European Stainless Steel Mill Factories Reduce Production, Good Opportunity to Export

European Stainless Steel Mill Factories Reduce Production, Good Opportunity to Export

High energy levels in Europe, higher prices of coal, natural gas and crude oil, and rising prices of electricity and various auxiliary materials have led to high production costs for stainless steel factories. In addition to the European summer vacation, demand is weak. Most steel mills will not be producing at full capacity. Data for July showed that the EU took more hot-rolled resources from China and Turkey.

High inflation in the euro area, consumption is suppressed

Energy and food prices continued to soar as the main reason for the euro to de-inflation. In August, the harmonized consumer price index (HICP) in the Eurozone rose to 9.1% at an annual rate, which was not only higher than the previous value of 8.9% in July and the expected 9.0%, but also broke the inflation history since the establishment of the Eurozone for the fifth time this year record.

The manufacturing industry in the euro area is also in a downturn. The final value of the manufacturing PMI in August was 49.6, which fell below the 50 line of prosperity and decline in July, and was the lowest since June 2020. Manufacturing in the Eurozone contracted, with little prospect of an improvement in the short term.

Rising energy costs, weak demand, more reduced production at European steel mills.

A growing number of European stainless steel producers are either shutting down or reducing production due to sharply rising energy costs, rising electricity prices and weak demand during the summer break.

At the beginning of August, the Belgian Aperam plant in Genk, which has a capacity of 1 million tons of stainless steel slabs, was closed.

Recently, the Spanish group Acerinox (stainless steel production capacity of 1.1 million tons) also announced a reduction in production, and 85% of its employees have temporarily reduced their working hours by at least 15 days.

European Outokumpu hedges massive energy use through long-term linkages and fixed-price contracts and fractional ownership of energy utilities, and off-peak production, reducing electricity costs, plus the spread of stainless steel plants, which can adjust production plans as needed to cope with local energy constraints.

At present, Outokumpu is operating normally, and has lowered the surcharge for stainless steel alloys in Europe in September. So far, its surcharge has declined for three or four consecutive months.

However, Outokumpu said their production could be affected if energy supplies are disrupted or if electricity prices continue to rise for longer.

China and Turkey's hot rolled coil exports to the EU increased significantly in July

According to Chinese customs data, in July 2022, the volume of stainless steel exported from mainland China to the EU increased again, with a volume of about 50,000 tons, an increase of 12,700 tons from the previous month (mostly hot-rolled coils), an increase of 34.2%; a year-on-year increase of 33,000 tons , an increase of 198.3%. From January to July 2022, the cumulative volume was about 335,000 tons, an increase of 217,800 tons or 185.2% year-on-year.

Among them, the volume of stainless steel hot-rolled coils exported from mainland China to the EU in July increased by 8,800 tons to 12,300 tons.

According to Turkish statistics, in July 2022, Turkey's stainless steel exports to the EU increased significantly by 89.8% month-on-month to 26,600 tons, accounting for about 86.6% of Turkey's total stainless steel exports. From January to July, the cumulative export volume to the EU was about 131,300 tons, accounting for about 82.1% of Turkey's total stainless steel exports.

Among them: Turkey's stainless steel hot-rolled coil exports to the EU in July increased by 19,300 tons to 19,600 tons.

Due to high inflation and intensified labor disputes, port workers in many parts of Europe have recently held strikes, causing certain damage to logistics and transportation and affecting the normal operation of European and even global supply chains.

EU energy ministers will hold an emergency meeting on September 9 to discuss how to deal with the surge in energy prices.

EU leaders are increasingly calling for the bloc to act to rein in costs, or to cap gas prices, or hope Europe will decouple electricity prices from soaring gas prices.

Entering September, the end of the European summer vacation may usher in "accumulated consumption", and its domestic stainless steel supply has declined, which may be good for China's stainless steel exports, especially hot rolling.