Day: 15 April 2021

Italian agency Invitalia has injected Eur400 million ($480 million) of new equity into ArcelorMittal subsidiary AM InvestCo Italy, bringing the renaming of the subsidiary and its main operating unit.

AM InvestCo Italy will be called Acciaierie d’Italia Holding, and its main operating subsidiary, ArcelorMittal Italia, will be Acciaierie d’Italia.

The largest European steel producer said April 14 that an investment agreement with Invitalia, Italy’s agency for investment promotion and enterprise development, has been completed, forming a public-private partnership between the parties.

The long-waited recapitalization will help start its planned investments toward greener production and secure its future path. ArcelorMittal agreed to the government equity payment in December, and it was originally expected to take place by Feb. 5.

As previously reported, Invitalia will make a second equity injection of up to Eur680 million to fund the completion of the purchase of the former Ilva’s business, which is expected by May 2022, with Invitalia’s share increasing to 60% and ArcelorMittal investing up to Eur70 million to retain a 40% share and joint control.

Payment delayed

Italy is under a “technical government” led by former European Central Bank President Mario Draghi. On Feb. 13, the Lecce regional administrative court said ArcelorMittal had to shut all hot-end operations within 60 days at its Taranto plant to curb emissions. ArcelorMittal appealed this decision to the Italian State Council, with a final hearing on the issue due May 13. All these issues led to a delay in the payment.

Because of the uncertainty surrounding the company, the new government was not willing to recapitalize the company, but then because of the importance of the sector decided to put the former Ilva’s future at the top of its agenda and decided not to wait for the May 13 hearing, sources said.

Following injection of the fresh capital announced April 14, Invitalia will have a 38% share and equal voting rights, with joint control over the company.

According to sources, Draghi asked Italian executive Franco Bernabè to be the president of the board over government quotas, in a clear sign that the future of the largest Italian mill is a priority. Bernabè is considered one of the top Italian managers and has led key Italian groups such as Eni and Telecom.

Second only to Germany

Italy is the second-largest European steel producer after Germany. Last year, according to Federacciai, the Italian steel association, the country produced around 20 million mt of crude steel. According to a government document, the Italian steel industry produces revenues of Eur60-70 billion a year. Italy has two large flat producers. One is ArcelorMittal Italia, with an installed crude steel capacity of 9 million-10 million mt a year, and the other is Arvedi, with about 5 million mt of crude steel capacity.

According to unions, at the moment ArcelorMittal Italia is working with only two blast furnaces: Nos. 1 and 2. No. 4 stopped recently because of refurbishment work. Each blast furnace has a design capacity of 1.8-1.9 million mt/year of crude steel, but they are not working at capacity. The former Ilva steel works has five blast furnaces at its Taranto site. Blast furnace No. 5, the largest in Europe with a production capacity of around 3.5 million mt/year, was idled in 2015. Blast furnace No. 3 has a capacity of about 2 million mt/year of crude steel but was idled in 1994 and is to be dismantled.

Highest prices ever

Italian and European steel prices are at their highest level ever because of increased demand and low supply. Buyers told S&P Global Platts on April 14 that it is difficult to find material, and most of the companies don’t even quote. Platts’ assessments show that, since the beginning of this year, South EU HRC prices have gone up by about Eur240/mt EXW Italy.

On April 14, the Italian Parliament’s upper house, the Senato, discussed and approved a motion for the Italian government to put forward a strategic plan for the steel industry, in a move that underlined the sector’s importance to the country.

The document, which won a majority of votes and has been seen by Platts, commits the government to support the launch of a common industrial policy for the steel sector in Europe and to sustain technological reconversion processes.

Among the key points was a request to consider the extension to the steel sector of the “golden power,” the right of the Italian state to intervene in a company that is considered strategic.

— Annalisa Villa

ArcelorMittal will invest $1 billion during the next three years to make steel production at its Ukrainian subsidiary environmentally friendly, the company said April 14.

The announcement came shortly after a meeting between Ukrainian President Volodymyr Zelenskiy and ArcelorMittal board chairman Lakshmi Mittal.

ArcelorMittal, the largest foreign investor in the Ukrainian economy, owns the country’s largest steel producer, known as ArcelorMittal Kryviy Rih.

“The ArcelorMittal corporation will invest $1 billion in environmental modernization and production development in Kryviy Rih,” the company said after the meeting. “The ‘steel billion’ is aimed at reducing production impact on environment, steady enterprise development, reuse of resources and processing of industrial waste.”

The modernization program will run during the next three years and will be completed by the end of 2023, the Zelenskiy said in a separate statement.

“Investments in the Ukrainian economy and the environment are a positive signal for all investors,” Zelenskiy said in the statement, adding that Ukrainian authorities will provide “comprehensive support” to investors.

ArcelorMittal Kryviy Rih reduced output of steel by 12.1% on the year to 4.7 million mt in 2020, down from 5.3 million mt produced in 2019, according to the company, which said 2020 was an “unprecedentedly difficult year” due to the coronavirus pandemic.

Meanwhile, the company’s extraction of iron ore rose 4.5% on the year to 25.6 million mt in 2020, up from 24.5 million mt in 2019. Iron ore concentrate output increased 8.3% to 10.7 million mt, while production of sinter fell 7.9% to 9 million mt.

Production of coke fell 5.3% to 2.6 million mt from 2.8 million mt, the company said.

ArcelorMittal Kryviy Rih, based in the Dnipropetrovsk region, is the largest steel and mining company of Ukraine, producing about 20% of national steel output.

— Alexander Bor

ArcelorMittal has received €400 million ($478m) of new equity from Invitalia, the state company that is investing in the Italian steelmaker formerly known as Ilva. ArcelorMittal’s Italian subsidiary, AM investCo, has therefore given Invitalia a 38% shareholding and joint control over the company.

AM InvestCo, now co-owner of the former Ilva, is being re-named Acciaierie d’Italia Holding, and its main operating subsidiary ArcelorMittal Italia will be renamed Acciaierie d’Italia, the company says in a note sent to Kallanish.

Acciaierie d’Italia Holding will become an independent entity without financial reliance on ArcelorMittal, which will now “deconsolidate the assets and liabilities (including the remaining lease and purchase liability) of Acciaierie d’Italia Holding (formerly AM InvestCo Italy) from its consolidated statement of financial position and will account its interest in the company under the equity method”, the note explains.

The €400m investment from Italian authorities has been the object of a dispute between the two companies due to Invitalia’s failure to meet the payment deadline. ArcelorMittal signed last year a binding agreement with Invitalia to form a 50-50 public-private partnership to operate the Taranto steelworks. At the time, Invitalia agreed to invest in ArcelorMittal’s Taranto operating subsidiary, AM InvestCo, in two tranches. The first investment of €400m was to be made by 5 February 2021.

Now that the Italian government has made the first payment, the 50-50 public-private partnership has become official, Kallanish notes.

A €680m second equity payment by Invitalia is scheduled for May 2022. However, if certain conditions are not respected, the capital invested in Ilva by Acciaierie d’Italia Holding, or ArcelorMittal, will be returned and the company “will not be required to complete the purchase”, ArcelorMittal reveals.

The conditions in question involve “the amendment of the existing environmental plan to account for changes in the new industrial plan; the lifting of all criminal seizures on the Taranto plant; and the absence of restrictive measures – in the context of criminal proceedings where Ilva is a defendant – being imposed against Acciaierie d’Italia Holding or its subsidiaries,” ArcelorMittal explains.

If all conditions are fulfilled, in May 2022 Invitalia’s shareholding in Acciaierie d’Italia will increase to 60%, and ArcelorMittal will invest up to €70m to keep a 40% shareholding.

Natalia Capra France

The Liberty Steel Magona coil re-rolling plant in Piombino is enjoying strong demand and full order books, sources close to the company tell Kallanish. Keeping the plant running however has become challenging due to the lack of banks’ written guarantees.

No banks in Italy are said to be willing to work with Magona at present or to provide guarantees. Sales and purchases are currently implemented on an upfront cash payment basis. The company is now working with weekly visibility. The main issue however remains feedstock procurement, as suppliers of hot rolled coil are said to be asking for bank guarantees even in case of upfront cash payments.

The only reason keeping Magona “alive”, sources say, is the current drastic coil shortage and the skyrocketing value of hot-dip galvanised coil, which is quickly approaching €1,100/tonne ($1,315) base ex-works in transactions.

One source believes Magona is destined to be idled unless its owner finds a solution to obtain a “serious and large written guarantee” from local banks.

Magona has a capacity of 600,000 tonnes/year. It counts one pickling line, two rolling mills, two galvanising lines and one coating line. One more galvanising line was idled in 2010. With a substantial investment on this line, the company could reach a capacity of 900,000 t/y, sources observe.

“From an operational point of view, the plant is running as normal benefiting from its successful improvement plans over the last 18 months and the recovery of market conditions,” a Liberty spokesperson says. “The management team at Liberty Magona have successfully undertaken significant self-help measures to speed up cash flow and temporarily reduce working capital, including reducing cash-absorbing stocks, through matching stock to customer orders; working with customers to achieve trading terms that will bring in cash earlier, and working with suppliers to achieve greater flexibility over payment terms.”

Natalia Capra France

The low output of crude steel at German mills since the beginning of the year amid robust demand for material continues to be debated by market participants.

Production figures recovered after last summer, but since November’s 3.4 million tonnes have not risen, and in February saw a notable dip to 3.1mt.

The most common explanation from mills was the period of cold weather in February. Although lasting for not much more than one week, it interrupted transport routes and logistics facilities, mills like thyssenkrupp and Salzgitter said then. Although it did not impair the actual production facilities, these were not left totally unaffected. According to one market observer, some 100,000 tonnes were lost because of the snow chaos.

He also says mills had to cope with technical issues that added up to throttle production. None of them were major cases, “but a ladle furnace here or a hot-rolling line there, down for two to three days – you won’t catch up on that when you mean to rev production up high”, he tells Kallanish. He concedes these may be excuses by mills that want to keep production slightly short to support higher pricing. “But in many cases I do trust that they did have the problems they reported,” he adds.

In other cases, mills played down and denied technical impairments. At one mill, the compact strip casting line was down for several weeks, according to a big buyer. But the mill denies this is true. It nevertheless previously informed its customers that the switch to an aggressive operation mode to feed the surging orders put major strain on the performance of its facilities, “and even caused some major troubles.”

In another case, one rebar mill was reported by various sources to have ramp-up issues following a modernisation, but when asked by Kallanish dismissed the allegations.

Steel federation WV Stahl has described recent months as “a steel market prone to disruption”. But a spokesman of a processor’s federation says this wording is erroneous. “This sounds weird for customers that are yearning for steel,” he says, and finds that “steel production prone to disruption”, hits the point better.

He does not exclude that shortcomings in production were welcome for the mills to some extent. “At the end of the day, we cannot tell what share of the production gap came by force, and what share came by design,” he explains.

Christian Koehl Germany

Concerns have grown in recent weeks over the situation at Liberty Steel’s coil rolling mills in Liege and Dudelange, in Belgium and Luxembourg respectively. The company confirms to Kallanish that the units are not working at full capacity due to the situation created by the collapse of major lender Greensill.

Trade union sources say the rolling mills are operating below their full capacity due to feedstock delays. In Belgium, for example, sources reported operations at 40% of capacity, while in Luxembourg unions note that visibility is very short as deliveries are agreed weekly. This is happening while demand for coils remains strong in Europe, while shortages of material persist.

“Liberty Liege Dudelange has faced some issues with its main supplier of HRC which has impacted its ability to operate at full capacity, even though the market is strong,” a Liberty Steel spokesperson says. “The business is undertaking significant self-help measures to reduce stocks, matching stock to costumer orders and working with costumers to achieve terms that will bring cash earlier.”

The business is also working to identify a sustainable solution and, when necessary, making use of public-funded temporary unemployment schemes. According to local press in Liege, Liberty Steel has also asked local authorities to look into finding a partner or investor for the mill.

Liberty Steel has four galv lines in Belgium and Luxembourg, with a combined capacity of some 1.5 million tonnes/year. Other lines include two electro-galvanising lines and a line for packaging material.

Emanuele Norsa Italy