Friday, October 22, 2021

ArcelorMittal ‘halts’ production at some European plants as energy costs rise

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ArcelorMittal has temporarily “stopped” production at some of its plants at peak times as rising energy costs hit Europe’s largest steel producer.

The company said it had been forced to implement “short and selective production breaks” in some of its electric arc furnaces in Europe that make so-called “long products”, plus basic products that are normally used in the construction sector. .

The company said the “breaks” were “aligned with hourly / daily changes in electricity prices,” adding that they were “in response to high energy prices, which make it very difficult to produce steel at cost. economic “.

It noted that it did not anticipate that the pauses would have a “significant impact” on its production volumes or its ability to meet customer demand.

Matt Watkins, principal analyst at commodities consultancy CRU, said European electric arc furnace operators in particular were exposed to the high cost of electricity and were struggling harder as a result.

ArcelorMittal typically produces around 40 million tonnes of steel in Europe per year, of which around 10 million are affected by construction products.

The news underscores the tensions facing European steelmakers as a combination of high energy costs and supply chain disruptions offset what, until recently, had been one of the strongest years for the industry due to rising prices of raw materials.

While many companies will be protected by long-term contracts and hedges, surges in the spot markets are beginning to be felt.

In Spain, steel producer Sidenor said it had been forced to reduce production by 30 percent between now and the end of the year due to what he called “exorbitant electricity prices”.

In the UK, the government is considering a bailout plan to help the steel industry and other energy-intensive users through the winter, with warnings that factories could close without state support.

Several steelmakers, including British Steel in the UK, have recently introduced surcharges on certain products to soften the impact of higher production costs.

British Steel, which is owned by China’s Jingye Group, said it had been forced to introduce “temporary energy and transportation surcharges on all new orders from October 1.”

Others, including Tata Steel, which operates the giant Port Talbot steel mill in Wales, are considering passing through the price increases, people familiar with the matter say. The company declined to comment on the issue on Thursday.

CRU’s Watkins said the industry had also been hit by the side effects of the global chip shortage, which has hit the auto sector.

A drop in demand from European automakers was starting to affect orders. The sector accounts for approximately 20 percent of European demand for steel.

“Mills have had very long order books up to now and all of a sudden they are not as full as they used to be,” Watkins said.

“That is one of the reasons why we anticipate a drop in steel prices, as we see a slowdown in demand,” he added.

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