Day: 3 July 2020

The EUROMETAL Online Presidency Meeting took place online on 2^nd of July 2020 from 15h30 to 17h00.

The first Presidency Meeting of 2020 has been organized online due to Covid-19 pandemic and traveling restrictions. 

The agenda of the Presidency Meeting was proposed as follows:

1. Opening by EUROMETAL President
2. Approval of Financial Statement 2019
3. Talks with European Commission and National Federations
4. EUROMETAL Webinar (09.07.2020)
5. 70th Anniversary Summit in 2021

Road-bound steel transport faces increasing difficulty with obtaining permits for large loads, say Germany’s main steel federations, WV Stahl (mills) and WSM (fabricators).

Transports totalling more than 40 tonnes – including the weight of the vehicle – need a permit of exemption, which is increasingly questioned by the authorities, according to WV Stahl expert for transportation issues Achim Beerheide.

“The argument often goes that coils can be smaller, and lighter,” which is not pragmatic, he says. “Entire process chains from the mills to the fabricators are laid out for big coil sizes. With smaller coils, the production facilities cannot operate efficiently, which means losses in capacity and quality, and extra costs,” he tells Kallanish.

Moreover, splitting coils onto two trucks also means more emissions and more trucks on the roads. In principle, WV Stahl favours transportation via railways. But this is not an overall solution, given that many companies do not have a rail connection, Beerheide says.

A rebar stockholder manager on the Rhine describes the problem of establishing a rail connection. “Our company is lucky to have a rail connection,” he says. “But in my previous company I tried to establish one for three years, and that faced so many costs and so many requirements that I just gave up in the end.”

Euroconstruct (EC-19) area construction output is set to fall this year by -11.5% year-on-year, in line with the fall registered back in 2009, says the European construction research network in its latest outlook. A partial recovery is expected for 2021 and 2022 but levels will remain below those seen in 2018.

EC-19 area output grew 2.7% y-o-y in 2019, driven mainly by new constructions. Total construction output reached €1,700 billion in 2019. This year the decline is now expected to be -11.5% y-o-y. “The total construction output is expected to reach about €1,500 billion which corresponds to the level of 2015, hence losing several years of growth,” Euroconstruct explains in a note seen by Kallanish.

Among the largest countries, Germany will see output decrease by only -2.4% y-o-y, while Italy, Spain, France and the UK will see it dropping by as much as -12-33% y-o-y. Portugal and Poland will be among the few countries to register growth despite the coronavirus emergency.

“Total construction for EC-19 countries will see a rebound already next year by around 6% and then continue to grow by 3% in 2022, reaching an output level similar to the one in 2018,” Euroconstruct explains. “Still, there are downward risks to the forecast and the most significant one involves the coronavirus and the containment of it. Questions such as, will there be further lockdowns after restrictions are being eased or will everyday life start to go back to normal after the summer, are affecting the market view.”

Civil engineering is expected to be the least impacted segment within the construction sector, while residential and non-residential construction will suffer more in the 2020-2022 period.

Spanish holding Grupo Industrial Cristian Lay (CL) has proposed an offer for the 100% acquisition of steelmaker Gallardo Balboa, the potential investor tells Kallanish. 

The supplier 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 2019.

“CL has presented to the bank a proposal to lift the pre-contest of creditors declared by Gallardo Balboa, to reinforce the own resources by means of a capital increase and inject additional liquidity,” Grupo Industrial says. CL will guarantee all of Gallardo Balboa`s commitments to suppliers as well as maintain the activity of the steelmaker’s subsidiaries and continuity of its 900 employees, the investor adds.

“Our offer, compared to others that suppose the dismemberment of the company, guarantees the continuity of jobs and all the activity of Grupo Gallardo Balboa, especially that of the Jerez de los Caballeros,” says Grupo Industrial CL president Ricardo Leal. Both the Government of Extremadura and the Gallardo Balboa council have expressed their support for the negotiations.

“The potential investor commits to maintain all jobs in the company, which is essential for the region. It is the best offer for the interests of Jerez and Extremadura,” comments Government of Extremadura President Guillermo Fernández Vara.

Grupo Gallardo Balboa declined to comment on the negotiation process, but it is understood other parties are still interested in the assets of the steelmaker.

Max Aicher has acquired the assets of insolvent Czech forged steel producer Pilsen Steel, the German group tells Kallanish.

The Czech firm has been in insolvency proceedings since January 2019. It possesses a 70-tonne 150,000 tonnes/year capacity electric arc furnace-based meltshop and a ASEA-SKF ladle furnace. Liquid steel is poured into ingots and castings. The firm has foundry, forge and machining shops. It has 570 employees and supplies the shipbuilding, power generation and nuclear industries, as well as rolling mills.

Until 2010, the company was owned by Russia’s OMZ. Sales of €239 million ($268.5m) and Ebitda of €48.7m in 2008 demonstrate the capacity of the company in its peak years. The next owner, Igor Shamis, was unable to secure sufficient demand and the company’s results substantially deteriorated, according to Tarpan Partners who acted as financial advisor in the insolvency proceedings.

“The macroeconomic crisis, Russian sanctions, and global overcapacity led to insolvency (reorganisation) in 2012-14,” Tarpan says. “Since 2014, the company was owned by its largest 2014 creditor, Vneshekonombank (VEB Kapital), a Russian state institution. The results have not improved since then.” Pilsen Steel posted sales of €32.7m and negative Ebitda of €23.1m in 2018.

A Max Aicher spokesperson tells Kallanish it is “…currently unable to provide any specific information about the further use of the acquired business.” It first needs to find a consensus with the city of Pilsen and the Czech Ministry of Economy on the future use of the steelworks. “We do respect the location’s longstanding successful industrial tradition and want to combine it with the tradition of Max Aicher in a future-proof way,” the spokesperson adds.

The German firm declined to comment on developments at Slovakia Steel Mills (SSM) since it was acquired in 2018 by Max Aicher’s Hungarian subsidiary, Ozdi Acelmuvek.

Global Stainless steel melt shop production fell 8% year on year to 11.7 million mt in the first three months of 2020, Brussels-based International Stainless Steel Forum (ISSF) said July 2.

In Europe, Q1 stainless steel production was at 1.79 million mt, 6.3% lower year on year, ISSF said.

In the US, production of 627,000 mt was 10.9% down year on year, while in China output was 9% lower at 6.08 million mt.

In Asia, not including China and South Korea, stainless steel output was 3.8% lower year on year at 1.89 million mt.

Although priced higher than carbon steel, stainless steel has in recent years increased its market presence in construction, transport and hygiene applications due to its superior corrosion resistance.

Stainless steel production is the biggest consumer of nickel metal.

— Diana Kinch

The UK government confirmed July 2 it had provided an emergency loan to steelmaker Celsa Steel (UK) Ltd. to allow the company to continue trading amid difficult market conditions caused by the coronavirus pandemic.

“The agreement will safeguard a key supplier to the UK construction industry and secures more than 1,000 jobs, including more than 800 positions at the company’s main sites in South Wales,” the Department of Business, Energy and Industrial Strategy (BEIS) said in a statement.

A report in the Financial Times estimated the loan package to Celsa Steel (UK) at GBP30 million ($37.39 million), but BEIS said it could not immediately confirm the amount.

Celsa Steel (UK) operates an electric arc furnace in Cardiff, Wales and is the largest UK manufacturer of reinforcing steel with an annual long products capacity of 1.2 million mt.

UK steelmakers have been hard hit by the pandemic which caused a substantial drop in demand in their two main consuming sectors, construction and automotive, which continue to be overshadowed by concerns over future investments and costs in the current absence of a Brexit trade deal.

Celsa was not immediately available for comment July 2.

As part of the loan, which is expected to be repaid in full, the company must meet a series of legally binding conditions, which the government has negotiated to ensure the loan benefits the workforce, business and wider society, BEIS said.

“This will ensure public money is used to aid wider government policies to further benefit the UK. These conditions include commitments to protect jobs, climate change and net-zero targets, improved corporate governance, such as restraints on executive pay and bonuses, and tax obligations. It has also required further financial commitments from shareholders and existing lenders,” it said.

The government said it has brought together the firm’s management, shareholders and other lenders to create a strong package of support for the company, its workers and UK economy. “This is a good deal for all parties,” it said.

Tata Steel situation

The government is also understood to be close to announcing a support package for Tata Steel Europe, which operates a blast furnace at Port Talbot, Wales, and is the UK’s largest steelmaker. Tata, which has around 8,000 employees in the UK, is reported to have asked the UK government for a GBP 500 million loan. A BEIS spokesman could not confirm July 2 if Tata was among a number of companies receiving loans.

British Steel — recently purchased by China’s Jingye Steel Group — and Liberty Steel Group are also understood to have applied for UK government support. According to S&P Global Platts calculations, so far, cumulative loan requests to the UK government from steel producers are approaching GBP 1 billion.

The support scheme under which the steelmakers have applied for help as companies of strategic importance is dubbed Project Birch.

In March, the government established a broad package of support schemes for companies of all sizes across sectors, to protect businesses and livelihoods during the pandemic.

Through its Coronavirus Business Interruption Loan Scheme, the Coronavirus Large Business Interruption Loan Scheme and the Bounce Back Loan Scheme, more than 1 million loans have been approved – while 9.3 million jobs have been protected through the Coronavirus Job Retention Scheme, BEIS said.

“In exceptional circumstances, where a company is of strategic importance and all other options have been exhausted, the government may consider providing bespoke support,” it said.

More broadly in support of the UK’s steel industry, the government has provided more than GBP 300 million in electricity cost relief since 2013, public procurement guidelines with annual reports on the proportion of public sector steel bought from British firms and details of a steel pipeline on national infrastructure projects worth around GBP 500 million over the next decade, BEIS said.

— Diana Kinch