Iron ore offers little support to scrap price in Europe
Iron ore prices have surged since April, but this has had little impact on European ferrous scrap prices and is likely to provide only limited support in the coming two to three months.
The Argus daily 62pc Fe iron ore fines cfr Qingdao (ICX) assessment rose to $121.35/t on 15 July from below $90/t on 2 April because of expectations of tighter supply from major iron ore suppliers and limited intent from Chinese steel mills to reduce output, despite falling margins.
Some European market participants previously anticipated that the increase in iron ore prices in China, which is the main driver of European iron ore prices, would support European delivered to mill ferrous scrap prices in June and July. The expectation was that blast furnace-based steel mills might increase their use of scrap to offset higher iron ore costs.
European blast furnace mills typically consume a mixture of iron ore pellets and fines that they purchase through long-term contracts. Prices under the contracts are usually linked to one or a basket of cfr China indexes.
But scrap demand from many northwest European mills since April has fallen or remained largely unchanged at best. Weaker steel demand and prices coupled with scheduled maintenance and upgrade works at steel mills were the main drivers behind the fall in scrap demand.
The Argus monthly national average assessment for E40 shredded ferrous scrap delivered to mill in Germany fell to €239.26-249.26/t in July from €262-272/t in April.
Many mills were also unable to significantly increase the percentage of scrap used in blast furnaces because of technical reasons.
"It is not that easy to increase scrap usage in blast furnaces. Most mills in Europe have probably reached the maximum charge rate of scrap and will not be able, or even consider, to use more scrap even if iron ore prices rose above $200/t," one European steel mill said.
Another steel market participant noted that some US mini-mills have been looking at options to displace some direct reduced (DR) pellets with high-grade scrap products, but added that this activity is fairly limited within Europe.
The average scrap utilisation rate in European blast furnace crude steel production is around 15-20pc, according to estimates by multiple steelmakers.
The availability of competitively priced pig iron further dented some European mills' appetite to use more scrap. Scrap demand from some integrated mills in northwest Germany was lower in June and July as prices for contracted pig iron were considerably cheaper than scrap, one scrap supplier said.
Pig iron prices in Europe were also under pressure in May-June. The Argus assessment for Russian/Ukraine basic pig iron, two of the main suppliers of European imported pig iron, fell to $334/t fob Black sea on 27 June from $350/t on 25 April. Prices rebounded to above $340/t fob in mid-July because of reduced availability and higher sales to the US. But spot demand from European mills was still comparatively weak, market participants said.
Logistical price boost
Market participants expect scrap prices in Europe to have little support in the next two to three months as steel demand and prices are unlikely to rise, while Turkish demand for imported scrap will be volatile depending on Turkish mills' ability to export steel products.
But scrap prices could increase in the event of even a minor disruption to availability, particularly because flows are relatively tight as a result of slower manufacturing activity in the past few months and a seasonal fall in collection rates over the next six to eight weeks.
Any major disruption to scrap transportation through the inland waterway system in Germany, Belgium and the Netherlands may significantly reduce scrap suppliers' ability to efficiently allocate material between domestic and export markets. This may create a shortage of scrap and lift prices in some regions, as happened last summer.
German domestic scrap delivered to mill prices in August 2018 were limited to a fall of around €5/t from the previous month compared with initial expectations of a minimum €10/t drop, as suppliers were unable to move material on the Rhine river from southern Germany.
Exports from Belgium, Germany and the Netherlands, including trades between these countries, totalled 4.5mn t in August-October 2018, down by 4pc from over 4.7mn t in the same period a year earlier.
Water levels on the Rhine at the key measuring point of Kaub near Frankfurt fell below the loading threshold for some cargoes and vessels on 15 July for the first time this summer and have since remained below the threshold. Water levels are expected to continue to fall this week, which will further increase loading restrictions.
Some scrap suppliers said they do not expect the disruption to be as bad as last year because they have had more rainfall so far this year. But monitoring service Elwis forecasts only one day of rainfall in southwest Germany and Switzerland for the remainder of this month.
Transportation of scrap on trains to some destinations in northwest Europe is an alternative. But the problem of limited-to-no availability of cargo wagons in Germany that affected scrap mobility in 2018 remains unsolved, some scrap suppliers said.
Related news posts
US inflation slows broadly in April
US inflation slows broadly in April
Houston, 15 May (Argus) — US consumer price gains eased in April, with core inflation posting the smallest gain in three years, signs the economy is slowing in the face of high borrowing costs. The consumer price index (CPI) rose by an annual 3.4pc in April, easing from 3.5pc over the prior 12-month period, the Labor Department reported on Wednesday. Core CPI, which strips out volatile food and energy, rose by 3.6pc, slowing from 3.8pc the prior month. The easing inflation comes as the Federal Reserve has pushed back the expected start of interest rate cuts after holding its target rate at a 23-year high since July 2023 as the US economy has continued to grow and generate jobs at greater than expected rates. Job growth however slowed to 175,000 in April, the lowest since October 2023, and job openings and wage gains have also slowed while a measure of manufacturing has contracted. The CME FedWatch tool boosted the probability of Fed rate cuts in September to about 72pc today from about 65pc on Tuesday. The energy index rose by 2.6pc over the 12 months ended in April, accelerating from 2.1pc. The gasoline index slowed to an annual 1.2pc in April from 1.3pc The food index rose by an annual 2.2pc, matching the prior month. Shelter slowed to 5.5pc from 5.7pc. Services less energy services slowed to 5.3pc from 5.4pc. Transportation services accelerated to an annual 11.2pc, led by insurance costs, from 10.7pc in the 12 months through March. On a monthly basis, CPI inflation slowed to 0.3pc in April from 0.4pc the prior two months. Core inflation slowed to 0.3pc from 0.4pc the prior three months. Energy held flat at a monthly 1.1pc. Services less energy services slowed to a monthly 0.4pc gain from 0.5pc. By Bob Willis Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Liberty looks to sell or recapitalise EU rolling lines
Liberty looks to sell or recapitalise EU rolling lines
London, 15 May (Argus) — Beleaguered steelmaker Liberty Steel is looking to recapitalise or divest its main European rolling lines, the company said today. The lines are Liege in Belgium, Dudelange in Luxembourg and Piombino in Italy, and have a capacity of over 2.5mn t, the company said. Liege and Dudelange galvanise hot-rolled coil (HRC) and produce tinplate and blackplate, Magona produces prepaint and hot-dipped galvanised (HDG) products. "The primary objective is to review options for strategic partnerships through long-term HRC feedstock supply contracts, but will also consider and [sic] co-investment and divestment options," Liberty said. Negotiations over at least one of the assets have been ongoing for a number of months, but have potentially stalled at the contract signing stage, sources suggested this week. The company refused to comment on "speculation". As with Liberty's other EU and UK assets, the lines have not been producing anywhere near full capacity, if at all, for a number of years. They have not been supplied with feedstock from the company's own mills. Galati in Romania is operating, but nowhere near capacity, while Ostrava is rolling limited quantities of imported slab with the aid of third-party financing. As far back as June 2021, Belgium's Walloon government discussed loaning Liberty Steel an undisclosed fee to continue operating Liege-Dudelange, subject to the organisation of a sales procedure being started. Walloon's investment firm Sogepa said the loan would be subject to "strict conditions", including the organisation of a sale, but the loan was not finalised in the end. That same month, Liberty merged the downstream assets of Dudelange, Liege and Piombino into its Galati organisation. At the time the company said this would see Galati become the primary supplier of HRC to the rolling lines. The difficult market environment in Europe is compounding the difficulties faced by Liberty. Last week it mothballed its merchant bar mill in Scunthorpe, UK , as first reported by Argus . In reality, the mill has not produced anything for years. At Liberty's Speciality Steel business in south Yorkshire, UK, around 7,000t has been produced this year, out of nameplate capacity of 1.2mn t/yr. By Colin Richardson Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
VW idles Brazil auto plants as floods hit parts supply
VW idles Brazil auto plants as floods hit parts supply
Sao Paulo, 14 May (Argus) — Persistent heavy rains in Brazil's Rio Grande do Sul led Volkswagen to announce collective vacation for workers in three of its local plants as the automaker struggles with a lack of parts made in the flood-hit state. The Anchieta, Taubate and Sao Carlos facilities, in southeastern Sao Paulo state, will have collective vacation starting 20 May as floods forced auto part suppliers to stop production. "Due to the heavy rains affecting the state and people of Rio Grande do Sul, some Volkswagen do Brasil parts suppliers, with factories installed in the state, are unable to produce at this time," the company said on Tuesday. Volkswagen declined to comment on which auto parts suppliers were affected by the floods. Volkswagen's Sao Jose dos Pinhais facility, in Rio Grande do Sul, will remain operating, the company said. Heavy rains that began flooding Rio Grande do Sul in late April persisted over the weekend , continuing to wreak havoc in the state. Rains reached an accumulated 123mm (4.8in) on 10-12 May in the state capital Porto Alegre, according to Brazil's national meteorological institute Inmet. Some areas experienced around 80mm of rain on 12 May alone, according to the US National Oceanic and Atmospheric Administration. Showers lessened but continued on 13 May, reaching 35mm in some parts of the state. The extreme weather has left 148 dead and 124 missing, according to the civil defense. Over 538,000 people are displaced. By Carolina Pulice Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Anglo American to exit from coal, Ni, platinum: Update
Anglo American to exit from coal, Ni, platinum: Update
Adds details of Anglo American's latest plan to demerge or sell its assets Singapore, 14 May (Argus) — UK-South African mining firm Anglo American has announced plans to exit its coal, platinum, nickel and diamond businesses, shortly after rejecting Australian resources firm BHP's latest takeover bid. Anglo American wants to sell its coking coal business in Australia, which includes the 6.5mn t/yr Moranbah and 5mn t/yr Grosvenor mines in Queensland. The firm also plans to demerge Anglo American Platinum, as well as sell or demerge its De Beers diamond business, it said on 14 May. Anglo American will also slow investment in its Woodsmith polyhalite fertilizer project in the UK, where it was previously targeting first commercial output in 2027 . It is also exploring options for care and maintenance as well as divestment of its nickel assets in Brazil. The move to "accelerate the delivery of consistently stronger shareholder returns" with the latest plan comes on the back of a takeover bid by BHP. Anglo American turned down a revised £34bn ($42.7bn) takeover proposal from BHP on 13 May because it "continues to significantly undervalue Anglo American and its future prospects". It earlier rejected BHP's £31bn all-share offer for the same reason. "The latest proposal from BHP again fails to recognise the value inherent in Anglo American," Anglo American chairman Stuart Chambers said on 13 May. Anglo American shareholders are well positioned to benefit from increasing demand from "future-enabling products", Chambers added. Copper was the second-highest contributor to Anglo American's earnings last year, accounting for 32pc of its earnings before interest, taxes, depreciation and amortisation, after iron ore. BHP's latest offer represents a total value of around £27.53 per Anglo American ordinary share, including £4.86 in Anglo Platinum shares and £3.40 in Kumba shares, BHP said on 13 May. The takeover proposal came with a requirement for Anglo American to complete two separate demergers of its entire shareholdings in Anglo American Platinum and Kumba Iron Ore — its assets in South Africa — to Anglo American shareholders. "This leaves Anglo American, its shareholders and stakeholders disproportionately at risk from the substantial uncertainty and execution risk created by the proposed inter-conditional execution of two demergers and a takeover," Anglo American said. By Reena Nathan Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Business intelligence reports
Get concise, trustworthy and unbiased analysis of the latest trends and developments in oil and energy markets. These reports are specially created for decision makers who don’t have time to track markets day-by-day, minute-by-minute.
Learn more