Daily Economy & Steel News 2023-05-16

Daily Economy & Steel News 2023-05-16


March 2023 compared with February 2023

Industrial production down by 4.1% in the euro area and by 3.6% in the EU/ Down by 1.4% in the euro area and by 1.3% in the EU compared with March 2022

In March 2023, the seasonally adjusted industrial production decreased by 4.1% in the euro area and by 3.6% in the EU, compared with February 2023, according to estimates from Eurostat, the statistical office of the European Union. In February 2023, industrial production increased by 1.5% in the euro area and by 1.4% in the EU. In March 2023 compared with March 2022, industrial production decreased by 1.4% in the euro area and by 1.3% in the EU.

Monthly comparison by main industrial grouping and by Member State - In the euro area in March 2023, compared with February 2023, production of capital goods fell by 15.4%, intermediate goods by 1.8%, energy by 0.9% and non-durable consumer goods by 0.8%, while production of durable consumer goods rose by 2.8%.

In the EU, production of capital goods fell by 12.9%, intermediate goods by 1.6%, non-durable consumer goods by 1.3% and energy by 1.0%, while production of durable consumer goods rose by 2.0%.

Among Member States for which data are available, the largest monthly decreases were registered in Ireland (-26.3%), Sweden (-3.9%) and Germany (-3.1%). The highest increases were observed in Finland (+3.0%), Slovenia (+2.3%), Czechia and Slovakia (both +1.7%).

Annual comparison by main industrial grouping and by Member State - In the euro area in March 2023, compared with March 2022, production of energy fell by 6.1%, intermediate goods by 4.7%, capital goods by 2.1% and durable consumer goods by 0.8%, while production of non-durable consumer goods rose by 6.8%.

In the EU, production of energy fell by 9.1%, intermediate goods by 5.6% and durable consumer goods by 3.1%, while production of capital goods rose by 0.4% and non-durable consumer goods by 7.1%.

Among Member States for which data are available, the largest annual decreases were registered in Ireland (-26.1%), Lithuania (-16.6%) and Estonia (-12.6%). The highest increases were observed in  Malta (+12.5%), Denmark (+8.9%) and Spain (+5.6%). Euro indicators - Eurostat (europa.eu)

EU commission sees Germany 2023 GDP growth at 0.2%, Italy 1.2% – newspaper

The European Commission will forecast Germany’s economic growth this year at 0.2%, while projecting a 1.2% rate for Italy, Italian daily La Stampa reported on Monday, citing Brussels-based sources.

The 0.2% rise in gross domestic product forecast for Germany would confirm the Commission’s previous forecast made in February, but is more downbeat than Berlin’s own most recent projection of 0.4% made last month.

The Commission sees the euro zone’s largest economy growing by 1.4% next year, La Stampa writes, slightly above its February forecast of 1.3%.

Brussels’ 1.2% forecast for Italy is an upward revision from a 0.8% estimate made in February, and it is also above the Rome government’s official forecast of 1.0%.

Brussels forecasts Italian growth to remain broadly stable next year at 1.1%, La Stampa said, which is a marginal upward revision from its February forecast of 1.0%.

For the euro zone as a whole, the Commission will forecast growth this year at “slightly above” its previous forecast of 0.9%, the paper said, without being more specific.

The broader European Union will also see its growth rate revised “slightly up” from the February projection of 0.8%, the newspaper said.

It offered no forecast for 2024 for the EU or the euro zone. EU commission sees Germany 2023 GDP growth at 0.2%, Italy 1.2% – newspaper | Hellenic Shipping News Worldwide

Romania | Instant Comment Romanian economy expanded by 2.3% in 1Q23

Flash 1Q23 GDP growth came in at +0.1% q/q corresponding to +2.3% y/y. 1Q23 GDP growth was below our call and Bloomberg median, both at +4.0% y/y. We stick to our 2.1% FY GDP growth forecast. GDP breakdown is due 8 June. Industrial production advanced by 0.9% q/q in the first quarter of the year. Retail sales increased by +2.2% q/q in 1Q23. Construction works contracted by 2.7% in the first two months of the first quarter vs 4Q22. The Economic Sentiment Index (ESI) inched down in 1Q23 to 101.5 from 103.1 in 4Q22. www.erstegroup.com



Source: www.steelbb.com

Platts EMEA HRC Assessment Rationale

Platts assessed hot-rolled coil in Northwest Europe down Eur20 on the day at Eur770/mt ($836.99/mt) ex-works Ruhr on May 15.

A service center source reported offers from a re-roller at Eur750/mt delivered Germany and estimated tradable values for German mills at Eur750-Eur770/mt ex-works Ruhr.

An international trader estimated achievable prices at Eur770-Eur780/mt ex-works Ruhr.

Another trader reposted tradable value at Eur760-Eur780/mt ex-works Ruhr.

A third trader estimated achievable prices at Eur750-Eur770/mt ex-works Ruhr.

A mill source reported tradable value at the equivalent of Eur770-Eur780/mt ex-works Ruhr.

Majority of EU mills hold back HRC offers, mood remains negative

Integrated mills to offer in June

Buyers expect price decline

The majority of the European mills have been holding back offers of hot-rolled coil on May 15, but the sentiment in the market has remained strongly negative.

Integrated mills in Northwest Europe have been avoiding giving offers, but market sources estimated that the steelmakers were ready to sell HRC at Eur750-770/mt ex-works Ruhr.

The region’s reroller has been offering limited volumes of September production material at Eur750/mt delivered Germany.

Platts assessed domestic prices for hot-rolled coil in Northwest Europe down by Eur20/mt on day to Eur770/mt ex-works Ruhr.

Last week, integrated mills from Northwest Europe notified their customers that they will resume offering September production coil in the market in June.

Buyers, in the meantime, have been holding back from new bookings as they anticipate that domestic prices would decline.

“The mills are not giving offers, as even if they asked for Eur750/mt ex-works [Northwest Europe], the buyers would prefer to wait,” a trader said. “So the mills are negotiating the prices with some customers, but overall they try to avoid trading.”

Platts assessed domestic prices for hot-rolled coil in South Europe unchanged on day at Eur750/mt ex-works Italy on May 15, reflecting tradable values heard in the market.

Platts EMEA HRC Carbon-Accounted Daily Rationale

Platts assessed Northwest European hot-rolled coil carbon-accounted down Eur20 on the day at Eur845/mt ($918.52/mt) ex-works Ruhr on May 15.

The carbon-accounted steel assessment consists of Platts daily carbon-accounted steel premium assessment of Eur75/mt on May 15, unchanged on the day. Platts assessed the daily hot-rolled coil price in Northwest Europe at Eur770/mt ex-works Ruhr on May 15, which was Eur20 lower on the day.

A mill source reported offered premium for carbon-accounted HRC at Eur100-Eur300/mt from and estimated achievable premium in Northwest Europe at Eur50-Eur100/mt.

Source: www.metalexpert.com

German government to support e-mobility sector

The German government will support growth of e-cars production, which will favour European steelmakers who are focusing on producing lighter and stronger steels for the automotive industry.

Swedish battery producer Northvolt plans to establish a new gigafactory for battery cells in Heide to meet growing demand for electric vehicles. The factory, when ramped up to full capacity, will have an annual production volume of 60 Gwh and will supply 1 million e-cars with batteries, Metal Expert learnt. "The federal government intends to directly stimulate the establishment of key technologies, such as battery cells, in Germany in times of growing global competition. In the Northvolt case, the support will unlock a multi-billion Euro private investment," according to the notice of the Germany's federal ministry for economic affairs and climate action. This support is subject to the approval by the European Commission.

This increasing production trend in the European e-mobility is offering new opportunities to the European steel manufacturers, who will need to meet the needs of car makers for lighter and stronger steel and develop tougher and thinner electrical steels used in the construction of electric motors, Metal Expert learnt.

“It is great that the EU has opened the way for Northvolt to locate here with the TCTF [Temporary Crisis and Transition Framework], providing a response to the US IRA within a very short time. This is the first time that this path has been taken in Germany," commented minister Robert Habeck,

By 2027, demand for electric vehicles in Germany is expected to be around 1.63 million cars, according to Statista. For 2023, The German Association of the Automotive Industry expects total sales of electric cars (BEV and PHEV) to be around 765,000 units.

Source: www.gmk.center

Marcegaglia received €8.6 billion in revenue in 2022

The company's EBITDA in 2022 reached €727 million, while net profit reached €411 million

The Italian steel company Marcegaglia received €8.6 billion in revenue in 2022 (excluding Outokumpu subdivision for the production of rolled products). The results of the latter will be included in the financial report for 2023. This was stated by the head of the company’s board Antonio Marcegaglia, reports Eurometal.

The company’s EBITDA reached €727 million in 2022, and net profit reached €411 million. According to the CEO of Marcegaglia, the company has more than doubled its revenue over the past 10 years.

The company achieved record results last year, despite a slight reduction in steel shipments of 6% y/y. The indicator decreased, mainly due to the decline in the global steel market in the second half of last year.

The company is currently targeting €10bn in revenue, €1bn in EBITDA, zero debt, and zero carbon steel production.

Earlier, Marcegaglia completed the acquisition of Latvian SIA Severstal Distribution (SIA SD), a subsidiary of Russian Severstal.

The company received full control over the SD SIA service center in Riga and the subsidiaries of SD Sp.zo.o. in Poland and SD LLC in Ukraine. The divisions operate through a supply chain that includes only the distribution of flat and long products, without any production activities. The total capacity and throughput of the enterprises is about 300 thousand tons of steel per year.

In addition, at the end of 2022 Marcegaglia announced the purchase of divisions for the production of stainless steel long products and a smelter of the British company Outokumpu. As a result, the company expects to provide rolled steel to European enterprises and circumvent protective measures, anti-dumping duties, as well as the mechanism of carbon border adjustment mechanism (CBAM) operating in the European Union.

Global demand for graded rolled steel in 2023 will remain unstable – forecast

Consumption in large economies is influenced by macroeconomic conditions

The unfavorable situation in the construction sector at the global level and fiscal obstacles will not allow to support the prices of graded rolled products in the current year. This was discussed at the meeting of the International Association of rebar producers and exporters (IREPAS), informs Argus.Media.

Regions with the potential for a significant increase in demand are likely to show this growth no earlier than 2024. At the same time, consumption in countries with large economies is affected by macroeconomic conditions.

According to Ahmed Ezza, chairman of Egyptian steelmaker Ezz Industries, rebar consumption in North Africa and the GCC is likely to remain flat in 2023. It has the potential to continue growing rapidly in 2024 or 2025. In particular, Egypt in the long term can consume approximately 3-4 million tons of rebar per year, provided that the government’s restrictions on private construction, introduced to protect agricultural land, are lifted.

Demand for long rolled steel in the European construction sector is forecast to remain subdued until the end of 2023 due to high energy prices and interest rates. Although it will be stimulated by infrastructure projects in north-western Europe, the private housing sector is weak. According to Ahmed Ezza, rebar producers in Southern Europe are operating at around 60% capacity and are still struggling for orders.

The forecast for the rebar demand in the USA for 2023 is also ambiguous. Construction projects in the country are slowing down due to a lack of funding. The industry has been affected by the bankruptcy of several medium-sized US banks over the past few months – most projects are financed by these, and not by large financial institutions. Also, with new capacity coming on line, any additional demand in the States could be met through domestic production over the next few years.

Demand for steel in China may have passed its historic peak after being hit hard by quarantine restrictions in recent years, noted Frank Zhong, deputy director-general of Worldsteel. A significant drop in real estate investment since the beginning of 2022 has affected the total volume of investment in construction, although financing of infrastructure projects has increased.

As GMK Center reported earlier, in the middle of April the global prices for rebar continued to decrease under the influence of low demand. Turkish producers have not yet been able to compete in export markets, the Chinese market has weakened, in the United States there are growing risks of a decrease in purchases of these products by the construction sector amid macroeconomic problems.

Source: www.argusmedia.com

EU automotive industry braces for 2H slowdown

Semi-conductor supply shortages seem to have largely subsided in the EU automotive industry for now, but logistical disruptions, high inflation and macroeconomic headwinds could present challenges to the industry later this year.

European carmakers have strong order books heading into the second quarter, and by the third quarter demand and supply are expected to realign following the normalisation of supply-side issues. The abatement of these logistical and supply chain obstacles, coupled with an anticipated slowdown in orders, is seeing some automakers ready themselves for increased competition.

Easing supply boosts first quarter

Sentiment in the automotive industry was overall positive in the first quarter, with vehicle registrations showing significant signs of improvement and inventories returning to normal levels after a multi-year period of materially constrained supply. Car registrations in the EU increased by 18pc year on year to 2.7mn units in January-March, data from the European automobile manufacturers association show.

In the meantime, car manufacturing group Stellantis had 1.3mn units in inventories at the end of the first quarter, a 21pc increase on the previous quarter and a 61pc increase year on year.

But automotive producers are bracing themselves for increasing competition and a slowdown in demand in the second half of the year. Stellantis has a healthy order book for the next three months but has "seen some relative slowdown in order intake", a spokesperson told Argus.

German carmaker BMW Group's first-quarter automotive sales inched lower to 588,000 units, weighed down by tepid demand, as high inflation in Europe and the lingering effects of Covid-19 policies in China weighed on overall demand, but the company expects 2023 sales to be stable on 2022 at 2.4mn t.

Rival German carmaker Volkswagen Group boasts a 1.8mn unit order book in Europe for the first quarter, which should carry the company through the second quarter. But the group is anticipating that competition will intensify as the demand outlook for the second half of 2023 weakens.

The auto industry is also grappling with inflated raw material costs, including lithium, copper and steel. Increased competition in the sector later this year will likely make it more difficult to pass on inflated costs to consumers.

But carmakers anticipate that costs will come down when compared with surging prices in the fourth quarter of 2022. The Argus assessed northwest European hot-rolled coil index averaged €657.79/t ex-works in the fourth quarter of 2022, which rose to €778.52/t ex-works in the first quarter of this year. The index is averaging €788.22/t ex-works so far this month, but has fallen by €73.50/t since its peak on 5 April.

Decarbonisation and electrification

Steel demand could receive a boost from the growing number of electric vehicles (EVs) that will be produced in the coming years. WorldAutoSteel, the automotive group of the World Steel Association, estimates that an EV could require up to 260-280kg more steel than an internal combustion engine vehicle, which Argus estimates requires around 900kg of steel.

There is an expectation that EVs will make up a quarter of all new car sales by 2025, according to European steelmaker ArcelorMittal. In March, the EU saw a surge of 58pc in new registrations of battery electric vehicles (BEVs), reaching 151,573 units. This equates to a 14pc market share.

Hybrid electric vehicles also had a strong month in March, with sales up by 38pc to 264,694 units.

BMW's first-quarter EV sales increased by 83pc year on year to 65,000. The company indicated that sales in China would drive the growth of its EV segment, which will reach 9pc as a share of total sales in 2023. And VW plans to increase the percentage of BEV sales from 7pc to 10pc, with Stellantis also targeting a "significantly higher" mix of EV sales by 2024/2025. But an intensifying price war across the EV space has seen car manufacturers planning to focus more heavily on margins in upcoming quarters — automakers will be more eager than ever to secure cheaper steel contracts.

Source: www.kallanish.com

Turkey needs ETS that aligns with EU: Çakır

Turkey must establish a carbon market that is aligned with the EU’s Emissions Trading System (ETS) to ensure its competitiveness in the export arena, Borcelik general manager Kerem Çakır tells Kallanish.

"In order to maintain the country's competitiveness in export markets, Turkey needs to follow closely the green transition trend," says Çakır, who is also chair of the board of Turkey’s Association of Cold Rolled, Galvanized and Coated Coil Manufacturers (SOGAD). He sees Turkey as a natural trade partner of the EU due to its proximity, and important hub within the EU's global logistics chain.

The EU Carbon Border Adjustment Mechanism (CBAM), an extension of ETS, will be implemented in October 2023, with financial obligations commencing from 2026 following a transition period.

“The green transition will become more serious in our country and will be accelerated with an Emission Trading System,” Çakır says.

“In the steel sector, we already have an advantage because the majority of crude steel production in Turkey is EAF-based compared to other countries. The biggest outcome of the ETS will be the fund created from carbon tax revenues. This fund must be transparently and rapidly transferred back to the sustainability projects of the relevant sectors' green transitions. Otherwise, companies will face a financial burden they cannot cope with, and in this case, no industrial or commercial organisation can support ETS,” Çakır adds.

The executive proposes five factors that should be integral to the Turkish ETS. The system must be established and harmonised with the EU ETS. Carbon taxes should be set at the same level as those in the EU to avoid additional tax payments for CBAM. It should adopt the "polluter pays" principle, ensuring that carbon taxes are paid at the source of production.

Moreover, carbon tax funds should be transparently and promptly allocated to research and development projects focused on sustainability and zero-emission targets in the industrial sector. Finally, investment should be encouraged into unlicensed renewable energy projects.

Thyssenkrupp distribution profit falls as prices normalise

Despite tonnages rising slightly year-on-year, thyssenkrupp Materials Services saw second-fiscal-quarter-through-March earnings drop due to normalised steel prices, Kallanish hears from the company.

Order intake came to €3.9 billion ($4.2 billion), down from the record prior-year figure of €4.5 billion; revenue was virtually identical in both periods. The drop was even more obvious for earnings, with adjusted Ebit reaching €85 million, after €336m a year earlier. The primary reason for this decline was falling margins as a result of lower material prices, it notes, pointing out that the prior-year period saw exceptional heights.

The development was particularly evident in the trading and European service centre business and direct-to-customer business. The North American units posted a slight increase in sales in both warehousing and automotive-related service centres. Tk Materials Services, one of Europe’s largest steel distributors that operates largely independent from thyssenkrupp’s mill unit tk Steel, also benefited from positive dollar exchange rate effects.

Volumes of steel, other materials and raw materials rose 2% overall to 2.34 million tonnes, mainly due to increased volumes in direct-to-customer business. Although sales prices were below the prior year overall, the company reports a slight recovery in the price of finished steel quarter-on-quarter, and improving demand.

In the half-year period from October through March, order intake at the unit fell by 12% to €7.25 billion, and revenue by 8% to €7.14 billion, with adjusted Ebit dropping from €555m to €105m.

Federacciai warns of high BF-EAF decarbonisation conversion costs

Federacciai warns of high BF-EAF decarbonisation conversion costs

The Italian steel sector is planning to achieve “green” steel production by 2030, Federacciai president Antonio Gozzi said at the Italian steelmakers association’s annual meeting held at last week’s Made In Steel tradeshow in Milan.

“Over 80% of Italian steel is produced using electric furnaces, in a decarbonised way, while in Europe about 60% of steel is still made with blast furnaces and coal … Italy is the second largest steel producer in the EU, behind Germany and ahead of France, and the leading steel producer using the electric arc furnace route,” Gozzi pointed at the event attended by Kallanish.

In Europe, about 90 million tonnes/year of steel is still produced with blast furnaces. Eurofer estimates that at least half of this amount will be converted to EAF steelmaking in the near future to pursue the decarbonisation process. According to Gozzi, this will lead to three major problems. The first is the high cost of this conversion, a roughly €1 billion ($1.1 billion) investment for each 1mt of converted production. This means around €50 billion will be needed in the near future to decarbonise European steel output, but there is no plan from the European Commission to support this financially.

The second issue is related to the very strong growth in demand expected for scrap and metal charges, which is estimated to reach about 50m t/year, “availability that does not exist today”, Gozzi said. “Europe exports around 20mt of this critical raw material every year and, even if we succeeded in blocking this flow of exports, another 30mt would still be missing,” he added.

The third challenge the industry needs to face is the future additional need for electricity that will replace coal in the EAF steelmaking process. Europe will also have to financially support decarbonisation of that portion of blast furnace steelmaking that cannot be converted to the EAF route and needs help to develop a range of technologies, from carbon capture to biogas, to hydrogen. “So far, the European Commission is signalling no attention to this need,” Gozzi warned.

In the absence of a common European industrial policy, Italy must continue to fight at the community level for equally balanced European aid, for the single market to be safeguarded, for industry to return to the centre of attention, and for the elaboration of common industrial policies, the executive continued.

If EU policymakers do not quickly change their approach, they will be responsible for the continent’s industrial erosion. In recent years, EU policy on industry has been gloomy and marked by a lack of effective and unifying measures. Gozzi urges collaboration, unity and, above all, equal aid to all member states.

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