Category: Latest Updates

The EU steel industry is now in “a state of emergency” after the coronavirus hastened a decline in the steel market that was already there in 2019, European Steelmakers’ Association (Eurofer) said August 5.

EU-28 apparent steel consumption shrank 12% year on year in the first quarter — the fifth consecutive quarter of falls — following a drop of 10.8% in Q4 2019, as EU manufacturing sector business conditions, particularly in the key automotive industry, continued to deteriorate, Eurofer said in a statement. Total Q1 apparent consumption in the EU was 37.6 million mt, it said.

With the onset and continuing impact of the coronavirus, future data was likely to show further sharp drops, as shutdown measures implemented by governments starting from March “hugely impacted” manufacturing activity and steel-using industrial sectors, it said. Steel consumption forecasts as well as the overall economic outlook across the EU and the world had now been slashed, it said.

“The coronavirus pandemic has cut the legs out from under the European steel industry, causing severe damage to the whole sector and its value chains”, Eurofer Director General Axel Eggert said. “The data now available confirm that the downturn that had begun in 2019 has been compounded by the crisis — with the sector now in a state of emergency”.

The continued downturn in steel demand led to the fifth consecutive fall year-on-year in domestic deliveries in the EU in Q1 (of 8%, the same rate as in Q4 2019), the association said.

Steel imports into the EU have also dropped: after diving 24% in Q4 2019, the downward trend in imports from third countries continued in Q1 2020, with a year-on-year fall of 20% in the period, Eurofer said. This equated to 8.4 million mt in absolute volumes, accounting for 21.2% of EU consumption, it said.

Total output in EU steel-using sectors fell by 7.2% in Q1 after falling 1.3% in Q4 2019.

On an annual basis, Eurofer has now revised upward its assessment for steel-using sectors’ output, which increased by an overall 0.3% in 2019 (up from the previous assessment of a fall of 0.2%), after growing 2.9% in 2018.

The European Commission’s Summer 2020 Economic Forecast, published early July, projects that the eurozone economy will contract by 8.7% in 2020 and grow by 6.1% in 2021.

“Even after the return to normal business conditions, the EU economy will still be particularly vulnerable as it is exposed to fluctuations in international trade,” Eurofer said. “As the largest contribution to growth during the previous cycle came from exports, a slowdown in export markets will further exacerbate the difficulties that EU economies are likely to face.”

— Diana Kinch

NLMK La Louvière has introduced a digital inventory management solution enabling it to minimise warehouse stock levels and ensure uninterrupted order fulfilment, Russian parent NLMK tells Kallanish. Since the start of system testing in April, stock turnover for the most in-demand feedstock product, slab, improved by 30%.

“As production becomes increasingly local, smart stock planning emerges as a key success factor,” says NLMK vice president for sales Ilya Guschin. “Our new digital solution enables us to ensure timely delivery to our customers while minimising our stock levels.”

Belgium-based La Louvière produces coil from slab supplied by NLMK’s principal Russian Lipetsk site. The supply volume is approximately 1.6 million tonnes/year.

NLMK’s consolidated steel output and sales were impacted in the second quarter by declining demand in its traditional sales markets due to the Covid-19 pandemic (see Kallanish passim). It expects lower on-year steel output at Lipetsk in Q3 because of major overhauls.

Consolidated output of crude steel decreased to 3.9mt in Q2, down by -8% on-quarter and -3% on-year due to lower capacity utilisation rates at NLMK Russia Long Products and NLMK USA.

EU finished steel imports in January-April dropped -16% on-year, with flat products intake down -17% and longs down -11%, says European steelmakers’ association Eurofer. Turkey was no longer the clear leader in imports supplied into the EU, as its 18% share in overall imports was equalled by South Korea.

Four-month finished steel imports from Turkey and China fell -51% and -40% respectively, while intake from India declined -28%. Imports from Russia and South Korea, however, rose 8% and 4% respectively.

Four-month strip mill and hot-rolled wide strip imports fell -26% and -32% respectively. Hot-dipped galvanised sheet intake declined -21%. Quarto plate imports recorded a fall of only -1%. Heavy sections, rebar and merchant bar imports dropped -68%, -36% and -11% respectively, but wire rod imports rose 2%.

EU four-month overall steel exports, meanwhile, fell -13%, with flats and longs down -15% and -13% respectively. Shipments rose to Egypt by 7% and China by 3%. However, exports to the US and Turkey fell -43% and -10% respectively.

Only quarto plate recorded export growth. Hot rolled wide strip exports dropped -31%, hot rolled flat strip mill by -30% and strip mill by -21%. Exports of rebar and wire rod recorded significant drops, while merchant bar and heavy sections fell only slightly.

The EU’s total steel product trade deficit amounted to 1.031 million tonnes/month over the first four months of 2020. The largest trade deficit in finished products was with South Korea, at 263,000t, followed by Russia with 257,000t and Turkey with 62,000t. A trade surplus remained with the US, Switzerland and Algeria.

“The risk is that any growth of EU steel demand in early 2021 would mostly benefit imports due to the unused quota transfer mechanism,” Eurofer comments in a report sent to Kallanish. Global overcapacity remains the core issue. “Excess capacity is still being built up without solid economic justification in countries such as China, Indonesia, Iran, Russia, or Turkey.”

Thyssenkrupp says it is paving the way for the first investment within the scope of its “Strategy 20-30” with the construction of a new walking beam furnace.

The new unit is intended to ensure a significantly improved surface quality of premium sheet, which are used, for instance, for exterior car body shells. The first orders for the equipment will be placed shortly, Kallanish hears from the group.

Completion of the unit for hot strip mill 2 at tk Steel’s Beeckerwerth plant in Duisburg is scheduled for 2022. The project involves an investment volume in the mid double-digit million-euro range, it states.

The walking beam furnace will be over 50m long and ensures that surface defects are prevented during the reheating and rolling of slab. This is achieved by special lifting and lowering devices for slab, weighing up to 30 tonnes. Before the new furnace is built, the old unit will first be dismantled in autumn 2022, tk notes.

EU real steel consumption will fall at the “…unprecedented rate” of -13.6% on-year in 2020, recovering in 2021 by 9.7%, says European steelmakers’ association Eurofer.

Even after Covid-19 lockdown measures are removed, economic growth and global trade will remain weak until 2021, hampering EU investment. This will be offset partially by continued resilience in construction, whose output will contract less than other sectors.

In the first quarter total EU steel-using output dropped by -7.2% on-year as a result of the pandemic-related lockdown exacerbating the existing negative trend. Only the Czech Republic and Poland saw output growth.

EU real steel consumption fell -5.8% on-year in Q1 to 38.6 million tonnes, after an -8.1% drop in Q4 2019. Continued economic slowdown over the second half of 2019 and widespread business uncertainty, as well as decreasing steel intensity were the key drivers.

Apparent consumption is expected to fall -16.6% in 2020, and then to rebound by 14% in 2021, Kallanish notes.

It fell -12% on-year in Q1, the fifth consecutive quarterly fall, to 37.6mt. The Covid-19 pandemic was only partially responsible. This compounded existing factors such as business uncertainty, weak manufacturing demand and continued stock reduction to record lows.

Third-country imports declined -20% in Q1 as a result of the safeguard measures applied by the EU. Domestic deliveries by EU steel suppliers fell -8% in Q1. The pandemic had a limited impact on data, but is set to produce even bigger business disruption and to depress steel demand by an unprecedented extent, Eurofer says.

Vietnam’s steel industry is expected to benefit from the EU-Vietnam Free Trade Agreement (EVFTA) implemented from 1 August, as it seeks to expand export markets, Kallanish notes. The EU will eliminate tariffs on Vietnam’s industrial products over seven years.

According to the Vietnam Steel Association (VSA), the EU has accounted for only slightly over 3% of Vietnam’s annual steel export value in recent years. Vietnamese exports have faced numerous trade remedy lawsuits in many countries, of which about 80% are related to the steel industry, according to Vietnam’s Ministry of Industry and Trade.

Australia initiated anti-dumping and countervailing investigations on aluminium zinc-coated steel exported from Vietnam last month (see Kallanish passim). In December last year, the US Department of Commerce imposed import tariffs of up to 456% on some corrosion-resistant and cold-rolled steel products made in Vietnam using materials originated from South Korea and Taiwan.

EVFTA is expected to help develop the entire industry by increasing steel exports to the EU. Vu Van Thanh, Deputy General Director of Vietnam’s Hoa Sen Group, says Hoa Sen exports an average of 10,000-15,000 tonnes/month of steel to the EU. “[I] believe that the EVFTA will offer us more opportunities to export products to this market,” he adds.

Toan Thang Steel Trading Co., which has never exported steel to the EU, has adopted strategies to sell products to this market to benefit from EVFTA opportunities, according to media reports.

Rebar was the only product for which Germany’s stockholding distributors reported an increase in sales in 2019, amid an overall decline in shipments, Kallanish learns from distributors’ federation BDS.

Sales of rebar totalled 1.31 million tonnes throughout the year, and by 31 December inventories remained unusually well-filled, at 245,000 tonnes, 17.5% higher than at end-2018.

While the good rebar performance was related to Germany’s construction boom, mainly in residential construction, sales of other products typically used in construction declined. Beams and sections sales, for example, dipped by -5.2% to 1.03mt, as did plate, which fell by as much as -13% to 932,000t.

BDS chief economist Jörg Feger believes actual demand did not fall as much as the figures suggest, but that supply sources alternated. “We assume that larger tonnages were sold from [port] warehouses abroad into Germany,” meaning they did not appear in BDS statistics.

He assumes the same effect for hot rolled strip/sheet, whose sales fell by -7% in 2019 to 1.1mt after two years of increase. The dip was even more pronounced for cold rolled strip, which fell by -9% to 1.27mt. Deliveries of the largest single product group, galvanized strip, fell by only -0.8% to 2.9mt. However, restocking remined moderate, as by the end of the year inventories were -12.5% lower than at end-2018.

French stainless steel producer Aperam expects unrevised third-country EU import quotas for stainless hot rolled flat products to yield increasing import pressure in the second half of 2020.

The European Commission decided to make country quotas quarterly to straighten out import flows and prevent a repeat of the H2 2019 import surge. However, Aperam believes the Commission needs to align quotas with the Covid-19-induced demand drop in Europe.

“Current quotas are extremely generous and allow third countries to solve their problem of oversupply by dumping material into the European Union, thereby hurting domestic employment and crowding out environmentally friendly produced material,” Aperam says in a report seen by Kallanish.

Although imports maintained a disproportionate market share of close to 30% in 2019, they dropped off significantly during H1 2020. This is a direct consequence of the excessive imports during H2 2019, when several countries misused their annual quotas, which run from July to June of the following year. These countries shipped as much material as quickly as possible to Europe, consequently exhausting quotas in Q2 2020 and thereby limiting imports, Aperam observes.

The European Commission confirmed earlier this year that preliminary duties on hot rolled stainless steel flat products from China, Indonesia and Taiwan should be imposed as of 12 April (see Kallanish passim). This decision curbed imports of these products during Q2.

As a consequence, the market share of imports dropped from 27% in H1 2019 to 23% in H1 2020. A pending countervailing duties case against China and Indonesia is expected to be concluded in 2020, Aperam adds.

The company started well into 2020. The first quarter saw a seasonal volume recovery and the exhaustion of some import quotas increasing demand for domestically-produced material. However, towards the end of Q1 the company started to face significant Covid-19-related effects which continued over Q2.

H1 Ebitda was €119m ($139.6m) versus €176m in H1 2019. Total sales in H1 stood at €1,867m compared to €2,268m in H1 2019 (see Kallanish passim).

After a disappointing 2020 so far, the majority of Germany’s mechanical engineering companies are confident they will achieve a nominal sales increase again in 2021, according to their industry federation, VDMA.

This is the key message of a flash survey carried out by VDMA of 640 member companies on the economic effects of the coronavirus pandemic. Of the respondents, 60% expressed optimism for 2021. 

However, “…this optimism is expectation-driven and therefore very fragile,” Kallanish hears from VDMA chief economist Ralph Wiechers. It should be kept in mind that more than half of the companies are expecting turnover losses of 10-30% in 2020, he adds. The growth base in the following year is therefore correspondingly low, he notes.

There has been little signal until now of the situation normalising. “45% of the companies report a noticeable drop in orders, some 34% saw profound drops; this confirms the gloomy picture of recent weeks,” says Wiechers. Companies’ customers from the automotive industry are particularly hard hit.

More companies nevertheless see a silver lining on the horizon. One quarter expect a recovery in demand in the next three months, whereas 16% expect the situation to worsen. The situation along the supply chain has also continued to ease. By now, only slightly over 10% of companies say they are still affected by disruptions in the supply chain.

The UK government launched an investigation into alleged dumped or subsidized imports of PSC wire and strands of Chinese origin, Department for International Trade/Trade Remedies announced in an official statement Aug. 4.

In a summary of the issues involved in the transitional review, the department said it will consider whether the application of the anti-dumping amount is “necessary or sufficient to offset dumping of the relevant goods in the UK market.”

It will also assess whether “injury to the UK industry in the relevant goods would occur if the anti-dumping amount were no longer applied to those goods.”

According to case’s public file, goods subject to the investigation include none plated or non coated wire on non-alloy steel, wire of non-allow steel plated or coated with zinc, stranded wire of non-alloy steel whether or not plated or coated with not more than 18 wires, containing by weight 0.6% or more carbon, with a maximum cross sectional exceeding 3 mm.

The department added that galvanized seven wire strands in which the diameter of the central wire is identical to or less than 3% greater than the diameter of any of the 6 other wires will not be subjected to the review.

Interested parties are encouraged to register their interest regarding the outcome of the case via the Trade Remedies Service by no later than Aug. 14.

According to the UK Trade Remedies department, entities that have registered will be able to receive updates on the investigation as well as submit evidence to assist the department in possible recommendations to import tariff changes.

The department specified any interested party may include China, any overseas exporter or importer of the goods subject to review and any trade or business association of overseas producers, exporters or importers of the goods subject to review.

On the UK side, this may also include any producer of the specified goods in the UK and any trade or business association of UK producers of the like goods.

— Amanda Flint