Category: Latest Updates

SBQ steelmaker Schmolz+Bickenbach was severely affected by the Covid-19 pandemic in the second quarter, as lower steel demand translated into reduced sales volumes and revenue.

“The biggest impact came from the extensive shutdowns of major European automobile manufacturers and their suppliers,” says chief executive Clemens Iller.

S+B reported a -38.1% on-year decrease in Q2 sales to 301,000 tonnes, Kallanish notes. This was most pronounced for quality and engineering steel, whose shipments fell -42.3% on the back of the sharp decline in demand from the automotive industry.

Volumes also fell in the stainless steel and tool steel segments, but with less sharp declines of -28.3% and -22.2% respectively. The average sales price/tonne of steel was €1,561 ($1,839) versus €1,662 in Q2 2019. This fall is mainly attributable to lower base prices as well as lower scrap and alloy surcharges than in the previous year.

S+B’s revenue declined -41.8% on-year to €469.9 million. The decline was most pronounced in the quality and engineering segment, at -50.1%. Revenue from stainless steel was down by -33.6 %, and for tool steel by -34.2%. Geographically, all regions and countries suffered a double-digit decline in revenue. Adjusted Ebitda was negative €45.8m, against positive €40.5m a year earlier.

The company previously told Kallanish new, stricter EU steel import rules are restrictive for every country outside the EU, including Switzerland. “Their effect was greatly mitigated by Covid-19, as demand collapsed,” it said. “Therefore, with this low demand, we currently have no problem with more stringent import conditions, but as soon as this changes, Swiss Steel will have to look again at the permissible quarterly quantities.”

Despite the slight increase in customer activity from May, demand is returning extremely slowly. A cautious, very limited recovery will not emerge until Q4, S+B concludes.

Dutch flat steel service centre Noviostaal confirms the outlook for flats prices in Europe remains positive. This is thanks to a recovery of activity in key markets and the need for mills to widen their low margins.

The company says in its newsletter published this week it is receiving indications that automotive production in Germany, France and Italy is recovering faster than expected. It also adds that Sweden is already registering pre-coronavirus economic activity levels.

The expected recovery in demand together with persistent low margins for European mills suggest prices for flat products will continue to move up further into the fourth quarter. “In summary, it can be said that all signals for a price increase are green and we assume that we will have to deal with higher steel prices in the coming months,” Noviostaal observes.

According to Kallanish price series, hot rolled coil in northern Europe recovered €20/t ($24) since the beginning of July to €420/t ex-works base last week. Noviostall confirms this and indicates mills are pushing for a further €30-40/t increase for new orders, with some targeting yet further price hikes for Q4.

Swedish scrap prices marked the first recovery in August since the middle of April, Kallanish learns from national scrap association Järnbruksförnödenheter AB (JBF).

Each month, JBF publishes the applicable price changes for Swedish scrap grade No.11, which is offered to the supplier contracted for supplies during the following month. The association has signalled for an August recovery of SEK 70/tonne ($8.04/t).

Prices slipped in July after two months of stability in May and June. According to Kallanish price series, most European scrap indicators show prices have been on a new upward trend since early July, supported by stronger levels in the Turkish market. However, this week sentiment has turned in Turkey.

Swedish grade No.11 scrap is equivalent to scrap grade HMS1, or E3 in European steel scrap specifications.

The European HDG market was relatively stable Aug. 12 with further improvements seen in automotive demand, sources told S&P Global Platts.

The Platts TSI HDG index was assessed at Eur520/mt ex-works Ruhr Aug. 12, unchanged week on week.

In southern Europe, HDG rose Eur5 on the week and was assessed at Eur493/mt EXW S Europe, its highest mark since May 20.

A German service center source confirmed recovering demand from automotive original equipment manufacturers and truck manufacturers.

“There is some restocking in the market as from March to June [during the] lockdowns there was inventory depletion, so they must restock as inventories are at a low level,” he said. After three months of complete closure, truck manufacturers in particular are now enjoying fuller order books that will support activity for the third quarter, the source said.

“Automotive order intake is better but not yet at preCOVID-19 levels,” he said adding that recent price gains achieved in the hot-rolled coils market will lift galvanized prices in the coming weeks.

A Benelux-based service center source said the outlook for HDG was unclear in the short term. While there was now reduced import volumes available in the European market, this will be offset by the return of Liberty to production, the source said, adding: “for HDG it’s unclear on what will happen.”

A Benelux-based trader said construction demand continued to be strong in Northwest Europe.

“Automotive trend is a little better, slowly of course, not the level of demand we want, but it’s slowly starting again and construction doing well in Benelux — a lot [of investment] going into real estate,” he said.

With the majority of market participants in southern Europe on holiday, the current market level was unclear, said an Italy-based rolling mill source.

An Italy-based distribution source said there was increased pressure on cold-rolled and hot-dipped galvanized material due to the sluggish return of automotive demand, but added that it was felt “mainly on galvanized products.”

— Len Griffin, Amanda Flint

Ferrum has signed a €19.8 million ($23.4m) agreement to supply Polish gas pipeline operator Gaz-System with insulated welded pipe for Baltic Pipe LOT D, the Polish pipemaker says. Deliveries will take place in January-July 2021.

Last month Ferrum won a €21.9m contract to supply insulated pipe for the construction of Baltic Pipe, with deliveries to be carried out until May 2021 (see Kallanish passim).

Separately, Ferrum has ordered PLN 30.8m ($8.25m) of steel products from Severstal Distribution. Deliveries will take place until March 2021. This takes overall business between the two firms in the last 12 months to PLN 75.6m.

Ferrum’s pipe sales declined -17% on-year in the first quarter to 23,800 tonnes.

Severstal Distribution increased sales in the first half of the year, the company says. Shipments amounted to 1.3 million tonnes, up by 8% on-year, Kallanish notes.

Severstal’s sales in Russia increased to 580,000 tonnes, up by 4% on-year. Shipments to Europe amounted to 740,000t, up by 13% on-year.

“We have created a large distribution centre in Vologda for the prompt supply of our regional warehouses with rolled metal,” says Severstal Distribution head Timur Yudichev. “This year we launched a programme to supply consumers from the small and medium-sized business segment. The pilot program started in Moscow.”

Exports of rolled products from Russia to the EU are limited by safeguard quotas, and supply to the domestic market is often more cost-effective for Severstal, the company claims.

Therefore, the European division of the distribution network focuses on sales of steel products with increased added value. These include products with polymer and zinc coating, as well as steel certified to be sold in the Nordic countries.

“We strive to become the first-choice company for our clients in the Baltic States, Finland, Sweden, Germany, Belgium, the Netherlands, Poland, Czech Republic, Slovakia,” says Timur Yudichev.

Severstal’s output of crude steel and steel products decreased in the second quarter to 2.81mt, down by -2% on-year (see Kallanish passim). Hot metal output decreased -3% each on-quarter and on-year to 2.33mt, following the short-term upgrades of blast furnaces No.1, No.4 and No.5.

A recovery in the European stainless steel market to levels prior to the Covid-19 pandemic will take significantly longer than many anticipate, says Joost van Kleef, commercial director of stainless scrap merchant group Oryx Stainless.

Although demand for stainless steel has recovered from its lowest levels in March and April, overall European demand is not expected to exceed 70% of pre-pandemic levels. Some leading market analysts forecast that a return to pre-pandemic levels will not occur until 2023, van Kleef writes in the latest Bureau of International Recycling (BIR) stainless steel mirror.

“The stainless steel market was weak for most of the recent years, but it looked like it would pick up this year,” Oryx chief financial officer Roland Mauss tells Kallanish. “China seemed to achieve a turnaround – but then Covid-19 came.” He notes that the stainless market has meanwhile started to recover, especially in Asia. Availability of stainless scrap has improved, too, and is basically in line with demand, “…so that the price level won’t change too much,” he adds.

For Europe, import penetration will remain a challenge, van Kleef notes in his article. “The latest development within Taiwan should be seen as a warning sign,” he says, referring to the closure of furnaces in favour of importing stainless slab from Indonesia. Van Kleef criticises the deeper environmental impact of using Indonesian-produced slab rather than melting scrap.

As steel consumption in Turkey rose notably in June and exports soared by 40.3% year on year in that month to 2 million mt, amid recovery attempts globally, Turkish mills’ crude steel output rose 3.8% year on year to 3.8 million mt. However, despite this rise, Turkish mills H1 steel output remained 4.1% lower than last year at 16.3 million mt due to the pandemic.

The decline in Turkish mills’ export volumes could accelerate again in the coming months due to EU quotas, the Turkish Steel Producers’ Association (TCUD) said on Aug. 11.

According to the European Commission data, the three-month EU steel quotas, during July 1- September 30, for construction steel and hollow sections have already filled, while more than 90% of the quotas for organic-coated plate, sections and wire rod were already used as of the end of July.

The 8.7% rise seen in Turkish steel consumption, however, supported Turkish mills output and prices in H1. Long steel consumption in Turkey rose 12.4% year on year in H1, while flat steel consumption increased by 5.8% on year in that period, despite the pandemic.

“However, the rise seen in finished product output remained lower than steel consumption in H1, as imports weighted consumption habits . . .,” the TCUD said in an Aug. 11 statement..

Highlighting that steel imports into Turkey rose by 59.8% on year to 1.4 million mt in June, the TCUD said: “To avert the rise in steel imports, Turkey should impose counter measures against the EU as soon as possible.”

Turkey informed the World Trade Organization on May 25 about possible duties against EU steel, as Platts has reported. But no presidential decree about it has been published yet, despite mill expectations.

Some Turkish market participants’ expectations in this regard are decreasing, as Ugur Dalbeler, CEO of a major Turkish steel producer, told Platts last week.

“Our expectations about counter measures against EU steel are decreasing, but we will continue to try to exist under the current conditions,” the CEO said.

— Cenk Can

Spanish authorities confirmed last week that Cristian Lay’s proposed acquisition of the Gallardo Balboa group has received the necessary green light from local regulators.

Last month Cristian Lay was indicated as the winner of the bidding race to acquire Gallardo Balboa in full (see Kallanish passim).

Spanish regulators confirm that the inclusion of Gallardo Balboa into Cristian Lay will not cause anti-trust issues. Cristian Lay has no operations in the steel sector. “The operation does not result in horizontal or vertical overlaps,” the Spanish competition watchdog confirms.

The Italian government has allocated €470 million ($553m) to becoming a shareholder in troubled ArcelorMittal Italia, formerly Ilva, through its investment body Invitalia.

The state is carrying out due diligence to determine the true value of the steelmaker, after which it will decide whether it becomes Ilva’s majority shareholder, Kallanish learns from sources close to the matter.

ArcelorMittal has a withdrawal right by 30 November, subject to the payment of €500m. However, in a televised interview, ArcelorMittal Italia’s chief executive, Lucia Morselli, reiterated ArcelorMittal’s commitment to its Italian investment. ArcelorMittal is respecting the roadmap for the environmental plan, and by 2023 it will have invested €1.2 billion, she said (see Kallanish passim).

ArcelorMittal has asked authorities for a grant of €200m and a loan of €600m that it will pay back in two years following the finalisation of the sale, Kallanish notes.

Meanwhile, the Taranto steelmaking facility is working at minimum levels as the majority of the workforce is temporarily laid off due to the Covid-19-induced steel demand drop.

ArcelorMittal is now implementing a two-week shutdown from 3 to 16 August. In Taranto the hot end area will keep running but the plate mill, pickling line, and galvanizing lines no. 2 and 3 will be idled for maintenance. The facility in Novi Ligure will also shut down from 3 to 16 August. In Genova galvanizing line no. 5 will also stop production for two weeks.