Gas rationing may impact steel demand more than supply

Potential rationing of gas in Germany could endanger steel demand more than supply.

German steelmaker ThyssenKrupp's main Duisburg mill is to a degree self-sufficient in terms of gas supply, although the company says a "minimum supply level is indispensable for maintaining our production operations" and that a complete stoppage could lead to output cuts and technical damage.

ThyssenKrupp's Hoesch Hohenlimburg narrow strip mill, which has capacity of about 1.3mn t/yr, could be idled in the event of any gas interruption, sources say. The plant is already running at reduced rates because of slow offtake from the automotive sector, which accounts for about 80pc of its tonnage.

German steelmaker Salzgitter has sought exemption from any rationing of gas, citing its importance in the country's drive for greater energy autarky - the company makes pipes that connect LNG terminals with the national grid and also feeds heat from its production processes into the district heating system.

Europe's largest steelmaker, ArcelorMittal, does not expect any operational disruption from the energy crisis, although it may have to transfer tonnes from German mills to other sites.

"It's a whole different discussion on what happens to customer demand, what happens to their facilities because, clearly, there could be supply chain knock-on effects," ArcelorMittal chief executive Aditya Mittal told analysts on a results call recently.

"And the energy crisis, I think, is more serious from our perspective, just in terms of what happens to end demand, but not as serious in terms of our ability to supply."

Germany is at phase two of a three-stage emergency plan that could lead to gas rationing, given the reduction in supply through the Nord Stream 1 pipeline from Russia. The pipeline is operating at just 20pc of potential capacity.

Mills with the necessary equipment can capture and reuse gas from their coke ovens and blast furnace/basic oxygen furnaces, giving them a baseline of supply.

Some analysts suggest mills could produce slab and roll less coil in the event of gas rationing.

By Colin Richardson

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