Year: 2018

Sanjeev Gupta-led GFG Alliance has submitted a bid to acquire UK-based trading firm Stemcor, Financial Times reports. The bid included a range of potential valuations, with the lowest just shy of Stemcor’s net asset value of $150 million, the paper says based on comments from unnamed sources close to the situation.

Stemcor says it is unable to comment on a specific bid by any group. However, it tells Kallanish: “On the strength of consistently profitable results, a term debt free balance sheet and established access to commodity trade finance, Stemcor is evaluating options around the ideal future ownership structure for the Group. Stemcor has appointed advisors to assist with this process and has been approached by a number of interested parties.”

GFG Alliance, whose flagship company is $15 billion annual turnover Liberty House Group, did not respond to requests for comment.

Liberty has been on a steel asset spending spree in recent years, with the most high-profile transaction so far being its purchase in October of ArcelorMittal’s Ostrava, Galati, Skopje and Piombino plants.

Earlier this month it signed a binding agreement to purchase all of the outstanding stock in US steelmaker Keystone Consolidated Industries from Contran Corporation. It also launched a plan that could see a new 10 million tonne/year steelworks be built next to its existing steelworks in South Australia’s Whyalla.

Stemcor underwent a major restructuring in 2015, finally returning to profit in 2017. Sales volumes of steel and raw materials fell by -15% year-on-year last year to 3.7 million tonnes. Revenue nevertheless increased 8% to $2.11 billion, and the firm turned to an adjusted group profit before tax of $19 million versus a loss of $3.2m in 2016.

Russia exported 38.4 million tonnes of ferrous products under the HS code heading 72 in January-October, 11.4% up on-year and 29.8% up in monetary value at $119.5 billion, Kallanish understands.

October exports of 3.8mt were -2.4% down on September, having fallen in value -2.3%  to $1.9 billion, Russian federal customs data shows.

January-October exports of semi-finished steel products have risen by 12.1% on-year to 13.15mt, gaining 39% in value, which reached $6.7 billion. October saw 1.9% increase in semis export volumes to 1.25mt, but their value has slipped -1.5% on-month $614.9m.

Exports of flat products in the first ten months of 2018 fell -4.9% on-year to 6.9mt, but rose 11.8% in value to $4.2 billion, while in October they have risen 4% on-month to 729,000t having gained 2.5% in total sales value of $433.2m.

Ten-month pig iron exports increased most once again, by 28.9% on-year to 4.63mt, rising 42.3% in value to $1.73 billion. But October exports have more than halved, having fallen -50.6% on September volumes to 338,200t, also losing -50.8% in value, at $132.6m.

Exports of ferroalloys have increased, but iron ore and coke exports continued to fall in January-October. Exports of ferroalloys have increased by 7.9% on-year to 666,600t, rising 3.3% in value to $1.12 billion, having risen in October by 34.4% on-month to 76,100t and $131.9mn, 42.1% in value.

Meanwhile, iron ore exports have fallen in the 10-month period -13.3% on-year to 15.2mt, having lost -6% in value totalling $1.22 billion. October saw iron ore exports rising 2.8% on-month to 1.92mt, their value remaining broadly unchanged on-month at $146.8m. Coke exports have slipped -9.6% on-year to 2.27mt, but gained 12.6% in value at $568.2m with October exports rising 14.4% on-month to 250,600t gaining 6.5% in value that totalled $56.9m.

Imports of ferrous products into Russia in January-October have increased also by 10.1% on-year to 6.2mt, gaining 12.8% in value that totalled $4.55m. But October total imports have slipped -6.6% to 521,600t, but gained 2.9% in value at $415.6m.

There has been increasing speculation in recent weeks that a decision on the provisional safeguard measures for 23 steel product imports into the European Union was imminent. Market chatter has included suggestions that the new definitive safeguards would be quarterly, that they would not include flats at all, or that they would be country-specific.

European steel association Eurofer said recently that it is advocating for country-specific safeguards. “We are promoting the idea to consider including a national quota with the EU Commission,” said Karl Tachelet, director of international affairs at Eurofer.

Currently, the provisional EU measures come in the form of a “global” quota, which is allocated on a first-come, first-serve basis — irrespective of the imported steel’s origin.

Exports from Russia and Turkey into the EU increased by 59% year on year after the US imposed tariffs and Turkey’s domestic steel market slumped, deflecting steel sales into the European open market.

The official decision on the fate of the quota system by the European Commission is now expected to come after the Christmas holidays, sources told S&P Global Platts this week.

In the meantime some quotas are running at critical levels. The situation in Wire Rod is the most extreme, with just 0.043 million mt remaining of the initial quota amount of 1.058 million mt as of December 12. This reduces further to 0.039 million mt when material pending allocation is included.

For the other main long steel product, rebar, just 0.091 million mt can still be imported into the European Union from the initial quota amount of 0.715 million mt. The current rate of importation, 4,900 mt/day in November on average, plus material pending allocation of 19,224 mt suggests that the safeguard quota could potentially be oversubscribed already by approximately 105,000 tons.

As of December 12, including material pending allocation, the wire rod quota allowance is at a critical 3.8% and rebar is about to achieve critical status with a balance of just 10% remaining.

After quota balances drop below 10%, it is deemed to be critical and steel importers are then obliged to deposit with customs authorities a 25% bank guarantee while their material is cleared and allocated.

For flat products, however, it is looking increasingly likely that most of the safeguard quotas will not be filled. The quota for hot-dip galvanized coil is running the closest to critical in the flat product category, but only if imports continue at their current rate.

As of December 12, for HDG, 0.742 million mt can still be imported into the EU from the initial quota amount of 2.11 million mt.

The current rate of importation, 11,300 mt/day in the last month on average, plus material pending allocation of 3,200 mt, suggests that the safeguard quota might come within 140,000 tons of being filled by the February 3, 2019 deadline of the current safeguard system.

Substantial increases in the rate of import for both hot-rolled coil and cold-rolled coil would be needed to fill the quotas on these products, which is now looking unlikely.

For HRC, 1.843 million mt remains available for import out of an initial quota of 4.269 million mt with imports clearing customs at a rate of 24,150 mt per day on average. This would need to increase by 44% or 10,600 tons per day on average to meet the remaining balance.

For CRC, 0.716 million mt remains available for import out of an initial quota of 2.115 million mt with imports clearing customs at a rate of 6,650 mt per day on average, which would need to double to meet the remaining balance.

In reality, importers will become increasingly cautious as any critical available balances reduce over the coming 53 days with any potential breach of quota seeing the offending material placed into a bonded warehouse on an un-cleared basis pending either importation under a new definitive safeguard quota, or customs clearance outside quota and payment of a 25% levy.

The provisional safeguards were put in place on July 19 to avoid the re-direction of steel import flows as a result of the 25% US Section 232 tariff on steel imports.

— Len Griffin

Conti 7, an Antwerp-based shipping company with heavy involvement in steel, is considering the building of a second warehouse in Colombia, about which it will decide during January. It first revealed plans of establishing a foothold in Colombia to Kallanish two years ago, and completed the building of the first warehouse there in summer 2018.

In the meantime, it established a new warehousing company, Antwerp Railhouse, pegged to begin operations in 2019. Its partners in this are logistics companies Van Dyck and Zuednatie, which both also specialise in break bulk and materials, mainly steel. Antwerp Railhouse covers a water-connected site of 33,000m² with covered rail access. One of two warehouses is dedicated to handling steel plate for one major client.

Conti 7 is a family-owned enterprise founded in 1923, and operating out of three offices globally in Antwerp (headquarters), London and Hong Kong with a staff of over 50 employees. It has a focus on the dry bulk segment, servicing steel mills, raw material producers, agricultural and other commodity traders, or industrial end-users. It handles about 3 million tonnes/year of steel.

On average it operates a fleet of 25 to 35 ships chartered and owned at any time. For specific trades the company has teamed up with partners, and developed joint ventures with GMT Hong Kong, Mitsui OSK Lines, and others.

With more than seven weeks to go before the expiration of the European steel safeguards, domestic markets are more divided than ever, particularly regarding wire rod, for which only 4% of the quota remains.

The allocated cleared balance for rod has not increased since December 7, however the rod backlog balance pending clearance increased with 42,401 mt remaining under the quota out of roughly 1.06 million mt initially. The quota was set as an average of the last three years of import volume.

Eunirpa, the European association of rod processors, is calling for an increase in the actual quota to what they are calling “a realistic value of the 2018 imports” in combination with a global trade arrangement. Meanwhile, EU producers said there is enough domestic rod production and the safeguards were just a way to level the playing field.

“We estimate the total import in 2018 at around 2.6 million tons. With the absence of China [AD procedure in place since 2008] the offerings of wire rod from outside the EU are still very limited coming from a small number of interested countries,” Kris Van Ginderdeuren, president of Eunirpa, told S&P Global Platts.

“We can also conclude that there is absolutely no redirection of volumes previously imported into the US towards the EU. Countries like Mexico, Japan, Canada or Brazil did not show any interest to export to Europe.

“It is unacceptable to Eunirpa if the EU will make life difficult for the entire population of EU fabricators. It will simply kill their business while giving integrated companies an extra opportunity for further concentration, which is bad for the EU market after all.”

The Eunirpa chief said the EU has already seen rapidly growing imports of rod end products such as galvanized wire, welded fence wire and wire rope.

However, some major EU rod producers have said there is an issue of oversupply in Europe, including a producer in Greece who said demand there has fallen dramatically because of the economic situation. “We have two plants in Athens and Vollos, but we stopped production at the Athens plant in 2012 with a 400,000 mt/year capacity because of lack of demand,” the producer stated. “The statement that there is a shortage in Europe is false. There is wire rod available but not at the cheap import price levels.”

According to Eurofer, in the EU 28 last year 21.2 million mt of wire rod were produced. In 2016 the total was about 20.5 million mt and 10 years ago rod production totaled about 22.9 million mt. Last year European rod imports from third countries totaled around 2 million mt, double the 2013 total.

The safeguards were put in place in July to avoid the re-direction of steel import flows as a result of the 25% US Section 232 tariff. Market chatter lately suggests the official decision on the fate of the EU quota system will not come until after the Christmas holidays.

Eunirpa was founded in 2016 to give a voice to large rod transformer issues, particularly after large independent rod producers went bankrupt and moved downstream, transforming their own internal rod production.

Annalisa Villa, Erica Sesay and Len Griffin

A delay in the final decision over the permanent safeguard measures for the import of steel products into Europe is triggering much speculation in the market. This happens as the expiry date for the provisional measures in place is approaching, Kallanish learns from sources.

This week Aditya Mittal said during a public event in Paris that the current provisional measures need to be confirmed and improved. As an example of this, he suggested the calculation of quarterly quotas to avoid the risk of seeing imports concentrating in a specific part of the year. European steelmakers’ association Eurofer has often voiced a request to make the quotas country-based.

Suggestions such as these are being considered by the European Commission and sources with knowledge of the situation say that it is likely the requests for country-based and quarterly quotas will be accepted.

It is possible that the EC will differentiate between particular product categories. “We have heard that HRC could be excluded from the country-based rule, to secure that the more basic products are not impacted by further restrictions,” a source comments. “Also, quarterly limits could work only if there is a way to roll over some of the unused volumes.”

A decision on this matter, with the expectation that the safeguard measures would be confirmed for a period of three years, was earlier slated to be made before the end of 2018. As the year comes to a close, some believe that negotiations are still ongoing. “The debate in the European Commission is still tense, but the issue is definitely important and it is very unlikely that the measures will not be confirmed,” a trader comments.

A source at a service centre notes that country-based quotas could create problems related to those countries subject to antidumping measures. “We have heard the volumes of the countries under anti-dumping measures could be grouped into a general section, but this could well make these tonnages impossible to use for importers,” the source comments. “We believe the current measures should not be made more complicated than they already are, maybe we could understand imposing a maximum limit for specific countries for each product in order to secure fair competition in the market.”

A number of sources also confirm that if discussions within the European Commission remain protracted, then the current system could remain in place until a new one is finalised.

ArcelorMittal’s asset sale to Liberty House was on track and will be finalized in the first half of 2019, ArcelorMittal Europe CEO Aditya Mittal told S&P Global Platts Tuesday at a media day event in Paris.

“There is no delay,” Mittal said. “As far as I am concerned, the transaction is on track.”

Sources had said the sale of steelmaking and rolling assets to Liberty would be delayed into next year. The European Commission is also said to be skeptical about the continuity of the operations being purchased by Liberty.

Speaking in front of journalists, Mittal said: “I do believe Liberty has a long-term vision in steel. [Liberty CEO] Sanjeev Gupta has been a long-term steel trader,” he said.

“Liberty made an offer for all assets divesting, which was important for the EU as it is creating a stronger competitor,” Mittal said, adding that ArcelorMittal would disclose the sale price and how the transaction was being structured once it was completed.

The assets sale is part of the remedy package imposed by the EU for ArcelorMittal for being able to take over Italy’s Ilva.

On November 2, Liberty struck a conditional agreement to buy ArcelorMittal’s Flemalle and Tilleur Liege and Dudelange facilities. Liberty and ArcelorMittal also reached a conditional agreement to acquire major integrated works at Galati in Romania and Ostrava in the Czech Republic, along with mills at Skopje in Macedonia and Piombino in Italy in October.

ArcelorMittal Italy started Ilva’s plate mill in November and is planning to produce 400,000 mt of plate next year, running the mill at 40% capacity, Matthieu Jehl, the CEO of ArcelorMittal (AM) Italy, told S&P Global Platts at the AM Europe Media day in Paris Tuesday.

Part of the plate production will be used for tubemaking, said Jehl. The new owner of Ilva also restarted the hot-rolling mill No. 1 last month and plans to produce 6 million mt of crude steel per year from 2019 using its own slab, material from other AM sites or external suppliers. This will be procured on a quarterly basis.

By 2024, finished steel shipments are planned to increase to 9.5 million mt.

Jehl said that Ilva would primarily focus on the Italian sales market, which he described as “one of the most competitive markets in Europe.”

On the sidelines of the event, Jehl told Platts that selling outside Italy would be subject to other markets’ needs. When asked if Ilva would also target non-European markets such as the Turkish market to which Ilva had previously supplied HRC, he said that would be possible as well.

AM Italy is currently “catching up on the standard of maintenance” of other AM sites, he added, saying “Today’s performances [of Ilva] show a considerable gap to ArcelorMittal,” while noting that the AM Italy mill has the potential to improve its results quickly.

“Ilva’s presence on the Italian market has clearly reduced over last years…we need to restore our reputation,” said Jehl.

Laura Varriale

The European Commission has ‘stopped the clock’ on its in-depth probe into the proposed merger between Tata Steel Europe and ThyssenKrupp Steel.

“This procedure in merger investigations is activated if the parties fail to provide, in a timely fashion, an important piece of information that the Commission has requested from them,” it says, in a note explaining its decision sent to Kallanish upon request. Once the missing information is supplied by the parties, the clock is re-started and the deadline for the Commission’s decision is then adjusted accordingly.

The stalling of the procedure occurred on 30 November, according to further information provided by thyssenkrupp AG. The company notes that there were “… further inquiries” to the two companies. This leaves it somewhat unclear however if original questions were not answered properly, or if the process is being prolonged because of additional questions from the EC. Neither side revealed what kind of information it is that has been lacking.

thyssenkrupp expects “… that the required papers will be compiled and sent to Brussels within a matter of days, so that the procedure is restarted as quickly as possible.” The previous deadline for the process was set for 19 March 2019.