German integrated flats producer Salzgitter-Flachstahl has warned its customers of potential delays to deliveries after a lightning strike at the plant impacted steelmaking and rolling operations, a company official told MetalMiner.
The company sent a letter to its customers on June 9, explaining that a lightning strike at the weekend at a substation on site caused its blast furnace and convertor shops — as well as its hot strip mills — to operate at lower levels, the source said.
The incident completely halted all production for only one hour. However, the aftereffects caused various disruptions that continue to impact operations. Furthermore, the stoppage impacted in digital controls, electrical cable feeds and motors on production lines. In turn, that caused the plant to operate at lower levels, the source said.
He did not say, however, either at what capacity percentage Salzgitter-Flachstahl is now operating or in what areas. He also did not indicate what previous production levels were before the incident.
ArcelorMittal is eyeing the potential acquisition of Liberty Steel France, which includes a steelmaking plant at Ascoval and rail rolling mill at Hayange, a source within the Luxembourg-headquartered company told MetalMiner.
“We were interested last year, when they were available,” the source said.
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Bids are due for assessment likely in July, the source added.
One analyst expressed his surprise on ArcelorMittal’s interest in those plants. In February, the steelmaker announced financial results for 2020, stating that its strategy would be to focus on organic growth.
ArcelorMittal also rolls rails in Europe at Gijón in Spain and Luxembourg’s Rodange mill. It also does so in Poland at the Dąbrowa Górnicza and Królewska sites.
Hot rolled coil prices in Western Europe have not slowed their upward trek over the past month. Demand continues to outstrip supply for the flat-rolled product, industry watchers said June 1.
“It has everything to do with high demand in Europe and the United States,” one trader told MetalMiner.
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Rising hot rolled coil prices
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Sources confirmed prices for hot rolled coil at €1,120-1,130 ($1,370-1,385) per metric ton exw for rolling and delivery into Q4. That compares with hot rolled coil prices of €1,000-1,020 ($1,225-1,250) in May.
Cold rolled coil is now carrying a premium of €125 ($150) per ton over HRC, sources indicated.
The auto and construction sectors are behind the high demand, one source said.
New registrations for passenger vehicles within the European Union rose by 218.6% year over year in April to approximately 862,226 units from 270,651 units, the European Automobile Manufacturers’ Association (ACEA) stated on May 19.
Restrictions from the COVID-19 pandemic in April 2020 were the main reason behind the increase, however, the association noted.
“Indeed, despite this big percentage increase, last month’s sales volume was almost 300,000 units lower than that recorded in April 2019,” ACEA added.
The copper price is likely to finish 2021 lower than its current level. However, they could yet see some further gains in the year, industry watchers told MetalMiner.
“It’s sentiment-driven,” one analyst said about current prices for the base metal and the prospect for increases in them over the year.
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Copper price roller coaster
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Copper could achieve $15,000 for a short while, a second analyst said, but warned that it would not be unsustainable.
Sustained higher prices could also impede rollouts of new electric vehicles. As such, the ongoing “environmental revolution” would precede at a much slower pace, the first source added.
“It would lose so much demand to aluminum in terms of cabling,” which is notably cheaper, the first analyst said about continuing rises in prices.
Copper on the London Metal Exchange (LME) has sharply risen on the year. LME three-month copper reached a high of $10,724.50 per metric ton on May 10. That more than doubled the $5,266 reported on May 11, 2020.
That price has since fallen, however. The copper price finished Monday at $9,868 per metric ton on news that the China’s National Development and Reform Commission warned commodity companies against pushing up prices by maintaining “normal market order.”
ArcelorMittal Mexico plans to complete the construction of a new hot strip mill with a 2.5 million metric ton capacity at its steelmaking site in Lazaro Cardenas by the end of 2021, the Luxembourg-headquartered group said.
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The new mill would produce HRC for the non-auto, domestic and industrial use sectors. The mill is part of a $1 billion upgrade project that the parent group announced in 2017 for the Lazaro Cardenas site.
Up until now, the plant has produced only slab via a direct reduced iron plant and four electric arc furnaces with a crude steel capacity of 4 million metric tons per year.
Long products are also a part of ArcelorMittal Mexico’s rolling capacity. Lazaro Cardenas can roll 1.3 million metric tons per annum of long products via one blast furnace and a basic oxygen converter to produce 1.35 million metric tons of crude steel for casting into billets.
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ArcelorMittal Dofasco plans revamped hot strip mill
Further north, ArcelorMittal Dofasco plans to complete by H1 2022 the modernization of its hot strip mill. In addition, it plans to replace three end-of-life coilers with two new ones.
Hot rolled coil from European mills have transacted in the past two weeks for €1,000-€1,020 ($1,200-$1,225) per metric ton exw for rolling and delivery as far ahead as Q4, sources said. Cold rolled coil for the same production and delivery times transacted for about €1,100 ($1,320).
Prices for hot rolled coil in late March reached about €900 ($1,140-1,200). Meanwhile, CRC reached approximately €980 ($1,180).
Deals on imports of HRC over May from India and Turkey concluded at about $1,100 per ton cost and freight (CFR) European ports for delivery in June and July, a second trader stated. That marked an increase from $900-$910 in late March.
A Russian steelmaker also let some steel go into Europe at prices lower than the imports from Asia, another European trading source reported, though no other sources told MetalMiner about this.
The Russians only concluded those transactions in the run-up to Russia’s May holidays. This year, the holidays last 10 days and include May Day on May 1 and Victory Day on May 9, the European trading source warned.
A construction boom in the country has also made Russia’s domestic market the end-user for its rolled product, the source added.
The group tapped 4.37 million metric tons of liquid steel in Q1 2021. Meanwhile, it tapped just over 4.21 million metric tons in Q1 2020, NLMK said.
Crude production rose 12.1% quarter on quarter, however, from 3.9 million metric tons.
Average capacity utilization across all of NLMK’s hot ends in Russia, Italy and the United States averaged 94.5% in Q1. The figure is unchanged from the previous quarter and year over year, the group indicated.
NLMK can produce 17 million metric tons per year of crude steel. That comes mainly from its main integrated site at Lipetsk, about 465 kilometers southeast of capital city Moscow. That asset also casts slab for further rolling at the plant or for export to subsidiary rolling mills in Europe and the United States.
The group also has electric arc furnaces in Russia at NLMK Kaluga, NLMK Ural, at its Italian site NLMK Verona and at NLMK Indiana in the United States.
Indiana can produce 770,000 metric tons per year of crude via one electric arc furnace. Estimated crude capacity from the 68-tonne EAF at Verona is about 500,000 metric tons per year.
NLMK’s consolidated sales, including semi-finished and finished products, fell 3% on the year to 3.91 million metric tons from 4.5 million metric tons.
Quarter-over-quarter sales were 14% lower from 4.22 million metric tons, the group said.
A decrease in commercial pig iron sales due to repairs to blast furnace operations at Lipetsk, plus an increase in intragroup slab sales, impacted sales results, NLMK said.
The group’s consolidated flat sales rose by 2% in Q1, however, to about 2.06 million metric tons from 2.02 million metric tons in Q4 2020. Those sales are down 7% from the more than 2.21 million metric tons the group sold in Q1 2020.
NLMK Russia Long Products, the only segment of the group that produces finished and longs, saw the highest increases in consolidated quarter on quarter at 635,000 metric tons, up 8% from 587,000 metric tons.
Year over year, the increase rises to 18% from 539,000 metric tons.
Tata Steel Europe (TSE) plans to enact a carbon surcharge on all new flat–rolled product contracts from July 1, a spokesman for the group said.
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The planned surcharge scheme stipulates for now a €12 ($14.30) per metric ton of hot and cold rolled coil from TSE’s plants at Port Talbot (Tata Steel UK) and IJmuiden (Tata Steel Netherlands), the spokesman told MetalMiner.
TSE is a wholly owned subsidiary of Mumbai-headquartered Tata Steel, which has operations in various parts of the world.
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Carbon surcharge
Several factors could see the surcharge amount change. Those include the difference between the sales price on the rolled products and the carbon tax, the TSE spokesman added.
Western European mills were offering HRC in late March at €900 ($1,070) per metric ton ex works for October delivery. Meanwhile, they were seeking €980 ($1,170) for CRC.
The planned scheme will also not carry any sort of discount, such as for volumes purchased.
“There is a certain amount of dipping our toe in the water,” the spokesman added. It is not yet clear how the how the market or other producers are likely to react to the carbon surcharges.
Tata Steel Europe’s current deficit on carbon allotments within the European Union and the United Kingdom prompted the group to introduce the carbon surcharge scheme, the spokesman also said.
Policy changes
The European Union’s Emission Trading Scheme Phase 4 took effect Jan. 1. Implementation of that will also see an annual 2.2% drop on carbon emissions allowances until 2030.
Those decreases exceed TSE’s decarbonizing rate, the spokesman noted, thus prompting the group to pass the costs on to buyers.
TSE is aiming to be zero-carbon emissions in Europe by 2050. The group’s more immediate aim is 30-40% cut in carbon emissions by 2030.
The spokesman declined to indicate what TSE’s total carbon emissions volume are at present.
However, they said it now produces 1.98 metric tons of carbon per every metric ton of crude steel produced.
Uncertain futures
TSE’s total crude steel capacity is approximately 11 million metric tons per year. Port Talbot can produce 4 million metric tons of crude, via two blast furnaces and two convertors, which it casts into slab for further rolling.
Ijmuiden, just outside of the Netherlands’s official capital of Amsterdam, has a crude capacity of 7 million metric tons per year. Its production there comes from two blast furnaces and a convertor shop.
The Dutch site can produce HRC in 1-2mm gauges. The plant can also produce CRC, hot-dipped galvanized coil, pre-painted coil and tin sheet.
Despite those plans, the two integrated works’ respective futures are unclear.
TSE split up IJMuiden from Port Talbot in November. At the same time, Sweden’s SSAB announced that it was in preliminary talks with the group over potential acquisition of the Dutch plant.
Those talks with the Indian group ended in February (after having announced them in November). The Swedish firm cited limited potential scope to integrate the Dutch plant into the Swedish group’s strategic framework.
SSAB wants to produce the world’s first fossil-free steel by 2026 and be completely fossil-free by 2045.
Labor unions at Port Talbot have also expressed concerns about that site’s future. Furthermore, Welsh nationalist and social democratic party Plaid Cymru has called on London to nationalize the plant.
The European steel industry faces three major challenges, following the impacts of the COVID-19 global and the 2008-09 financial crisis, management consultancy McKinsey & Company stated.
“European steel producers should consider making a series of short-term operational and medium- to long- term strategic moves to ensure economic and environmental sustainability going forward,”
McKinsey said in its March 15 report, “The future of the European steel industry.”
“These strategic moves could encompass restructuring steps aimed at capacity reduction, steps toward strengthening the position of steel companies by diversifying their capabilities and sustainability moves toward low- and no-carbon steel,” McKinsey added.
The first move the sector needs to address is the increase in structural overcapacity. That is particularly true after a demand loss of between 5 million and 10 million metric tons demand loss as a result of the pandemic, the group stated.
“European steel players need to adjust overcapacity to be in sync with next normal steel demand,” McKinsey said.
Adjusting for a greener future
Steelmakers also need a short-term response to compensate for higher costs with profitability improvements and incremental measures that will reduce CO2 emissions. For example, they can do so by increasing the scrap rate, the report added.
Meanwhile, producers need to make investments with a view to medium- and long-term decarbonizing of the steel industry. In short, they should tailor long-term plans and technology choices towards CO2 neutrality, McKinsey noted.
Some producers’ offer prices from late last week are now at least €900 ($1,060) per metric ton exw. Meanwhile, delivery times extend as far out as October, market participants said.
Cold rolled coil is on offer for €980 ($1,155), they added.
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“It’s impossible to get anything before June,” one trader said.
Hot rolled coil offers in mid March reached €850-900 ($1,000-1,060) for May rolling and June delivery. However, traders warned then that the price and lead times were not certain and could rise further.
Import offers for hot rolled coil are now $900-910 cost and freight (CFR) for European ports. That is up from $890-900 transacted earlier in March for material from India and Japan, respectively for May and June delivery, sources also noted.
Import prices could also face more increases, a second trader warned.
