Day: 7 May 2020

Luxembourg-based ArcelorMittal said today the European Commission launched an anti-dumping investigation on Turkish hot-rolled coils (HRC) in April.

The Commission has not yet returned a request for comment, and neither has ArcelorMittal. No market participants, including at mills across Europe and Turkey surveyed by Argus this morning, have been made aware of the move. European steel association Eurofer declined to comment, saying “we constantly monitor trade flows to and from the EU to assess whether trade is being conducted under fair conditions”.

European mills, led by ArcelorMittal, have been pushing for action against Turkish HRC for years, and sources close to the matter said efforts have intensified recently with the mills gathering evidence to present to the Commission, amid increasing imports and declining demand across the continent especially in the context of the Covid-19 pandemic.

Turkey was flagged in a previous dumping case against other countries but subsequently removed.

By Lora Stoyanova

Although the start of the 2020 fiscal year for SBQ steel maker Schmolz+Bickenbach was marked by a low-level recovery from a trough, the coronavirus crisis has left a big dent in volumes and prices.

As of mid-March, the Swiss-German group suffered an abrupt collapse in demand from the complete shutdown of all business activities of major European automobile manufacturers and their suppliers. “From our current perspective, we do not expect a gradual normalisation of demand to set in until the end of the first half of 2020 at the earliest,” says ceo Clemens Iller.

In the first quarter, S+B reported a -17% decrease in sales volumes, down to 457,000 tonnes, Kallanish notes. This was most pronounced for quality & engineering steel, which were down -21% year-on-year on the back of the sharp decline in demand from the automotive industry. Volumes also fell in the two other product groups of stainless steel and tool steel, but with less sharp declines of -3% and -11% respectively. The average sales price/tonne of steel was €1,542 ($1,666) for the first quarter of 2020 versus the prior-year figure of €1,605/t in Q1 2019 The decline was mainly due to lower scrap and alloy surcharges, but also to lower base prices, S+B notes.

S+B’s revenue declined by -20% on-year to €705 million. The decline was most pronounced in the quality & engineering steel product group at -31.5%. Revenue from stainless steel was down by -3.6 %, and for tool steel by -15.7 %. Geographically, all regions and countries suffered a double-digit decline in revenue. Adjusted Ebitda was a negative €6.1m, against a positive result of €42.2m seen a year earlier.

After Anyang City in Henan province announced an integration plan for its steel companies, Handan City in Hebei province and Xuzhou City in Jiangsu province have now also introduced plans to merge steel companies. Local governments believe that allowing steel companies to integrate and reducing their numbers is conducive to the elimination of backward production capacity, Kallanish notes. It is also necessary for the upgrading of the steel industry in the region, they believe.

Handan City plans to integrate 17 steel companies into 8 by the end of 2020 and further reduce the number of steel companies by 2025. The Handan government is looking to see 15 million tonnes/year of high-quality steel capacity in 2020, accounting for 30% of its total steel production capacity. It also intends to increase these two targets to 20m t/y and 50% respectively by 2025.

Xuzhou City in Jiangsu province meanwhile has announced the integration of 18 steel companies in the region to form 2 large-scale steel complexes and 3 production sites. It will reduce total steel capacity by -30% at the same time. The city’s 11 coking companies will be integrated into 3 comprehensive coking entities, reducing -50% of the city’s original coking capacity. Up to now, 10 of 18 steel companies in the city have been decommissioned and a further 5 will be shut down by the end of June 2020. After the integration, the remaining three will be Zhongxin Steel, Xuzhou Iron & Steel and Jinhong Steel. Three of the 11 coking companies have been closed, and five will be closed and integrated by the end of June 2020. The remaining three coking producers will be Yizhou Coking, Tian’an Coking, and Jiantao Coking.

The Steel Industry Adjustment and Upgrade Plan (2016-2020) issued by the Ministry of Industry and Information Technology in 2016 said that China’s crude steel production should be limited to 1 billion tonnes by 2020. 60% of total steel production was intended be generated by the top 10 steelmakers. This long-standing national goal has never been met, but local governments have made some progress in uniting local capacity in recent years.

Russia’s NLMK tells Kallanish that its La Louvière plant in Belgium has received the first lot of major equipment for its hot strip mill upgrade. This will enable the company to expand the production of thinner, stronger and more environmentally friendly steel for customers in the European Union, NLMK says.

Two 100-tonne mill housings for the first finishing mill stand were delivered to La Louvière on 5 May. This is one of three stands to be replaced by the end of the year. The mill housings for the first finishing mill stand are being supplied by London-headquartered technology supplier Primetals Technologies which was awarded the contract to modernise the hot strip mill in 2019.

Investment in the hot strip mill modernisation is part of NLMK Group’s Strategy 2022. With the improved capability, NLMK La Louvière will increase its share of the niche HRC market, the steelmaker says. The total value of the upgrade is €150 million ($162m).

The extensive upgrade and modernisation includes the installation of a modern automation system. It also comprises three new and three upgraded roll mill stands, new drives and motors as well as new run-out table, modernized cooling and water systems, and a new down-coiler.

The project will enable the mill to expand the production of high strength thin hot rolled coil as thin as 1.2mm, MLMK says. It will also increase the range of high-strength products beyond 1 000 MPa yield strength and provide customers with best-in-class surface and dimensional tolerances.

The first phase of the mill transformation is scheduled for completion by end-2020, and a second phase will be completed in 2021.

ArcelorMittal Italia is restarting some cold rolling mills in Taranto as 630 workers that had been temporarily laid off are resuming normal working hours starting on 11 May, Kallanish learns from union sources.

The company is boosting production to complete orders received before the lockdown. The plate mill will be restarted for one month approximately together with the pickling facilities on 11 May and two galvanizing lines that will be operational starting on 14 and 18 May. The strip mills will be idled for 2 weeks for maintenance works. Depending on new orders all equipment will be gradually restarted, a union source says.

In a release sent to Kallanish, the Italian unions express concern however regarding the closure of ArcelorMittal’s southern French plant in Fos-sur-Mer. The site is idling its second blast furnace due to a collapse in orders (see Kallanish passim). The 2,500 workers at Fos-sur-Mer fear that the temporary idling of the mill will become permanent as happened in the past for the other French site in Florange, the Italian trade unions suggest. Two third of the production from Fos-sur-Mer goes into the Italian and Spanish markets. Fos supplies ArcelorMittal’s rolling mills in Aviles in Spain and in Genova, Conegliano and Novi Ligure in Italy, the release says.

Considering the Covid-19 emergency and the deteriorated global steel market, the unions are asking for a meeting with the Italian authorities regarding the future investments and the industrial plan to relaunch Taranto. The unions fear that the current negotiations between the Italian government and ArcelorMittal may reach a breaking point. Questions to ArcelorMittal in Italy from Kallanish on the matter remained unanswered by publication deadline.

There could be more steel output cuts in May as lockdowns will probably continue until June, says the International Rebar Exporters and Producers Association (Irepas). Industrial activity will be low and demand for steel limited, although Europe and the US could reopen gradually this month.

Steel production will, however, probably recover quicker than demand, which may put pressure on pricing in the market in the second quarter. “There is oversupply of almost everything, except those items that suddenly end up being in short supply due to impacts on the supply chain,” Irepas says in a note sent to Kallanish.

Scrap-based steel industries seem to have fared better during the crisis, with long steel production continuing. Scrap availability has been heavily reduced during the lockdown period.

China opening up and economic stimulus activities throughout the world will buoy markets for some time when reopening takes place, Irepas says. “China is recovering rapidly, mainly in the construction sector, which is boosting the demand for rebar and billet,” the association observes. “Chinese steel exports are still under control. In fact, Chinese companies are active in the market importing billets.”

The EU economy is likely to experience a depression after the lockdown, with numerous insolvencies taking place as banks and credit insurance companies are not able or willing to lend cheap money and maintain coverage limits. Unemployment in the bloc could return to 2008-2009 levels. However, the region’s construction industry is still doing fine.

In the US, suppliers are willing to sell even at cost level in order to continue operating. Domestic prices are similar to prices of imports from Mexico or Canada, and cheaper than those from countries subject to Section 232 duties. Construction in the US was slow in April and it looks like May will see only a minor improvement.

“Oil prices have sunk to historic lows, creating a serious negative outlook for the whole steel pipe and oil tool manufacturing industry,” Irepas comments. “Many companies are expected to downsize or to become insolvent in the US oil-producing states, particularly in Texas. This will negatively affect commercial building, housing construction and even auto manufacturing in the US.”

In an environment of Covid-19-induced commercial extremes, the fall in UK construction activity in April 2020 will take some beating. In the latest survey by IHS Market/CIPS monitored by Kallanish, around 86% of the survey panel reported a fall in activity since March. There were rapid falls in all main areas of construction activity and new orders slumped as clients froze spending plans.

The headline seasonally adjusted IHS Markit/CIPS UK Construction Total Activity Index fell from 39.3 in March to 8.2 in April, to signal a rapid downturn in overall construction output. Moreover, the latest reading was the lowest since data were first collected in April 1997. The previous record low was 27.8 in February 2009. It must be remembered that any figure below 50 signals a negative trend.

The total activity index was not the only record low caused by the coronavirus pandemic. All three main categories of construction work experienced a survey-record fall during April, with the steel-intensive commercial sector registering an activity index of just 7.7. The latest lengthening of average lead times for the delivery of construction products and materials was by far the steepest since the survey began in April 1997.

New business volumes fell at a rapid pace in April, with the downturn by far the steepest recorded in more than two decades of data collection, Markit/CIPS says.

Business expectations for the year ahead dropped slightly since March and equalled the survey-record low seen in October 2008. Construction firms widely noted concerns beyond simply reopening sites, including cash flow difficulties across the supply chain, rising costs and severely reduced productivity.

Ferona, one of Central and Eastern Europe’s largest steel distributors, has appointed corporate audit director Jan Moravec as its new chairman and chief executive effective 1 July. He will replace Frantisek Kopriva.

Moravec has several years of experience on the Czech firm’s board of directors. Ferona’s supervisory board “… is, therefore, convinced that [… Moravec] has the required qualities for the successful leadership of Ferona in the years to come and that he can count of the full support of the managers and employees of Ferona as well as our business and financial partners,” supervisory board chairman Robert Kay says in a note seen by Kallanish.

According to the latest data available, Ferona sold 699,611 tonnes of steel in 2018, down by 27,195t from the year before, of which 406,000t were sections. Its service centre processed 246,000t of steel, close to the record volume of 2017. Revenue rose 3% to CZK 13.15 billion ($526 million), but net profit fell -28% to CZK 210m.

Long and flat products each accounted for 37% of 2018 revenue, with pipe comprising 10% and special steel 4%.

European hot-dip galvanized coils dropped Wednesday with demand from automotive sector slow to return, sources told S&P Global Platts.

A Nordic-based buyer said if the automotive industry continues to restart gradually, prices would fall.

“If the automotive industry continues at this low pace, prices will drop further – production is not at the same momentum as it will be before coronavirus,” he said. “Who’s going to want to own a car at this point? But they [car manufacturers] need to keep on producing – it’s expensive – I think that we are talking about a number of millions losing every single month that they are not producing. People are already holding their orders back and not going through with the ones that they have,” he added.

A German distribution source said the automotive was enduring some structural problems.

“West European mills are looking to jump back into a normal market – but consumption is down,” he said. “Every end user is afraid of their salaries being cut, no one wants to buy a car right now. The automotive needs government help, between €3000-€4000 per ton. The export automotive market will also suffer because coronavirus is everywhere.”

A car-buying incentive scheme would be required to stimulate sales in the coming months, a second German steel distributor said.

“The automotive companies are back but at only one out of three shifts and the general public will need cash incentive to consider buying a car now,” he said.

Environmental groups would likely push that any government funded incentives would favor electric/hybrid vehicles in order to accelerate the transition away from gasoline or diesel vehicles, the source said.

One Italian mill source said there was “more pressure” on hot-dipped galvanized steel given restarts from the automotive industry have been slow to pick up, and mills eager to get rid of rising stocks.

“Mills are really trying to sell this product, the forecast is that in the second half of 2020 things will be more difficult and prices will drop further,” he said.

An Italy-based service center manager said that demand in HDG would increase after the lockdown in April saw demand plunge, but longer longer term the sector would struggle.

“Coming from a level of zero in April, automotive demand will increase,” he said.

Demand for HDG from the construction sector would increase going forward as governments increase infrastructure spending to create jobs in Europe, the source said, adding that he was looking for HDG to drop under Eur500/mt basis EXW Southern Europe in the short term.

The Platts TSI HDG index was assessed at Eur545/mt ex-works Ruhr Wednesday, a decline of Eur15 week on week.

In Southern Europe, HDG was assessed at Eur505/mt ex-works S. Europe, slipping Eur5 week on week.

— Len Griffin, Amanda Flint

Swiss long steel producer Schmolz + Bickenbach (S+B) is exploring more government aid to combat a slump in orders caused by coronavirus and will drive restructuring further by closing Ascometal’s Dunkirk rolling mill, CEO Clemens Iller said Wednesday.

On a Q1 results call, Iller said the company had seen a recovery in orders this year but that this was halted from the second half of March, with no pick-up expected in the first half of this year.

“COVID-19 came at the wrong moment for us,” he said.

Before the pandemic hit, S+B’s order book was improving but it started to see customers increasingly reschedule orders from late March, which will have even more of an effect on its Q2 results.

The company introduced short-time working measures across the production network, which entails reduced working hours and government support for workers’ wages.

However, it will need more financial support on short-term liquidity protection measures and is now looking into public loans and other government support.

The already in place restructuring plan will continue with the closure of Ascometal’s Dunkirk rolling mill in France by mid-March. The closure will save S+B Eur8 million per year, according to Iller.

Germany-based Deutsche Edlestahlwerke will also see reductions in functions, while US-based Finkl Steel — heavily affected by the oil price slump — will see restructuring of its sales organization.

“From our current perspective, we do not expect a gradual normalization of demand to set in until the end of the first half of 2020 at the earliest, with a possible continued recovery expected in the second half of the year,” the company said.

Sales volumes dropped 17.1% year-on-year to 457,000 mt in Q1. The fall is primarily attributable to decreasing sales volumes for quality and engineering steel, which were down 21.0 % on the back of the sharp drop in demand from the automotive industry. Sales volumes also decreased in stainless steel and tool steel, but with less sharp declines of 3.2 % and 10.8% respectively.

Crude steel production was down 11.3% year on year to 525,000 mt in Q1 and the order backlog droppped 24.5% to 431,000 mt.

Base prices are under pressure said S+B with soft demand and increasing competition in the quality and engineering steel segment particularly, while lower alloy surcharges also contributed to weakening prices.

Average sales prices of quality and engineering steel dropped 13.5% year on year in Q1 to Eur915/mt, while tool steel saw a 7.1% decrease to Eur2,867/mt. Stainless steel sales prices dropped slightly, by 0.3% to Eur3,101/mt.

— Laura Varriale