Gas rationing could affect steel demand more than supply

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

German steelmaker ThyssenKrupp's main plant in Duisburg is somewhat self-sufficient in terms of gas supplies, though the company says "a minimum level of supply is necessary to sustain our production operations" and that a complete shutdown could lead to production cuts and technical damage.

The ThyssenKrupp Hoesch Hohenlimburg narrow-band mill with a capacity of about 1.3 million tons per year could be shut down in the event of gas supply interruptions, the sources said. The plant is already operating at reduced speed due to slow deliveries from the automotive sector, which accounts for about 80% of its tonnage.

German steelmaker Salzgitter is seeking an exemption from any gas rationing, citing its importance in the country's push for greater energy autarky - the company manufactures pipes that connect LNG terminals to the national grid and feeds heat from its production processes into the district heating system.

Europe's largest steelmaker ArcelorMittal is not expecting any disruption due to the energy crisis, although it may have to shift tons from German plants to other sites.

“It's a completely different discussion about what's happening to consumer demand, what's happening to their facilities, because obviously there could be domino effects in the supply chain,” ArcelorMittal chief executive Aditya Mittal told analysts recently during a phone call about the results.

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

Germany is in the second phase of a three-phase emergency plan that could lead to gas rationing, given the reduction in Nord Stream 1 supplies from Russia. The pipeline operates at only 20 percent of its potential capacity.

Plants with the right equipment can capture and reuse gas from their coke ovens and blast furnaces/basic oxygen furnaces, providing them with a basic level of supply.

Some analysts speculate that mills could produce slabs and coils without coils if gas was rationed.