10 May 2022 – The EU Carbon Border Tax CBAM is increasingly turning into a pipe-cracker for EU steelmakers as the European Commission wants to abolish ETS allowances and rejects export rebates as a double subsidy. US consumption is robust. Indian energy crisis continues, steel prices almost double. Global steel demand and prices remain high.
Robust development of US consumption
US consumer spending developed positively in April 2022. Credit and debit card payments increased by 22 per cent and six per cent, respectively, from a year ago. In aggregate, consumer spending outpaced annual inflation by nearly five percentage points. This benefits real economic growth in the United States.
Households had a few extra pennies left over, especially for fun and leisure. Spending on flights and travel increased by 60 per cent in April compared to the previous year, and on event tickets by as much as 140 per cent. The buoyant labour market combined with high pent-up demand for services should continue to support the economy.
Indian steel prices almost double
Indian steel prices have almost doubled in recent months. Analysts also continue to see potential for rising prices, especially for flat steel products.
Looking at the energy price development in India, this is hardly surprising. More than 50% of India’s steel is produced from induction furnaces (IF) or electric arc furnaces (EAF), which consume up to 800 kWh per tonne of steel.
Indian energy prices double within a month
At the same time, India is already suffering from the worst heat in decades in spring. This is not only a burden on people and nature. Prices for coal have almost doubled in some cases from March to April 2022. The price of natural gas in India has increased almost fivefold.
As long as the Indian energy crisis continues, and it has been doing so for months, there is little potential for correction on the steel market there.
Steel prices remain high worldwide
Even if the market has necessarily corrected a little, there can be no talk of a swan song for steel demand and prices at present. HRC prices are holding at a significantly higher level everywhere.
No major changes are expected for stainless steel due to limited availability, especially in Europe and the United States. Nickel stocks on the LME and SHFE remain at historic lows.
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EU: ETS subsidies with CBAM at the end?
European steel producers in particular have pushed for the introduction of the European Carbon Border Tax CBAM to protect their production from imports from outside the EU.
CBAM pipe-drop for steel producers
In retrospect, however, the CBAM project is proving to be more and more of a pipe-drop for the steel producers. At the latest since the EU wants to phase out the hidden subsidies in the form of free ETS certificates, there has been a lot of crying on the part of the manufacturers. This is not the way they had planned it.
Export rebates instead of free ETS certificates?
In response to the EU manufacturers’ demand to introduce export rebates as a replacement for expiring ETS certificates, EC officials from the tax department have once again made it clear that ETS certificates, CBAM and export rebates in combination would not be compliant with WTO regulations. It would also be a red line in the negotiations.
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Disclaimer: Many things here represent our opinion. Others are information from the Internet. We can therefore never claim to be correct or complete. And never base a business decision solely on the news you receive from us.
