Day: 24 August 2020

Mechanical engineering companies in Germany suffered a major decline in orders in the first six months of the current year, Kallanish learns from their association VDMA.

In the first half of 2020 incoming orders fell by -16% in real terms compared with the previous year. The decrease in orders from abroad was much stronger than the decline in orders from Germany, VDMA points out.

The difficult situation becomes clearer when looking at the three-month period from April to June, in which orders dropped by -30% compared with the previous year.

Domestic orders fell by -20% and foreign orders by -34%. Orders from the euro countries shrank by -24%, and by -38% from non-euro countries. The decline is attributable to a global economy weakened by trade disputes and political upheavals, which was additionally hit hard by the Covid-19 pandemic, the association’s economic expert Olaf Wortmann explains.

In June 2020, order intake in the German mechanical engineering industry fell by -31% in real terms y-on-y. While domestic orders were down -12%, orders from abroad even dropped by -38%.

“There is, however, a base effect that plays a role here,“ Wortmann noes. “In June 2019, there was an enormous amount of large plant business in the orders from non-euro countries.” Hence, orders from non-euro countries decreased by -44%. From the euro zone, the industry recorded a decline in orders of -14%.

China Baowu group will become the controlling shareholder of Taiyuan Iron & Steel (Tisco), as well as the actual controller of Tisco Stainless. This will make Baowu Group the world’s first 100 million tonnes/year crude steelmaker, Kallanish notes.

On 21 August, Shanxi State-owned Assets Supervision and Administration Commission, Tisco’s 100% shareholder, signed an agreement with Baowu to transfer a 51% stake in Tisco to Baowu for free.

After the completion of this transfer, Baowu will indirectly control 62.7% of Tisco Stainless shares through Tisco, which means Baowu will achieve effective control of Tisco Stainless. The ultimate controller of the three companies will be the State-owned Assets Supervision and Administration Commission of the State Council (SASAC).

According to the World Steel Association, Baowu’s and Tisco’s crude steel output were 95.47 million tonnes and 10.86mt respectively in 2019. After this reorganisation, Baowu will surpass ArcelorMittal’s 97.31mt crude steel output in 2019 to officially become the world’s top steel enterprise. Baowu Group and Tisco combined accounted for 10.67% of China’s steel output in 2019.

According to targets from the Ministry of Industry and Information Technology, national crude steel output must be controlled under 1 billion tonnes/year. The output of the top ten steel companies should account for no less than 60% of national output. Baowu would account for almost one fifth of production of the top ten steelmakers, assuming no further expansions.

In terms of stainless steel, the capacity of Baowu and Tisco Stainless, plus Baosteel Desheng’s capacity to be commissioned next year, will be more than 10m t/y. Baowu and Tsingshan will become the only two steelmakers with an annual stainless output of more than 10mt. The industrial concentration of stainless steel is expected to increase, since the top three companies’ output will account for 60% of overall stainless production in the future.

Baowu also became the largest shareholder of Tibet Mining Corporation two months ago. The company’s main products are chromite, copper and lithium ore, and chromite is an important raw material for stainless steel.