European steelmakers likely to raise prices on surging energy costs

European producers are preparing to increase steel prices amid a surge in energy prices in light of the Russian conflict with Ukraine; buyers are avoiding imports from both countries and some have withdrawn offers, Fastmarkets heard on Thursday February 24.
Even though the full impact of the recent escalation of the military conflict between Russia and Ukraine has yet be seen, a majority of sources expect it to push energy prices up.

“Gas prices are out of control now,” a source in Italy told Fastmarkets.

A Central European integrated mill said that their costs for gas jumped by about 55% overnight and they have withdrawn offers from the market.

Some long steel producers in Italy have withdrawn offers, while all flat steelmakers in Italy and a majority of coils producers in Northern and Central Europe have done the same. They prefer to halt and assess what the production costs will be and to review prices accordingly.

“We [will be able to] see a clearer picture in 3-5 days,” a source in Germany said.

“Nord Steam 2 is stopped, but Nord Stream 1 is still pumping gas. When it stops, and it should stop, prices [for gas may] see new highs,” a trading source in Europe told Fastmarkets.

Italian and some German producers tried to increase rebar prices recently, but demand was not strong enough to back the rise.

Sources involved in flat steel have a mixed outlook on the possibility of closure of Nord Stream 1, but they agree that energy costs will see new highs.

As a result, flat steel producers are planning to announce price increases, according to market participants, and buyers are likely to accept the new prices.

European coil producers – particularly in central Europe – traditionally rely on raw material imports from Russia and Ukraine and so will have to look for alternatives, which are likely to cost more.

Slab from both countries, which is used as feedstock by coil re-rollers in Italy and Benelux as well as by plate producers in Italy and Czech Republic, is also unlikely to continue, sources said. EU slab consumers will not be able to secure needed volumes from Brazil and other alternative sources, they said.

An Italian coil and plate re-roller was reported to have slab stocks for a few months.

Imports
European buyers could not rely on imports as an alternative to the EU-origin material because of safeguards, busy ports and the conflict between Russia and Ukraine.

“Navigation is stopped in Black Sea, ports [are] shut down. Steel that was ready to be shipped stays in ports,” a buyer in the EU said.

Exporters of coil to the EU also reportedly withdrew offers, preparing to increase offers.

Most Ukrainian ports have been closed since the Russian invasion of the country on Thursday February 24 and navigation in the Black Sea has been “paralyzed,” sources said.

Published by: Julia Bolotova, Maria Tanatar
24 Feb 2022 @ 18:29 UTC