Day: 5 August 2021

Austria and Germany are seeing steel delivery delays due to the recent floods, says voestalpine chief executive Herbert Eibensteiner.

“There were short-term problems with shipping, but we are logistically well positioned and can switch to rail,” he told Kallanish during a conference call on Wednesday. “It is a difficult time, but we’ve survived everything well … We essentially supplied the plants.”

The steelmaker does not at present expect future disruptions resulting from the flooding, he added.

“A general topic in the industry is the replenishment of stocks at customers and customer segments, because orders cannot be fully fulfilled because supply chains are incomplete,” Eibensteiner said. “The demand was so great that it was not possible to build up the intermediate storage facilities very much, but this extreme tightness in the market will perhaps stabilise in the course of the financial year.”

The floods in some parts of Europe not only caused great damage, but also increasingly impaired logistics (see Kallanish passim). For example, shipping on the Rhine and some railway lines are blocked, which is now leading to bottlenecks in the supply of wagons.

The German and Austrian scrap markets have so far seen no effects from the flooding.

Svetoslav Abrossimov Bulgaria

The US auto industry is making a concerted push – with the Biden administration’s support – to reach 40-50% EV penetration by 2030, Kallanish reports.

On the back of an executive order supporting the industry-wide push, a truckload of US auto figures pledged their support to creating a robust EV industry in the US.

“Today, Ford, GM and Stellantis announce their shared aspiration to achieve sales of 40-50% of annual US volumes of electric vehicles (battery electric, fuel cell and plug-in hybrid vehicles) by 2030 in order to move the nation closer to a zero-emissions future consistent with Paris climate goals,” according to a rare joint statement from the Detroit Big Three. “This represents a dramatic shift from the US market today that can be achieved only with the timely deployment of the full suite of electrification policies committed to by the administration in the Build Back Better Plan, including purchase incentives, a comprehensive charging network of sufficient density to support the millions of vehicles these targets represent, investments in R&D, and incentives to expand the electric vehicle manufacturing and supply chains in the United States.”

United Auto Workers president Ray Curry says the US is slipping behind its competitors in the EV race; it’s now-or-never time for the industry.

“We are falling behind China and Europe as manufacturers pour billions into growing their markets and expanding their manufacturing. We need to make investments here in the United States,” he says. “Fortunately, President [Joe] Biden recognizes the importance of this moment, and his Build Back Better Plan makes the bold investments in manufacturing, consumer incentives, and infrastructure needed to ensure vehicles of the future are made in our country. Investments alone are not enough.”

BMW, Ford, Honda, Volkswagen, and Volvo also issued a joint statement, praising California for providing the base for President Biden’s climate initiatives.

“While the California framework companies are driving towards 40-50% of our sales being EVs in the next nine years, bold action from our partners in the federal government is crucial to build consumer demand for electric vehicles and put us on track to achieve the global commitments of the Paris Climate Agreement,” the companies say.

Standard and Poor’s (S&P) has upgraded Tata Steel and its subsidiary ABJA Investment Company’s long-term issuer rating from BB- to BB. Continued strength in steel prices has accelerated the company’s ratings, says S&P.

S&P observes that management’s commitment to deleveraging, supported by above-average strength in steel prices has helped Tata Steel to accelerate debt reduction as well.

“In the base case scenario, Tata Steel’s adjusted debt is expected to decline by over 30% by March 2023 from its March 2021 levels,” says the rating agency. “Tata Steel’s adjusted debt (including customer advances and securitised receivables, etc) will fall to about INR 60,000 crore ($8.09 billion) by March 2023 from about INR 91,500 crore as of March 2021.”

This would significantly outperform the company’s stated intention to reduce debt by at least $1 billion/year, and continue the trend of declining debt from March 2020, when the company reported INR 1.1 trillion in debt, Kallanish notes.

The company’s credit profile is further expected to rise over the next 3-4 years on the back of the ongoing 5 million tonnes/year capacity expansion at its Kalinganagar facility. The expansion will directly impact the rating as the facility accompanied with cold-rolled mill and pellet plant setup will be added without material debt and will raise the company’s profitability.

Sayed Aameer India

The European Commission says it has started an expiry review on existing anti-dumping duties on Chinese and Russian cold rolled coil.

The review, requested by Eurofer, will determine whether to extend the duties beyond their natural ending. The provisional measures were put in place in February 2016, with definitive duties confirmed in August 2016.

Russian suppliers are subject to a duty of 18.7-26.2% depending on the mill, and Chinese suppliers to a duty of 13.7-16% depending on the mill.

“The applicant alleges the likelihood of continuation or recurrence of injury. In this respect the applicant has provided sufficient evidence that, should measures be allowed to lapse, the current import level of the product under review from the countries concerned to the Union is likely to increase due to the existence of unused capacity of the manufacturing facilities of the exporting producers in the countries concerned and due to the attractiveness of the European Union market in terms of size and in terms of geographical proximity (the latter with regard to Russia),” the Commission notice explains.

A final decision on the expiry review will be taken by August 2022; in the meantime, existing measures will remain in place, Kallanish notes.

Emanuele Norsa Italy

UK carmakers produced 69,097 units in June, up on the Covid-19-hit June 2020 but still the worst June output since 1953 as the global chip shortage continued to hamper activity, says the Society of Motor Manufacturers and Traders (SMMT).

Output in the first half of 2021 was 498,923 units, down 38.4% on the five-year, first-half average, representing a loss of 311,160 cars worth more than £8.5 billion. The pandemic, new trading rules with the EU and supply issues caused ongoing challenges.

Exports continued to sustain British car manufacturing, with 83.4% of H1 output shipped abroad. Almost 52% went to the EU, followed by 19% to the US and 8% to China.

UK production of battery electric (BEV), plug in hybrid (PHEV) and hybrid electric (HEV) vehicles, meanwhile, remained steady year-to-date, with 22.6% of all cars alternatively fuelled.

“However, with the looming end of sale date for new petrol and diesel cars less than nine years away, the industry is challenged to accelerate the transition from fossil fuel to zero emission vehicles,” SMMT says in a note seen by Kallanish. “This will require significant investment into vehicle manufacturing, battery production and supply chain transformation for which a clear commitment to enhancing UK automotive competitiveness is essential.”

Despite the easing of Covid-19 restrictions, manufacturers are experiencing staff shortages due to self-isolation arising from notification of contacts outside the workplace. This is putting production at risk and is another drag on the sector’s recovery, the organisation observes. The negative impact on planned UK car production, primarily due to the worldwide shortage of critical semiconductors, could be as much as 100,000 units this year.

Adam Smith Germany

ArcelorMittal Tubular Products Jubail (AMTPJ) has completed the acquisition of Jubail Energy Services Company (Jesco) from TAQA Industrialization and Energy Services Company.

AMTPJ – ArcelorMittal’s joint venture with Saudi Arabia’s Public Investment Fund (PIF) – is now the undisputed sole seamless pipe producer in the Middle East, with a combined annual capacity of 1 million tonnes.

The transaction creates a “regional champion” by combining Saudi Arabia’s two leading tubular products producers, ArcelorMittal says. It is set to bring multiple benefits, such as improved cost competitiveness across multiple areas including raw material procurement, strengthened financial position, sales and marketing logistics, inventory optimisation, and asset utilisation, it adds.

TAQA agreed to sell its 72% stake in Jesco to ATPJ last December (see Kallanish passim).

ArcelorMittal’s shareholding in AMTPJ, which will operate under the joint management control of ArcelorMittal and PIF, will reduce to approximately one third – from 41% – with PIF’s shareholding correspondingly increasing to approximately two thirds.

Incoming AMPTJ chief executive Gabriel Monti says: “Combining AMPTJ with Jesco creates a new regional champion capable of delivering first-class products and services to our expanded customer base. I’d also like to thank the Ministry of Investment of Saudi Arabia for the enabling role it played in facilitating this transaction.”

Saudi Arabian oil giant Aramco is the country’s biggest buyer of seamless pipe. The kingdom has already tendered $58 billion of construction and transportation contracts in 2021, out of $1 trillion of planned projects, which are set to lift steel demand.

Gulf Cooperation Council market participants often cite the lack of round billet feedstock supply in the region as an obstacle to seamless pipemaking development in the region. ATPJ typically sources from within the ArcelorMittal group, while Jindal Shadeed in Oman became the GCC’s first round billet producer in 2014; it remains the only supplier to this day.

Burak Odabasi Turkey

Austrian steelmaker Voestalpine is expecting lower steel shipments to the automotive industry until the end of 2021 as the car industry is being hampered by components issues, the company said Aug. 4.

On a call for the company’s April-June results, CEO Herbert Eibensteiner said stoppages to car production were more prevalent in Europe than other regions such as China or the US.

“We will prepare for the case that volumes will go to other customers and supply less than initially thought to the automotive industry,” Eibensteiner said.

Demand in the European steel market remained strong overall during the quarter, the first of the company’s financial year, with steel production at maximum capacity, according to Voestalpine.

Apart from the aerospace industry and “hiccups” in the automotive industry, all customer groups showed continuous growth. Consumer goods, white goods and mechanical engineering industries continued to benefit from the market momentum that carried over from the end of the previous quarter. This also applied to the construction industry, which returned to high capacity utilization after the seasonally weaker Northern winter months.

Voestalpine said that supply chain inventories remained at record low levels while steel prices rose in the European spot market.

S&P Global Platts’ assessment for hot-rolled coil on an EXW Ruhr basis rose from Eur860/mt on April 1 to Eur1,177.5/mt on June 30. The daily assessment stood at Eur1,165/mt EXW Ruhr Aug. 4.

The heavy plate industry continued to lag behind the positive developments for other flat steel products, only improving due to higher crude oil prices.

The seamless tubes segment however was able to benefit from the improving oil and gas industry.

Higher prices for raw materials led to substantial cost increases in steel production but the steel division “more than just offset the higher raw materials prices through higher steel prices”, according to Voestalpine.

The steel division’s EBITDA soared to Eur263 million in the reporting period, up from last year’s Q1 at Eur68.2 million, which was then heavily impacted by pandemic-related demand drops.

For the business year 2021/2022, Voestalpine expects an EBITDA between Eur1.9 billion and Eur 2.2 billion, up from Eur1.1 billion in the business year 2020/2021.

— Laura Varriale

US automakers expect supply issues due to the global shortage of semiconductor chips to persist throughout 2021 and are putting in long-term solutions to de-risk their supply chain, executives say.

The issue of semiconductor supply remains fluid, General Motors CEO Mary Barra said Aug. 4 during the company’s Q2 earnings call. Barra’s comments come a day after GM said it would be taking a one-week outage at three of its North American full-size pickup truck assembly plants due to the chip shortage.

Growing coronavirus cases in Malaysia have caused further disruption to the company’s ability to source semiconductors, Barra said.

“While we informed our employees yesterday that some truck production will be impacted next week, even as we resume production at some crossover plants, we remain confident in our team’s ability to continue to find creative solutions that minimize the impact on our highest-demand and capacity-constrained vehicles, including full-size trucks and SUVs,” she said.

GM is putting in place long-term solutions to avoid such issues in the future and is collaborating with semiconductor manufacturers to enhance transparency in the supply chain, she said.

GM CFO Paul Jacobson said the company was able to pull forward some chip availability into Q2 from Q3, helping to offset production disruptions.

“We have continued to believe that as we get into the fourth quarter, some of the underlying semiconductor challenges are going to start to abate,” Jacobson said. “We don’t know that it will be fully resolved then, but we’re being cautious and we’re seeing signs for improvement.”

During its Q2 conference call in late July, Ford executives said the chip constraints have led to permanent changes in the company’s go-to-market strategy.

“We’re placing greater emphasis on build-to-order sales bank, not just low stocks,” Ford CEO Jim Farley said during the company’s Q2 call on July 28. “We have learned that, yes, operating with fewer vehicles on lots is not only possible, but it’s better for customers, dealers, and Ford.”

Ford is seeing some signs of improvement in the flow of chips at the start of Q3, however the situation remains fluid, Farley said.

“We do see that the chip issue running through this year, and we could see it bleeding into the first part of next year,” Ford CFO John Lawler said. “But I think we won’t really have a good feel for that, until later in this year.”

Chip suppliers have indicated in discussions that they are reallocating capital and increasing supply to the automotive market, he said, however these investments will take time.

“I think this is one of those things where we need to see the release coming through before we can really feel comfortable that we’re out of the woods here,” Lawler said.

— Justine Coyne