The situation of the steel industry in Europe

The situation steel industry – Europe is shaped both by the war in Ukraine and by the increased energy prices.

Photo source ft.com

THE SITUATION OF THE STEEL INDUSTRY – EUROPE – RUSSIA

Russia steals steel worth 600 million dollars from factories and ports in Ukraine. The statement belongs to the head of the largest steel company in Ukraine, Metinvest.

He stated that public sources and the company’s own informants reported that the steel is being transferred to Russia. Then it is sold on domestic markets or in African and Asian countries.

„What they do is basically rob. They are not only stealing our products, but some of these products already belong to European customers,” Mr Ryzhenkov told the BBC.

The company is documenting the theft as much as possible and is preparing to take legal action in the future.

„At some point, the Russians will face not only the international courts, but also the criminal courts. And we will go after them with everything we have”.

THE SITUATION IN THE EUROPEAN UNION – GERMANY

The German steel market is preparing to face the reduced gas supply in September. The flow of Nord Stream 1 was reduced to only 20% of the installed capacity.

The big steel buyer BMW said it could reduce gas consumption even more for a limited period of time. Without „jeopardizing the reliability of supply at its locations in Germany”.

Germany’s largest steel producer, ThyssenKrupp, has declared that it cannot convert its production processes from natural gas to oil or coal. So that they could face stoppages and technical damages in the event of a gas shortage. The company representatives stated that they can face a restricted production „to a certain extent”.

Currently, the real impact of higher gas prices on the market remains limited. However, the conversion costs for obtaining hot rolled steel have increased.  The reason being higher energy costs.

Hot rolled steel producers say that conversion costs are now EUR 150-170/t. Gas and electricity representing approximately half of this. Usually, energy represents 25-30% of conversion costs.

Because of its proximity to the conflict, both geographically and politically, German industrial production is particularly modest. Domestic rolling mills reduced production to 3.2 million tons of crude steel in June. Down by 7% compared to the similar period in 2021.

OTHER EU COUNTRIES

Inventories at steel distributors are increased due to panic purchases made in March and April. These purchases are mostly at considerably higher values ​​than the current offers from EU producers.

Europe enters the holiday period, when the demand for steel traditionally decreases.

The reduction in production during this period alleviates part of the negative pressure on the basic values. This alone will not be enough to support prices. A recovery will occur only once the buyers have to renew their stocks, after the vacation period.

Italian crude steel production fell by 14.2% year-on-year, reaching 1.8 million tons in June. Factories have severely restricted their production to address problems related to overcapacity and falling demand.

In Turkey, steel production also suffered. In June, production is 2.9 million tons, down 13.1% year-on-year.