Category: Latest Updates

Nissan’s intention to close by year-end its production plant located near Barcelona is set to weigh directly on local steel suppliers, Kallanish learns from sources.

Spanish steelmakers specialised in supplying the automotive sector are already under pressure, as national production of vehicles in April fell by some -98% year-on-year to less than 5,000 units. The country has for a number of years been the second-largest automotive producer in Europe after Germany.

The latest blow to the sector came this week, as Nissan confirmed its intention to close its Barcelona plant, putting at risk almost 25,000 jobs in the area.

Among other companies near Barcelona, ArcelorMittal and thyssenkrupp have two important assets mainly specialised in supply to the automotive sector.

ArcelorMittal has temporarily stopped some lines at its coils rolling mill in Sagunto, and unions are preparing some stoppages in response to the ongoing negotiations with the group on temporary layoffs.

Thyssenkrupp Galmed has opened a temporary layoff scheme for its workforce since March, which is expected to remain in place for longer. The galvanising plant was idled for three years until the end of 2016, but its future remains uncertain as thyssenkrupp confirmed it plans to look for a partner or buyer for its European steel business.

The Spanish steel sector’s activity continued to be sharply impacted by the Covid-19 outbreak in April, registering a record low and raising many concerns within Spanish steelmakers’ association Unesid.

According to preliminary data, the local steel sector produced around 680,000 tonnes of crude steel in April, a drop by -48% year-on-year, Unesid says. As a comparison, in a typical July or December, when activity is usually most reduced, Spanish output ranges from 900,000t to 1 million tonnes. The lowest monthly production registered during the last financial crisis in 2008/09 was 725,000t, says Unesid director of economic studies Alfonso Hidalgo de Calcerrada García.

The fall in output was seen in almost all steel products, although it was greater in the automotive sector, which was practically halted in April. Long steel products output used in the construction sector, meanwhile, decreased -30-40% y-o-y in April. Only tinplate output continued at its usual rate given its need in the food industry.

“We have to be aware of the seriousness of the situation,” Garcia says in a note seen by Kallanish. “The deterioration is so great that the removal of restrictions on its own will not guarantee a recovery. It is necessary to boost the restart of the industrial sector in general and the production of steel in particular.”

“The steel-consuming sectors need to return to their pre-confinement activity, either by promoting private demand, as in the case with automobiles, or directly through public actions, as in construction,” he adds.

Stalprofil’s steel sales grew 21% on-year in the first quarter to 48,000 tonnes despite reduced steel output and consumption in Poland the EU, the Polish distributor says. Consolidated revenue rose 8% on-year in the first quarter to PLN 365.8 million ($91.14m), but net profit dropped -10% to PLN 7.1m.

The firm says that although the Covid-19 pandemic has not yet had a significant impact on its operations, a protracted economic crisis could hamper performance. The firm cites risks such as problems with inflow of cash and payment delays, weakening demand, lower sales prices, interruptions in the supply chain, and worker absenteeism in the case of a second wave of the virus.

The infrastructure segment, which supplies pipe mainly to gas pipelines, has a full order-book until end-2020 and the firm does not anticipate any difficulties in sales or a weakening of demand. The firm has seen some disruption to procurement of insulated pipe, which it dealt with by placing orders with alternative suppliers. With Poland and other European countries easing Covid-19 lockdowns, the risk of disruption to business is fading, the distributor says.

Stalprofil’s indirect Kolb steel structures fabricator subsidiary also has a full order-book for the year. The expansion of its production facility, completed in February, has allowed it to secure new orders in the export market that are more profitable than orders in the domestic market.

There is more uncertainty surrounding the trading business, Stalprofil observes. After a period of moderate sales and stabilisation of long product prices in Q1, demand has weakened and prices have fallen.

“Investment into the construction of the gas transmission network, and road and rail infrastructure financed by EU funds is anticipated to continue in 2020 in the domestic market,” Stalprofil says in a report seen by Kallanish. “The implementation of these plans should mitigate the negative impact of the market environment on demand and prices in the Polish steel market.”

In 2019 Stalprofil’s steel product deliveries fell -1% on-year in 2019 to 215,839t, while steel structures sales fell -15% to 2,374t.

ArcelorMittal’s Bosnia-based Zenica long steelworks has resumed production after ten days of stoppage due to low demand provoked by the Covid-19 pandemic, the company confirms to Kallanish.

From 26 May the firm has gradually been preparing plants for putting back into operation. The blast furnace was restarted on 27 May and from Thursday the company expected the normalisation of work at all plants, except for the rolling mills which will resume at the beginning of June, the firm says.

Workers who were on a temporary layoff are returning to their jobs. “Temporary layoffs were from 19 May to 27 May, for now. I have no information yet on decisions for the future,” a Zenica representative comments.

The plant said earlier it had proposed a wage cut of between 10% and 20% for managerial positions, which account for 25% of the workforce, but the company’s unions rejected the proposal.

Operations at ArcelorMittal’s Bosnian Omarska iron ore mine remain on hold due to the crisis.

Since the beginning of the outbreak of Covid-19, the plant has taken measures to cut costs, procure protection equipment and renegotiate gas and power prices with its suppliers.

Zenica produced 800,000 tonnes of crude steel in 2019, up 14% on-year (see Kallanish passim). Several new investments are expected in the coming years at Zenica to continue improving the environmental footprint of the plant by reducing emissions.

Steel production in Europe remains subdued, market sources said this week, with producers and buyers both maintaining high inventories.

Demand has been slow to return since the gradual easing of national lockdowns in Europe but EU steel producers are hopeful that state-funded incentive schemes will once again kick-start consumption. The largest consumers of steel are the automotive and the construction industries, where incentive schemes could help drive a rebound in demand and support prices, sources said.

Since the beginning of May, European hot-rolled coil prices have declined by 4.9% in northern Europe and 3.4% in southern Europe, with market participants divided as to whether the bottom of the market could be reached any time soon.

“Stocks are way too high in Europe, especially in the southern regions,” a Benelux-based service center manager told Platts. “Steel service centers are loaded up with inventory and customer turnover is extremely low while the mills have continued to produce during the lockdown. Many service centers now have limited warehouse space and can’t take more material –- some will struggle to make upcoming payments with risk of credit lines breaching.”

Payment terms range from 40 days in north Europe to 60-90 days in the south of the region, indicating that material delivered at the start of European lockdowns — for example March 9 in Italy — will be due for payment from June onwards, the source said, adding “there may be payment issues or defaults.”

Italy-based mill sources said that steel production in the country is around 50% of mill capacity at present.

A German mill source told Platts that demand is still lagging and that most material can be sold from stocks.

“Sales are at low levels, demand will increase but stocks are full and that needs to be cleared first,” the mill source said.

According to the latest data released by the World Steel Association, in April European steel production fell to 10.72 million mt, a decline of 23% on the year, and 11% lower than March this year.

However, considering the new definitive data from local associations, steel production in April dropped by far more that the worldsteel data, which includes estimates from a number of countries.

According to Federacciai, the Italian steel federation, crude steel production in the country was down 43% to 1.12 million mt. Worldsteel puts the drop at 31%.

In Germany, crude steel production according to worldsteel dropped 11% in April to 3 million mt, while according to German steel federation WV Stahl the domestic crude steel output fall was 24% on year to 2.6 million mt.

— Annalisa Villa, Len Griffin, Laura Varriale

Japan’s Nissan Motor Corp. plans to slash global vehicle production by 20% to 5.4 million units a year by the end of its 2023-24 fiscal year (April-March), the carmaker said Thursday, based on average run rates of more than 80% of capacity.

The cuts, spread over four years, will involve it slashing global production through measures that include permanent plant closures in Indonesia, Barcelona in Spain and optimizing its US operations.

The Indonesian plant has a production capacity of about 260,000 units/year and the Barcelona plant 120,000 units/year.

Although the Indonesian and Spanish plants will shut, production will be maintained at Samutprakan in Thailand and Sunderland in the UK, Nissan said.

The Thai plant has a production capacity of 295,000 units/year while production at Sunderland hit 507,430 vehicles in 2016.

Nissan said it would exit “South Korea, the Datsun business in Russia” and streamline operations in some markets in ASEAN.

The move to consolidate its operations came as Nissan swung to a net loss of Yen 671.2 billion ($6.23 billion) in 2019- 20, against a net profit of Yen 319.1 billion the previous year.

The net loss is Nissan’s worst showing since 1999-2000, when it posted a net loss of Yen 684 billion.

Along with the weak performance, “Nissan estimates global TIV (total industry volume) to decline by approximately 15%-20% in FY20 [2020-21] from the prior year due to the COVID-19 pandemic,” but did not disclose any details, saying it “will issue its FY20 forecast as soon as a reasonably calculated outlook is available.”

In 2019-20, Nissan’s sales fell 10.6% to 4.93 million units, so a 15%-20% drop would be about 739,500-986,000 units, S&P Global Platts calculations showed.

Looking ahead to 2022-23, Nissan plans to boost its electric vehicle and autonomous vehicle sales to 1 million units and 1.5 million units, respectively.

Nissan’s scaling back of production will affect its needs for automotive steel.

In April, crude steel production in Japan fell 23.5% year on year to 6.62 million mt, data from the Japan Iron and Steel Federation showed, while output of hot-rolled steel products fell 22.1% to 5.86 million mt. Japanese carmakers’ production tumbled in April as the coronavirus pandemic slashed demand.

Nissan said Thursday its global April production plunged 62.4% on the year to 150,388 units while sales fell 41.6% to 217,264 units.

In Japan, steel making for vehicles are primarily produced from blast furnaces, and collectively, their crude steel production contracted 6.9% year on year in January-April, meaning less need for raw materials. Over the same period, iron ore imports contracted 3.8% to 37.2 million mt, the latest customs data showed.

— Clement Choo, Samuel Chin

Japanese automaker Nissan has announced its intention to close its plant in Barcelona, Spain, after the COVID-19 pandemic halted production at the site and vehicle demand nosedived.

The company will close the plant as part of a global restructuring plan, it said Thursday, confirming press reports earlier this month.

Spain’s auto industry has been one of the worst hit by the industrial slowdown created by anti-pandemic measures.

In April, which saw a near-total shut-in of production up until last week, only 4,844 vehicles were assembled, a drop of 98% year on year, with exports falling by the same amount to just 3,753 units, according to the country’s vehicle association ANFAC.

The automotive sector is typically the second-biggest steel-consuming sector.

On a wider scale, Spanish steel output fell 48% year on year in April to less than 680,000 mt in the midst of the COVID-19 restrictions, according to an estimate published by industry association Unesid.

The decline in demand came from all sectors, but Unesid singled out the auto sector and the construction sector as the worst impacted.

The only sector which held up was sheet metal for packaging, particularly of food products, Unesid said.

The steel production figure was lower than a monthly minimum of 725,000 mt which came at the low point of the 2008 financial crisis, Unesid said, comparing it to recent seasonal minimums in July and December of 900,000 mt/month.

The steelmakers’ group also estimated a decline of 30% to 40% year on year in demand for long products, with no figure supplied.

Spain started lifting restrictions on industrial activity at the start of May, with most services back in place for June.

However, according to the country’s large industrial power consumer group AEGE, industrial productivity is still at only around 85% of pre-shutdown levels with the steel and auto sectors hit not only by shrinking demand, but also by high inventories.

Spain’s largest aluminum producer, Alcoa, is also proposing to reduce production and staff in the country, it said Thursday.

— Gianluca Baratti

EUROMETAL participated on May 28 in a conference call bringing together representatives of 15 European National Federations as well as the CEOs of two industrial companies representative of their sector of activity.

In summary and obviously, professionals in the Distribution and Processing of Steel (carbon and stainless steel), must better organize themselves to have the specificities of their trades recognized; but also to defend their interests in Europe.

It is essential that our profession can speak with one voice to the European Commission, Eurofer,…

EUROMETAL must be able to meet the challenge.

En el siguiente enlace pueden acceder a la edición de Mayo de nuestra revista: INFOACERO

A continuación destacamos algunos de sus contenidos:

1. Opinión – D. Fernando Moraga –Vicepresidente de la UAHE. 
2. Evolución del Índice de Precios de Productos Siderúrgicos – UAHE.
3. Información Asociativa: webinar “Estrategias para la salida de la crisis del Covid 19 en las empresas familiares”- Profesor Manuel Bermejo.
4. Ayudas Pymes: Programa de apoyos Covid 19, a través de E.O.I. (Escuela de Organización Industrial)
5. Sector Siderúrgico: “Previsión sobre los mercados del acero” – Eurofer- Informe 2º Trimestre

COVID-19 hit Turkey’s economy mid-March. Most industrial sectors, including steel long product mills, halted production in April, when the nation’s monthly crude steel output dropped 26.3% on year to 2.2 million mt, after a strong first quarter, according to the World Steel Association.

Due to the adoption of stringent measures, the spread of the virus has slowed in recent weeks and most of Turkey’s industrial sectors, including most steel mills, had restarted production as of the second week of May, in line with normalization efforts globally.

However, the domestic steel market outlook is bleak for the rest of the year, despite government efforts to spur domestic demand by cutting interest rates. In Turkey’s major European Union export market there are rising protectionist pressures.

Construction, typically the biggest steel-using sector, is expected to continue to shrink in Turkey during 2020 from 2019 levels.

Turkish automotive producers – typically the second biggest steel consuming sector – plan to raise capacity use only gradually depending on market conditions, following a 91% on-year plunge in production in April, when white goods production shrank 54%.

The World Bank has slashed Turkey’s growth estimate for 2020 to 0.5%, from 3% foreseen before the COVID-19 pandemic.

Mills’ capacity usage fell as low as 45% in April, according to Turkish Steel Producers’ Association TCUD. Ugur Dalbeler, CEO of major producer Colakoglu, believes the second quarter will be “hard” for Turkish mills, with market recovery possible in the second half of the year. Turkish mills’ 2020 crude steel output is expected to fall significantly from 2019.

Sharp exchange rate fluctuations, together with virus-related business interruptions, have significantly damaged most of the small, medium and even large Turkish steel producers’ balance sheets, sources say. “The first half of 2020 has been lost. Let’s hope that there’s some relief in the second half,” a steel service center manager said.

Infrastructure

Turkey produced around 33 million metric tons of steel in 2019 – 20 million mt of long steel products and 13 million mt flat steel – relatively flat on year, according to Turkish Steel Producers’ Association TCUD. It was the eighth largest steel producer worldwide.

Some 68% of Turkey’s steelmaking capacity is electric arc furnace based, with 24 EAF plants, making it the world’s biggest importer of steel scrap. In 2019 it imported 18.86 million mt of steel scrap, according to International Recycling Bureau BIR.

At the start of 2020, Turkish market participants were expecting a strong year following the halving of US Section 232 tariffs on steel imports from Turkey to 25% in Q2 2019, which helped Turkey maintain its steel exports last year.

Trade flows

Turkey’s steel industry is dependent on scrap imports and on steel product exports. It typically exports 50% of its total steel output every year.

However, Turkey’s steel exports shrank by 25% year on year in April as a result of the pandemic, TCUD reported.

The sector is vulnerable to exchange rate fluctuations and changes in global trade flows or protectionist currents that may lead to alterations in existing tariff and quota systems. In mid-May the European Commission started an investigation into allegations of dumping of Turkish hot-rolled coil into the EU. On May 25, Turkey notified the World Trade Organization that it could impose customs duties on steel imports from the EU in retaliation for the move.

The EC is also reviewing its steel import safeguards, which have temporarily reduced interest in Turkish-origin long steel imports. Following a sharp demand drop for Turkish-origin steel in the country’s key export markets at the height of the pandemic, Turkish mills have recently booked large-volume rebar cargoes into Hong Kong and the US, suggesting some improvement in demand sentiment since mid-May.

The Turkish lira has fallen around 20% against the dollar since the beginning of the year as its depreciation has accelerated during the coronavirus pandemic.

The US is Turkey’s largest ferrous scrap supplier, having provided 984,000 mt of scrap in Q1 2020 – around 250,000 mt higher on year – followed by the Netherlands and the UK. Russia in recent years has been Turkey’s fourth-largest ferrous scrap supplier; however volumes fell off in Q1 due to lower prices and intensified competition from US and European suppliers. In Q1 the average price to Turkey was $270/mt CFR, down from $310/mt CFR in Q1 2019.

Russia’s scrap export trend to Turkey reversed in April when the pandemic paralyzed activity at US and EU scrap merchants, while Russian collection was not so greatly impacted thanks to milder restrictions on businesses. Last month the volume of ferrous scrap Russia’s Rostov and Volga river ports exported to Turkey jumped by 65% to 35,370 mt, up from 22,000 mt in March.

Going forward, Russia’s shipments will depend on the pace of steelmaking recovery in Turkey, as the scrap procurement price needs to be higher than the current $240/mt to make exports appealing.

Prices and margins

Turkish mills’ hot-rolled coil prices fell by as much $100/mt during March, hitting as low as $400/mt mid-April, as the pandemic reduced demand in both domestic and export markets.

Turkish rebar export prices plunged $50/mt over three weeks in March before bottoming out in early April, and despite a moderate rebound remain significantly below the pre-COVID-19 level. An upturn in finished steel demand is expected with the end of Ramadan, although the impact of the coronavirus continues to depress demand. Turkish mills were heard to have sold large-volume rebar cargoes to Hong Kong, with prices heard at $390-$395/mt FOB Turkey for 55,000 mt shipments. A number of US-bound rebar sales have also been reported from three Marmara mills, but talk of rebar sales to the EU currently remains limited, with uncertainty surrounding the review of the EU steel import safeguards.

Turkish mills were heard to have booked eight deepsea scrap cargoes late last week, ahead of the Bayram holiday, which took place May 24 until May 27. Six cargoes were sold by Baltic recyclers, with one heard from a UK recycler and another from a Benelux seller. Scrap sell-side sources expect Turkish mills to take a step back from scrap buying in the coming days, as their focus shifts to boosting finished steel sales.

Premium heavy melting scrap HMS 1/2 (80:20) has traded within a range of $239-$252/mt CFR so far over May, with the downside limited by continued tight scrap supply, due to coronavirus-related collection restrictions and a sharp drop in the availability of new production scrap, following automotive stoppages in April in key scrap-exporting regions. The upside to scrap prices has been limited by poor domestic and export finished steel demand.

Import prices for Turkish ferrous scrap had plunged to $207/mt, their lowest level in four years, in early April, on coronavirus-fueled concerns of demand weakness. Benchmark import scrap prices recorded a $60/mt drop from pre-coronavirus levels over the second half of March.

The Turkish long steel melting margin – the spread between Turkish export rebar and import scrap – has remained within a range of $147-$161/mt so far in May.

— Cenk Can, Viral Shah, Diana Kinch, Wojtek Laskowski and Katya Bouckley