Northern EU steel service centers in margin squeeze

Northern European steel service centers are finding themselves in a “sandwich position,” faced with higher coil prices from mills but with limited scope to pass these on to end-customers, sources said Wednesday.

Service center sources said competition is fierce with some offers below current replacement costs, making it difficult to lift prices in discussions with customers.

“Sales prices at service centers are not going up, that is a problem. There are replacement cost issues,” said a German service center source.

A Belgian service center source said that they were having difficulties moving prices up due to some competitors offering as low as Eur555/mt ($643/mt) ex-warehouse for hot-rolled coil to end-customers.

With current prices of around Eur565/mt ex-works Ruhr for HRC, no attractive import offers as an alternative source of material and northern European mills now starting to push for Eur575-580/mt ex-works for Q4, the stockholding and distribution sector is already struggling to maintain a margin if they do not have older material on stock.

“It’s brutal competition resulting from a surplus of service centers,” said a German mill source. “There are always some big industrial customers that beat prices down in negotiations and there is always one service center that says, ‘OK. There’s no margin for us but better than no business at all,'” the mill source added.

The latest data from the German stockholder association BDS showed that inventories of flat steel increased in June for the first time since March, growing 2.5% to 1.47 million mt from May. Sources said that the coming weeks should show whether some service centers will continue to drop selling prices.

Demand is expected to pick up with the market returning from holidays.

Laura Varriale, PLATTS

German stockholder Eisen-Fendt invests in new workspace

Southern German steel stockholder Eisen-Fendt is reportedly expanding its facilities at its headquarters in Marktoberdorf.

The company is expanding storage space by 7,300 square metres, and is investing €10.8 million ($12.5m) to that end,Kallanish learns. A new workshop for steel products storage will be equipped with a high-bay warehouse on space of 930m², and with a height of 20 metres. It will be used for storing items of bright bar and speciality steels of six metres in length. Four more workshops are projected to store sheet, beams and speciality sections, and install a sawing centre.

The expansion is said to be adding 10 jobs in addition to 134 existing ones. Eisen-Fendt has a customer supply radius of 130 km, and specialises in rebar products, which will get more space once other products are moved to the new halls.

The company’s management is maintaining a low profile about the investment, which was reported only locally by a business portal in Swabia.

Klöckner adds new warehouse in Landsberg

After approximately one year of construction, Klöckner & Co has opened a new warehouse at its location in Landsberg in eastern Germany, Kallanish learns.

The distribution company spent €4.5 million ($5.1m) on a new workspace of 4,500 square metres in area plus an external storage facility of 3,000m², along with machinery and cranes. The expansion makes Landsberg the largest location in Klöckner’s Region Ost, which also includes sites in Zwickau and Kaufungen. It enables Landsberg to provide the complete product range for the region and adds an inventory volume of 3,000 tonnes.

Among the new features are a separation device and a foiling machine for formats of 2,000×4,000mm, which makes the region independent from services from other sites. Along with the opening of the new facility, the Landsberg site also celebrated its 25th anniversary.

AD duties on Russian CRC a Baltic challenge: Severstal

Finding alternative supplies of cold-rolled coil since the EU’s 2016 imposition of prohibitive antidumping duties on Russian imports has proven very challenging for buyers in the small-market Baltic states, Severstal said Wednesday.

The Baltic market is too small for large producers in Europe, and as a result buyers there are last in the pecking order and have to pay top prices to secure their requirements, the Russian producer told S&P Global Platts. At the same time, imports from Asia are not feasible as volumes from there need to be large in size while the Baltic market generally books small batches.

Despite the AD duties, Severstal continues processing CRC into sheets at its service center in Riga, Latvia, it said. To continue deliveries to customers in the Baltic states, Poland, Finland, the Czech Republic and Slovakia the mill is buying Indian feedstock, which is not subject to a duty, it said.

Russian CRC has practically disappeared from the wider European market as a result of the EU’s 18.7%-36.1% AD duties. This left a vacuum, quickly filled by domestic EU producers and imports from other markets, Severstal noted.

Since the AD duties were imposed CRC prices in Northern Europe have increased on average to Eur630/mt from Eur460/mt in 2016, Severstal estimated.

The Platts CRC assessment for Northern Europe moved to Eur643/mt ex-works Ruhr currently from Eur400/mt in early 2016, before duties were announced.

In Northern Europe, formerly a captive market for Severstal, half the Russian CRC was replaced by EU mills, mostly German, Belgian and Slovakian. The remainder was filled by imports from India, Ukraine, Serbia and South Korea.

According to official EU trade statistics, the average monthly volume of rolled coil imported from India this year is 75,000 mt, up 56% from 2016; from Ukraine, up 52% to 29,000 mt; from Brazil, up 76% to 30,000 mt, and from South Korea, up 4.4% to 47,000 mt.

Wojtek Laskowski, PLATTS

thyssenkrupp Schulte expands Frankfurt facility

thyssenkrupp Schulte is strengthening its sales and logistics site in Frankfurt for carbon steel, stainless steel as well as nonferrous metals. It aims to expand its reach beyond the region, Kallanish learns from the company, which is a distribution arm of the thyssenkrupp Materials Services division.

Among other things the company is investing in the expansion of the high-bay warehouse and processing equipment at the site, the company says. “The expansion of our Frankfurt site is an important milestone,” says Ilse Henne, ceo of thyssenkrupp Schulte. “Our core competencies include the development of tailored material and supply chain solutions which we deliver reliably,” she emphasises. The Osthafen site offers the ideal conditions for these services.

The city of Frankfurt am Main is aiming to expand and further improve the good conditions for companies in the Osthafen (East Port) district. With the Council’s adoption of the ‘Osthafen development 2050+’ plan in 2013, the city resolved to secure the area as a commercial site up to 2050. “We are pleased that we can now offer reliable perspectives to a further company,” a councillor, Markus Frank, comments.

The tk branch in the Frankfurt Osthafen district covers a total area of 28,000 square metres, of which 15,000m² is used as storage space. Around 65 employees currently work for tk Schulte in Frankfurt.

Bountiful tonnage left in EU steel strip quota

Less than 100,000t of the EU’s preliminary hot-rolled sheet and strip quota has been used so far, according to European Commission data.

The quota, in place from 19 July this year until 3 February 2019, is set at 4.269mn t, and 4.171mn t was left as of 8 August. There was a “blocking period” between 19 July and 1 August, where no allocation was made, to allow EU member states to implement the measures.

The allocation process typically takes two working days after the claims are submitted, according to UK government tax department HMRC. The quotas are allocated in claim date order.

There is another 17,527t waiting to be allocated, according to the commission, meaning around 4.153mn t is still available to be imported tariff free before February. Anything above the quota incurs a 25pc tariff.

The EU imported an average of 7.3873mn t/yr of hot-rolled wide strip from third countries over 2015-17, according to Eurostat data. This excludes the 1,090t imported from Iceland, Norway and Lichtenstein over the period, as they are exempt from the tariffs.

After talk of an initial flurry of import activity when the safeguard was announced, activity has eased, partly because of worries over how full the quota might be and how it will be administered.

There are also discussions that some shipments are being delayed as customs authorities throughout Europe get used to the measures.

Turkish and north African material has lately been sold at aggressive pricing into Italy and Greece. But import appetite is generally low, particularly into the Benelux region, with a large portion of the market away for summer holidays.

Uncertainty about future direction is also crimping import buying, with many market participants questioning whether steel mills will get their targeted increases for the fourth quarter.

Some buyers are trying to spin a bearish narrative, citing delayed automotive production and quiet activity. But import penetration is fairly low and fundamentals look solid enough, with consumer activity in steel consuming sectors to outstrip EU GDP growth this year and next.

EEU launches flat steel import investigation

The Eurasian Economic Union (EEU) has initiated on 7 August a safeguard investigation into imports of hot, cold and coated flat rolled carbon and alloyed steel products. This follows a complaint from Russian steelmakers MMK, NLMK and Severstal, according to the notice published by the EEU on 7 August, monitored by Kallanish.

The producers cited increasing volumes of import of flat products into the EEU amid ongoing global overcapacity and increased protectionism in the US, EU and Turkey in the last three years. They say the latest safeguarding 25% import duties implemented by the US, preliminary protective measure implemented by the EU and the ongoing investigation in Turkey pose a significant risk factor. This may contribute to further re-distribution of export volumes globally and in the EEU markets and have a negative effect on Russian producers.

The EEU notice says import volumes of hot rolled flat products to the union from Ukraine, Austria and Germany could double as a result of redirected shipments from the US and EU. They could increase by a factor of 2.5 as a result of redirected shipments from Turkey. Potential increases in cold rolled flat products’ imports from these countries could reach 88,5%, 294.9% and 73.3%, respectively. China, South Korea and Ukraine together could increase their supplies of coated steel by 88.2%, 285.9% and 33.1% respectively, as a result of redirected exports from the US, EU and Turkey.

Over 2015-2017, import volumes of hot rolled steel products have already increased by 25.9%, having increased by 45.8% in 2017. Consumption of these increased by only 7.9% in the 2015-2017 period, and by 13.7% in 2017 on-year. Cold rolled steel products import volumes have risen by 38.4% in the same period, the producers say.

Meanwhile, the price difference between imported and domestically-produced steel has fallen by 33%. The cost of production meanwhile has increased by 20.1%, although prices have only increased by 13.8%, thus affecting Russian producers’ profitability.

Hoberg & Driesch expands in Düsseldorf, Cologne

Hoberg & Driesch, a leading German pipe distributor, reports good progress with the expansion of its site in the Rath district of Düsseldorf.

The ground-breaking for the expansion of the warehouse at its headquarters and the installation of a two-story high-bay shelf took place in June. The company is in the process of merging four sites at its headquarters by 2020; the other sites are in the Düsseldorf districts of Heerdt and Reisholz, and in Voerde.

Total storage space will be expanded by 7,000 square metres to 43,000 m², and capacity will eventually reach 46,000 tonnes, half of which will be in the high-bay facility. The new facilities are planned to be completed in summer next year, Kallanish understands. Last week the company completed ground works in record time, with 15,000 m² of soil moved in four weeks and 150t of rebar laid.

With its second big expansion after 2014, Hoberg & Driesch underlines its confidence in the German pipe market and its ambition to stabilise its market leader position. Only recently, it acquired RSC Röhrencenter in Wesseling near Cologne. RSC specialises in the processing of precision pipe, mainly for the automotive industry.

voestalpine launches expanded production for blanks

Additional production capacities for laser welded blanks manufactured at voestalpine’s Linz site are now operative, the company says.

Thanks to “… an excellent order situation”, the company decided to invest €16 million ($18m) in further expansion that has been recently completed. In a 32,000 square metre production area, it will now be possible to produce up to 30 million blanks a year on 14 welding and three punching lines, the company says. Annual revenue is expected to increase from the previous figure of €150 million to €200m, Kallanish notes.

The start of the new facilities marks the 20th anniversary of blanks production in Linz. The order from a German premium automobile manufacturer for the production of laser-welded inner door panels was the start of blank production in Linz 20 years ago. Since then, almost 190 million blanks have left the plants of Automotive Components Linz—formerly voestalpine Europlatinen GmbH, the company says.

Important milestones were the installation of the world’s fastest laser-welding system in 2015 and the construction of a second plant in 2016. voestalpine claims that this has made Linz the leading production site for laser-welded automotive blanks.

The steelmaker commenced production of the first hot-forming blanks using so-called phs technology in 2006. This allowed voestalpine to set completely new standards in terms of weight reduction, corrosion protection, and crash performance for high-strength body parts, the company maintains.