Category: Latest Updates

ArcelorMittal has temporarily idled a number of blast furnaces across Spain, Italy and France since March due to the impact of the coronavirus outbreak. Now sources among trade unions are indicating that a swift reopening of these furnaces is not to be expected and further output reductions could be imminent in Italy.

In Italy the company halted blast furnace number 2 in Taranto in mid-March, whilst keeping numbers 1 and 4 running at a rate of some 8,000 tonnes/day of pig iron. This represented 50% of the run rate registered before the virus. This week local trade unions said in a press release that production levels are being reduced further to 7,000 t/day of pig iron and that BF2 is not being prepared for restart. This is despite the fact that Italy is easing its lockdown as from next week.

In Spain ArcelorMittal is discussing a new temporary layoff scheme with the unions (see related article). The first indications point towards one blast furnace at the mill in Gijon remaining idled in the coming months. The group also controls an EAF plant in Spain in Sestao for the production of flat products and this is also set to remain idled.

In the South of France ArcelorMittal idled one blast furnace at Fos-sur-Mer at the end of March, with a second expected to be idled by June, as confirmed by the company. The plant is going to maintain a minimum level of activity in order to be able to swiftly resume output when demand picks up, Provence-Alpes-Côte d’Azur region president Renaud Muselier said last week.

Spain, Italy and France have been the countries most hit by the coronavirus outbreak since beginning of March. Their economies are expected to suffer more this year compared to those of other European countries further north, Kallanish notes.

Major US-based auto producer Ford will begin a phased return to production outside of China beginning 4 May, Kallanish learns from the company. 

Ford operations in Germany, Spain and Romania will re-open on 4 May, while an additional Spanish operation will re-open on 18 May. Two operations in the United Kingdom do not yet have confirmed restart dates. 

Several financial publications, including the Wall Street Journal, had previously reported tentative 18 May restart dates for all three Big Three Detroit auto producers, though Ford has not yet confirmed any possible restart dates for the US. 

Ford’s shutdown in March forced the company into a $2 billion loss for the first quarter, and the absence of Detroit auto sheet demand has pressured many domestic steelmakers. 

Cleveland-Cliffs, which recently acquired legacy auto steel producer AK Steel, baked in auto shutdowns through June in its worst-case-scenario stress test for the company. In that scenario, hot-rolled prices bottomed near $480/short ton before rising to $525/st in the fourth quarter.

Swedish special steelmaker Ovako has announced that it has successfully tested the use of hydrogen to heat steel before rolling it. This is set to open up further possibilities to reduce the carbon footprint of steel producers due to the fact emissions generated by hydrogen heating is water vapour, Kallanish learns from the company.

The test was done within a full-scale trial launched by the company together with its partner Linde Gas. Hydrogen in this case was substituted for liquefied petroleum gas to re-heat steel before rolling at the group’s mill in Hofors, Sweden.

“This is a major development for the steel industry. It is the first time that hydrogen has been used to heat steel in an existing production environment. Thanks to the trial, we know that hydrogen can be used simply and flexibly, with no impact on steel quality, which would mean a very large reduction in the carbon footprint. We have worked closely with Linde for many years and are proud to be doing this together,” says Göran Nyström.

The company is now looking to invest further in developing the technique. “Our estimate is that an initial investment would save 20,000 tonnes of carbon dioxide each year, and that is just the beginning. We performed this trial in such a way that it can be reproduced at full scale in Hofors and at our other rolling mills,” says Anders Lugnet, group technical specialist, energy & furnace technology at Ovako.

Sentiment in the German steel and metal processing industry is currently worse than during the financial crisis of 2008-09, with business activity expected to further deteriorate, German steel and metals processing association WSM said Tuesday.

According to the survey, the industry is not seeing improving indicators for the next six months.

“That the expectation for the coming half of the year is so pessimistic is pointing toward a prolonged weak period for the industry,” Christian Vietmeyer, managing director at WSM said.

Earlier this month WSM said that around 90% of the processing industry would be in short-time working, a scheme that entails reduced shift hours and financial support from the German government.

Although lockdown restrictions have gradually eased in Germany, with end-customer markets such as the automotive industry slowly ramping up production again, weak order books remain persistent.

German steel mills also continue with production curtailments. ArcelorMittal Germany and Stahl Holding Saar — the parent company of Saarstahl and Dillinger — confirmed Tuesday to S&P Global Platts that current cuts would remain in place, while Thyssenkrupp also said restrictions from crude steel to finished steel production would continue.

Salzgitter announced last week that cuts would extend into May until the economic situation improves.

German steel association WV Stahl said last week that German crude steel production in March dropped 10% year on year to 3.29 million mt.

IHS Markit data showed that the decline in business activity across Germany deepened in April, with both services and manufacturing seeing record output declines as a result of the coronavirus pandemic and subsequent lockdown.

— Laura Varriale

Italian steel producers lost 1.0 million to 1.3 million metric tons of output during the stringent four weeks of coronavirus-prompted lockdowns and now they all have resumed production, working at around 40-50% of their capacity with most of them executing COVID-19 precautions, reliable industry sources told S&P Global Platts on Tuesday.

Mill executives confirmed they are working at just about one month of market visibility in an unprecedented setting with problems such as assessing future demand, in particular from key steel industry sectors like automotive and construction. Those markets are still on hold and when they reopen are unlikely to restart at full capacity.

The Italian government signed a decree just before the Easter break aimed at loosening restrictions made to stem the spread of the coronavirus after around four weeks of lockdown, but it did not include the steel sector. Steelmakers nevertheless started to slowly reopen the week of April 13 after local prefectures granted them permission.

Italy is Europe’s second-largest steel producer, making about 23 million mt annually. But unlike most other European countries, many of Italy’s mills stopped production during March 16-23, with the only exceptions being ArcelorMittal Italia in Taranto, southern Italy, and Arvedi in northern Italy.

“To understand the demand for the coming months is the real key issue, if [state] investments in infrastructure will not take place, it will be difficult to recover a big part of the demand that is unlikely to be at the level of the previous years as cars, but also white goods, sectors are unlikely to rebound as before,” a source from a leading steel Italian association commented.

According to latest data available from Federacciai, the Italian steel producers association, in March Italian crude steel production went down by 40.2% month on month to 1.37 million mt, only partially representing the lockdown period.

Automotive production and building construction are expected to resume by decree next week, but having customers is not the only problem for steelmakers. They rely on steel scrap generation from manufacturers like automakers to feed their furnaces and this has become difficult due to their lockdowns. Most Italian steel mills are based on electric arc furnace steel production, which requires scrap, with the only exception being AM Italia, which has blast furnaces. According to industry sources, with the mills working at 40-50% of their capacity, scrap will become relatively difficult to obtain for about a month.

These sources estimate Italy produces around 13.5 million to 14.0 million mt of scrap per year, satisfying 70% of domestic steelmakers’ demand, with the rest being imported.

With the lockdowns easing, market participants are closely watching the scrap supply/demand balance, as this will impact raw material prices as well the steel product prices, and therefore steelmaker profit margins.

Since the beginning of the lockdown Italian scrap prices have declined by around Eur20/mt, sources said. Scrap dealers told Platts on Tuesday that since the beginning of this week scrap prices went down only slightly, off Eur5/mt week on week.

On April 10, the TSI-Platts monthly southern European scrap price – an average of all southern European countries – at Eur237.50/mt delivered for April contracts, down from Eur255/mt delivered in March and February.

— Annalisa Villa

Turkey’s construction confidence index collapsed in April due to the coronavirus outbreak in the country. It had been at 77.2 the previous month and showing improvement since the beginning of the year, but fell -44.2% in April to 44.7, the Turkish Statistical Institute (TUIK) says in a note seen by Kallanish.

The index for building activity over the past three months decreased to 57.2 in April versus 86.7 in March, while current overall order-books fell to 34.2 from 61.1.

An index above 100 indicates an optimistic outlook, while below 100 indicates a pessimistic outlook.

For every 100 companies surveyed, 39 indicated financial constraints were limiting construction activity versus 42 in March. However, 42.4 said there was insufficient demand versus 31.1 a month earlier, and 17.2 indicated no negative factors compared to 37.1.

TUIK also reports that housing sales in March increased by 3.4% on-year to 108,670 units. However, this is expected to fall sharply in April as Turkey started experiencing the negative effects of the virus towards the end of March.

Turkey’s seasonally-adjusted confidence index decreased by -50.1% in services and -26% in retail trade in April compared to the previous month.

No improvement is expected in May indices due to the impact on the Turkish economy of the pandemic and Ramadan.

Turkish automotive companies have started resuming production after their industry was one of the worst hit by the Covid-19 pandemic.

Honda Turkey’s Şekerpınar facility and Mercedes-Benz Türk’s plants in Hoşdere and Aksaray have restarted their operations this week.

Hyundai Assan and commercial vehicle manufacturers Otokar and Karsan resumed production on 20 April. Temsa, Türk Traktör, Tofaş, and Ford Otosan have announced they will end their “…corona break” on 4 May.

Oyak Renault and Man Turkey restarted production on 27 April, Kallanish notes.

Toyota will restart its output later than any other carmaker in Turkey. The Japanese manufacturer says in a statement its factory in Sakarya will start production on 11 May.

Many companies supplying the automotive industry have also temporarily stopped their production activities.

The Association of Automotive Parts and Components Manufacturers (TAYSAD), which has 450 members, said earlier in April that 40% of its members completely stopped production from 30 March-5 April. 50% of members have produced with limited capacity for the last month.

Now, TAYSAD members have started re-opening their factories.

The tire industry was also closed due to interruptions in the Turkish and European automotive industries. However, tire manufacturers have now also begun to restart production.

The developments show that the negative impact of the coronavirus epidemic on the Turkish automotive industry has started to ease.

Structural steel products made in Germany have not been hit significantly by production cuts as have finished products for other purposes, such as coil and SBQ steel.

In the same way that rebar production has remained nearly unchanged at many mills since the start of virus-related quarantine measures (see Kallanish 8 April), this is similar for sections. Stahlwerk Thüringen has full order books, and no problems with materials supply, according to public radio broadcaster MDR. Difficulties occur only with transport to badly-affected countries such as Italy and France, MDR cites the management as saying.

In nearby Luxembourg, beams and sheet piling production at ArcelorMittal’s plants in Differdange and Belval were closed only for one week in late March, and were then restarted. The company said earlier that production there continues to thrive as does the construction sector. Differdange makes beams for high rise dwellings and other special projects.

Salzgitter AG reports that it has introduced short-time working at its Peine sections mill, but “… due to declining demand, which was evident before the coronavirus crisis measures were introduced,” a spokesman tells Kallanish.

The German interest group for steel used in construction, Bauforum Stahl, recently issued a statement saying that construction customers can rest assured that the supply of sections, as well as plate, is safe.

French vehicle producer Renault Trucks is gradually resuming production, Kallanish learns from the company.

Factories in France have been restarted gradually from 22 April starting with the Lyon-Venissieux Engine Plant. Other Renault Trucks production sites, such as Bourg-en-Bresse and Blainville-sur-Orne assembly plants will gradually resume activity in the coming weeks.

However, the restart of industrial activity is planned for all plants at a very low output level. “Ramp up will be slow and be spread over several weeks, in line with customer demands, the ability of suppliers to deliver the required provisions, and in synchronisation with the other Volvo Group plants,” the company says in a note.

The company is examining requests from its customers, dealers and bodywork partners and analysing market trends to adjust production rates for the coming months, it adds.

Meanwhile starting last week Renault has also gradually resumed production at some of its passenger vehicle and engine plants in France, Spain, Portugal and Russia, Kallanish hears. Production however is said to be slow and should be ramped up after France has eased its lockdown as from 11 May.

Germany’s steel mills serving the automotive industry have reduced their production significantly. All of them, including strip mills as well as those making speciality long products, had already reduced production during 2019, so the coronavirus measures have simply added to the pain.

thyssenkrupp Steel says it has adjusted all stages of production from the blast furnaces to the processing line, mainly due to the production cuts in the automotive sector. For reasons of competition, it declines to give the levels at which it is now operating, but denies that it plans to idle a blast furnace.

Indirectly, this is happening at its 50% subsidiary HKM (Hüttenwerke Krupp-Mannesmann). The steelmaker makes slab used in car bodies, and even more so for tube production which is also not faring all that well. One of its BFs will be shut down for repair until October, “… which wasn’t originally planned,” an insider tells Kallanish.

This had already happened at ArcelorMittal Bremen in September and at Salzgitter where the small blast furnace C underwent repair last year and remains out of operation. “We would rather increase production at A and B before restarting C,” a spokesman tells Kallanish.

Makers of special bar qualities for automotive purposes had all introduced short-time working even before the quarantine rules kicked in. This applies to Georgsmarienhütte, Saarstahl and Deutsche Edelstahlwerke (DEW).  “We have introduced short-time work, and defined further measures when presenting annual results in March,” a spokesman for DEW says. “We will definitely reduce production further to adjust it to the lower demand.”