Steel construction at risk: the threat of substitution if emissions reduction falls short
The construction industry could look to substitute steel for other materials to decarbonise the sector if steelmaking emissions are not reduced quickly and competitively, Kallanish learns from a report by the Energy Transitions Commission (ETC).
Its “achieving zero-carbon buildings” report says decarbonising construction requires either the decarbonising of the production of building material inputs such as cement, concrete, steel, bricks, glass, aluminium, or reducing demand for high-carbon material inputs, by using materials more efficiently or substituting lower-carbon materials.
It notes that 95% of embodied carbon emissions are from the production of material inputs, cement, concrete and steel, with the building’s structure accounting for over half of these.
Production of primary and secondary steel accounts for around 7% of global emissions, while the built environment drives around 50% of steel use by mass.
It notes achieving significant emissions reductions via supply decarbonisation will take time, with only little progress likely to be feasible over the next decade. It says this is because the cost of near-zero-emissions primary steel production will be significantly higher than conventional production for at least the next decade, and technologies are still on the cusp of reaching commercial scale.
Lengthy 20-40-year asset lifetimes imply a slow shift to low-carbon technologies, unless high carbon prices force these offline; ETC therefore highlights the importance of reducing building demand for steel.
Reducing material intensity through different building design choices and innovative construction techniques, and substituting for lower-carbon materials could in principle reduce steel demand by 15% to 2050.
Altogether, these demand efficiency strategies could in theory reduce cumulative demand for cement, concrete and steel by 30-35% by 2050.
ETC notes that alternative materials such as timber should be sustainably sourced and dealt with correctly at end-of-life in order to have a lower whole-life carbon impact, Without strict guidance, replacing concrete and steel with mass timber could become a net GHG-emitter.
It says combining the MPP pathways for decarbonisation of material production and opportunities to reduce demand for materials suggests that the total embodied carbon from the construction of new buildings to 2050 could be 65% lower. The vast majority of this reduction is achieved via the decarbonisation of material production.
Carbon pricing will be essential to drive heavy industry decarbonisation since, while decarbonisation is clearly technically possible, it will entail a green premium. MPP estimates suggest the cost today of producing zero carbon steel could be around 50% higher and while these increases will only add about 1.5-3% to the total cost of construction, developers will not voluntarily absorb these costs unless forced to do so via carbon prices or regulations.
Carrie Bone UK
Northern European long steel market inhibited by weak demand from construction sector
But high energy prices mean mills in the region maintained their offer prices from the previous week, Fastmarkets understands.
Fastmarkets’ weekly price assessment for steel reinforcing bar (rebar), domestic, delivered Northern Europe, was €625-645 ($651-672) per tonne on Wednesday, widening week on week down by €15 per tonne from €640-645 per tonne on January 15.
Price increases established before the Christmas holidays have been maintained despite the weak demand, mainly because of ongoing high feedstock costs, sources said.
“These is ongoing poor demand, but we have had some inquiries and some [questions] about prices [and we] still have some running orders from last week,” one buyer source told Fastmarkets.
Deals were reported at around €625 per tonne while offers were reported at €635-645 per tonne. It remained unclear if the market would accept these higher offers.
“Energy costs are around 25% higher than they were last year, which is a big problem for the steel mills, especially with low demand,” the buyer source told Fastmarkets.
Sources in the Netherlands said they expected construction projects to pick up again in Spring, which could, in turn, stimulate buying activity.
“The government is talking about new construction projects being commissioned,” a trader source from the Netherlands said. “If it is true, we will see. Sentiment is better now we have a new government, that says it will prioritise building over environmental priorities.”
Import offers for rebar into Northern Europe were scarce due to weak demand and uncompetitive prices, sources said.
Scrap prices edged slightly higher, meanwhile, amid improved demand from Turkish mills for February deliveries due to improving steel sales in the country, sources told Fastmarkets.
Fastmarkets’ calculation of its daily index for steel scrap, HMS 1&2 (80:20 mix), North Europe origin, cfr Turkey, was $334.58 per tonne on Wednesday, up from $332.34 per tonne week on week but down from $348.12 per tonne month on month.
Fastmarkets’ corresponding weekly price assessment for steel wire rod (mesh quality), domestic, delivered Northern Europe, was unchanged at €610-620 per tonne.
Wire rod import offers were reported at €590 per tonne for May delivery, but the appetite for imports was muted amid ongoing uncertainty regarding the current EU safeguard review.
“The last review from June 2024, which came into effect on July 1, 2024, caught a lot of [market participants] by surprise, so there is some risk aversion [now],” a wire rod producer source said.
Bleak outlook
The outlook for the European steel market remains bleak due to ongoing weak demand and negative growth in the region, combined with increasingly protectionist measures elsewhere, the International Rebar Producers and Exporters Association (IREPAS) said in its latest short-range outlook, published on January 15.
According to IREPAS, the EU is expected to announce a revision of protective measures on April 1.
Excess capacity from China has continued to put downward pressure on prices and, with increasing moves towards protectionism, heralded by the US, the short- or medium-term outlook was bleak, both in terms of prices or demand, the association said.
Italian rebar makers push up prices
Several Italian rebar producers are halting sales and seeking a €20/tonne ($20.8) increase for deliveries scheduled in January. Mills have already increased values this month and will continue to deliver material until the end of this week, Kallanish notes.
Current quotes from producers are positioned at €320/t base ex-works, applicable for orders delivered by the end of this month. For contracts executed in January, asking prices are set at €340-350/t base ex-works. This indicates a significant rise from the November asking price of €300/t base ex-works.
Current transactions, for December delivery, are positioned within the €300-320/t base ex-works range. A number of rebar mills are going to cease operations by the end of this week, with some having already suspended their facilities. Activity will resume on 7 January.
Current transactions are priced within the €560-580/t ex-works range, including size extras averaging approximately at €260/t. Domestic mesh contracts are at €410-420/t, excluding transportation costs – size extras are an additional €300/t, according to sources.
Natalia Capra France
Eurofer gives up on expectations for demand recovery in 2024
According to Eurofer’s latest report, demand is expected to shrink by 1.8% to 127 million tonnes in 2024. This is a downward revision from the previous forecast from end-July of a slight recovery by 1.4%.
At the beginning of the year, Eurofer predicted a recovery of apparent steel consumption in the EU by 5.6%, rising to 137 million tonnes in 2024. Since then, this has been the third time Eurofer has downgraded its forecasts.
“In 2024, due to poor developments in the industrial outlook and decreasing demand from steel-using sectors, particularly construction and automotive, apparent steel consumption is projected to experience another recession, albeit moderate,” Eurofer said, adding that a modest recovery is foreseen in 2025.
According to the association, apparent steel consumption in the EU in 2025 will increase by 3.8% to 132 million tonnes, still below the pre-pandemic volume of 145 million tonnes in 2019.
After a short-lived rebound of apparent steel demand in January-February 2024 related to restocking, activity in the European flat steel market has been deteriorating, with prices under pressure.
For example, in February, Fastmarkets’ steel hot-rolled coil index domestic, exw Northern Europe averaged €738.28 ($797.86) per tonne ex-works.
Since then, the average monthly HRC price has been decreasing gradually, and for September, it reached €567.22 per tonne. Similar levels were last recorded in November 2020, when the index averaged €530.72.
At the beginning of October, European mills tried to push prices up by increasing their offers.
But demand remained weak, and deals continued to be concluded at lower levels.
“Mills’ attempts for price increases were unsuccessful, but at least the HRC prices stopped dropping further,” a buyer source told Fastmarkets.
Industry sources commented that any hopes for a price rebound would be postponed to the first half of 2025. A potential positive impact on the domestic HRC price could be uncompetitive import offers combined with some output cuts in the local market, Fastmarkets understands.
End-user outlook
Automotive
Eurofer said that automotive output in the EU27 had previously increased by 8.3% overall in 2023, despite the overall subdued investment outlook.
“However, output levels have remained low in historical terms, far below the levels seen in 2018 and 2019,” Eurofer added.
The sector was expected to decline by 6.5% in 2024 (revised downward from a 3% decline in a previous outlook) and to increase by just 1.9% in 2025 (revised downward from a 2.3% growth).
According to Eurofer, the reasons for the negative trend were related to the protracted weakness of the manufacturing sector, overall EV standards uncertainty and lackluster consumer confidence.
“Demand is projected to remain weak until the macroeconomic picture and consumer disposable income substantially improve, given the rather unpredictable economic outlook and uncertain economic growth perspectives”, Eurofer said.
But according to the association, demand has shown some resilience against all the uncertainties around the implementation of EVs and preparing the ground for the ban of petrol cars by 2035.
Negotiations between steel mills and original equipment manufacturers (OEMs) in the automotive industry for HRC contracts for the first half of 2025 were still underway, and OEMs would likely seek substantially lower prices for the next year contracts, sources reported.
Notably, several sources told Fastmarkets that for the first half of 2025 contracts, OEMs were asking for discounts up to €200 per tonne, which were “unacceptable” from suppliers’ point of view.
For the second half of 2024, long-term contracts with automotive OEMs were closed at €730-750 per tonne — and even at €700 per tonne in some cases — in contrast with €800 per tonne in the first half of the year.
Construction
The largest steel-using sector — representing 35% of total steel consumption — construction consumption fell by 0.8% in 2023.
For 2024, Eurofer expected that construction activity would continue to decrease, falling by 1.3% rather than the previous prediction of a 1.4% decline.
The sector is expected to grow by 1.3% in 2025 (revised downward from 1.8%).
According to Eurofer, construction output has been under pressure since the third quarter of 2022.
“This is due to several factors, including rising construction material prices, labor shortages in some EU countries and increasing economic uncertainty. Most notably, higher interest rates in 2022 and 2023, driven by monetary policy tightening, have also played a key role,” Eurofer said.
All these factors impacted the sector negatively, especially the private non-residential sub-sector.
Fastmarkets’ price assessment for steel reinforcing bar (rebar), domestic, delivered Northern Europe averaged €635.63 per tonne at the midpoint in September, up slightly by €8.13 per tonne from a monthly average of €627.50 per tonne at the midpoint in August. But the assessment was sharply down from a monthly average of €589.38 per tonne at the midpoint in September 2023.
Euro area construction output unchanged in July from June
According to first estimates released by Eurostat, the Statistical Office of the European Union, in July this year the seasonally-adjusted production of the construction sector in the European Union member states (EU-27) increased by 0.2 percent compared to June and went down by 2.4 percent compared to the same month of 2023. In June, production in the construction sector had increased by 0.3 percent month on month.
In the euro area, the seasonally-adjusted production of the construction sector in June remained stable month on month and fell by 2.2 percent year on year. In June, production had decreased by 2.2 percent month on month.
Building construction in the EU-27 in July moved down by 0.2 percent month on month and by 4.6 percent year on year, while civil engineering output in the region went down 0.7 percent month on month and by 0.4 percent year on year. In the euro area, building construction was down 0.8 percent compared to the previous month and by 3.5 percent year on year, while civil engineering output in the region remained stable month on month and increased by 0.2 percent year on year.
As compared to June, construction output in July increased by 7.7 percent in Belgium, by 6.8 percent in Czechia, and by 3.2 percent in Slovenia, while it decreased by 2.2 percent in France, by 1.6 percent in Slovakia and by 1.3 percent in the Netherlands.
As compared to July 2023, construction output in July this year increased by 2.5 percent in both Bulgaria and Spain, by 2.0 percent in Czechia and by 1.7 percent in Portugal, while it decreased by 12.0 percent in Slovenia, by 7.8 percent in the Netherlands and by 7.5 percent in Sweden.
Italian rebar producers seek increases
Italian rebar producers are looking to implement price increases of €20-30/tonne ($22.1-33.2) in an effort to halt the price decline and regain some lost margins. Increased costs of production, especially in terms of energy, have put significant pressure on their financials.
According to buyers who spoke to Kallanish, the outlook for the end of the year remains pessimistic, with ongoing low downstream orders and reduced consumption. Buyers have no confidence that the latest hike attempt will be sustained. The distribution sector is adopting a cautious approach. Sources indicate prices for domestic rebar have remained steady in comparison to last month, but a price decline is expected.
Transaction values in the domestic market last week ranged from €290-300/t base ex-works, or €550-560/t ex-works effective. This includes an average of €260/t for additional size extras. Domestic mesh is at around €400/t, excluding transportation costs.
There is an additional charge of €300/t for size extras. Mills are requesting €320-330/t ex-works for rebar. Some steelmakers temporarily halted sales last week due to uncertainty surrounding pricing decisions. The market continues to underperform, with buyers reporting an influx of much cheaper long products from Turkey.
Natalia Capra France
French construction sentiment improves slightly
Sentiment among French construction companies improved slightly in August. According to L’Institut National de la Statistique et des Études Économiques (Insee), construction companies active in both structural works and finishings reported a slightly more positive business climate and an improved attitude towards their future but also their past activity.
The sentiment improvement however remains moderate as “economic uncertainty felt by construction managers is virtually stable”, says an Insee report obtained by Kallanish.
In August, construction companies’ order books are considered stable. Given their staff size, the firms surveyed reported eight months of work. Production capacity was stable on-month, while 44% of firms reported slowing output because of supply difficulties.
Production bottlenecks are continuing. The same number of business managers as in July are facing obstacles which limit their production capacity. About 18% of construction firms consider themselves unable to increase their production in case of additional orders due to a lack of personnel and supply difficulties. About 42% of companies reported being at the limit of their production capacity and 32% report they are facing “insufficient” demand. The production capacity utilisation rate has slightly decreased this month, Insee concludes.
The situation in France for steel consumption downstream continues to be subdued. The distribution sector is seeing a challenging year. The main concern revolves around tight margins, French distribution sources say.
Some improved demand has however been reported for rebar in July and August, with orders coming in and production levels rising slightly. Activity has not properly resumed this week after the August summer break. One distributor says buyers are now in a wait-and-see mood. Market participants expect a clearer direction next week.
Natalia Capra France
Residential construction remains gloomy in Germany
With 17,600 apartments under construction and conversion in June, activity in Germany’s residential construction was 19% lower than in June 2023, according to industry association Hauptverband der Deutschen Bauindustrie.
This confirms a downward trend seen all through the first half year, with a year-on-year decline of 21%. The managing director of Bauindustrie, Oliver Müller, says there is no hope of a recovery in sight.
“The first half of the year was another major disappointment in terms of housing. We are heading for the weakest level of approvals since 2010,” he states.
For builders and benders, this means that the struggle for orders remains tough, and could become tougher. Benders are operating unprofitably because the competition is even worse for their customers, the construction companies.
“We often have five to ten benders competing for an order; but one level up, it is even more builders wooing to get a project,” Kallanish hears from a bender’s manager.
Hence, construction firms pass the pressure along to partners and try to compensate some of their concessions in award speculation by pushing down the price for rebar services.
“Many just need a deal to keep operating. We are between the devil and the deep blue sea,” the manager states.
Christian Koehl Germany
InQuik: revolutionizing concrete construction with Steel
InQuik, an Australian company, has developed a game-changing method for building reinforced concrete bridges. Their innovative system uses prefabricated steel formwork and reinforcement, creating lightweight, self-supporting modules built offsite. These modules are easily transported and lifted into place before being filled with concrete on-site, significantly reducing construction time and complexity.
InQuik bridges boast numerous advantages:
- Faster, Safer Construction: Installation requires minimal skilled labor and lightweight cranes, minimizing risks and taking just days.
- Durability and Sustainability: Engineered for a 100-year lifespan with minimal maintenance, these bridges have proven resilient against natural disasters.
- Versatility Beyond Bridges: The InQuik System can be adapted for buildings, car parks, data centers, and even jetties.
ArcelorMittal Construction acquires insulation panel manufacturer Italpannelli
Steelmaker ArcelorMittal has completed the acquisition of Italpannelli, a specialized manufacturer of insulation panels for roofs and facades, it said in a statement May 31.
The acquisition includes two production sites operated by Italpannelli SRL in in Abruzzo, Italy and Italpannelli Iberica in Zaragoza, Spain.
According to ArcelorMittal, the two facilities operate seven production lines with a capacity of 13 million sq m/year of sandwich panels, serving the Central and Eastern European, French, German, Italian and Spanish markets.
Italpannelli will be incorporated into ArcelorMittal’s construction-focused subsidiary, ArchelorMittal Construction.
The company said the acquisition adds considerable strategic value to ArcelorMittal Construction, including access to new markets and an expanded product portfolio.
The latest announcement marks the second acquisition of Italpannelli businesses by ArcelorMittal, following the purchase of Italpannelli Germany in March 2023.
ArcelorMittal Construction CEO Jean Christophe Kennel said Italpannelli had built a formidable reputation as a high-quality supplier of lightweight sandwich panels and was “highly regarded in the market for its service and delivery.”
Platts, part of S&P Global Commodity Insights, assessed domestic prices for HRC in South Europe at Eur625/mt EXW Italy on May 30, unchanged on the day.
