Here is Rystad Energy’s weekly steel and OCTG note from Alistair Ramsay and Marina Bozkurt:

Energy Steel

Steel prices were broadly mixed last week as modest gains in flat-rolled markets were offset by erosion in long products and associated raw materials, including obsolete scrap.

Further weakness in the European markets, regardless of product, is somewhat surprising as energy costs remain significant and more producers are deciding to stop production, such as Dunaferr in Hungary, citing a shortage of coke.

From the demand perspective, flat-rolled business in Europe continues to be impacted by the automotive industry as car sales in the EU have fallen more than 11% during the first eight months, despite rising – if only on a year-on-year rather than month-on-month basis - last month.

One potential boon for EU flat-rolled producers could be Posco’s misfortune, with the lack of import competition from the South Korean major predicted to help tighten the European flat-rolled market.

Rystad understands Posco is not following in the footsteps of European mills in cutting steel production, so will have more slabs to sell.

However, the energy costs required to process cold slab are higher than ever, limiting demand from EU processors or “re-rollers.”

We continue to believe efforts by leading producers to raise prices in Europe will become more successful as the impact of production cuts reduces industry stocks in the short term.

Alistair Ramsay, vice president


The OCTG seamless market in the US remains tight, and prices should stay at least near current levels into next year.

Availability and offers for the rest of 2022 are very limited from domestic manufacturers, and any available 2022 space will likely be at a premium.

Seamless OCTG buyers in the US are still looking to lock up domestic supply and determine what options are available from imports.

Due to the potential curtailment of European operations on the back of high energy prices, OCTG import flows from Europe can be reduced.

Another significant issue is the outcome of the OCTG trade case against Mexico, Argentina, Russia and South Korea.

The hearing at the ITC is scheduled for September 22, and the final ruling is expected at the end of October.

If it is proved that the countries dumped material caused injury to the domestic industry, imports of OCTG can be significantly decreased.

Although the HRC market in the US remains weak due to low demand despite US manufacturers’ attempts to raise HRC prices, ERW OCTG prices are very steady.

Domestic capacities are already fully booked for this year, while Q1 2023 production of alloy OCTG is also nearly booked at most mills.

Low input costs, including HRC and scrap prices, are a big advantage for ERW OCTG mills as there is a big room for ERW OCTG prices to increase and make huge profits.

However, if the market of HRC remains weak, it may cause a slight price decrease in ERW OCTG prices in late Q1 and into Q2 next year.

Expected subsidence in ERW OCTG imports will keep the market tight in Q4 2022/Q1 2023.

Some rolling lines of Posco, the leading HRC supplier in Korea, could be out of action for as long as three months because of massive flooding after a typhoon.

This may hurt ERW OCTG production in South Korea, historically one of the leading ERW OCTG suppliers to the US, and reduce supplies in Q4 this year and Q1 next year.

Supplies of ERW OCTG from South Korea in Q4 this year can also be cut because of the low quota left for this year’s supplies.

Another problem with the ERW OCTG supply chain in Q4 is that companies do not want any imports in Q4 because of a 2.5% tax in Texas on any inventory suppliers have at the end of the year, so companies try to cut inventories to reduce the tax payment.

We assume that decreased import supplies combined with low domestic availability will support the further price growth in the ERW OCTG sector.

Marina Bozkurt, senior analyst