Category: Latest Updates

Scrap and rebar futures contracts on the London Metal Exchange jumped over the week to May 13, reflecting continued expectations of bullishness following recent physical market strength.

S&P Global Platts assessed the May scrap contract up $24/mt on the week at $529.50/mt on May 13, while the June contract jumped $30/mt at $545.50/mt on the week. The July contract rose $35/mt on the week at $550/mt, while the August contract jumped $47/mt at $549.50/mt on May 13.

Amid a strong hike in physical scrap prices, the forward curve contango structure for May to July contracts steepened significantly over the week, suggesting futures traders expect further near-term strength in the physical market, before shifting into slight backwardation over July-August contracts, albeit at significantly strong levels.

Spot prices for physical imports of premium heavy melting scrap 1/2 (80:20) gained $23.75/mt on the week at $503/mt CFR Turkey on May 13, as the market reported fresh deals at elevated prices amid a significant increase in finished steel levels.

“I believe mills will try to maintain the price at $510/mt CFR maximum for premium HMS 1/2 (80:20) for the short term so as to create a good margin base and then pay whatever is needed moving forward,” an EU trading source said.

Weekly scrap futures trading volumes over the week to May 13 totaled 96,030 mt, sharply up from 53,930 mt recorded the week prior. This was the highest weekly trading volume since the week ended March 11, when 125,850 mt was traded.

Rebar futures also jumped on the week, in line with scrap. The forward curve also displayed a strong contango structure over May to July contracts, before shifting into a backwardation over July-August contracts, albeit maintaining significantly elevated levels.

Platts assessed the May contract up $39/mt on week to $769.50/mt on May 13, while the June contract increased $59/mt on week to $809.50/mt and July contract rose $89.50/mt on week at $830/mt. The later-dated August contract soared $104.50/mt on the week at $825/mt on May 13.

Turkish rebar export prices rose sharply to a near 13-year high, as well-booked mills hiked offers sharply and held firm at elevated levels. Platts assessed Turkish exported rebar at $770/mt FOB Turkey on May 13, up $80/mt on the week.

The index reached its highest level since Sept. 16, 2008, when it sat at $850/mt FOB. Lead times for export rebar were heard as far ahead as end-July or early-August shipment, sources said.

“And off we go, into a bubble,” an EU buyer said. “But since everything is moving at lightning speed now, who knows what I’ll be able to offer tomorrow?”

The daily outright spread between Turkish export rebar and import scrap was assessed at an all-time high of $267/mt May 13, up $4.50/mt day on day.

Rebar futures weekly trading volumes on the London Metal Exchange totaled 11,730 mt in the week to May 13, up sharply from 3,830 mt recorded the week prior, to each its highest weekly volume since the week ended March 18.

— Viral Shah

The UK’s Department for International Trade has made a preliminary decision to continue imposing antidumping duties on certain welded tubes and pipes of iron or non-alloy steel imported into the UK from China and Belarus, but to revoke duties against imports of similar products from Russia.

A May 14 document from the department’s Trade Remedies Investigations Directorate, or TRID, said that antidumping duties of 90.6% would be maintained on imports of these tubes and pipes from all companies in China, and duties of 38.1% on these products from all companies in Belarus.

Measures have been revoked on imports of these tubes and pipes from Russia’s Severstal and all other Russian companies, TRID said.

The antidumping duties previously charged on the Russian tubes and pipes had varied between 10.1% and 20.5%.

The measure applies to welded tubes and pipes, of iron or non-alloy steel, of circular cross-section and of an external diameter not exceeding 168.3 mm, excluding non-threaded or threadable welded tubes and pipes that are also plated or coated with zinc, line pipe of a kind used for oil or gas pipelines, casing and tubing of a kind used in drilling for oil or gas, precision tubes and tubes and pipes with attached fittings suitable for conducting gases or liquids for use in civil aircraft.

The relevant products have CN codes of: ex 7306 30 41, ex 7306 30 49, and ex 7306 30 77, which are also produced by the UK’s main domestic producer, Tata Steel UK, TRID said.

The size of the UK market is 100,000-150,000 mt/year and 30%-50% of demand is met by domestic producers, according to TRID.

The new preliminary decision measures will apply for a period of five years from Jan. 30, 2021, which was the date the existing measures expired, the document said.

The antidumping duties on imports of welded tubes and pipes of iron or non-alloy steel originating in Belarus, China and Russia were imposed by the European Commission on a definitive basis on Jan. 26, 2015, with the measure transitioned to the UK after it left the EU.

“The UK has chosen to maintain some trade remedy measures once it is outside the EU’s common external tariff. The Department for International Trade identified which measures may be of interest to the UK following a call for evidence.

“We are conducting transition reviews to determine if these measures should be varied or revoked in the UK,” TRID said in the document.

In this case, the review was based on full questionnaires responses from: Tata Steel UK, the main domestic producer; UK Steel, a domestic trade body; Community Trade Union, a domestic trade union; China Chamber of International Commerce, a trade body; BSS, a downstream user; and Severstal, a Russian producer, TRID said.

UK industry ‘fragile’

“We have concluded that the current state of the UK WTP [welded tubes and pipes] industry is fragile and has suffered injury,” TRID said. “This is demonstrated by a decline in sales volumes, sustained negative profits and declining production and capacity utilisation. Injury has occurred in the absence of imports of the goods subject to review. We have assessed that other factors have caused this injury. These other factors include uncertainty over EU Exit, reduced demand due to COVID-19 and imports of like goods from third countries.”

TRID added that while its intended preliminary decision had been to vary the application of the antidumping amount for Belarus and for China, it had not been possible to recalculate the amount due to insufficient data, and so the existing antidumping amounts were maintained, in accordance with article 100A(4)(b) of its regulations.

The document added that TRID no longer expected dumping of Russian pipes to occur.

— Diana Kinch

Liberty Liège-Dudelange, part of the Liberty Steel Group, has been granted temporary protection from creditors of its Belgian Liège plants and will work in coming days with stakeholders to identify new sources of financing to sustain the company’s activities and continuity, a Liberty Steel Group spokesperson said May 14.

Dudelange and Liège together have annual production capacities estimated at 1.6 million mt of galvanized/coated steel, 300,000 mt of cold-rolled coil and 200,000 mt of tinplate, products greatly sought after in recent months due to a tightness in the European markets which has been pushing prices up since Q3 2020.

The daily S&P Global Platts’ assessment for hot rolled coil, the base product for Liège-Dudelange’s products, rose Eur5/mt ($6.07/mt) May 14 to Eur1,095/mt EXW Ruhr, having risen Eur65/mt on week. Its current price is the highest-ever.

Granting of court protection follows Liberty Steel Group’s request on April 27 to the Liège Enterprise Court that it should grant a judicial reorganization procedure (PRJ) for its Liège plants, the group spokesperson said in an emailed statement to Platts.

Sources close to Liberty Steel Group said that this business had been adversely impacted by the coronavirus pandemic, with the situation exacerbated by the March collapse of Greensill Capital, the main financier of parent group GFG Alliance.

“LIBERTY Liège-Dudelange, which incorporates two plants at LIBERTY Liège in Belgium and LIBERTY Dudelange in Luxembourg, has faced a significant reduction in working capital support since the collapse of Greensill Capital which has led to ongoing issues with its main supplier of Hot Rolled Coil (HRC),” the Liberty Steel Group spokesperson’s statement said.

HRC supplies

The company sources alleged it had suffered “significant issues” with its main supplier of hot rolled coil, impacting its ability to operate at full capacity even after COVID-19 restrictions were lifted and causing supply chain disruptions.

However, steelmaker ArcelorMittal, the main supplier of hot rolled coil to Liège-Dudelange, said May 14 that it continues to supply to the works under a pre-established contract arrangement.

A “temporary issue” with one supplier had been resolved via a commercial dispute procedure a Liberty Steel Group spokesman said early March.

Market sources had nonetheless been cited as saying that Liberty Liège-Dudelange had secured pre-material via non-EU imports recently after customers refused to accept Liberty’s suggestion to supply their own coil for rolling at the works.

Former ArcelorMittal works

The operations at Liège-Dudelange were bought from ArcelorMittal in July 2019 in a Eur740 million deal. ArcelorMittal’s sale of various works – several of which were acquired by Liberty Steel Group – was part of an antitrust deal imposed by the European Union competition authorities to allow ArcelorMittal to take over Italy’s Ilva. For that reason ArcelorMittal would not now be able to buy back any of the works sold to Liberty, despite market chatter that this could be on the cards.

Liberty Steel Group said May 5 it will “fix or sell underperforming units” in a restructuring and refinancing drive as it recovers from the Greensill Capital collapse..

In the UK, sources said that some Liberty steel rolling mills are currently working only one day a week. A stockholder said Liberty is currently offering hot rolled coils in the market in UK for August rolling at GBP950/mt ($1,339/mt) on the condition they are paid for upfront.

PRJ to ensure continuity

The objective of the Liège-Dudelange PRJ, which applies only to the company’s plants at Flémalle and Tilleur in Belgium, is to temporarily protect the company from its creditors, while ensuring the best possible ongoing relationships with them, and ensure the continuity of the company, the Liberty Steel Group statement said.

It is understood that the PRJ will not affect the day-to-day management of the Liège business and the local management team will remain at the helm, benefiting from an initial creditor moratorium to the end of July 2021.

“In the next few days, the company’s management team and a Mediator will continue to work collaboratively with stakeholders to identify new sources of financing to sustain the company’s activities,” the spokesperson said. “LIBERTY will also continue to engage with stakeholders to identify new sources of financing of the Dudelange plant. LIBERTY Liège-Dudelange’s first priority remains the welfare of its high quality and highly committed employees and the management team believe that these decisions will offer the best chances for a sustainable outcome for the plants, their employees and their loyal customer base.”

News of the Liège-Dudelange creditor protection follows the late April entry into judicial administration of three French units of Alvance Aluminium, GFG Alliance’s aluminum subsidiary.

— Diana Kinch and Laura Varriale

Move to investigate suspected fraud and money laundering prompts collapse of Liberty Steel rescue deal putting 3,000 UK jobs at risk.

The Serious Fraud Office has launched an investigation into the financing of Sanjeev Gupta’s metals empire, including its links to Greensill Capital, in a move that immediately caused the collapse of a rescue deal for Liberty Steel and raised fears over thousands of British jobs.

The UK’s anti-corruption agency said it suspected fraud, fraudulent trading and money laundering related to the financing of Gupta Family Group Alliance (GFG), the loose grouping of steel and metals trading companies controlled by Gupta.

The investigation prompted renewed fears for the struggling GFG company Liberty Steel, which employs about 3,000 people in the UK.

San Francisco-based investor White Oak Global Advisers on Friday pulled out of a deal to provide finance to GFG. It had last week agreed terms to lend to operations in both the UK and Australia, but both were subject to due diligence checks.

“As with any regulated financial institution, we are not in a position to continue discussions with any company that is under investigation by the Serious Fraud Office for money laundering,” White Oak said in a statement.

Globally there are as many as 35,000 people in related GFG companies, including large mining and steelmaking operations in Australia, the US, France, eastern Europe and India.

Gupta has been scrambling to secure financing for his companies since March, when his key lender, Greensill Capital, collapsed. The supply chain finance provider, set up by the banker Lex Greensill, had lent Gupta’s companies as much as $5bn (£3.6bn).

The SFO on Friday said that its investigation included GFG’s financing arrangements with Greensill’s UK arm.

The SFO inquiry has been running covertly for several months, said a person familiar with the investigation. Covert investigations are often used in cases where destruction of evidence may be a risk.

In a short statement, the SFO said: “The SFO is investigating suspected fraud, fraudulent trading and money laundering in relation to the financing and conduct of the business of companies within the Gupta Family Group Alliance (GFG), including its financing arrangements with Greensill Capital UK Ltd. As this is a live investigation, the SFO can provide no further comment.”

Gupta had previously approached the UK government for a £170m emergency loan. The request was rejected because of fears the money would be moved outside the UK via GFG’s opaque and complex corporate structure. A government source said the SFO inquiry vindicated a possible plan to step in to save Liberty Steel operations only if they fell into insolvency.

Steel mills in Rotherham and Stocksbridge, both in South Yorkshire, have been put under particular pressure by the collapse of GFG’s main lender, as well as the decline in demand from the aerospace industry during the coronavirus pandemic. Gupta’s companies employ a further 2,000 people elsewhere in the UK, including in an energy company and a Scottish aluminium smelter.

A steelworkers’ union, Community, said the SFO inquiry was a “concerning development” but added that “this must not detract from the complete focus of all parties on securing our members’ jobs and protecting these crucial strategic businesses”.

Gupta built the GFG empire rapidly with the help of Greensill’s loans. However, since Greensill collapsed GFG’s financing has come under heavy scrutiny, including in relation to the practice of borrowing against invoices for potential future clients. GFG has previously said that it borrowed from Greensill on the basis of “prospective receivables”.

David Cameron, the former prime minister who was paid by Greensill and lobbied on his behalf, on Thursday told MPs that reports about GFG’s financing were “clearly very disturbing if true”.

In March, Richard Fuller, a Conservative MP, in parliament asked the business secretary, Kwasi Kwarteng, whether the reports about GFG warranted the SFO’s involvement. On Friday Fuller said Gupta should now provide details on his companies’ corporate structure and financing, as well as clarity over his contingency plans for the steel plants.

Responding on Friday to news of the SFO investigation, a GFG spokesperson said: “GFG Alliance notes the UK Serious Fraud Office’s announcement that it has opened an investigation into GFG Alliance. GFG Alliance will cooperate fully with the investigation. As these matters are the subject of an SFO investigation we cannot make any further comment.

“GFG Alliance continues to serve its customers around the world and is making progress in the refinancing of its operations which are benefiting from the operational improvements it has made and the very strong steel, aluminium and iron ore markets.”

The administrators for Greensill’s UK arm, Grant Thornton, declined to comment.

Tight supply of mixed and high-grade new arisings E8 in Italy is causing prices to rapidly increase and disrupting drawing-quality wire rod production.

A similar if not worse situation is being reported in France and Germany, where wire rod producers are looking for E8 to be able to respond to increasing European demand. Short supply of E8 is also pushing prices up throughout Europe, scrap and wire rod sources tell Kallanish.

In Italy, all rod producers stopped sales last week due to escalating prices. They are now struggling to find the high-quality of E8, particularly, and will not go back to quoting unless they resolve the issue of price and supply

The high grade of E8 was sold last week in Italy at €420/tonne ($509) delivered. This price, however, has become outdated as mills are now paying €440/t delivered and €450/t is being quoted.

Italian mills purchase this grade from Eastern European countries, France and Germany. This month, however, these regions will be shipping considerably lower volumes to Italy due to the short supply. Compared to northern Europe, southern Europe has some more E8 availability due to the presence of large re-rollers. This is however not enough to respond to booming demand from mills.

Before Italian wire rod producers stopped sales, local drawing-quality material was sold at €700-720/t ex-works, up from €680-700/t previously, with drawing mills requesting material thanks to their high level of orders. When producers go back to quoting, the product is expected to approach the level of €800/t ex-works, as current scrap prices make even €750/t unworkable, a source believes.

The escalating tension with E8 in Europe is not seen easing in the short term. French drawing-quality material is also at €700/t base ex-works. Domestic transaction prices in other northern European countries for drawing-quality wire rod are currently at €670-690/t ex-works but producers are also asking for €700/t ex-works on average (see Kallanish 7 May).

Natalia Capra France

Seaborne iron ore prices fell back on Thursday, while scrap prices were still catching up rapidly. Strong Chinese steel output continues to support raw materials prices, but speculators took a hit to their confidence, sending futures prices lower.

The Kallanish KORE 62% Fe index fell $5.34/t to $220.64/dry metric tonne cfr Qingdao. The Kallanish KORE 65% Fe index dropped $5.09/t to $254.49/dmt cfr, but the KORE 58% Fe index was flat at $182.90/t,

On the Dalian Commodity Exchange September iron ore settled down CNY 47/t at CNY 1,268/t ($196.48/t), while on the Singapore Exchange June 62% Fe future settled down $16.51/t at $210.83/t. The same contract for 65% Fe and 58% Fe futures settled down $16.44/t at $245.20/t, and unchanged at $184.47/t respectively.

Chinese scrap prices continue to increase however after lagging the sharp increases in iron ore. 6mm+ heavy scrap delivered to mills in the Yangtze River Delta increased CNY 133/t on Thursday to CNY 4,180/t. There was some mix in confidence however. Binxin Steel in Jiangsu cut its scrap purchasing prices by CNY 30/t on Thursday. Many more mills hiked their purchasing prices however, including a CNY 270/t hike in Shagang’s Heavy 3 purchasing price to CNY 4,190/t. In Tangshan, billet prices increased CNY 50/t to CNY 5,820/t.

Chinese steel output remains at high levels, supporting both iron ore and scrap demand. According to the China Iron and Steel Association (CISA), its member mills produced crude steel at a rate of 2.418 million tonnes/day in the first ten days of May. That was up another 0.75% from the end of April and 17.84% higher y-o-y.

Sentiment has been hit however by weak lending data for April, and by continuing comments by senior politicians that commodity prices need to be brought under control. This took the wind out of some of the speculative buying on futures markets.

Tomas Gutierrez UK

Taiwan’s president promised to work with the European Union to boost its supply of semiconductors due to a global shortage that has mostly impacted the automotive industry.

“Taiwan will continue to cooperate with the EU to establish a more resilient supply of critical commodities such as semiconductors,” said this week President Tsai Ing-wen in a video message broadcast at a democracy conference in Copenhagen.

She also renewed her call to negotiate an investment agreement between the EU and Taiwan.

In April, the country’s leading semiconductor manufacturer Taiwan Semiconductor Manufacturing Company (TSMC) said the automotive industry can expect semiconductor shortages to begin easing in the second quarter.

However, overall deficits of critical chips will last throughout this year and potentially into 2022, it added.

The fire in March at semiconductor manufacturer Renesas in Japan exacerbated existing supply chain disruptions (see Kallanish passim). This is likely to hamper the automotive sector recovery and impact steel demand, said Fitch Ratings. 

This disruption has affected a number of global carmakers in Asia, US and Europe, given Renesas is the second-largest producer globally of car microcontroller unit chips. The shortage is also disrupting automotive production in Russia.

Russia’s Ministry of Industry and Trade expects semiconductor shortages affecting various automotive manufacturers in the country will be resolved by the end of this summer.

In 2021, lost profits for the global automotive industry due to semiconductor shortages could amount to more than $60 billion, according to Bloomberg.

This problem will further hurt the global automotive industry, and global car production in the first half of the year may decrease by 2 million units, says Oxford Economics.

Svetoslav Abrossimov Bulgaria

The Italian flat steel market faced continuing uncertainty after a key legal body put off a decision May 13 on the future of the largest domestic producer, the former ArcelorMittal Italia, now Acciaierie Italiane.

The market had awaited the Italian State Council’s decision on whether Acciairie Italiane could keep producing crude steel after the Lecce regional administrative court said Feb. 13 that ArcelorMittal had to shut all hot-end operations within 60 days at its Taranto plant to curb emissions.

ArcelorMittal appealed the decision to the Italian State Council, with a final hearing expected May 13, but the court said it would take more time to decide. A decision should come within 45 days, but sources said it is likely to be made sooner.

“Italy is a major transformer market that consumes around 12 million-13 million mt of coils a year, so we need a strong domestic player,” a source from a large Italian distributor said. “It is impossible to find materials at the moment, and whoever has materials can do the prices that they want. It is so crazy what is happening to Acciairie Italiane, as we need material.”

Amid the uncertainty, import quotas from crucial markets such as India have been exhausted. Steel demand is strong and supply is low.

Italian HRC prices have gone up this year Eur423/mt, with prices reported around Eur1,100/mt base ex-works with imports from Vietnam heard at $1,320/mt CFR Italian ports.

Acciairie Italia is working with two blast furnaces, No. 1 and No. 2, because No. 4 has been temporarily shut for maintenance and should restart by mid-June. The company is targeting 5 million mt of crude production by year’s end.

Each blast furnace has a design capacity of 1.8 million-1.9 million mt/year of crude steel, but they are not operating at capacity. Blast furnace No. 5, the largest in Europe with a production capacity of around 3.5 million mt/year, was idled in 2015. Blast furnace No. 3 has a capacity of about 2 million mt/year of crude steel but was idled in 1994 and is to be dismantled.

Italy has two large flat steel producers: Acciaierie d’Italia, with an installed capacity of 9 million-10 million mt of crude steel capacity a year, and Arvedi, with about 5 million mt of crude steel capacity.

Italy is the second-largest European steel producer after Germany. Last year, according to Italian steel association Federacciai, the country produced about 20 million mt of crude steel.

— Annalisa Villa

Klöckner & Co is striving to become the leading one-stop digital platform for steel by 2025, Kallanish hears from the German-based steel distribution group.

Klöckner claims a pioneering role in digitalisation, and in the next phase of its digital transformation intends to focus on automating internal processes. It says its aim is to link the physical and the digital side of the business more closely, thus greatly reducing manual interventions along the value chain, what it dubs “zero touch”.

This will also involve pooling key Klöckner & Co digital and IT competencies under the roof of its kloeckner.i unit. In this context, kloeckner.i will build up a second innovation hub in the US to better fulfil the local requirements for digitalising the business.

The company’s target is to more than double its pre-pandemic level of operating income, and sustain this, by 2025. Its new corporate strategy, “Klöckner & Co 2025: Leveraging Strengths”, was presented at Wednesday’s annual general meeting by incoming chief executive Guido Kerkhoff.  Kerkhoff, formerly ceo of thyssenkrupp AG, is assuming the position from 13 May.

The group’s board will also get an additional member in Bernhard Weiss, as chief executive officer Europe. For the past several years, Weiss has been ceo of the French country organisation, where his accomplishments include a successful restructuring. As of 1 June, the management board will thus consist of Guido Kerkhoff, ceo; Oliver Falk, cfo; John Ganem, ceo Americas; and Bernhard Weis, ceo Europe.

Christian Koehl Germany

Italian merchant bar and sections producers are stopping sales this week, following increasing prices of scrap and finished long products. All flat and long steel producers have withdrawn from the market as scrap prices are rising each day. Longs contract prices are surpassing quotes, amid a “frenzy” leaving mills and buyers baffled over which prices apply, sources tell Kallanish.

Merchant bar domestic values have reached €300/tonne ($364) base ex-works on average, or €720/t ex-works including €420/t size extras. On Friday last week some producers were asking for €360/t base ex-works for a short period of time, but all mills have stopped sales this week. Customers expect new asking prices to reach the level of €400/t base ex-works, sources say. Domestic demand is said to be at normal levels but stocks at distributors are low.

Beam producers are also stopping sales after the first category of sections increased in contracts to €360-380/t base ex-works. Including €380 size extras, beams now start at €740-770/t ex-works, a €20/t increase on average compared to the first week of May. Sections producers should start quoting again by the end of this week, sources say.

“Prices are changing every day,” a source comments. “Distributors lament a lack of stability and do not know what price to quote. Some are resorting to also stopping sales and waiting.”

Another distributor warns stability is essential as end-users cannot absorb continuously changing prices. Some customers are putting off their orders because “working in such a mad market is madness”, he exclaims. Buyers believe that if stability is not reached, a price collapse could be possible.

Natalia Capra France