The decline in iron and steel production in Europe hit the demand for pellets and raw materials

Lower iron and steel production in the EU led to lower raw material demand in Q4 2022 and early 2023, especially for high quality iron ore and pellets, while coking coal demand was supported by high energy prices until 2022 .and trade. restrictions on Russian coal, according to S&P Global Commodity Insights January 9th.

According to market sources, cutbacks in pig iron or pig iron production at large steel mills in the EU, the UK, the Balkans and Turkey have reduced demand for iron ore pellets and the injection of pulverized coal, or PCI. .

Industry sources said seller demand for coke declined due to increased stocks of blast-furnace coke.

The EU ban on the trading of Russian PCI coal and other coals, which came into force in August 2022, and earlier restrictions have increased the demand for alternative coals to use PCI. The ban could support coke prices early this year, as volumes and quality of Russian PCI and anthracite are hard to replace by other producers. Higher thermal coal and energy prices in 2022 pushed up coking coal prices and reduced some of the coal supply.

Several blast furnaces in Europe have been idle since September 2022, reducing demand for raw materials. Buyers also struggled to justify paying for pellets to maximize pig iron production amid lower steel demand and weaker steel margins. In some cases, pellets have taken the brunt of reduced demand for iron ore, while buyers have said they have switched to using more lump and sinter as a burden, and some have even taken on lower quality pellets at prices and on terms that allow trading.

By November 2022, EU daily pig iron rates had plummeted from higher levels at the start of the year and in 2021, according to the latest data from the World Steel Association. The Brussels-based industry group is expected to release iron and crude steel data for December and all of 2022 at the end of January. EU pig iron production in 2022 could fall by almost 8 million tons compared to 2021.

According to S&P Global estimates, EU pig iron production rose marginally to an average of 169,203 t/d in November from 167,118 t/d in October and just below 202,000 t/d in June.

Lower regional production in the EU contrasts with market talk of a potentially larger production cut in Q4 2022 and possibly beyond, given the full capacity of the various blast furnaces idle in the EU.