Day: 8 May 2020

US service centre chain Ryerson remains hopeful about the post-Covid-19 market, Kallanish learns from the company’s first-quarter earnings. 

Ryerson’s profits fell by about half on-year to $16.4 million on sales of $1.01 billion. In Q1 2019, the company earned $29.5m on sales of $1.23 billion. 

“January started slowly given demand weakness within key original equipment manufacturer, or OEM, verticals. Then, the pandemic tidal wave which gripped China in January and February exponentially spread and paralysed North America in March,” says ceo Eddie Lehner. “With respect to ACV (after the coronavirus), we remain hopeful and determined that as we collectively accelerate learnings about the virus and continue building virus response infrastructure to combat and eventually eradicate the virus, we will see societal and economic conditions normalise to the better side of current projections. We look forward to seeing all of you safe and well as we all work in common cause toward better and easier times.”

Ryerson is not issuing full guidance for the second quarter, in line with most other domestic steel companies. It notes, however, that pricing has been more resilient than shipment levels. 

“At this point in the second quarter, demand conditions have been impacted by temporary customer closures in-line with stay-at-home orders and virus driven demand shocks,” the company says. “North American April shipments trended -25% below March levels while the pricing environment has held up better than anticipated given faster-than-historical supply-side responses to decreased demand as well as commodity prices that were already below their historical 10-year averages going into the pandemic.”

ArcelorMittal’s first-quarter earnings results confirm the growing challenges faced by global steelmakers due to the coronavirus pandemic. The company posted an operating loss of $353 million for the quarter and issued a bleak outlook for Q2 steel shipments, Kallanish notes.

At its steel plants globally, ArcelorMittal produced 21.1 million tonnes of crude steel in Q1, down 3mt year-on-year but above the 19.8mt produced in Q4 2019. The impact of pandemic-induced plant closures was mainly seen from March onwards, meaning further reductions are expected in Q2 production, Kallanish understands.

Steel shipments reached 19.5mt in Q1, but the outlook for Q2 is for these to drop to 13.5-14.5mt, marking a potential decline of over 10mt y-o-y during the April-June quarter.

“The remainder of this year will be challenging, but I am confident that ArcelorMittal has the experience and inherent resilience, to manage through these difficult times,” Lakshmi Mittal says. The company did not publish its apparent steel demand outlook, but confirmed this will be significantly lower versus 2019 levels.

As for iron ore production, the company’s output in Q1 reached 14.4mt, up 0.3mt y-o-y and only slightly below the record level registered in Q4 2019.

“The impact of the Covid-19 pandemic on the group’s mining operations has to date been largely at ArcelorMittal Mines Canada,” the company explains. “The unit has now resumed normal operations. Nevertheless, it is not expected to be possible to recover all the volumes that have been impacted and accordingly market-priced iron ore shipments for 2020 are now expected to be 5-10% lower as compared to 2019.” This compares to previous guidance of stable year-on-year.

ArcelorMittal Hunedoara has resumed production following a stoppage for the month of April due to Covid-19-related disruptions, an ArcelorMittal spokesman tells Kallanish.

The plant has been producing intermittently since it temporarily stopped production last December due to a significant increase in electricity and gas prices (see Kallanish passim).

Electric arc furnace-based Hunedoara, part of the ArcelorMittal Europe – Long Products division, produces sections, billets and merchant bars, employing 640 people and 200 contractors. The firm produced 200,000 tonnes of crude steel in 2019, down from 300,000t in 2018.

Hunedoara remained part of ArcelorMittal after the steelmaking group sold its flagship Romanian Galati steelworks to Liberty Steel last year.

ESTA, the association representing European tubemakers, has sent a formal request to the European Commission’s trade unit to cut safeguard quotas for the coming months. This is in response to the Covid-19 pandemic.

ESTA’s position is largely in line with Eurofer’s, although tubemakers have requested the EC reduce safeguard quotas in different forms depending on the product. In a letter to the Commission last week, ESTA requested reductions for the second half of 2020 from -10% for welded tube for the automotive industry to -50% for seamless tube for the oil and gas sector.

The association calculates that order intake at European tube suppliers is now down -45-50% year-on-year.

The association concludes that import pressure remains despite the fall in demand. “Despite the significant decrease of final demand, the imports in the EU did not reduce yet, as shown by the updated figures of safeguard quota exhaustion,” ESTA says in the letter seen by Kallanish.

The European Commission has officially opened an anti-dumping investigation against hot rolled coil imports from Turkey, ArcelorMittal says in its first-quarter earnings report.

Authorities are, however, yet to make an official announcement. When contacted by Kallanish, ArcelorMittal said it had nothing further to add to what it stated in the release.

It is understood there is typically a 40-day gap between the filing of a request for a trade investigation, and the commencement and official publication of the investigation.

European steelmakers’ association Eurofer, meanwhile, says simply it “…constantly and consistently monitors trade flows to and from the EU to assess whether trade is being conducted under fair conditions.”

Since mid-2019 sources in the market have reported that an EU investigation into HRC imports from Turkey was highly possible. In November 2019, for example, Fabrizio di Gianni from Van Bael & Bellis explained that the investigation could be launched soon, as data showed the EU’s Turkish-origin HRC imports had increased by over five-fold since 2015 (see Kallanish passim).

A senior Turkish steel executive, however, tells Kallanish the EU has “…shot the first bullet, so it will be self-defence […for Turkish steelmakers] thereafter. Europe has actually exposed its desperation – they try every possible way as they can’t compete.” Turkish producers were recently vindicated in the US when the Department of Commerce zeroed dumping margins on rebar from various Turkish mills, he adds.

ArcelorMittal said Thursday that the EU opened a new antidumping investigation into imports of hot-rolled steel coils from Turkey in April.

A European Commission spokesperson however said there had been no official announcement on such an investigation.

“All ongoing cases are listed in our database and announced in the Official Journal. I do not have any information about such case having been initiated”, the EC spokeswoman said.

European steel industry federation Eurofer limited itself to saying: “We constantly monitor trade flows to and from the EU to assess whether trade is being conducted under fair conditions.”

When re-contacted by S&P Global Platts, ArcelorMittal said it had nothing further to add on this matter.

ArcelorMittal said in a question and answer document released with its first-quarter earnings that “…given the significant economic impact of the COVID-19 pandemic, with reduced production and steel demand, significant capacities being idled in the EU, Eurofer is seeking an immediate and significant reduction of current tariff-free quota volumes. In April 2020, a new AD investigation has been opened versus HRC from Turkey.”

Aditya Mittal, the president and CFO of ArcelorMittal and CEO of ArcelorMittal Europe reiterated this information during a call with analysts.

Ugur Dalbeler, CEO of Turkish steelmaker Colakoglu, one of the main exporters to the EU, told S&P Global Platts Thursday that a probe could be opened only via an official decision on the part of the EC. “We are not currently at that point,” he said.

In mid-April, Dalbeler told Platts that Eurofer made an application to the EC on March 31, requesting an antidumping and subsidy investigation into HRC imports from Turkey.

The Turkish Steel Producers Association (TCUD) Wednesday urged the government to impose similar retaliatory duties against EU steel, based on the reciprocity principle, saying Eurofer’s recent demand to reduce EU quotas by 75% due to the coronavirus pandemic had deepened Turkish producers’ concerns. TCUD pointed to a 50% year-on-year rise in steel imports by Turkey in Q1 and a 47% drop in Turkish steel exports to the EU.

After becoming a net HRC exporter in 2018 due to strong EU demand, especially from Southern Europe, Turkey flipped to being a net HRC importer in 2019 as trade barriers severely restricted Turkish HRC exports, especially to the EU.

According to the latest Turkish Statistical Institute (TUIK) data, Turkish mills’ Q1 HRC exports to the EU fell 47% on the year to 525,000 mt.

— Annalisa Villa, Cenk Can

A UK service center manager said that market conditions continued to improve as more and more customers returned to work after temporary closing during the quarantine lockdown period.

“This week is better than last week and it’s a 4-day week so demand is improving, we have had one or two large orders from a small list of clients,” he said.

The Platts TSI hot-rolled coil index was assessed down GBP 17.50/mt on the week Friday at GBP 400-420/mt ($494-$530/mt) DDP West Midlands UK.

Demand from the construction sector continued to recover and news that UK house builder Taylor Wimpey had restarted was lifting sentiment.

“Construction is improving, however, the standout area at the moment is point of sale items for the retail sector which uses steel for protective perspex screens in supermarkets,” he said.

This new demand sector would continue to increase as UK employers and retail businesses look to comply with social distancing requirements, the source said.

A mill source said that buyer interest remained low but that this would improve after the extended weekend holiday in the UK.

“Nobody is really looking to buy at the moment and we will not see any improvement until next week,” he said.

“Some customers who have been booking have ordered 25% of their usual volumes as they do not want the risk, however, we are seeing inquiries for July which is positive.”

A UK-based trader source said most end users were looking to come back to work in the next few weeks and would be implementing social distancing measures, and said, “everyone is a bit more optimistic of levels rebounding a little bit come May time. Some customers said that considering what they expected, April was a bit better than it could have been.”

— Amanda Flint, Len Griffin

In attachment, a letter from ASSOFERMET sent to the EU Commission on 06 May, regarding the review of the Safeguard Measures on imports of certain steel products (SAFE009R2) and the consequent impact of the COVID Pandemic -19 on the steel market.

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In allegato si inoltra, per Vostra conoscenza, una Nota di ASSOFERMET inviata in Commissione UE il 06 Maggio u.s., in merito al procedimento di Revisione delle Misure di Salvaguardia sulle importazioni di determinati prodotti di acciaio (SAFE009R2) ed il conseguente impatto della Pandemia di COVID-19 sul Mercato Siderurgico.