Day: 13 May 2020

US service centre chain Reliance Steel & Aluminum will permanently shut down operations at three of its subsidiary facilities in Texas and Louisiana, Kallanish reports.

The facilities in question include Sunbelt Steel and Continental Alloys & Services, located outside Houston, Texas, and an additional facility located in Broussard, Louisiana.

According to a representative with Reliance, the last day of operation at the Sunbelt facility was 8 May, and the other facilities will gradually shut down over the next few weeks.

The reason for these shutdowns are due to a decline in the oil and gas industry caused by the Covid-19 pandemic, the representative confirms.

In late April, during Reliance’s first quarter earning conference, ceo James Hoffman announced that “…[due to] lower oil prices in the first quarter of 2020, we’ve made the decision to permanently close three of our business, supporing the energy end market.”

The European steelmakers’ association Eurofer believes that the recovery in demand for steel products will take some time, beyond the industrial production restart currently happening in Europe, Kallanish notes.

The association has decided to not issue forecasts for 2020 and 2021 apparent and real steel demand yet, as the coronavirus emergency impact remains yet to be fully assessed.

“Market conditions are not expected to improve before the fourth quarter of 2020 or early 2021. Much will depend on the length of the industrial lockdown in steel-using sectors that has almost put a stop to new steel orders (on the supply side) – although there are already signs of some restart in automotive and other sectors – as well as on governments’ ability to alleviate the huge economic and social costs of the pandemic so as to support demand,” Eurofer comments. “Consumer demand, due to the huge social disruption caused by the pandemic, is set to remain depressed throughout 2020; therefore, it will take time before the end of industrial lockdown leads to substantial output increases,” the association says.

Once the economy returns to normal conditions however, the association believes that downside risks present before the start of coronavirus pandemic will also remain, such as a no-deal Brexit and trade issues. “All the downside risks that had considerably weakened steel-using sectors and steel demand during 2019 will still be there, namely import distortions and continued global overcapacity and weakness in the global manufacturing cycle,” Eurofer continues.

Since beginning of April the association has requested that the European Union to significantly reduce the safeguard quotas for the second half of 2020 in order to align them to the fall in demand. While the review of the measures is ongoing, it is apparent that a further tightening of import measures in Europe could lead to retaliations from other countries, something of which Eurofer is also aware. “A new escalation in protectionist trade measures would also contribute to a sustained negative outlook,” the association adds.

In its latest report Eurofer revealed that apparent steel demand had fallen by -5.3% year-on-year in 2019 to 154 million tonnes, the lowest level since 2015. Imports of steel products in Europe decreased by -11.5% y-o-y while exports were down only -1.5% y-o-y.

The Italian equipment and engineering company, FIMI Group has finalised the commissioning of a new stainless slitting line for CPC Inox, a supplier of stainless strip, bar, sheet and tube.

The new line is able to process 300 and 400 AISI stainless-steel coil from 100mm up to 850mm wide and between 4-15mm thick. FIMI Group has supplied to CPC another 5 slitting lines and 2 cut-to-length machines to CPC during the last twenty years, Kallanish notes.

“The line is also provided with a packing system and with an automatic blade change system to minimise operator intervention,” FIMI says.

Germany’s Thyssenkrupp is expecting steel production to remain reduced untilthe summer, depending on how end-user markets as well as the pandemic develop, its CFO, Klaus Keysberg, said Tuesday.

Along with other steelmakers such as Salzgitter and ArcelorMittal, Thyssenkrupp has been hit by shrinking demand from end-user markets such as the automotive industry.

Thyssenkrupp cut production following shutdowns in March and took out blast furnace A at semis producer HKM, adjusted blast furnaces at its integrated mills and reduced downstream processes by 30% at its steel unit, Keysberg said.

“Corona hit in April,” said Keysberg in response to a question from S&P Global Platts during a press call on the company’s second fiscal quarter (January-March) results. “We are going to ramp up step by step,” he said, adding that production cuts were likely to be in place until summer depending on how the pandemic and demand unfolds further, adding at an analysts’ call later in the day that Thyssenkrupp might ramp up to a 20% reduction.

Q2 results hit by low demand

Keysberg said the impact of the coronavirus would be bigger in fiscal Q3 was only marginally reflected in the Q2 results. Lower shipments and volumes are expected in Q3. For the steel unit, Thyssenkrupp expects a shipment decline of around a third.

Order intake at distribution unit Materials Services, both dropped year on year in Q2 due to low demand from the automotive sector and price pressure as well as the temporary plant closure of Italian stainless mill AS Terni.

Crude steel production at the steel division fell by 3.1% quarter on quarter and 5.2% year on year to 2.7 million mt.

Cold-rolled shipments dropped 2.8% on the year to 1.78 million mt, while hot-rolled shipments increased by 3.6% to 1 million mt.

Thyssenkrupp is expecting further production and sales declines in the auto industry this year due to demand slump during the pandemic. In Europe, in particular future trading relations with the UK and US remain uncertain. The weakening of the auto market that started last year, will be putting pressure on flat steel particularly. “EU carbon steel flat market contracted by 6% in 2019 due to very weak automotive market and recessionary trends in other sectors; with current high level of uncertainty, the decline in 2020 is expected to be higher, possibly in the two-digit range,” according to Thyssenkrupp.

‘Maintaining liquidity key’

Keysberg said that maintaining liquidity remained important in the current situation and that Thyssenkrupp had taken action to secure that.

Keysberg confirmed reports that Thyssenkrupp received a Eur1-billion ($1.08 billion) credit line to bridge the time until the elevator unit sale is processed.

The sale of the elevator unit would go ahead as planned, Keysberg said, responding to recent press reports saying that the financial consortium comprising Advent, Cinven and RAG Foundation that struck a Eur17.2-billion deal to take over the unit, would now be looking for more investors to offload risk. The sale is expected to be finalized by the end of September.

“Our position compared to our competitors is not so good,” Keysberg said, adding that the company was working on restructuring in its 2030 plan.

“We failed to do necessary things…And with this restructuring program we are trying to work on that,” he said.

Thyssenkrupp will announce further measures at its annual general meeting next week.

— Laura Varriale

Businesses with supply chains which rely on Trade Credit Insurance and who are experiencing difficulties maintaining cover due to Coronavirus will get support from the government, the Economic Secretary to the Treasury, John Glen has announced.

Trade Credit Insurance provides cover to hundreds of thousands of business to business transactions, particularly in non-service sectors, such as manufacturing and construction. It insures suppliers selling goods against the company they are selling to defaulting on payment, giving businesses the confidence to trade with one another. But due to Coronavirus and businesses struggling to pay bills, they risk having credit insurance withdrawn, or premiums increasing to unaffordable levels.

To prevent this from happening, the government will temporarily guarantee business-to-business transactions currently supported by Trade Credit Insurance, ensuring the majority of insurance coverage will be maintained across the market. This will support supply chains and help businesses to trade with confidence as they can trust that they will be protected if a customer defaults on payment.

The Economic Secretary to the Treasury, John Glen said:

This country’s businesses are crucial in helping us to kick start the economy as we get back to work, and I will do everything I can to help support them through this difficult time. By guaranteeing business-to-business transactions currently supported by Trade Credit Insurance, we will help to maintain a vital cog in our economy.

This is on top of an unprecedented package of support we have put in place to help protect individuals, businesses and the economy.

Business Minister, Paul Scully, said:

Giving businesses the confidence to continue trading is vital to seeing us through this crisis. This guarantee will be essential as we seek to reopen new sectors of the economy and get the UK back to work in a way that is safe for everyone.

The guarantee will be delivered through a temporary reinsurance agreement with insurers currently operating in the market.

The government will work with businesses and the industry on the full details of the scheme to ensure firms are supported and risk is appropriately shared between the government and insurers.

The guarantees will cover trading by domestic firms and exporting firms and the intent is for agreements to be in place with insurers by end of this month.

The guarantee will be temporary and targeted to cover CV-19 economic challenges, and will provisionally last until the end of the year. It will be followed by a review of the TCI market to ensure it can continue to support businesses in future. Further details will be announced in due course.

Further information

BCC Director General Adam Marshall said:

The government has demonstrated once again that it is listening to the concerns of our business communities.

The launch of a government-backed guarantee to support the provision of trade credit insurance will help ensure that this vital lifeline remains available to businesses during and after this crisis, helping to maintain supply chains and trade.

CBI Chief Economist Rain Newton-Smith, said:

The government’s decision to backstop trade credit insurance will protect thousands of jobs and allow many businesses across the UK to restart operations.

This intervention will keep cash flowing within critical supply chains and more importantly, it will help lower risk for our exporters and ensure that UK firms can continue to trade with other countries.

Getting this scheme up and running is crucial as the UK economy gradually restarts, while keeping public health as the first priority.

FSB National Chairman Mike Cherry, said:

As the pandemic continues to bite, small firms need all the help they can get to continue to trade domestically and internationally. This temporary reinsurance scheme should mean that small businesses don’t have their trade credit insurance withdrawn and should be able to continue to access affordable insurance to support trading with other businesses.

The intervention provides much needed confidence for small businesses to get back on their feet and start trading again as we enter recovery. This protection will be particularly helpful for small businesses operating in the supply chains of sectors like construction and manufacturing. We look forward to working with the government and insurance industry to get this scheme live as quickly as possible and to ensure that it helps small businesses to trade with confidence.

• in whole of 2018 £450 million was paid in TCI premiums to cover over £350 billion in business activity
• as of April 2020 there was over £171 billion business activity insured, covering transactions between around 13000 suppliers and 650,000 buyers

Source: gov.uk

European steel industry association Eurofer does not expect market conditions to improve before the fourth quarter of 2020 or early 2021, although much will depend on the length of the industrial lockdown in steel-using sectors, the European steel federation said Tuesday in its Economic and Market Outlook report.

Eurofer said that due to the uncertainty and the unprecedented nature of the disruption caused by the coronavirus pandemic it will temporarily not publish, figures quantifying its forecasts for 2020 and 2021 “uncertainty and volatility surrounding possible developments in the coming months means no forecast could be considered reliable.”

The consequences of the coronavirus-related shutdown for industrial activity has affected Europe, but also all the countries in the world. “They have reached a global scale, in terms of huge disruption to supply chains and supplies of input and raw materials. This will probably have unprecedented repercussions on output in the second and third quarters of 2020. Against this background, a substantial rebound is not in sight before the first quarter of 2021.”

Coronavirus not the only risk

According to Eurofer even after the end of the pandemic, external risks will continue to cast a shadow over steel-using industrial sectors, even in 2021 and it will likely hamper investment. “However, the extent remains difficult to predict, because much will depend on other, non-COVID-19 related factors that were already in place before the outbreak.”

Other sources of uncertainty exist, such as a no-deal Brexit — as the final agreement with the EU must be reached before the end of 2020 — and a new escalation in protectionist trade measures would contribute to a sustained negative outlook.

The early data for this year showed the dramatic impact of coronavirus, but in 2019 the steel market was showing struggling signs too, Eurofer said. Over the course of 2019, business conditions in the manufacturing industry have continued to deteriorate. This downward trend gained speed in the second half of 2019, particularly in the automotive industry, while the construction sector continued to outperform other major steel-using sectors. This resulted in a pronounced slowdown in output growth in steel-using sectors. Total output in steel-using sectors fell by 1.6% after 0.4% growth in Q3. In the whole of 2019 marginally decreased by 0.2% compared to 2018, against a growth of 2.9% in the preceding year, Eurofer said.

Prospects for the EU construction sector had been massively affected by the economic lockdown in some member states. It will have resulted in closures of construction sites, particularly in civil engineering. However, some EU countries have explicitly planned to restart public construction activity as quickly as possible to use it as a countercyclical tool during the unprecedented economic downturn.

Auto industry outlook

The automotive industry has almost completely shut down and production has been suspended all over Europe, with very few exceptions, although some production sites re-opened in late April. Huge disruption to the supply chain due to lockdowns and blockages in transport across EU countries have made it very difficult to ensure the supply of materials and components to the industry. According to Eurofer it remains to be seen if and when normal business conditions are restored in the course of 2020, however, even if from the third quarter on normal business conditions return and lockdown measures recede, it will take time before new orders will translate into new deliveries.

In 2021, provided that the industry has been able to restore its production at normal conditions, and with the worldwide harmonized light vehicles test procedure distortions having faded out by then, the launch of new models — many of them electric vehicles — could be a supportive factor, combined with some rise in real wages and labor market dynamics on the demand side. However, subdued car demand in major markets such as the US, China and Turkey would remain a challenge for EU car exporters, the association said.

According to Tuesday’s Eurofer data, EU-28 apparent steel consumption in the whole 2019 went down by 5.3% year on year, the worst drop since 2012. In Q4 last year the apparent demand decreased by 10.8% year on year to 34.1 million mt, after a drop of 1.6% in Q3. The negative trend seen in the last two quarters of 2019 is the result of the continued slump in EU’s manufacturing sector due to weakened exports and investment that has become more pronounced during the second half of last year, coupled with escalating trade tensions.

According to Eurofer’s report “equally, data for the fourth quarter of 2019 continued to show growing import distortions as well as higher volatility as a result of the increase of safeguard measures’ quota.”

The continued slowdown in production activity of steel-using sectors, coupled with reduced steel intensity, led to a fall of 7.7% year on year in real steel consumption in Q4 2019 to 37.6 million mt. This was the third consecutive year-on-year drop (2% in Q3). In the whole 2019 the whole drop was of 2.6%.

— Annalisa Villa