Category: Latest Updates

Output and domestic and export orders of one of Turkey’s largest alloy bar producers, Bursa-based Cemtas, has not yet been affected by recent stoppages announced by automotive producers globally, S&P Global Platts has learned.

“As of today, we didn’t face any disruption that could effect our activities. Our domestic and export customers didn’t make any order cancellations since today and our production and shipments are ongoing according to plan,” the company said Wednesday, adding that they don’t have any plan of an output suspension or stoppage.

Cemtas finished the installation of its new auto stabilizer bar line for Mercedes Benz and started trial production in August, as reported. The company said installation of another auto stabilizer bar line for MAN is expected to be completed at the end of 2020.

Cemtas has melt shop capacity of 193,200 mt/year. It supplies bearing steel, free-cutting steel, leaded steel, spring steel and tool steel, mainly to the automotive sector.

Turkey’s largest automotive steel producers have been announcing output suspensions one after another in recent days in line with the suspensions seen in the global automotive sector. Some of Turkey’s major automotive producers, Ford Otosan, Toyota, Honda and Mercedes-Benz Turk, decided to suspend production by two weeks as of March 23, as Platts has reported.

These suspensions are expected to pull down automotive steel demand in Turkey in the mid-term, especially if these output cuts last longer than expected, amid the expanding virus outbreak.

This could also result in output cuts in some of the largest steel suppliers to the sector.

— Cenk Can

German steelmaker ThyssenKrupp on Wednesday brought its proposed steel restructuring plan forward in light of declining demand amid the coronavirus pandemic and announced 3,000 job cuts, of which 800 will be at its heavy plate business.

“At present the coronavirus pandemic is leading to a sharp decline in customer call-offs and a deterioration in the order situation. Thyssenkrupp is therefore going to make production adjustments in the steel business at short notice,” it said.

An immediate “coronavirus package” also includes the requirement to increase compensation for reduced hours to 80%.

“We will have to begin reductions in our operations at many locations in the coming weeks. This will initially affect production-related areas, but also administration. We are taking a close look at all areas to see when which measures make sense,” said Oliver Burkhard, executive board member for human resources and labor director.

As part of the restructuring plan, Thyssenkrupp said it will be cutting 3,000 jobs in total over the coming years, the majority of which will be administrative positions, but 800 will be in its heavy plate production operations.

Thyssenkrupp did not respond to an S&P Global Platts request for more details on the production cuts Wednesday.

“We have put off problems for too long and shied away from tough decisions,” said Klaus Keysberg, the member of the executive board in charge of steel.

The restructuring will involve a combined investment of Eur800 million over the next six years in addition to Eur570 million annually in spending to move production to higher grades of steel.

Thyssenkrupp scrapped its outlook for the business year earlier this week in light of the pandemic.

Also Wednesday, German steel stockholder Kloeckner said it would not be able to maintain expectations for 2020 and that there would be a temporary reduction in operations via reduced working hours.

— Laura Varriale

Following negotiations and an agreement with union IG Metall, thyssenkrupp AG has announced the future plan for its Steel Europe division it is calling ‘Steel Strategy 20-30’, Kallanish learns.

The measures include a reduction of up to 2,000 jobs in the next 3 years, and roughly another 1,000 jobs up to 2026. Of the total, 800 jobs are affected in the troubled heavy plate segment. In that area, thyssenkrupp sees no development prospects within the group. “The job reductions have been firmly agreed and will be carried out in a socially responsible manner,” the company notes.

It says it will systematically align the product portfolio with future markets and profitable steel grades. These include multiphase steels and lightweight steels as well as grades with high surface quality. In addition, the production of non-grain-oriented electrical steels, which are becoming essential for electromobility, will be strengthened.

“We have put off problems for too long and shied away from tough decisions. The agreements give us room for manoeuvre so that steel can remain competitive in the long term,” says Klaus Keysberg, tk AG executive in charge of steel/materials. “What you have to keep in mind: We are investing in one of the best steel locations worldwide. The expertise of our team is highly valued by customers,” he says. Keysberg notes however that “… today, we are too complex and have an inappropriate cost structure.”

German steel distribution group Klöckner & Co and steelmaker Salzgitter AG both say that they will be unable to maintain the profit guidance they gave earlier this month, Kallanish notes. Following thyssenkrupp, they are the other big stock market-listed German steel companies to have lowered expectations because of the coronavirus crisis.

Against the background of crisis measures and unforeseeable developments in the near future, the economic impact of the pandemic on Klöckner cannot be determined nor reliably quantified, the company says. At its annual press conference only two weeks ago, it indicated a significant increase in operating income (Ebitda) as target for the full year 2020, from last year’ s basis of €124 million ($134m). Its 2019 revenue was €6.3 billion.

Klöckner notes that it has significant liquidity reserves to counter the crisis and has taken comprehensive measures to protect the health of its employees as well as to protect its business. This comprises the activation of emergency plans and the temporary reduction in operations by way of short-time working.

Similarly, Salzgitter says that it can neither maintain its forecast published on 16 March, nor provide a robust new forecast for the financial year 2020. It had predicted pre-tax earnings at around breakeven, after a pre-tax loss of €253m last year, largely caused by non-recurring factors. Its revenue was expected to return to €9 billion this year.

Under the grip of the COVID-19 pandemic, LMC Automotive expects the percent decline in global Light Vehicle sales in 2020 to be nearly double that of the fall during the Great Recession (between years 2007 and 2009).

With every market around the world now struggling from the COVID-19 impact, there remains significant risk as the situation is extremely dynamic. Further downward revisions in many markets are probable.

Read the full press release:

Buyers of coil products in north-western Europe tell Kallanish that lead times are already long, and already stretching until the end of the second quarter. That picture may be altered by the evolving coronavirus issue, but its projected influence cannot easily be assessed.

The high degree of utilisation at the mills was preceded by what one service centre manager calls a “… historic low in inventories” at the end of 2019. Earlier this year, all service centres had restocked with some urgency, “… so that temporarily we were facing lead times of four weeks. – I have never seen that,” he tells Kallanish.

The second quarter appears to be practically sold out so, “… you won’t get anything before July, and that applies to all coil categories,” he says. Other sources largely agree, although maybe to a different extent. Some say it is a question of price if volumes are required urgently. This would explain the price spread, they suggest.

Mills recently claimed that €520/tonne ($561/t) ex-works was a viable price for HRC and €620/t for HDG, which many buyers deny. Such peak values are quite likely achieved in urgent cases, while otherwise €480/t or €580/t respectively are a more likely target for big buyers. “The truth is probably in the middle,” the manager says. “The upward trend in prices has halted for two weeks now, but mills are still not willing to discuss price reductions,” he observes.

German consultant Andreas Schneider points out that the good utilisation says little about real market demand in the longer run. In accord with the manager, he suggests that it is mainly the busy end of a restocking cycle.

Jastrzebska Spolka Weglowa (JSW) is yet to feel any direct impact from Covid-19 on its coal or coke trade. The group’s coking plants are not affected by global logistical problems since they mainly use captive coking coal, the Polish miner says.

JSW’s external coking coal sales fell -3% on-year in 2019 to 5.8 million tonnes, although production was down only -1% to 10.2mt. Performance was impacted by the difficult situation in the coke and steel markets, which resulted in lower demand for coking coal. Unit mining cash cost, however, rose 8% to PLN 426/tonne ($100).

Premium hard coking coal fob Australia prices came down from above $200/t at the start of 2019 to below $140/t at the end of the year. Prices declined in the second half of the year due to curtailed coking coal purchases by China, lower-than-expected demand from India and reduced steel production in Europe.

Coke sales slumped -17% last year to 2.9mt, with output down -11% to 3.2mt, meaning capacity utilisation fell to 86.5% from 93.4% in 2018. Unit cash conversion cost rose 19% to PLN 161.7/t. JSW’s coke sales price fell -2% from 2018 to PLN 1,073/t fca.

“Without a doubt, 2019 was a year of global economic slowdown,” JSW chief executive Wlodzimierz Herezniak says in a note seen by Kallanish. “The crisis in the automotive industry, reduced demand for steel in Europe, and tariff war between the US and China contributed to the drop in international trading activity. Our current activities are therefore focused on intensifying sales and implementing measures to gradually increase operational and cost efficiency.”

JSW’s consolidated revenue fell -11.6% on-year in 2019 to PLN 8.67 billion ($2.03 billion), while net profit slumped -63% to PLN 649.6 million. Poland accounted for 52% of revenue, Austria for 15%, Czech Republic 10%, India 8% and Algeria 5%.

In late November last year JSW signed a PLN 1.7 billion deal to supply Liberty Galati with blast furnace coke for five years until end-2024.

The abrupt slump in customer demand caused by the coronavirus pandemic is forcing Austria’s voestalpine to reduce production in various areas, the company says in a statement monitored by Kallanish.

This includes reducing pig iron capacity at the site in Linz by around -20%, by temporarily shutting down a small blast furnace. Elsewhere in Austria, units of the group will go on short-time working. This is to reduce production but also “… with the clear objective of retaining our highly qualified employees within the group,” ceo Herbert Eibensteiner says.  

“Demand in key voestalpine customer segments has collapsed in just a few days,” he says. In order meet the required level of flexibility and to secure jobs as far as possible, short-time working is being registered at 50 units in European countries. Outside of Europe, voestalpine will implement alternative measures as appropriate in countries where no such short-time working models are available. Several sites in countries including France, Italy, Peru, Brazil, and the USA have already been temporarily closed.

“When our customers significantly reduce their level of demand, stop production, and supply chains temporarily come to a standstill, we need to react promptly,” Eibensteiner says. “In these difficult times, my particular thanks go to those who are still hard at work in production. They are making a vital contribution to maintaining our critical infrastructure at many plants,” he adds.

Italian stainless steel producer Valbruna is extending production stoppages to fight the coronavirus outbreak. This is in compliance with the measures imposed by the latest decree of the Italian Prime Minister on 22 March and until 3 April, Kallanish learns from the company.

Among the sectors that the government has decided to suspend are also the economic activities pertaining to group 24 of the Italian classification of economic activities (AtEco). This relates to stainless steel manufacturing, from melting to its processing.

As per the decree, up to 25 March the company is allowed to complete the necessary operations for the suspension of its production activities. This includes the shipment of goods in stock at the Vicenza and Bolzano sites as well as stock at peripheral sites located in Italy. Beyond 25 March and until the end of the suspension of activities, shipment of ready-made material available from stock is permitted to specific Italian customers. These must be part of authorised production chains and considered essential by the government, the company says in a note.

At the same time Cogne Acciai Speciali will not restart production this week as previously scheduled but says that it will guarantee the continuity of its customer service, Kallanish notes.

Indian automotive production fell -18% on-year in February to 1.65 million units, according to a Society of Indian Automobile Manufacturers (SIAM) note seen by Kallanish.

Passenger vehicle sales fell -7.6% to 251,516 units.

In the 11 months through February Indian automotive production slumped -13% on-year to 20.5m units, maintaining the same declining rate as after ten months. Passenger vehicle sales dropped -15% to 2.63m units.

Earlier this month SIAM president Rajan Wadhera said reduced sales are due to the economic slowdown and lower production of BS-IV class vehicles, which are not permitted to be sold after 1 April.

“Supply chain disruptions from China are also a concern, which may impact the production plans for companies going forward,” he added. “The auto industry is grateful to the government for issuing a notification of force majeure for coronavirus and 24×7 clearance of shipments at all customs formations.”

Indian auto ancillaries and original equipment manufacturers import around 27% of key input materials from China, according to India Ratings & Research. “The extended production halts in China after the Chinese New Year due to a substantial rise in Covid-19 affected population have created supply-side risks for domestic auto companies,” the credit rating agency says.

The industry could look alternatively at sourcing components either locally or from other countries such as Germany, South Korea, Japan and Thailand, which now account for around 33% of total input material imports. But this would be costly and supply may be insufficient to meet demand.

With India going into a three-week nationwide lockdown from 25 March, it is unclear how much automotive production will be able to continue in the nation. Manufacturers such as Maruti, Hyundai, Honda, Suzuki, TVS & Tata Motors have already opted to temporarily suspend their operations.