Category: Latest Updates

According to union sources, four companies have been shortlisted for the purchase of Italian stainless steel producer Acciai Speciali Terni (AST), which is part of thyssenkrupp.

Italian steelmaker Arvedi and re-roller Marcegaglia are visiting the facility in Terni this week, while Posco and Baosteel are also said to be competing to acquire the troubled producer. Kallanish hears there is a “political will” for Terni to remain Italian, possibly with the help of some government financial support that is currently being discussed.

Arvedi and Marcegaglia preferred not to comment at this phase of negotiations. An informed source believes a partnership between the two could be an option, but other sources rule out this possibility.

In April, thyssenkrupp started the first phase of the sale, where buyers had access to some of AST’s production, sales and financial documents. This phase, which lasted two months, has been handled by JP Morgan, which oversees the entire process. Together with the Italian government, local steelmakers association Federacciai has publicly supported the sale of AST to one of the Italian companies involved.

The companies in the run for AST are now preparing a financial offer, Kallanish understands.

Natalia Capra France

Italian HRC prices were heard lower July 21 as import pressure and a sluggish summer take their toll on prices, sources told S&P Global Platts.

Buy-side participants were more comfortable sitting on the sidelines as they wait for material previously booked to arrive into their warehouses.

“We have some material to be delivered June-July that was previously booked in March, with the majority of companies closing in the first week of August and will be back in the last week,” an Italian trader said.

Availability concerns were still evident, particularly in Italy, with Liberty Magona still undergoing production issues.

“Liberty Magona is still closed and not producing, leaving Arvedi and Marcegaglia,” the trader said. “I see at the moment there is no willingness to buy – people preferring to wait until September to see what will happen.”

Meanwhile, a European mill source said the ongoing difficulties at the Marcegaglia Ravenna would have some affect on production.

“With the terrible accident that happened at Ravenna, those guys will be out,” the mill source said.

Sources remained certain that there would be no major prices decreases in Europe, though US prices were looking particularly attractive, potentially incentivizing producers to export across the Atlantic.

North European HRC prices were heard at Eur1,185/mt ex-works Ruhr and Eur1,170/mt ex-works Ruhr July 21.

— Amanda Flint

Carbon prices in the EU are set to continue rising further in the coming years, mainly impacting the domestic metals industry, as the EU plans to further cut annual free carbon allocations, Fitch Ratings says.

As part of the “Fit for 55” package presented by the European Commission, carbon allocations are expected to be cut annually by 4.2%, instead of the 2.2% annual cut currently in place. This acceleration of free allocation cuts is set to bring prices to a new record, after the recent high of almost €58/tonne ($68) touched earlier this year.

In June a survey by the International Emissions Trading Association reported that members expected EU Emissions Trading System (ETS) prices to average at some €47/t in the 2021-2025 period. These would then increase further to over €58/t in 2026-2030. This survey did not however take into consideration the further cut in free allowances announced in July.

“The European steel sector faces over €50 billion in capex by 2030 to achieve emission-reduction targets, according to Eurofer. It will also incur high carbon costs at least until 2026 when the CBAM is in effect, and experience quicker free allocation cancellation. The proposal also means higher energy costs for European producers,” Fitch says in a report sent to Kallanish.

In addition to lower ETS allowances, the EU is set to introduce a Carbon Border Adjustment Mechanism (CBAM) from 2026. Most analysts, including Fitch, believe the announcement was made mainly to spur EU commercial partners to consider their own carbon trading system, in order to avoid being impacted by CBAM taxes after they become official.

Emanuele Norsa Italy

The “Fit for 55” package announced by the European Commission to achieve the goals of the Green Deal fails to set the right course for a climate-neutral steel industry, German mills find.

On the contrary, the plans for emissions trading increase the risk of international competitive disadvantages and thus carbon leakage, German steel federation WV Stahl says in a statement seen by Kallanish.

“The goals of the Green Deal can only be achieved with a strong industry. As it is now, the “Fit for 55” package does not take into account the requirements for transformation in the steel industry,” says WV Stahl president Jürgen Kerkhoff. The package “lacks sustainable support for the necessary investments in low-CO2 and also neutral processes in the long term.”

By converting to scrap-based electric steel production, the steel industry can make a major contribution to achieving the 2030 climate target and produce in a climate-neutral way in the long term, he explains. However, in the current proposal, the package “jeopardises these ambitions and must therefore be urgently revised in the further decision-making process”, Kerkhoff points out.

The steel industry is particularly critical of the fact that the free allocation of certificates in EU emissions trading is to be massively reduced. In sectors like steel, it is to be gradually halved by 2030 and completely abolished by 2035, to be replaced by a CO2 limit compensation. However, a climate tariff alone cannot prevent steel from being produced in other regions of the world with lower climate protection requirements in the future, Kerkhoff warns.

“Border adjustment is still untested and involves considerable risks. Foreign competitors could find ways to circumvent the tariff,” he concludes.

Christian Koehl Germany

The Asia hot rolled coil market increased July 20 on an FOB China basis, in line with higher mills’ offers amid expectations of rising prices and reduced allocations for export due to output cuts in the second half of the year.

S&P Global Platts assessed SS400 HRC 3 mm thick at $927/mt FOB China, up $15/mt on the day. Platts assessed SAE1006 HRC at $955/mt FOB China, up $15/mt on the day.

Some export mills in eastern China raised offers to $1,000/mt FOB, after a suspension in quoting in the previous week, while some mills in northern China offered $1,030-$1,040/mt FOB.

Some major mill’s export allocations are tight, and they mainly exported to long-term buyers, market sources said. For SAE HRC, demand is slow due to competitive offers from Indian mills, but some buyers need to book SS400 from China and they had to catch up to chase the rising offers, said a Chinese trader.

Demand from Asia is overall weak, due to the slow season and a new COVID outbreak, although the costs equivalent to the domestic market for SS400 HRC has been about $950/mt FOB, said a second trader.

Meanwhile, there are rising market chatters about China that it might apply export duty on HRC and remove rebate on CRC and HDG since September. “They are market talks in different versions,” said a Chinese mill source. But sellers would ship the cargoes to the bonded warehouses after signing the contracts, said another trader.

In Vietnam, Formosa Ha Tinh Steel has started negotiated with local customers for sales for September shipment. With a reduction of $60/mt month on month, the mill was heard offering about $965-$975/mt CFR for SS400 and SAE HRC, according to local sources.

Meanwhile, Indian mills’ prices for SAE HRC remained competitive. One Indian mill was heard concluded deal to Vietnam at $930/mt CFR for SAE HRC and sold to South Korean buyers at a similar level. It’s also reported that one major Chinese mill had sold HRC at $1,000/mt CFR level in the previous week.

In Shanghai, the spot price of Q235 5.5 mm HRC was assessed at Yuan 5,860/mt ex-stock, including value added tax, down Yuan 40/mt day on day.

In the Shanghai Futures Exchange, the most actively traded October contract closed at Yuan 5,968/mt, up Yuan 42/mt, or 0.7%, over the same period.

Meanwhile, Platts assessed SPCC grade 1 mm thick CRC at $937/mt FOB China on July 20, up $14/mt on the week. Mills lifted CRC offers further in line with HRC and tradable level also increased.

In the Shanghai dealers’ market, Platts assessed the same CRC grade at Yuan 6,400/mt ex-stock, including VAT, up Yuan 100/mt on the week.

— Analyst Yuelin Dai

Belgian wire specialist Bekaert anticipates strong demand in the second half of the year and lower inventory valuation impact thanks to the expected flattening of raw materials prices, Kallanish notes.

The company, however, says it “remains cautious about supply chain interruptions and other challenges posed by the Covid-19 pandemic.”

While it will release its H1 financial results on 30 July, based on “preliminary and unaudited” financial statements, Bekaert expects to reveal a particularly strong financial performance in the half.

The high margins of its finished product were due to the strong market rebound from the Covid-19 pandemic, structural improvements in the firm’s business portfolio and performance, and “a very strong positive inventory valuation impact driven by the price increases of raw materials”, Bekaert adds.

According to preliminary H1 results, revenue stood at €2.3 billion ($2.7 billion), up 30% from H1 2020 and back to pre-Covid-19 levels.

Natalia Capra France

Vanilla Steel, a German-based marketplace, has revealed a seed funding campaign with the aim to recruit new talent to support growth, expand to new geographies and invest in new product functionalities.

The company says it raised $4 million, in a funding led by June Fund and backed by existing investors such as Seedcamp and Mustard Seed Maze, it tells Kallanish.

Launched in 2020, Vanilla Steel is building a secondary market for excess steel, material that is in overstock and has no direct customer attached to it. Headquartered in Berlin, it facilitates transactions through weekly online auctions, in which steel suppliers can find buyers in a competitive bidding process. It claims it is already present in 50 countries with more than 100 steel suppliers who have listed 90,000 tonnes of steel during its first year of operation.

“The steel industry faces challenges that can be solved efficiently via an independent digital platform. We aim to bring more simplicity and smart data to the steel industry,” says co-founder Alexis Ducros.

Christian Koehl Germany

European construction output in May approached a new record level, according to Eurostat figures.

The monthly index for production in the construction sector, issued since the beginning of 2015, reached in May a level of 113.2 for the EU27 and 111.7 for the Euro area. These levels are only slightly below the previous record levels reached in January 2020 – before Covid-19 – at 113.4 for the EU27 and 111.8 for the Euro area, Kallanish notes.

The index is based on a value of 100 in January 2015.

The recovery of the construction sector in Europe has been very strong since summer 2020. In April 2020 extended lockdowns across Europe dragged the Eurostat index down to 84.2 and 77.2 for the EU27 and Euro area respectively.

Market sources are reporting construction activity is continuing to perform very strongly in Europe. When they are released, June levels might well mark a new record level for the sector.

Emanuele Norsa Italy

In the wake of the flooding caused by heavy rains in Germany, several companies have decided to declare force majeure, among them thyssenkrupp Steel.

The status was declared because supply chains are disrupted to an extent that scheduled delivery cannot be guaranteed until further notice. Notably, the actual production facilities were harmed only to a minor extent, Kallanish learns from thyssenkrupp.

“The flood disaster in Germany has so far had only a very minor direct impact on thyssenkrupp’s sites. In isolated cases there was minor damage due to water ingress, such as failures of IT infrastructure or air conditioning units,” the company states.

However, disruptions on rail lines have cut off supplies of starting material to individual locations; shipments to customers are also affected.

The declaration has also been heard from cold-roller companies located in the region of Hagen, where main train lines were still inaccessible by Monday evening. The works of Risse + Wilke Kaltband, for example, on Wednesday was evacuated by the fire department, and production brought down. The facilities were largely unharmed.

Still, the company expresses worry about its supply chains, especially on the input side.

“Some suppliers and transport companies themselves have been suffering damage, so that we cannot predict how bad the repercussions will be on our deliveries,” it writes.

Christian Koehl Germany

US hot-rolled coil prices continued moving higher on July 19 as transactions at $1,840-$1,850/st were reported recently with limited supply options for the near future.

The daily Platts TSI US HRC index rose by $14 to $1,839.25/st on an ex-works Indiana basis.

Some market sources lately noted a rising number of import offers in the marketplace and saw that as a major threat for pricing outlook. Others, however, did not see rising imports cause a significant change in the current supply-demand imbalance by the end of the year.

“I’m not too worried about imports disrupting the current market and plummeting pricing any time soon,” a Midwest service-center source said. “It might become a bigger factor come Q1.”

The service-center source also noted worsening global logistics issues and anticipated delays in the arrivals of those imported products. “I started to hear this a week or two ago and picked up a little steam last week that the sheet market might find its tightest availability come Sept/Oct, meaning the worst might still be ahead of us,” he added.

Another Midwest service-center source echoed firm pricing sentiment: “I think it can make it through Q1 with outages and lack of imports.” He said that they were still able maintain their margins even with higher replacement costs.

Some end-users were running with almost no inventory and were in danger of stopping their operations due to a lack of steel, according to the second service-center source.

A third service center source reported a 1,000-st transaction at $1,850/st for September production of an integrated mill.

“It is still not easy to find spot tons out there,” a fourth service-center source said. “It feels like prices are about to peak but we have already failed many times at those predictions in the last six months.”

A fourth service-center source was hesitant in booking any spot orders at above $1,800/st but was not succeeding in finding availability below that level from domestic mills either. They were exploring their options in import markets and received an offer at $1,610/st DDP Houston from Serbia with November arrival time.

A fifth service-center source, meanwhile, was becoming more cautious about spot purchases: “We are seeing more tons available, so we are being cautious as can be, and dealing only with trusted suppliers. Virtually we are not buying anything for stock. If our buy doesn’t have a customer agreement behind it, we’re not buying.”

A European and a Canadian mill was offering at $1,580/st DDP Great Lakes port with an October or November delivery time, according to the fifth source.

— Ali Oktay