Category: Latest Updates

US heavy equipment producer and plate consumer Caterpillar saw its sales drop by almost a quarter on-year in Q3, Kallanish learns. 

Caterpillar generated revenues of $9.9 billion in Q3, down -23% from the $12.8 billion it generated in Q3 2019. 

Caterpillar attributes the drop to “…lower sales volume driven by lower end-user demand for equipment and services.”

The company’s profit per share was $1.22, down from $2.66/share in Q3 2019. 

Last year, Caterpillar predicted that its sales would be off organically due to lower end-user demand. This forced the company to draw down its headcount, which plate sources predicted would pressure the 2020 plate market. 

These predictions and moves, however, were made well in advance of the Covid-19 pandemic. 

“Our third-quarter results largely aligned with our expectations, and we’re encouraged by positive signs in certain industries and geographies,” says ceo Jim Umpleby. “We’re executing our strategy and are ready to respond quickly to changing market conditions.”

ArcelorMittal Poland has reduced its pig iron and steelmaking capacities by little over a third each with the recent closure of its blast furnace and three basic oxygen furnaces in Krakow, according to S&P Global Platts calculations based on company results statements and market sources.

However, sources said Oct. 27 that the actual loss of output to the company — which comprises mills in Krakow, Swietochlowice and Dabrowa Gornicza — could in fact be somewhat smaller, at around a quarter, given that the BOFs in Krakow had been running at less than half their full capacity over the last decade, producing 1.2 million mt/year on average between 2010 and 2019.

ArcelorMittal does not disclose the furnace capacities of individual units, but the company’s factbook for 2014 says the Krakow site was equipped with 2.3 million mt/year BF and 2.6 million mt/year BOF capacities.

Dabrowa Gornicza has BF capacity of 4.4 million mt/year, and steelmaking capacity of 5 million mt/year, according to the same factbook.

According to sources, the Krakow BF and BOFs were among its oldest, with little in the way of upgrades over recent years.

“It could have been a choice between [downsizing in] Poland and France. Obviously, it is easier and cheaper to close an industrial enterprise and dismiss workers in Poland due to the country’s more liberal labor legislation,” one source said.

An ArcelorMittal spokeswoman told S&P Global Platts that a number of different factors contributed to the decision, including high energy costs and the introduction of additional capacity market fees in Poland from January 2021.

Low capacity utilization of the Krakow hot end could also be one of the reasons., sources said.

Last year, ArcelorMittal Poland made 4.8 million mt of steel. Its production fell by 0.5 million mt or 9.5% on the year due to the idling in November of the Krakow’s furnaces amid the demand downturn.

In the five years to 2018, ArcelorMittal Poland’s annual steel production averaged 5.25 million mt/year, or around 70% of the unit’s 7.6 million mt/year capacity.

Of the two steelworks, Krakow had been least utilized relative to its nameplate capacity. In the same period, with average crude steel output of 1.4 million mt/year, the plant’s run rate hardly exceeded 55%.

By comparison, Dabrowa was producing 3.9 million mt/year in 2014-18, the equivalent of 78% of its 5 million mt/year crude steel capacity.

— Ekaterina Bouckley

Major Turkish steelmaker Colkaoglu pulled up its lira-denominated domestic scrap buying prices on Oct. 27, amid ongoing sharp Lira depreciation and strong imported scrap pricing.

S&P Global Platts’ daily HMS 1/2 (80:20) assessment was at $291.25/mt on Oct. 26. The HMS 75/25 and A3 assessments were at $281.25/mt and $280/mt, respectively, all CFR Turkey.

Colakoglu, one of Turkey’s largest EAF-based steelmakers, pulled up its lira-denominated buying price for DKP grade (auto bundle) scrap on Oct. 27 by Lira 70/mt to Lira 2,380/mt ($292/mt), while the company’s extra grade domestic scrap buying price rose to Lira 2,205/mt ($271/mt).

Turkish mills have been consuming around 30 million mt of steel scrap per year and are procuring generally one third of it from the domestic market.

As scrap costs rose further and the Turkish lira fell to a new historically low level against the US dollar, Major Turkish long steel producer Icdas, pulled up its domestic rebar list prices for the second consecutive day on Oct. 27.

Turkish Lira lost around a 1% further value against the US dollar and began to trade in the range of Lira 8.15-8.16/$1 at 1 pm local time on Oct. 27. Thus the depreciation in Turkish lira exceeded 2% within two days.

Icdas started offering 12-32 mm rebar at Lira 4,410/mt ex-works Biga, including 18% value-added tax (VAT), on Oct. 27, which equated to $458/mt ex-works, excluding VAT, relatively flat day on day on a dollar basis. This price, however, reflected a roughly $3/mt rise week on week, amid strong scrap pricing.

Sharp depreciation in the Turkish lira, however, has begun to limit rebar demand in the country’s construction.

— Cenk Can

Tata Steel’s tube unit in Zwijndrecht, the Netherlands, has installed custom-made and fully-automated equipment designed to produce steel tube for car suspension parts, the company tells Kallanish.

The cutting, profiling and bevelling machine is able to precisely cut and shape safety-critical steel tube used to make parts known as twist-beam axels used in many modern cars, Tata explains. With the addition of the new equipment, the company has already secured orders from important European carmakers, it claims.

The project cost €1.8 million ($2.3 million) and has taken three years to develop and deliver. It involved the sales, procurement, engineering, production and technical teams who worked closely with the equipment maker on specifications.

“The equipment is unique in several ways – it is fully automated and it can cut many sizes of tubes,” says Sanne Kramer, works manager at the Zwijndrecht site. “As well as cutting, the equipment is also able to make several other cuts, notches and bevels. These help in the final manufacturing by customers. The machine also cleans, inspects and stacks the material before it is shipped.”

Spanish stainless steel producer Acerinox recovered most of its lost production in the third quarter, with melt-shop volume rising 25% quarter on quarter to 524,000 mt on recovering demand, the company reported Oct. 26

The figure was a 3% decline from the year ago quarter but sufficient to push the company back to profit after Q2 production disruptions and collapsing demand.

Hot-rolled production was 459,000 mt, up 30% from the previous quarter and also down 3% year on year.

Cold-rolled output rose 14% from Q2 but was down 16% year on year, while long product output rose 4% quarter on quarter and 2% year on year to 51,000 mt.

In its newly acquired high performance business in Germany, the company produced 40,000 mt in the melting shop and 24,000 mt in the finish shop from when it acquired the business on March 17 through to end September, with no previous comparison.

The new business helped Acerinox swing back to profit as it also implemented cost-cutting measures in the quarter.

Personnel costs were reduced 10% year on year for the year to date to Eur282 million ($333 million) while operating costs were cut 20% over the period to Eur387 million, the company said, without elaborating.

The company made a net profit of Eur28 million in the quarter, compared with a loss of Eur26 million in Q2 which was affected by the peak of measures to restrict the spread of COVID-19.

Production was interrupted by five days of stoppages at the end of Q1 and start of Q2 in Spain, 35 days in South Africa and 28 days in Malaysia.

Looking forward, the company said the reactivation of a number of sectors, its order backlog and geographical diversification, led it to expect fourth-quarter EBITDA to be in line with that of the third quarter, when it made Eur87 million – roughly in line with the previous two quarters.

While demand looked robust in the US market, where Acerinox makes 48% of its sales, the seasonal fourth quarter slowdown needed to be considered, the company said.

— Gianluca Baratti

ArcelorMittal Italia has told unions it will extend temporary layoffs for a further 13 weeks starting from 16 November. The furlough extension has been granted by the government to all Italian companies in response to the Covid-19 crisis, Kallanish learns from union sources.

The new furloughs affect 8,140 employees including production workers, office workers and managers at the company’s main steelworks in Taranto. ArcelorMittal Italia told unions the extension is due to the effect of Covid-19, which continues to have an impact on orders and deliveries.

The Taranto works is still producing at minimum capacity. Commercial and distribution activities are also heavily reduced and a union source says the company will probably end the year with 3 million tonnes of crude steel production.

The company extended layoffs in July, then again in August and again in September (see Kallanish passim). Ordinary layoff schemes have overlapped with the new Covid-19 layoffs.

ArcelorMittal Italia declined to comment.

Meanwhile, as negotiations continue between the company and the government over the future of the former Ilva plant, press reports in Italy claim ArcelorMittal will maintain a majority stake in the mill. The government, which will invest in the new entity through its subsidiary Invitalia, is meanwhile set to take a 40% share.

Erdemir Group’s nine-month-through-September steel output remained roughly in line with the previous year, while sales declined slightly, the company says.

The firm’s output of crude steel across its two principal mills totalled 6.5 million tonnes, flat on-year. The Eregli plant’s crude steel output continued to increase after a series of blast furnace and other equipment repairs last year, gaining 22% on-year at 2.74mt. The Isdemir plant meanwhile reduced production by -11% to 3.75mt.

The group’s crude steel capacity utilisation was up 1 percentage point on-year at 91% in January-September, Kallanish notes.

Output of flat products in the first nine months declined marginally, by -1.5% on-year to 5.42mt, while long products output gained 2.1% at 0.77mt. Iron ore and pellet output also increased, adding 9.7% on-year at 1.54mt.

Nine-month sales of flat products declined -1.4% on-year to 5.4mt, with domestic sales volumes rising 1% to 4.4mt. Long products domestic sales rose 21% to 726,000t. Export sales volumes remained at 18% of total sales, totalling 1.1mt. Exports of flat products totalled 1.04mt.

Erdemir’s consolidated January-September sales revenue increased 4.4% on-year to TRY 21.94 billion ($2.76 billion), while profit halved at TRY 1.55 billion. Profitability slid -2.9pp to 19.7%.

The company increased its capital expenditure in the first nine months of the year by 72.8% on-year to $216 million, it says.

SSAB is holding preliminary talks with Tata Steel over a potential merger with its European business, according to a Bloomberg report citing people familiar with the matter.

The Swedish steelmaker declined to comment when approached by Kallanish, saying: “We do not comment on rumours.” A Tata Steel Europe representative responded: “We do not comment on rumour or speculation.”

The news comes following the collapse last year of the proposed merger between Tata Steel Europe and thyssenkrupp’s steel unit after it was blocked by the EU on competition concerns. This was despite both steelmakers offering significant concessions in order to make the deal happen (see Kallanish passim).

Thereafter, Tata Steel Europe announced a restructuring programme that entails the reduction of up to 3,000 jobs across Europe, in order to ensure continuing operation. Also included is the target to increase sales of high-value added products, and the reduction of procurement costs through better cooperation with other Tata Steel group companies. The situation has been further complicated by the Covid-19 pandemic this year.

Thyssenkrupp Steel Europe, meanwhile, said after the collapsed merger it was determined to shape its own future and regain competitiveness without a partner. The week before last, Liberty Steel confirmed it had made a non-binding indicative offer to acquire the steel unit of thyssenkrupp. In its third-quarter earnings call a few days later, SSAB said it was not engaging in bidding for the steel arm of the German group.

The World Steel Association reported 156.4 million tonnes of global steel output for September, a 2.9% increase compared with the previous year, according to data released Oct. 23.

China produced 92.6 million mt of crude steel during September, a 10.9% increase compared to the same time last year, while India produced 8.5 million mt, down 2.9% from last September.

Japan’s output totaled 6.5 million mt, down almost 20% on year and South Korea’s crude steel production for last month was 5.8 million mt, up 2.1% from September 2019.

Output figures were down across all major European producers, with Germany’s total production at 3 million mt in September, a yearly decrease of 9.7%. Italy produced 1.8 million mt, down 18.7% from the previous year, and France saw a fall of 20.1%, with total steel output at 1 million mt. Spain saw the most drastic decrease, with a total output of 0.9 million mt of crude steel, a year-on-year drop of almost 21%.

Estimated CIS production was at 8.2 million mt in September, down a minimal 0.3% compared with 2019 and Ukraine’s total production stood at 1.7 million mt, down 5.4% from last year.

In the US, September 2020 production figures totaled 5.7 million mt of crude steel, a decrease of 18.5% on year, while in Latin America, Brazil’s output stood at 2.6 million mt of output, up 7.5% from September 2019.

— Amanda Flint

The International Stainless Steel Forum (ISSF) is pleased to be able to share the following industry data following our October 2020 conference.

World stainless steel melting shop production which has been growing consistently over the 6 years prior to 2020. During the current year we have observed a significant fall in melting shop output (>9%) during the first 6 months compared to the equivalent period in 2019. The impact of the COVID 19 pandemic was most significant on our industry production in percentage terms in Europe, USA and Asia (excluding China).

The regional actual and forecast stainless steel consumption changes by product group which shows the current and expected future impact of the current pandemic on regional demand for stainless steel products.

The aggregated global view of the regional data described above.

Source and graphic: ISSF

15.10.2020 by Hans Diederichs