Day: 17 June 2020

Slovakian company US Steel Kosice has restarted two blast furnaces and the hot rolling mill after a coronavirus pandemic-induced outage, the plant’s spokesman told S&P Global Platts.

“Due to the pandemic, we made a decision to pull our Q3 [maintenance] outages into Q2 while we are at what we believe to be the bottom of the market,” the spokesman said. “We finished the outage work last week and restarted a blast furnace.”

USS Kosice will wait until demand returns before restarting its third blast furnace. Blowing in the last BF might take time, as “the COVID pandemic has crippled the manufacturing sector, and the demand for steel in the EU is down 50%”, the spokesman said.

Given the weakened market, the steelmaker has expressed its disappointment with the so-called Safeguard review proposal made by the European Commission.

“Once again the government in Brussels has shown they do not support the home steel industry, and all our employees and the employees of the many businesses that depend on the EU steel industry,” he said.

USS Kosice was seeing poor demand before the coronavirus pandemic. In 2019, its liquid steel output declined to 3.9 million mt, down from 5 million in 2018 and 5.1 million mt in 2017.

In July 2019, it announced, as a measure to improve the cost position of its business, it would reduce the employee headcount by 2,500 by the end of 2021. Some 1,400 people left the company in 2019. COVID-19 has made it speed up the process.

After negotiations with trade unions, the steelmaker has recently adopted an amendment to the collective labor agreement, which offers, in exchange to the termination of work, a one-off severance payment amounting to 18-times their monthly wages to employees, who either have less than three years to their retirement, or have worked in the company for 35 years or more.

USS Kosice, a US Steel-owned integrated steel plant and coke production facilities in Slovakia, conducts its business mainly in Central and Western Europe and primarily serves customers in the European transportation (including automotive), construction, container, appliance, electrical, service center, oil and gas conversion and petrochemical markets.

With 5 million mt/year steelmaking capacity, the plant produces and sells slabs, plate, sheet, tin products, spiral welded pipe, and refractory ceramic materials.

— Ekaterina Bouckley

GFG Alliance, an international group of businesses founded by the British Gupta family, plans to take its steel, aluminum and renewable energy subsidiaries public in the foreseeable future, perhaps as soon as next year, executive chairman and CEO Sanjeev Gupta said in an interview with S&P Global Platts June 16.

The plan is to present Liberty Steel Group and Alvance Aluminium to the stock exchanges using their “green” credentials to attract investors, “when market conditions are right,” Gupta said. The group is accelerating plans to achieve carbon-neutrality, which may be achieved even before its target date of 2030, Gupta said. There are also plans to open up the capital of GFG’s SIMEC Group, active in renewable energy, mining, shipping and infrastructure.

Preliminary discussions for IPOs were shelved last year due to market conditions. Consolidation and restructuring ensued, to ensure transparency and appropriate governance for GFG Alliance’s growing subsidiaries, following market talk of opaque finances. Late last year the group’s steel businesses worldwide were consolidated into Liberty Steel Group, after several European works were acquired from ArcelorMittal.

“On 31 March we appointed a global board … a global audit is underway and we will publish quarterly results … we will prepare ourselves and do everything that a public company does: Liberty Steel, Alvance and SIMEC will enter public markets…. It’s a question of time, not if,” Gupta said. “In steel we’re almost ready: and Alvance and SIMEC are on their way. All three businesses are on this journey.”

Liberty’s aluminum assets, including Europe’s biggest aluminium smelter with a capacity of 280,000 mt/year in Dunkirk, France, bought from Rio Tinto; the UK’s sole smelter at Fort William, Scotland; and downstream assets have recently consolidated into Alvance Aluminium Group.

IPOs should allow the group “remodel our capital stack, which is heavily based on equities and short-term funding. We would like to have more permanent capital as well,” Gupta said. The businesses are profitable and have potential to become highly profitable, he said.

Despite GFG’s announcing last week a drive for 30% efficiency improvements in a market which has slumped as much as 20%-40% from pre-COVID-19 levels, Liberty Steel Group — now one of the world’s top ten steelmakers outside China — could eventually expand production further, according to Gupta. It’s possible that three of the company’s plants could double capacity in three to four years: the Galati, Romania plant, to 4 million mt/year; Whyalla, Australia, to 2 million mt/year; and Rotherham, UK, to more than 1 million mt/year crude steel capacity, he said.

However, he gave no date for capacity recently halted due to the pandemic to come back on stream. “Production for the time being is being calibrated with demand … we won’t dump … we won’t overproduce and we will keep our market share … the steel and aluminium markets will see pressure for the next year.”

Hydrogen market dynamics

COVID-19 may accelerate the move towards achieving “green” steel and aluminum because it may encourage emergence of supply chains “closer to home” and has highlighted the need for governments to help industry secure funding at good rates for achieving net-zero carbon targets, according to Gupta.

“Renewable energy becomes cheaper by the day,” he said, noting that natural gas-based steelmaking is a first step to hydrogen-based steelmaking, which should fit into “market dynamics” when hydrogen prices come down to $1-$2/kg.

Galati, and Liberty’s direct reduced iron-based Whyalla, Australia, steel mill, where direct reduced iron plants and new electric arc furnaces are being installed, will both eventually use hydrogen, and the company’s steel mill in the Czech Republic will be the first in Europe to use an EAF with hybrid technology, he said.

“We are going to announce pilot projects for hydrogen production in short order,” he said. The group plans to produce its own hydrogen for its plants, using solar power.

Liberty also wishes to get more involved in the scrap metals business in the UK, for use in EAFs. “We don’t need blast furnaces in the UK,” he said.

Green aluminum trading

GFG Alliance is a “strong proponent” of the London Metal Exchange’s plans to set up a platform for low-carbon aluminum trade, possibly next year. There’s a “strong customer pull for green metal,” even if it may involve a price premium: “that’s how we set the market,” he said.

Alvance’s operations are considered low-carbon, as its French smelter is powered by nuclear and hydroelectric energy and its Scottish one by hydroelectricity.

Gupta, meanwhile, considers the possible putting in place of a European Union carbon border tax “very urgent” to eliminate dumping in the EU of metal produced with less environmentally-acceptable standards.

M&A appetite

GFG Alliance continues with its appetite for mergers and acquisitions, which have formed the basis for its growth so far, viewing consolidation as positive for the industry, Gupta said.

“As a result of COVID-19 the pot is stirring and there will be a need for M&A activity: it’s become more compelling and will happen faster … fixed costs for steel are high, particularly in Europe, causing enormous pressures,” he said, without being drawn on which new targets GFG may currently have in sight.

— Diana Kinch, Annalisa Villa

EU member states have approved the steel safeguard quota revision proposal presented by the European Commission at the end of May to the World Trade Organisation (WTO).

EU trade commissioner Phil Hogan confirmed in a tweet that the proposal was approved. He stated that “…the proposal will result in substantive benefits to industry in this difficult period. It reflects the Commission’s commitment to effectively defend EU industry from trade diversion effects.” The proposal is compliant with WTO rules, he added.

The document presented at the end of May raised many concerns among steelmakers as well as European trade unions. A number of official statements from Eurofer and other associations were issued to request the European Commission to further consider their proposal. The biggest changes proposed were the calculation of all country-specific quotas on a quarterly basis as well as changes to the way residual quotas can be used.

Hot rolled coil quotas are also set to be strongly impacted as they will be moved from global to country-specific.

Sources confirmed the approved draft by member states is not substantially different from the one seen previously (see Kallanish passim).

The new changes to the safeguard measures should be implemented from the beginning of July, when new quotas will become available for the market. The official publishing of the changes should be done in the next days.

The prospect of ArcelorMittal leaving its Italian investment in former steelmaker Ilva is becoming more realistic. This comes after Italian Prime Minister Giuseppe Conte declared as “…absolutely unacceptable” the company’s latest industrial plan, which involves the possibility of cutting the steelworks’ workforce by half.

In a televised interview seen by Kallanish, Conte added that the government has a clear project in mind for the steelworks that remains essential for the country’s economy. He states that his administration intends to invest into and relaunch the steelmaker through its financial body Invitalia.

The latest industrial plan submitted by ArcelorMittal has been judged unacceptable also by economic development minister Stefano Patuanelli. According to the agreement that ArcelorMittal has with the Italian authorities, it is allowed to leave at the end of the year by paying €500 million ($566m). At present, 8,200 workers in Taranto are on temporary layoffs.

The new industrial plan that ArcelorMittal submitted for Ilva for 2020-2025 has been reviewed and adapted to the current crisis from the previous plan submitted in March. Over the period 2020-2025 the former Ilva’s crude steel output is to be pushed to 6-6.5 million tonnes/year, while the previous plan indicated 8mt as the target level. 3,300 jobs will be cut this year and the future is uncertain for the 1,600 workers from Ilva’s administration who remain on temporary furlough (see Kallanish passim).