Thyssenkrupp lowers full-year steel sales outlook on challenging market environment
German steelmaker Thyssenkrupp has lowered its sales outlook for the 2023-24 financial year ending Sept. 30 due to a continued challenging market environment, it said late July 25.
The conditions had resulted in a “significant decline in sales in the current financial year, among other things,” it said in a statement, with the company now expecting sales to fall 6%-8% year on year.
The lower expectations were informed by preliminary results for the third quarter of the October 2023-September 2024 financial year and its updated forecast for the full year, it said.
Preliminary, unaudited sales for Q3 were worth around Eur9 billion ($9.8 billion), although the company did not provide any sales volumes.
“The market is not expected to stabilize in the short term in the current fiscal year. The efficiency improvement measures introduced as part of the APEX performance program are successfully mitigating the negative developments of the market, but cannot fully compensate for these effects,” Thyssenkrupp said.
The company had previously said in its quarterly results statement released May that it expected sales to be below the previous financial year due to volume reductions and lower prices at its Steel Europe and Materials Services units, with the macroeconomic outlook for the rest of 2024 to remain “overall challenging.”
German steel product sales fell 2% year on year in the first half of 2024 to 4.9 million mt, according to German steel stockholders’ association BDS data released July 26.
Both real and apparent demand in H1 has been lower year on year, mainly due to slow growth in the construction and automotive sectors that has put a strain on the industry, forcing producers to sell at close to breakeven levels, market sources said.
There has also been uncertainty around EU safeguard duties and the feasibility of importing some steel products, such as hot-rolled coil, adding to concerns.
Platts, part of S&P Global Commodity Insights, assessed domestic HRC prices in Northern Europe at Eur630/mt ex-works Ruhr July 25, down 8.7% from the start of 2024.
Jacqueline Holman | Devbrat Saha | Geraint Moody
ArcelorMittal increases offer prices for long steel products across Europe
The new prices were effective immediately and the company has been offering its long steel products across Europe at the higher levels. But, according to industry sources, the increased prices have not yet been accepted in deals.
The main reason behind the decision to increase the offer prices was the high production costs, according to market sources.
ArcelorMittal tried to increase its prices for long steel products across Europe at the beginning of June.
But due to slow demand from the construction sector, the main consumer of long steel products, prices in Northern Europe have been gradually declining since the start of June.
For example, Fastmarkets’ weekly price assessment for steel reinforcing bar (rebar) domestic, delivered Northern Europe, averaged €635 per tonne for the 7 days from June 1 to June 7, compared to €622.50 per tonne for the period from July 13 to July 19.
A price rebound has also not been observed also in Northern Europe’s mesh-quality wire rod market, Fastmarkets’ data shows.
According to Fastmarkets’ weekly price assessment for steel wire rod (mesh quality), domestic, delivered Northern Europe, the price for this product was stable at a weekly average level of €632.50 per tonne since the end of May.
European long steel producers hope that the new steel safeguard measures of the European Commission, effective from July 1, would have a positive effect on prices.
Notably, the European Commission approved a 15% cap per country on residual quotas for steel wire rod initially available for each quarter. The measure would impact imports from destinations like Algeria, Egypt, Malaysia, Indonesia, and India, which usually give the most competitive prices.
Thus, each country falling under the “other countries” category will be limited to delivering no more than 70,850 tonnes of wire rod to the EU in one year, Fastmarkets understands.
However, according to industry source, European buyers are still keen to book from these destinations due to the price gap with domestic prices.
Egypt’s Suez Canal revenue shrinks 23% amid attacks on shipping, political tensions
“The effect on the Egyptian economy of the continuing conflict in the region is severe,” a producer source from a steel mill said.
“Not only are we losing the Suez Canal revenues, but the conflict is halting exports to East Asia. The higher freight costs also affect import costs of raw materials from that region,” he said. “Nobody knows when these issues will resolve themselves.”
Income gained from the shipping trade through the Suez Canal fell to $7.2 billion in the financial year ended July 1 this year, from $9.4 billion in the financial year 2022-23, the chairman of the Suez Canal Authority, Osama Rabie, announced on Thursday July 18.
The Red Sea-Suez Canal corridor was a major maritime route between Asia and Europe before the violence began in November 2023, when the Houthis started to strike at vessels which they believed were involved in trade with Israel. The Houthis are aligned with the Palestinians in Gaza, who are in conflict with Israel.
Since the escalation of the attacks from bases in Yemen, shipping operators have diverted vessels away from the Red Sea to avoid the conflict, trade sources said.
Yemen borders the Gulf of Aden to the south and the Red Sea to the west. At its narrowest, the strait between them is only 26km wide.
The loss of the income gained from transits through the Suez Canal, at the northern end of the Red Sea, linking to the Mediterranean Sea, has further intensified Egypt’s pre-existing struggles with a deficit of foreign currency, weakening the country’s import and export trade, market sources said.
A second steel mill source said that, because income from the canal was a source of foreign currency, the loss of that would increase the deficit in Egypt’s balance of trade. He added that the country needed to find a way to compensate for the drop in dollar-denominated funds.
Other sources said that any improvement in the situation for Egypt would depend on how the war in Gaza progressed and how the Houthis would respond.
EUROMETAL members expect stable steel prices in 4Q
Steel distributors’ association EUROMETAL’s inaugural market sentiment survey shows that members expect fourth-quarter steel prices to remain generally stable, despite below-average activity in the third quarter.
Respondents across different European markets that are exposed to different end-use sectors all agreed that current market activity is below average. Most major markets expect final-quarter activity to remain below average, but the outlook for the UK and Ireland, the Balkans and the Visegrad region is slightly more optimistic, with average or stable activity anticipated. Yet prices in all geographical markets are forecast as stable, except for Iberia, where respondents see higher prices in the fourth quarter.
Most major end-use sectors are likely to remain subdued, with forecasts for continued below-average activity in the automotive, construction, packaging, machinery and white goods segments. Respondents expect activity to tick up to above-average in the tubes and energy sectors from below average at present.
Stock levels going into the fourth quarter appear to be mostly stable, although flat steel service centres report below-average inventories. Perceptions about stocks in Italy, Iberia, the Nordics and Turkey are also down. Stocks in the white goods, automotive and packaging sectors are perceived as being below average and average in all other end-user segments.
By Lora Stoyanova
