Day: 20 March 2020

As the spread of the coronavirus has accelerated, Toyota has decided to suspend production in Turkey at the end of this month, S&P Global Platts learned Wednesday.

“Within the scope of Turkish Health Ministry’s advice, to protect our workers’ health, we decided to suspend production at our plant in Sakarya for two weeks from March 21 till April 5,” the company said in a statement.

Toyota Turkey is one of Toyota’s largest automotive plants in Europe with a production capacity of 280,000 units/year.

Due to interruptions in production facilities abroad, another large Turkish automotive producer, Ford Otosan, also suspended production at its 455,000 units/year plant in Kocaeli from March 30 till April 4, as Platts has reported.

After falling to the lowest level of the last 16 years in 2019, the Turkish Automotive Manufacturers’ Association was expecting 2020 to be a normalization year.

However, the coronavirus outbreak could harm these expectations, if the outbreak is not brought under control soon.

— Cenk Can

European steel service center stockpiling of coils could lead to market instability amid market uncertainty, sources told S&P Global Platts Wednesday.

“The market is quieter with each passing day as companies are shutting down voluntarily meaning there is less turnover and Belgian companies are fearful of a forced lockdown,” A Benelux-based service center source said. “This will have an impact on subcontracting companies and the economy is likely in a recession scenario now. The coils market however is stable with imports only being offered when the currency rates move to certain levels.”

Stockpiling of coils by service centers could lead to instability in the coming months if consumption remained at depressed levels, according to an Italy-based rolling mill source.

“End-user buyers are booking but for specific jobs or projects and they are just accepting prices without much negotiation,” he said. “However some service centers are buying without thinking of the macro outlook, they are like supermarket shoppers hoarding groceries and this might be messy if they have to liquidate at a later date if their customers don’t continue to purchase. The smaller service centers don’t hedge their inventory so it would be disruptive for the market if they needed cash and had to sell quickly.”

The market in Europe would remain stable until mid-April Easter holidays then there was potential for a softening in pricing, the source said.

Another Italy-based mill source said that production costs for steel producers remained high and this would support prices in the short term..

“Costs remain relatively high and mills are not making money so prices cant go lower,” he said. “Mills are selling what they can at the moment in this difficult situation.”

The Platts TSI hot-rolled coil index was calculated 50 euro cent lower Wednesday at Eur482.50/mt ($523.37/mt) ex-works Ruhr, and in southern Europe was assessed at Eur453/mt ex-works Italy, gaining 50 euro cent day on day.

Cold-rolled coil slipped Eur1.50 day on day and was assessed at Eur555/mt ex-works Ruhr.

— Len Griffin

European steelmakers are cutting output as a consequence of the coronavirus outbreak’s impact on steel-consuming sectors such as automotive and construction, which are curbing their production.

ArcelorMittal, the largest worldwide steel producer, said Thursday morning that it will reduce production across all its European operations in order to respond to declining demand and to protect workers.

The company when reached by Platts declined to disclose where it is planning to cut productions.

The steelmaker – which had already cut back output at its Italian mill in Taranto earlier in the week, according to sources close to the mill – produced 44.7 million mt of crude steel in 2018 in Europe, but cut this back by around 3% last year.

ArcelorMittal produces a wide range of long and flat steel in Europe, with key sites in the Benelux region, Germany, France and Spain. After Italy, France and Spain have seen the largest impact from the virus in Europe.

In France, according to the local press, ArcelorMittal will decrease steel productions at its site in Fos-sur-Mer and in Dunkerque.

In France, Europe’s largest merchant steel bar producer, the Beltrame group, temporarily closed its French operation, Lamines Marchands Europeens, in Trith Saint Leger until the end of March because of the coronavirus pandemic, a Beltrame spokesperson said Wednesday.

Beltrame has its headquarter in Italy where it suspended its production only for a few days at the hot end of its operations in Vicenza, as well as in its re-rolling units in San Giovanni in Tuscany and in San Didero in Piedmont, until the middle of next week to sanitize the area.

In Italy also the largest global producer of seamless steel tubes, Tenaris-Dalmine has temporarily halted its Bergamo output. Long products maker Feralpi temporary shut down its mill in Lonato, joining the earlier closures of mills owned by Riva, Duferdofin-Nucor, Alfa Acciai, Ferrosider and Valsabbia.

In Germany, Salzgitter confirmed to Platts that it would decrease its flat steel production over the next few days and might take further steps depending on how the situation develops.

Austrian steelmaker Voestalpine said Thursday it would assess the feasibility of keeping production running. German long steel maker Georgsmarienhuette said similarly that production would continue as normal for now, as they had stockpiled raw materials.

Thyssenkrupp board member Oliver Burkhard told local media that the workforce would have to prepare for reduced working hours.

The port of Antwerp, a major hub for steel imports into northern Europe, said it would remain open and that the transport of goods and raw materials would be secure.

Sources however said that long delays have started to occur in transport, particularly by rail and road as many European countries have implemented border controls.

A source at a German cold-roller told Platts Thursday that the stoppages at car manufacturers are likely to be extended beyond the initial two weeks.

“This is dramatic for steel mills. An entire monthly production volume would be missing for them. For direct and indirect steel suppliers to the automotive [sector] it is bad as well,” the source said.

“We expect a reshape of steel production once this is over. The question is steel mills will stop blast furnaces. If they keep them running at a minimum then this will result in material that won’t be used and create oversupply and massively put pressure on spot prices. The second question is if mills will be able to restart quickly enough once demand increases,” the source said.

Steel prices have largely been stable since the height of the outbreak in Europe, but with demand from end-customers dropping sharply due to shutdowns, market sources have become deeply bearish on the future outlook.

— Laura Varriale, Annalisa Villa

German steelmakers are under pressure from the coronavirus outbreak on the one hand, and production stoppages announced this week by carmakers on the other.

For ArcelorMittal, this means production cuts primarily at its strip mill in Bremen and Eisenhüttenstadt. Bremen will again idle blast furnace No.3, which was restarted only in early January following a stoppage since October, Kallanish is told by the company. It is currently holding talks with works councils about short working hours and further measures to prevent the spreading of the virus, says ArcelorMittal Flat Steel Germany chief executive Rainer Blaschek.

In a brief statement Salzgitter says it will reduce production at its strip unit as of this week. Thyssenkrupp steel says it “…will analyse the situation thoroughly these days to find out if and to which extent we need to adjust our production.”

In Austria, meanwhile, voestalpine is “…currently examining which production areas can continue to operate in compliance with all legal regulations, and which will need to significantly reduce operations or even be completely shut down.”

On the long product side, Schmolz+Bickenbach is the biggest supplier of SBQ steels for the automotive industry from its sites in Germany and Switzerland. “We are assessing the situation from plant to plant,” a spokesman says upon request. The company had already introduced short working in response to slackening demand from carmakers. “We expect in any case that production will be re-adjusted to the new low level of demand,” the spokesman says.

Aperam is pausing production at some European production lines in response to the coronavirus emergency, Kallanish learns from the company.

The firm controls production units in France and Belgium but did not specify which mills will be impacted and which lines.

“Following stringent measures introduced by several governments in terms of health and safety, hygiene, and border closures which are heavily impairing our ability to continue receiving supplies and producing, we have decided in coordination with our social partners to temporarily pause production at some of our European production lines where necessary,” Aperam says. “Such measures are expected to take a few days to implement depending on the operations.”

The cuts planned from this week will be adapted further as the situation evolves. “The restart and the further output level will be adapted in line with future measures ordered by authorities, the related impact on our workforce and the production situation of our customers. Our flexible multi-plant production set up will minimize the impact for customers,” the company adds.

While production lines will be impacted, service centres will continue working normally at the moment, Kallanish understands.

Turkish welded pipe producers are facing very stagnant demand in export markets this week.

As a result of the coronavirus outbreak, unclear market conditions, sharply decreased scrap prices and shipment problems, welded pipe buyers are seen to have backed off from the market.

In the absence of demand, most welded pipe producers are refraining from declaring a price level. However, with the current price of hot rolled coil, they prefer to keep their prices at $520/tonne fob.

A Turkish welded pipe producer tells Kallanish: “It’s useless to express an offer level when there are no buyers. I would prefer to sell at $520/t fob; however, under current conditions – when there is no demand – I would not hesitate to sell at $500/t fob if I could find a firm bid.”

Another Turkish welded pipe producer adds: “We have stopped our sales activities. We focused on loading our previous sales. Ports are full, there are no containers, everybody’s panicked. We have to rush to load while we can. We may be unable to load in the near future. Who buys under these conditions?”

Coupled with European quotas, the coronavirus spread has caused welded pipe demand to come to a halt.

Most welded pipe producers are seen to be pessimistic and are not expecting to see a positive development in market conditions in the near future.

ArcelorMittal Spain tells Kallanish it has implemented production stoppages at its plants in the Asturias region, Basque Country and Valencia as from 18 March.

The steelmaker took the decision due to the impact the coronavirus is having on many of its customers, mainly those from the automotive sector. They have practically halted their output in recent weeks.

“ArcelorMittal is temporarily stopping one of its two blast furnaces, one of the two sinter plants and the galvanizing line in Asturias,” the company says. The Avilés mill will operate at half capacity, with one converter and one continuous casting machine, ArcelorMittal confirms. The company’s EAF-based Sestao steelworks will be totally closed, while the stoppage at the Sagunto plant involves the galvanizing line.

The company is evaluating a temporary lay-off scheme for part of the workforce. The plan will be negotiated with unions in the coming days, ArcelorMittal adds.

In a separate statement, the steelmaker explains that “…ArcelorMittal will continue to monitor the evolution of the coronavirus in each of the markets it operates and will take decisions accordingly to ensure the health of its workforce and its ability to meet customer demand.”

Beltrame, the Italian-headquartered merchant bar supplier, has extended stoppages to its French units this week after previously halting operations in Italy, Kallanish learns from the company.

The company stopped production at its plant in Vicenza, north-western Italy, in response to the coronavirus outbreak. “Since 24 February, the company has adopted increasingly stringent precautionary measures to cope with the spread of coronavirus,” it says. “To date, no case of Covid-19 has been found among our collaborators, but the decision has been made to suspend industrial activity at the Vicenza plant. In the other Italian plants of San Giovanni and San Didero activity has been slowed down.”

This week, production was also halted at its plant in France, named LME. “Because we all need to face this situation and contain the virus, the decision to stop all direct and indirect activities was taken from the beginning of this week up to 31 March included,” Beltrame explains.

Large stoppages among steelmakers have already been reported in Italy, Spain and France, with more expected in other European countries going forward.

The world’s largest steelmaker’s raw materials purchasing arm, ArcelorMittal Sourcing, issued a force majeure declaration Thursday amid operational disruptions at ArcelorMittal sites in Europe as a result of the coronavirus outbreak, according to a notice sent to company coal suppliers and seen by S&P Global Platts.

It was unclear if the force majeure was declared on a particular product or a number of products that ArcelorMittal Sourcing buys. However, at least two sell-side sources for Australian metallurgical coal said they had received the notice Thursday. Sources said the measure was also understood to have been extended to iron ore supplies.

In the notice sent to the sellers and seen by Platts, ArcelorMittal Sourcing said that “unavoidable” lockdown measures taken by governments and administrations in Europe, together with measures taken by the company to protect employees had triggered “severe disruptions of operations at ArcelorMittal sites” and that it was “unable to provide an estimate of when it will be able to overcome the effects of the Force Majeure Events.”

This was preventing, affecting or delaying the steelmaker from performing its obligations under certain contracts, according to the terms of the letter.

ArcelorMittal declined to comment Thursday.

However, the company announced separately early Thursday it intends to cut its European steel production over and above 2019 reductions due to an excess of supply. It said it was “taking steps to reduce production from its European operations to ensure the wellbeing of our employees is maintained and that production is aligned with demand,” without giving further information on where or how much production would be cut.

Other European steelmakers including Salzgitter, Thyssenkrupp, Tubos Reunidos and various Italian mills are also cutting their production levels to be more in line with lower market demand and to prevent excessive steel inventory building up.

Automotive manufacturing “plants are reducing production and there are companies in lockdown, so we don’t need so much raw material,” one steelmaker source said. “We will see FM being used more.”

A sell-side source for Australian metallurgical coal said: “I guess there are more [such cases] to come when countries in the European Union are all” dealing with the pandemic.

One observer said the impact on the steel raw materials market was still unclear.

According to the observer, in 2019, ArcelorMittal Sourcing wrote to several suppliers asking for price cuts and renegotiations, citing the weak steel market, requests that were ultimately rejected in many cases.

In 2019, iron ore prices hit a five-year high following production curbs resulting from miner Vale’s fatal tailings dam accident in Brazil, and weather-related supply restrictions have kept iron ore and metallurgical coal prices – both key steelmaking raw materials – relatively firm during the coronavirus outbreak so far in 2020.

ArcelorMittal has steel plants in 18 different countries that produced 89.8 million mt of crude steel in 2019.

— Yi-Le Weng, Diana Kinch, Hector Forster and Samuel Chin

As the COVID-19 outbreak has hit flat steel demand significantly both in the domestic and export markets in recent days, Turkish mills’ offer prices continued to fall throughout the week. Some production cuts by some Turkish producers could be on the way in this sentiment, producer and trade sources told S&P Global Platts Thursday.

A major Turkish coated coil producer started maintenance at its cold-rolling and galvanizing lines, Platts learned from a company source Thursday. Maintenance at the company’s tandem rolling mill and pickling line will start at the beginning of next week, the source said, while maintenance at the company’s galvanizing line will continue till the beginning of April.

Major Turkish flat steel producer Colakoglu has plans for maintenance at its hot-rolling line at the beginning of April, as S&P Global Platts has reported.

Some other producers could also pull down their capacity usages notably in the coming weeks in a sluggish market, as uncertainties arising from the virus outbreak continue to hit global demand and prices.

The recent sharp declines seen in imported scrap prices and sluggish market sentiment were also raising the pressure on Turkish mills’ quotations.

Some mills’ hot-rolled coil offer prices fell below $500/mt ex-works in this sentiment, while some Turkish coated coil producers have begun offering DX51D with 50-70 grams/square meter zinc coating, 0.50 mm hot-dip galvanized coil as low as at $610-$620/mt ex-works in recent days, down a further $20/mt on-week, Platts learned from producer and trade sources Thursday.

“I also heard a mill offer as low as $600/mt ex-works,” a coated coil producer source said, adding that they have begun to receive some order cancellations from export markets in recent days, especially from some countries in Europe that made “state of emergency” proclamations.

Turkish producers may face difficulties responding to Chinese mills’ probable aggressive offers in the coming days as they seek to deplete their excess stocks, he also noted.

— Cenk Can