Day: 13 March 2020

Spanish special seamless tube supplier Tubos Reunidos (TR)’s performance deteriorated in 2019, as activity disappointed in main markets, Kallanish notes.

“The uncertainty and volatility of the market remains at the beginning of 2020,” TR says. “The evolution of the slowdown in the economy, the distortions in global value chains as a result of the imposition of tariffs, and the coronavirus outbreak reaffirm the need for Tubos Reunidos to reformulate its business plan.”

US OCTG demand continues its downward trend, with the main operators prioritising a return to investment and financial control versus increasing production. On the other hand, the upstream sector in the remaining regions is much more positive, with the possibility of TR closing larger agreements in the short term, the Spanish company comments.

The recovery in the downstream segment is sluggish due to a longer delay in the awarding of projects. Tubos Reunidos, however, maintains its positive prospects for the sector as well as for the midstream in 2020, the company adds.

TR shipments were at 171,707 tonnes in 2019, down -19% on-year. Of this total, shipments in the fourth quarter represented 42,869t, -10% down on-year. Group revenue amounted to €284.4 million ($320.7m), a decrease by -17% compared to €342.5m in 2018. Of this total, sales of tubes were €270.1m, or -14% less y-o-y.

Sales in North America and the Middle East/Africa decreased by -38% and -23% respectively last year to €94.4m and €17.3m. In Europe (without Spain), on the other hand, sales were €77.1m in the period, or 13% higher compared to 2018. Sales in the Spanish market fell by -3% to €28.5m.

TR’s Ebitda tumbled by -161.4% to negative €11.4m in 2019, while net loss widened to €41.4m from €34.4m in 2018.

ArcelorMittal has called for the EU to introduce a carbon border adjustment (CBA). The new system should be included in the €1 trillion ($1.11 trillion) “Green Deal,” aimed at making the bloc carbon neutral by 2050.

The company believes the CBA “…will help to create the market conditions and protections needed for companies to make investments and transition to carbon neutrality without disruption.”

A CBA would add to non-EU-origin steel imports into the bloc the cost that European producers pay under the Emissions Trading System (ETS). “This would equalise the cost of carbon for every producer to create a fair market and, crucially, encourage investment in lower-emissions steel production,” ArcelorMittal says in a note sent to Kallanish.

The company notes that a CBA could be imposed in different ways, “…as long as it neutralizes the disparities in carbon costs between domestic products and imports, and incentivizes the transition to low-carbon steel production.” The company believes, for example, that it should initially be applied to primary goods, rather than end products like household appliances and everyday tools.

Proceeds from the CBA would then be used by European authorities to invest further into new technologies reducing carbon footprint, further supporting the process, ArcelorMittal concludes.

“There are of course challenges that will need to be overcome,” the steelmaker continues. “For example, some have argued that there is the risk of contravening international trade rules. However, the establishment of a border adjustment is compatible with international trade rules, allowing members to adopt measures necessary for the protection of the environment or relating to the conservation of natural resources providing that such measures do not constitute arbitrary discrimination between countries where the same conditions prevail.”

This will, however, only work if the policies are well-designed and drafted in the right way, according to ArcelorMittal Europe – Flat Products chief executive and Eurofer head Geert Van Poelvoorde.

Steelmakers association Eurofer has welcomed the latest action plan for the circular economy released by European authorities. It nevertheless calls for further incentives aimed at keeping scrap within Europe.

“Over 90% of steel scrap in the EU is collected and we recycle all of the scrap returned to our facilities,” says Eurofer head Axel Eggert. “While recycling is a very effective means for keeping materials in the loop, circularity must strike a balance between ‘recycled content’ and design for ‘end-of-life recyclability’.”

“Both parts need to be assessed per sector, otherwise true circularity will never be achieved,” he continues. “The EU exports millions of tonnes of steel scrap every year, so incentives should be developed to keep circular materials within the EU so as to meet our circular economy and climate objectives.”

The association notes that the carbon embedded in scrap means that using it as a raw material can help reduce emissions from steel production. In recent years numerous European steelmakers have said they will include in their plan to cut their carbon footprint the installation of new electric arc furnaces to partially replace blast furnace-based steelmaking, Kallanish notes.

“As producers of an essential, 100% recyclable and permanent material, steelmakers are eager to see circularity put at the heart of the EU’s policy focus,” Eggert concludes.

Turkish SBQ distributor Akçelik has acquired a bright bar producer in the Cologne area and established a German entity. Akçelik is the biggest distributor of steelmaker Asil Çelik, according to the company’s website.

The shop acquired is Blankstahlwerk Sindorf (BWS), located in the Sindorf commercial zone in Kerpen, west of Cologne, a region with otherwise little steel processing activity. According to Akçelik, BWS operates in the field of peeling rounds of 14-200mm and serves mainly the automotive and machinery manufacturing industries.

The company has existed for some 26 years and during that time has had several owners, Kallanish learns from a local manager. Originally owned by its founders, it temporarily belonged to Dortmunder Blankstahl, which itself is part of Ruhrstahlgruppe that has several SBQ activities.

Some eight years ago, it separated from Dortmunder Blankstahl in a management buy-out, and last year went into insolvency. The acquisition by Akçelik is effective 2 March. This is also the founding date of Akçelik Blankstahl und Service GmbH as given in the trade register, with an address in Düsseldorf. Akçelik’s first investment in Germany is a part of the company’s foreign growth strategy, it says.

Three offers have been submitted to the French government for the Hayange rail mill owned by British Steel, Kallanish learns from union sources.

According to rumours unsubstantiated by the companies, ArcelorMittal, Germany’s Saarstahl and Greybull Capital entity Olympus Steel are in the run to buy the French rail mill. Hayange produces rail for the local national railway system SNCF. According a union source, the future of the company is strictly connected to the EAF-based steelmaking plant of Ascoval that has a sizable contract to supply Hayange with approximately 140,000 tonnes/year of bloom. Olympus Steel acquired Ascoval last year (see Kallanish passim).

Most of British Steel’s assets have been sold to Chinese steelmaker Jingye. The sale to Jingye includes the steelworks at Scunthorpe, mills in Teesside and Skinningrove, shares of FN Steel BV in the Netherlands and the TSP Engineering business based in Cumbria. Hayange, however, was left out of the sale.

Italian rebar producer Valsabbia and section maker Duferdofin are halting production due to the coronavirus outbreak, Kallanish learns from the companies.

This adds to a list of Italian mills that are idling production in northern Italy, some in an unofficial way. Alfa Acciai, the Italian long products supplier headquartered in the Brescia area, has also announced its production will be halted to adhere to the restrictive measures imposed by the local government (see Kallanish passim).

Meanwhile, Italian steelmaker Arvedi and re-roller Marcegaglia issued statements saying production and logistics operations, including shipments and receipt of deliveries, will continue in the coming weeks.

Valsabbia is shutting down production at its Odolo steelworks in Brescia province, the main steelmaking area in the country, as a measure to prevent the spread of the virus within the company. Production stopped on 11 March. The company has not yet communicated a date for resumption.

Duferdofin is also shutting down production at its steelworks in San Zeno Naviglio, also in the Brescia area, starting from 12 March. The company will however continue to deliver material.

Italian trade unions have unanimously requested the stoppage of all industrial production not considered vital at present, to protect workers and help in stopping the spread of the virus in the country. The unions suggested a stoppage until 22 March.

Concern in the US steel industry concerning the coronavirus appears to be growing.

Late Wednesday, US President Donald Trump issued a travel ban for the bulk of Europe against a backdrop of the World Health Organization declaring the coronavirus an official pandemic. 

Several mill and service centre sources tell Kallanish that their companies have instituted internal travel bans, limiting physical exposure to both conferences and customers. 

While the immediate effects on the supply chain have not yet been felt, it’s virtually impossible that the US remains unaffected, sources say. 

“It is feasible that supply chains are disrupted from shutdowns [both] global and domestic,” says a Midwest service centre source. 

A source at one top-tier mill says it is hard to tell exactly how the industry will react to bottlenecks or shortages. 

“I could argue it could be a boon for the domestic steel industry, and I could argue it could disrupt certain parts of the supply chain and be a bust for the domestic steel industry,” he says, noting that imports are likely to be disrupted due to production issues in the exporting countries. 

A Gulf Coast trader predicts that the oilpatch will be heavily affected by bankruptcies as a result of the virus and falling oil prices, leading ultimately to credit shortages. 

“Accelerated devaluation of assets will cause many companies to fall in default of bank covenants,” he says. “That means no access to money. They can’t pay you, you can’t pay me, which means I can’t pay who I owe.”