28 October 2022 – The LME launches new ferrous futures to increase liquidity on the trading floor. Indian steel export tax so far with no sign of end. And is the European steel industry playing creatively with the green steel numbers again?
- LME launches new ferrous futures to increase liquidity
- No new proposal on Indian steel export tax
- Green steel: playing numbers with hydrogen
LME launches new ferrous futures to increase liquidity
Since the London Metal Exchange (LME) suspended nickel trading in March 2022, the commodity exchange has been struggling with significantly reduced trading activity and related liquidity in certain areas. A massive loss of confidence had built up among many LME traders following the trading suspension, some of whom had suffered significant losses as a result of the LME decision. The first lawsuits against the decision amounted to a mid 9-digit sum in terms of damages.
Nickel chaos not yet forgotten
Recent rumours of efforts by the Tsingshan Group to force its way back to the LME and into nickel trading there had led to further rejection by many traders.
Does LME urgently need more liquidity?
Now the LME appears to be bringing more liquidity back to the trading venue with the announcement of a new Ferrous Futures Initiative. At the centre of this, according to media reports, are the LME Steel Scrap CFR Turkey and the LME Steel Rebar FOB Turkey contracts, which are due to start from 1 November 2022.
Is there a threat of further liquidity outflow?
At the same time, the LME is coming under increasing pressure from suppliers, e.g. in the aluminium sector. Most recently, sources had reported that large aluminium stocks, which had been held outside the official LME warehouses to cover speculative risks, had surprisingly almost doubled the stocks, which had fallen to a historic low. Large aluminium shipments from mining group Glencore and CITI were said to be responsible.
In any case, this is unlikely to help build new confidence and tap fresh liquidity on the commodity exchange.
No new proposal on Indian steel export tax
According to the Indian Finance Ministry, there is no proposal to amend the existing 15% export tax on certain steel and stainless steel products from the responsible ministry of steel.
The export tax on steel products had been introduced by the Indian government to keep steel production in the country. According to current information, the export tax will not be changed before the next budget. Experts believe that especially flat rolled products could still be affected by the export tax after the new budget.
Green steel: playing numbers with hydrogen
It should be well known by now that the European steel industry has a lot of catching up to do in the green transformation. The lack of a legal framework to secure investment is usually blamed for this, but it has not really been actively promoted by manufacturers and associations in recent years. In the case of alternative energy sources such as wind and solar, there is also a lack of political will on the part of politicians and steel manufacturers to reduce regulations and bureaucracy.
Are the producers just playing creative numbers games again?
The steel industry’s number games seem rather amusing when they refer to seemingly large figures such as a need for 165 TWh of alternative energies by 2030 (or 400 TWh by 2050) for the decarbonisation of the blast furnaces. Or assuming only 9 litres of water for 1 litre of hydrogen and leaving out of consideration the entire previous chain of processing and cleaning the water or to desalinate it and the energy required for this. And simply reduces the assumed amount of hydrogen needed per tonne of steel from 50 to 70 kg to less than 30 kg. And in doing so, it forgets to mention at which production step exactly this assumption is made.
Enormous demand for green hydrogen and energy
Nevertheless, steel producers have also realised that their demand for hydrogen and alternative energies will be enormous. And enormous efforts will have to be made by 2030 to achieve this goal. But as long as the EU steel manufacturers invoke legal uncertainties because they are afraid of the entrepreneurial risk, the green transformation will never happen.
- Germany urgently seeks new raw material suppliers
- Prices for stainless steel scrap continue to rise
- New turmoil on the nickel market?
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