Rising Nickel Costs Squeeze Stainless Steel Producers’ Margins

Rising nickel prices have lifted the input costs for most stainless steel producers, significantly, in recent months. In many parts of the world, however, suppliers have been unable to pass the total amount of this increase on to their customers. The steelmakers, therefore, are forced to absorb the rising price of raw materials, thus cutting – or eliminating – their profit margins.

Only in North America have recent increases in alloy extras been fully applied, without cuts in basis values. This may become more difficult to sustain, in the coming months, as surcharges continue to rise, but end-user demand remains modest.

The price of nickel has been pushed up by predictions of future supply tightness. Consumption will be boosted by the metal’s use in batteries for the growing number of electric vehicles. Fears of possible shortages were raised, recently, by confirmation of an imminent ban on nickel ore exports, by the authorities in Indonesia. Although outside parties have announced plans to invest in nickel refining facilities in Indonesia, the ban will result in reduced supply, from the country, in the short-to-medium term.

Demand for stainless steel, conversely, is rather subdued. Trade actions, by the United States, have slashed the volume of shipments – of steel, and manufactured goods – from China, and other Asian countries. In turn, this has negatively affected the ability of consumers, in these emerging economies, to buy goods from prestige suppliers in many developed countries.

Producers, particularly in the traditional stainless steelmaking regions, continue to struggle with growing global excess capacity. European mills find it increasingly difficult to compete with price offers from Asia, for commodity grades. However, they may receive some temporary respite, in the near future, as the EC Safeguarding quota tonnages for several stainless steel product forms are projected to be exhausted, before the end of the quota period.

Source: MEPS International Ltd.MEPS Stainless Steel Review

US Steel Prices Stall Following Recent Revival

The recent revival in US flat steel product prices appears to have come to a halt, this month. The consensus view, from MEPS’ September research, is that US selling values have plateaued – with figures expected to be under negative pressure for the remainder of 2019.

Ahead of the seasonally slower fourth quarter, US steel manufacturers are likely to be intent on minimising the extent of the price erosion – with few market signals giving them cause for optimism. A combination of weak demand and relatively high domestic production is a threat to the sustainability of current prices.

Activity levels, in the US, are likely to soften, in the coming months. A slowdown in major end-user markets, such as automotive, construction and energy, is widely anticipated. Domestic capability utilisation remains around the 80 percent mark. Several US steelmakers have already outlined their plans to reduce output, next month, by taking extended periods of maintenance. The impact on the market is projected to be negligible, given that domestic supply is still likely to exceed demand.

Imported volumes remain an influence on the US steel market, despite the implementation of Section 232 measures. Recent exemptions for neighbouring Canada and Mexico, as well as quota agreements on steel imports from Argentina, Australia, Brazil and South Korea, have reduced the impact of the current trade legislation.

A number of political and economic uncertainties, in the regional and global steel markets, persist. The ongoing trade tensions between the US and China will do little to boost buyer confidence, in the short term.

However, MEPS predicts that US steel prices have the potential to rise, once again, at the beginning of next year. A seasonal upturn in steel purchasing and an expected recovery in scrap costs are likely to exert upward pressure on US selling figures, in early 2020.

Source: MEPS International Ltd.MEPS International Steel Review

Falling Raw Material Costs Add to The Negative Trend in Northern European Steel Prices

Northern European suppliers of flat steel products report sluggish activity, since the end of the summer vacation period. Carmaking, in Western Europe, continues to be depressed, while other manufacturing sectors show little sign of picking up. Falling raw material costs add to the negative trend in northern European steel prices. Few third country offers are attractive, with local prices at the current low levels. A substantial quantity of imported material is already available, at European ports.

Hot Rolled Coil

Purchasing activity failed to pick up, in Denmark, following the summer holiday period. Prices are under downward pressure despite the regional mills’ proposed increases. Customers, in Sweden, report declining demand. Producers predict a further slowdown, but selling values are, currently, stable, in local currency terms. Finnish sales activity is satisfactory but beginning to decrease. The mills’ forward order books are quite short. In Norway, current sales volumes are a little lower than before the summer break. Delivery lead times are shrinking.

Hot Rolled Plate

Demand continues to slow, in Denmark, under the influence of regional and global factors. In Sweden, project work is limited, and truck manufacturers are expected to reduce their output. Selling values are unchanged, in September, but remain under negative pressure. Russian producers are active in the Finnish market, due to a shortage of large scale gas pipeline projects, at home. Marine construction – using shipbuilding grades – is busy, in Norway.

 

Cold Rolled Coil

Regional mills announced increased official prices, in September, in an attempt to offset the negative effects of falling raw material costs and declining demand. This succeeded, in Denmark, where cold rolled coil values were stable, this month. Orders from European OEMs slowed, somewhat, in Sweden, in recent weeks. However, the country maintains strong export sales, boosted by the weak local currency. Spot prices are decreasing, in Finland, as a result of reduced mill input costs and mediocre purchasing activity. Cold rollers in the north of Europe are suffering from the slump in the automotive sector. Sales volumes are slightly down, year-on-year, in Norway. Prices are stable, in local currency terms, although the krone is weakening, against the euro.

Coated Sheet and Coil

Danish buyers report that European mills have spare capacity for October and November deliveries, while importers are quoting similar prices to those of local suppliers, for December arrival. The uncertain outlook, for the local carmaking and building sectors, is key to the galvanised steel market, in Sweden. The drop in demand, from the major consumers of galvanised sheet and coil, continues to have a negative effect on selling values, in Finland. Sales tonnages are decreasing, in Norway.

 

Source: MEPS International Ltd.MEPS European Steel Review Supplement

Downturn in EU Manufacturing Sector Suppresses Steel Demand

Activity in the EU strip mill product market was muted during the summer holidays. Numerous supply chain participants remarked that conditions were quieter than usual for the time of year. In early/mid-September, the market remained subdued. Procurement by distributors is still weak, due to concerns about their own tight resale margins. Overall demand indicates little, or no, improvement in the short term. Global trade tensions and political uncertainty continue to create a great amount of caution. Steelmakers, whose profit margins are being squeezed, continued to attempt to raise basis prices but their proposals were rejected by buyers. Purchasing executives, across Europe, were able to negotiate rollover values, or even small discounts in some instances, with regional steel producers. Despite cutbacks in production by the major mills, customers perceive no significant supply tightness, although delivery lead times have extended.

Germany

The lack of activity in the auto industry continues to have a negative impact on Germany’s economy. Machinery manufacture is also under pressure, after many years of growth. The steel market is very quiet amidst such a pessimistic outlook. A number of service centres are selling aggressively, in order to offload stock that is surplus to requirements. Supplying mills are lacking orders, thus negating any opportunities for the implementation of price increases.

France

Activity on the French flat products market was slow to pick up at the beginning of September. Buyers confirm a significant slowdown in a number of industries. They believe that this will affect the rest of the year. Prices are suffering as a result. Several mills are reported to be struggling to sell material they have in stock.

Italy

The downturn in the Italian manufacturing sector continued, in August, as companies recorded the thirteenth consecutive monthly decline in both output and new orders. Steel market participants comment that, under the new government, policies may change, bringing some form of new investment to the country. For the moment, the steel industry is depressed, with little sign of any demand recovery in the post-holiday period. Producers are attempting to maintain, or even increase, current prices. However, their ambitions were undermined, during the summer, by poor market sentiment, at home and abroad, whilst iron ore costs also softened.

United Kingdom

In August, output volumes in the UK manufacturing sector fell, as the intake of new orders contracted, at the fastest rate for over seven years. In the steel sector, a number of service centres were quite busy in July/August, against the traditional seasonal pattern. Margins on low-cost inventories were reasonable. In direct contrast, other distributors, often those allied to the auto industry, report very poor business conditions. Buyers comment that the recent steelmaking capacity cuts were insufficient, leaving the market oversupplied.

Belgium

Tepid demand and high service centre stocks prevented implementation of the proposed rises for strip mill products, in Belgium. In reality, prices came under renewed downward pressure. Sentiment is poor. Very few deals were booked over the summer, despite steelmakers’ keenness to secure business, in an effort to plug holes in their order books. Distributors comment that credit insurance companies are warning that payment problems may develop with a number of end-users.

Spain

Spain’s manufacturing sector continued to contract during August, undermined by the sharpest fall in output since May 2013 and a further decline in new orders. Steelmakers’ order books are quite weak. Buyers have halted their purchasing as they evaluate import offers which, with the recent drop in raw material costs, have become much more competitive, although lead times are long. August proved to be a dire month for Spanish service centres. Market participants were reluctant to replenish stock in a context of decreasing prices. In the meantime, real activity remains mediocre. Resale values are very low as distributors fight for the few orders available.

 

Source: MEPS International Ltd.MEPS European Steel Review

Primetals Technologies receives FAC for automation upgrades at Gerdau Ouro Branco and conducts Industry 4.0 study

In late March, Primetals Technologies received the Final Acceptance Certificates (FACs) for automation upgrades conducted on a third-party 6-strand billet caster and two blast furnaces of Gerdau Ouro Branco in Minas Gerais, Brazil. The caster project included the upgrade of outdated level 1 and level 2 systems, resulting in quality improvements, reduced maintenance requirements and operating cost savings. Blast furnaces #1 and #2 were outfitted with a new level 2 process optimization system with a short payback period of several months. On the one hand the solution saves fuel and reducing agents, and on the other hand it improves the hot metal quality. In addition, Gerdau contracted Primetals Technologies to assess two of their facilities regarding their digital maturity level within the scope of an Industry 4.0 study, and to provide a roadmap towards a smart steel production.

The level 2 system installed at a 6-strand billet caster encompass basic functionalities like material tracking, heat pacing, cutting schedule and process set-point generation as well as the implementation of the Equipment Expert, which is a preventive maintenance tool for the caster equipment. Advanced process models for the caster include the DynaSpeed secondary cooling model, Quality Expert Express Edition used for product quality rating, a billet cut-length optimization and the Intermix model for calculation of the heat volume concentration and incompatible strand portions along the strand.

In the course of upgrading the billet caster´s level 1 system, Primetals Technologies undertook the migration of an obsolete third-party platform to the latest state-of-the-art controllers, using a special migration kit in order to reduce risk and consequently shortening the shutdown period. Existing frequency converters were replaced by new components. A new HMI(Human Machine Interface) system, using a virtual server concept was also supplied. In addition, the existing low performance field networks were replaced by Ethernet IP, and the operation desks and panels were modernized.

The level 2 systems for the two blast furnaces #1 and #2 enables all optimization functions to work within a virtualized server concept, allowing for high-availability hardware redundancy. The system offers data recording, data visualization and long term data archiving functionality. Control of blast furnace raw material supply and material distribution within the shaft is model based, as is the optimized control of the hot stoves system. Also, expert systems for automatic operation of blast furnace in closed-loop mode, and for preparing the blast furnaces for intermediate maintenance shut-downs were introduced. Finally, a recently developed slag optimization model was included in the level 2 system.

The Industry 4.0 Study conducted by Primetals Technologies consisted of the assessment of an integrated process route from blast furnace to continuous casting and the assessment of an EAF route from scrap handling to long rolled products. The assessments were performed in a holistic manner, including an investigation of metallurgical models and tools for better and more repeatable process execution, automation and system requirements, production planning and digital assistance systems, all with regards to product quality, traceability and consistency. Based on the results of this assessment a roadmap was provided by Primetals Technologies, which will assist Gerdau to further transform its production site in Ouro Branco to meet their goal of becoming a smart steel production. 

Gerdau S.A., headquartered in São Paulo,  is the largest Brazilian steel producer and one of the major suppliers of long steel in the Americas and of special steel in the world and possesses an installed capacity of 21.7 million tons of steel per year. The company is present in 10 countries in the Americas. Gerdau Ouro Branco, located in the Brazilian state of Minas Gerais, is Gerdau’s largest steel mill. Its product mix includes billets, slabs, blooms, beam-blanks, wire-rod, carbochemicals, hot coils and plates. The installed capacity of the Ouro Branco plant is 4.5 million metric tons per year.

The new level 1 and level 2 systems from Primetals Technologies for the billet caster of Gerdau Ouro Branco in Brazil improve the quality, reduce maintenance efforts and operating costs.

Source: Primetals Technologies