Day: 24 April 2020

EUROMETAL, the European association for steel distributors and processors, expects that a slow recovery will start in May across the continent. It still predicts 2020 to be the worst year for the sector in the last 60-70 years.

The association notes that for stockholders the drop in demand since the beginning of March has been around -20-60%. A recovery is expected to begin in May, and while orderbooks are not comfortable, they are also not considered poor. “More recent sales forecast for stockholders are close to 55-65% compared to budgeted sales plans (more optimistic in north-western and north-eastern Europe versus southern Europe),” the association tells Kallanish.

Steel service centres (SSC), on the other hand, expect the second quarter to be better than Q1, but confirm the first half of 2020 will be very challenging overall. During the last six weeks SSCs operated at reduced capacity, with those more linked to the automotive sector only working at 20-25% utilisation.

Looking forward, the construction sector is expected to get a boost from the resumption of activity and the seasonality factors. The automotive sector’s outlook remains uncertain as production volumes are hard to foresee.

US service centre chain Reliance Steel &Aluminum saw its net income cut by about two-thirds on-year in the first-quarter, Kallanish reports. 

Reliance earned $61.7 million on sales of $2.57 billion in Q1, down from earnings of $190.1m on sales of $2.96 billion in Q1 2019. 

“We have taken difficult but appropriate actions in response to the Covid-19 pandemic, including workforce reductions, to right-size our operations to sustainable levels. We believe this will allow us to emerge from this current crisis intact, prepared and positioned to face new business realities, including the ability to quickly ramp up with our customers and suppliers, and to recall laid off employees when the time comes,” says ceo Jim Hoffman. “Although the current situation is unlike anything we have experienced, we believe the resilience of our business model will help us manage through this particularly challenging time just as it has in the past.”

Post Covid-19, Reliance plans to continue its diversification and value-added strategy to weather the long-term recovery, Hoffman adds. 

ArcelorMittal Brazil says its joint venture with Bekaert, Belgo Mineira Bekaert Artefatos de Arames, has improved its commercial policy and started to sell steel wire through its online store, Kallanish learns from the company.

“Steel e-commerce is an option with potential for growth, especially due to the ease of the process,” Belgo Bekaert Arames says. “We need to better understand the logistics challenges because Brazil is a large market and our supplies need to reach small and medium-sized cities,” the steel wire manufacturer adds.

Belgo Bekaert Arames supplies a wide range of wire for the agricultural sector, such as barbed and smooth wire, annealed and galvanized ready-made fences, and welding, fencing and hexagonal screens.

ArcelorMittal has 55.5% control in the Belgo Bekaert Arames JV, while Bekaert’s share is 44.5%.

The Italian rolling mill of La Magona, controlled by Liberty Steel, has resumed limited operation this week, Kallanish learns from sources close to the company.

The mill is now working to supply essential volumes, for example for the medical supply chain. Output will then increase from 4 May, when the Italian government plans to give the go-ahead for all industrial sectors to restart.

The plant stopped production due to the coronavirus outbreak on 24 March.

Magona produces galvanized and pre-painted thin-rolled coil products. It was acquired by Liberty from ArcelorMittal last year as part of the reorganisation of Italian production following the latter’s purchase of Ilva.

ArcelorMittal is going to commence the idling of the second blast furnace at its steelmaking site in Fos-sur-Mer, southern France, the company confirms to Kallanish.

The shutdown procedure will take several weeks to guarantee safety, the firm explains. It is a temporary stop and when demand picks up, the site will resume production, it adds.

The site is currently running at 50% capacity. Blast furnace number 1 was mothballed on 23 March. The company is preparing to halt the second blast furnace due to a dramatic fall in orders from its main markets, such as Italy and Spain. The mothballing process of the second blast furnace will last several weeks.

The site employs 2,500 workers and 1,500 contractors. 80% of the employees are being temporarily laid off. The plant is going to maintain a minimum level of activity in order to be able to swiftly resume output when demand picks up, Provence-Alpes-Côte d’Azur region president Renaud Muselier told local press. He added that this is a temporary idling to face the current collapse in demand.

Celsa Group, the Spain-based steel product manufacturer with operations in the UK, Poland, Norway and France, is in talks with its creditors and Spanish banks to cover a debt payment due May 4, Spanish financial news website El Confidencial reported Thursday, citing financial sources.

The company has requested a credit line from Banco Santander, CaixaBank, BBVA, Sabadell and Bankia of Eur75 million ($81 million) to meet a Eur35 million payment to holders of Eur1.2 billion worth of debt that is convertible to capital, the report said.

Nobody was available at Celsa to comment Thursday.

A further payment of Eur115 million is due in November, El Confidencial said, with the payments compromised by the impact of COVID-19.

The company is due to meet with creditors in the next few days, the report said, with the aim of rolling over both payments towards the end of 2021 using a force majeure clause in the contracts.

— Gianluca Baratti

Crude steel output in Germany, the largest steel producer in Europe, fell by 10% to 3.29 million mt in March, according to data released Thursday by the country’s WV Stahl steel federation.

The drop, although large, is still far less steep than that estimated by the World Steel Association.

In worldsteel’s global production statement Wednesday, the association gave a preliminary estimate for German crude production in March as a decrease of 21% on the year to 2.9 million mt, with a 9.3% drop to 9.47 million mt in the first quarter.

WV Stahl bases its figures on reports from its members, while the worldsteel numbers are “only” an estimate, the two associations told Platts when reached for comment on the matter.

According to WV, after an already low result in the same period last year, steel production fell by around 5.6% in the first three months of the year to 9.86 million mt.

“The first effects of the corona crisis have already become clearly visible in the steel industry,” WV Stahl said.

Crude steel volumes produced by blast furnaces registered a decrease of 8.8% in March year on year to 2.25 million mt, while electric arc furnace output was down by 13.5% to 1.04 million mt.

Pig iron production decreased by 7.4% year on year to 2.10 million mt in March, while hot-rolled steel product volumes registered a drop of 4.5% to around 3 million mt.

In March, some German steel producers started to suspend or reduce production following lower order levels. Industry sources have also said that April looks gloomy.

On Thursday, IHS Markit showed that the decline in business activity across Germany deepened in April, with both services and manufacturing seeing record decreases in output as a result of the COVID-19 pandemic and subsequent lockdown. The headline Flash Germany Composite PMI Output Index registered 17.1 in April, down sharply from 35.0 in March and by far its lowest reading since comparable data were first compiled more than 22 years ago, Markit data showed.

April’s survey showed sustained downward pressure on prices charged for goods and services, with the rate of decline accelerating to the quickest in more than a decade. There was also a further softening of cost pressures, linked to lower prices for oil and other commodities, as well as a reduction in average wage costs.

— Annalisa Villa

European steel distributors have seen a demand decline of as much as 60% due to the coronavirus pandemic, according to trade group EUROMETAL.

Since the beginning of March there has been a widespread decline in steel demand across Europe following pandemic-induced shutdowns, with members of the steel, tubes and metals distribution sector reporting a consumption slump of between 20% and 60%, the trade association said in a note Thursday.

Activities have been “deeply impacted” by the pandemic, it added.

“The most impacted sectors are construction, machines building, manufacturing … Distributors are using furlough schemes when available, depending on local options,” EUROMETAL said.

Looking forward, the trade group said its members expect a step-by-step recovery to begin at the start of May and that most recent sales forecasts would be around 55-65% of budgeted sales plans, with Northern European market conditions more favorable than those expected in southern Europe.

European automotive shutdowns, resulting in assembly line closures or large decreases in demand, had impacted the order books of most steel service centers, it added.

The group said automotive requirements made up around 50% of the market share in Europe for processed steel products such as slit coils, blanks and sheets and that depending on each steel service center’s exposure to that sector, then a reduction in operations of 20-25% up to 80-85% of capacity had been seen.

The current year “will remain one of the worst years that distributors, steel service centers and traders have faced during the last 60-70 years,” it said.

EUROMETAL members comprise steel distributors, service centers and traders responsible for the supply of 80 million mt of steel, tubes and metals to EU end-users and account for more than 60% of the supply in steel and tubes to more than 1 million end-users in the EU manufacturing and construction-related sectors.

— Len Griffin

The current world health crisis will result in a decline of 9.2% in EU exports and 8.8% in EU imports from third countries in 2020, according to the EU Chief Economist note, based on the estimated decline in GDP worldwide.

The analysis outlined in this note is one of the few attempts at predicting the impact of the COVID19 outbreak on trade flows. In order to test the robustness of this analysis, results are also compared to the latest WTO trade forecasts published on 8 April 2020.

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