Category: Latest Updates

Union action was expected to intensify from Tuesday at the major IJmuiden Netherlands plant of integrated steelmaker Tata Steel Europe, following the unexpected departure of company chairman Theo Henrar Monday.

Approximately 9,000 workers at the Tata Steel Netherlands (TSN) steel plant in IJmuiden walked out Monday after news of the chairman’s departure. Tata Steel Netherlands’ Central Works Council (CWC) Tuesday said in a statement that they expected a “hard confrontation with management in the coming months.”

Mill sources said that the industrial action in itself had little impact on production levels. However, the mill is already understood to be producing at below its full capacity as a result of COVID-19- related restrictions, and union action could reduce production further if jobs are cut.

CWC leaders said the company’s decision was “ill-considered” at a time of such market uncertainty brought on by the coronavirus pandemic.

An estimated 18.9 million mt of EU crude steel capacity has been taken offline during the COVID-19 pandemic as steelmakers vie for customers in a market slump that European industrialists have compared to the 2009 financial crisis.

Chairman Theo Henrar had played a key role in helping to guarantee the steel mill’s survival amid a severe market downturn that has resulted from restrictions imposed during the COVID-19 pandemic, representatives of the CWC said this week.

“The steel industry is very vulnerable right now — there is not enough liquidity and we are currently in the throws of dealing with the coronavirus.[This decision] is unbelievable,” a CWC spokesperson told S&P Global Platts Tuesday.

A Tata Steel Europe spokesperson said that Henrar’s departure was agreed “mutually” and that he would continue to support Tata Steel until the end of the year as an advisor.

A reduction in 1,250 jobs was announced by Tata Steel as part of its “transformation program” in March this year, after the European Union competition regulators decided to reject a merger with Germany’s ThyssenKrupp.

Tata Steel Europe announced in April that as a result of the pandemic, it would postpone its reorganization plans until after July 1.

— Amanda Flint, Diana Kinch

thyssenkrupp (tk) has returned to highlighting its interest in finding an international partner for its steel business. Initial media speculation has already revealed to whom it might be talking.

Late on 18 May, the executives of the German conglomerate revealed the long-term strategy they had previously announced for the early summer. Following the recent sale of the Elevator division, the group intends to slim down much further, and to spin off more units. This will be the case for activities like Plant Technology, Powertrain Solutions, Springs and Stabilisers, Infrastructure, and Battery Solutions.

Regarding its steel activities, tk did not announce anything new. It aims to sell the Italian stainless plant AST Terni, and seeks either the sale or closure of its heavy plate production in Duisburg. On a general level, tk says it is preparing for a standalone development within the company for its Steel division, but at the same time is continuing to explore possible partnerships and consolidation options.

Meanwhile, Reuters and Handelsblatt have already quoted insiders as saying that the companies tk is talking to are Sweden’s SSAB, China’s Baosteel, and, again, Tata Steel. When contacted by Kallanish, tk’s press office declined to comment on the reports.

In other media sources, trade union IG Metall was cited as approving the group’s plan in general. However, for the Steel division, it favours a solution which would leave the ownership of the mills in German hands.

Regarding its steel & materials distribution business in the Materials Services division, thyssenkrupp says it sees consistently good development potential. For this division as well as for Industrial Components (Forged Technologies and Bearings), tk will continue to develop these businesses on its own in the future.

Thyssenkrupp is seeking either a partnership or a sale for its Italian subsidiary, Acciai Speciali Terni (AST), Kallanish learns from the company.

Pursuing its restructuring strategy, the company is considering for certain assets “… the best prospects for the future – a place under the thyssenkrupp umbrella, in a partnership or outside the company. With this reassessment of the portfolio, we have taken some difficult decisions that were long overdue and will now implement them systematically. thyssenkrupp will emerge smaller but stronger from the transformation”, Chief Executive Officer Martina Merz said in a note sent to Kallanish.

Those businesses for which thyssenkrupp sees no sustainable future prospects within the group for various and very specific reasons will be managed separately. They will be combined in the Multi-Tracks segment under the leadership of Dr. Volkmar Dinstuhl, head of mergers and acquisitions at thyssenkrupp AG. For the segments Plant Technology, the stainless steel plant (AST) in Terni, Italy, including the associated sales organisation, Powertrain Solutions and Springs and Stabilisers, thyssenkrupp is seeking either divestment or a partnership.

Meanwhile the unions at AST as asking an urgent meeting with the government to discuss not only the future of Terni but also the state of the national specialty steel sector. “The supervisory board of thyssenkrupp considers Terni to be no longer strategic… AST is ending up as a sort of ‘bad company’ waiting to be sold,”, trade union Fiom-Cgil says in a letter sent to Kallanish.

thyssenkrupp Materials Processing Europe has moved its Industries business unit from Leverkusen to a new site in Willich, further north in North Rhine Westphalia, Kallanish learns from the company.

The main focus of the location is the specialisation for segments such as manufacturers of profiles, furniture or equipment and apparatus construction. In addition to higher capacities, the steel service centre can now offer its customers an expanded product and service portfolio.

The service centre in Willich has five slitting lines and one cut-to-length line. Slit strip is now available in thicknesses from 0.4-7.0mm, widths from 7.0-1,600mm, and lengths of up to 6,000mm are possible in the sheet area. Compared with the previous site in Leverkusen, the company now has 20% more production capacity available.   

Thanks to the additional narrow strip centre offered on site, including pack winding, customer requests for strips in special lengths of up to 25 kilometres can be met, the company says. A new feature is a welding unit for stainless steel, which can be used to weld narrow strip up to 2mm in thickness.

Construction growth provides a positive outlook for steel demand in most countries of Southeast Europe (SEE), according to Bulgarian long steelmaker Promet, part of Ukraine’s Metinvest.

The situation in Serbia, Bulgaria and Romania is improving despite global demand being hampered by the Covid-19 pandemic, a Promet official tells Kallanish. “Our company had some 30-40% more production in March and April,” she says. “The situation is improving and we are expecting even higher demand in the near future.”

Demand is coming mainly from construction projects, such as the Hemus highway in Bulgaria. “In Serbia the market is booming because different construction projects are stepped up by the government with the upcoming general election in June and the end of the measures against Covid-19 in May,” the representative says.

Romania is also enjoying strong steel demand thanks to construction projects. A Russian mill is heard by traders to have concluded a rebar sale to Romania on Monday at $375-380/tonne fob Black Sea. The tonnage was not specified. Offers could reach $400/t in the near future.

In the more specialist steel segment, Beltrame’s Romania-based Donalam plant recently completed a €4 million ($4.3m) investment into a special steel bar treatment line (see Kallanish passim). This will allow the company to offer steel bar products with increased added value. Given the volatility in the global steel market, the company’s target for 2020 is to maintain its market share in Europe by identifying new business niches, it says.

Spain’s Gestamp saw decreased revenues during the first quarter of 2020 due to the Covid-19 pandemic, the company says in its quarterly report monitored by Kallanish. Gestamp is a major supplier of components to the global automotive sector.

As a result of the current situation, the group’s plants, with exception in China, saw gradual shutdowns during the second half of March, beginning from Europe, and extending to North and South America. Some of these operations were restarted and the company expects a gradual re-opening of most of the facilities during the coming weeks.

“The implementation of operational efficiencies and labour flexibility measures have allowed the company to have a satisfactory first-quarter performance. We expect to improve our results throughout the rest of the year. Activity levels in some of our plants in April are already in line with foreseen targets,” Gestamp says.

During Q1 2020 the global automotive sector saw a production decline of -23.2% on-year, while Gestamp’s performance fell -6.1%. “This quarter has been impacted by the unprecedented challenge of the Covid-19 pandemic and Gestamp has been able to outperform the market as a result of new projects and its lower exposure to Asia versus that of global production volumes,” the company confirms.

Gestamp`s total net revenues amounted to €2.01 billion ($2.19 billion) in Q1, or -7.3% less y-o-y. North America was the only region that saw an increase in sales. These were up by 7.5% over Q1 2019 at €495.0 million.  

During the first three months of 2020 the company posted a net profit of €14.0m, or -65.6% lower than the same period of last year. Ebitda fell by -22.6% to €192.6m y-o-y on the same basis.

Shipments by Brazilian independent flat steel distributors and service centers in April fell 37.6% year on year to 165,900 mt, recent data from Inda, the national flat products distributors association, showed.

Shipments fell 37.5% month on month, the data showed.

April’s domestic purchases from mills decreased 20.8% year on year to 179,100 mt, according to Inda. Domestic purchases fell 34.3% month on month.

Flat product inventories at the Brazilian distribution network amounted to 860,100 mt at the end of April, up 1.6% from the end of March, while the inventory-turnover average closed April at five months of supply, the data showed. Normal levels would be around three months of sale.

April flat steel imports by distributors totaled 56,500 mt, a 37.9% slump year on year. When compared to March, imports fell 3.5%.

For May, Inda expects shipments to increase about 5% and purchases from mills to decrease about 15% compared to April.

— Priscilla Antunes

The return of automotive demand for flat steel has been slow to materialize in Europe with calls for state-funded car-incentive schemes to spur demand, sources told S&P Global Platts.

A German distributor said although prices are climbing in China, domestic European prices are still “under pressure” with mills looking for volumes in June. “They (the mills) have to give discounts to secure any quantities.”

The return of the automotive industry in stages has been slow to materialize into meaningful demand, according to the same source, who said, “Here in Germany, the automotive industry restarted two weeks ago, with just one shift. Volkswagen has idled some of their assembly lines because sales are low. People are waiting for a car-buying incentive program to boost private car sales and demand.”

An Italian mill source said he would wait before taking any kind of position, due to uncertainty around prices. He added the market would need to wait to see if there was stability in Asia and if there would be “some effect in Europe” of the antidumping probe around Turkish hot-rolled material, as well as the European Commission’s revision of safeguard quotas.

A Northern European mill source was pessimistic on automotive demand returning quickly.

“Steel distribution was down 70% in April and for May everyone hopes this will improve to 50%, but I am not so sure that is achievable. In the construction sector, this should be the busy period right now but with social distancing I am not so sure the demand will come back as expected.”

June would be key time for European mills when order books would be thinner resulting in shorter lead times in steel coils, the mill source said, adding the outlook from there on would be highly dependent on summer maintenance shutdowns, if mills would cut additional weeks of production either side of the planned outages, and the EC review of safeguard TRQ system.

As European market sources look to the Chinese market, HRC gained $8/mt Friday as Platts assessed HRC SAE1006-grade FOB China at $409/mt, up 3.8% from the year-to-date low of $394/mt seen on May 7.

However, Chinese HRC prices are still down some 19% from pre-pandemic levels, and in the period since Wuhan emerged from lockdown on April 8, Chinese HRC has posted only five days of gains out of 24 assessment days.

The Platts TSI hot-rolled coil index was calculated Friday at Eur428.50/mt ($463.25/mt) ex-works Ruhr, declining Eur2.50 day on day and Eur8 week on week.

In Southern Europe, HRC gained 50 euro cent for a second straight day and was assessed at Eur414.50/mt ex-works South Europe, down Eur4 on the week.

Cold-rolled coil was assessed unchanged on the day at Eur522.50/mt ex-works Ruhr, but ending the week down Eur2.50.

— Len Griffin, Amanda Flint

European Union steelmakers need to be cautious about restarting capacity as COVID-19 lockdowns ease, as they risk producing into a demand vacuum which will intensify downwards pressure on prices, analyst and mill sources said. Although mills continue to restrict production, this is still outpacing demand across Europe, they said.

As much as 18.9 million mt of steelmaking capacity was taken offline in Europe during the market slump caused by the pandemic – more than in any other global region – and so far only pockets of production have come back on stream in countries including Italy, France and the UK, in line with restarts in the automotive and construction sectors, according to data from VTB Capital Research, S&P Global Market Intelligence (MI) and S&P Global Platts.

In Italy, the EU’s second biggest steelmaking nation with 23 million mt crude steel production last year and the first to officially restart steel production in late April/early May, mills are working at just 40-50% capacity. In Germany, the EU’s biggest steelmaker, restarts may be slower: steelmaker Thyssenkrupp said it expects a production cut of 20-30% of its capacity to last into the summer while Salzgitter plans to continue with reduced production amid a gloomy outlook for the rest of the year.

With 39.7 million mt of crude steel produced in 2019, Germany saw crude steel output fall 10% on year in Q1, with further falls likely this month as more mills put workers on reduced working hours effective early May.

“The worst contraction of the German economy since 2009 is not where the current crisis will end,” ING Economics warned Friday. “The second quarter will be more dreadful.” Germany’s economy shrank 2.2% in the first quarter, compared to the previous quarter, albeit slightly less than the overall eurozone’s 3.8% contraction in the same period, ING reports.

“Steelmakers are wisely proceeding cautiously to avoid piling more pressure on prices by increasing output at a faster pace than demand resumes,” Phillip Price, advisor to Fetch.AI’s Mettalex, a decentralized commodity exchange, told Platts. “The severe economic impact of the lockdown is only now starting to become clear. …While a gradual restart should support some improvement in demand…with national deficit forecasts at unprecedented levels, discretionary spending will likely be limited and central governments will likely have limited remaining resources in order to stimulate demand for some time to come,” he said.

“Steelmaking conversion margins remain under intense pressure and will likely be the key deciding factor for increased capacity utilization across the continent.”

Some steelmaking capacity, for instance in Poland, is widely expected not to return to the market for months.

Slow restarts in automotive, construction doubts

Steel consumption forecasts have been slashed or withdrawn and the overall economic outlook downgraded, with normal business conditions not seen returning before the third quarter. European Steel Association Eurofer said the construction industry – accounting for around half the region’s steel consumption – may perform better this year than other steel-consuming sectors. However, in the automotive sector, the second-biggest steel using sector, where performance is very tied to consumers’ disposable income levels, “it will take time before new orders will translate into new deliveries due to persistent transport and supply chain issues, which will remain in place for some time.”

Up until early May, Platts’ estimates were that the slow nature of restarts in the automotive sector – which came to an almost complete halt in the EU between late March and early April – meant that metals consumption in that sector was still around 50,000 mt/day of steel and 10,000 mt/day of aluminum lower than pre-COVID-19 levels.

Automakers including Renault and SEAT have reportedly returned to 33-40% working in Spain. However, Volkswagen was reported by the Financial Times this week to have paused production of four key models just weeks after reopening its manufacturing headquarters in Wolfsburg, due to weak demand for new cars in Europe, amid forecasts by Moody’s that global car sales would shrink by a fifth in 2020, and by as much as 30% in western Europe.

In construction, major UK firm Taylor Wimpey announced in the first week of May it is making a return to production, using PPE equipment.

At the height of the lockdown, some 65% of UK construction sites by value had closed down, but by the first week in May that figure was down to 37%, according to data provider Glenigan, reported by Construction News. Still, UK-based GMB Union said in a statement Friday it is in urgent talks with construction giant JCB in an attempt to save nearly 1,500 jobs following a fall in demand due to coronavirus.

Steel output to fall in 2020

2019 itself wasn’t a great year for European steel, with a fall in apparent steel consumption of 5.3% on a weak manufacturing sector, according to Eurofer, and record high import levels eroding prices, leading the European Commission to beef up its import safeguards system. Early forecasts indicate this year will be far worse: MI analyst Ronnie Cecil said in a May 14 webinar he expects EU crude steel production to slump 10% to 141 million mt, barely above the 139 million mt of the 2009 economic crisis.

Steel pricing under pressure

An incipient steel price recovery in Europe early in 2020 following losses last year has been cut back in no uncertain terms by the pandemic.

European finished steel prices are taking a dive due to persistent demand slumps despite ramp-up efforts by key customer markets. The hot-rolled coil EXW Ruhr price – a benchmark for flat steel and heavily affected by the auto shutdowns – decreased around 11% since the beginning of March to Eur428.50/mt ($463/mt) EXW Ruhr on Friday, according to the daily Platts TSI Northwest European HRC index. Northwestern European mills have tried to hold offer prices up and searched for buyers outside Europe, but have had to make concessions over the past weeks.

Increasingly more competitive import offers ex-Russia and Turkey for flat steel are putting additional pressure on domestic European price levels amid the demand slump.

Construction steel has also seen downward trends following weak demand, although rebar import quotas for some countries such as Turkey have been exhausted and European buyers have to look more into sourcing material domestically. Rebar prices have weakened further after intermittent price gains in late March as scrap supply tightened due to restrictions on scrap collection. While European scrap is firming again after a brief drop in late March, rebar did not follow the movement and fell since early April by 4.2% to Eur455/mt EXW NW Europe Friday, according to the weekly Platts TSI Northwest rebar assessment.

Broker expects ‘protracted’ lower demand

Ricardo Evangelista, senior analyst with online broker Activtrades, says that despite the economic restart in some European countries, “the lowered demand for metals is likely to be protracted,” keeping downward pressure on steel prices for some time. “The coronavirus fallout triggered the deepest global economic contraction since the second world war and the recovery won’t be V-shaped,” he said.

“The slowdown was too pronounced and many doubts remain, regarding the full extent of the virus impact; should we expect a second and third wave, and if so what will be their economic impact? How long before there is a vaccine or a cure? Will demand for cars and other heavy industry products go back to pre-crisis levels, in a post-COVID-19 world? Despite the lockdown easing, the future remains uncertain.”

— Diana Kinch, Laura Varriale and Annalisa Villa

Only two steelmakers worldwide have carbon emissions reduction targets aligned with the Paris Agreement aim to keep global temperature increases to 2 degrees Celsius or below, an environmental disclosure agency analyst said Friday.

Moreover, some major steelmakers have shown no evidence of setting any emissions reduction targets so far, Tom Crocker, research analyst from CDP Global, told a virtual conference organized by the Brussels-based International Stainless Steel Forum, linked to the World Steel Association.

Nordic and US-based steelmaker SSAB and South Korea’s Hyundai Steel have set goals to achieve carbon neutrality between 2040 and 2050, with SSAB aiming to reach carbon neutrality by 2045 throughout its entire operations, Crocker noted in a presentation entitled Support for future investment versus carbon footprint development.

These are the only two steelmakers globally whose emissions targets are aligned with a pathway to keep the Earth’s temperature rises below 2 C, he said.

The premise of the Paris Agreement, signed in 2016 within the United Nations Framework Convention on Climate Change, is to hold the increase in the global average temperature to well below 2 C above pre-industrial levels and to pursue efforts to limit the temperature increase to 1.5 C above pre-industrial levels, recognizing that this would significantly reduce the risks and impacts of climate change.

While 60% of steelmakers have now set emissions reduction targets, and many have set internal carbon prices, a considerable number have apparently still not set climate targets, which they need to do to be transparent, Crocker said.

“Hesteel, Nucor, Gerdau, Baotou Steel and Beijing Shougang show no evidence of setting an emissions reduction target,” the CDP analyst told the event.

US-based Nucor and Brazil-based Gerdau Group did not immediately respond to email and telephone inquiries by S&P Global Platts seeking clarification on the analyst’s statement.

CDP describes itself as a not-for-profit charity that runs a global disclosure system for investors, companies, cities, states and regions to manage their environmental impacts and receives data from companies and organizations from more than 90 countries.

“The physical impacts of climate change are a significant risk for the steel sector,” Crocker said in his presentation. “Water stress” is already impacting 40% of steelmakers globally and securing a sustainable water supply will be of crucial importance for the sector in the future, he said.

In addition, “investors are increasingly scrutinizing the transparency of companies’ reporting on environmental issues, to allow for consistent benchmarking,” the CDP analyst said.

Many major steelmakers including ArcelorMittal and Tata Steel have now set internal carbon prices to use in their operations, Crocker said.

In the case of ArcelorMittal, the world’s largest steelmaker, the internal carbon price has been set at $18-30 per metric ton of carbon, while in the case of Tata the price range starts as low as $10/mt, according to data presented by the analyst.

— Diana Kinch