Europe’s steel hollow sections market suffering from energy-cost uncertainty, trader says

Prices for hollow steel sections in Northern Europe remained unchanged but the market in Southern Europe narrowed downward in the week to Wednesday October 5, due to limited trading.Fastmarkets’ weekly price assessment for steel sections (medium), domestic, delivered Northern Europe, was €1,020-1,050 ($1,012-1,041) per tonne on Wednesday, stable week on week.

Sources told Fastmarkets that stockholders were busy trying to clear imported steel products under this year’s fourth-quarter EU steel safeguard quota allowance.

“There are not so many inquiries at the moment, and no sales [in which] to reduce or increase the price due to low demand,” a producer said.

But sources in Southern Europe said that, despite the low consumption, demand for sections was not dead and that production was still running at full capacity at some mills.

“We are pushing on with production and using quite a lot of energy,” the producer said. “Clearly, there are higher costs and, for the moment, we are trying to manage, but we will see [how the situation develops] in the coming months.”

Fastmarkets’ weekly price assessment for steel sections (medium), domestic, delivered Southern Europe, was €970-1,020 per tonne on Wednesday, narrowing downward by €30 per tonne week on week from €970-1,050 per tonne.

Market participants expected construction-sector consumption of steel products to remain weak until next year, despite the European Council approving emergency measures on September 30.

The measures, intended to ease the burden of rising energy costs fueled by Russia’s unprovoked invasion of Ukraine in February, included a voluntary overall reduction target of 10% of gross electricity consumption, and a mandatory reduction target of 5% of electricity consumption during peak hours.

The council also approved a cap on market revenues at €180 per MWh for “inframarginal” technologies such as renewable and nuclear energy producers, a windfall levy on fossil-fuel companies, and additional powers for member states to temporarily set a price for the supply of electricity to small and medium-sized enterprises.

The regulation was scheduled to come into force early this month.

Some EU member states have also pledged independent support for energy-intensive industries, with the Italian government approving its “Aiuti Ter” decree which will offer heavy industry companies a 40% tax rebate at the end of 2022.

The German government announced a €200 billion support package for businesses and households, while France and Italy have pledged subsidies of €67 billion and €68 billion respectively.

But sources told Fastmarkets that they did not think any short-term measures would improve construction consumption due to there being long lead times for projects.

The August forecast by European steel association Eurofer predicted that apparent steel consumption would recover in 2023, following a third annual recession in the past four years.

“But the overall evolution of steel demand remains subject to high uncertainty, which is likely to continue to undermine demand from steel-using sectors,” Eurofer said in its third-quarter report.

Traders said that mills needed more clarity on energy costs so they could calculate whether to reduce or shut down production.

“The market is suffering at the moment because it is unclear what will happen – no one knows for the moment,” a trader said.

Meanwhile, traders said that the market for the product’s feedstock, hot-rolled coil, was muted due to sluggish demand.

Fastmarkets’ daily calculation of its steel hot-rolled coil index, domestic, exw Northern Europe, was €740 per tonne on Wednesday, down by €22.50 per tonne from €762.50 per tonne a week earlier.

Published by: Holly Chant