The rapid growth in steel prices in 2021 has squeezed re-rollers, including Vitkovice Steel in Czech Republic, says the Czech and Slovak steel association Steel Union.
Iron ore prices have surpassed $200/tonne cfr China on robust Chinese demand, while increasing scrap demand in Asia, the Americas and Europe, as infrastructure investments kick off, has supported scrap values, the association observes.
At the turn of the year, large steel buyers depleted stocks in anticipation of falling prices, so that in Germany, for example, flat steel stocks reached their lowest level in 33 years. Now, everyone has to replenish stocks quickly at higher-than-expected prices, which further contributes to price growth, Steel Union chairman Daniel Urban says.
Prices are also being pushed by the fact that part of EU capacity shut down in response to the Covid-19 pandemic will no longer be operational, while the remainder will start up slower than expected. Delivery times are therefore slower than usual due to the unexpectedly rapid recovery in demand.
“The situation of companies without primary steel production, such as Vitkovice Steel, is not easy today, because the spread between the price of slab, i.e. the semi-finished product input for sheet production at Vitkovice, and the price of the final product is at its lowest level in ten years,” Vitkovice Steel chairman and Steel Union board member Dmitrij Ščuka says in a note seen by Kallanish.
Urban observes: “More expensive inputs mean a big problem for steelmakers in the form of an increase in the need for working capital. For all market participants, high prices mean extraordinary demands on financing, bank guarantees and credit lines. The steel industry is a cyclical industry and the period of low prices from mid-2018 to autumn 2020 is quite logically alternating with a boom and higher prices, which we estimate will last at least until the end of the third quarter.”
Steel Union member companies are doing everything in their power to produce and supply steel to customers with an emphasis on long-term business relationships, the association says. Most Czech operations are already operating at maximum capacity.
Adam Smith Germany