Gas supply problems paralyze steel market in Europe – MEPS
The price of Dutch futures for natural gas on the European TTF exchange has tripled since the start of the special military operation of the Russian Federation in Ukraine. After today's opening of trading on the London ICE exchange, the September futures price on the Dutch TTF hub exceeded $3,200 per 1,000 cubic meters. m. (+8% compared to yesterday's figure). This is the highest level since the beginning of March, when a historical record was set - $3,898 per 1,000 cubic meters. m (now the cost is 3,236 dollars per 1 thousand cubic meters).
Continued growth in energy prices is expected in the coming months, and inflated gas and electricity prices multiply the cost of steel production. According to Gazprom's forecast, gas prices in Europe this winter may rise above the record $4,000 per 1,000 cubic meters. m.
Russia is one of the world's largest gas exporters, but European countries have taken or plan to introduce measures to limit their dependence on this country for energy needs. The rationing of gas supplies to Europe could limit the amount of steel that plants can produce.
Several European steel producers in the central and eastern parts of the continent have taken advantage of the summer season. They decided to restructure their production facilities to meet current and potential future demand requirements.
Leading steelmaker ArcelorMittal has suspended production at one of its Polish facilities. The blast furnace at US Steel Kosice in Slovakia was also shut down.
Similar steps in Western and Northern Europe appear to be having the desired effect. Talk of further price cuts for September and October is fading. Market participants in Central Europe believe that the values are at or close to the bottom of the current cycle.
With soaring energy prices, it is generally accepted that European factories can no longer cut prices if they want to continue selling at a price above the cost of production.
According to MEPS, several Polish and Czech buyers have reported that regional mills are already asking for higher prices for supplies in the third quarter.
The level of buying activity in the rest of the year is still not determined.
There is a possibility that future production will be disrupted by power restrictions and shortages of spare parts. Consumer spending is likely to be capped by rising household energy bills, which will limit purchases of steel products.
As a result, rising steel prices in Central Europe are unlikely to be supported by increased buying activity. It is expected that the economies of many EU countries will fall into recession, if not in 2022, then by the beginning of next year.