Europe’s energy crisis cuts off US flat steel exports: LME Week

Europe’s spiraling energy costs have choked off flat steel exports to the United States, while buyers continue to shun overseas material amid declining domestic prices and ample local availability.Imported flat-rolled steel products have been non-competitive in the United States for several months now, with domestic steel prices continuously softening and lead times remaining short, several market participants told Fastmarkets.

The current lead time for domestically produced hot-rolled coil in the United States is four weeks, and cold-rolled coil and hot-dipped galvanized lead times are at five to seven weeks.

“The foreigners are not even offering steel,” a US-based steel distributor said. “Next shipments of foreign products are [in] January 2023.”

“We have not seen any import deals that we would consider,” a US consumer said.

A plate consumer said he had “not heard any plate offers coming from [the European Union], barring for one or two niche products,” in the last several weeks.

“The German mills are completely out of the US import plate market, and I have not heard a single Italian plate offer in two months,” the plate consumer said.

European flat steel producers have been squeezed between high production costs and low demand.

“We cannot really be flexible with offers, because [production] costs bite: energy, carbon permits, labor, transportation – everything went up drastically,” a mill source in Italy said.

For example, in September 2022, average electricity prices in Italy were around €543.15 ($531.40) per MWh, up from about €112.40 per MWh in August 2021, according to local energy service company Gestore dei Mercati Energetici.

In August 2022, the average wholesale price of electricity in Germany surpassed €500 per MWh for the first time in history, sources told Fastmarkets.

Faced with these unprecedented energy price rises, European steel mills started to increase their prices in September, but failed to achieve targeted levels due to persistently weak demand.

During the month of September, a number of EU mills announced production cuts, but sources said that more capacity needs to be brought offline to balance supply and demand.

According to Fastmarkets estimates, about 14-15 million tonnes of steelmaking operations in Europe have been taken offline.

Fastmarkets calculated its daily steel HRC index, domestic, ex-works Northern Europe at €683.75 per tonne on Tuesday October 18, unchanged from the previous day.

The index was down by €35.00 per tonne week on week and by €86.25 per tonne month on month.

Prices for most flat-rolled steel grades imported into the US have been under pressure for months.

Fastmarkets’ fortnightly assessment for steel hot-rolled coil, import, ddp Houston declined by 6.41% to $700-760 per short ton ($35-38 per cwt) on October 12, from $760-800 per ton on September 28.

Fastmarkets’ assessment for steel medium plate, import, ddp Houston fell by 3.17% to $1,350-1,400 per ton from $1,400-1,440 per ton in the same comparison.

Steel import licenses into the United States fell both month on month and year on year in September, according to data from the US International Trade Administration’s steel import monitoring system.

Apart from Europe, flat-rolled steel import offers from Turkey into the United States have been unattractive as well, due to rising Turkish prices and lukewarm appetites for long lead times associated with overseas material.

“HRC prices are going up internationally whereas domestically the prices are softening in the United States,” a Turkish exporter told Fastmarkets.

“For Turkey, compared to last year, and even compared to three to four months ago, export demand is very weak,” the exporter said. “The EU market is totally closed, and domestic demand in Turkey is not good as well. The energy crisis is affecting the Turkish export markets.”

Published by: Julia Bolotova, Rijuta Dey Bera