Day: 26 March 2020

Output and domestic and export orders of one of Turkey’s largest alloy bar producers, Bursa-based Cemtas, has not yet been affected by recent stoppages announced by automotive producers globally, S&P Global Platts has learned.

“As of today, we didn’t face any disruption that could effect our activities. Our domestic and export customers didn’t make any order cancellations since today and our production and shipments are ongoing according to plan,” the company said Wednesday, adding that they don’t have any plan of an output suspension or stoppage.

Cemtas finished the installation of its new auto stabilizer bar line for Mercedes Benz and started trial production in August, as reported. The company said installation of another auto stabilizer bar line for MAN is expected to be completed at the end of 2020.

Cemtas has melt shop capacity of 193,200 mt/year. It supplies bearing steel, free-cutting steel, leaded steel, spring steel and tool steel, mainly to the automotive sector.

Turkey’s largest automotive steel producers have been announcing output suspensions one after another in recent days in line with the suspensions seen in the global automotive sector. Some of Turkey’s major automotive producers, Ford Otosan, Toyota, Honda and Mercedes-Benz Turk, decided to suspend production by two weeks as of March 23, as Platts has reported.

These suspensions are expected to pull down automotive steel demand in Turkey in the mid-term, especially if these output cuts last longer than expected, amid the expanding virus outbreak.

This could also result in output cuts in some of the largest steel suppliers to the sector.

— Cenk Can

German steelmaker ThyssenKrupp on Wednesday brought its proposed steel restructuring plan forward in light of declining demand amid the coronavirus pandemic and announced 3,000 job cuts, of which 800 will be at its heavy plate business.

“At present the coronavirus pandemic is leading to a sharp decline in customer call-offs and a deterioration in the order situation. Thyssenkrupp is therefore going to make production adjustments in the steel business at short notice,” it said.

An immediate “coronavirus package” also includes the requirement to increase compensation for reduced hours to 80%.

“We will have to begin reductions in our operations at many locations in the coming weeks. This will initially affect production-related areas, but also administration. We are taking a close look at all areas to see when which measures make sense,” said Oliver Burkhard, executive board member for human resources and labor director.

As part of the restructuring plan, Thyssenkrupp said it will be cutting 3,000 jobs in total over the coming years, the majority of which will be administrative positions, but 800 will be in its heavy plate production operations.

Thyssenkrupp did not respond to an S&P Global Platts request for more details on the production cuts Wednesday.

“We have put off problems for too long and shied away from tough decisions,” said Klaus Keysberg, the member of the executive board in charge of steel.

The restructuring will involve a combined investment of Eur800 million over the next six years in addition to Eur570 million annually in spending to move production to higher grades of steel.

Thyssenkrupp scrapped its outlook for the business year earlier this week in light of the pandemic.

Also Wednesday, German steel stockholder Kloeckner said it would not be able to maintain expectations for 2020 and that there would be a temporary reduction in operations via reduced working hours.

— Laura Varriale

Following negotiations and an agreement with union IG Metall, thyssenkrupp AG has announced the future plan for its Steel Europe division it is calling ‘Steel Strategy 20-30’, Kallanish learns.

The measures include a reduction of up to 2,000 jobs in the next 3 years, and roughly another 1,000 jobs up to 2026. Of the total, 800 jobs are affected in the troubled heavy plate segment. In that area, thyssenkrupp sees no development prospects within the group. “The job reductions have been firmly agreed and will be carried out in a socially responsible manner,” the company notes.

It says it will systematically align the product portfolio with future markets and profitable steel grades. These include multiphase steels and lightweight steels as well as grades with high surface quality. In addition, the production of non-grain-oriented electrical steels, which are becoming essential for electromobility, will be strengthened.

“We have put off problems for too long and shied away from tough decisions. The agreements give us room for manoeuvre so that steel can remain competitive in the long term,” says Klaus Keysberg, tk AG executive in charge of steel/materials. “What you have to keep in mind: We are investing in one of the best steel locations worldwide. The expertise of our team is highly valued by customers,” he says. Keysberg notes however that “… today, we are too complex and have an inappropriate cost structure.”

German steel distribution group Klöckner & Co and steelmaker Salzgitter AG both say that they will be unable to maintain the profit guidance they gave earlier this month, Kallanish notes. Following thyssenkrupp, they are the other big stock market-listed German steel companies to have lowered expectations because of the coronavirus crisis.

Against the background of crisis measures and unforeseeable developments in the near future, the economic impact of the pandemic on Klöckner cannot be determined nor reliably quantified, the company says. At its annual press conference only two weeks ago, it indicated a significant increase in operating income (Ebitda) as target for the full year 2020, from last year’ s basis of €124 million ($134m). Its 2019 revenue was €6.3 billion.

Klöckner notes that it has significant liquidity reserves to counter the crisis and has taken comprehensive measures to protect the health of its employees as well as to protect its business. This comprises the activation of emergency plans and the temporary reduction in operations by way of short-time working.

Similarly, Salzgitter says that it can neither maintain its forecast published on 16 March, nor provide a robust new forecast for the financial year 2020. It had predicted pre-tax earnings at around breakeven, after a pre-tax loss of €253m last year, largely caused by non-recurring factors. Its revenue was expected to return to €9 billion this year.

Under the grip of the COVID-19 pandemic, LMC Automotive expects the percent decline in global Light Vehicle sales in 2020 to be nearly double that of the fall during the Great Recession (between years 2007 and 2009).

With every market around the world now struggling from the COVID-19 impact, there remains significant risk as the situation is extremely dynamic. Further downward revisions in many markets are probable.

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