ArcelorMittal hikes 2021 HRC contract offers
Europe's largest steelmaker ArcelorMittal is targeting €550/t for quarterly, half-year and yearly hot-rolled coil contracts with northwest European service centres next year.
This is an increase of more than €100/t compared with 2020 contracts. July-December contracts this year were settled around €410-440/t depending on mill, at a rollover to the first-half, market participants said.
Mills and service centres will start contract negotiations in the next few weeks.
Steelmakers' are pushing for higher levels given the very low settlements reached for 2020, and as a result of strong spot market momentum in the past few months. Spot supply has been very tight because of reduced production and brisk apparent demand levels, although activity has reduced substantially this month compared with August and September. The combination of lower output and higher demand has sent lead times into January and February for most northwest European producers, with some even quoting March arrival.
When mills negotiated accords for this year in late 2019, they did so against a much weaker spot market backdrop, as a softer automotive sector caused excess tonnes to be filtered into the spot market, dampening prices. Some northern mills are as much as 70pc exposed to the automotive industry, and the market always struggles to cope with reduced demand from the integral market without cannibalising spot prices.
Argus' daily benchmark northwest EU HRC index reached a low of €412.25/t ex-works on 15 November 2019. The price recovered to a high of €484.75/t ex-works on 27 February, before Covid-19 roiled supply chains in March.
The index then reached a low of €384.50/t on 25 June, and closed at €493.50/t yesterday, an increase of €109/t, somewhat justifying the dramatically higher asking price from ArcelorMittal. But buyers are unlikely to acquiesce to such prices, and will cite the fact that spot market lows were not fully factored into contractual pricing. At the same time, spot market upside has not been fully realised by the mills this year, given they are locked into lower-priced contracts for a substantial amount of tonnage — contract volumes that have been reduced by the pandemic.
Mills can clearly point to higher raw material costs. On 15 November last year, the raw materials basket cost of blast furnace producers was $260.65/t, compared with just below $306/t yesterday. Over the same period the spread for spot HRC has moved to $274/t from $196/t, aided by the rapid increases seen in the past few months.
Given the intense volatility in the market this year, the talks will likely be terse and protracted, and could lead to changes in the pricing mechanism used to decide contracts. One solution would be index-linking against a monthly average, letting the base price float but ensuring prices follow the market in a timely fashion. Swaps and futures contracts could be used to lock in fixed prices for buyers — the CME Group already has a North European HRC contract, and the London Metal Exchange will launch one next year. On the CME open interest reaches out to August-September, which have both traded at €465/t, at a steep discount to ArcelorMittal's physical offer. The curve is only mildly backwardated, with the first quarter trading in the low €470s/t.
With ArcelorMittal increasing its offer to such an extent, there is an expectation in the physical market that it will also push for spot price increases, taking its offer to €550/t in the northwest and €530/t in Italy.
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Italian service centres turn to secondary HRC
Italian service centres turn to secondary HRC
Milan, 26 September (Argus) — Italian steel service centres (SSCs) are turning to secondary hot-rolled coil (HRC) as they cannot move their higher-priced prime stock, market participants said on the sidelines of Italian association Assofermet's autumn conference in Milan today. SSCs are buying second-choice material as weak demand means sales of prime material are increasingly lossmaking. With EU mills refusing to cut production, although some have adjusted output, there has been an increased amount of second-choice coils offered in the market. This has allowed SSCs to continue selling processed material in a declining market, which one sheet seller said has been falling by around €10/t each week. While there are some restrictions to using second-choice HRC, such as not being able to meet every customer's request, SSCs can use it for some sales, minimising their losses. Some said SSCs have six months worth of inventory, and stocks will get a further boost from incoming imports in October, which will allow buyers to re-evaluate their stock gaps and establish what they need to purchase domestically. EU mill prices, having lost €47/t in Italy and €36.50/t in northwest EU since the start of September, according to Argus assessments, have prevented imports from being of interest to buyers. The Argus cif Italy HRC assessment has in comparison lost only €15/t since the start of the month. Today some market participants were talking about prices being close to the bottom, a sentiment that was previously seen in June and July, but did not materialise owing to an unexpected further slowdown in demand in September. But producers selling large quantities of second-choice coils, at prices that sources said can be as much as €100/t below costs, is not sustainable. The main issue in the flat steel sector remains a lack of demand, which unless there is an EU stimulus package, will continue weighing on prices, market participants said. By Lora Stoyanova Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Tight supply remains Europe Al driver
Tight supply remains Europe Al driver
London, 25 September (Argus) — European aluminium markets have barely stirred following the slow summer months, as demand in the automotive and construction markets continues to disappoint and sales opportunities for traders and distributors remain sparse even after the holiday period definitively ended. But premiums have remained steady throughout September, as tight supply remains the main driver of the European aluminium market, even more so than earlier in the year, when premiums were climbing amid moderate demand. European aluminium premiums rose by two-thirds over the first five months of the year, with the Argus assessment of the P1020 duty-paid spot in-warehouse Rotterdam premium hitting an 18-month high of $320-350/t in May. Demand, although unimpressive compared with stronger years, increased sufficiently to tip the market balance against tight supply. Availability in Europe was severely limited by low production following sizeable cuts over the previous two years, the absence of Russian metal owing to self-sanctioning by consumers and official sanctions by governments in the UK and US, and aggressive Chinese importing from most international regions. Premiums subsequently edged back slightly to $320-340/t and then began an unprecedented run of flatness over the June-August summer period, as demand fell away in Europe but the sustained tight supply environment stopped premiums from falling back. Throughout the slow summer months, there was a sense that premiums were primed to race higher as soon as demand picked up in the autumn, led by automotive markets that were expected to at least show some improvement after slowing from the middle of the year. But that has not happened, and premiums have continued to flatline at $320-430/t in September, as demand has failed to stir in either the automotive or construction sectors. Europe's largest economy Germany has seen particular weakness in its consumer industries, with the construction sector having been in decline throughout this decade, while major carmaker Volkswagen recently told its employees that it is considering closing some factories. In July, Germany's manufacturing output index hit its lowest since June 2020, according to climate and economy ministry BMWK, with total industrial production down by 2.4pc from June this year and 5.3pc lower than in July 2023. "There has been no bounce-back from the end of the summer. Stockists and distributors still have empty inboxes, which is very unusual for this time of year," one analyst said. "The automotive market is bad and the construction market is terrible." But premiums have not budged against such a bleak demand picture, as supply remains very tight even against that stark lack of buying. The factors that reduced availability in Europe over the past few years remain very much in play, while China's appetite for imports has grown even stronger this year. China's primary aluminium imports in the year to August rose by more than 50pc on the year to 2.58mn t, customs data show. That trend is likely to continue, as domestic Chinese aluminium production is bumping up against the country's output cap of 45mn t/yr. Some had expected earlier this year that China could raise the cap but few are of that view now, especially given the damage done this year to the country's steel industry by excess production. Additionally, most provinces have now mandated efficiency targets. The best way to achieve them is to limit energy use, and aluminium smelters are one of the biggest energy users. "The Chinese production cap is key, and China is within a few hundred thousand tonnes of it already," a second analyst said. "They don't even need to see better demand to keep increasing imports." Tightness in the alumina market will feed through to the smelting industry, limiting output further. UK-Australian mining firm Rio Tinto's alumina output fell by 10pc on the quarter and the year to 1.68mn t in the second quarter, following an incident at its third party-operated Queensland gas pipeline in March, while record Chinese aluminium production this year has also drained alumina supplies. There is little in the way of imports flowing to Europe from other regions. Freight costs remain high, and suppliers in the Middle East and India are showing little inclination to bear the cost of deliveries to Europe without greater price and premium incentives. Consequently, the European market will remain very tight in the fourth quarter, leaving it susceptible to any stirring of demand that could cause premiums to jump. But there seems little chance of any such demand growth until 2025, with few suppliers even reporting discussions for further activity this year. By Jethro Wookey Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
EU steelmakers lobby for US Section 232-style tariff
EU steelmakers lobby for US Section 232-style tariff
London, 25 September (Argus) — EU steelmakers are lobbying for emergency restrictions on imports in light of continuing market penetration, according to numerous sources. European steel association Eurofer has met with the European Commission to discuss high imports, at a time when weak demand is already putting pressure on local steel prices. Multiple sources suggest it is lobbying for a tariff similar to the US' Section 232, which applies a blanket tax on all finished steel imports. "The commission of course is aware of the concerns of the sector, it's a sector with which we have a strong ongoing contact and dialogue. Any new trade defence cases are looked at on a case by case basis on their own merits," a commission spokesperson told Argus in Brussels on Tuesday. The commission understands the concerns of mills, but at the same time has to balance the interest of steel users, sources suggest. Imports to the EU's hot-rolled coil (HRC) market have increased dramatically since China started ramping up exports in the third quarter of last year. Imports since July 2023 have constituted around 25pc of all EU market supply when safeguard quotas reset at the start of each quarter, up from 11-15pc in the previous months. Imports rose to a record 1.56mn t in July, and would have been even higher if not for 175,000t being pulled back from clearance to avoid additional tariff rate quota duties. The EU imported 6.2mn t of HRC in January-July, the highest on record, despite tightened safeguards. The share of imports in overall supply is higher on cold-rolled coil and hot-dip galvanised (HDG), where the impact of comparatively higher energy costs is even more problematic for local mills. Steelmaking sources suggest that the existing safeguard is not fit for purpose as a result, and they also question the ability of importers to hold back supply to avoid duties. But others suggest the impact of the existing 15pc other countries cap and continuing dumping investigation has not been felt yet, and that these measures will help tighten the market when demand strengthens. Vietnam is a major source of HDG supply to the EU and sources expect this could be the next dumping case, especially given the country's high usage of Chinese HRC. By Colin Richardson and Dafydd ab Iago Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
India's HRC importers hit by falling steel prices
India's HRC importers hit by falling steel prices
Mumbai, 25 September (Argus) — Indian importers of hot-rolled coil (HRC) have suffered large losses in the last three months as bets on a demand recovery failed and domestic prices fell to over three-year lows. HRC prices in India's domestic market have fallen by around 13pc between mid-May and mid-September, forcing some importers to sell at a loss. A slowdown in construction activity during the monsoon season, reduced government funding for infrastructure projects and heightened pressure from lower-priced seaborne shipments have combined to send domestic HRC prices to their lowest level since 2020. Importers were paying landed costs of 50,000-51,000 rupees/t ($598-610/t) for HRC when bookings were made in May, at a time when domestic steel prices were increasing. But prices had fallen back down by the time those cargoes started arriving in July, leaving importers facing losses. The Argus weekly Indian domestic HRC assessment for 2.5-4mm material was last assessed at Rs47,400/t ex-Mumbai on 20 September, down by 13pc compared to mid-May when prices were assessed at Rs54,200/t. Imported HRC is now being offered at Rs46,000/t, about 10pc lower than its landed cost, a Mumbai-based trader said. Expectations of an uptick in demand following India's national elections in June failed to materialise. Some market participants then forecast that prices would recover in September on the back of a post-monsoon rebound in construction activity. Prices instead kept falling as the government did not release funding for building projects as had been expected, while the availability of cheaper imports and rising domestic production created excess supply. "The thinking was that even if we faced losses in the beginning, we would be able to cover them later when prices rose. But the price decline has continued," a Chennai-based HRC importer said. "Currently, there is no risk appetite left among importers. We have sold out whatever we imported and now we are buying from other importers," he said. The steel unit of NMDC, India's state-owned iron ore mining firm, has also started selling HRC recently. This has added to the pressure on domestic prices by increasing supply, market participants said. HRC offers from overseas sellers to India have also fallen in recent months, in line with the downturn in domestic demand and sluggish Chinese markets. Importers booked volumes from Vietnamese steelmaker Formosa Ha Tinh for $590-595/t cfr India in May, but levels fell to $565-570/t in July and indicative bids were at $530-540/t cfr in August. Buyers booked Chinese HRC for around $560/t cfr in late April, while the latest bookings were at $490-495/t cfr India. Support from duties New import offers have all but dried up recently given increased discussions that anti-dumping (AD) duties could be imposed on Vietnamese HRC, and that tariffs could be raised on imports from China, market participants said. India launched an AD probe into Vietnamese imports in August, while the steel ministry has backed raising tariffs on Chinese imports to 10-12pc from current levels of 7.5pc. Import restrictions could provide some support to prices, which have been falling with no signs of bottoming out. But there has been no official communication on AD duties yet, which has soured steel market sentiment further. Some market participants expect domestic HRC prices to fall to Rs45,000/t soon. By Amruta Khandekar Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
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