Category: Latest Updates

Tata Steel Europe, the UK’s biggest steelmaker, is still in talks with the British government on possible support for the company’s operations in the country, which include the major Port Talbot blast-furnace-based steelworks in South Wales, a company spokesman told S&P Global Platts on Aug.16.

The company denied press reports in recent days that its negotiations with the government for a support package had fallen though because the steelmaker, part of an Indian-owned conglomerate, did not qualify for the UK government scheme.

“Tata Steel remains in ongoing and constructive talks with the UK Government on areas of potential support,” the Tata Steel Europe spokesman said. “As these discussions have not reached a conclusion, it would be premature to comment on any options that may or may not be under consideration.”

Platts understands that Tata Steel, which employs around 8,000 people in the UK, has has been in negotiations for around three months with the government’s Department of Business, Energy and Industrial Strategy (BEIS) on a loan under its Project Birch scheme aimed to safeguard UK industrial operations that have suffered as a result of the COVID-19 pandemic.

Reports not confirmed by Tata say the steelmaker has been seeking about GBP500 million ($654.75 million)-worth of support from the government, and that there has been talk of the government offering a loan in return for equity to the steelmaker.

BEIS did not respond to Platts’ requests for clarification Aug.16.

Spanish-owned Celsa Steel UK, the largest UK manufacturer of reinforcing steel with annual production capacity of 1.2 million mt of long products, was granted an emergency loan by the UK government early-July to allow the company to continue trading amid difficult market conditions caused by the coronavirus pandemic

The Celsa loan – estimated by media at GBP30 million – is expected to be repaid in full and is linked to a series of conditions, including job-protection, climate change and net-zero targets, BEIS said in a July 2 statement.

Celsa UK produces steel in Cardiff, South Wales, using electric arc furnace technology which typically has a lower carbon footprint than the blast-furnace production route.

Tata sees ‘slower’ recovery for European operations

European Steel Association Eurofer said earlier this month that total output by steel-using sectors in the European Union, including construction and automotive, is set to fall by 12.8% in 2020 and to recover by 8.9% in 2021.

In the UK, the picture is further clouded by increasing uncertainty over whether the government will reach a Brexit trade deal before the deadline later this year. A no-deal could reduce production in the UK automotive sector, one of Tata Steel Europe’s most important customers for its flat rolled steel.

Tata Steel said its in its April-June results announcement Aug. 13 that it expects its overall demand recovery prospects in Europe to be “slower” than in the rest of the group, with an overall 2020 European demand decline for its products of about 16%.

Tata Steel Europe also operates an integrated steelworks in the Netherlands. Its Port Talbot blast furnace site has been kept in operation at a reduced rate in recent months, while its cold mills have continued operations based on customer orders. Port Talbot has a designed steelmaking capacity of 5 million mt/year.

The company reported Aug.13 that “Tata Steel Europe’s performance (in the April-June quarter) was affected by lower deliveries and sharp decline in European spreads to an unsustainably low level. ….the company did receive short support from the UK and Netherlands Government including cash flow deferrals of payables.”

British Steel — purchased this year by China’s Jingye Steel Group — and Liberty Steel Group are also understood to have applied for government support as a result of the UK market downturn caused by the pandemic.

According to Platts’ calculations, cumulative loan requests to the UK government from steel producers have so far approached around GBP1 billion.

— Diana Kinch

Klöckner & Co expects upcoming acquisitions to accelerate its digitalisation process

The acquisition and integration of new companies into the German-based distribution group will open new opportunities for its ongoing digitalisation, chief executive Gisbert Rühl said during a conference call attended by Kallanish.

A mere acquisition by itself has only minor potential for growth, “…as you cannot boost margins that much in our industry,” Rühl explained. However, tying in new member companies into the group’s digitalisation process from the outset will provide much stronger leverage, he added.

Regarding its digitalisation ambitions, Klöckner regards itself as a beneficiary of the coronavirus pandemic, which has acted as an accelerator, it writes in its half-year report. The share of sales generated via digital channels increased at a faster pace in the second quarter to 38%, up from 29% in Q2 2019.

The AI-based Kloeckner Assistant delivered a significantly increasing contribution to this development. According to Klöckner, the application shortens what was previously a complex ordering process for both buyers and sellers from several days to just a few minutes.

Additional important progress was also made with the open industry platform XOM Materials. The new AI-driven XOM eProcurement solution will almost fully automate the procurement process for XOM customers.

Klöckner & Co intends to proceed with acquiring distribution companies in Europe and the USA, Kallanish hears from its outgoing chief executive, Gisbert Rühl.

Rühl said during a conference call he expects opportunities to come about in the wake of the coronavirus crisis, “…which not everyone will survive unharmed.” Klöckner has a strong financial cushion for takeovers, in the three-digit-million euro range, he added. The German-based distribution group is eyeing smaller stockholders as well as groups for expansion in existing regions of activity, as well as in new regions that Rühl did not specify.

He emphasised Klöckner is not much interested in distribution companies that are part of mill groups. This suggests that a combination of Klöckner and thyssenkrupp Materials Services, which in Germany is bigger than Klöckner, has become unlikely. Although thyssenkrupp AG undergoing restructuring, its chief financial officer, Klaus Keysberg, made clear last week that it intends to hold on to its distribution division.

An unexpected guest at the conference call was former thyssenkrupp ceo Guido Kerkhoff, who will soon replace Gisbert Rühl as ceo of Klöckner. He named consolidation as one of the key challenges of his upcoming tenure, and noted that “…Klöckner is in a very good starting position” for acquisitions.

Tata Steel says it remains in talks with the UK government on receiving support for Port Talbot but declined to comment on specifics. This follows media reports suggesting the steelmaker had ended talks with the UK government on receiving close to £500 million ($655m) of funding through the “Project Birch” scheme.

A Tata Steel spokesperson tells Kallanish: “We remain in ongoing and constructive talks with the UK Government on areas of potential support. As these discussions have not reached a conclusion, it would be premature to comment on any options that may or may not be under consideration. In the meantime, we will not respond to speculative and inaccurate media reports about the future of our operations in the UK or elsewhere.”

The media reports said the UK government ended talks with Tata as it concluded the steelmaker is sufficiently financed and does not qualify for taxpayer support.

Last month Celsa UK received a government loan worth £30m, while Tata Steel was set to receive a much larger amount, according to reports (see Kallanish passim). In return for the state loan, the government was reported to be requiring the steelmakers to commit to investments to further curb CO2 emissions.

Tata Steel Europe confirmed last month it was discussing with the UK government several options for the future of its UK operations, to address existing structural challenges. One of these was understood to be the possible replacement of the blast furnaces at Port Talbot with electric arc furnaces.

Tata Steel Europe’s June-quarter performance was affected by the overall weakness in economic activity in Europe. “Spreads are at unsustainably low levels but are expected to improve going forward,” Tata Steel chief executive TV Narendran said of Europe last week.

As a result of low steel prices and weak demand, distribution group Klöckner & Co recorded a significant year-on-year decrease in operating income in the second quarter.

The firm suffered a net loss of €111 million ($131m), compared with a net profit of €28m in the prior-year period. Revenue dropped by -30.4% to €1.171 billion on shipments that fell -27.6% to 1.07 million tonnes, Kallanish notes.

Klöckner & Co has continued to drive its digital transformation, and raised the share of sales generated via digital channels to 38%, compared with 29% in Q2 2019.

By way of project Surtsey, which was initiated at the start of the pandemic, Klöckner & Co has increased the automation of core processes. This has accelerated its transformation into a platform company and implementation of restructuring measures. The goal of the implemented measures is to achieve an overall improvement in earnings of more than €100m by end-2021 and simultaneously increase the share of sales generated via digital channels to over 50%.

“Our transformation strategy is taking effect,” Klöckner chief executive Gisbert Rühl told journalists during a conference call. “Thanks in particular to our Klöckner Assistant, we have succeeded in further accelerating the growth of our sales via digital channels.”

In Europe, the construction, mechanical engineering and, especially, automotive industries are ailing. In the US, construction, mechanical engineering, energy and automotive are also under pressure, the enterprise concludes.

In light of the global pandemic, Klöckner & Co is anticipating a substantial decline in steel demand in the relevant key European and US markets for 2020.

Salzgitter suffered large losses in the second quarter, with imports compounding the damage done by the coronavirus pandemic, the firm says in a report seen by Kallanish.

In its first-half-year report, the group bemoans that “…excessively generous quotas” for duty-free steel imports into the EU provided no protection whatsoever even before the advent of Covid-19. The share of these imports was even higher in Q2 due to slack demand for steel in the EU, Salzgitter claims. Most affected were steel strip as well as plate, whose imports have contributed to accelerating the erosion of prices.

For plate, this applied to conventional construction steels as well as higher grades. Around 40% of EU plate imports currently originate from Ukraine. Together with volumes from South Korea, North Macedonia and Russia, the four nations account for almost 80% of all non-EU imports.

Salzgitter’s consolidated revenue, including its Strip Steel, Plate/Sections, Mannesmann Tubes and Trading units, fell -32% year-on-year in Q2 to €1.523 billion ($1.8 billion). Total crude steel production fell by -25% to 1.27 million tonnes. Shipments of its Trading unit fell -29% to 747,000 tonnes, with unit revenue down -33% to €526m. The group’s net loss came to €101 million, down from the breakeven it reported in the corresponding 2019 quarter.

Italian rebar and wire rod maker Alfa Acciai plans to modernise its rolling mill in Brescia, Kallanish learns from Danieli, which is set to carry out the upgrade. The project is a response to increased demand for spooled bar-in-coil production, the technology supplier says.

The Brescia plant produces straight bars and spooled-bar-in-coil. At present, 130mm square billet feeds the two rolling lines, one for straight bar and one for spooler coil. The new layout configuration will allow for the simultaneous feeding of the two spooler units, maximising productivity even when producing small products, Danieli adds.

In addition to the new mechanical equipment, the upgrade will involve electrical and automation parts, Kallanish notes. The Brescia plant is one of Italy’s largest electric arc furnace mills. Alfa Acciai also owns the Catania-based Acciaierie di Sicilia, the only steel mill in Sicily; Ferroberica, which pre-shapes and assembles rebar at its sites in Vicenza Catania and Udine; and Brescia-based Tecnofil, a drawing mill for wire rod.

Alfa Acciai employs 1,100 workers for an annual capacity of 2.5 million tonnes.

Salzgitter reported a massive dip in production, sales and orders in the second quarter, especially from its activities in the automotive and energy industries. The fall was less hard for construction-related activities, although the bottom in this sector may yet be reached, the company says.

Compared with Q2 2019, capacity utilisation dropped between -10% and -70%. “The slump in demand, from the automotive industry in particular, created a burden, while the construction sector proved to be stable,” Kallanish hears from the company.

The units that depend heavily on the automotive and energy consumer groups therefore saw order intake virtually halve on-year in Q2. For steel strip it dropped from 1.144 million tonnes to 641,000t, for tube from 344,000t to 178,000t.

The dip was less pronounced in the Plate/Section business unit, where the order intake went down by some -25% to 511,000t. For sections, the construction industry, as the key customer, proved to be robust in the first six months of 2020 on the back of existing projects. However, there is less willingness to invest in new construction projects, which will impact the second half of the year, Salzgitter predicts.

For the tubes business, the firm says the first signs of recovery materialised in June. Markets in the Far East, especially, which were the first to collapse from the Covid-19 pandemic, have recovered somewhat earlier than other regions.

Still, the company is very cautious with making a general performance forecast, citing further risks from currently unforeseeable trends in selling prices, input material prices and capacity developments. It anticipates a negative pre-tax result in the low to mid-triple digit million euro range.

Liberty Steel Group won the competition for French mills Hayange and Ascoval, originally part of British Steel, with the mills set to form the company’s first steel business in France.

Following the decision in July by the Tribunal de Grande Instance de Strasbourg to award Hayange to Liberty Steel, the French government gave its final approval for the deal on Aug. 14. Liberty Steel Group is part of Sanjeev Gupta’s GFG Alliance.

The assets will expand Liberty Steel Group’s rail business, which is currently comprised of a rail mill in Whyalla, South Australia. The acquisition will create an integrated GREENSTEEL rail business in France, the company said in a statement on Aug. 14.

Liberty’s GREENSTEEL model seeks to transform steel making through increased use of steel scrap recycling in Electric Arc Furnaces, or EAFs, application of low carbon and renewable energy sources to power industrial processes and use of hydrogen instead of coking coal as a reducing agent for iron ore through Direct Reduced Iron plants to remove CO2 emissions from steel making. The GREENSTEEL strategy is key to GFG Alliance’s aim to become carbon neutral by 2030.

“The acquisition will secure the future of the nationally strategic plants and their 700-strong workforce”, it said.

The Hayange plant, located in Moselle, France, manufactures over 300,000 mt/year of steel rails that it supplies to major infrastructure clients including France’s national rail operator SNCF and RATP, the operator of Paris’ metro system.

While the French rail market will remain its priority, with help from across the Liberty Steel network, Hayange may be able to grow rail sales across Europe and other markets.

The deal also rescues Ascoval’s plant in Saint-Saulve in northern France that was placed into an ad hoc receivership process last year. It uses EAF technology and is capable of producing 600,000 mt/year of steel blooms, billets and other forged products. Ascoval will supply Hayange with semis, together creating an integrated French GREENSTEEL rail business.

“We will revive both businesses …. connect them to bigger opportunities in the market, host downstream developments, and provide additional demand for Ascoval’s steel,” Sanjeev Gupta, executive chairman of GFG Alliance and Liberty Steel Group said on the acquisition.

“We intend to develop Ascoval as a GREENSTEEL hub and to drive Hayange into new markets through strong engagement with European rail operators seeking to make their networks carbon neutral.”

To enact its plan of building a rail and rail services business with international reach, and based on the GREENSTEEL model, Liberty had committed to providing an initial Eur65 million for its new assets.

— Ekaterina Bouckley