UK Steel Market Evaluation Jan 2022

It is relatively easy to report on current and historical costs of the physical ingredients that drive steel prices but this All Steels bulletin steps over this boundary by making bold predictions on forwarding price direction.  These forecasts are all logically based on analytical trends, sentiment and anecdotal evidence collected from a wide base of trusted industrial contacts.

At the outset of this year, the impact of Omicron created massive uncertainty with such a high spread of infections.  However, whilst this has most certainly curtailed industrial consumption of steel during the early part of January, Omicron aftereffects now appear to be fizzling out, which should allow a steel business recovery.

It is still All Steels’ view that the rapid acceleration of steel prices during January -June 2021 were totally justified as steelmaking costs necessitated such price movement.  When we reflect on the data available however it is clear to see that a lot of the demand during this period was artificial with companies throughout the industry re-stocking from a very low base.  True underlying demand was therefore hidden and very much exaggerated by heavy inter-trade volumes within the stockholding and dockside trading community.  It was this activity that forced steel prices up a notch too far over the summer and by September steel traders and stockholders woke up to this reality, and demand on the mills rapidly diminished causing a price softening.  Much of Q4, 2021 was therefore a period of market correction as the industry tried to rebalance stocks to reflect true underlying demand and we believe it is fair to say that this correction process is still spilling over into Q1, 2022. 

It is also worthy of note that as part of this stock rebalancing process many mills did cut back capacity during Q4 and are still operating at reduced levels, so the supply and demand balance is not too out of kilter, and this is what has helped to avoid a boom-and-bust cycle like historical experiences.  As previously expressed, it is always the supply and demand balance that dictates prices, and therefore we saw rates softening in Q4, but the All Steels current view is that sentiment has largely improved.  Moreover, stocks will get into balance by the end of February 2022 and with the impact of Omicron expected to moderate many of the large infrastructure projects planned for the UK will finally take off. 

As All Steels, we have already seen evidence of steel buying to cover very large rail-related projects coming to fruition, but you can also see from construction media reports produced by the likes of Barbour ABI and Glenigan that the 2022/23 outlook for the construction industry is very strong.  Only this weekend news was released of electric vehicle battery start-up, Britishvolt securing £1.7 billion of funding to build a new factory in the North East that even makes an Amazon Warehouse look small all of which will consume a massive amount of steel to build the new factory.

The forecast for 2022 construction growth is circa 7% largely created by public sector investment.  It is also fair to say that construction was also constrained during 2021 by the general tight availability of building materials so many of last year’s construction projects will spill over into 2022.  Much of the supply flow should improve this year allowing the construction industry to flourish although optimism probably still needs to be tempered as labour availability is expected to remain tight.  Having said the latter industrial buildings in the construction sector which is one of the key focus areas for steel consumption is forecast to grow by a staggering 24% during 2022.

Whilst we are confident that steel buying activity will be strong in the months ahead off the back of the improved sentiment and more imbalanced stock levels many of the steelmaking cost drivers appear to be creating a necessity for mills to increase prices further.  It would therefore appear that we could be on course for another re-run of 2021.  The only variance this time is that a much higher steel price base should avoid excessive speculative buying, and this should logically result in a smoother rising of steel prices rather than the big leaps we experienced last year.

Hopefully, our opening message above gives a flavour of what we should expect but here are some of the updated data on steelmaking ingredients that force mill price changes which reinforce some of the positive sentiment messages already expressed.

Coking Coal
0.7 tonne used to make a tonne of steel
The recent movement in coking coal prices has remained under the radar but the new up spin must start to feature in the coming weeks' steel journals as prices are now at record-breaking levels.  It will be renewed buying activity that has probably been the catalyst for change as Chinese steelmakers return to the market to build up raw material inventories ready to increase production immediately after the Beijing Winter Olympics that concludes on 20 February 2022.

It is also understood that supply disruption currently exists in some of the major metallurgical coal mines.  Trade flows are also being hampered by rail transfer constraints from mines to the ports.  One such example was caused by an explosion at a coal transfer station in the US at the Curtis Nay terminal in late December that is one of the main handlers of this commodity.

The graph below clearly shows the impact for BOS route steelmakers.  Whilst the graph below shows Chinese domestic price movement the more highly transacted Australian seaborne coking coal hit a historic record high of $445 per tonne FOB Australia on Friday after a $15 per tonne daily jump.


Iron Ore
1.7ttonne used to make a tonne of steel
As conveyed in the coking coal section the increased Chinese buying activity will also be the probable cause for the recent push up in iron ore prices and with restocking continuing over the coming weeks, we will probably see little change to the upward price pressure.  This is surprising news for many pundits that were speculating that iron ore would remain in the zone of $80-$100 per tonne although it is perhaps the heavy resumption of steel production planned in China that is likely to have caught the market by surprise.  Such planned growth in steel output obviously questions China’s commitment to environmental improvements.



Scrap
tonne used to make a tonne of steel
Scrap rates in Turkey always provide one of the best barometers for assessing steel prices as the speed of change is always most reactive to sentiment so it provides excellent direction on future steel prices.  The graph below nicely depicts steel price movement through the pandemic industrial recovery, but it is the current month's price bounce that should be spotlighted.  The All Steels view is that this immediate curve would have shown a higher price trend if production output in Turkey had not been constrained by energy issues which are explained below, nevertheless, this upward movement must be one of the early signs of another strengthening in steel prices.



Energy
The cost of gas and electricity remains hot news around the world and whilst we thought the problem to be just a winter spike issue the fundamentals would now suggest that high energy costs are likely to remain firm well into 2023.  There are many reports in the public domain produced by energy brokers and leading utility suppliers to justify the high prices and the table below nicely summarises the factors, reasons and resolution timeframes concerning the UK. 


Further afield in Turkey both gas and electric shortages are so bad that virtually all producers are having to regularly cut output.  In the Izmir region for the week ahead, there are three full days of government-enforced steelmaking closures.

Shipping Prices
The shipping cost of bulk raw materials such as metallurgical coal /iron ore fell away sharply in Q4, but this was understandably a reaction to a lack of raw materials flowing into China during this period as government pressure dictated a cut in steelmaking capacity.  As reported early however Chinese high volume steel production looks set to come back on stream for the second half of Q1 and just like coking coal and iron ore prices must be set to rise.

Looking more locally on typical 2,000-3,000t shipload quantities that service the UK there is no relaxation in shipping prices.  In our last UK steel market evaluation, we reported that we had seen shipping costs from Turkey increase by $70 per tonne during the period April 2021 to September 2021.  We can now confirm that the shipping costs on our December inbound material from Turkey increased by another $30 per tonne to $150 per tonne.  What is even more disconcerting is that our main Turkish hollow section supplier is now indicating that the forward price for Q2 could be as high as $190 per tonne.



EU suppliers on shorter shipments from Germany, Italy and Spain are also experiencing a similar surge in costs and on cargo we have just booked from Italy we have seen a shipping rate increase from September 2021 to January 2022 of Euro 60 per tonne.

At present we really can’t see any softening in shipping rates and when you consider that EU steel activity looks set to increase and marine diesel costs simply follow oil prices that are still trending upwards as shown in the graph even higher shipping costs look most likely.

Port Congestion
All UK docks remain congested and the peaks and troughs in trade flows are now creating total mayhem as all importers try to de-risk by advance bonding material for longer periods at the ports in preparation for the onset of each new quarter.  This is also being compounded by imports increasing to reflect demand growth and volumes to substitute the loss of domestic supply (left by large voids due to cuts in capacity to the market by the Liberty Steel Group particularly on engineering bar supplies).

The overload in the material at the ports is now commonly resulting in material being block stowed to maximise floor space capacity but the negatively of this action results in severe delays for material to become unscrambled for despatch after customs clearance.  In some cases, delays of 4-6 weeks are being experienced.  Moreover, due to such huge loadings on the ports, many have increased storage charges over the last six months from a low of 25p per tonne per week up to new highs of £2 per tonne per week.

Transport
The good news here is that transport availability constraints seem to have eased but we must recognise that this is against a background of lower trade activity in Q4 as the supply chain attempted to reduce stocks.  As we progress through Q1 and into Q2 buying activity and real underlying demand are all forecast to increase so tight transport problems are very likely to materialise once again.  Even with lower activity, the cost of transport has remained expensive and with fuel prices yet again rising we should probably expect more increases in transport costs especially given that diesel prices continue to move up.

Inflation (Finance)
High inflation levels have already resulted in one recent bank base rate increase and whilst this movement was small the movement is more impacting in today’s world of steel with material costs being so high.  More bank rate increases will inevitably be seen in 2022 and whilst this will add greater cost to the financing of steel inventories it will create wage pressure, adding even more costs to steel prices in an industry that is still heavily labour intensive.

EU Carbon Permits
Since our September report, the cost of Carbon Permits has advanced by another €21 per tonne to a new record high of €85.80 per tonne.  Such a rise impacts utility costs as referenced above but the bearing on steel prices through environmental taxes is more direct.

All steel producers are on a path aiming for net-zero carbon emissions but for many, this will take decades to be realised.  In the short term on capacity exceeding carbon allocations blast furnace operators must buy 2t of CO2 for each tonne of steel produced whereas electric arc manufacturers depending on the efficiency of their plant must buy 0.5-0.8t of CO2 for each tonne of steel manufactured.  As can be seen from the graph below these costs were insignificant 12 months ago but the impact today is very significant and with the cost of carbon permits continuing to rise this will just become an even bigger cost for those plants that fail to reduce carbon emissions.


In blast furnace production the carbon tariff escalation cost adds €171.60 per tonne to steel manufacturing costs (£143.60p per tonne).  In EAF manufacture the cost is somewhere between €42.90p - €68.64p per tonne.

UK Safeguard Duties
Safeguard duties seem to be impacting more of our inbound supplies and the cost of such duties are now becoming more punishing as it is a percentage charge on what are ever-increasing steel prices.  We are also finding that HMRC’s administration of quota monitoring and reporting is becoming so bad that traders are losing visibility as to when quotas become exhausted and by what level thresholds have been exceeded.

New rules on category 12 (effectively merchant bar/engineering bar) have tried to split out these products into two separate categories through chemical composition rules but material intended as general structural steel supply is regularly falling into the engineering bar classification due to high residuals such as copper.  Consequently, customs clearance is in total disarray.

On truckloads, this confusion has caused serious delays on customs clearances all of which adds to transport demurrage costs.  The big issue here however is that as a mass importer of steel, as of today (23-1-22), we have no idea of our duty liability on material customs cleared on 1 January 22 and little clarity on what quota, if any, remains available in products that we are landing in the UK during the coming week. 

Conclusion
There are many other factors that we could report upon all of which are upwardly affecting steel prices but, in this report, we have simply tried to focus on just the main steel price influencers.  We could for example expand on energy and steel price inflation caused by the threat of war between Russia/Ukraine that would have an unbelievable impact, but this would be speculative whereas we are just choosing to report on actual known facts.

As a steel trader that takes large stock positions the fear of a price crash is our biggest risk/concern and the reason why we must analyse steel price influencers in such detail.  It is against this background that we have resumed buying heavily for our Q2 requirement despite the high prevailing steel prices.  We recommend that you take a pragmatic view on the data presented here, and make sure that you are reflecting anticipated replacement prices on the extremely valuable stock you hold for sale. 

All Steels' Xmas Tree 2021

After yet another extraordinary pandemic year, and as 2021 draws to a close, we are delighted to share an image here of our dazzlingly spruced up outside office Christmas tree.  We hope this magical sight will bring a smile to your face too! 

Truly, it’s officially now a time for celebration and festive cheer - well at least already here at All Steels!

All Steels' Hot Chilli Competition!

It's been an interesting few months at the Thirsk office watching each All Steels colleague taking great care of their given chilli plant in the hope of being crowned either the winner/owner of the best looking chilli plant or the winner/owner of the chilli plant bearing the biggest chilli!

As you can imagine there's a fine line between under or over watering such a plant as well as ensuring the plant is left to grow in the right light conditions and pruned when necessary! However, it's fair to say that all colleagues were extremely keen to participate in the challenge set by All Steels' green-fingered Managing Director, who had grown the set of originally all identical chilli plants from seeds. 

We are very grateful to Dr Sophia McDougall & Dr Jim Dunnill (chilli plant growing aficionados) who kindly volunteered to come along to the All Steels office to act as independent judges for the All Steels chilli plant growing competition. They arrived with calibrated weighing scales, and duly marked each anonymous office grown chilli plant in accordance with the set of pre-determined criteria.
Without further ado here are the Judges' declared results:

Best looking chilli plant winner -
Lee White (Export Sales Director)
Lee's chilli plant certainly had the greatest considered wow factor ie excellent symmetry, thickest stem, healthiest looking leaves, highest number of chillies etc!  

Largest chilli winner -
In fact Lee's plant also bore the single biggest chilli in recorded mass (7g), but the rules of the competition dictated that a colleague could only win in one category of the competition! Hence, the judges declared Jon Jacobs' (Operations Director) and Adam Grant's (Business Development Manager) chilli plants joint winners in this particular category, as each of their plants bore a chilli of 6g in recorded mass respectively.

It's hoped that the token prize money awarded to the All Steels competition winners in each category coupled with the healthy competitive fun and banter experienced along the way here will inspire our colleagues to continue to develop their green-fingered skills even further! However, all of our colleagues can now also take their chili plants home and enjoy the fruits/chillies of their labours!

UK Steel Market Evaluation May 2021

Dear All Steels Customers,

This is a relatively short note intended to provide you with an update on the key outcomes relating to predictions we made in our 23 April 2021 UK Steel Market Evaluation Report.

Steelmaking Raw Materials
Virtually all raw materials continued on an upward trajectory, as anticipated, with record-breaking price levels being reached.  In our previous note, we reported iron ore levels breaking the US$180 per tonne barrier (KORE 62% Fe/Qingdao CFR) and for the last fortnight, the rate has capitulated at a new record-breaking high in the band of US$208.84 to $226.07 per tonne.  As you would expect scrap prices also followed this move growing from US$427 per tonne to US$510 per tonne (HMS1/2 Scrap/Turkey CFR). 

The two graphs below showing this move requires little explanation to understand the impact on steelmaking. 
1: Iron Ore


2: Scrap 


Whilst the push on iron ore prices appears to have taken some breathing space over the last fortnight the dynamics remain unchanged with demand continuing to increase.  Hence, the possibility of another price run over the summer must now be a serious consideration.  Similarly on scrap the market is currently adjusting to the reality of the newfound high prices but speaking to one of our main Turkish suppliers over the weekend they remain deeply concerned that the price of scrap is likely to push on again.  The new concern on the horizon for Turkish steel makers is that there is speculation that the EU will enforce scrap export taxes and there are already reports of the Ukraine increasing its scrap export tax to 90 Euro per tonne.

General Steel Price Movement in the UK

In our note of 23 April 2021, we strongly expressed the likelihood of further price increases and this has happened at quite staggering levels as summarised below: 

Structural Sections
5 May 2021   – British Steel announced a £50p/t increase.
14 May 2021 – British Steel announced a plan / necessity for customer allocations to apply.
18 May 2021 – British Steel announced a further £100p/t increase.
18 May 2021 – British Steel announced a customer allocation system based on historical purchase levels.
4 May 2021   – ArcelorMittal announced a £40p/t increase.
17 May 2021 – ArcelorMittal announced a further £80p/t increase.
18 May 2021 – ArcelorMittal issued a rolling programme with restricted availability and notification of tonnage allocations to be applied.

At the time of writing this report virtually all other EU producers have extended a period of not offering to the UK market due to overwhelming demand in mainland Europe and the fact that scrap prices have not settled down so there is a reluctance to offer forward.

As a reminder since the prices started to climb on the current cycle from August 2020 British Steel has now actually applied a total of £410 per tonne of price increases.

Merchant Bar
19 May 2021 – Liberty Merchant Bar announced a further £80p/t increase to follow up on a £40p/t mid-April price increase.
26 April 2021 – LME (Beltrame) announced a £20p/t increase.
14 May 2021 – LME (Beltrame) announced a further £80p/t increase.
Other suppliers of merchant bar do not make public price increase announcements, but they have all applied similar price measures and most have restricted availability.

As a reminder since the prices started to climb on the current cycle from August 2020 Liberty Merchant Bar has now actually applied a total of £310 per tonne of price increases.

Hollow Sections
Like merchant bar we do not see official price increase announcements from domestic producers although at this present time we understand that Liberty Tubes has temporarily ceased manufacture due to the availability and price of hot rolled coil.

What we can advise however is that our buy price from Turkey since 23 April 2021 has increased by a magnitude of U$250 per tonne (£178 per tonne).  In addition to this price increase, there is then also a Safeguard duty factor which is unavoidable even when customs clearing on the first day of each quarterly quota window and this is becoming more sizable as the cost of hollow sections keeps rising.

As a reminder since the prices started to climb on the current cycle from August 2020 Turkish Hollow Section Prices have increased by US$670 per tonne from our own experience (£478 per tonne).  However, you then need to add increased shipping costs and a Safeguard duty impact, which became a reality when UK Safeguard Quotas came into force on 1 January 2021.  Both of these impacts are significant.

Supply & Demand
In our report of 23 April 2021, we made the point that we were entering a new paradigm of market pressures where demand exceeds supply, and it is fair to say that we are already now starting to see the consequences of this situation.  Over the past several days we have already witnessed availability being more critical than price and given that we are now knocking on the door of the mill summer shutdowns this problem is going to become even more acute.

Speaking out as a trader a new phenomenon for All Steels and probably many other businesses in the supply chain is affordability.  As a business typically holding 40,000-45,000t of stock with similar quantities in the pipeline financed by letters of credit our substantially increased banking facilities will simply not allow for such volumes to be maintained.  Hence, the only way to combat this is to reduce inventory levels to an affordable level.  It, therefore, seems inevitable that whilst availability from the mills cannot keep pace with demand dock stocks and probably stocks amongst the UK stockholding community will also tighten up even further.

As the saying goes it, therefore, looks like we are heading into a perfect storm that will inevitably lead to more rationalisation/consolidation in our supply chain.  Hence, it is now totally unpredictable as to how long it will take for supply and demand to get in balance and how far prices will rise in the intervening period.  The consensus is that unaffordability will eventually bring prices crashing back down but at the same time, you can appreciate the logic that steel producers can now see the benefit of keeping capacity tight, and with such huge costs of bringing lost capacity back to life will any steelmaker wish to make such a move?  It is fair to say that many pundits had speculated that the rising cost of copper would not be sustainable on the grounds of affordability but on the London Metal Exchange the price of copper has increased from US$ 2,908 per tonne in December 2008 to its current level of US$ 10,011 per tonne and demand remains insatiable.  Food for thought!  

April 21 UK Market Evaluation

Dear All Steels Customers,

Two months have passed since our last posted newsletter and as always, the main purpose of such messages is to communicate All Steels’ views on the market / events and more importantly anticipated developments ahead.

In our messages over the last 5-6 months, we have been able to predict steel price increases primarily by showing the rising cost of raw materials associated with steelmaking that have all necessitated mills moving their prices up to maintain profitability.  The graphical displays with some basic explanations have been easy to understand and the steel price increases have clearly been justified.  Again, in the graphs below such base costs remain high and mainly on an upward trajectory, especially iron ore that has moved to a 10-year high.  However, we are now entering a new paradigm of market pressures that are even more price influential.  This being basic economics, where demand exceeds supply, and this is occurring at a time when stocks within the supply chain are already coming from a very low base following the effects of the Covid-19 pandemic.

It is also clear that we have a huge gulf with respect to price and availability between long products and flat products where the latter has already entered a stage of critical shortages with a consequential surge in prices.  As All Steels our expertise is on long products, so our message needs to bear this in mind although as a seller of hollow sections that is a derivative of HR Coil, we do make some references to the flat rolled market in this context.

The usual graphs are detailed below and now require little explanation based on past newsletters, so we have skipped over the usual narratives as going immediately forward it is far more important to focus on supply / demand.

STEELMAKING COST DRIVERS

1: Iron Ore

1.7t of iron is required to make a tonne of steel. 

2: Scrap

1.1t of scrap is required to make a tonne of steel. 

3: Coking Coal

0.7t of coking coal is required to make a tonne of steel. 

4: Oil Prices 


Main influencer of energy and transportation costs. 

Supply and Demand

At present we have several factors which have created a steel supply and demand imbalance both at a macro and micro level and in no particular order we have simply listed what we consider to be the main factors:
1. According to the Worldsteel Association despite the Covid-19 pandemic 2020 global demand for steel only fell by 0.2% y-o-y, to 1.7 billion tonnes.  (This was due to a surprisingly robust recovery in China).  This year Worldsteel is forecasting that demand will recover by 5.8% y-o-y and in 2022 by 2.7% y-o-y.  We are therefore going to see all-time record-breaking consumption over the years ahead. 

2. On the world stage most of the main countries plan to inject huge financial stimulus packages and lot of this funding will be aimed at infrastructure projects to effectively build countries out of recession.  To understand the scale of fiscal stimulus around the world the Atlantic Council Organisation publish some very detailed information on their website and the image below best illustrates the level of stimulus packages by drawing comparisons between planned support to recover from the Covid-19 pandemic compared to the levels of support made back in 2009 to assist recovery from the financial crisis. 


3. Closer to home data produced by the National Association of Steel Service Centres shows that March 2021 sales had fully recovered to March 2020 levels but by contrast service centre stock levels are hovering around a level of 70 days of sales compared to a more normal 100 days of sales.  Very few stockists have been able to build up stocks.  Moreover, there is now a question of affordability and desire to build back to normal stock levels given the high costs even if availability exists. 

4. In our local market the difficulties for Liberty Steels are well publicised and until such time that group finds a financial resolution output from their many steel manufacturing facilities in the UK will remain badly restricted. 

5. China is entering its traditional period of enforcing steel production restrictions to curb dangerous levels of air pollution.  At the end of last week Handan Municipal Government, announced such restriction measures for April 21 to June 30 of this year.  The estimated resulting average daily production losses in Handan for wire rod, steel plate and HR Coil will amount to 8,700mt, 6,500mt and 5,600mt respectively! 

6. Closer to home All Steels has tried to keep its review of supply and demand simple by looking at EU production capacity and EU apparent demand whilst recognising that import balancing is more difficult with Safeguard measures in place.

Data 1 (below) is data published by McKinsey, which shows that massive EU crude steel capacity in 2019 of 216mt was reduced to 150-160mt by the end of 2020. 

Data 2 (below) is data published by Eurofer, which shows that apparent demand forecast for 2021/2022 should climb to 157mt. 

Evidently, we can see that apparent demand in the EU is forecast to have fallen by 13% in 2020 and to rebound to +13% in 2021 and whilst quick transition in apparent demand can occur steel producers (especially those that have closed plants and turned off blast furnace capacity) just cannot react so quickly.  It therefore seems inevitable that in the short term the EU will need more imports at a time when world demand is increasing.  In addition to the resulting tight availability Safeguard quotas will therefore start to be exceeded on many products resulting in large duty payments that we as a UK trader are already starting to experience.  In the short to midterm, it therefore seems inevitable that the cost of steel will continue to rise until such time that EU producers can bring on stream additional capacity.  All Steels’ view is that EU producers will most likely avoid such expenditure having now seen the price benefits of keeping supply tight.  They will therefore in the short to midterm typically prefer to take profits rather than take risks and go to the huge expense of bringing lost capacity back to life.

Data 1

Data 2


Looking more specifically at the UK here is our view on each of the products we trade.

UK PRODUCT REVIEWS

Merchant Bar

Price increases by the mills are becoming less formal by way of public announcements but they are all increasing prices and a lot of the adjustments have become more sophisticated and product focused where bigger extras are logically being applied to those products that cost more to produce or are on tighter availability.

It is the supply situation however that has become more alarming.  The well-publicised financial problems in Liberty Group are seriously constraining output at one of the UK’s largest producers (Liberty Merchant Bar).  We are also finding that some of the producers of the smaller sizes of merchant bar have ceased production (Cogeme, Italy & Feralpi Profilati Nave, Italy) and large producers such as Beltrame appear to be shying away from the very small merchant bar sizes and those product sizes where demand is traditionally small.  To cap off the supply difficulties containerised goods out of Turkey have almost become impossible due to lack of containers especially after the infamous Suez Canal blockage and this will probably take several months to rebalance container availability (the container box situation was already dire all the way through Q1 before the Suez Canal event).  As most merchant bar is containerised out of Turkey such supply has basically dried up!

What is apparent just now is that many UK distributors of merchant bar have turned to mainland EU supply to address the imbalance and whilst this should improve availability from UK stockists it seems a foregone conclusion that UK Safeguard quotas will be breached at some point in Q2 on EU imports, and this will either block supply to the UK as imports are deferred until Q3 or it will simply result in price premiums as the distributors will need to recover the 25% duty hits.

As a final point it is evident that merchant bar is probably the poor relation with respect to market prices on popular sizes.  Hence, whilst this is the case it is most exposed to the rising costs of steelmaking and any upshift in scrap prices, which seems highly likely in the EU, will automatically have to trigger further mill price increases.

Structural Sections

Since our last newsletter British Steel announced a further £30 per tonne increase on 5 March 2021 taking total increases since the summer of last year to £260 per tonne.  It was expected that price increases would keep flowing through to properly restore profitability for the large EU manufacturers but evidently this has not happened.  The environment for further prices increases in the UK seemed very likely with the inflow of EU imports remaining very low and virtually no supplies arriving from further afield. 

All Steels’ view is that underlying demand did not accelerate as quickly as anticipated and so some of the heat out of the necessity to increase prices diminished as scrap prices stabilised /slightly softened.  At this present time NASS data does show that stocks within the distribution chain remain very low and it feels like we are at that turning point when underlying demand is about to jump up with so many new infrastructure projects being awarded.  As shown early on in this report iron ore prices have also continued to push up over the past few weeks and pressure must therefore be returning to our domestic BOS route steel producer (British Steel) to increase prices.

What is also worthy of note is that British Steel does produce slabs on its concast lines at Scunthorpe and with slab market prices rising close to section prices this does present a very good profitmaking opportunity for British Steel if it wishes to sacrifice some heavy section production for more lucrative slab sales.  Logic would suggest that British Steel would not wish to cut section production, but it does form a basis for them to choose to be more price aggressive on section selling. 

Given all the above we are therefore of the view that we might be on the cusp of further section price increases that should become clear quite early as we progress through Q2.

Hollow Sections
As a direct derivative of HRC hollow sections are in critically short supply and it appears that the situation will only get worse.  As a large trader of this product, it simply feels like the quota level for Turkish, UAE and even EU supplies is inadequate since the new UK Safeguard quotas came into play on 1 January 2021.  Only last week we received retrospective C18, HMRC duty invoices for our proportion of quota exceeded on day 1 of Q1, and in the coming months, we will see repeat retrospective HMRC bills for day 1 of Q2.  (These are very hefty charges!).  Import duties are therefore going to become a standard feature of importing hollow sections and as general hollow sections prices rise this becomes an even bigger number!  We then have the headline price issue that is being driven by massive HRC availability constraints and the consequential price surge.

On Friday, the EU’s largest steel producer (ArcelorMittal) announced another €30p/t of increases to take HRC to €1,000p/t.  (€200p/t of increases since 4 March 2021).  The graph below best illustrates the HRC movement although it does not yet reflect the most current increase: 


Whilst this surge in EU HR Coil prices looks excessive you only need to look at the US to see what effect further shortages can have on steel prices where mill selling prices have tripled over the last 9 months. 


It is therefore fair to conclude that hollow sections will remain the most troublesome product.  Tight availability will become a bigger issue and it is difficult to predict how high the price will go but it is clearly going to be substantial. 

From an All Steels point of view we have already signed off contracts for Q4 supply, but we have only booked two vessel loads rather than the three vessel loads we booked for Q3.  This decision was basically governed by affordability with respect to banking facilities available due to the high prices but virtually all this capacity has been forward sold.  We have also seen a rush on sales of our hollow section stocks even though we have substantially increased prices.  It is therefore already a foregone conclusion that we will have little stock /forward availability for the rest of this year.  We are sure that other steel traders will be facing the same issues and it may be that we will see a reversal of structural sections displacing what has become traditional markets for hollow sections as we genuinely believe that the shortages will be catastrophic!  

Conclusion
As a summary note, we are of the view that:
1. World steel demand is likely to skyrocket as we move into a safer world post the height of the Covid-19 pandemic as a successful vaccine protection rollout continues.
2. Steel producers will have to increase production and possibly re-open closed facilities to meet new levels of higher demand, but their approach will be cautious keeping supply tight for some time.
3. Stocks amongst the stockholding community are unlikely to fully recover as the high prices make it unaffordable for many and the risks will be too high when supply catches up with demand, even though the shortages are envisaged to persist for some time.
4. Base materials that influence steel prices will remain strong off the back of forecasts that global crude steel production will grow to an all-time world record high over the next two-year period.
5. Other costs associated with steel manufacturing and distribution are all increasing, and look set to continue with further rises ahead i.e. raw materials, energy, all taxes including environmental, road transport, shipping, trade insurance, employment, mill housing/warehousing, port handling charges, etc.

The underlying message here is that the scene seems to be set for steel prices to remain high and with tight availability!

Please note that these are only All Steels’ views and experiences, which we have generally been asked to share.  However, we hope this provides you with some useful guidance on how pricing in our professional opinion is most likely to continue to unfold.

October UK Steel Market Evaluation

Dear All Steels Customers,

Changes in the steel market certainly continue to move at significant pace, and the forecasts we predicted in our mid-August note have very much all now come to fruition.  Hence, many of our customers have been asking for our considered view on the current and foreseeable market situation, so here is another relatively succinct update on observations, and our forecast for the most likely changes ahead.

Understandably the resurgence of Covid-19 is causing further confusion and uncertainty for us all.  However, it is also fair to say that most countries around the world seem to be taking the stance that the industrial world cannot be allowed to suffer, and construction markets all appear to be strong as governments advance their infrastructure projects to assist employment.  “The Get Britain Building Campaign” certainly still looks to be a top initiative in the UK, and if we look at the sales statistics produced by the National Association of Steel Service Centres (NASS) it is evident that demand for structural sections, merchant bars and hollow sections have returned back, indeed since July, to pre Covid-19 levels.

Our own UK rolling mills are also very busy and overtime working is now starting to be applied to keep up with demand, so the speed of positive turnaround of our industry from being in a rather dark place in the spring is quite extraordinary.

For simplicity, we have started off by updating the usual graphs, which we last presented to you in mid-August, and that we typically follow on a daily basis as it is these fundamentals that drive steel prices combined with supply and demand. 

Iron Ore



Iron ore prices clearly remain strong.  Recent concerns have been expressed that increased mining capacity coming on stream would result in a price softening and whilst the bull run came to a halt in mid-September prices once again seem to be on an upward trajectory. 

China's crude steel output is now estimated to exceed a record breaking 1 billion metric tonnes this year.

What is evident from media reports is that China’s crude steel production has been running at very high levels since May with consumption being lifted by the country’s infrastructure boom, and underpinned by their manufacturing sector.  Such activity is probably now sufficient to keep iron ore hovering around its current high levels.

When considering ratios of iron ore usage to the manufacture of steel it cannot be ignored that this element alone is adding circa £52 per tonne to BOS route steel-making costs since the end of April’s low point!

1.7t of iron ore is used to make a tonne of steel. 

Coking Coal



Like most commodities coking coal prices recovered sharply following the first wave of the Covid-19 pandemic.

As seen with iron ore, Chinese BOS route steelmakers are producing crude steel at a rate of knots with daily output records being recorded in September.

With such strong demand coking coal prices must logically stay strong, which the graph reflects from one of China’s major domestic sources.

The top graph also shows FOB Australia prices that are a good illustration of the recovery following the price decline at the end of Q1.

Moreover, only this week severe heavy rainstorms and floods are once again making headline news in Australia’s major mining territories, and we all know what impact this can have on both iron ore and coking coal prices.

0.7t of coking coal is used to make a tonne of steel.  

Scrap



As expressed in previous steel bulletins Turkish imported scrap prices are always the most reactive to supply and demand and other world steel events.

The graph therefore naturally depicts general steel price movement and little explanation is required to where steel prices appear to be trending.

Clearly iron ore and scrap prices are currently moving in tandem, so both electric arc and BOS route steelmakers both face the pressure of rising costs.

Unsurprisingly, Europe and UK scrap prices are generally moving in the same upward direction, so there is no geographical immunity to such increases in steel-making costs.

We also picked up news yesterday that the Chinese are reappearing in the world market buying up scrap and this could cause a serious uplift in scrap prices.

1.1t of scrap is used to make a tonne of steel.

Exchange Rates



The £ sterling recovered quickly from the initial shock of the Covid-19 outbreak, but it still remains weaker than its year opening position especially against the Euro.  Such an outcome only serves to firm up imported steel and steel-making raw material costs.

In an environment where we have American elections and Brexit negotiations closer to home it will be a volatile time for the £ sterling, and we would shortly expect to see some significant movement, but the direction is currently too difficult to call.

If you look at the value of the £ sterling against the Euro in particular, which is most relevant to the UK, the devaluation of the £ sterling here has added circa £36 per tonne to imported steel costs from mainland Europe since the start of the year.

All shipping and road transport for deliveries to the UK are also Euro based, so this is also adding additional costs to imported prices from the EU.  

Oil Prices 



 As is usually the norm the oil price mirrors the world’s general economic trends.

It is certainly reflective of what we have seen in the UK, with June and July showing the strong bounce back we have seen in steel demand.

It equally shows some confusion in recent months as the Western world wrestles with further uncertainty of the Covid-19 second wave.

On balance, we would say it shows improved confidence in the economy.

Whilst all these graphs convey a positive message for strengthening steel prices the same health warning applies again here that the Covid-19 pandemic could return to ultimately bite more severely as we progress through the cold winter months ahead.

In the section below, we have tried to give a short overview on each product group.  The underlying message however is that from the selection of graphs above is that everything is pointing towards a necessity for steel prices to keep on increasing, especially when you combine this with the knowledge that virtually all steelmakers are still losing money.  Evidence would therefore suggest that we will continue to see mill price increase announcements. 

PRODUCT REVIEWS

Merchant Bar 

Merchant bar prices are now firmly up by £40 per tonne with all the major domestic and European players having successively implemented a second round of increases since the summer.  Rising raw material costs are the main drivers, but the tightness in supply is continually forcing buyers to source many infill purchases from the wholesale market and consequentially radically increasing their costs by an extra measure.  Looking at the overall picture you basically get the impression that all mills cut back shifts and associated labour to deal with the early impact of Covid-19 and whilst demand has returned there has been a reluctance to re-recruit in fear of further Covid-19 pandemic setbacks.  The effects of the Covid-19 pandemic have also forced the closure of another producer i.e. an Italian merchant bar producer (Cogeme) and the resurgence of the Covid-19 pandemic is again creating disruption to manufacture.  Even our own Bromford mill is currently taking some necessary manufacturing time out due to a small-scale Covid-19 outbreak and this issue is evidently most likely to become an even bigger manufacturing impediment for all EU producers.

We have certainly never witnessed supply being so tight on merchant bar, and at present we simply cannot see any immediate change in this situation.  Against this background if we do see the slightest uptick in scrap prices, as anticipated, further price increases have to be on the agenda especially when you consider that the increases applied to merchant bar to date fall some distance behind the movement we have seen on both hollow sections and structural sections.

As a business our own merchant bar stock for infill supply to stockholders has been heavily depleted, and we are struggling to replenish at the desired pace, and nothing on the horizon is going to allow us to correct this situation.  Container shipments out of Turkey also remain extremely dangerous due to the Safeguard issues with no practical solution to bonding the boxes should quotas get exhausted.  We therefore cannot see a simple solution for quickly filling our stock gaps.

Hollow Sections 

As mentioned in August imports have always largely satisfied the UK market and whilst the new quarterly quota system was introduced to better stabilise the spread of imports throughout the year it has added another complexity and risk to hollow sections traders.  The quota for the October to December period was actually exceeded on the first day of this trading period by 6,000t and all importers could be subjected to a retrospective HMRC C18 post clearance demand.  This demand could, by all accounts, be inflicted by HMRC at any time over a three year post the initial clearance follow on period.

Needless to say, availability is tight and bonding has once again had to be used by many importers’ ships that arrived after the 1st October to avoid duties.  Such constraints will be an ongoing problem and arguably the new individual UK Safeguard quota will tighten up supply even further with new measures coming into effect on EU imports of the product.  At present the limit for EU imports is set at only circa 10,000t per quarter and with many EU deliveries being made on trucks supplying the UK from the 1st January 2021 will become extremely arduous and high risk never mind deterring many suppliers away from the UK.  Some of the quotas set for mills outside the UK and Turkey also appear to have been set at very low levels especially for the likes of the UAE, which has been a significant supplier to the UK market over recent years.

The perfect storm on hollow sections supplies is therefore likely to worsen and the prices in the marketplace from domestic mills and dock stock sellers reflects what is an unbelievably tight situation.  Price increases since the summer of over £200 per tonne are commonplace and whilst some traders will no doubt sell forward at cheap rates they will be potentially playing with fire with respect to HMRC imposing a C18 regulation.  Another additional problem is that with so much hollow sections being bonded in preparation for clearance on the first day of each month dockside warehousing is in real short supply and simple economics is forcing up the cost of such storage for the traders.

With such huge obstacles and trading risks in play a number of traders have already called it a day and very few imports will escape some duty charges over the quarters ahead.  As a trader, we are trying to minimise the risk for our customers by heavily bringing in supply well in advance of each quarter and accordingly bonding material for customer clearance on the first day of each quarter.  Warehousing however restricts the volumes we can trade and therefore our own sold stock positions are being greatly reduced.  On the price front it will be availability more so than raw material price movement that will influence price movement and with availability being set to remain in very short supply it is logical for prices to remain exceptionally high.  Hence, there is really no ceiling as to where prices could go given the immediate circumstances.

Structural Sections 

The National Association of Steel Service Centres' sales statistics on structural sections strongly reaffirms that “The Get Britain Building Campaign” is a reality with September daily sales being in line with the average for Q1, Covid-19 pre-pandemic.  Similar to all other products mill supplies are all running late and there is serious confusion for the EU mills on how to service the UK post the 1st January 2021 following our separation from the EU.  Customs clearance becomes a new requirement in the process, but the bigger concern is that EU Safeguards becomes a new obstacle and whilst these have been tabled in the event of a Brexit Deal the EU has still not reciprocated with quota arrangements for UK exports to the EU.  In the event of a no-deal Brexit the proposed UK Safeguards immediately get thrown out of the window, so at this very late hour nobody is clear on the terms of engagement with EU section mills.  With such lack of clarity, it is possible that EU suppliers will take a trade break for supplies to the UK during January or until such time that we get further clarity. 

With regard to price, we have seen £60 per tonne of price increases since the summer months (2 x £30 per tonne) all of which appear to have been fully implemented, but prices have still not got back to levels seen this time last year even though raw material prices are higher.  It therefore seems apparent that the mills still need to make further price increases and with supply remaining tight and raw material prices appearing to be still driving upwards it is highly likely that another sizable official price increase will be announced shortly.

Please note that these are only All Steels’ views, which we have generally been asked to share.  However, we hope this provides you with some useful guidance on how things are in our professional opinion most likely to unfold.

Current UK Steel Trade Evaluation

Dear All Steels Customers,

It was certainly a difficult second quarter for all steel producers, and our own rolling mills took their fair share of lockdown time as demand sharply fell away.  Thankfully both Bromford Iron and Special Steel Sections have been back in business since the start of July and demand continues to slowly improve.  On the trading side of our business many customers are asking for our view on the market as a multi-product trader, so here it is based on the usual fundamental hard facts that normally drive steel prices.

When I looked back at my last circulation I mailed out in mid-March I was pleased to see that I logically opened my message with the following statement:
“Everything said below has to be tempered with a belief that demand will slow down and it could even fall off a cliff edge if forced self-isolation and social distancing measures continue for most of 2020”. 

Understandably the same health warning applies again, but hopefully we are on the road to recovery in most respects.

My opening section below really just addresses the raw material cost fundamentals on steelmaking.  As you can see from the selection of graphs everything is pointing towards a necessity for steel prices to increase, especially when you combine this with the knowledge that virtually all steelmakers are losing money.  Evidence would therefore suggest we must be hitting a bounce back point.

Iron Ore


Mining commodity prices fell nowhere near the levels anticipated, primarily because of China’s quick economic recovery. Moreover, Chinese demand has continued to strengthen at a time when Brazilian mines have almost ground to halt as a result of large Covid-19 outbreaks amongst the mining communities.

Brazilian output will eventually return but in the short to mid-term the maths is simple to do.

A $30pt iron ore cost increase is just not possible for a steel producer to absorb so BOS route steel prices must rise.

1.7t of iron ore is used to make a tonne of steel.


Coking Coal



As more metallurgical coking coal production has been concentrated in Australia, prices have been more influenced by extreme weather over the last decade rather than supply and demand.  The onslaught of Covid19 however did take its toll on coking coal prices, but the dip was clearly short lived as the graph shows.

Evidently coking coal prices are now within $2p/t of pre-crisis levels.  There is also a lot of new speculation pointing towards rising prices off the back of many mining giants’ decisions to significantly cut capacity.

0.7t of coking coal is used to make a tonne of steel.

Scrap



Turkish imported scrap prices are always the most reactive to supply and demand and general world events.  Clearly, we are seeing a common theme with scrap prices having hit rock bottom in early April followed by a sharp recovery.

Against expectations of a July scrap price fall the opposite now seems to be the reality. 

The same outcome is also being mirrored in both the UK and mainland Europe.  Scrap route melters are therefore facing equal cost pressures to that of the BOS route steelmakers!

1.1t of scrap is used to make a tonne of steel.

Exchange Rates






As Covid-19 took a stranglehold in the UK at the end of March the £ took a thumping and lost circa 12% of its value.

Again, the recovery here was relatively quick, but it still remains much weaker against both the Euro and the US$ than its position at the start of the year.

Whether it is raw materials for UK steelmakers or imported finished steel this devaluation is significant.  Since the start of the year the currency effect alone is adding circa £35-£40 per tonne to steel imported from mainland Europe.

All shipping and road transport for deliveries to the UK are also Euro or US$ based, so this is also adding additional costs to imported prices.

Oil Prices


A notorious rule of thumb is to use oil price trends as a barometer for steel price movements.

Despite our move to green steel oil generally still has a bearing on steelmaking energy costs, so this again has an impact on prices.

In general, however oil prices are usually just a reflection of the economic world and without surprise this is pointing to a position of improvement.

PRODUCT REVIEWS

The pricing dynamics by product are quite varied, so in this second section I have tried to give All Steels’ true view on how we see trade.

Merchant Bar

Domestic over capacity for today’s UK market remains a constant problem and the imbalance on supply and demand has already taken its toll once again on merchant bar prices.  As we have all seen in the media the mills have been pushing hard for Government loan assistance and some support has been granted, but these are loans at a cost that have to be paid back.  On a positive note, I am sure the weak value of sterling will be assisting exports, but current domestic prices cannot be sustainable for the mills. 

At the outbreak of Covid-19 most of the mills took the brunt of the costs as they were left with the financing of stock as many stockholders/consumers simply closed.  The mills naturally cut back capacity and discounted prices to encourage some sales, but the balance now seems to have been addressed.  Stockholders have called in the mills’ aged stocks, mills and traders dock stocks have been heavily depleted, and we have finally reached the mills’ extended summer shutdown periods.

Everything therefore suggests a tightening in supply and a much busier period on their return from summer breaks.  Given all the other steelmaking cost factors referenced above price increases must be on the mills’ agendas.

Hollow Sections

As EU Safeguard quotas became exhausted mid-February it was almost guaranteed that hollow section investors were going to get a very nice margin return in Q2.  Once again this was another one of those lessons that nothing is guaranteed in the steel industry.

Demand fell off a cliff and Turkish prices collapsed, and the new July Safeguard quota window quickly opened.  As buyers have understandably returned in a cautious mode there has been a reluctance to forward order.  Mill stocks and dock stocks have suddenly become heavily depleted and shortages are now evident on many popular sizes.  This coincides with Tata UK announcing a £50 per tonne price increase on HRC that logically must wash through into hollow section prices.  From All Steels’ experiences we are also seeing similar changes in our Turkish buying prices especially when you factor in the adverse foreign exchange.

Hollow sections has always been one of those products of feast or famine with consequential dramatic price swings, and at present it looks like we are entering a window of famine!

Structural Sections
The Jingye Group’s acquisition of British Steel literally happened as UK manufacturing slammed on the brakes and went into lockdown.  Miraculously British Steel Sections has managed to plough on regardless and appear to have spanned the world to find the necessary sales to keep their mills rolling.  This was clearly a set out intent of Jingye to maximise plant utilisation as a first priority to improve competitiveness, and I am sure they will have recovered UK market share.  Even with such efficiency gains however the rising costs of steelmaking ingredients have surely reached a point where they can no longer be ignored. 

It also has to be recognised that “The Get Britain Building Campaign” appears to be a top priority Government initiative, so this has to bode well for structural steel demand.  The coming together of these developments would therefore appear to be good timing for a recovery in steel prices, and British Steel has already formally announced a €30 per tonne price increase to its European customers.  An increase on structural section prices for the UK therefore has to be just around the corner!

These are only All Steels’ views, which we have generally been asked to share.  However, we hope this provides you with some useful guidance on how things are most likely to unfold in what will hopefully prove to be a time of recovery for all concerned in our industry.

Keep staying safe!


UK Steel Market Evaluation

Dear All Steels Customers,

A fair number of you have recently been asking for All Steels’ opinion on market developments based on our international trade experience and contacts. Hence, rather than potentially repeating the same current message many times over here is our view on trying to make sense of steel trade in the UK in these unprecedented times.

Everything said below has to be tempered with a belief that demand will slow down and it could even fall off a cliff edge if forced self-isolation and social distancing measures continue for most of 2020.

My opening section really just addresses the raw material cost fundamentals on steelmaking, but as we all know it is supply and demand that always has the hardest bearing on steel prices.

As you can see from the selection of graphs below iron ore, coking coal and scrap prices remain relatively high, and with the knowledge that virtually all steelmakers are losing money we can take some comfort that steel producers simply can’t afford to cut prices:

Iron Ore


Prices clearly remain firm and the recent stabilising in price is reportedly resulting from the Chinese heavily returning to buying as they resume normal production.

The acceleration on prices at the start of 2019 leading to the June 2019 peak was primarily caused by major output cuts in Brazil following the collapse of a major dam at Vale’s Córrego do Feijão mine. This followed with closure of many other Brazilian mines due to concerns over the structure of their tailings dams. Production has remained slow to recover, so over supply has been avoided.
1.7t of iron ore is used to make a tonne of steel.

Coking Coal


Whether you are looking at Australia or China, metallurgical coking coal prices all follow a close trend.

The peaks usually arise at the time of monsoon weather conditions and resulting heavy floods in Australia.

Over the last few years prices have been in a more stable band of $160-185 per tonne and have remained relatively flat since the start of this year.
0.7t of coking coal is used to make a tonne of steel.

Scrap


Turkish imported scrap prices are always most reactive to supply and demand and whilst prices have tumbled circa $35-40 per tonne over recent weeks, they still remain much higher than the early October 2019 position. The downwards trending of scrap was expected to continue, but the tightening up of availability from US Ports as they go on lockdown is now becoming a constraint on supply, so this trend could reverse.
1.1t of scrap is used to make a tonne of steel.

Another big influencer of UK steel prices is obviously exchange rates and the message here is clear to see.

Exchange Rates



Since the onslaught of the coronavirus the value of the £ has taken a tanking with the loss of circa 10% of its value.

Whether it is raw materials for the UK steelmakers or imported steel this movement is dramatic adding circa £50 per tonne of price growth to steel with a typical price tag of £500 per tonne.

All shipping and road transport for deliveries to the UK are also Euro or US$ based, so this is again adding big additional costs to imported prices.

PRODUCT REVIEWS
The pricing dynamic by product are quite varied, so in this second section I have tried to give All Steels’ true view on how we see trade.

Merchant Bar
In the UK we are blessed with a good volume of domestic mills including Bromford Iron, Celsa UK, Liberty Merchant Bar, etc, but all these mills have the reverse benefit on exchange rates with a 10% sterling return gain on Euro selling prices.

Moreover, two of the most prolific producers of merchant bar in Europe (Beltrame Italy & LME France) are both on coronavirus lockdowns for manufacture and despatches. There are also many other small family merchant bar mills in southern Europe that are also known to be closed. This is creating a huge mainland European demand for our domestic mills whilst a hole is left in import supplies to the UK from Beltrame and LME. This has resulted in Celsa UK applying £50 per tonne of increases on deliveries this coming week (£25 per tonne on Monday 23-3-20 + £25 per tonne on Thursday 26-3-20). 

Our other domestic mills are also applying increases, but demand is really tight and providing demand holds up more dramatic increases seem inevitable. We also can’t rule out the risk of the domestic mills suffering the same fate as LME/Beltrame. The chances of the latter has to be high as it does not take too many key operatives to be absent for a mill / steel plant not to function.

Hollow Sections
There has been an abundance of hollow section availability with so many purchasers buying so heavily to beat EU Safeguards against the Turkish supply quota that got exhausted much quicker than anticipated in mid-February. Dock stocks do remain relatively high and All Steels also heavily front loaded to beat Safeguard quotas, but the holes are just starting to appear in our hollow sections stock range.

With no prospects of Turkish imports being possible until the new Safeguard quota window opens on the 1st July supply has to tighten up as we step through each month in Q2. It is also worthy of note that Italian imports will clearly become more difficult with the coronavirus constraints on both production and logistics. With respect to replacement prices out of Turkey current prices are high due to the weak value of the £, so domestic prices in the UK have to rise over the next three months, but this will be somewhat curtailed by an anticipated weakening in demand.

Structural Sections
This is another product where stocks have remained high in the UK as everyone bought heavily in anticipation of price increases pre-Christmas and then demand suddenly weakened. The price increases had all failed by the time we entered February, but two factors will come into play on forward supplies.

1. Virtually half the UK supply is satisfied by EU imports and the 10% devaluation of sterling against the Euro must end up being reflected on import prices.

2. Over the weekend ArcelorMittal has declared a force majeure on raw materials supplied to its European steel mills. This signals a strong message on the likelihood of further mill closures. The likes of Duferdofin Nucor, Italy’s largest section producer is already closed and more must follow. When one of these mills goes down it leaves a huge hole in the supply chain. When more than one mill goes on lockdown availability will become analogous to trying in vain to purchase a fair share of necessary toilet rolls from one of Britain’s supermarkets!

These are only All Steels’ views, which we have generally been asked to share. However, we hope this provides you with some useful guidance on what is most likely to unfold in these difficult business times.

Stay safe.

Best regards,

Laurence McDougall
Managing Director

UK Steel Market Evaluation

Dear All Steels Customers,

A fair number of you have recently been asking for All Steels’ opinion on market developments based on our international trade experience and contacts. Hence, rather than potentially repeating the same current message many times over here is our view on trying to make sense of steel trade in the UK in these unprecedented times.

Everything said below has to be tempered with a belief that demand will slow down and it could even fall off a cliff edge if forced self-isolation and social distancing measures continue for most of 2020.

My opening section really just addresses the raw material cost fundamentals on steelmaking, but as we all know it is supply and demand that always has the hardest bearing on steel prices.

As you can see from the selection of graphs below iron ore, coking coal and scrap prices remain relatively high, and with the knowledge that virtually all steelmakers are losing money we can take some comfort that steel producers simply can’t afford to cut prices:

Iron Ore


Prices clearly remain firm and the recent stabilising in price is reportedly resulting from the Chinese heavily returning to buying as they resume normal production.

The acceleration on prices at the start of 2019 leading to the June 2019 peak was primarily caused by major output cuts in Brazil following the collapse of a major dam at Vale’s Córrego do Feijão mine. This followed with closure of many other Brazilian mines due to concerns over the structure of their tailings dams. Production has remained slow to recover, so over supply has been avoided.
1.7t of iron ore is used to make a tonne of steel.

Coking Coal


Whether you are looking at Australia or China, metallurgical coking coal prices all follow a close trend.

The peaks usually arise at the time of monsoon weather conditions and resulting heavy floods in Australia.

Over the last few years prices have been in a more stable band of $160-185 per tonne and have remained relatively flat since the start of this year.
0.7t of coking coal is used to make a tonne of steel.

Scrap


Turkish imported scrap prices are always most reactive to supply and demand and whilst prices have tumbled circa $35-40 per tonne over recent weeks, they still remain much higher than the early October 2019 position. The downwards trending of scrap was expected to continue, but the tightening up of availability from US Ports as they go on lockdown is now becoming a constraint on supply, so this trend could reverse.
1.1t of scrap is used to make a tonne of steel.

Another big influencer of UK steel prices is obviously exchange rates and the message here is clear to see.

Exchange Rates



Since the onslaught of the coronavirus the value of the £ has taken a tanking with the loss of circa 10% of its value.

Whether it is raw materials for the UK steelmakers or imported steel this movement is dramatic adding circa £50 per tonne of price growth to steel with a typical price tag of £500 per tonne.

All shipping and road transport for deliveries to the UK are also Euro or US$ based, so this is again adding big additional costs to imported prices.

PRODUCT REVIEWS
The pricing dynamic by product are quite varied, so in this second section I have tried to give All Steels’ true view on how we see trade.

Merchant Bar
In the UK we are blessed with a good volume of domestic mills including Bromford Iron, Celsa UK, Liberty Merchant Bar, etc, but all these mills have the reverse benefit on exchange rates with a 10% sterling return gain on Euro selling prices.

Moreover, two of the most prolific producers of merchant bar in Europe (Beltrame Italy & LME France) are both on coronavirus lockdowns for manufacture and despatches. There are also many other small family merchant bar mills in southern Europe that are also known to be closed. This is creating a huge mainland European demand for our domestic mills whilst a hole is left in import supplies to the UK from Beltrame and LME. This has resulted in Celsa UK applying £50 per tonne of increases on deliveries this coming week (£25 per tonne on Monday 23-3-20 + £25 per tonne on Thursday 26-3-20). 

Our other domestic mills are also applying increases, but demand is really tight and providing demand holds up more dramatic increases seem inevitable. We also can’t rule out the risk of the domestic mills suffering the same fate as LME/Beltrame. The chances of the latter has to be high as it does not take too many key operatives to be absent for a mill / steel plant not to function.

Hollow Sections
There has been an abundance of hollow section availability with so many purchasers buying so heavily to beat EU Safeguards against the Turkish supply quota that got exhausted much quicker than anticipated in mid-February. Dock stocks do remain relatively high and All Steels also heavily front loaded to beat Safeguard quotas, but the holes are just starting to appear in our hollow sections stock range.

With no prospects of Turkish imports being possible until the new Safeguard quota window opens on the 1st July supply has to tighten up as we step through each month in Q2. It is also worthy of note that Italian imports will clearly become more difficult with the coronavirus constraints on both production and logistics. With respect to replacement prices out of Turkey current prices are high due to the weak value of the £, so domestic prices in the UK have to rise over the next three months, but this will be somewhat curtailed by an anticipated weakening in demand.

Structural Sections
This is another product where stocks have remained high in the UK as everyone bought heavily in anticipation of price increases pre-Christmas and then demand suddenly weakened. The price increases had all failed by the time we entered February, but two factors will come into play on forward supplies.

1. Virtually half the UK supply is satisfied by EU imports and the 10% devaluation of sterling against the Euro must end up being reflected on import prices.

2. Over the weekend ArcelorMittal has declared a force majeure on raw materials supplied to its European steel mills. This signals a strong message on the likelihood of further mill closures. The likes of Duferdofin Nucor, Italy’s largest section producer is already closed and more must follow. When one of these mills goes down it leaves a huge hole in the supply chain. When more than one mill goes on lockdown availability will become analogous to trying in vain to purchase a fair share of necessary toilet rolls from one of Britain’s supermarkets!

These are only All Steels’ views, which we have generally been asked to share. However, we hope this provides you with some useful guidance on what is most likely to unfold in these difficult business times.

Stay safe.

Best regards,

Laurence McDougall
Managing Director

UK Steel Market Evaluation

Dear All Steels Customers,

A fair number of you have recently been asking for All Steels’ opinion on market developments based on our international trade experience and contacts. Hence, rather than potentially repeating the same current message many times over here is our view on trying to make sense of steel trade in the UK in these unprecedented times.

Everything said below has to be tempered with a belief that demand will slow down and it could even fall off a cliff edge if forced self-isolation and social distancing measures continue for most of 2020.

My opening section really just addresses the raw material cost fundamentals on steelmaking, but as we all know it is supply and demand that always has the hardest bearing on steel prices.

As you can see from the selection of graphs below iron ore, coking coal and scrap prices remain relatively high, and with the knowledge that virtually all steelmakers are losing money we can take some comfort that steel producers simply can’t afford to cut prices:

Iron Ore


Prices clearly remain firm and the recent stabilising in price is reportedly resulting from the Chinese heavily returning to buying as they resume normal production.

The acceleration on prices at the start of 2019 leading to the June 2019 peak was primarily caused by major output cuts in Brazil following the collapse of a major dam at Vale’s Córrego do Feijão mine. This followed with closure of many other Brazilian mines due to concerns over the structure of their tailings dams. Production has remained slow to recover, so over supply has been avoided.
1.7t of iron ore is used to make a tonne of steel.

Coking Coal


Whether you are looking at Australia or China, metallurgical coking coal prices all follow a close trend.

The peaks usually arise at the time of monsoon weather conditions and resulting heavy floods in Australia.

Over the last few years prices have been in a more stable band of $160-185 per tonne and have remained relatively flat since the start of this year.
0.7t of coking coal is used to make a tonne of steel.

Scrap


Turkish imported scrap prices are always most reactive to supply and demand and whilst prices have tumbled circa $35-40 per tonne over recent weeks, they still remain much higher than the early October 2019 position. The downwards trending of scrap was expected to continue, but the tightening up of availability from US Ports as they go on lockdown is now becoming a constraint on supply, so this trend could reverse.
1.1t of scrap is used to make a tonne of steel.

Another big influencer of UK steel prices is obviously exchange rates and the message here is clear to see.

Exchange Rates



Since the onslaught of the coronavirus the value of the £ has taken a tanking with the loss of circa 10% of its value.

Whether it is raw materials for the UK steelmakers or imported steel this movement is dramatic adding circa £50 per tonne of price growth to steel with a typical price tag of £500 per tonne.

All shipping and road transport for deliveries to the UK are also Euro or US$ based, so this is again adding big additional costs to imported prices.

PRODUCT REVIEWS
The pricing dynamic by product are quite varied, so in this second section I have tried to give All Steels’ true view on how we see trade.

Merchant Bar
In the UK we are blessed with a good volume of domestic mills including Bromford Iron, Celsa UK, Liberty Merchant Bar, etc, but all these mills have the reverse benefit on exchange rates with a 10% sterling return gain on Euro selling prices.

Moreover, two of the most prolific producers of merchant bar in Europe (Beltrame Italy & LME France) are both on coronavirus lockdowns for manufacture and despatches. There are also many other small family merchant bar mills in southern Europe that are also known to be closed. This is creating a huge mainland European demand for our domestic mills whilst a hole is left in import supplies to the UK from Beltrame and LME. This has resulted in Celsa UK applying £50 per tonne of increases on deliveries this coming week (£25 per tonne on Monday 23-3-20 + £25 per tonne on Thursday 26-3-20). 

Our other domestic mills are also applying increases, but demand is really tight and providing demand holds up more dramatic increases seem inevitable. We also can’t rule out the risk of the domestic mills suffering the same fate as LME/Beltrame. The chances of the latter has to be high as it does not take too many key operatives to be absent for a mill / steel plant not to function.

Hollow Sections
There has been an abundance of hollow section availability with so many purchasers buying so heavily to beat EU Safeguards against the Turkish supply quota that got exhausted much quicker than anticipated in mid-February. Dock stocks do remain relatively high and All Steels also heavily front loaded to beat Safeguard quotas, but the holes are just starting to appear in our hollow sections stock range.

With no prospects of Turkish imports being possible until the new Safeguard quota window opens on the 1st July supply has to tighten up as we step through each month in Q2. It is also worthy of note that Italian imports will clearly become more difficult with the coronavirus constraints on both production and logistics. With respect to replacement prices out of Turkey current prices are high due to the weak value of the £, so domestic prices in the UK have to rise over the next three months, but this will be somewhat curtailed by an anticipated weakening in demand.

Structural Sections
This is another product where stocks have remained high in the UK as everyone bought heavily in anticipation of price increases pre-Christmas and then demand suddenly weakened. The price increases had all failed by the time we entered February, but two factors will come into play on forward supplies.

1. Virtually half the UK supply is satisfied by EU imports and the 10% devaluation of sterling against the Euro must end up being reflected on import prices.

2. Over the weekend ArcelorMittal has declared a force majeure on raw materials supplied to its European steel mills. This signals a strong message on the likelihood of further mill closures. The likes of Duferdofin Nucor, Italy’s largest section producer is already closed and more must follow. When one of these mills goes down it leaves a huge hole in the supply chain. When more than one mill goes on lockdown availability will become analogous to trying in vain to purchase a fair share of necessary toilet rolls from one of Britain’s supermarkets!

These are only All Steels’ views, which we have generally been asked to share. However, we hope this provides you with some useful guidance on what is most likely to unfold in these difficult business times.

Stay safe.

Best regards,

Laurence McDougall
Managing Director

UK Steel Market Evaluation

Dear All Steels Customers,

A fair number of you have recently been asking for All Steels’ opinion on market developments based on our international trade experience and contacts. Hence, rather than potentially repeating the same current message many times over here is our view on trying to make sense of steel trade in the UK in these unprecedented times.

Everything said below has to be tempered with a belief that demand will slow down and it could even fall off a cliff edge if forced self-isolation and social distancing measures continue for most of 2020.

My opening section really just addresses the raw material cost fundamentals on steelmaking, but as we all know it is supply and demand that always has the hardest bearing on steel prices.

As you can see from the selection of graphs below iron ore, coking coal and scrap prices remain relatively high, and with the knowledge that virtually all steelmakers are losing money we can take some comfort that steel producers simply can’t afford to cut prices:

Iron Ore


Prices clearly remain firm and the recent stabilising in price is reportedly resulting from the Chinese heavily returning to buying as they resume normal production.

The acceleration on prices at the start of 2019 leading to the June 2019 peak was primarily caused by major output cuts in Brazil following the collapse of a major dam at Vale’s Córrego do Feijão mine. This followed with closure of many other Brazilian mines due to concerns over the structure of their tailings dams. Production has remained slow to recover, so over supply has been avoided.
1.7t of iron ore is used to make a tonne of steel.

Coking Coal


Whether you are looking at Australia or China, metallurgical coking coal prices all follow a close trend.

The peaks usually arise at the time of monsoon weather conditions and resulting heavy floods in Australia.

Over the last few years prices have been in a more stable band of $160-185 per tonne and have remained relatively flat since the start of this year.
0.7t of coking coal is used to make a tonne of steel.

Scrap


Turkish imported scrap prices are always most reactive to supply and demand and whilst prices have tumbled circa $35-40 per tonne over recent weeks, they still remain much higher than the early October 2019 position. The downwards trending of scrap was expected to continue, but the tightening up of availability from US Ports as they go on lockdown is now becoming a constraint on supply, so this trend could reverse.
1.1t of scrap is used to make a tonne of steel.

Another big influencer of UK steel prices is obviously exchange rates and the message here is clear to see.

Exchange Rates



Since the onslaught of the coronavirus the value of the £ has taken a tanking with the loss of circa 10% of its value.

Whether it is raw materials for the UK steelmakers or imported steel this movement is dramatic adding circa £50 per tonne of price growth to steel with a typical price tag of £500 per tonne.

All shipping and road transport for deliveries to the UK are also Euro or US$ based, so this is again adding big additional costs to imported prices.

PRODUCT REVIEWS
The pricing dynamic by product are quite varied, so in this second section I have tried to give All Steels’ true view on how we see trade.

Merchant Bar
In the UK we are blessed with a good volume of domestic mills including Bromford Iron, Celsa UK, Liberty Merchant Bar, etc, but all these mills have the reverse benefit on exchange rates with a 10% sterling return gain on Euro selling prices.

Moreover, two of the most prolific producers of merchant bar in Europe (Beltrame Italy & LME France) are both on coronavirus lockdowns for manufacture and despatches. There are also many other small family merchant bar mills in southern Europe that are also known to be closed. This is creating a huge mainland European demand for our domestic mills whilst a hole is left in import supplies to the UK from Beltrame and LME. This has resulted in Celsa UK applying £50 per tonne of increases on deliveries this coming week (£25 per tonne on Monday 23-3-20 + £25 per tonne on Thursday 26-3-20). 

Our other domestic mills are also applying increases, but demand is really tight and providing demand holds up more dramatic increases seem inevitable. We also can’t rule out the risk of the domestic mills suffering the same fate as LME/Beltrame. The chances of the latter has to be high as it does not take too many key operatives to be absent for a mill / steel plant not to function.

Hollow Sections
There has been an abundance of hollow section availability with so many purchasers buying so heavily to beat EU Safeguards against the Turkish supply quota that got exhausted much quicker than anticipated in mid-February. Dock stocks do remain relatively high and All Steels also heavily front loaded to beat Safeguard quotas, but the holes are just starting to appear in our hollow sections stock range.

With no prospects of Turkish imports being possible until the new Safeguard quota window opens on the 1st July supply has to tighten up as we step through each month in Q2. It is also worthy of note that Italian imports will clearly become more difficult with the coronavirus constraints on both production and logistics. With respect to replacement prices out of Turkey current prices are high due to the weak value of the £, so domestic prices in the UK have to rise over the next three months, but this will be somewhat curtailed by an anticipated weakening in demand.

Structural Sections
This is another product where stocks have remained high in the UK as everyone bought heavily in anticipation of price increases pre-Christmas and then demand suddenly weakened. The price increases had all failed by the time we entered February, but two factors will come into play on forward supplies.

1. Virtually half the UK supply is satisfied by EU imports and the 10% devaluation of sterling against the Euro must end up being reflected on import prices.

2. Over the weekend ArcelorMittal has declared a force majeure on raw materials supplied to its European steel mills. This signals a strong message on the likelihood of further mill closures. The likes of Duferdofin Nucor, Italy’s largest section producer is already closed and more must follow. When one of these mills goes down it leaves a huge hole in the supply chain. When more than one mill goes on lockdown availability will become analogous to trying in vain to purchase a fair share of necessary toilet rolls from one of Britain’s supermarkets!

These are only All Steels’ views, which we have generally been asked to share. However, we hope this provides you with some useful guidance on what is most likely to unfold in these difficult business times.

Stay safe.

Best regards,

Laurence McDougall
Managing Director

Santa Says 48 Days Left!

It’s certainly been a very exciting day here at All Steels because our large outside Christmas Tree is now up and beautifully adorned with its usual sparkling red & gold baubles! The tree’s many festive fairy lights, and including its large tree top star are all also shining very brightly too! We hope that all of our Thirsk neighbours will really enjoy seeing and sharing this seasonal sight with us throughout the next couple of winter months.



Can you believe that there’s now only 48 days left until Christmas Day 2019! However, All Steels feels it’s perfectly acceptable now to start getting into the festive spirit and sharing some good cheer all around! We’re sure that you will agree our wonderful 2019 Christmas Tree is a very pretty sight to behold, and one that will no doubt put a smile on your face too each time you pass by it.

With special thanks to Freddie (our Credit Controller Emily’s little boy) who officially picked out our tree this year. It’s never that easy picking the perfect shape, height plus a truly straight looking Christmas Tree is it, so what a truly great job he did?!

Freddie understands that there are no presents under the tree yet because Santa only delivers presents on Christmas Eve and of course only to those who have been good all year!

Steel Prices Alert

Dear All Steels Customers
It is only at unprecedented times that we feel the need to go to print on events that are having a major impact on steel prices and we have again reached such a point in time.
As always for simplicity we will keep to straight forward facts that are mainly in the public domain and leave you to make your own judgement.  From an All Steels perspective however we just feel it is necessary to convey such news so that all our customers are forewarned as to why our prices are rising with the added problem of stock outages on a number of our key products that will be difficult to replace until early July 2019.
The issues are basically four fold: Iron Ore, Coking Coal, Scrap & Safeguards.  There is also the BREXIT factor to come into play but this is such an unknown we are wisely keeping away from this debate.

Iron Ore
The catalyst for change on steel prices started with the disaster that took place in Brazil on the 25 January 2019 with the collapse of a major dam at Vale’s Córrego do Feijão mine.  This was the second Brazilian dam to collapse in 3 years linked to iron ore production.  The death toll on this occasion is likely to exceed 300 people and the severity of the humanitarian and environmental disaster has prompted huge government intervention.
As of this morning Vale declared force majeure on some iron ore contracts after a court-ordered halt to a mine responsible for nearly 9 per cent of Vale’s output.  The force majeure came after a court on Monday ordered it to stop using eight tailings dams, including one affecting production of about 30 million tonnes of iron ore output per annum.
Numerous dams in Brazil are now coming under heavy scrutiny and further mining operations could be suspended.
Iron ore prices have surged since the disaster, hitting effectively a two-year high.
The graph below shows the rate of price change.  There are various published iron ore price indices / recordings but they all show the same trend movement.  The graph below is for: XSIO001 – SGX 62% Fe Iron Ore Cash-Settled Swaps (dry metric tonne) – CFR Tiamjin Port, China import $/t.
What the graph below shows is over a 30% increase in iron ore prices since the December year end. This equates to a $25 per tonne movement but with 1.7t of iron ore required to make a tonne of steel this amounts to a $42.50 per tonne impact on steel prices.



What is also known is that Europe is one of the large export markets for Brazilian iron ore and with many of the European buyers being forced to find new supplies quickly following Vale’s force majeure such action logically suggests further upward price pressure will follow.

Coking Coal
The news of Monsoon weather conditions in Queensland Australia is making world news headlines with the city of Townsville being completely flooded as officials were forced to release floodgates at an overwhelmed dam.  Loss of human life was again experienced and at least 20,000 homes have been flooded.
The city’s streets are reportedly full of washed in crocodiles and snakes and whilst this remains the main focus of the news feeds the monsoon has now moved south into the Bowen Basin and heading towards McKay where all the major Australian thermal coal mines and coal port terminals are located.
There is plenty of web news live on this topic as the heavy rains continue e.g.
https://think.ing.com/snaps/the-commodities-feed-heavy-crude-osp-raised/
A paragraph in this link reads as follows:
Coking coal disruptions: “Floods in Queensland, Australia have led to some disruptions at coal mines and export terminals in the region. Queensland’s main coal exporting terminal, Abbott Point has suspended operations, whilst Glencore has also halted operations at its Collinsville and Newlands mines.  This comes at a time when there is plenty of uncertainty over iron ore supply, following the recent Vale dam accident. Yesterday, Vale declared force majeure on some contracts, following a court order to suspend 30mtpa of capacity.”
The events of the Australian mines being hit by the monsoon is breaking news so the impact on coking coal prices will not be known until early next week but the below reports generated by Simpson Spencer Young show a $15 per tonne rise in coking coal prices over the last 2 week period against a background of forecasters predicting a decline in coking coal prices.  (It is estimated that 0.7t of coking coal is required to produce a tonne of steel).



Scrap

When any events in the world have a potential impact on steel prices Turkish scrap prices always respond the quickest and most aggressively.  As a single price indicator the Turkish scrap price is therefore an excellent barometer to watch.
Given the Iron ore and coking coal situation it is therefore not surprising to yet again see a huge shift in Turkish scrap prices.
There is little narrative that is required to explain the below.  An upward shift in price of $49 per tonne in less than a month with 1.1t of scrap required to make a tonne of steel.


This evening one of our major Turkish steel suppliers refused to commit to an offer as scrap prices today moved up by the hour as they were trying to buy and they are expecting more of the same in the lead up to the weekend.

Safeguards
The impact of EU Safeguards only started to materialise in the closing weeks of December as quota levels by product quickly started to fill up.  As All Steels Trading we had first-hand experience with a December shipload of hollow sections that we quite simply had to bond to avoid the risk of a 25% duty charge.  On 2 February 2019 we entered a new 5 month duty window and like many other traders we were busy customs clearing our bonded cargos but the situation is very confusing and extremely high risk going forward over the next 2 quarters.
We are sure most of you will be up to speed on EU Safeguards but the below should help to clarify how the current situation is going to result in All Steels Trading having stock outages during the first half of the year.
For the purpose of explaining our issues we will focus specifically on hollow sections even though we believe some other products have bigger issues.
During the first EU Safeguard quota window that ran from 19 July 2018 to 1 February 2019 with an allowed quota level on hollow sections of 387,343 tonnes for all non-EU suppliers.  (The whole quota was fully utilised).
The second EU Safeguard quota window runs from 2 February 2019 to 1 July 2019 but this time the quota is broken down by country at the following levels.

 Country Tonnage Quota 
 Turkey  154,436
 Russia  35,406
 Former Yugoslav Republic of Macedonia  34,028
 Ukraine  25,240
 Switzerland  25,265
 Belarus  20,898
 Other Countries  25,265


Our general concerns are:

1: The Turkish hollow sections quota is set at a low level as it is based on a 3 year average trade level pre July 2018.  In more recent times Turkey has been a much more dominant supplier to Europe as Trump’s 50% import tariff on Turkish hollow sections effectively shut the door on Turkish hollow sections exports to the USA.  The Turkish EU Safeguard quota is therefore expected to be utilised very early in this new window.
2: On 2 January 2019 many traders throughout Europe were known to be bonding Turkish hollow sections just like All Steels Trading so we believe that a huge loading against the allowed allocation is already in place.
3: It is also known that many traders have attempted to front load the quota window just like All Steels Trading and have shiploads due to arrive over the coming months.  Again the number of such ships already on the high seas heading towards Europe is known to be large and as each week drifts by the chances of being hit with a 25% duty as the quota gets exhausted becomes a huge danger!
4: The EU commission are struggling to reconcile tonnage receipts due to the added complexity of also setting tonnes by country.  At present we have no visibility of where imports are against the set quotas for any product and we are being advised by the commission that it could take up until 19 February 2019 for them to get their system up and running.  All traders are therefore running blind with the risk of retrospective duty charges being a real possibility on goods already imported on certain products.

With such confusion All Steels Trading is finding it impossible to buy non EU hollow sections for the sale of such goods prior to 1 July 2019.
If we bought more hollow sections today from Turkey we either run the risk of paying out a 25% duty on arrival or if timing allows putting such new material in bonding until 1 July 2019, which would ultimately leave us letting customers down and incurring huge incremental financing and warehousing costs.  The bottom line is therefore on sizes where we already have zero stock or zero remaining availability on our February 2019 ship this will remain our position until 1 July 2019.  We would also add that we are already seeing a high level of sales so we do believe our stocks will soon become depleted.

We trust that you will appreciate this update and if you have any queries please give me or one of All Steels Trading’s sales team members a call.

Best regards
Laurence McDougall

Christmas Joy at All Steels!

It's beginning to look a lot like Christmas
Toys in every store
But we think the prettiest sight to see is the sparkling dressed tree outside All Steels Trading’s front door!

 

EUROMETAL Steel Net Forum

EUROMETAL Steel Net Forum & International Steel Trade Day (9th October 2018) in Hamburg certainly attracted an influential crowd of professionals and stakeholders in the steel market. Naturally, the list of invited conference delegates and speakers included steel aficionado representatives from All Steels Trading!

The International Steel Trade Session for example debated the latest developments in the field of steel trade policy, anti-dumping, steel trade cases, safeguard measures, rising protectionism and their impacts on the steel supply of the European market.  It’s fair to say that All Steels Trading’s Managing Director (Laurence McDougall) in his invited capacity as a steel trading expert panellist helped to deliver some amazing value and insights on such highly topical and relevant matters for the audience!

AST's EU Safeguards (Import Duties) Memo

Dear All Steels Trading Customers,

Further announcements were made at the end of last week with regard to safeguard measures to be wisely applied in retaliation to the US Section 232 implementation.

As All Steels Trading we always try to keep our customers fully informed on any significant changes in the marketplace, which will automatically affect steel prices, and the impact of safeguards is likely to be the most dramatic overnight change when the official implementation is announced.

Through our own rolling mills’ trade association links with Eurofer, who act as the interface for steel manufacturers in Europe with the European Commission, All Steels Trading learnt on Friday evening that safeguard duties are highly likely to kick in on steel imported from all non-EU countries as from the 17th July 2018 on a quota basis.  However, because it will be a low quota level and backdated to the 1st January 2018, and imports into the EU have been high this year to date, All Steels Trading believes that the duties will still apply very quickly.

Statement from our own rolling mills’ trade association on Friday night read as follows:

EU Member States Vote to Introduce Safeguard Measures - EU member states meeting in Brussels yesterday voted to introduce provisional safeguard measures in response to the US steel tariffs. These measures (expected to be in place by 17th July) are intended to guard against surges in steel imports resulting from trade diverted away from the US, are urgently needed as trade data shows significant increases in imports for certain products, such as heavy sections and rebar, already this year. This comes on top of the record imports highs seen in 2017. The measures will take the form of tariff rate quotas, with volumes up to the 2015-17 average for each product permitted to enter into the EU tariff free, with only those above the permitted level subject to a 25% tariff. The steel industry had strongly pushed for quotas to be set at national levels to prevent front-loading and stockpiling, but at least for provisional measures the quotas will be set at a global level. The steel sector will continue to push for a more nuanced approach for definitive measures which will need to be decided upon within 200 days. We understand that 25 countries voted in favour of the measures, including the UK, with just three abstaining.

In light of this situation All Steels Trading will only provide quotations for the coming week with 12 hours validity and we must warn you that the upward change in price could be very significant, with increases of £100-150 per tonne being likely across most of the products we offer.  This is simply taking into consideration likely replacement price changes from our suppliers, including shipments that are about to sail from Turkey that could be subject to 25% duties on arrival.

It is clearly a time for recognising the value of your stock and alerting your own sales people to the significance of the safeguard event that will most likely unfold in less than 10 days’ time.

Best regards
Laurence McDougall


We Steel Believe!

But Homeward Bound!

The title chosen for the 2015 Made in Steel exhibition and conference held in Milan was WE STEEL BELIEVE – a motto and play-on-words expressing the underlying spirit of an event whose sights were set on the future. It most definitely turned out to be a full immersion in the future, a smart sustainable future for the whole steel industry including All Steels Trading and our co-exhibitor sister manufacturing companies: Special Steel Sections and The Steel Ball Company!

What a fantastic, memorable and educational experience All Steels Trading’s team has gained by participating in such a highly innovative international trade fair. As we anticipated exhibiting at this critically acclaimed steel industry show meant being part of an exclusive and unique context of visibility as well as providing the perfect opportunity to develop qualified contacts and to find new worldwide outlets for our extensive range of steel products. No doubt we will return as an exhibitor in 2017 for the seventh edition of Made in Steel in Milan.

In the meantime our exhibition stand seen below is now neatly packed away and making its way safely back home to the UK but its next outing will be fairly soon i.e. in April 2016 when we will be exhibiting at Tube & Wire in Düsseldorf. We are already looking forward to the possibility of meeting you there but of course there’s always the possibility that we might get the chance to see you before then!

 

Three Days Made of Steel!

Made in Steel Milan 20-22 May 2015

The curtain finally went up this morning on Made in Steel 2015, which is the main event in Southern Europe dedicated to the entire iron and steel industry from production, distribution, manufacturing and processing right up to the final application of steel. This distinguished internal trade fair is able to offer not only the presence of key players in the iron and steel industry, which of course includes All Steels Trading and our two manufacturing sister companies but also a rich timetable of conferences with prestigious speakers from the academic world, from national and international institutions and from the business community.

The All Steels Trading team were extremely pleased to attract a really great crowd of visitors to our stand this morning and they are looking forward to welcoming many more equally interested visitors over the next two and a half days of the Made in Steel conference. Please do drop by and visit our exhibition booth if you can. We are located in G06 Pavilion 12.

Here at All Steels Trading we are mindful of the fact that just three exhibition stand winners will be selected and awarded tomorrow tonight, during the gala dinner. The “Best Communication Stand” award will be granted to the exhibition stand boasting the clearest and most effective exhibition communication strategy. The most international stand will be recognised with the “Best International Stand” award while the “Best Friendly Stand” award will be given to the most welcoming stand of the exhibition. All Steels Trading will be delighted to receive any one of the stand exhibition awards on offer tomorrow tonight so fingers crossed here! In the interim you can judge our exhibition booth for yourself – All Steels Trading’s Managing Director aka Laurence McDougall can be seen in the image to the left deep in discussion with several visitors to our trade show stand. 

Eastern Trade Opportunities

AST in The Press (York) published 8 April 2015

EASTERN Europe and Turkey offers a myriad of opportunities for businesses in North Yorkshire looking to trade beyond the main EU markets of Germany, France and Italy according to export experts.

The seventh Export Network event was organised as part of the We are International campaign by the Leeds City Region Local Enterprise Partnership, which covers York, in partnership with international trade specialists Chamber International, UK Trade & Investment (UKTI) Yorkshire, Enterprise Europe Network and MY Export Hub. Delegates at the event, held in Leeds, heard how Eastern European economies are catching up with the rest of the EU and believe that trade with the UK can be a stepping stone to greater prosperity, while Turkey is seeking opportunities to build its own its own blue-chip global businesses.

One of the attendees at the event was Victoria Bowater, International Business Development Executive at Thirsk-based steel specialist All Steels Trading. She said: "About ten per cent of our current turnover is exports but we’re looking to increase this significantly in the years ahead and were interested in what this event had to offer.

"Our current export markets are Ireland, mainland Europe and Scandinavia. We are looking to double our export business during the next two to three years by looking at markets throughout the rest of the world, taking export sales to around £10 million.

“The Export Network event was very useful in making new contacts, which will hopefully lead to our business entering new markets."

The event featured talks from the chief executive of British Romanian Chamber of Commerce, the director of British Polish Chamber of Commerce, and the chairman of the British Chamber of Commerce in Turkey.

Face-to-Face & Building Trust

In the current marketing climate it’s easy to become caught up with the hype over new and innovative methods, like social media, email marketing and content.  However, here at All Steels Trading we take the view that face-to-face meetings are still the most important ingredient for developing strong business relationships over the long term.

Members of All Steels Trading's sales team are currently in Germany exhibiting at Tube 2014 in Düsseldorf.  Please do not hesitate to put our sales department's knowledge about long rolled or niche market steel products to the test if you are attending the Tube 2014 fairground - we have every confidence that you will not be disappointed!

Exhibiting at Tube 2014

It's Sunday night and the All Steels Trading stand is ready to welcome all visitors when the doors to Tube 2014 officially open tomorrow morning.

Our exhibition team will be delighted to see guests shortly now at our stand in Hall 04/B21.  We will be offering customers an extremely wide range of angles, beams, sections and merchant bar products to choose from.  In addition All Steels Trading will also be demonstrating our unique skill in being able to source and supply niche market steel products for customers spread throughout the world.

AST’s Sister Company Enhances its Global Audience!

We would like to congratulate The Steel Ball Company on the launch of their new dynamic multilingual website, which can be seen at the following address: steelballcompany.co.uk.

The new website is available to view in Chinese, English, French, German & Spanish. The Steel Ball Company may well be over 90 years old but its forward thinking Directors appreciate that for businesses wishing to get that competitive advantage, a multilingual website now presents one of the most high impact means of expanding a customer base and securing greater export sales volumes.

The majority of the translation work for the new website was carried out by Lingo24. In 2010 Lingo24 won the HSBC Business Thinking award for Scotland & Northern Ireland the same year that All Steels Trading won the award for the North East of England. So it’s pleasing to report that a chance meeting at the 2010 HSBC final in Hong Kong of two Directors from two very different business genres prompted the start of a mutually beneficial & harmonious business relationship.

Here at AST we have every confidence that The Steel Ball Company's new multilingual website will also attract a large regular global audience and be the envy of its competitors worldwide!

All Steels' New Scania Truck Arrives

A New Scania Truck For AST.

On Friday the 17th May 2013 All Steels Trading Ltd took delivery of a new Scania R500 Topline Griffin truck with a 16 litre V8 engine.

Steve Reay is to be the proud driver of the new AST vehicle and he is really looking forward to his first overnight stay in the truck, which is best described as a mobile 5 star luxury hotel room equipped with a deluxe double bed and kitchen fittings.

 

We think it is fair to say that Steve could even give Heston Blumenthal a run for his money in terms of the culinary delights that he could conjure up in his bespoke truck kitchenette.

The new vehicle should further enhance AST's delivery reliability and ensure that our driver Steve always turns up with a smile on his face too.

So please do keep a look out for Steve in our shiny new truck coming to a Works like yours soon!  

 

Advertised Availability

Dear Customers

In our stock offer of the 29th November 2012 we conveyed a number of factual events that signalled a warning that steel prices would rise.  (A copy of the latter mail is copied below).

In this New Year message we must warn you as a valued customer that changes in world iron ore spot prices are surpassing our previous warnings and increasing at an alarming rate.

As a relatively small trading operation in the UK we can’t provide a full explanation for these changing conditions but key influences are understood to be as follows:

· Iron ore mining was significantly cut back in the latter half of 2012 as demand substantially weakened.

· Numerous new iron ore projects were mothballed as concerns increased with regards to anticipated weak demand and falling prices.

· Stock levels at Chinese ports tumbled by the end of 2012 to a 2 year low as the market expected further price deterioration.

· Some of India’s largest mines were closed down by governing bodies due to corruption related issues.

· Large numbers of Chinese iron ore mines significantly cut back production as steel plants went into a big stock reduction programme.

It would now seem that the supply balance tipped far too low just at a time when buying and production activity in China has reignited thus resulting in a huge iron ore price escalation.

Since the end of Q3 2012 spot iron ore prices have nearly doubled. i.e. CFR Chinese price for iron ore 62% fines (the key ingredient for steel making), has increased from $85p/tonne to $160p/tonne as of last night. In the last 7 days the price has been rising by as much as $5p/tonne per day! As of now we are also seeing World scrap prices quickly increasing to reflect the changing iron ore situation.

The graph below shows iron ore price changes over the last 6 week period:

In the short term this escalation looks set to continue and all our steel suppliers are having to react to this changing situation so we are faced with big increases on replacement stock especially on beams, columns, HEBs, PFCs and angles.

Please therefore be warned that you will see an immediate impact on new prices that we can offer as of today.  Based on current visibility we cannot see this changing in the immediate months ahead. If anything price escalation and tightening availability is simply going to increase.

Naturally we have reflected the changing situation in our advertised prices. Please also note that our selling prices for beams and columns also now reflect the size extra differentials introduced by the UK's domestic producer, which we expect the market place to fully adopt from the start of this new year.

If you have any questions with regards to this message please give us a call and we will try to provide any further clarity.

Best regards from everyone at All Steels Trading Ltd.

Advertised Availability

Dear Customers

For those of you that do not subscribe to the online steel journals we feel that it is important to highlight some of the recent media headlines and price increase announcements made by leading producers:

News article bullet points over the last 7 days:

· Steel scrap shortage is fuelling a revival in long product prices in Europe.

· US scrap prices surge sharply in November 2012; up almost $55pt on the previous month.

· Scrap import prices are rising in East Asia, with suppliers hiking offers and withholding supply.

· One of Europe’s largest producers of flat rolled ‘ILVA’ risks shutdown on Dec 14 due to raw material shortage.  The plant also has on-going legal battles relating to environmental pollution issues, which could force a complete or partial closure of the works. This week Prosecutors obtained a court order to seize all the steel produced in the last four months to partially cover likely funds. To add to Ilva’s woes it is reported this morning that a heavy storm, like a tornado has devastated its Steel Mill in Taranto causing serious damages mainly to port infrastructures as well as causing a fire inside the mill. Damage has also been reported in coke ovens, the Blast Furnace and Converters.

· Peiner Träger GmbH of Salzgitter Group has announced an increase of EUR 100 per tonne on all its European steel section prices.

· Duferdofin-Nucor announced a further $25pt price increase for sections yesterday taking their total increase to $45pt with immediate effect.

· Tata Steel UK has issued a letter to all UK customers announcing a £30pt price increase on all newly produced long and flat rolled products.

· ArcelorMittal has announced a Euro 40pt increase on flat rolled products with similar increases likely to be announced on long products.

· Spanish-based Celsa Group has announced its intention to lift its section price offers by €50p/t with immediate effect. They also warned that similar increases will follow on wire rod and merchant bar.

· The threat of anti-dumping duties still hangs over Turkish hollow sections imports with duties rumoured to be up to a potential 10% premium. · Rebar price hikes of $35pt in the US market are seen to be sticking.

· Bullish mood grows in Europe, N. America according to The Steel Index’s latest 3 month forward survey.

All Steels Trading Ltd feels that it is important to convey such news to give all of our customers fair warning of price advancements, which we will be making on both our stock and forward offers over the weeks ahead.  The next few days will therefore present some of the last opportunities to avoid the price escalation that is clearly going to unfold.

Regards

Laurence

Firms Urged to Race into the Export Market - Yorkshire Post HSBC Breakfast 2011 May 12th

Panellists, Mark Vines (North East Regional Commercial Director HSBC), Mark Berrisford-Smith (Senior Economist HSBC), Bernard Ginns, (Yorkshire Post Business Editor), Laurence McDougall (Director of All Steels Trading) and Andrew Neil (Journalist and Presenter).

Yorkshire business leaders with international ambitions went to Wetherby Racecourse this week to hear straight from the horse’s mouth how to break into overseas markets.

The event, organised by HSBC and hosted by broadcaster Andrew Neil, featured expert advice from economists, bankers and businesses that have tasted success abroad.

Mr Neil told the audience: “Britain is the world’s sixth largest exporter.  We export a larger percentage of our GDP than most other nations, including the United States, but there are many companies that don’t export at all and some of our biggest companies export a lower percentage of their output than their international rivals.  “International trade is particularly important at this time if we are to have a strong recovery.”

Mark Berrisford-Smith, a senior economist with HSBC, said Yorkshire companies should consider exporting to huge emerging economies like Brazil, India and China, which are growing “at the most fantastic rate”.

Other expanding markets include Turkey, Poland, Latin America, South East Asia, parts of Africa and the Persian Gulf, he said.  But companies should not overlook traditional export markets in the heart of the Eurozone, like Germany, he added.

Mark Vines, regional commercial director at HSBC, said: “China to me is the great opportunity.  The middle classes in China are so wealthy now and growing massively and their demand for branded goods, particularly English branded goods, is just immense.”

He said Yorkshire businesses have been through cost-cutting programmes, paid down debt and are now considering international expansion.

Rising commodity prices and fluctuating currency movements might be of concern to those considering international business, but there are ways to mitigate against these, he added.

Laurence McDougall, managing director of Thirsk-based All Steels Trading, told the audience about his international experience.  He imports steel from around the world and sells it domestically.  He said: “When we buy in foreign currency we fix the forward purchase for that currency.”  He plans to move into European markets, incentivised by the low value of the pound and advantageous logistic costs.

On the prospects for the European economy, Mr Berrisford-Smith said Europe’s leaders have to convince investors that they would not let peripheral countries default on sovereign debt.  “Europe does not need to have a debt crisis,” he said, pointing to its comparatively low budget deficit and debt burden.

A bigger potential crisis lies in America, which seems to have no deficit reduction plan, he said.  Companies with ambitions to export should consider looking for partners or joint ventures and try to get legal protection for their intellectual property rights, the audience heard.

Prices Must Rise to restore 'Sensible' Margins: UK Stockist

Steel Business briefing - Tuesday, 09 February 2010

Steel Prices need to rise as producers react to increasing input costs, according to Laurence McDougall, chairman of North East Association of Steel Stockholders (NEAS). If UK stockists are to survive and return to profitability they must not sell below replacement costs, he said to loud applause at the NEASS annual dinner attended by Steel Business Briefing on Friday (5 February).

The current demand is what it is and stockholders need to realise this and restore "sensible margins" in their sales, he continued. Other stockists corroborated this view, suggesting demand remains very weak across many sectors, and will continue to do so, which means "discipline" is vital if cost increases are to be passed on. "Pernicious selling" will only serve to undermine prices and profitability in 2010, on trader said.

The UK market for steel is about 10 million tonnes/year, half imported and half produced domestically, he noted. Stockists handle 50% of the tonnage produced by domestic mills and nearly all the imported tonnage.

NEASS raised 2600 for the charity WaterAid at the dinner in Harrogate.

Weak Pound Should Support UK Manufacturing, Stockists Told

Steel Business Briefing, Wednesday, 25th February 2009

The strength of the dollar and euro against the pound is just one reason to be cheerful regarding the UK's steel market, says John Brierley, outgoing Chairman of the North East Association of Steel Stockholders (NEASS).

This strength, which is deterring imports and making UK exports more attractive, is creating a "very good basis for manufacturing", he says. As managing director, UK & Ireland at carbon and stainless steel plate stockists Brown McFarlane he says his business is certainly seeing new jobs in the plate sector and process engineering and is starting to see some more in infrastructure.

Unlike automotive and white goods, not all UK sectors are suffering under the economic crisis, he adds. Those relating to energy, like new-build powers stations and renewables are most buoyant.

Addressing the NEASS annual dinner attended by Steel Business Briefing, he added that the UK's stockholding sector remains in the black despite dramatic declines in stock value in the second-half of 2008. "The stock write-up [in H1] is better than the subsequent write-down:" The exception, where last year's stock profits could now equal the recent losses, is strip mill products for cars and white goods.

2009 and 2010 will be poor compared to 2008, but the system's underlying strength will see the stockholding and distribution business though, he concludes.

Brierley will be succeeded as chair of NEAS by Laurence McDougall, director at Tomrods Ltd. Brierley's term as President of the National Steel Stockholders Association (NASS) continues until April 2010.

UK Stockist Keen to Know When to Expect Recovery

Steel Business Briefing, Friday, 07 November 2008

The mood was sombre at the 5 November meeting of the UK's National Association of Steel Stockholders and its northeastern division NEASS in Wakefield, with many participants painting a gloomy picture of the outlook of most steel products.

High inventories and a sudden disappearance of demand were among the most depressing factors, as attendees acknowledged the manifestation of the financial crisis on a sector which they had hoped might escape the worst.

"Virtually overnight demand has crashed," one attendee told Steel Business Briefing. "It's not a gradual slowdown as we have witnessed in the past, because of the credit crunch," he added.

With many of the world's biggest steel producers reducing output, the downturn is widespread; the question is, when will the market rebound? "Buying will resume in two months, "said NEASS vice-chairman Laurence McDougall. "In January there could even be a tight supply situation as a result of production cuts. At Tomrods we have got no availability for some of our products," he added.

Others believe the upturn will take longer to appear.  Corus has apparently told one attendee that it will take until mid-end Q2 2009 to remove surplus stock from the market. The message from the producer, he said, was that stockists "won't make money until Q3 or Q4".

UK Stockist Tomrods Makes Another Acquisition

Steel Business Briefing - Tuesday, 27 May 2008

Two UK long products stockholders have joined forces to acquire another stockist based in the West Midlands area.

In the statement sent to Steel Business Briefing Yorkshire-based Tomrods Ltd. says that, together with specialist bright bar stockist and processor Boswell Steels, it has acquired Bradley Steels Ltd, a privately owned general steel stockholding business based in Ettingshall, West Midlands. No value for the deal has been disclosed.

The acquisition takes effect from 1 June 2008, with the former owner Eric Bradley providing a consultancy service to ensure the smooth handover of the business.

Bradley Steels will continue to operate as a major supplier of merchant bar and hollow sections to consumers and stockholders in the West Midlands region. Enlargement of the business is planned though additional warehousing, improved purchasing power and access to group stocks which include medium and heavy sections.

This continues a trend of selective expansion by bar and sections specialist Tomrods, which in 2006 established All Steels Trading Ltd, followed by the 2007 acquisition of Legg Brothers, a Midlands-based re-rolling mill.

UK Stockholder Installs New Processing Equipment

Steel Business Briefing, Tuesday, 15 April 2006

Northern England-based stockholder Tomrods continues to invest in its processing facilities and has just purchased a new shot-blasting and preservation (painting) line to be installed at the companies Thirsk, North Yorkshire site.

The line will apply water-based paints and is being supplied by Dutch shot-blasting specialist Gietart Machinefabriek NV. The equipment, representing a £400,000 (€595,000) investment by Tomrods, will be installed before the end of 2006, managing director John Thompson tells Steel Business Briefing.

The company is one of the UK's largest steel stockholders and distributes over 24,000 tonnes/year of stock lengths and semi-processed steel into a range of market sectors.

A sister company All Steels Trading Ltd which, Tomrods says, buys and sells specialist parcels of steel for sale into both UK and export markets was set up in q1 2006 by Laurence McDougall; who arrived at Tomrods from Caparo as previously reported.

UK Stockist Strengthens Management with New Appointment

Steel Business Briefing Monday, 23 January 2006

UK Stockholder Tomrods Ltd based in Knaresborough, North Yorkshire has appointed a new executive director.  Managing Director John Thompson tells Steel Business Briefing that Laurence McDougall will be joining the company upon completion of his present contract.

McDougall is currently commercial director with Scunthorpe-based Caparo Trading, a company set-up in mid-2004 by Caparo plc to import those merchant bar products not produced by its UK mill Caparo Merchant Bar.  SBB understands that no successor has yet been appointed.

Thompson says that McDougall brings extensive commercial steel industry experience in both home and overseas markets to Tomrods, and that his appointment represents an important step in the company's continuity planning.  Tomrods distributes 24,000 tonnes/year of long and flat products to both UK and export markets.