Category: Latest Updates

Max Aicher has acquired the assets of insolvent Czech forged steel producer Pilsen Steel, the German group tells Kallanish.

The Czech firm has been in insolvency proceedings since January 2019. It possesses a 70-tonne 150,000 tonnes/year capacity electric arc furnace-based meltshop and a ASEA-SKF ladle furnace. Liquid steel is poured into ingots and castings. The firm has foundry, forge and machining shops. It has 570 employees and supplies the shipbuilding, power generation and nuclear industries, as well as rolling mills.

Until 2010, the company was owned by Russia’s OMZ. Sales of €239 million ($268.5m) and Ebitda of €48.7m in 2008 demonstrate the capacity of the company in its peak years. The next owner, Igor Shamis, was unable to secure sufficient demand and the company’s results substantially deteriorated, according to Tarpan Partners who acted as financial advisor in the insolvency proceedings.

“The macroeconomic crisis, Russian sanctions, and global overcapacity led to insolvency (reorganisation) in 2012-14,” Tarpan says. “Since 2014, the company was owned by its largest 2014 creditor, Vneshekonombank (VEB Kapital), a Russian state institution. The results have not improved since then.” Pilsen Steel posted sales of €32.7m and negative Ebitda of €23.1m in 2018.

A Max Aicher spokesperson tells Kallanish it is “…currently unable to provide any specific information about the further use of the acquired business.” It first needs to find a consensus with the city of Pilsen and the Czech Ministry of Economy on the future use of the steelworks. “We do respect the location’s longstanding successful industrial tradition and want to combine it with the tradition of Max Aicher in a future-proof way,” the spokesperson adds.

The German firm declined to comment on developments at Slovakia Steel Mills (SSM) since it was acquired in 2018 by Max Aicher’s Hungarian subsidiary, Ozdi Acelmuvek.

Global Stainless steel melt shop production fell 8% year on year to 11.7 million mt in the first three months of 2020, Brussels-based International Stainless Steel Forum (ISSF) said July 2.

In Europe, Q1 stainless steel production was at 1.79 million mt, 6.3% lower year on year, ISSF said.

In the US, production of 627,000 mt was 10.9% down year on year, while in China output was 9% lower at 6.08 million mt.

In Asia, not including China and South Korea, stainless steel output was 3.8% lower year on year at 1.89 million mt.

Although priced higher than carbon steel, stainless steel has in recent years increased its market presence in construction, transport and hygiene applications due to its superior corrosion resistance.

Stainless steel production is the biggest consumer of nickel metal.

— Diana Kinch

The UK government confirmed July 2 it had provided an emergency loan to steelmaker Celsa Steel (UK) Ltd. to allow the company to continue trading amid difficult market conditions caused by the coronavirus pandemic.

“The agreement will safeguard a key supplier to the UK construction industry and secures more than 1,000 jobs, including more than 800 positions at the company’s main sites in South Wales,” the Department of Business, Energy and Industrial Strategy (BEIS) said in a statement.

A report in the Financial Times estimated the loan package to Celsa Steel (UK) at GBP30 million ($37.39 million), but BEIS said it could not immediately confirm the amount.

Celsa Steel (UK) operates an electric arc furnace in Cardiff, Wales and is the largest UK manufacturer of reinforcing steel with an annual long products capacity of 1.2 million mt.

UK steelmakers have been hard hit by the pandemic which caused a substantial drop in demand in their two main consuming sectors, construction and automotive, which continue to be overshadowed by concerns over future investments and costs in the current absence of a Brexit trade deal.

Celsa was not immediately available for comment July 2.

As part of the loan, which is expected to be repaid in full, the company must meet a series of legally binding conditions, which the government has negotiated to ensure the loan benefits the workforce, business and wider society, BEIS said.

“This will ensure public money is used to aid wider government policies to further benefit the UK. These conditions include commitments to protect jobs, climate change and net-zero targets, improved corporate governance, such as restraints on executive pay and bonuses, and tax obligations. It has also required further financial commitments from shareholders and existing lenders,” it said.

The government said it has brought together the firm’s management, shareholders and other lenders to create a strong package of support for the company, its workers and UK economy. “This is a good deal for all parties,” it said.

Tata Steel situation

The government is also understood to be close to announcing a support package for Tata Steel Europe, which operates a blast furnace at Port Talbot, Wales, and is the UK’s largest steelmaker. Tata, which has around 8,000 employees in the UK, is reported to have asked the UK government for a GBP 500 million loan. A BEIS spokesman could not confirm July 2 if Tata was among a number of companies receiving loans.

British Steel — recently purchased by China’s Jingye Steel Group — and Liberty Steel Group are also understood to have applied for UK government support. According to S&P Global Platts calculations, so far, cumulative loan requests to the UK government from steel producers are approaching GBP 1 billion.

The support scheme under which the steelmakers have applied for help as companies of strategic importance is dubbed Project Birch.

In March, the government established a broad package of support schemes for companies of all sizes across sectors, to protect businesses and livelihoods during the pandemic.

Through its Coronavirus Business Interruption Loan Scheme, the Coronavirus Large Business Interruption Loan Scheme and the Bounce Back Loan Scheme, more than 1 million loans have been approved – while 9.3 million jobs have been protected through the Coronavirus Job Retention Scheme, BEIS said.

“In exceptional circumstances, where a company is of strategic importance and all other options have been exhausted, the government may consider providing bespoke support,” it said.

More broadly in support of the UK’s steel industry, the government has provided more than GBP 300 million in electricity cost relief since 2013, public procurement guidelines with annual reports on the proportion of public sector steel bought from British firms and details of a steel pipeline on national infrastructure projects worth around GBP 500 million over the next decade, BEIS said.

— Diana Kinch

Metso Outotec has commenced operations following the merger of technology supplier Outotec with its rival Metso’s Minerals Business. Trading in the shares of the new firm has begun on the Nasdaq Helsinki stock exchange.

The two Finnish firms announced the merger plan last year (see Kallanish passim).

The new firm employs over 15,000 professionals in more than 50 countries and its illustrative combined sales for 2019 were about €4.2 billion ($4.7 billion). “The combination offers potential for significant cross-selling and cost synergies and an even stronger platform for innovation, digital leadership and growth,” says Metso Outotec.

“The growing interest towards the environment and the impacts of climate change, urbanisation, decreasing ore grades and electrification are forcing traditional industries like aggregates, minerals processing and metals refining to redefine their license to operate,” the firm adds. “Metso Outotec can drive these industries towards a responsible use of the world’s natural resources.”

Metso Outotec consists of six business areas: Aggregates, Minerals, Metals, Recycling, Services, and Consumables. Metso’s chief executive Pekka Vauramo is the new firm’s ceo, with Eeva Sipilä chief financial officer.

Among other technology, Metso Outotec manufactures iron ore beneficiation and pelletising plants. Last year Metso secured a contract to supply Tata Steel India with a scrap shredder – India’s first – as well as an order to deliver a large-scale iron ore pellet plant for Tata Steel’s Kalinganagar steelworks. NLMK, meanwhile, contracted Outotec last year to boost its Stoylensky iron ore pelletising plant’s capacity. China’s Mingtuo Group is building a high carbon ferrochrome products line supplied by Outotec.

Metso Flow Control, which was not included in the merger, has become the focused standalone flow control company Neles Corporation. It also offers solutions for the metal recycling, mining and oil and gas industries.

Turkey’s imports of hot rolled flat steel rebounded again in May on-month, but they were considerably down on-year, Kallanish notes from data published by the Turkish Statistical Institute (TUIK).

May arrivals of flat products under HS code 7208 totalled 234,220 tonnes, 26.1% up on April, but down -30% on-year. January-May import volumes totalled 1.44 million tonnes, -16.3% down on-year, with the pace of decrease deepening by -3.3 percentage points on April. 

Imports of HR flat products under 3mm thickness (HS code 720839) rebounded in May to 96,948t, 20.5% up on April, but they were still -29.5% down on-year. Ukrainian-origin shipments prevailed in May at 41,732t, 147% up on April and 42.2% up on-year. Russian shipments remained low at 30,669t, 18.7% up on-month but -56.6% down on-year. The Netherlands sent the third largest volume at 8,272t, compared to almost nothing in April and five times the May 2019 volume.

Arrivals of HR unpickled wide strip of 3-4.75mm thickness under HS code 720838 continued to decline, with 27,428t received in May, -17.5% down on-month and -60.1% down on-year. Ukraine again overtook Russia as the largest supplier, shipping 10,257t, as compared to 4,604t in April and 12,346t in May 2019. Russia’s shipments were 5,778t and France’s at 4,173t.

May imports of hot rolled coil/plate with 4.75-10mm thickness (HS code 720837) rebounded on-month, with France again sending the largest volume at 11,453t. Total import volumes came to 23,636t, 29.7% up on-month but -43.3% down on-year. France’s shipments were up 14.9% on-month and 68.9% on-year. Ukraine was the second-largest supplier with 5,250t, and Russia third with 3,924t.

Guangzhou-based commodity conglomerate Cedar Holdings has completed its acquisition of UK-headquartered steel trader Stemcor. Stemcor will retain its name and autonomy.

The deal was agreed in January (see Kallanish passim). Although unconfirmed by either side, the deal is reportedly valued at $150 million and sees ownership transferred fully from US investor Apollo group.

Cedar, which has so far been largely focused on non-ferrous metals and chemicals, said the acquisition will help to develop its ferrous metals industrial chain. Cedar is China’s largest private commodity trader, with 2017 revenue of $32.7 billion.

In 2019 Stemcor sourced and delivered 3.1 million tonnes of steel and raw materials, up 5% on-year. Revenue fell -10% to $1.74 billion due to a higher proportion of raw material shipments and lower prices. Profit before tax halved to $8m.

“The Group faced a number of external challenges to the business throughout 2019, from a softening global economy, declining industrial activity, continuing Brexit-EU and trade war uncertainty and increasing levels of protectionism,” Stemcor chief executive Steve Graf said last month.

Stemcor has a 70-year history in steel trading. It was once one of the top three global traders of steel and raw materials. Around 20% of its business is focused on the Chinese market, Kallanish understands.

Global finished steel demand is forecast to fall 6.4% in 2020 due to the COVID-19 pandemic and rebound by 3.8% in 2021, the World Steel Association’s Director of Economic Studies Nae Hee Han told the Southeast Asia Iron and Steel Institute e-conference June 30.

Demand for finished steel globally was seen falling to 1,653.9 million mt in 2020 from 1,766.5 million mt in 2019, before recovering to 1,717.4 million tons in 2021, Han said.

“In this minus 6.4%, we have some growth from China, around 1%, so the picture of the rest of the world is not actually as beautiful as 6.4%, it is more likely minus 14%,” she added.

Developed counties will be more deeply impacted than emerging and developing economies by the pandemic, and India’s domestic market more affected than China’s, she said.

However, China’s role as a crisis buffer has been reduced compared with the global financial crisis 11 years ago, she said, adding the impact of the global pandemic on GDP was already greater than during the global financial crisis due to the lockdowns in multiple countries. While China’s steel market recorded a 23.4% growth rate after the global financial crisis in 2009, only 1% growth in demand was forecast in 2020, she noted.

The automotive sector was among the hardest hit both during the global financial crisis and the COVID-19 pandemic. It is forecast to contract 19.6% year on year in 2020, compared with a 23.8% on year decline in 2009, while mechanical machinery was forecast to fall 11.7% in 2020, in line with 11.7% in 2009, according to World Steel Association research.

Disruptions to value chains will also ripple through other industries, many of which will struggle to recover while social distancing measures remain necessary, she said. “We do not think the recovery of demand will be strong, as with high unemployment there is more cautious consumption,” she added.

Small and medium industries in particular are at risk of bankruptcy as social distancing will be difficult to maintain, she said.

The restoration of confidence will depend on a discovery of a vaccine or cure, she said. In the meantime, the experience of lockdown could prompt societal changes, such as movement from highly urbanized centers to lower-density rural locations impacting transportation, urbanization and investment.

While automobile use plunged during lockdowns, the increasing preference for private vehicles over public transport as restrictions ease is also likely to result in structural transformation that will impact steel markets in years to come, she added.

— Analyst Chelsea Ye

ArcelorMittal Italia and Italian government representatives are in talks about agreement on a restructuring plan offered by the company and opposed by the government because it would mean the loss of 3,300 jobs, a source close to the company said July 1.

No further details were available.

Production at AM Italia’s Northern Italy facilities, meanwhile, has been restarted in response to increased demand, offering a possible glimpse for their future.

According to the 2020-2025 plan prepared by ArcelorMittal, steel production in the former Ilva facilities will be ramped up to 6 million mt/year by 2025 rather than 8 million mt/year. The 8 million mt/year target will be reconsidered in 2025 when demand presumably will have returned to pre-coronavirus pandemic levels. Production at AM Italia’s Northern Italy facilities, meanwhile, has been restarted in response to increased demand.

AM Italia’s steelworks in Genoa-Cornigliano restarted production at its No. 5 galvanizing line on June 30 and has started to work at full capacity on its tinplate line, the source close to the company and a union representing workers at the facilities said July 1. The Northern Italian steelworks has four galvanizing lines, but only two have been operative for the past few years. AM Italia’s Genoa-Cornigliano hot-dipped galvanized lines Nos. 3 and 5 have combined production capacity of around 900,000 mt/year. The No. 5 stopped production in March, due to the coronavirus outbreak, while No. 3 has been operating intermittently since March, at very low production. The line started operations in 2016, with a production capacity of 460,000 mt/year. The Cornigliano-Genoa works processes around 1.5 million mt/year of hot band from Taranto, of which 900,000 mt are transformed into HDG on the two lines, while 100,000-150,000 mt are transformed into tinplate and the rest sold in the open market as hot rolled product, mainly sheets. The tinplate lines are also working.

The company also restarted the productions at its HDG line in Novi, which has a capacity of around 450,000 mt and was also halted in March. Also the mill in Racconigi, near Genoa, has restarted two lines of tube productions out seven seven tubes. In total, the facility produces about 140,000 mt of tube when operates at full capacity. All the lines stopped production back in March.

“The Genoa galvanized line will re-stop production in the month of August, but is still a positive news,” the source said. “It also shows the willing of ArcelorMittal to carry on production when and where is possible. At the moment the company is still negotiating with the government the future of the mill, but considering how Italy works I doubt we will have news before the Puglia regional election that are due in September.”

There are that ArcelorMittal could pull out from its Italian asset. AM has an option to withdraw from the troubled works in November. If it does so this could threaten the survival of the Taranto plant, in capacity terms the largest flat carbon steelmaker in the EU. The Italian government’s position about the former Ilva plant was always divided, with some elements favoring the closure of the hot-end facility in Puglia and others wanting to tranform it into a “green mill” using European Commission funds.

The Taranto plant is currently operating only two of four blast furnaces (Nos. 1 and 4) and with most of its cold-end lines temporarily shut, union sources told Platts. The Taranto site is producing around 7,500 mt/d of crude steel, sources said.

AM declined to comment on this issue when contacted while the Italian government representative did not respond.

— Annalisa Villa

Cedar Holdings Group Co, a China-based privately owned commodities business, has completed acquisition of Stemcor Global Holdings, a privately held, independent UK-based steel trading and distribution company, Stemcor said June 30.

Conclusion of the deal, for an undisclosed sum, follows the signing of a sale and purchase accord between the parties in January at the World Economic Forum in Davos.

The transaction marks the latest acquisition of a European-based steel industry concern by a Chinese entity, following steelmaker Hesteel Group’s acquisition of Luxembourg-based steel trader Duferco International Trading in 2015 and Jingye Steel Group’s acquisition of steelmaker British Steel in March. China is the world’s largest steelmaker and consumer.

Cedar, with a total revenue of over $40.6 billion in 2019, is listed on the Fortune Global 500 list and says it is involved in the development of new metal materials and building green supply chains. Headquartered in Guangzhou, the group has branches in Hong Kong, Singapore, Switzerland, Germany, France and the US, as well as offices across Asia, Europe and Africa.

Stemcor, with a worldwide trading network, said it will retain its name and autonomy.

Established in the 1950s, the company has 30 offices worldwide and is involved in steel supplies, facilitation of financing, logistics, distribution, the provision of stockholding of niche products and other value-added services.

A turbulent period in steel markets which led to price reductions in 2015 was a factor in Stemcor undergoing a major restructuring that year, with the downsizing of a number of less profitable business units and product lines. It returned to a consolidated group profit in 2017, when it sold 3.7 million mt of materials, and had revenues of $2.11 billion, according to the company website.

Since that time, there has been market talk that Stemcor could find a new owner.

Natixis advised Stemcor’s shareholders on the transaction.

— Diana Kinch

US raw steel capability utilization continued to rise last week, increasing to 55.4% from 54.6% the previous week, according to data released by the American Iron and Steel Institute on June 29.

Raw steel capability utilization has not been above 55% since the week ended April 25 and has been steadily increasing since the week ended June 6, when the utilization rate was at 53.3%.

Production increased by 1.3% to 1.240 million st during the week ended June 27 from 1.224 million st in the previous week, according to the data.

Last week’s production was down 33.4% compared with the same week a year earlier, when capacity utilization was at 80.1% and production totaled 1.863 million st.

The AISI calculated adjusted year-to-date production at 39.2 million st, with a capacity utilization rate of 67%. The total is 18.9% lower than that of the same period last year, when the utilization rate was 81.2% for 48.3 million st of output.

Other than the Southern district, which saw a 1.9% decrease in production, all regions saw week-on-week increases.

Last week’s production totaled 123,000 st in the Northeast; 409,000 st in the Great Lakes region; 132,000 st in the Midwest; 516,000 st in the Southern district and 60,000 st in the Western region, according to the data.

The weekly raw steel production volume AISI provides is estimated. The figures are compiled from weekly production data provided by 50% of domestic producers combined with monthly production data for the remainder.

— Ingrid Lexova