel consumption forecasts for the year,” says ArcelorMittal Group chief executive Aditya Mittal. Meanwhile, ArcelorMittal registered increasing profit and production at its European units during Q2.

Operating income reached $1.2 billion in the June quarter; in the first half of the year operating income was $1.8 billion, against a loss of over $600 million in H1 2020.

Production at the company’s units continued recovering in H1. In April the group adjusted its calculation to take into consideration the reduced share of control of the former Ilva unit in Italy. Q2 adjusted crude steel production in Europe was up 6.5% on-quarter, supported mainly by the reopening of one blast furnace in Ghent, Belgium.

Emanuele Norsa Italy

China’s Ministry of Finance said on Thursday it has decided to cancel export tax rebates for more steel products from 1 August. These products escaped the last raft of tax rebate cancellations in April, which were meant to encourage the export of high-end products.

According to the announcement, 13% export tax rebates for 23 steel products will be cancelled starting 1 August, Kallanish reports. These products are mainly cold rolled coil, galvanised steel, silicon electric steel, rail and seamless pipe used for natural gas and drilling for oil.

They come under HS codes 7209.15.10, 7209.15.90, 7209.16.10, 7209.16.90, 7209.17.10, 7209.17.90, 7209.18.10, 7209.18.90, 7210.12.00, 7210.30.00, 7210.49.00, 7210.61.00, 7225.11.00, 7225.19.00, 7225.50.00, 7225.91.00, 7225.92.00, 7226.11.00, 7226.19.00, 7302.10.00, 7304.29.10, 7304.29.20, and 7304.29.30.

Last year, China exported 13.58 million tonnes of these products to overseas markets, down 15.53% year-on-year, according to customs data. Due to the recovery of overseas demand in the six months through June this year, total exports came to 10.53mt, up 42.8% y-o-y. This also exceeded the level of the same period in 2019.

In a separate document, the ministry announced an increase in export taxes on high-purity pig iron and ferrochrome. These will now be set at 20% and 40% respectively. The HS code for pig iron covered by the tax change is 7201.10.00, while ferrochrome comes under HS codes 7202.41.00 and 7202.49.00.

There is still no announcement about the rumoured export tax on hot rolled coil, however. Traders estimate this could be announced one month later and take effect from 1 September. “We don’t think China will abandon it, but September could be the possible timeline for the change,” a source opines.

By Kallanish Team

Damage from heavy rains on the Ruhr and in other German regions have to some extent raised concern among buyers further afield.

“I had mail from German mills that claimed some kind of force majeure, telling us there could be delay of deliveries. The damage is mostly affecting their transports, rather than the production plants,” a Benelux manager says.

An assessment in terms of figures cannot be given by anyone as of yet. On the waterfront, so-to-speak, companies are still very much busy cleaning up and re-organising their logistics, rather than taking stock. “I do not have any time to talk to you now; I ask for your understanding,” says a service centre manager and friend of Kallanish, summing up the prevailing sentiment.

As far as Austria, some are preparing for additional shortages of coil products due to the flood. “We did get force majeure notifications from the cold-rollers, too, so we will feel delays in deliveries later on,” one manager says. The shortage already seen for months will be aggravated because of a domino effect, he says. “Our competitors and large consumers will now be looking for alternative sources,” he forecasts.

This could mean more buyers queuing up at the local Austrian mill, which could cause new delays for other Alpine customers. “It remains to be seen how bad that will turn out after the summer break when the automotive crowd comes back.”

Christian Koehl Germany

European domestic steel sections prices remained stable on week to July 28, as mills continued to hold offers at elevated levels.

S&P Global Platts’ European medium sections price (category 1, S235 JR) was assessed at Eur1,050/mt delivered July 28, unchanged on week.

“The lowest available price is Eur1,050/mt delivered, but it’s a high price to buy at in a quiet holiday market,” a distributor in the Benelux region said. “Prices are relatively high, so I don’t see much more upside.”

Some European mills were heard to target Eur1,080-1,100/mt delivered for August shipment, while one German mill was heard to offer as high as Eur1,150/mt delivered for September shipment.

One European producer said deals had been confirmed at Eur1,050/mt delivered but that they would not be “surprised if someone tried to offer Eur1,100/mt even though the market is quiet.”

A second distributor source noted that domestic lead times remain around 4-6 weeks, with some mills undergoing a longer summer maintenance period than usual.

Turkish import offers for category 1, S235 JR material were heard to be much cheaper than domestic material at Eur850-900/mt delivered, but for delivery in October and November. This would mean the material would be cleared for the fourth quarter of the EU steel import safeguard quota, with the long lead time considered unattractive for distributor sources.

The EU import quota for non-alloy and other alloy merchant bar and light sections of Turkish origin for Q3 totaled 65,582.60 mt and was already exhausted by July 13. The Q4 2021 quota has the same tariff-free volume.

— Viral Shah

European HDG prices were stable July 28 as a lack of automotive demand due to the shortage of semi-conductor and chip supply and overall quietness in the market kept activity steady, sources told S&P Global Platts.

Given softer demand, there was supposedly more room to negotiate on HDG prices in Italy, with cheaper imports from the Far East playing a major role in price discussions, although these were few and far between.

“Demand is quiet but we are selling every week, its unnormal. We see inquiries, but its calm,” a European mill source said.

One mill was heard to be offering Eur1,450/mt ex-works Ruhr, though Eur1,330/mt ex-works Ruhr was more likely in the market.

The flooding was still having a severe affect on HDG supply, with few possibilities to buy prior to the disaster, with prices expected to increase.

“Stockholders not affected by the water, I expect they will raise prices very quickly and drastically because they are the winners in this situation,” a German distributor said.

Around 80-100,000 mt of steel has been damaged by the flooding, sources have said, with much of it to now be made into scrap.

“We have a quiet market, in middle of summer holidays, we see automotive closing plants earlier than expected due to semiconductors, we expect less production in some branches,” the same distributor said.

The lack of market activity in Italy during August was also expected to keep prices stable, with short HDG supply still a major issue in Europe.

— Amanda Flint

The Russian Steel Association says the Carbon Border Adjustment Mechanism (CBAM) that the EU plans to implement in 2026 entails significant risks for the global economy and ferrous metallurgy in particular, Kallanish notes.

“The inclusion of the steel sector in the scope of the EU border carbon regulation may have a significant negative impact on the development of the industry,” Russian Steel claims. “The current project of the European Commission (EC) is selectively approaching the selection of goods within the sectors included in the scope of the new collection, including metallurgy. We believe that this approach does not pass the test for compliance with the declared climate goals of the EU and can lead to a significant market imbalance.”

The extent of the impact of the tax on Russian exporters remains unclear. The EC must develop by-laws to regulate carbon footprint calculation, says the association, which represents major Russian steelmakers like NLMK, Evraz, Mechel, MMK, TMK, Severstal, IMH, OMK and Metalloinvest.

“Until this information is received, no industry will be able to assess all the potential effects of EU border carbon regulation,” Russian Steel observes. “However, it is already obvious that calculations using a complex European methodology and mandatory external verification of emissions can become a serious administrative barrier for supplies to the EU.”

The association therefore believes that after the measures are imposed, EU trading partners will initiate a WTO dispute resolution procedure in order to force deregulation. “It should be borne in mind that, firstly, the procedure for resolving disputes at the WTO usually takes more than two years, but today the Appellate Body does not work,” Russian Steel says. “Secondly, the ultimate goal of the WTO dispute resolution procedure is to eliminate the violation … [while] winning in a dispute does not create the right to claim compensation for losses incurred by the business.”

Even if the carbon tax is revoked following the dispute, suppliers to the EU would suffer irreparable losses and, most importantly, irreversibly lose their position in a highly competitive market, the association adds.

Russian Steel concludes that it would be prudent for Russian government representatives to promptly begin negotiations to protect the interests of domestic exporters, including ferrous metallurgy products, from the EU carbon tax impact.

Svetoslav Abrossimov Bulgaria