Day: 14 August 2020

The US Department of Commerce has proposed modifying anti-dumping (AD) and countervailing (CV) duty order regulations, Kallanish reports.

The proposed modifications include the creation of standalone rules to govern Commerce’s conduct of circumvention inquiries and the creation of rules for Commerce to assist US Customs and Border Protection in combating duty evasion. Other modifications include creating rules to prevent foreign companies from abusing new shipper reviews and updating existing rules on scope inquiries in order to streamline procedures and expedite deadlines.

If adopted, the changes would increase the efficiency of trade proceedings as well as create new enforcement tools to be used in combating circumvention and evasion, Commerce states.

“Since the beginning, President [Donald] Trump and his administration have remained steadfast in defending the interests of American workers and the vigorous enforcement of our trade remedy laws, so those who take risks, innovate, create new products or toil on the farm receive all the protection from unfair trade to which they are entitled. The regulations being proposed today reaffirm our commitment,” says US Department of Commerce secretary Wilbur Ross.

As of 13 August, Commerce has initiated 281 new antidumping and countervailing duty investigations under the Trump administration. This is a 260% increase from the comparable period under the Obama administration. Commerce maintains 531 AD/CV duty orders on unfairly traded imports, compared to the 368 orders in place at the end of the Obama administration.

The deadline to submit public comment on the proposed rules is 14 September.

Turkish pipe producers are struggling to sell in the global market in the absence of European buyers.

Although European buyers still want to benefit from the strengthening euro, safeguard quotas prevent them from buying from Turkey. As a result, only a limited number of sales have been concluded to the European market this week. Demand from other markets has been insufficient to fill the gap left by the withdrawal of EU buyers.

Hot rolled coil prices, meanwhile, which increased to $500-510/tonne last week, have further risen to $515-525/t ex-works this week.

Turkish pipe producers are unable to reflect the increases seen in HRC prices to pipe prices, due to low demand.

Most offers for Turkish electric resistance welded (ERW) pipe made from S235 grade HRC have remained unchanged at $535-545/t fob Turkey theoretical weight this week. However, welded pipe offers at above $555/t fob are also available from some producers that have advantageous production costs or are booked for longer.

Some Turkish pipe producers have concluded sales to the UK this week, at $520-530/t fob theoretical weight. African buyers have continued concluding bookings from Turkey; however, sales quantities are too low at below 100 tonnes.

A Turkish pipe producer tells Kallanish: “We achieve the best profit margin in the European market. No other market gives us those margins as they buy thinner material. Our costs increase as the material gets thinner.”

Another producer says: “We are suffering from higher HRC prices. We have increased our prices by $50/t while our raw material costs increased $90/t. Insufficient demand is preventing us from increasing our prices at the same rate.”

Sales to Turkmenistan have continued this week, though sellers are worried about receiving payments. Israel is seen to have inquired about some material this week; however, their price expectations are at much below Turkey’s offer prices.

Thyssenkrupp’s performance in the first nine months of its 2019/2020 fiscal year through September has been significantly impacted by the initial effects of the Covid-19 pandemic.

As a result of temporary plant closures at customers, production in many areas came almost to a halt at the start of the third fiscal quarter through June.

The Materials Services division (distribution), continued to feel the effects of pandemic-related weak demand and declining prices in virtually all product segments. Both order intake and sales were clearly negative in a difficult market environment, with a noticeable decline in volumes. Nine-month order intake dropped by about one third year-on-year to €2.4 billion ($2.84 billion), thyssenkrupp says in its interim report.

The situation, particularly in warehousing and distribution, the auto-related service centres and at aerospace, weighed on business and led to negative earnings effects. Accordingly, adjusted Ebit for the nine-month period was negative €62 million down from a profit in the corresponding prior-year period of €119m.

The exception was plastics, which profited from the sale of transparent plastic sheets as a form of protection against the coronavirus.

At a conference call monitored by Kallanish, thyssenkrupp AG chief executive Klaus Keysberg maintained the group intends to hold on to its materials distribution unit. Its future in the group “…will not be questioned as it has promising prospects in the long run,” he said.

Depending on the speed at which production is restarted by customers, thyssenkrupp expects the unit to stabilise or achieve slight improvement in the September quarter.

Thyssenkrupp Steel Europe plans to improve its capacity utilisation going forward, following painful losses in its third fiscal quarter through June.

During the earnings call of parent thyssenkrupp AG, chief financial officer Klaus Keysberg said the steel plants saw production dip -38% at the beginning of the Covid-19 lockdown. Utilisation has meanwhile recovered to between 60% and 70%, he told Kallanish upon request. The idled blast furnace at Hüttenwerke Krupp-Mannesmann (HKM) is meant to come back on stream, he added.

The group nevertheless remains very cautious with predicting a clear improvement for tk Steel Europe. It says it “…expects almost all businesses, with the possible exception of Steel Europe, to report a stable performance or a slight quarter-on quarter improvement in the fourth [fiscal] quarter.”

The group suffered an operating loss (adjusted Ebit) of €679 million ($804m) in the June quarter. In the nine months through June, the loss was €1.2 billion, with Steel Europe alone accounting for €706m. Keysberg conceded that those steelmakers that depend on the automotive industry have been hit harder by the pandemic than others. Still, he maintained that the company’s focus on automotive-grade steels remains promising in the long run.

The steel unit generated a positive cashflow for many years, and the enhanced investments announced in May will keep it fit and competitive, Keysberg observed. He did not comment on speculation about partnerships with other steelmakers, but said that talks are being continued in this regard.

Tata Steel redirected sales to global markets in the first fiscal quarter through June (FQ1) when the Covid-19 lockdown paralysed Indian domestic demand, hitting 1.46 million tonnes of exports. The steelmaker has since lifted capacity utilisation to 95% and reduced exports as domestic demand is improving.

Demand in the September quarter has so far been “…much better” than a typical monsoon quarter, Tata says, adding that the price outlook continues to improve.

The export surge in FQ1 helped limit the decline in Tata Steel India’s sales to -26% on-year and -27% on-quarter, compared to the -55% on-quarter drop in overall Indian steel demand, the producer says. Deliveries totalled 2.93 million tonnes. Revenue fell -40% to INR 12,689 crores ($1.7 billion) and profit after tax was down -74% to INR 411 crores.

India average steel realisations were lower due to the Covid-19 impact in FQ1. About INR 2,000 crores of costs were under absorbed due to the lower volumes and have been charged to the profit and loss account.

“During the quarter, we recalibrated our operations and our sales across geographies in line with underlying regulatory and market conditions,” Tata Steel chief executive TV Narendran says in a report seen by Kallanish. “While this had an adverse impact on our volumes and our margins, we were successful in mitigating the impact as we pivoted the business towards export markets and successfully generated free cashflows despite adverse market conditions.”

“We are further ramping up capacity utilisation and increasing domestic sales which will lead to an improvement in our margins in coming quarters,” he continues. “While the risk of further Covid-19 outbreaks remains, we are cautiously optimistic that the worst is behind us.”

Tata Steel’s consolidated sales fell -22% in FQ1 to 4.93mt, with revenue down -32% to INR 24,289 crores and the firm turning to a net loss of INR 4,609 crores versus a profit of INR 695 crores a year earlier.

Tata Steel Europe performance was affected by the overall weakness in economic activity in Europe. “Spreads are at unsustainably low levels but are expected to improve going forward,” Narendran says of Europe. The company received short support from the UK and Netherlands governments in FQ1, including cash flow deferrals of payables.

German steelmaker Thyssenkrupp is still running at “over 60%” capacity utilization, reiterating that there is no update on a steel joint venture or sale while talks with undisclosed partners are ongoing, CFO Klaus Keyberg said at a press call Aug. 13.

Thyssenkrupp remained vague on plans for the steel unit, only highlighting that the management would be talking to external partners. Keysberg also did not rule out a complete sale of the unit at during the call on the company’s fiscal third-quarter (April-June) earnings.

“Following weeks of a great deal of speculation, there is still no comment today. We are in talks, keeping our options open,” he said, responding to a question about Thyssenkrupp exiting the steel business entirely by saying: “the options are wide-ranging.”

The sale of the Elevator unit late July has improved Thyssenkrupp’s overall position, but Keysberg highlighted that the much needed cash injection of the sale worth Eur17.2 billion ($20.4 billion) would not last forever and that measures in steel in particular would be “rigorous.”

“Maybe that is a difference to the past — the measures are more detailed,” CFO Klaus Keysberg said.

“We have performed worse than our peers, you have to admit that. Restructuring has been overdue, it should have happened earlier,” Keysberg said.

Thyssenkrupp will carry on with its so-called “20-30” restructuring plan which entails staff cuts and investments to improve the product portfolio and quality.

Slow ramp up in line with customer demand

Current capacity utilization at the steelworks would be “over 60%” and slowly ramping up in line with the automotive industry. The blast furnace at semis producer HKM remains down, but will be restarted while other furnaces would then lower their output — although timing for this had not yet been determined.

Thyssenkrupp will continue to focus on the automotive industry, despite being one of the major reasons the steel unit underperformed, as there are “still long-term growth prospects.”

“Uncertainty is still high. We also don’t know what is going to happen to auto demand next year if buying incentives for consumers stop,” Keysberg said.

Keysberg hinted that a sale of the Materials Business into a JV would be off the table for now, and the unit remaining a core business for the group despite suffering from similar seasonal problems, high fixed costs and structural problems to the steel unit.

Production cuts become visible in Q3

Crude steel production at Thyssenkrupp decreased 26.11% year on year to 1.55 million mt in fiscal Q3, while HKM produced 24.2% less at 458,000 mt. Shipments of cold-rolled material dropped 30.1% to 1.16 million mt, hot-rolled production dipped 39.7% to 637,000 mt.

Italian special steel producer AS Terni produced 176,000 mt of steel in Q3, down from 222,000 mt a year earlier due to a temporary plant closure in April during the national lockdown in Italy.

Order intake in Q3 at the steel unit was down 57% year on year at Eur943,000 with significantly lower volumes across all industries, in particular the auto industry. Materials services also had a major drop in orders of 33% year on year to Eur2.24 million, although slightly mitigated by orders from the plastics industry.

The company expects a 10% increase in shipments for Q4, but also higher raw material prices, describing them as “still insufficient cost base.”

— Laura Varriale

A fire broke out the morning of Aug. 13 at the Arvedi Cremona, Italy, steel plant, a mill source close to the matter told S&P Global Platts.

The fire is not expected to affect production at the 3.4 million mt capacity plant, although the mill source said word of the fire would “help to increase Italian steel prices.”

The fire was said to have been caused by a short circuit in the plant’s cooling tower and is now reportedly under control, with no worker fatalities or injuries reported.

The Arvedi Cremona production site is Europe’s first and the world’s second mini-mill for the manufacture of flat rolled steel.

The plant’s hot-rolled production area has two complete lines equipped with two electric arc furnaces), four ladle furnaces and one vacuum oxygen decarburization furnace.

— Amanda Flint