Thyssenkrupp hints on further consolidation after Tata jv

Thyssenkrupp Steel Europe has hinted that there could be further consolidation following its potential merger with Tata Steel, analyst firm Jefferies said in a note Thursday, suggesting that Thyssenkrupp’s Material Services could be “combined” with Klöckner’s distribution services.

“Interestingly, TKA [Thyssenkrupp] noted additional consolidation post-Tata is possible, further improving the regional market and also admissible under antitrust rules,” the note about Thyssenkrupp’s roadshow hosted by Jefferies said. The analyst firm highlighted that according to Thyssenkrupp, neither the ArcelorMittal-Ilva nor a Thyssenkrupp-Tata Steel tie-up would lead to “immediate” capacity closures.

In addition, Thyssenkrupp’s management has emphasized that any operational measures at Thyssenkrupp are likely to be “less severe” in a merger situation, according to the note.

However, Jefferies said that the Material Services unit, including the metals distribution and Italian-based special steel maker Acciai Speciale Terni, is no longer likely to be a core division. “We believe a combination with KCO [Klöckner] could finally consolidate Euro distribution and is increasingly likely as Tata is a core supplier to KCO,” said Jefferies.

A potential merger of the German industrial firm’s steel arm and Tata Steel’s European business is getting closer to being finalized after Tata reached an agreement over its pension contributions last month. This is now pending to be signed off by the pension regulator. The likely structure will be a 50-50 jv with Thyssenkrupp possibly saving €500 million in synergies as well as seeing benefits from steel pricing.

The financial results of the German steelmaker are likely to be pressured in H2 as raw material prices take around six months to be reflected in the company’s books “and with ~50% of contracts half year or longer, H2 margin expectations were squeezed,” said Jefferies.

Laura Varriale, PLATTS

EUROMETAL COPENHAGEN: EU hopes to enact new anti-dumping legislation by end of 2017

The European Union hopes to have its proposed anti-dumping legislation adopted by the end of 2017, according to Aleksandra Kozlowska, a policy officer for steel at the European Commission.

“We hope to have the new anti-dumping rules in place by the end of the year, following the conclusion of the negotiations between the commission, the European Council and the European Parliament,” Kozlowska told delegates at European steel federation EUROMETAL’s regional meeting in Copenhagen, Denmark, on Thursday June 8

“The new methodology will only apply to new anti-dumping cases,” Kozlowska said.

The EC proposed tougher regulations to combat under-priced steel imports from state-backed or state-owned organisations in November 2016.

The proposed methodology for calculating dumping on imports from countries where there are “significant market distortions” would involve the removal of the distinction between market economy and non-market economy countries, and would “be applied equally to all members of the World Trade Organization (WTO)”, the EC said at the time.

The EC proposal also includes issuing specific country reports for every country with “significant market distortions”.

“We also hope to issue a report on identifying market distortions in China by the end of the year,” Kozlowska said.

The move to change the EC’s anti-dumping calculation methodology came as China, the world’s largest steel-producing nation, asked fellow member nations of the WTO “to honour their WTO obligations and terminate the use of the surrogate methodology on time” after December 11, 2016.

A provision in China’s 2001 accession agreement with the WTO allowed other countries to treat it as a non-market economy, but this provision expired on December 11, 2016.

European imports of key steel products from countries involved in trade cases fell significantly in the first quarter of 2017, EUROMETAL said on May 19.

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EUROMETAL COPENHAGEN: New EU plate capacity may lead to price pressure

New steel plate capacity in France and Italy will increase competition and put pressure on European quarto plate prices, Eugene Sarkits, sales director at Novolipetsk Steel Europe (NLMK), said on Thursday June 8.

Laminoirs des Landes, a 500,000 tpy heavy plate joint venture between Italian steelmaker Beltrame and Spain’s Hierros Anon, will be operational in September 2017. The new mill is in Bayonne, southern France.

Meanwhile, Italy’s troubled steelmaker Ilva is set to return to the plate market in 2017 “with a nominal capacity of 1.40 million tpy,” according to European steel trade federation Eurometal.

“Apparent EU plate consumption is around 10 million tpy, and EU plate capacity is around 16 million tpy so there is a need to cut capacity,” Sarkits told delegates at Eurometal’s regional meeting in Copenhagen, Denmark, on Thursday.

“So, this will be a headache for Dillinger in France, ArcelorMittal in Spain, and NLMK,” Sarkits said.

NLMK operates the 550,000-tpy Dansteel plate mill in Denmark and has further strip and plate facilities in Italy and Belgium.

European domestic heavy plate production was 10.20 million tpy in 2016, having decreased steadily from 12.60 million tpy in 2011, according to Eurometal.

Imports
Imports had a 27.80% share of the EU heavy plate market in 2016, up from 26.20% in 2015 and 20.40% in 2014, Eurometal said.

The increasing market share of imports in the EU plate market led to the European Commission starting an anti-dumping (AD) investigation into imports of heavy plate from China in February 2016.

The EC imposed definitive anti-dumping duties at rates of 65.10-73.70% on heavy steel plate imported from China on February 28, 2017.

Imports of heavy plate into the Europe have fallen by 14% year-on-year to 842,000 tpy in January-April 2017, down from 980,000 tpy in the corresponding period of 2016, according to Eurometal.

Following the imposition of duties, plate imports from China into the EU over the same comparison tumbled to just 2,000 tpy, down from 456,000 tpy in January-April 2016.

“Imports from Ukraine have almost completely replaced the volumes from China – their local market is small so they have to export,” Sarkits said.

Other imports are coming from India, Severstal in Russia, and South Korean steelmaker Posco’s domestic mills and its Indonesian operations, Sarkits added.

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Italy awards Ilva to ArcelorMittal-Marcegaglia combine

The minister of economic development has signed the decree that authorized the special commissioners to sell Ilva, Italy’s largest steel company, to AM Investco Italy, owned 85% by ArcelorMittal and 15% by Marcegaglia, the government stated late Monday.

AM Investco’s victory came after days of protests by trade unions that on Monday struck in Genoa, and on Thursday in Taranto, as the industrial plan foresees a sharp downsizing of the staff. However, the government statement said AM Investco has pledged to improve proposals to employ around 10,000 workers.

The statement said “an exclusive negotiation phase will be held between the special commissioners and the successful tenderer, with the possibility to improve the binding tender”.

In these negotiations the commissioners will aim, among other things, to increase the numbers to be employed, to establish a research center at the Taranto steelworks, and to identify and pursue the most sustainable and efficient technological solutions with the least environmental impact including the introduction of DRI.

According to the official government statement AM has expressed willingness to reduce the time for the realization of environmental investments at Taranto, to assess the economic sustainability of DRI ironmaking, and not to modify its plans in the event of any constraints imposed by anti-trust authorities.

The government’s decision came regardless the fact that over the weekend the rival joint venture Acciai Italia – involving JSW Steel and Delfin (the holding company of businessman Del Vecchio) – increased its bid to around €1.85 billion and, in order to have the unions on their side, added that it would “immediately” hire 9,800 employees. It also extended this offer to 30 September. An extension that could still play an important role in case of withdrawal of AM in case of antitrust problems, sources commented to Platts.

On Monday late afternoon before the decree went out, JSW and Delfin wrote another letter to the government saying that the offer of Acciai Italia was “the only one that would have allowed the closing of the operation and the award of the company in the quickest time” not only as the unions were keen to agree with their terms but also as “for sure they don’t have antitrust problems”. The JV asked also the attorney general for an opinion on antitrust matters.

In the meantime the government also managed to get back from Switzerland the so called “Riva treasury” – the €1.2 billion seized from Ilva’s former owners, the Riva family, which now will be used by Ilva to do the upgrades necessary to meet environmental standards.

Ilva was placed under court administration in 2013 after magistrates seized the assets belonging to the Riva family, amid allegations that toxic emissions were causing high rates of cancer. The government took over administration of the business in 2015 to try to save jobs and clean up the hot end of the integrated steelworks in Taranto. In 2016 the government put Ilva on sale via an international tender. AM Investco and Acciai Italia submitted binding offers to financial advisor Rothschild on March 6, in what became the most heated M&A bid of the year in the steel industry.

Annalisa Villa, Steel Business Briefing