Day: 18 March 2020

The Covid-19 outbreak is triggering an economic slowdown for which the consequences for Spanish industry remain unclear, the Spanish automotive association, Anfac warns. Nearly 90% of the large companies in the industry have begun implementing temporary lay-offs since 16 March, Kallanish notes. Industry sources are demanding urgent measures from the Spanish government to prevent further economic hardship and mitigate significant layoffs during the crisis facing the country.

The Spanish automotive industry has seen more than 100,000 direct jobs affected, as a result of the temporary lay-offs implemented by Seat, Renault, Nissan, PSA Group and Mercedes production plants in Spain.

“The coronavirus crisis is impacting the automotive sector with the same severity as the other industrial sectors in Spain. There is uncertainty surrounding the scale of collapse in the supply chain, as well as to how the automotive sector will react when the economy began to recover,” analysts say. Sales of vehicles in Spain might drop by more than -70% year-on-year in March, industry sources estimate.

“The automotive sector has closed the vast majority of its production plants. This paralysis has also a direct impact on the manufacturers of parts and components, and indirectly, on the chemical sector, for which 20% of activity relies on the demand from the automotive sector,” market analysts add. According to Anfac, the automotive industry represents 10% of Spain`s GDP.

Mannesmann Stainless Tubes Italia, located in Costa Volpino in Italy, is shutting down production this week, Kallanish learns from the parent group Salzgitter.

Group cfo, Burkhard Becker, announced this at a press conference on the measures that the group is taking to combat coronavirus.  With a production line for cold pilgering and cold drawing, the Costa Volpino mill specialises in tube with smaller outer diameters. Its products are used for instrumentation tubing, heat exchanger piping, boiler tube and tube for umbilical lines.

The Mannesmann business unit ended 2019 with a loss, but the company expects a turnaround this year. Order intake fell to €1.38 billion ($1.52 billion) in 2019, down from €1.46 billion, on shipments that dropped to 546,000 tonnes, from 625,000t in 2018. The pre-tax loss (Ebit) was €27 million. This development was essentially attributable to the notable downturn in demand for precision tubes from both the automotive and manufacturing industries. Moreover, the lack of volumes from the US market in the medium-sized line pipe segment was not fully offset by projects in other markets, Salzgitter says.

In contrast, the stainless steel tube group achieved a notable increase in order intake, and was the only subsegment that kept its shipments steady y-o-y. The group’s expectations of returning to profit in 2020 are partly based on a positive outlook, especially for stainless tube. It remains unclear as to how the Italian, and other potential production cuts will affect that outlook.

Italian EAF-based flats supplier, Arvedi, is set to reduce output during the coming weeks, in a similar move to that taken by many other steelmakers in the country.

Sources in the market confirmed that the company is set to produce only on weekdays, cutting production during weekends, Kallanish notes. The decision has been taken in response to the coronavirus emergency and the consequent shutdown of many automotive sector production lines in Italy and Europe.

Arvedi is located in the north of Italy, the area most affected by the coronavirus outbreak in Europe. Many longs suppliers in the same area have halted production for the time being and ArcelorMittal has also significantly reduced output at the former Ilva plant in Taranto and rolling lines in Liguria (see related articles).

ArcelorMittal Italia is reducing production volumes at its main steelworks in Taranto, Kallanish learns from trade unions at the site.

Steel shop number 1 and blast furnace no. 2 will be idled together this week with the plate mill and strip mill no. 1. The company will implement temporary layoffs for half of the workers for a period of nine weeks, extending its current temporary layoffs (see Kallanish passim).

Work on blast furnace no. 2 to improve safety, already planned before the outbreak of the coronavirus, will be carried out. Of over 8,200 workers at the Taranto site, 3,200 will be working. Production will be reduced gradually from Tuesday 17 March, the source adds. The company is currently producing 8,000 tonnes/day of pig iron. This would mean output of approximately 2 million tonnes/year or -50% less compared to pig iron volumes being produced before the virus.

A request for comment from ArcelorMittal Italia remained unanswered before Kallanish publication deadline.

While the Taranto output will be cut, the rolling lines located in Genova will also be stopped due to the coronavirus emergency, Kallanish learns from unions.

ArcelorMittal Tubular in Europe has issued a statement confirming that all its mills across the continent remain operational, Kallanish notes.

The company said that none of its tube mills will be shut down in France, Poland, the Czech Republic, Romania or Italy. Some delays in shipments and the delivery of raw materials to the sites could occur nonetheless due to lockdowns in many European countries.

ArcelorMittal notes that “… the transport of goods is a key priority for all EU governments.”

The company has taken all the necessary measures to safeguard the health of its workforce and serve customers with a minimum impact, it says.

ArcelorMittal Italia, the largest Italian flat steel producer, has reached agreement with its employee unions to temporarily reduce output at its Taranto site in the south of the country, with around 50% of its workforce set to stay at home in response to stringent government measures to contain the coronavirus outbreak, sources close to the mill told S&P Global Platts.

As a result of the move, only 3,800 workers will remain on site at the facility in Ilva, sources said.

ArcelorMittal Italia declined to comment on the matter Tuesday.

The number 2 blast furnace at Taranto will be temporarily halted this week as well as the facility’s number 1 melting shop, the sources said.

Crude steel production will be around 8,500 mt/day, with only two blast furnaces — numbers 1 and 4 — working, the sources said.

Rolling mill 1 will continue to be shut down, with the facility’s heavy plate mill also set to stop working as of Tuesday, the sources added.

Around 300 people will work from home and those that continue to work in the mill will wear masks as well as having their temperature checked, the sources said. Thousands of protective masks are expected to arrive this week, while the company will implement more deep cleaning of its various departments, the sources said.

According to industry sources, ArcelorMittal’s site in Genoa, in the northwest of Italy, where the company rolls the Taranto coil, will also suspend production.

The northern parts of Italy have been hit worse by the coronavirus outbreak, in particular the districts of Brescia and Bergamo in Lombardy, the country’s industrial heart.

Separately, Tenaris-Dalmine, the largest global seamless tube producer, has temporarily halted its Bergamo output, an industry source told Platts.

The company wasn’t immediately available for comment on the matter.

In addition, longs producer Feralpi has this week also announced the temporary shutdown of its mill in Lonato, according to an official note seen by Platts.

Longs producer Riva shut down its mills based in Brescia last week, along with section producers Duferdofin-Nucor, Alfa Acciai, Ferrosider and Valsabbia.

— Annalisa Villa

German steel suppliers to the automotive sector are facing “existential threats” from production stoppages at European car manufacturers due to the coronavirus pandemic, associations told S&P Global Platts Tuesday.

Martin Kunkel, managing director of the German cold-rolling association FV Kaltwalzwerke, told Platts that cutting working hours will be unavoidable for companies as the automotive industry makes up two thirds of its customers.

German car manufacturer Volkswagen said Tuesday that it would halt all production in Europe for at least two weeks, with most plants to be shut by Friday. The world’s biggest carmaker followed the moves of Fiat Chrysler (FCA) and France’s PSA Group, which said Monday they would temporarily shut down most of their European plants. German carmaker Audi also said it would cease production at its plants.

“The effects of production stoppages at VW, PSA and FCA are going to be dependent on the duration and depth of the measures and the continued development of the [pandemic],” Kunkel said.

“A production stoppage is of course affecting us immediately and massively albeit with a bit of time lag,” he said. “Companies are therefore forced adopt reduced working hours.”

Kunkel called on the German government to support businesses.

“It is important for us that the German government ensures that liquidity is there in case of reductions to demand and in the case of sick employees,” he said.

The head of the German steel and metal processing industry, Christian Vietmeyer, told Platts that although the promised government aid in the form of reduced-hours pay and liquidity support would be positive, companies will be forced to increase debt capital.

“A lot of suppliers are facing existential threats,” Vietmeyer said. “If the government wants to avoid insolvencies because of the coronavirus crisis, then it has to look at financial support which is not disclosed under non-current debt.”

— Laura Varriale

Please find attached EUROFER’s reply of 17 March on the Commission questionnaire on the “Impact of COVID-19” on the industry.

Please note that the content is based on the aggregated responses EUROFER have received from membership.

As the situation is deteriorating everyday, please keep on providing our director for Market Analysis with information: Alessandro Sciamarelli (A.Sciamarelli@eurofer.be). EUROFER will update the situation frequently. In order to respect competition compliance guidelines, please send any information individually.

EUROFER will also prepare a note for the press in case journalists are requesting information.

There is now a Commission task force led by the Commission President. The Commissioner for Internal Markt, Thierry Breton, is also part of that task force. EUROFER and some energy intensive industries will have a call with the Commission’s DG GROW tomorrow at noon to discuss questions relevant for the industry.

Please send (DirectorGeneral@eurofer.be; A.Sciamarelli@eurofer.be) by tomorrow, Thursday 10 am any issue that you believe needs to be clarified with the Commission, for example on free movement of people and goods, … ).

Kind regards, Axel Eggert