Day: 3 April 2020

Turkey’s largest automotive steel producers have continued to announce output suspensions one after another in recent days, due to disruptions in the procurement, sales and delivery processes amid expanding the COVID-19 outbreak.

One of Turkey’s largest auto producers, TOFAS, has also decided to suspend production as of April 3 for two weeks at its plant in Bursa. Some of Turkey’s other major automotive producers, Ford Otosan, Toyota, Honda, Mercedes-Benz Turk and OYAK Renault, already announced two or three week output cuts.

“Within the framework of the measures taken to reduce the effects of coronavirus affecting the world, the disruptions in supply and delivery processes have been evaluated and as a result TOFAS decided to suspend production activities for two weeks,” the company said.

TOFAS also noted that in order to keep the effects of this decision at a minimum level, periodic maintenance activity will be carried out as much as possible during this period.

Bursa-based TOFAS is a joint venture of Turkey’s Koc Holding and Italian Fiat Chrysler with automobile production capacity of 450,000 units/year.

These suspensions by Turkey’s major automotive producers are expected to pull down automotive steel demand notably in Turkey, especially if these output cuts last longer than expected, given the expanding virus outbreak.

Many Turkish steel producers and re-rollers have already announced output cuts due to sluggish market sentiment arising from the globally expanding coronavirus outbreak.

— Cenk Can

The European antitrust authority has given the green light to long steel producer Feralpi buying a 50% stake in Caleotto, a special wire rod re-roller producer based in Lecco, Italy, from Duferco Italia Holding.

Feralpi, which will own 100% of Caleotto, said Giovanni Pasini, executive director of Feralpi, was also President of Caleotto.

“Despite the delicate economic phase that we are living due to the global pandemic and a rather weak steel market, we full support the follow up on Caleotto’s multi-year development plan,” Giovanni Pasini said.

Pasini also said that the collaboration between Feralpi and Duferco will continue in order to expand the range of high quality steel.

“The Feralpi-Duferco synergy has in fact relaunched the plant from both a technical and commercial basis. In this period the priority is the health of our workers, but immediately afterwards there is the need to start again as soon as the condition will allow us,” he said.

At the moment, the Italian market was “frozen” as mills and re-rollers are not working, all production has been suspended with exception of the two largest Italian flat steel producers, AM Italia in Taranto and Arvedi, that never the less are working at their lower historical rate.

Feralpi, that has also companies outside Italy and that in total produces around over 2 million mt of steel a year, in Italy where it has its headquarter, is based in Lombardy as well as Caleotto. Lombardy is the heart of the Italian manufacturing production but also the worst hit region so far by the coronavirus. Half of the Italian 23 million steel production is produced in Lombardy.

Caleotto has a design capacity of 250,000 mt/year, and the plans are to expend productions and qualities. Caleotto produces rod for the automotive sectors. According to S&P Global Platts data, the Italian wire rod market is about 3.5 million mt/year, is second in size in Europe only to the German market. The target market for the product type of Caleotto is between 1.5 million mt and 1.8 million mt.

— Annalisa Villa

Spain’s main tube suppliers, Tubos Reunidos (TR) and Tubacex, have partially resumed operations, Kallanish notes. Both companies meet the criteria of essential economic activity in the government’s decree that allows the continuation of output.

The manufacturers have also taken advantage of their import and export activities to justify their exclusion from the new extreme measures to prevent the spread of Covid-19 in Spain, sources comment. The latest restrictive measures are in force until 9 April.

“We have been able to resume limited activity in our factories in Trapaga and Amurrio since 1 April with the commitment to guarantee the safety and health of all the employees involved,” TR explains. The seamless tube supplier hopes to gradually return to normal production levels throughout the month, as soon as circumstances allow, it confirms.

Tubacex, meanwhile, has also gradually restarted operations at its Llodio and Amurrio plants. The company has cancelled several orders in the last week due to the uncertain situation and production cuts. In this context, continuation of output is necessary to guarantee business sustainability, Tubacex says. “We resumed our activity gradually maintaining minimum levels that guarantee compliance with international supplies in the short and medium term,” Tubacex adds.

Suppliers have reduced offer prices in a bid to secure import deals for long products in East Asia, market participants say. Buying interest has about evaporated as regional economic activity has slowed down. There are also bearish expectations for longs pricing as scrap prices sink.

Offer prices for rebar are prevailing at $410-415/tonne cfr Singapore, theoretical-weight basis, a Singapore trader says. He believes traders are making offers for June shipment at this level for material from Russia, Ukraine and Turkey. The suppliers for Chinese rebar, meanwhile, could consider selling at $420-425/t cfr, down from their targeted $440/t cfr but “…nobody is bidding,” he notes. Last week, Turkish rebar offers were heard at $430/t cfr, and Chinese rebar at $445/t cfr Singapore.

Some traders heard Turkish rebar offered at $405/t cfr Singapore theoretical weight. “There is no demand anywhere,” a Singapore trader says. Construction projects will be delayed in Singapore so no one is in a hurry to fulfill order contracts, says another. Singapore authorities are tabling a bill to give a six-month reprieve to those who cannot meet contractual obligations because of the virus outbreak, he notes.

In Hong Kong, after Russian rebar for June shipment was booked at $425/t cfr actual weight last week, another Russian rebar deal closed lower at $410/t cfr. An importer heard the lower-priced deal is for delivery over three months in the third quarter.

On Thursday, Kallanish lowered its weekly BS4449 500B 10-40mm diameter rebar price to $400-410/t cfr Singapore theoretical weight, down $27.5 on-week.

Similarly, wire rod demand is weak. Chinese wire rod offers are prevailing at about $445-450/t cfr Southeast Asia, a Chinese trader reports. There are also offers at $440/t cfr Southeast Asia but no buying interest, he says. In Thailand, Ukrainian wire rod is currently offered at $420/t cif Thailand, and Malaysian wire rod at $450/t cif Thailand. These offers are for 100% 5.5mm diameter wire rod, or combination 5.5/6.5mm diameter wire rod, a Thai trader says. But there is no buying, he adds.

There are no offers in the Manila market due to the Philippines’ lockdown. Kallanish lowered its SAE 1008 6.5mm diameter mesh-grade wire rod assessment to $430-440/t cfr Manila, down $20 on-week.

Celsa, the Spanish-headquartered long products supplier, is preparing to reduce output at its flagship electric arc furnace-based mill by -50%, Kallanish understands from sources close to the company.

This week, the Spanish government ordered most industrial activity to stop to further limit the spread of the coronavirus. However, it gave steelmakers and some other industrial producers the possibility to continue operating, provided safety measures are in place.

Celsa’s mill in Castellbisbal, near Barcelona, will operate at 50% capacity utilisation during the next two weeks. The other plants of the group in Spain will also continue operating, strictly following government regulations.

Celsa has three main steel complexes in Spain, one located near Barcelona and two in northern Spain. The group’s other plants are located in France, the UK, Norway and Poland.

Italian-headquartered long products supplier Feralpi has received clearance from anti-trust authorities to complete the acquisition of Duferco Italia Holding’s stake in the Caleotto wire rod mill. The holding owns a 50% shareholding in the northern Italian mill.

Feralpi has been sharing control of the mill with Duferco for the last five years on a 50:50 basis. Giovanni Pasini and Lorenzo Angelini will be president and ceo respectively of Caleotto’s new management board, Feralpi says in a note sent to Kallanish.

Feralpi intends to continue implementing the relaunch of the rolling mill by investing in technology, quality and widening the product range of high steel grades.

“This operation is a sign of business continuity with the past five years during which the Feralpi-Duferco synergy has effectively relaunched the plant both technically and commercially,” Feralpi president Giovanni Pasini says. “It is evident that, in this period marked by the global pandemic, the priority is health protection, but immediately afterwards, as soon as the health conditions allow, there will be a need to restart […production] immediately. This is also why we commit to offer Caleotto full support to continue its relaunch.”

Unions at ArcelorMittal’s integrated flat steelmaking site of Fos-sur-Mer, southern France, report that the company is planning to further reduce output in the short term.

Earlier in March the company confirmed that one of two blast furnaces at the site had been taken temporarily offline due to the coronavirus emergency. Now it appears the company is implementing a programme to stop crude steel production at the site completely in the coming weeks.

A representative from the unions at the plant says the lead time necessary to stop production completely at the mill could mean the facilities will be halted just as the epidemic peak passes. He is concerned the stoppage at the mill could therefore continue beyond the containment measures imposed in most European countries.

At the other French integrated site controlled by ArcelorMittal, in Dunkirk, the company earlier announced the stoppage of one of its three blast furnaces. It is understood to be preparing to stop a second one, according to trade unions, while the third and largest will continue operating.

Some of the rolling lines located in Florange were restarted last week, after a week-long stoppage.

Contacted by Kallanish, ArcelorMittal declined to give new details on the French closures. Earlier this week it said: “In response […to the coronavirus crisis] we are reducing production and temporarily idling steelmaking and finishing assets, adapted on a country by country basis in alignment with regional demand as well as government requirements.”

Eurofer has written to European Commission President Ursula von der Leyen, calling for a number of measures to support the steel sector in the current Covid-19 crisis.

The European steelmakers association asks authorities to immediately review existing safeguard measures. It proposes to reduce quotas by 75% for a period of six months, to align them to the difficult situation of the market. In return, tariff level beyond the quotas could be reduced below 25%, it adds.

Furthermore, the imposition of “…crisis and security-related steel import restrictions” could be taken into consideration.

In addition to reviewing the safeguard system and controlling imports, Eurofer calls for the EU to encourage regional and local governments to recognise steel as an “essential” sector to keep it operating during the crisis.

The association also suggests a series of measures to realign the EU Emissions Trading System to avoid carbon leakage, Kallanish notes.

“For steel, the difficult situation has become critical,” the association says in the letter. “We had already lost about 25% of our workforce and 20% of production volumes between 2009 and 2019 as a result of massive global steel excess capacity and trade distortions. The significant downturn in EU steel demand in 2019 rendered the otherwise welcomed EU steel safeguards ineffective for a large part of our industry, even before the Covid-19 pandemic.”

“Our industry is fighting for its survival. The impact of Covid-19 is emptying order books, forcing massive cuts in production, idling of entire facilities, and short-time working hours and temporary lay-offs of workers,” Eurofer concludes.