Category: Latest Updates

Southern European coil import activity has ceased during the last ten days due to the coronavirus outbreak, despite the fact that prices from exporters have decreased significantly, Kallanish learns from sources.

All traders contacted note that price indications are only nominal, as there is no activity taking place. “We sold the last batch of coils at the port in Italy last week, since then everything has been silent and new orders for new production are not being discussed,” a trader notes.

Due to the fall of scrap prices traders say that Turkish exporters could well be at $450/tonne fob and below for HRC. “The reality is if you have cash you could get amazing deals at the moment,” another source says.

Meanwhile some are mentioning South Korean suppliers as being very competitive, with nominal HRC import prices potentially falling as low as €420-430/t ($459-470/t) cfr South Europe.

Going forward the situation remains uncertain. Many traders believe that the lack of import orders could continue beyond the current lockdown. “Banks are not interested in supporting new orders from traders of steel products at the moment and I feel like this will continue beyond the lockdown,” a trader says.

Demand for steel products in Russia fell by -20% on-month in March, says Russian distributor BVB Alliance, Kallanish notes.

This was caused by the uncertainty surrounding the spread of Covid-19, a shortage of working capital for businesses, an increase in rental costs and increased competition, the firm says. Russian transport companies have also increased the time and cost of delivery.

At the same time, there has been an increase in the prices of a number of categories of alloy steel products for special applications.

Logistics restrictions in Europe, China and Taiwan have led to a -50% reduction in the volume of carbon and alloy steel imports into Russia. Since the introduction of quarantine measures in a number of countries in the CIS and Europe, logistical issues have seen exports decline by -35%.

Due to the drop in demand for steel, BVB Alliance has reduced its marketing budget, the firm says.

The company is a major alloy, stainless and carbon steel distributor and wholesaler in Russia and the CIS. Its main suppliers are Severstal, Chelpipe, MMK and other Russian steelmakers. The company has 14 warehouses in Russia, and four in Kazakhstan, Belarus and Kyrgyzstan. Its main Markets are America, Africa, Asia, the Caribbean, Europe, Oceania, and the Middle East.

Polish authorities plan to carry out a tender in mid-April to sell ISD Huta Czestochowa (HCz), a source close to the Polish heavy plate producer tells Kallanish.

This comes despite the fact Sunningwell International Polska’s 12-month lease of HCz does not expire until September. The investment firm signed an agreement to lease the plate mill in September 2019 and restarted production the following month (see Kallanish passim). It is expected to partake in the latest tender.

It is not clear whether Polish steelmaker Cognor or UK-based Liberty House plan to participate, after both bid for the plate mill last year when it was seeking an investor following its insolvency. Metinvest, itself a producer of plate in neighbouring Ukraine, has also been touted as a potential investor. The situation has, however, been complicated by the outbreak of Covid-19. None of the three firms responded to requests for comment before deadline.

The Czestochowa district court, which last acted as HCz’s administrator, also did not respond to request for comment.

Electric arc furnace-based HCz has an 800,000 tonnes/year slab capacity and 1.2 million t/y capacity of heavy plate.

Major steel companies in Spain could maintain output following an “… interpretative note” published by the country’s National Ministry of Industry on 31 March, Kallanish notes.

According to the authority`s statement “… the manufacturing industry is considered essential insofar as its activity is necessary and is intended to provide the goods and materials necessary for the development of essential sectors.”

The Royal Decree also establishes that those plants whose prolonged shutdown causes damage that makes it impossible or difficult to put them back into production or create a risk of accidents, may remain open. Spanish Industry Minister, Reyes Maroto, requested that the steel sector must maintain minimum activity, taking as a point of reference what happens during weekends or holidays. Electro-intensive industry cannot be halted, so its activity must be ensured although with less mobility of workers, Maroto adds.

Companies and their workers that are involved in import and export activities are also exempt from the application of compulsory paid leave. This is because they are organised in such a way to supply or fulfil international contract commitments, the Spanish government says.

Automotive production in Europe is currently being hard-hit by the spread of coronavirus and the consequent stoppages at factories across the continent. ACEA, the European automobile manufacturers’ association, calculates that the loss of production is expected to surpass 1.2 million vehicles, including cars, vans, trucks, buses and coaches.

Plants are being shut down for around 16 days on average across Europe, ACEA says. The association notes that production losses could increase if stoppages are further prolonged.

The biggest impact should be in Germany, the largest automotive producer in the continent. Germany should lose production of some 360,000 vehicles due to the stoppages. The second most-impacted market will be Spain (237,000 vehicles), followed by France (113,000 vehicles).

According to the European steelmakers’ association Eurofer, the automotive sector accounts for 18% of total steel consumption in the region. After a challenging 2019, automotive production was expected to grow by around 1% y-o-y in 2020, this outlook is set to be dramatically revised downward in the coming weeks, Kallanish notes.

German steel distribution group Klöckner & Co believes that it will take more than a year until business returns to where it was before the coronavirus crisis.

“My prognosis is one to two years until the global value-added chains are back to functionality and consumers spend money as they used to,” Klöckner’s ceo, Gisbert Rühl says in an interview with Handelsblatt. The company is maintaining operations, but Rühl notes that “… the coming weeks will be very hard,” because the consumer chain is coming apart. Klöckner therefore has introduced short-working at most of its sites.

Unlike in France where steel distribution has stalled, the steel distribution sector In Germany could in fact continue to operate. Other major companies however appear reluctant to provide details to what extent operations are being reduced or, indeed, if any interruption to services is imminent.

Some smaller plate distributors tell Kallanish that they feel no impediment to business so far, but, as one concedes, “… we are looking from week to week and will see what April will bring.” Another one is more pessimistic in outlook: “I have the impression that the market is suspended in a state of shock, and everyone is looking ahead to what the state of the epidemic will be after Easter,” the source says.

It is striking that none of Germany’s big steel distribution groups are offering an update on any business disruptions on their homepages. Austria distributor Frankstahl presents an upbeat attitude in its customer bulletin. “Many customers are positively surprised that we are still available. And in fact, we are,” it says, and directs customers to its webshop “… which gives you access [… to products] even in times of social distancing.”

Turkish crude steel production in February grew 8.2% year-on-year to 2.9 million tonnes, with January-February output up 12.7% to 5.9mt, according to the Turkish Steel Producers’ Association (TCUD).

February finished steel consumption was 3mt, up 68.3% on-year, with two-month use up 63.3% to 5.7mt.

Exports, however, decreased -8.9% in February to 1.7mt, and -12.6% in value terms to $1.2 billion, due to the coronavirus impact on the international steel market. January-February exports decreased -4.9% to 3.6mt, and -9.6% to $2.5 billion.

February imports, however, increased 31.2% to 1.1mt, and by 14.8% in value to $857 million. Two-month imports increased 40.4% to 2.6mt, and 16.3% to $1.8 billion.

In January-February, the ratio of exports to imports decreased sharply to 138:100 from 177:100 in the same period of the previous year.

February output growth was restricted, despite the consumption surge, by increased imports, TCUD observes. “In order to prevent imports, which have increased tremendously in recent months, and the foreign trade deficit, which has increased by 86% in the first two months of the year, protection measures must be taken against the imports of products that have domestic production,” says TCUD general secretary Veysel Yayan.

The coronavirus adversely affected steel consumption in Europe in February, but had little impact on Turkish consumption which continued to improve due to the base effect, Yayan adds.

“In March, however, it is predicted that Europe and the US will have very different figures and the decline in consumption in those regions will accelerate while the increase in steel consumption in Turkey is expected to start slowing down,” he comments.

Yayan has repeated calls for Turkish mill production stoppages – which he considers temporary – to be supported with measures that will enable a strong restart.

On the other hand, global crude steel production reached 143mt in February, an increase of 2.8% on-year. Two-month production increased 1% to 294mt, Kallanish notes.

Among the top 15 steel-producing countries, Iran recorded the highest production growth of 40.5% in January-February. Turkey was ranked second in production growth terms. Germany’s production continued to decline, falling -10.9% to 6mt.

Steelmaker ArcelorMittal said Wednesday that it will temporarily shut down Blast Furnace A at its site in Austurias in Spain on May 7 because most of its customers have suspended production due to the coronavirus pandemic.

The Asturias site has two blast furnaces with a combined capacity of 4.2 million mt a year of crude steel. Blast Furnace A has a capacity of around 2.7 million mt/year, according to S&P Global Platts data.

ArcelorMittal also said it was suspending operations at its electric-arc furnace in Sestao to balance supply and demand. Sestao has a design capacity of around 1.4 million mt/year but a company spokesman said that since last year it had only been producing 300,000 mt/year of crude steel. The company produces materials for the automotive and general industry sectors.

The spokesman said the company had suspended production at its rolling mill in Lesaka which produces organic coating coils for the construction sector with an annual capacity of 250,000 mt/ year. Also the Sagunto rolling mills have been stopped as the mill produces 70% of its flat and longs materials for the automotive sector. Sagunto has a capacity of around 600,000 mt/year of galvanized steel. The 1 million mt/year Olaberria-Bergara lines for the automotive and construction sector are being kept in operation for the moment.

ArcelorMittal’s plans come as Spanish steel industry association UNESID said it was seeking clarification from the Industry Ministry about what counts as an essential industry. Under tighter measures to combat coronavirus only “strategically important sectors” will be allowed to continue operating.

A number of steel-consuming plants, such as auto factories, have been closed for the duration of the measures.

According to power demand data, consumption by the Spanish steel sector on Tuesday was 184 MW and metallurgy was 587 MW out of a total 843 MW of demand from interruptible consumers.

That marked a sharp drop from 842 MW for steel and 635 MW for metallurgy on March 3, before the measures, and compared with the last Tuesday in March 26, the drop, particularly for steel is even steeper, with figures of 1.589 GW for steel and 686 MW for metallurgy.

— Annalisa Villa, Gianluca Baratti

Major Turkish integrated long steel producer Kardemir, based in the Karabuk region of northern Turkey, has decided to partially reduce output due to adverse market conditions in the market arising from the globally expanding COVID-19 outbreak, S&P Global Platts learned.

“In line with the evaluations made, reducing employee density and with the aim of maximizing occupational safety and sustainable production; considering the adverse market conditions in the sector, it is decided to partially reduce the daily production level across the company by bringing forward various planned maintenance and repair activities,” the company said in a statement Wednesday evening, without giving further details about the level of the output cut.

All the necessary precautions have been taken for the supply/procurement safety of our stakeholders and additional precautions will be taken according to the pandemic/market developments to be faced, the company noted.

Kardemir currently has 2.5 million mt/year of liquid steel production capacity. Within the scope of the 3.5 million mt/year steel production capacity target as well as the performance increase and productivity, the company is targeting to start to build a new blast furnace with a capacity of 1 million mt/year.

Some Turkish longs producers have been similarly pausing their output while some have been reducing their capacity usages in recent days.

Turkey’s largest integrated steel producer Isdemir, Erdemir Metalurji Group’s Iskenderun-based mill, will also pause one of its blast furnaces for maintenance in the coming week, as S&P Global Platts has reported.

— Cenk Can

Polish steel billet, bar and rebar producer Cognor warned Wednesday that the fallout from the coronavirus pandemic such as greater sickness rates, customers shutting down or going bankrupt, problems with supplies or administrative measures might mean it having to reduce or halt operations.

In 2020, Cognor expects demand in all segments of the steel market to fall, with rebar hit the least. The steelmaker is even forecasting a temporary rise in steel demand from the Polish construction sector in the second quarter.

Due to the coronavirus pandemic, it expects GDP to fall in Q2 and the whole of 2020 both in Poland and the EU. However, last year there was no correlation between economic growth and steel production. In 2019, Polish GDP grew 4.0% year on year, while the country’s steel output fell almost 11%. The EU-28’s GDP inched up 1.5%, but its steel production was 5% lower, according to data provided by Cognor.

Cognor does not rule out the cost of electric arc furnace production becoming less competitive than blast furnace production this year despite the likely drop in power prices because of the economic slowdown. During the most of 2019, EAF feedstock was cheaper than that for blast furnaces due to ferrous scrap prices falling more than those of iron ore and coking coal since Q2 2018.

The steelmaker said it used its capacity to the maximum last year, with sales volumes only 1% lower year on year, but revenue dropped 8.7% to Zloty 1.9 billion ($455 million), which was partly a result of a greater share of billet and a lower share of value-added products in the company’s portfolio. Its EBITDA almost halved last year to Zloty 101 million.

In 2019, Cognor sold 141,850 mt of scrap, down 18% year on year. Its steel billet sales soared by 32% to 185,000 mt, while rolled steel sales fell 4.5% to 476,000 mt. Cognor sold almost 70% of its steel products (billets and rolls) in Poland. Germany was its second largest market on a 14% share. A quarter of its output was absorbed by the automotive, 30% by the construction and 11% by the engineering sectors.

— Ekaterina Bouckley