Category: Latest Updates

Mechanical engineering companies in Germany suffered a major decline in orders in the first six months of the current year, Kallanish learns from their association VDMA.

In the first half of 2020 incoming orders fell by -16% in real terms compared with the previous year. The decrease in orders from abroad was much stronger than the decline in orders from Germany, VDMA points out.

The difficult situation becomes clearer when looking at the three-month period from April to June, in which orders dropped by -30% compared with the previous year.

Domestic orders fell by -20% and foreign orders by -34%. Orders from the euro countries shrank by -24%, and by -38% from non-euro countries. The decline is attributable to a global economy weakened by trade disputes and political upheavals, which was additionally hit hard by the Covid-19 pandemic, the association’s economic expert Olaf Wortmann explains.

In June 2020, order intake in the German mechanical engineering industry fell by -31% in real terms y-on-y. While domestic orders were down -12%, orders from abroad even dropped by -38%.

“There is, however, a base effect that plays a role here,“ Wortmann noes. “In June 2019, there was an enormous amount of large plant business in the orders from non-euro countries.” Hence, orders from non-euro countries decreased by -44%. From the euro zone, the industry recorded a decline in orders of -14%.

China Baowu group will become the controlling shareholder of Taiyuan Iron & Steel (Tisco), as well as the actual controller of Tisco Stainless. This will make Baowu Group the world’s first 100 million tonnes/year crude steelmaker, Kallanish notes.

On 21 August, Shanxi State-owned Assets Supervision and Administration Commission, Tisco’s 100% shareholder, signed an agreement with Baowu to transfer a 51% stake in Tisco to Baowu for free.

After the completion of this transfer, Baowu will indirectly control 62.7% of Tisco Stainless shares through Tisco, which means Baowu will achieve effective control of Tisco Stainless. The ultimate controller of the three companies will be the State-owned Assets Supervision and Administration Commission of the State Council (SASAC).

According to the World Steel Association, Baowu’s and Tisco’s crude steel output were 95.47 million tonnes and 10.86mt respectively in 2019. After this reorganisation, Baowu will surpass ArcelorMittal’s 97.31mt crude steel output in 2019 to officially become the world’s top steel enterprise. Baowu Group and Tisco combined accounted for 10.67% of China’s steel output in 2019.

According to targets from the Ministry of Industry and Information Technology, national crude steel output must be controlled under 1 billion tonnes/year. The output of the top ten steel companies should account for no less than 60% of national output. Baowu would account for almost one fifth of production of the top ten steelmakers, assuming no further expansions.

In terms of stainless steel, the capacity of Baowu and Tisco Stainless, plus Baosteel Desheng’s capacity to be commissioned next year, will be more than 10m t/y. Baowu and Tsingshan will become the only two steelmakers with an annual stainless output of more than 10mt. The industrial concentration of stainless steel is expected to increase, since the top three companies’ output will account for 60% of overall stainless production in the future.

Baowu also became the largest shareholder of Tibet Mining Corporation two months ago. The company’s main products are chromite, copper and lithium ore, and chromite is an important raw material for stainless steel.

Polish passenger car production fell -48.5% on-year in the first half of 2020 to only 122,600 units, according to data from Poland’s Central Statistical Office (GUS) monitored by Kallanish.

Output had risen in January and February after a disappointing 2019, but was curtailed from March onwards, with May and June seeing particularly steep on-year drops of -48% and -49% respectively. This was a result of the Covid-19 pandemic impact on the European automotive industry, which has exacerbated already weakened demand from the sector last year. This has seen increased competition among regional auto sheet suppliers who have been forced to find new buyers.

In 2019 Polish car output fell -3.7% on-year to 434,700 units, its lowest since 2003.

Production of commercial vehicles, including trucks and tractors, slumped -36% in H1 to 75,759 units. In 2019 it had hit a new annual record of 207,802 units.

Public transport vehicle output, meanwhile, fell -23% in H1 to 2,761 units, following an annual record 7,362 units in 2019.

Overall Polish automotive production thus slumped -44% in H1 to 201,120 units.

The outlook is more positive, however. Poland’s overall industrial production rose 1.1% on-year in July compared to expectations of a -2% fall. This was helped by a 0.6% growth in the automotive sector. Polish production growth of electric appliances nevertheless slowed to 7.1% last month. “Industrial activity, alongside labour market developments, underlines that the recovery after the first Covid-19 wave continues faster than expected,” ING bank says of Polish industry.

Steel fabricators supplying the automotive industry are not happy about the breakdown in communication with their customers that occurred when Covid-19 lockdowns forced them to alter production.

“At times we learn on the day we deliver that the production plant does not take in material, not now and not for the coming weeks,” says Hubert Schmidt of automotive supplier company Hubert Stünken. “What’s worse, we don’t learn so from the customer, but from the transportation company in between.”

Schmidt is president of German steel and metals working federation WSM. “Our production has been like a quilt, in which some patches are totally quiet, while others keep operating in several shifts,” Schmidt says.

“For three or four weeks, it was like driving in the fog,” says a manager of fasteners maker company Wilhelm Schumacher. The company built up stocks that customers would not buy, and cut its output dramatically, Kallanish notes. Now that production along the chain could resume, he is concerned it could happen at a time when many mills have summer closures. “If automotive customers ramp up production now, they may even face supply shortages,” he says.

Greater weighting should be given to environmental factors in the UK’s procurement of steel, while the higher electricity costs paid by UK steelmakers than their EU counterparts need to be addressed, says the Trade Unions Congress (TUC).

Buying steel from China can produce up to 50 times more carbon than sourcing from the UK, TUC points out.

When the UK introduces its own Emissions Trading Scheme following Brexit in 2021, moreover, it must at least penalise steel producers no more than the current regime, TUC adds.

The comments come as part of the UK trade union federation’s report published on Friday outlining a balanced energy policy to meet the UK’s net zero commitments.

Financial support for the steel industry also needs to be brought forward. “The UK government has announced more than £500 million to help transition, through the Industrial Energy Transformation Fund and the Clean Steel Fund – but much of this is not available until mid-2020s,” TUC says in the report sent to Kallanish. “Bringing this funding forward could help us invest out of crisis.”

TUC says Tata Steel’s closure of its Orb Electrical Steels unit in Newport, Wales at the end of last year was a missed opportunity. An investment of around £20-40m ($26-53m) was seen required to upgrade it to make electrical steel for car engines.

“The electrical steel that Orb could have made for electric motors represented a small part of the value of the power train in isolation, but the capacity could have incentivised others to invest in other essential parts of process, like stamping and laminating, and so persuading companies to build powertrains for electric vehicles in the UK,” says the federation. This could mean lost value of more than £1 billion over ten years to the economy, it adds.

Voestalpine has come up with a manufacturing process to produce lighter weight rail cars, able to carry up to 4 mt more load as a result reducing environmental impact from freighting, the company said Aug. 19.

The Austrian steel and technology group said it has transferred a process for making ultra-high tensile auto parts to railway systems.

In cooperation with the Rail Cargo Group, the cargo subsidiary of the Austrian Railways (OBB), Voestalpine’s steel division and logistics subsidiary, Logserv, has developed TransANT, a design concept for manufacturing freight cars with lightweight modular superstructures.

Voestalpine has already started to supply a complete system for new lightweight freight cars, encompassing high-performance steels and a particular welding technology, which both contribute to the cars’ lower weight and greater performance.

Weight reductions are achieved through the use of stiff, ultra-high tensile section solutions.

“The undercarriage, which is about 20% lighter than conventional models, makes it possible to add loads of up to four tons per freight car,” the company said.

The steelmaker said this is the first time so-called topology optimization is being applied in the construction of freight cars. The technology, which so far has been used in automotive and aerospace construction, involves a software algorithm that works out a particular design proposal based on predetermined parameters yielding a structure that combines minimum weight with maximum tensile strength.

Logserv is already using the first batch of freight cars to carry iron ore, Voestalpine said, adding that the cars’ new design and the additional weight they accommodate should reduce the number of train trips for the subsidiary by about 100/year.

— Ekaterina Bouckley

South Korea produced 345,711 vehicles in July, down 3.8% year on year, but up 16.4% from June, the Ministry of Trade, Industry and Energy said Aug. 18, amid higher sales.

The month-on-month increase was the second straight monthly hike, indicating that the car industry had rebounded. June’s output was up 28.5% from May, while May was down 20.2% from April.

Sales for July gained 8.9% year on year to 164,539 vehicles, but was down 20.1% from June.

Following the production trend, exports in July fell 11.7% at 181,362 vehicles from the year before, but up 43.2% from June, the ministry said, citing the COVID-19 pandemic.

With the July figures summed up, January-July production was 17.4% lower at 1.97 million vehicles, sales at 1.09 million vehicles, up 7.5%, while exported amounted to 1 million vehicles, down 30.7% — against the corresponding 2019 period.

South Korea’s environmentally friendly vehicle sector stood out with 110,330 vehicles made over January-July, rising 32.9% from the previous year, after 17,360 vehicles were produced in July, a 39.3% spike from July 2019, but down 20.6% from June.

On the sales side, eco-friendly vehicles chalked up 27,468 units in July, up 12.5% year on year and 9.6% higher from June. January-July sales amounted to 155,094 units, a 13.7% gain from the year before.

The rebound in South Korea’s car industry has led to domestic steelmakers revising their projections for 2020. On July 31, Posco revised its annual crude steel production to 35.3 million mt, up from 34.1 million mt foreseen in April, and forecast sales at 33.8 million mt, up from a prior 32.4 million mt.

The rebound was also reflected in the country’s largest automotive producer Hyundai Motor, with its June and July domestic sales seeing a corresponding year-on-year growth of 37.2%, or 83,700 units, and 28.4%, or 77,381 units, respectively. Its accumulated year-to-date sales managed to attain a 4.0% growth on year, to 461,994 units, largely due to the rebound in volumes in June and July.

— Clement Choo, Samuel Chin

Seaborne iron ore prices surged to new highs on Tuesday, while Chinese steel futures followed more slowly. Optimism about autumn demand and new injections of liquidity to the economy are driving prices higher.

The Kallanish KORE 62% Fe index jumped $4.82/t to $126.50/dry metric tonne cfr Qingdao, just a few cents short of the 2019 peak of $126.68/dmt cfr on 3 July that year. The Kallanish KORE 65% Fe index leapt $4.51/t higher to $134.06/dmt cfr, and the KORE 58% Fe index gained $3.01/t to $110.98/dmt cfr. 

On the Dalian Commodity Exchange January 2021 iron ore settled up CNY 15.5/tonne at CNY 849.5/t, while on the Singapore Exchange September 62% Fe futures settled up $5.81/t at $122.71/t. The same contracts for 65% Fe and 58% Fe futures settled up $5.89/t at $132.11/t, and up $0.75/t at $107.32/t respectively.

On the Shanghai Futures Exchange the October rebar contract closed CNY 16/t higher than Monday at CNY 3,848/t ($554/t), while the same contract for hot rolled coil closed up CNY 34/t at CNY 3,984/t. In Tangshan, billet prices were flat at CNY 3,410/t.

Ferrous markets, but especially iron ore, have been buoyed by optimism over Chinese steel demand in the coming months. This implies that China’s blast furnaces will maintain very high operating rates at least until the end of autumn. 

In order to back up this optimism, the Chinese government has been keen to balance the need to have plentiful financing available to support the recovery, but strict limits on the use of funds to prevent them from being wasted.

On Monday the weekly State Council executive meeting stressed that liquidity would be maintained but there would be no “…flood irrigation.” On the same day, however, the People’s Bank of China injected CNY 700 billion into credit markets through a one-year medium-term lending facility. This helped to support the view that strict controls on credit will not mean a shortage of ready funds for the rest of the year.

Steel and iron ore markets have also been bolstered by inventory levels. Although these have increased slightly for both steel and iron ore, the pace of increase has been very slow despite high production levels and steel demand passing the lowest point of the summer.

Numerous German steel and metal working companies have coped with the Coronavirus pandemic challenge in constructive ways, since the virus started dictating the rules of business, Kallanish notes.

Companies interviewed by fabricators federation WSM cited the relocation of input material sourcing closer to home and the restriction of international traffic among the adjustments they were forced to make.

“The lockdown did not only hit our suppliers but also the transport companies involved,” says EJOT Holding, a manufacturer of fasteners. “Looming closures of borders made us transfer transports to rail. Also, one of our tool suppliers in Italy stopped production, so we returned to making parts in-house,” Kallanish hears from the company.

A similar issue is described by Wilhelm Schumacher, another maker of fasteners. “With the exception of one Austrian firm, we have no suppliers in other countries, so our supply chains remained intact,” it reports.

The relocation to in-house production was highlighted also by traditional hardware maker Gust Alberts. “The production sites in Germany and Europe will reconquer their role; it has become clear now that supply safety must not be put at risk,” the company states.

Gust Alberts managing director Dietrich Albers emphasises the importance of open communication among staff within the company. “We met with our employees each day to keep them updated about measures in the context of the crisis,” he says, adding that “…information creates confidence.”

Fifteen tariff-free quota allocations within the EU safeguard system have reached a critical level, Kallanish learns from the official calculation system provided by the European Commission.

Despite the overall downturn in imports seen during the first half of the year, importers of some key products will need to wait until the beginning of October for new allocations to become available.

As anticipated, rebar quotas for both Turkey and Russia have been completely exhausted. Tariff-free quotas for Turkish and Russian wire rod are almost completely finished. Hollow sections, angle shapes and merchant bars imports from Turkey will also need to wait until the beginning of October for new quotas.

In the flat products sector, organic coated sheet quotas have been exhausted for the “other countries” group as well as for Turkey. Metallic coated sheet from India – not for the automotive sector – has also used up almost all allocations, as has Chinese metallic coated sheet specifically for the automotive sector.

In the stainless area, cold rolled coil quotas from other countries and Vietnam are also nearly finished. Finally, Turkish gas pipe has used all available quotas.

Based on the imports seen during the first six months of the year, Eurofer calculated that overall imports of carbon steel finished products this year could reach approximately 21 million tonnes, the lowest level since 2014.