Distributors cautiously positive about 2023 steel price outlook: EUROMETAL forum

Iberian steel distributors are cautiously optimistic about the steel sector’s performance in 2023, Fastmarkets heard on the sidelines of EUROMETAL’s Steel Net Forum Iberia in Porto, Portugal, on Friday March 17.

Despite high levels of volatility and looming challenges — including high inflation rates, energy prices and geopolitical risks due to Russia’s war in Ukraine — steel prices are not likely to drop to the low levels seen in 2022 again, market sources told Fastmarkets.

“We might see a downward correction [of HRC prices] in the summer due to seasonal factors, but a nosedive is unlikely,” a distributor told Fastmarkets.

“Volatility will set prices, but old levels are very unlikely,” another source said.

Sources agreed, however, that the recent upticks in flat steel prices have mainly been achieved thanks to limited supply resulting from output cuts in the last months of 2022, rather than a real steel demand rebound.

Fastmarkets’ weekly assessment for steel hot-rolled coil domestic, exw Spain averaged €763.75 per tonne in February, up from a monthly average of €706.25 per tonne in January.

Last year, the European market registered the steepest drop in steel output rates since 2008, sources noted.

Steel output in Iberia totaled 13.3 million tonnes in 2022, down by 17.5% year on year, while flat steel output dropped by 25% and long steel by 14%.

In Spain, ArcelorMittal stopped one blast-furnace (BF) in Gijon in September 2022 amid poor fundamentals. The steelmaker also halted one electric-arc furnace (EAF) in Sestao in August 2022 for scheduled maintenance but delayed restarting operations in September, citing low consumer confidence and rising import levels.
The BF in Gijon has since restarted, but the EAF in Sestao remains idled.

Energy prices lower but still volatile

Energy prices in Spain and Portugal have declined from the record levels reached during last year’s energy crisis, triggered by Russia’s war in Ukraine, but costs still remain high and volatile.

The Spanish government has been regulating electricity prices to ensure stability and affordability; however, average electricity prices in Spain still remain higher than elsewhere in Europe.

Notably, energy prices in Spain were hovering at around €80-90 per megawatt hour (MWh) in mid-March, compared with a record monthly average of €283 per MWh in March last year.

The governments of Spain and Portugal have recently asked the EU to extend a cap on electricity prices, which is currently set to end on May 31, until the end of 2024. In case the so-called “Iberian exception” is not prolonged, the cost of electricity in Spain could surge to about €150 per MWh on average, one source told Fastmarkets.

Raw materials and carbon costs remain elevated
Also supporting upbeat expectations for finished steel prices have been the high costs of raw materials and carbon allowances, sources said.

The carbon permit price in the EU surged above €100 per tonne again on March 10, up from around €70-80 per tonne in March 2022. On March 17, however, the price retreated to around €90 per tonne.

International scrap prices have also been on the rise recently. Notably, Turkish steelmakers have accelerated deep-sea scrap purchases in recent weeks to meet the expected demand for 5 million tonnes of steel for the rebuilding of earthquake-damaged areas. Even though purchasing activity has slowed recently, sentiment in the market remained rather upbeat.

Fastmarkets’ index for steel scrap, HMS 1&2 (80:20 mix), North Europe origin, cfr Turkey averaged at $423.14 per tonne in February, up from a monthly average of $406.59 per tonne in January. The index was most recently calculated at $459.26 per tonne on March 17.

Published by: Julia Bolotova

17 Mar 2023 @ 20:57 UTC