Day: 20 November 2020

Thyssenkrupp is seeking an expansion on the North American market for its steel and materials distribution division, Materials Services.

At the firm’s annual press conference on Thursday, chief financial officer Klaus Keyberg confirmed these ambitions to Kallanish. They were reported earlier in a newspaper interview with chief executive Martina Merz. Thyssenkrupp is thus treading the same hunting ground as the other big German steel distribution group, Klöckner & Co.

The North American market “…is very much fragmented, with low market shares for each of the players, and much consolidation activity going on,” Keysberg explained. In addition, he noted that margins “…are just much better” Stateside, and that additional services like processing “…are much better paid than in the EU”.

Unlike its steel production division and some of the other activities within the conglomerate, Materials Services is the sole unit thyssenkrupp AG decidedly wants to hold on to, and expand.

In the fiscal year ending 30 September 2020, thyssenkrupp’s overall shipments were lower year-on-year in all regions and operating units. This is partly due to the absence of group-internal direct-to-customer business, which was partially transferred to tk Steel Europe in the prior year.

In total, Materials Services sold 8.7 million tonnes of materials in the reporting period, -11.4% less than in the prior year. With the exception of the volatile nickel price, prices in all main product segments were lower on average than a year earlier.

Order intake and revenue were each at around €11.3 billion ($13.4 billion), each -18% down year-on-year. Ebit was negative €733 million, versus positive €88m a year earlier.

New Italian scrap import contracts from other European countries are stable month-on-month, traders tell Kallanish.

Scrap import contracts are usually agreed between the tenth and 15th day of each month. This month Italian mills are paying €250/tonne ($296) delivered on average for the imported mixed grade new arising quality E8, in line with domestic E8. Some grades have remained stable compared to October, while the high-quality grades such as E8 increased by €10/t m-o-m, sources suggest.

Traders, however, are noticing a short scrap supply in Europe and a purchasing frenzy in Eastern European countries to meet the high level of rebar demand stemming from strong construction sector activity.

This, together with demand from Turkish buyers, is also creating tight supply. “Italian mills refuse any price increases, but some are finding themselves without material unless they make quick decisions and pay €10/tonne increases,” a trader comments. Import prices for lower-quality material, such as steel turnings or cheaper demolition grades, currently in strong demand, are also forecast to increase significantly next month on short supply.

This month, Eastern European countries such as Czech Republic and Poland have seen scrap increasing by €5-10/t in their domestic markets. Italy has seen a €5/t decrease month-on-month so far, while French and German scrap has remained stable or increased slightly.

For December, and considering fast-rising international values, sources forecast hikes of €15-20/t on the domestic markets in Italy, Germany, France and Eastern European countries. A similar increase is forecast to happen on import prices into Europe, Kallanish hears.

IndustriALL, the European association of trade unions, has issued a letter calling for the European Union to develop a new steel action plan, taking into account the Covid-19 pandemic.

European authorities previously approved a steel action plan in 2013. This touched on many important aspects including a level playing field and the supply of raw materials. “It certainly supported the recovery of the steel industry at the time,” IndustriALL says in a note seen by Kallanish. “However, European steel production is again in a very critical situation and we need a new European Steel Action Plan to tackle today’s challenges, paying special attention to the impact of Covid-19.”

Unions believe the centre of the new plan should be support for a “greener” and sustainable European steel industry. “Our key demands include the need to invest in European steel plants and the decarbonisation of the sector, ensuring fair international trade and implementing fair trade defence measures as well as ending global overcapacity. Crucially, the recovery of the European steel industry will depend on its workforce,” the association notes.

The call from IndustriALL comes at a crucial time for the sector, as many European governments are discussing potential support to key steelmakers.

Thyssenkrupp has limited time left to find a potential buyer for its heavy plate plant, which is under threat of shutdown next year, the company’s executives told Kallanish during the group’s annual conference on Thursday. This comes after talks with various parties to sell the unit have so far failed.

“The sales process for the unit is ongoing and no decision has been made on whether or not to shut it; however, no buyer has been found so far which increases the risk of closure,” confirmed human resources chief Oliver Burkhard. The tender process will be closed on 31 December, he added.

Thyssenkrupp says there should be no layoffs if the plant is closed. Among other things, those workers affected are to be offered jobs at other tk plants.

Earlier this week, in response to rumours of the plate mill closure, Union IG Metall complained about a “…black day” for the steel industry in North Rhine-Westphalia (see Kallanish passim). “The Covid-19 situation broke the neck of the sales process, which was carried out with great care,” IG Metall NRW district manager Knut Giesler told local media. “The current situation shows how urgently state participation is needed for thyssenkrupp’s steel division.”

The heavy plate plant, which employs about 800 employees, was earmarked for sale or closure under an ongoing asset review by the company. The mill produces plate for the construction industry, shipbuilding and pipelines, among other applications.

Italian economic development minister Stefano Patuanelli says the government will be a majority shareholder in former steelmaker Ilva, now ArcelorMittal Italia.

During televised question time at the Italian Chamber of Deputies, followed by Kallanish, Patuanelli said the government will be a significant presence. It will guarantee employment, a “greener” Ilva and the sustainability of the new industrial plan. He added that the government “…will not be a minority shareholder”.

According to local press reports, Italian authorities are willing to invest €1 billion ($1.18 billion) to relaunch the steelmaker.

Meanwhile, ArcelorMittal Italia has replaced its chief marketing officer, Carlo Malasomma, with Alessandro Faroni, a director under the former Riva ownership. It is also understood that ArcelorMittal is reorganising its commercial structure to shield the Italian unit from its other European activities (see Kallanish 10 November).

ArcelorMittal’s actions, along with the latest government declaration, are adding fuel to the rumours that ArcelorMittal may exit Ilva or keep a heavily reduced stake in the steelmaker.

The parties have until the end of November to reach a final agreement on the planned investment by Italian authorities. In the event an agreement is not reached, AM InvestCo, ArcelorMittal’s Italian entity, has a withdrawal right, subject to an agreed payment of €500 million.

Germany’s Thyssenkrupp is looking to close its plate mill as it failed to find a buyer while still pursuing discussions with several other steel producers to find a buyer or partner for the struggling entire steel unit until deciding in March next year, the company said Nov. 19.

The company is also evaluating whether a “stand-alone” future strategy without a partner for the steel unit can work. The company also highlighted the transformation to green steel will need government funding and it would be in discussion with the state and federal governments.

Thyssenkrupp received a non-binding offer from Liberty Steel for its steel unit in October.

Additional job cuts, restructuring of steel

During the annual results press call Nov. 19, the company said it was not possible to find a buyer for its plate mill in Duisburg-Huettenheim until the deadline of Dec. 31, 2020 and is seeing a “high likelihood” to close the mill 2021, while the stainless steel plant AST in Italy has gathered undisclosed interest. Thyssenkrupp is further continuing with the profitability analysis of the Bochum plant.

There will be 7,400 further layoffs, of which 5,300 will be in Germany. The cuts will be across different parts of the company but in materials business especially. The job cuts add to the already 3,600 jobs axed, the company said on the call.

The current capacity utilization rate at the Thyssenkrupp steelworks have further increased from the previous rate of “just over 60%”, CFO Klaus Keysberg told S&P Global Platts during the call, adding he cannot comment on how much but highlighted the production is not back on full rate. Platts understands a full rate is usually 90-100% utilization.

Overall, the effects of the coronavirus pandemic were increasingly felt in the steel unit in the course of the third quarter at Thyssenkrupp. Full-year order intake and sales were down by 17% and 20%, respectively. Due to the “collapse” in shipments and the cost pressure from weak capacity utilization, adjusted EBIT showed a loss of Eur946 million compared with a profit of Eur31 million a year earlier.

Steel production, shipments up in Q4

Production of crude steel increased in Q4 to 1.8 million mt from 1.6 million mt in Q3, but the full-year fell 12.8% to 7.6 million mt. Crude steel production at semis producer HKM fell further in Q4 to 417,000 mt from 485,000 mt in Q3. The full year production stood at 2.3 million mt, down from last year’s 2.6 million mt.

Hot-rolled shipments increased in Q4 to 765,000 mt from 637,000 mt in Q3 on increased demand from the automotive industry. The full-year shipments of HR amounted to 3.1 million mt, down 18.1% on the year.

Cold-rolled shipments grew from 1.2 million mt in Q3 to 1.6 million mt Q4, seeing an overall 9.3% y-o-y drop to 6 million mt.

— Laura Varriale