Day: 20 May 2022

French pipemaker Vallourec is reshaping its European business structure and downsizing its organisation with the ambition to “refocus European plants”, it says in its first-quarter financial report monitored by Kallanish.

The group is starting the shutdown process of the heat treatment line of Saint-Saulve in France and of the threading line in Bellshill in Scotland, while also completing the divestment of Vallourec Bearing Tubes.

The closing of its finishing tube rolling plants in Germany is also underway and will be carried out over the next two years. The company decided in 2021 to divest its German and other European mills, but has still not found a buyer.

The German output for the Oil & Gas segment will be relocated to the firm’s Brazilian plants by end-2023 for an investment of €110 million ($117m). The German plants’ shutdown will mean a 685,000 tonnes/year reduction in Vallourec’s rolling capacity.

“This rationalisation will entail the consolidation of all European threading activities in a single location in Aulnoye in France,” the company says. It adds it is optimising its activities towards achieving higher productivity, “a leaner organisation in all regions, lower overheads and central costs”.

Vallourec sees an improving market environment and increased investment in global exploration and production (E&P) capital spending for the period 2022-2025. Drilling activity is increasing again globally, particularly in North America and the Middle East, but also in North Africa. Thanks to global demand resumption, OCTG prices are also increasing. The group expects to report strong results this year.

Vallourec posted €916 million ($961m) revenue in Q1, a 30% year-over-year increase led mostly by North America. Ebitda was €45m compared with €80m in Q1 2021, negatively impacted by the iron ore mine shutdown. However, thanks to improved market conditions, the firm forecasts 2022 Ebitda to be significantly above 2021.

Natalia Capra France

The Federal Association of German Steel and Recycling Companies (BDSV) submitted a proposal to the European Commission for the incorporation of scrap bonuses into the EU Emissions Trading System (EU ETS), documents seen by S&P Global Commodity Insights show.

BDSV defined a “scrap bonus” as a combination of economic advantages and a positive impact on the environment from scrap use. It estimates the bonus at Eur80-213/mt ($84-$224/mt) for ferrous scrap and Eur158-502/mt for alloy scrap.

Steelmaking from scrap saves 1.67 mt of CO2 compared with production using iron ore and coke, BDSV said.

BDSV said the market prices of raw materials need to reflect the advantages and disadvantages that each raw material has for the environment, something that current EU climate policy does not do.

The association proposed several changes to tackle those issues.

According to BDSV, the mining industry should become subject to both EU ETS and the Carbon Border Adjustment Mechanism (CBAM) and ferroalloys should not be exempt from the regulations. For example, BSDV called for a price to be placed on the greenhouse gas emissions that arise in the mining and production of raw materials or in the production of intermediate products, contributing to fairer competition between scrap and mined raw materials.

Emissions from mining in Europe contribute a minor share of CO2 emissions, but their inclusion in the policy would result in fairer competition between scrap and other ferrous raw materials, according to BDSV. As steel imported into the EU is mainly produced from iron ore, raw materials and intermediate products should also fall under CBAM regulations to fully integrate emission costs of mining outside the EU, BDSV said.

As a temporary solution, the use of scrap could be rewarded within the EU ETS by linking it to the free allocation allowances, making use of scrap beneficial for steelmakers.

Alternatively, a mandatory scrap utilization quota could be imposed on domestic steel. “Compared with a positive incentive for the use of scrap, this would constitute a greater intervention on the market, could place strain on the European steel sector and open up the question of whether a mandatory scrap utilization quota would also apply to imported steel,” BDSV said.

International scrap trade, however, should not be restricted, BDSV recommended, as any barriers put on export would lower scrap prices in the EU due to higher supply and reduce the use of scrap outside Europe, leading to increased CO2 emissions. Turkey is currently the world’s largest seaborne importer of ferrous scrap, importing 25 million mt in 2021, up 11.5% year on year, Turkish Statistical Institute (TUIK) data showed. Almost 10 million mt of this total was from EU origins.

European steelmakers have been focusing on securing high quality ferrous scrap supply through acquisitions, as increasing the proportion of ferrous scrap in their raw materials mix is the swiftest way to reduce the carbon footprint of their steel production.

M&A activity

ArcelorMittal acquired several steel scrap recycling facilities from environmental services and recycling company ALBA International Recycling, it said on May 11.

The deal includes 10 scrap yards located in the south of Germany, across three different companies, ALBA Electronics Recycling, ALBA Metall Süd Rhein-Main and ALBA Metall Süd. Together, these companies process approximately 400,000 mt/year of material, the majority of which is steel scrap, ArcelorMittal said.

In March, ArcelorMittal also acquired Scottish steel scrap recycler John Lawrie Metals in March 2022. Lawrie collects about 200,000 mt/year of metal scrap, according to the company’s website.

Elsewhere, European stainless steelmaker Aperam acquired stainless and alloy scrap recycler ELG in December 2021, for an enterprise value of Eur357 million (equity value Eur30 million). ELG collects, trades, processes and recycles stainless steel scrap and high performance alloys, delivering 1.2 million mt/year of materials.

— Viral Shah, Maria Tanatar

British Steel has started up a GBP1 million state-of-the art laser measurement system at its Special Profiles business, it said May 19.

The new system enables the steelmaker to monitor dimensional control during the manufacturing process and allows it to make adjustments so its bars meet high dimensional tolerances, British Steel said.

The mill at Skinningrove, northeast England, rolls profiles that are used in a wide range of applications, such as track shoes, forklift masts and cutting-edge profiles, the company said.

The investment comes on top of a GBP26 million upgrade to its Special Profiles business, a company spokesperson told S&P Global Commodity Insights.

British Steel has a crude steel production capacity of about 3 million mt/year. The company makes more than 1,450 different specifications of steel rolled into wire rod, sections, special profiles, rail, billet, bloom and slab. The Scunthorpe works in north Lincolnshire produces primary steel and has four blast furnaces, two of which are currently operating. The company’s rolling facilities are located at its Skinningrove mill.

Platts, part of S&P Global, assessed Medium Sections Europe at Eur1,160 on May 18, up from Eur1,000/mt at the beginning of the year, although prices have eased since hitting a record high of Eur1,500/mt at the end of March.

— Annalisa Villa

Liberty Steel Group said May 19 it has won its appeal against the Liège Enterprise Court’s decision to appoint administrators to Liberty’s Liège plants in Belgium and has pledged an immediate restart of the business.

This is an unprecedented result, as never in Belgium court history has a liquidation order for insufficiency of net assets been overturned, Liberty said in a statement sent to S&P Global Commodity Insights.

To support that restart Liberty will be assisted by a mediator to help it work with the unions to implement the business plan and rebuild the confidence of the workforce.

“We are looking forward to restarting production as soon as possible and working with the mediator, the unions, our employees, suppliers and customers to rebuild the business,” commented Liberty Greensteel EMEA CEO Toker Ozcan.

Liberty Steel Group aims to ramp up production at the Liberty Liège unit to 110,000 mt/month by October.

To this end, it has recently injected new funding into the plants at Flemalle (housing two galvanizing lines) and Tilleur (tin mill), with further support pledged for the future.

The new funding came on top of Eur80 million that GFG Alliance, which groups together Liberty Steel Group and other metals and energy assets owned by magnate Sanjeev Gupta, injected into Liberty Liège since 2019, when GFG acquired Liege plants from ArcelorMittal.

Liberty Steel’s Flemalle steel galvanizing lines in Belgium – part of the Liege unit – have remained at a standstill since December 2021 due to lack of feedstock and the ongoing restructuring process, while production at the 200,000 mt/year tinning line at Tilleur, also part of Liberty Liege, has already been restarted following three months of maintenance work on this line and intermittent disruptions in raw material supplies, as S&P Global reported previously.

Platts’ weekly assessment of the north European hot-dip galvanized coil domestic price totaled Eur1225/mt ($1,297/mt) ex-works on the week of May 16.

— Ekaterina Bouckley

The suspension of duties on imports of Ukrainian products won approval in a European Parliament session May 19, with the measure next needing to be endorsed by the European Council for it to take effect, a European Commission spokesperson told S&P Global Commodity Insights.

Final approval is expected during the next Foreign Affairs Council meeting in early June, according to the spokesperson.

To help boost war-ravaged Ukraine’s exports to the EU, the European Commission proposed April 27 suspending for one year its import duties on all Ukrainian exports to the bloc, including on Ukraine’s major revenue item — steel.

The move would see the suspension of all EU anti-dumping and safeguard measures in place on Ukrainian steel, as well as the drop of all rolled steel product-specific quotas, which Ukraine has had to pay 25% customs charges for exceeding, in line with the existing system that full trade liberalization is coming to temporarily replace.

In theory, the biggest effect from the lapse of duties and quotas should be on the exports of hot-rolled coil, or HRC, and plate, as the EU removes the Eur 60.5/mt antidumping duty on Ukraine’s HRC, and drops the quota for plate, which allows the export of 1 million mt/year, the equivalent of roughly a third of the 2.8 million-2.9 million mt/year plate output by Metinvest. However, that total was before Feb. 24, when Russia attacked Ukraine.

Unlikely to fully take advantage of move

Now, with Metinvest’s two major steelworks — Ilyich and Azovstal — remaining disabled indefinitely in Mariupol, the scene of intense fighting, and other mills in the country that have resumed operations still somewhat hamstrung by difficulties with inbound and outbound freight, Ukrainian industry looks too scarred by the war to use the duty-free regime to the maximum.

As a result of the war and production stoppages, Metinvest’s steel output, at 1.96 million mt in the January-March quarter, dropped by 25% on the quarter, with most of this made before the war.

In early April, Ukraine’s major long rolled steel producer, ArcelorMittal Kryviy Rih put back into operation one of its four blast furnaces, all halted in late February. It is gradually ramping up operations but still has little to sell.

“Our production has been on hold for most of the first quarter,” said a spokeswoman for ArcelorMittal Kryviy Rih, which in 2021 accounted for 23% (4.9 million mt) of Ukraine’s steel production.

“We do export exclusively to the EU, because we are cut off from other markets by broken logistics, and because we are linked to the EU by the railway, but everything we managed to ship in January-March were small batches of remaining inventories and iron ore concentrate,” she said, adding that these sales are burdened with long lead times and high delivery costs.

“EU import quotas allow duty-free imports of steel products in volumes equal to our average annual imports,” the spokeswoman said, and the EU has recently even increased the quota for Ukrainian mills via redistributing the volumes of steel imports from Russia and Belarus that the block banned as part of sanction, she added.

Significant help for Ukrainian steelmakers

The blockade by Russia of Ukraine’s sea ports and Ukraine’s severely depressed current demand for steel has left the nation depending effectively on only one market — the EU — so lifting these barriers is without doubt a big aid for struggling Ukrainian steelmakers.

And 4 million mt/year hot- and cold-rolled coil and sheet producer Zaporizhstal, 49.99% owned by Metinvest, seems to be in a stronger position to make the most of the scrapped duties and quotas. Since its restart 1.5 months ago it has already exceeded 50% of its full capacity.

Metinvest’s fully owned billet and long rolled steel producer, Kamet Steel in Kamianske, in the Dnipropetrovsk region, is another one to benefit right away; in Q1, it increased output to 607,000 mt, with a good part of this shipped as billet for further processing to Bulgarian sections and bar mill Promet, also part of Metinvest. Billet exports are not quota-regulated, but removing quotas from Kamet’s rolls should help maximize their sales.

The US suspended the Section 232 25% tariffs May 9 on steel imports from Ukraine for one year, amounting to partial relief because of a few product-specific duties staying in place.

— Ekaterina Bouckley, Annalisa Villa