European HRC market remains stable amid muted activity
Domestic prices for European hot-rolled coil remained stable on Sept. 12, on muted market activity as buyers remained cautious amid expectations of further decreases in prices later in the year.
Additionally, prices seemed to be experiencing more of a downward pressure within Northern Europe amid worsening macroeconomic factors, while Southern Europe remains relatively stable, sources said.
“Booking prices dropping further down,” a distributor source said. “Seems Southern Europe is doing better than Northern Europe right now.”
Sources noted that many consumers were holding off buying any more material in the hopes that prices continued to become more favorable towards the end of the year. Additionally, inventory levels remained high, further dampening demand for domestic material.
“We need to follow booking prices carefully,” the distributor source said. “Customers are still looking where prices are bottoming.”
Platts assessed Northwest European HRC at Eur565/mt ex-works Ruhr on Sept. 12, stable on the day
Offers were reported at Eur570/mt EXW Ruhr.
Meanwhile, Platts assessed domestic HRC prices in Southern Europe at Eur570/mt EXW Italy, stable on the day.
Tradable values were reported at Eur570-575/mt EXW Italy.
Platts assessed imported HRC in Northwest Europe stable on the day at Eur559/mt CIF Antwerp and imported HRC in Southern Europe stable on the day at Eur555/mt CIF Italy.
Regarding green steel, prices in Europe continued to fluctuate, particularly as consumers were hesitant to purchase new material at a premium compared to conventional steel.
Faced with the existing pressure in the coils market, green steel has also struggled to attract the necessary demand, especially for the automotive industry, which is facing increasing costs and a lull in demand. As a result, prices for green steel could differ significantly.
“The exact premiums can vary,” the distributor source said. “[It can be] based on demand and regional factors.”
Platts assessed carbon-accounted HRC Ruhr at Eur660/mt EXW Ruhr, stable on the day.
Geraint Moody | Devbrat Saha
European HRC market remains quiet, prices broadly unmoved
Trading in the spot HRC market across Europe was close to nil on Friday. Buyers have been cautious with making new bookings, due to uncertainty over the price direction after the summer months.
Besides, most buyers have sufficient stocks and no immediate need to book new volumes, Fastmarkets heard.
“Consumption remains low; we can work with the level of stock we have. [The level of stock] is still quite high at some distributors and steel service centers, and we see fierce competition downstream,” one buyer in Europe told Fastmarkets.
For September-delivery HRC, integrated steelmakers in Europe mainly maintained offers at stable levels of around €630-650 ($684-706) per tonne ex-works, while tradeable values for such material were heard from buyer sources at €620-630 per tonnne ex-works.
For October delivery, some suppliers are targeting price hikes of around €20 per tonne, but market fundamentals are unsupportive of any price rise, according to sources.
“The market is oversupplied. Mills need to fill order books and this talk about price rises is not convincing – there is not enough demand,” a second buyer said.
Fastmarkets calculated its daily steel HRC index domestic, exw Northern Europe at €632.13 per tonne on Friday, down slightly by €0.37 per tonne from €632.50 on Thursday.
The index was up by €1.13 per tonne week on week but down by €3.08 per tonne month on month.
In Southern Europe, Fastmarkets calculated its corresponding daily steel HRC index domestic, exw Italy at €626.00 per tonne on Friday, down by €0.25 per tonne from €626.25 per tonne on Thursday.
The index was up by €1.90 per tonne week on week but down by €5.88 per tonne month on month.
The Italian market was also quiet, with buyers mainly keeping at sidelines.
September-delivery HRC was still being offered by a local supplier at €640-650 per tonne delivered, which corresponds to €630-640 per tonne ex-works.
Buyer sources estimated achievable prices at no higher than €620-630 per tonne ex-works, with sporadic trades reported at €620-625 per tonne ex-works in the week to Friday.
New import HRC offers were scarce. Key Asian suppliers – Vietnam, Japan and Taiwan – have exceeded their allocation for third-quarter deliveries, Fastmarkets reported.
Offers of HRC from Turkey were available at €610 per tonne CFR, including the anti-dumping duty.
From Japan, offers were heard at €600-610 per tonne CFR, for September-shipment coil.
Two sources reported an offer from South Korea at $660 per tonne CFR to Southern Europe.
EU steel emissions to see higher penalties as free allowances get taken away
EU steel production emissions will be gradually penalized further from 2026 through to 2034, which will lead to higher costs for existing steel production and incentivize lower-emissions output.
The penalties based on carbon emissions emitted by key steel and raw materials production processes will increase under the EU’s Emissions Trading System and Carbon Border Adjustment Mechanism.
EU steel processes will see the quantity of allocated free emissions allowances reduce in a non-linear trajectory from existing levels to zero by 2034. This will lead to heavier emissions costs for producers forced to buy EU Allowance, or EUA, carbon permits for compliance. The ETS free allowances are to be replaced by the CBAM from 2026 and 2034.
The removal of free EUAs would lead to additional costs for steel producers exceeding benchmark levels. Based on reference values for blast furnace-based steel mills producing met coke and iron ore sinter, higher costs of around Eur144.72/mt of finished steel can be expected, with a reference cost for electric arc furnace carbon steel producers of Eur18.93/mt of steel, using July average EU carbon prices and analysis by S&P Global Commodity Insights.
Related podcast: How is Europe’s steel industry rising to the challenge of energy transition
Steel producers with higher operating emissions will be encouraged to adapt steel processes and raw materials usage, as well as invest, to transition more of the region’s production to steel with lower embedded emissions.
The alternative would be to pay to offset the difference, assuming risks on forward carbon pricing and using any banked EUAs available.
The dilemma may be how to manage the higher costs of alternative raw materials such as iron ore pellets and high-grade ferrous scrap, along with supporting the energy transition to use green hydrogen and renewable power and cut coal-based fuels.
Investment in new plants and processes to achieve low-emissions steelmaking have pushed steel companies such as Salzgitter and Thyssenkrupp to seek government subsidies and grants.
A move to certify emissions in steel production and mining, logistics and processing has allowed carbon-accounted steel markets to develop in the past few years.
Europe has led the interest in carbon-accounted steel and industry decarbonization, followed by Canada and the US and some markets in Asia.
The CBAM’s effect on global seaborne steel trade is anticipated to further deepen the interest in carbon-accounted steel production and marketing.
Steel end-users and steel processing and distribution groups are looking to adapt steel supplies for consumers, and to meet new procurement targets and standards. This is also pushing for more transparency around steel’s carbon intensities, with interest led by industry and government bodies.
Steel producers are currently obliged by the EU to report and pay for emissions from installations in the region based on the defined categories of hot metal production, iron ore sintering, met coke production and two types of electric arc furnace steel production.
Scope 3 emissions for steelmakers, emitted from raw materials mining, processing and logistics, are not included under the ETS reporting scheme.
The incoming CBAM will be applied for steel, pig iron and direct-reduced iron product imports, among other markets such as for aluminum, cement, hydrogen and fertilizers.
The CBAM aims to require the same carbon emissions cost being paid for imports as relevant to EU steel and other products, ensuring a level playing field and complying with World Trade Organization rules. The mechanism will take into account EU ETS and free allowances levels for applicable markets as the frameworks converge, in relation to certified carbon emissions for import products.
CBAM will develop reference emissions values for product categories where reported carbon intensity data is not available prior to the mechanism’s launch on Jan. 1, 2026.
Importers to the EU will buy CBAM certificates to comply with any outstanding product emissions costs required. CBAM certificates will price based on weekly EU Allowance pricing.
The CBAM will enter into application in its transitional phase on Oct. 1, with the first reporting period for importers ending Jan. 31, 2024.
Reporting obligations and information sought from EU importers of CBAM goods, as well as a provisional methodology for calculating embedded emissions released during the production process of CBAM-related imports will be specified further in an Implementing Regulation. This legislation will be adopted by the European Commission after consulting the CBAM Committee.
The CBAM and ETS will apply charges with adjustments available for steel production processes through to 2034, which mean steel imports are expected initially to pay a similar carbon-based charge. CBAM is not expected to include upstream Scope 3 emissions, emitted from mining and processing, logistics and transportation of steel raw materials.
Imported flat and long steels produced with ferrous scrap and direct-reduced iron may compete with more emissions-intensive steel in certain grades and segments.
European steel markets and user groups are increasingly differentiating on pricing and demand between steel with carbon emissions data reported for Scope 1, 2 and 3, and whether direct emissions cuts or mass balance-based calculated emissions reductions are involved.
A variation between the ETS and steel production emissions compliance, and a new focus on product-level carbon intensity with upstream emissions is seen. This considers emissions in the entire production chain and any differences between steel imports and EU origin products.
EU safeguards already place quotas on steel imports by origin. CBAM is designed to help ensure imports are on a level playing field with EU products and emissions costs, and support investments in industry decarbonization.
The reduction in the steel sector’s free EUAs may lead to higher compliance costs for steel producers if they cannot decarbonize at the same rate, as companies fund high capital greenfield plants.
