Category: Latest Updates

The expected reverse of steel pricing uptrend will not happen any time soon, Marcegaglia chief executive Antonio Marcegaglia said during a Siderweb webinar attended by Kallanish.

Despite the current rush to buy, “we do not manage to replenish our stocks as we would like to, because everybody around the world is in the same situation”, Marcegaglia commented. High raw material prices, together with the positive impact of unprecedented fiscal stimulus, will push the sector forward, he added.

He sees the current positive economic cycle as a beginning of an expansive phase that will last a few years. “We initially overestimated the impact of the pandemic on the industry and manufacturing sector,” Marcegaglia observed. “We saw the end of steelmaking, but in fact, we realised that an important part of the world such as Asia and China, in particular, had a positive performance [in 2020] and, overall, we’re seeing a rapid recovery… I believe that some of us in March have achieved figures that had never been achieved before.”

The strong recovery is not being driven by specific regions, such as India or China, but is global, the ceo said.

Marcegaglia believes safeguard duties may be suspended in July due to the serious coil shortages. As a decision from the European Union is needed to extend the measures, it is more probable that that decision is not made with the objective to let the duties terminate upon the expiry date. Even if measures lapse, Europe will not be invaded by coil imports as the supply-demand imbalance involves the entire world, Marcegaglia forecasts.

After mitigating the impact of the first wave of the pandemic in 2020, Marcegaglia SpA registered strong performance in the first quarter. The company saw a 7.5% year-on-year increase in steel shipments and a significant hike of 26.5% in turnover versus Q1 2020 to €1,460 billion ($1,736 billion).

Sales volumes in 2020 increased by 2.7% y-o-y mostly thanks to the integration from December 2019 of plate producer Palini and Bertoli that Marcegaglia bought from Evraz.

Marcegaglia also reiterated his interest to purchase stainless steel producer Acciai Speciali Terni based on industrial synergies between the two companies. Marcegaglia currently buys around 30% of its stainless coil requirement from AST.

Natalia Capra France

A growing number of investors are demanding sustainability targets be attached to financing, making it risky for steel companies without a zero carbon transition strategy, says Claire Coustar, Global Head of ESG, FIC at Deutsche Bank.

Regulatory and political impetus has driven the shift towards Environmental Social and Governance (ESG) financing instruments over the last decade. What started with green bonds and then social bonds has in the last couple of years moved on to sustainability bonds, where banks provide loans for companies committing to certain ESG performance indicators, Coustar said at a meeting organised by technology supplier Primetals on Tuesday.

Investors are demanding, as part of their due diligence and investment criteria, to know what investees’ carbon transition plans are. At the end of this year, moreover, the European Central Bank will carry out a climate stress test on eurozone banks.

“Investors realise that in certain sectors the technology is not there yet to fully map out the path to carbon zero in 2050,” Coustar observed at the event attended by Kallanish. They are however looking for details of what a company’s decarbonisation plan is for the next five years, followed by the period after that, she added.

Adam Smith Germany

The main trade union at Liberty Ostrava, the Czech Republic’s biggest steelmaker, threatened strike action April 13 amid concerns surrounding the future of the works, owned by UK-based Liberty Steel Group.

Liberty Steel Group is facing a financing squeeze following the collapse last month of its major financier Greensill Capital.

All labor unions at Liberty Steel Ostrava have now issued strike warnings due to their “increasing concerns” at the situation facing Liberty Steel Group and its parent, the international group GFG Alliance, the OS KOVO Liberty Czech Republic union, the works’ biggest union, announced on its web pages April 13.

Liberty Steel Ostrava has an annual production capacity of 3.6 million mt and employs around 6,000 people.

A GFG Alliance spokesperson said in an emailed statement that GFG is “deeply disappointed by the response of the unions to the current situation at LIBERTY Ostrava, which can only add to the uncertainty following the collapse of Greensill. We are ready to engage with the unions to reduce their concerns over the issue they have raised.

“The improved financial performance at the plant builds on its operational and commercial improvement efforts over the last year as well as the strong recovery of the market and steel prices, which currently stand at their highest levels for thirteen years. These have all led to the Ostrava mill operating at full capacity. The company continues to be fully booked and has secured the material required to run at full capacity. The business is prudently managing its cash flows to maintain a healthy buffer while the group refinances its debt.”

Carbon emissions allowance sales

The unions’ worries focus in particular on suggestions in international media that Liberty management will attempt to lend carbon emission allowances saved up by the Ostrava steelworks to the Romanian Galati Steelworks, also a member of the Liberty Group, which reportedly has no allowances to continue operations.

“We categorically refuse the option of lending emissions allowances from Liberty Ostrava to the Galati Steelworks,” OS KOVO union branch chairman, Petr Slanina, was cited as saying on the website. According to the union official, media reports have suggested the Romanian steelmaker had sold carbon allowances worth Eur100 million ($119 million) last year.

Slanina said that Liberty Ostrava has saved around 5 million carbon allowances, worth around Eur200 million at current prices, over recent years. Liberty Steel promised when taking over the Ostrava steelmaker in 2019 that cash from the sale of the emissions allowances would be used for modernization of the steelworks, including the installation of two new hybrid furnaces by 2023, he added.

“In common with other large industrial companies, LIBERTY Steel Group businesses trade carbon credits as part of the usual course of business,” the GFG Alliance spokesperson countered. “That includes transactions to buy and to sell credits according to their business requirements and according to the market price. We do not comment on our sites’ current balances for commercial reasons but expect them all to surrender the correct number of credits to the EU Registry at the end of April.”

Funds reportedly in Greensill account

The unions also appealed to local management to take all the necessary steps needed to prevent any flow of capital or assets out of the Ostrava steelmaker. The unions said that the Czech steelmaker had been given an operating loan of Koruna 2.0 billion ($92.2 million) by the Czech state-owned bank, EGAP, to help it deal with the coronavirus pandemic but they say these funds had never been drawn on.

The unions said they had information from management that the funds were now in the account of Greensill Capital, which filed for insolvency at the end of March, and could no longer be used by the Ostrava steelmaker.

The unions said that because of the financial problems, the Ostrava steelmaker has lost the trust of some of its business partners and has been forced in recent weeks to pay for raw materials in advance.

— Chris Johnstone and Diana Kinch

Marcegaglia, the largest European steel re-roller and largest worldwide tube producer, reconfirmed its firm interest to acquire special steel producer Acciai Speciali Terni, or AST, Marcegaglia CEO Antonio Marcegaglia said, adding that the steel market had entered a supercycle.

“Our interest is serious and solid for Terni, it is based on good industrial synergies between our downstream operations and Terni upstream operations,” Marcegaglia said on April 13 during an online event organized by news portal Siderweb.

Marcegaglia said that the timeline of the sale process was dictated by the seller and that the companies were in the middle of the due diligence.

German steel maker Thyssenkrupp, owner of AST, put the company back in the market for sale in May 2020. In 2018, following a restructuring of Thyssenkrupp Materials, AST became one of the company’s core assets and was withdrawn from sale.

Marcegaglia produces around 550,000 mt/year of stainless-steel products and buys around 30% of its stainless steel feedstock from AST. If Marcegaglia buys AST, the company will not only have a primary production but will also increase its stainless market production.

Marcegaglia is not the only company interested in AST but there are other potential buyers as AST is a good performing mill, according to sources.

Marcegaglia said that overall the demand for coils continued to be strong and that the fundamentals were so good that there were expectations for prices to continue to increase in Europe as supply was low following mills implementing structural cuts in the past.

The margins between still very high raw materials costs and the steel products have “never been so good for years,” the company said.

The first quarter of 2021 for Marcegaglia was positive compared with the same period of last year, when the company still did well as the pandemic made an impact only at the end of March.

The first quarter of 2021 ended for Marcegaglia, which is not a listed company, with a 7.5% year-on-year rise in sales to 1.5 million mt of steel products. The company’s revenues rose 26.5% on the year to Eur1.460 million for the steel units.

European coils are at their historical highest level with the European hot-rolled coil steel and raw materials price spread surging in March to a new record high. This came as the record high spot steel prices outpaced iron ore, scrap and coking coal costs, S&P Global Platts reported earlier.

Northwest European HRC steel averaged Eur477/mt ($560/mt), more than a basket of raw materials costs in March, up from around Eur420/mt in February, according to estimates by Platts on April 1.

According to Platts data, European coils benchmark, Northwest European HRC, since the end of 2020, went up by Eur243/mt to Eur908/mt base ex-works as of April 13.

— Annalisa Villa

Seaborne iron ore prices increased on Monday even as steel futures pulled back. Comments on inflation and the absence of a revision to export rebates created confusion in markets.

The Kallanish KORE 62% jumped $2.39/t to $172.48/dry metric tonne cfr Qingdao. The Kallanish KORE 65% Fe index broke through the $200/t barrier on Monday, gaining $2.81/t to $202.68/dmt cfr. The KORE 58% Fe index meanwhile increased $0.58/t to $154.92/dmt cfr.

On the Dalian Commodity Exchange September iron ore settled up CNY 11.5/t at CNY 990/t ($151.05/t), while on the Singapore Exchange May 62% Fe futures settled up $1.27/t at $166.65/t. The same contract for 65% Fe and 58% Fe futures settled up $1.50/t at $199.34/t, and up $2.19/t at $150.87/t respectively. In Tangshan, billet prices fell CNY 80/t, after falling CNY 70/t on Sunday, to CNY 4,390/t.

China’s long-awaited announcement on a change in stell export tax rebates again failed to materialise over the weekend. As the change would restrict exports, it would mean more pressure on Chinese steel production and has been seen as negative for iron ore.

Over the weekend, meanwhile, government departments noted that producer price inflation was being driven higher by commodity prices. If controlling inflation becomes a bigger priority than reducing steel output, then inflationary policies such as production restrictions could be less strongly enforced. This would support iron ore demand.

Market movements so far, however, have been entirely speculative this week. Until further policy announcements are made, markets could remain in a state of confusion.

Tomas Gutierrez UK

A number of EU safeguard quota allocations were rapidly exhausted during the first week of April, confirming the fears of buy-side sources in the bloc, Kallanish notes.

As expected, Indian-origin hot rolled coil allocations of slightly over 160,000 tonnes for the second quarter were all used up during the first days of becoming available. Importers of Indian HRC can now use the remaining almost 300,000t quota from the “other countries” allocation. However, sources note that most of this will be used rapidly as volumes previously ordered are on their way to European shores.

In the long products segment, quotas for Turkish-origin merchant bar and light sections have also been exhausted, as have quotas for Russian wire rod.

Meanwhile, quotas have also been exhausted for hollow sections from Turkey and Russia, indicating the strong demand for imports of this product. It is worth noting that the UK’s second-quarter safeguard quotas for Turkish hollow sections have also already been fully used.

Emanuele Norsa Italy

European prices for stainless hot and cold rolled coil remain mostly stable compared to the end of last month at very high levels. However, lead times from all European mills are now stretching into the fourth quarter, sources tell Kallanish.

Stainless HRC for October-December delivery is now sold at €2,580-2,620/tonne ($3,072-3,120) delivered, depending on tonnage and month of delivery. CRC prices are pegged at €2,750/t delivered on average, also for Q4 delivery. No mills in Europe are quoting material for earlier than October casting, with one large European stainless steelmaker now quoting for Q1 2022 casting.

Business is said to be booming throughout the value chain as order books are full for producers, distributors and end-users. Lead times are also stretching for distributors, who are pushing up their flat products prices across their entire range as coil supply shortages remain the main issue, sources say.

Sources believe the situation of high flats values will continue this year. Rumours are spreading that the European Union will confirm its anti-dumping measures and impose safeguards on stainless CRC coming from India and Indonesia, Kallanish hears.

Natalia Capra France

Many European coil buyers currently see no alternative to paying exorbitant prices to secure the material they need for their production. But that may not save their businesses from a liquidity crisis.

Most observers see a general willingness among consumers to pay high spot prices if they need to close material gaps in a short time. One tells Kallanish of a recent spot deal for a smaller tonnage of hot rolled coil at €1,040/tonne ($1,239), when major mills were still about to jump the hurdle of €900.

However, one German manager points out that smaller customers, especially, who normally can pay cash, will now have to ask their banks for a loan to finance a purchase. “And that will be a growing problem as we go ahead, because the banks might not be all that willing,” he says.

This is especially so now that a case of collapsed financing has happened high up in the coil industry, with Liberty Steel losing its main lender. This is pushing liquidity problems downstream, as Liberty “has started asking its customers to pay in advance for current orders”, a Dutch service centre manager reports.

Another German buyer notes that “many customers are still paying, but also many are suspending investments, like delaying the construction of a building, etc”. He tells of a case of a construction plan with a cost quote amounting to €1 million in December. Meanwhile, the construction company came back asking for €1.2 million because the material costs have gone up so rapidly.

The result was that the deal was suspended, due to a domino effect of costs. “Now, the calculation does not work anymore,” he says. And this also involves banks and the financing. “I’d need to cover more of the costs by a higher loan, for which the bank would then charge a higher interest rate,” he concludes.

Christian Koehl Germany

Northwest European buyers are adamant the current coil price high cannot last forever, although they cannot make out a turning point in the foreseeable future.

“Such phases don’t last, and what goes up will come down,” a manager at a stockholder group tells Kallanish, but also concedes that the corrective downturn is behind the visible horizon. “I hear different opinions every day. In January, I thought it will be over soon, but in fact it has become more dramatic,” he says of the prevailing confusion.  

A buyer at a processing group is more precise in his outlook. “For the next two months I see zero indicators for a drop,” he comments. He cites many indicators for continued demand. In addition to China’s curbed exports and problems at European mills like Liberty, Ilva and Dunaferr, he notes that order activity at miners like Vale for heavy vehicles points at increasing activity upstream.

The jury is out on whether this means, as some market participants suggest, that one should accept prices surpassing €900/tonne ($1,072) for hot rolled coil, which could this week be tagged at €950 by mills. This is especially the case, those sources say, since delivery times now stretch late into the third quarter.

The stockholder’s manager issues a warning here: “Unless you have back-to-back agreements, I’d be very cautious. The bubble could burst in, say, October, when today’s orders arrive. So, you paid €900 today, and may have to sell at €700,” he says.

Price would matter less if supply arrived sooner, thereby reducing the current exposure to months of risk. “I can look three to five weeks ahead, but not that far,” he concludes.

Christian Koehl Germany

One of Turkey’s biggest automotive components producers, Bursa-based Beycelik Gestamp, will build a new mill at the Automotive Procurement Industry Organized Industrial Zone (TOSB), in Kocaeli, western Turkey, to produce chassis products to the automotive sector, according to a company statement to the local media during the signing ceremony of the project over the weekend.

“Our new mill investment worth Eur50 million will provide 750 new jobs,” said CEO Baran Celik at the ceremony, adding that they will begin to produce chassis products as of 2022.

The Beycelik Gestamp Sheet Forming and Welding Plant operates in a closed area of 60,000 square meters in Bursa and has two plants in Kocaeli, western Turkey.

Spanish automotive components producer Gestamp Automocion acquired a 50% stake in Bursa-based Beycelik in 2007. Beycelik Gestamp then acquired the majority share of a Romanian automotive component supplier in 2017.

Beycelik Gestamp is supplying automotive sheet components to major domestic and global auto producers.

— Cenk Can