Day: 31 July 2020

ArcelorMittal posted a first-half operating loss of over $600 million, commenting that the period was “…one of the most difficult in the history of the company.”

The group saw the Covid-19 pandemic impacting all areas of its business, with steelmaking affected more than the mining unit.

H1 sales reached almost $26 billion, down by over -30% year-on-year. Crude steel production was down by over 12 million tonnes y-o-y to 35.5mt globally, while iron ore production was less impacted, moving down by less than 1mt to 27.9mt.

Looking forward, the company sees some signs of recovery across markets, but it remains cautious. “There are now signs of activity picking up, especially in regions where lockdowns have ended, but clearly it is prudent to remain cautious about the outlook,” chairman Lakshmi Mittal says in a report seen by Kallanish. “Against this context, we are examining what structural changes might be required to ensure the company is well configured to prosper in the coming years as demand recovers.”

In Europe, ArcelorMittal’s largest market, operating losses more than doubled y-o-y in H1, reaching $655m against a loss of $290m in H1 2019. The results were impacted by significantly lower shipments as well as lower average steel selling prices, which declined from $716/tonne in H1 2019 to $636/t in H1 2020.

ArcelorMittal is continuing to adapt production levels to market demand, but maintains the flexibility to quickly restart hot idled capacity on a regional basis as demand improves, it says.

Nevertheless, the company notes that “…the experience of the last 4-5 months has forced the business to operate differently. It has shown that it is possible to operate with a leaner cost structure.” The group thus wants to identify and develop its options for further structural cost improvements. This will “…position the fixed cost base for the post-Covid-19 operating environment,” it says. More details on the new strategy are expected next year.

Germany’s largest road haulage company for steel transport, Hergarten, feels it will emerge from the coronavirus crisis in a stronger position than before, thanks to its efforts with digitalising processes.

“We have been lucky that we had all major internal processes moved to the cloud in time before the coronavirus crisis came on,” says managing director Marcel Hergarten. The company, therefore, has further digitalisation projects planned for the time after Covid-19. Personnel and vehicle files will be available online in the future, and the telematics and merchandise management systems of the company and its business partners will be synchronised.

The digitalisation started some ten years ago, and over the years was pushed to cushion the notorious lack of skilled personnel in the transportation sector. “The enormous value-added of digitalisation for a medium-sized company like us, despite initial costs and efforts for integration, has never become clearer than now,” Hergarten says.

On the competition of Uber Freight, which started its services in Germany last year, the company sees little danger for local transportation groups, which are highly specialised. “For us, such app-based providers can even be a sensible addition at times,” Kallanish hears from Hergarten. For example, the company frequently uses Europe’s largest freight exchange, Timocom, for bookings to offer space for return trips to avoid unladen journeys.

Based in Cologne and Düsseldorf, Hergarten operates 180 trucks with 300 employees, plus warehouses with steel processing facilities.

Most Italian steelmakers will shut down for 2-3 weeks on average for maintenance works this summer. Firms had been willing to stay open to compensate for the long shutdown during the Covid-19 lockdown, but domestic and export demand for finished long products is not strong enough, market participants tell Kallanish.

Longs producer Beltrame will shut down from the start of next week to 25 August. Rebar producers Alfa Acciai will be closed from 8 to 25 August, and Duferdofin Nucor from 26 July to 31 August. Riva Acciaio in Caronno closed on 25 July and is set to reopen on 23 August. Ori Martin will be idled from next week to 23 August. Longs producer Accieirie Venete is also shutting down from 27 July to 21 August.

Tenaris Dalmine is closed from 20 July and will restart operations on 23 August, although the rolling mill was idled slightly later on 27 July.

Rebar maker Feralpi Siderurgica, a net rebar exporter, will implement short stoppages and keep producing to satisfy both domestic and export orders. The company will idle its main works in Lonato del Garda for only a week from 10 to 16 August. Acciaierie Calvisano, part of Feralpi, will be idled from 8 to 21 August, while Feralpi Profilati Nave is shutting down from 27 July to 21 August. The works in Lecco will also be idled from 3 to 28 August.

UK car production fell by 48.2% year on year in June, with half-year output running at its lowest level since 1954 despite a partial recovery from April-May lows, according to figures released July 30 by the Society of Motor Manufacturers and Traders.

“Although post-shutdown production slowly ramped up in the month, strict social distancing measures and weak demand across global markets continued to restrict output,” SMMT said in a statement.

A total of 56,594 units were produced in June, “rounding off [the] weakest six months since 1954,” SMMT said, adding that for the first six months of the year production of 381,357 units was down 42.8% on H1 2019 — a decline of more than 285,000 units.

June manufacturing for the domestic market was down by 63.8% year on year, reflecting the gradual easing of the UK’s retail lockdown, while production for export also fell, by a substantial 45%, the group said.

SMMT added, however, that overseas orders accounted for nine out of 10 vehicles built as key global markets, including the EU, China, US, South Korea and Japan, opened for business earlier than the UK.

“Recovery is difficult for all companies, but automotive is unique in facing immense technological shifts, business uncertainty and a fundamental change to trading conditions while dealing with coronavirus,” said Mike Hawes, SMMT’s chief executive, citing ongoing concerns over a possible “no-deal” Brexit.

According to a survey of SMMT members, six out of 10 automotive companies say COVID-19 has diverted resources away from Brexit preparations, while more than seven out of 10 view securing a tariff- and quota-free trade agreement between the UK and the EU as crucial to their future success.

The latest independent production outlook commissioned by SMMT now expects just over 880,000 cars to be produced in the UK this year — around 32% lower than 2019 and 30% less than anticipated in January pre-crisis, the group said.

“The analysis also suggests that without a positive trade agreement with the EU, and the industry trading on WTO terms with 10% tariffs, output could stay around the 800,000 mark, or less, to 2025,” SMMT said.

In contrast, a successful conclusion to negotiations with a zero tariff and quota free trade agreement would see car volumes recovering to pre-crisis levels of 1.2 million units within the next few years, with potential for growth thereafter, it added.

“The critical importance of an EU-UK FTA is self-evident for UK automotive. Our factories were once set to make 2 million cars in 2020 but could now produce less than half that number, a result of the devastating effects of the pandemic on top of already challenging market conditions and years of Brexit uncertainty,” said Hawes.

— Andy Blamey