Day: 26 June 2020

The European Automobile Manufacturers’ Association (ACEA) has issued its latest forecast, expecting car registrations to fall by -25% this year due to the coronavirus pandemic.

The previous forecast issued in January indicated registrations in the EU were expected to fall -2%, but the sector has been one of the most hit by the sanitary emergency.

“The industry association expects car sales in the European Union to tumble by more than 3 million from 12.8 million units in 2019 to some 9.6 million units this year,” ACEA explains in a note seen by Kallanish.

So far, the industry has contracted more than -40% year-on-year, with a partial recovery expected in the coming months as lockdowns ease. If the forecast is confirmed, nevertheless, the sales volume of cars will be the lowest since 2013, when the industry was still suffering from the 2008-2009 crisis.

Bloomberg issued a similar outlook this week, indicating that car sales should go down -20% y-o-y this year. The firm added that it expected steel demand from automakers in Europe to be down -40-50% y-o-y in H1, only to rebound by 5% y-o-y in H2.

Gallardo Balboa says it is concluding the sale of its assets to a local industrial group and refinancing its debt.

The Spanish steelmaking group specialised in the supply of light long products for the construction sector was acquired at the end of last year by investment fund Kohlberg Kravis Roberts (KKR). The move was designed to save the company from insolvency. The board of Gallardo Balboa has been working on a long-term solution for the company since November last year, which includes the acquisition by an industrial group, for which negotiations are very advanced.

The coronavirus emergency has somewhat delayed the conclusion of the deal, but Gallardo Balboa says it is still operational despite making use of the temporary layoff scheme for some units, Kallanish notes.

Local press in Spain report the buyer of the company could be Megasa, which has steel operations in Spain and Portugal.

Czech construction output is forecast to fall -2% on-year in 2020 as a result of the Covid-19 pandemic impact, following 2.6% growth in 2019, industry participants say in the latest edition of CEEC Research’s Czech construction report. Output is then seen inching down a further -0.4% in 2021.

The construction industry is faring better during the crisis than other sectors. In March, construction output fell by only -2.3% year-on-year in real terms, which was less than expected. Although the sector confidence index fell by 3.1 points on-month in the Czech Statistical Office (CZSO) business survey for May, meanwhile, it was still at a high value of 104.2. Moreover, employment expectations over the next three months rose slightly.

Building construction is seen falling -2.4% this year, but civil engineering construction should fall by a less steep -1.4%, Kallanish notes.

“There is a risk of a slight decline in the market, mainly due to reduced demand from private builders (investors),” Czech industry and trade minister Karel Havlicek says of the construction sector. “In order to mitigate the consequences of the Covid-19 pandemic, contracts awarded by state investor organisations, in particular the Directorate of Roads and Motorways and the Railway Administration, will be very important.”

The Czech State Fund for Transport Infrastructure budget has been increased by CZK 20 billion ($836.5 million) to CZK 106.5 billion ($4.45 billion), and negotiations are ongoing to raise this further to CZK 114 billion, Havlicek adds.

Tomas Koranda, chairman of construction firm Hochtief CZ, however, says “…there will be a further slowdown in the economy and a decline in state budget revenues with a dramatic increase in extraordinary expenditures. This will lead to a consequent reduction in public investment expenditure, and it is therefore possible to expect the suspension of some public contracts or the postponement or cancellation of some contracts.”

Czech Republic’s main construction steel supplier is Liberty Ostrava, while compatriot steelmakers Trinecke Zelezarny and Vitkovice Steel supply mainly other end-use sectors.

Ukraine’s steel output decreased by 10.4% on the year to 1.64 million metric tons in May, down from 1.83 million mt produced in May 2019 due to weak demand and falling prices on world markets amid the coronavirus pandemic, steel making industry association Ukrmetallurgprom said June 25.

“The drop in steel output shows that the crisis in the Ukrainian steel industry continues,” Ukrmetallurgprom said in a statement. “The main reasons for the decline in production of basic metallurgical products, along with the global quarantine, are lower prices and reduced demand for metal products.”

Production of rolled steel dropped by 16.3% on the year to 1.46 million mt and pig iron output fell 0.2% to 1.67 million mt.

Coke output decreased by 12.2% on the year to 805,000 mt in May, down from 917,000 mt produced in May 2019.

Ukraine’s steel industry, which employs 700,000 workers, has asked the government for support to stimulate domestic demand and to make sure that power prices and transportation tariffs remain steady to make sure the sector can weather the crisis.

The association urged the government to cut tariffs for transportation by railroad and seaport handling for the country’s steel sector to stay afloat.

“The steel industry of Ukraine needs a competent state industrial policy to ensure favorable tariffs, provide quality service by state transport monopolies, create conditions for expanding investment in the [manufacturing sector and the related process of increasing metal consumption and protection,” Ukrmetallurgprom said. “Otherwise, the situation could turn into a catastrophe for Ukraine’s economic stability and national security.”

In January through May, Ukraine’s production of steel decreased by 10.5% on the year to 8.295 million mt from 9.27 million mt in January-May 2019, according to Ukrmetallurgprom.

Output of steel pipes and tubes dropped 29.8% on the year to 330,000 mt in January-May, production of pig iron fell 6.5% to 8.158 million mt and rolled steel output fell 6.2% to 7.43 million mt.

Production of coke decreased by 9.1% on the year to 4.02 million mt in the period, down from 4.421 million mt produced in January-May 2019.

As of June 16, out of 21 blast furnaces 18 were in operation in Ukraine, the association said. Also in operation were four out of eight open-hearth furnaces, 14 out of 16 converters, six out of 15 electric furnaces and 15 out of 16 continuous billet casting machines.

In 2019, Ukraine reduced steel output 1.4% on the year to 20.8 million mt, according to Ukrmetallurgprom.

— Alexander Bor