German steelmaker Salzgitter sees continued weak market in Q4
German steel maker Salzgitter expects a continuously weak market environment in the fourth quarter, with the short-term global economic outlook geared more to the downside, amid dwindling demand and a reluctance to invest, especially in Europe and Germany, it said Nov. 13.
In its nine-month results statement, Salzgitter said overall German foreign trade would be particularly hard hit by weak global economic growth.
“While industry is still cushioned by a high order backlog, incoming orders are in a downtrend,” it said. “The weak construction industry and domestic economy emanating from high inflation rates and rising interest rates have in particular placed a burden on the steel industry.”
In the first none month of the year Salzgitter produced 4.4 million mt of crude steel, down from 4.8 million mt in the same period last year. The loss of the production from the relining of Blast Furnace A in August was largely offset through slab stockpiling, slab deliveries from companies within the group, as well as by the reactivation of BF C, it said.
“The economic situation in many of our key markets is currently challenging. In particular, the recessionary tendencies in our home market of Germany placed a burden on earnings strength, especially in the summer quarter,” Salzgitter CFO Burkhard Becker said. “Inasmuch, the result in the first nine months of the financial year 2023 is indeed presentable although discernibly below the exceptional year of 2022.”
Salzgitter’s overall sales in the first nine months of the year dropped to Eur8.4 billion from Eur9.8 billion in the same period last year, due to a downturn in shipment volumes and lower average selling prices of many rolled steel products. It still considered the results as “satisfactory”, mainly thanks to the performance of the Steel Production and Steel Processing business units in the first half of the year and the strong performance of the Technology Business Unit, the company said.
“In these times of economic and political turbulence, we continue to work full steam ahead on rapidly implementing our SALCOS® decarbonization program,” Salzgitter CEO Gunnar Groebler said in the results statement. “To secure and accelerate the transformation of our company, we nevertheless require a clear commitment from policy makers on Germany as a business location and on a resilient primary industry.”
Although the German government last week agreed to lower the electricity tax, further efforts are required as the industry undergoes a capital-intensive transformation and tends with global competition, he said.
Salzgitter’s flagship Salcos projects aims to fully convert the integrated steelworks into low-carbon crude steel production in three stages by 2033.
Author: Annalisa Villa
Italian service centres struggle to increase prices: Assofermet
Considering the several European trade measures on coil imports, Italian steel trade association Assofermet expects coil sales volumes at European producers to increase in the coming months.
Grappling with high energy and raw material costs, EU steelmakers have announced a first step of increases for January delivery, with a second round expected to follow, the association says in its market note sent to Kallanish.
The climate of uncertainty caused by contracting flat steel sales volumes is persisting in the Italian market, as are low margins. End-user concern over weak demand is now compounding service centres’ difficulties with passing on downstream the coil price increases demanded by EU steelmakers. “The [coil] production curbs have not supported sales prices. Due to the contraction of sales volumes, stocks remain at high levels, while volumes ordered from non-EU producers are decreasing,” the note says.
The current weak demand for coil derivatives may only slightly improve during the first quarter of next year. Service centres remain gravely concerned over fulfilling the requirements of the Carbon Border Adjustment (CBAM) regulation. This obliges importers to declare a complex series of data to authorities about the production process, which many non-EU steel mills are not yet able to provide.
“The situation in November promises to be complex: the new conflict at Europe’s doorstep increases uncertainties, particularly regarding energy supplies which weighs heavily on the prices of steel products,” Assofermet says. While demand for coil derivatives remains weak, prices seem to have reached the bottom and, consequently, distributors are now inclined to increase their stocks in view of a possible rebound, the association concludes.
Natalia Capra France
kallanish.com
EU coil contract talks: sides take irreconcilable positions
In the annual negotiations for long-term steel supply contracts, the position of steelmakers and big customer sectors will be wider apart than in previous years, and each side has good reasons for its stance.
Mills find that, in view of increased production costs, driven by raw materials as well as energy prices, steel prices for 2024 need to be higher than those of a year ago; or at least not any lower. Back then, many deals for hot rolled coil were signed at around €800/tonne ($854), with early deals securing a lower price, and later deals a higher one.
Although annual contracts go by a year-to-year comparison logic, the spot price of the time does have an influence. Coincidentally, one year ago, spot levels were similar to now, in the mid-€600s. The big difference is that many anticipated a surge back then, which did indeed materialise with a vengeance, pushing negotiated figures up during the talks.
At present, however, hardly any buyer sees cause to assume a major increase given the poor outlook for demand. Against that, mills are insisting they must lift prices because of hiked production costs. “We need to get more [than last year] to cover our costs, and the automotive buyers need to understand that,” a mill manager told Kallanish at the Blechexpo trade fair in Stuttgart last week. “We definitely cannot go lower.”
“Everybody is aware of the pressure from risen costs for mills; that is out of the question,” a director of a service centre concedes. But the production costs on the one side stand against a lack of demand from steel-using segments.
One manager from a German processor that buys on half-year contracts says that increases are totally out of the question, and he dismisses even the perspective of prices being roll-over. By June, the massive spring surge had slackened, and spot prices were on the way down, then passing the mark of €750. Half-year contracts then would have been mostly around €800-850/t. On that basis, “we want to see a three-digit reduction”, the processor’s manager says.
A manager of a Benelux distribution group adds that customers prefer shorter contracts, of a half or quarter year, because “they want to go only as far as the eyes can see”.
Unsurprisingly then, “talks this year will be very hard”, the mill manager concludes.
Christian Koehl Germany