Energy surcharge up to date again
Energy prices broadly maintained their downward trend in the 2022/23 heating season, with gas prices as high as €25/MWh (Dutch TTF) in May 2023. This meant that the pre-crisis level had already been reached and some producers decided to suspend the energy surcharges. However, some others continued to apply them despite the low energy values, or at least reduced them.
It is clear that energy and therefore also energy surcharges are very volatile, as emotions also play a role in this sector due to stock market trading and the influence of global trade. If a strike is threatened at a large LNG (liquefied natural gas) plant in Australia, the potential impact on the global market is calculated and the European gas price, and therefore the energy surcharge, rises. This happened in late summer/autumn 2023.
For these reasons and due to the start of the 2023/24 heating period, the gas price has risen again to currently €45 - €50/MWh (Dutch TTF).
This will lead to the reinstatement of the suspended energy surcharges and to significant increases in all energy surcharges. However, we will probably not reach the levels of last year, but the energy surcharge will once again play an important role in the stainless steel price calculation.
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Energy surcharge forecasts now available at LZ-prognose.de.
Since September, energy surcharges have become increasingly relevant to the total price. For some products, the energy surcharge already accounts for 30-40% of the total surcharges.
Therefore, we at LZ-prognose.de have decided to include the energy surcharges in our product portfolio so that they can now also be forecast 2 - 3 months in advance for our customers.
What is the outlook for the energy surcharge?
The gas price peak at the end of August due to the shutdown of Nordstream 1 from Russia caused energy surcharges to rise extremely in September. However, the lack of gas from Russia was compensated for in the short term by supplies from Norway. This led to falling gas prices, so that the energy surcharges are expected to fall from November.
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Who currently uses an energy surcharge for stainless steel and how is it charged?
Flat products
Outokumpu (D): without energy surcharge
Aperam (F): separate energy surcharge (for calculation see: https://www.aperam.com/alloys/2022-energy-surcharge/)
Acerinox (E): separate energy surcharge
ATI, Cliffs, NAS (US): included in alloy surcharge
Bars
DEW (D): separate energy surcharge, in our opinion also partly included in alloy surcharge
Outokumpu (D): included in alloy surcharge
Cogne (I): included in alloy surcharge
Ugitech (F): separate energy surcharge, in our opinion also partly included in alloy surcharge
Acerinox (E): included in alloy surcharge
NAS (US): included in alloy surcharge
Hollow steel
MST (D): separate energy surcharge, in our opinion also partly included in alloy surcharge
Tubacex (E): not included in alloy surcharge, no information about separate surcharge.
Information to the best of our knowledge and without guarantee.
Thus, according to our calculations, the following total energy surcharges would result for e.g. hot rolled bars for March 2022:
DEW (D): approx. 170 €/t charged in the alloy surcharge + approx. 130 €/t separately, = approx. 300 €/t total.
Ugitech (F): approx. 120 €/t charged in the alloy surcharge + 147 €/t separately, = approx. 270 €/t total
Cogne (I): 260 €/t charged in the alloy surcharge
Acerinox (E): 197 €/t charged in alloy surcharge
DEW and Cogne differentiate the energy surcharge for the product groups, while Ugitech and Acerinox use a flat energy surcharge.
What is the outlook?
The energy sector is currently experiencing the highest volatility. The pressure on energy prices is likely to remain high due to the expansion of the sanctions against Russia, so that we do not expect a reduction in the energy surcharges for stainless steel for the time being.
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