EU alloy surcharges July 2022 - another round in the scrap quota adjustment
EU alloy surcharges July 2022 – another round in the scrap quota adjustment

22 June 2022 – The first published alloy surcharges for July 2022 suggest another round in the adjustment of the scrap quota. But has the justifiable maximum been reached in the meantime? Is CO2 reduced steel really CO2 reduced or is this just green washing? New vote on emissions trading and CBAM expected in the EU Parliament. And beware in international money business – when the “arbitrariness” of banks and financial service providers strikes.

EU alloy surcharges July 2022 – turning the scrap quota again

As usual, the EU stainless steel producers publish the alloy surcharges for the following month from the 21st of each month. Yesterday was no exception. This time, the Finnish EAF stainless steel producer Outokumpu made the start.

According to our calculations and in view of the development on the raw material markets, the European alloy surcharges should actually have increased. We had expected that this would not be the case.

What are the raw material prices doing?

The nickel price has hardly moved on average, even though the price for a tonne of nickel on the LME had fallen recently. Ferro-chrome prices have risen by more than 50% compared to the benchmark prices from Q2 (energy costs). Only the steel scrap prices had fallen recently, which, however, would have had only marginal effects with regard to the “original” basis for calculating the alloy surcharges.

With the old calculation basis of the EU stainless steel producers, the alloy surcharges for July 2022 would still be at the level of May 2022, or slightly lower.

So the manufacturers have once again changed the stainless steel scrap rate in the calculation for the alloy surcharges, added a few percentage points and adjusted the prices for the alloy surcharges slightly downwards as a result.

Maximum scrap quota for flat steel now reached?

EAF-based steel and stainless steel production has many advantages, but also some disadvantages for the producers. The biggest disadvantage is that for many higher-quality stainless steel products, for example, 100% scrap cannot simply be thrown into the electric arc furnace. The quality that then comes out of the furnace is just suitable for long products – but not for flat steel such as coil and sheet.

Optimal scrap quota already exceeded?

The “optimal” quota is about 70% scrap and 30% raw materials, such as Direct Reduced Iron (DRI) or Hot Briquetted Iron (HBI). And since the scrap quota of stainless steel producers must now be over 80% to justify the further reduction of alloy surcharges for July 2022, there is unlikely to be much left to extract.

Blue, Green and CO2-reduced steels

Since 2021, “clean” (Blue, Green, CO2 reduced) steels and stainless steels have been sprouting like mushrooms. Where European manufacturers outdo each other in how much they have reduced CO2 emissions in their newly developed “low carb(on)” steels.

This leads to a completely different topic, namely that since 2021 new EU benchmarks for CO2e emissions per tonne of steel or stainless steel apply. And these benchmarks have to be met by manufacturers if they want to benefit from free ETS allowances.

And with the use of DRI/HBI in BF/BOF/EAF you simply shift the CO2 emissions to another company. Then it’s easy to say that you reduce your CO2 emissions in your blue gum steel by 1.5 t/CO2e and suddenly you only emit 0.6 t/CO2e. Then you cash in the free ETS certificates and make the customer pay twice for already subsidised steel.

What a pity. Opportunity for a real reduction of CO2 emissions lost. Because DRI/HBI is nothing new and has been known since the 1980s. Yes, it improves the productivity of steel production. But a real reduction in CO2 emissions is not achieved, especially when it is used in BOF steel production. Green washing in its purest form.

New vote on EU emissions trading and CBAM

Today, Wednesday, the EU Parliament is due to vote again on the European emissions trading scheme and the Carbon Border Tax (CBAM). The last vote failed because the drafts were apparently softened more and more by massive lobby pressure.

Business Tip: Caution in international banking

Let’s assume a company has an eCommerce shop and offers Paypal as a payment service provider, among other things. Business is good and the company has accumulated $50,000 in its Paypal account in a few days and has not yet had time to transfer this to a regular bank account. Now an automatic system strikes at the payment service provider, which considers it unusual that so much money is in this account and summarily blocks the account.

International payment transactions with pitfalls

Surprisingly, this is not an isolated case. Not only with the US payment service provider Paypal. It can also happen at Amazon. Or at Alibaba. When employees or automated systems in international payment transactions think they have discovered an irregularity, accounts are quickly frozen. And then good advice is expensive. Because sometimes such accounts are blocked for months.

Legally, such behaviour by payment service providers and financial institutions/banks may be correct. For the company concerned, however, it is a serious challenge.

Legal recourse? Big banks like to sit this one out

Because companies hardly have any real means of action. Often there is no direct contact person. Appeal procedures are difficult and lengthy. Or communication with the customer is stopped completely. This is rarely a problem for the big banks. They can simply sit it out and five-, six- or seven-digit amounts are only considered relevant there in the masses. Individual companies quickly fall through the cracks. In the end, only lawyers can help.

Hence our tips for international payment transactions:

  • Pay attention to the financial service providers you work with.
  • Spread out transfers of larger sums over several transactions.
  • Regularly transfer money in online accounts abroad to your house bank.
  • Keep an eye on any legal provisions or sanctions that may be in place and could negatively affect a transaction.
  • And ensure that you have a good rating with your financial partners.

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