Category: Latest Updates

ArcelorMittal Spain tells Kallanish it has implemented production stoppages at its plants in the Asturias region, Basque Country and Valencia as from 18 March.

The steelmaker took the decision due to the impact the coronavirus is having on many of its customers, mainly those from the automotive sector. They have practically halted their output in recent weeks.

“ArcelorMittal is temporarily stopping one of its two blast furnaces, one of the two sinter plants and the galvanizing line in Asturias,” the company says. The Avilés mill will operate at half capacity, with one converter and one continuous casting machine, ArcelorMittal confirms. The company’s EAF-based Sestao steelworks will be totally closed, while the stoppage at the Sagunto plant involves the galvanizing line.

The company is evaluating a temporary lay-off scheme for part of the workforce. The plan will be negotiated with unions in the coming days, ArcelorMittal adds.

In a separate statement, the steelmaker explains that “…ArcelorMittal will continue to monitor the evolution of the coronavirus in each of the markets it operates and will take decisions accordingly to ensure the health of its workforce and its ability to meet customer demand.”

Beltrame, the Italian-headquartered merchant bar supplier, has extended stoppages to its French units this week after previously halting operations in Italy, Kallanish learns from the company.

The company stopped production at its plant in Vicenza, north-western Italy, in response to the coronavirus outbreak. “Since 24 February, the company has adopted increasingly stringent precautionary measures to cope with the spread of coronavirus,” it says. “To date, no case of Covid-19 has been found among our collaborators, but the decision has been made to suspend industrial activity at the Vicenza plant. In the other Italian plants of San Giovanni and San Didero activity has been slowed down.”

This week, production was also halted at its plant in France, named LME. “Because we all need to face this situation and contain the virus, the decision to stop all direct and indirect activities was taken from the beginning of this week up to 31 March included,” Beltrame explains.

Large stoppages among steelmakers have already been reported in Italy, Spain and France, with more expected in other European countries going forward.

The world’s largest steelmaker’s raw materials purchasing arm, ArcelorMittal Sourcing, issued a force majeure declaration Thursday amid operational disruptions at ArcelorMittal sites in Europe as a result of the coronavirus outbreak, according to a notice sent to company coal suppliers and seen by S&P Global Platts.

It was unclear if the force majeure was declared on a particular product or a number of products that ArcelorMittal Sourcing buys. However, at least two sell-side sources for Australian metallurgical coal said they had received the notice Thursday. Sources said the measure was also understood to have been extended to iron ore supplies.

In the notice sent to the sellers and seen by Platts, ArcelorMittal Sourcing said that “unavoidable” lockdown measures taken by governments and administrations in Europe, together with measures taken by the company to protect employees had triggered “severe disruptions of operations at ArcelorMittal sites” and that it was “unable to provide an estimate of when it will be able to overcome the effects of the Force Majeure Events.”

This was preventing, affecting or delaying the steelmaker from performing its obligations under certain contracts, according to the terms of the letter.

ArcelorMittal declined to comment Thursday.

However, the company announced separately early Thursday it intends to cut its European steel production over and above 2019 reductions due to an excess of supply. It said it was “taking steps to reduce production from its European operations to ensure the wellbeing of our employees is maintained and that production is aligned with demand,” without giving further information on where or how much production would be cut.

Other European steelmakers including Salzgitter, Thyssenkrupp, Tubos Reunidos and various Italian mills are also cutting their production levels to be more in line with lower market demand and to prevent excessive steel inventory building up.

Automotive manufacturing “plants are reducing production and there are companies in lockdown, so we don’t need so much raw material,” one steelmaker source said. “We will see FM being used more.”

A sell-side source for Australian metallurgical coal said: “I guess there are more [such cases] to come when countries in the European Union are all” dealing with the pandemic.

One observer said the impact on the steel raw materials market was still unclear.

According to the observer, in 2019, ArcelorMittal Sourcing wrote to several suppliers asking for price cuts and renegotiations, citing the weak steel market, requests that were ultimately rejected in many cases.

In 2019, iron ore prices hit a five-year high following production curbs resulting from miner Vale’s fatal tailings dam accident in Brazil, and weather-related supply restrictions have kept iron ore and metallurgical coal prices – both key steelmaking raw materials – relatively firm during the coronavirus outbreak so far in 2020.

ArcelorMittal has steel plants in 18 different countries that produced 89.8 million mt of crude steel in 2019.

— Yi-Le Weng, Diana Kinch, Hector Forster and Samuel Chin

As the COVID-19 outbreak has hit flat steel demand significantly both in the domestic and export markets in recent days, Turkish mills’ offer prices continued to fall throughout the week. Some production cuts by some Turkish producers could be on the way in this sentiment, producer and trade sources told S&P Global Platts Thursday.

A major Turkish coated coil producer started maintenance at its cold-rolling and galvanizing lines, Platts learned from a company source Thursday. Maintenance at the company’s tandem rolling mill and pickling line will start at the beginning of next week, the source said, while maintenance at the company’s galvanizing line will continue till the beginning of April.

Major Turkish flat steel producer Colakoglu has plans for maintenance at its hot-rolling line at the beginning of April, as S&P Global Platts has reported.

Some other producers could also pull down their capacity usages notably in the coming weeks in a sluggish market, as uncertainties arising from the virus outbreak continue to hit global demand and prices.

The recent sharp declines seen in imported scrap prices and sluggish market sentiment were also raising the pressure on Turkish mills’ quotations.

Some mills’ hot-rolled coil offer prices fell below $500/mt ex-works in this sentiment, while some Turkish coated coil producers have begun offering DX51D with 50-70 grams/square meter zinc coating, 0.50 mm hot-dip galvanized coil as low as at $610-$620/mt ex-works in recent days, down a further $20/mt on-week, Platts learned from producer and trade sources Thursday.

“I also heard a mill offer as low as $600/mt ex-works,” a coated coil producer source said, adding that they have begun to receive some order cancellations from export markets in recent days, especially from some countries in Europe that made “state of emergency” proclamations.

Turkish producers may face difficulties responding to Chinese mills’ probable aggressive offers in the coming days as they seek to deplete their excess stocks, he also noted.

— Cenk Can

Turkey has requested WTO dispute consultations with the European Union regarding the EU’s safeguard measures on imported steel products.

The request was circulated to WTO members on 19 March.

Turkey claims that the EU safeguard measures, in the form of tariff-rate quotas and additional duties, and the investigation that led to their imposition, are inconsistent with a number of provisions of the Agreement on Safeguards and the General Agreement on Tariffs and Trade (GATT) 1994.

The EU initiated the safeguard investigation in March 2018, with provisional measures imposed in July 2019. In February 2019 the EU decided to apply a definitive safeguard on 26 categories of steel products through June 2021.

Further information is available in document WT/DS595/1

Volkswagen and other German carmakers are temporarily suspending production in response to the accelerated rate of coronavirus infections, the resulting interruption in supply chains, and the rapid decline in demand on the automotive markets.

The VW Passenger Cars brand is gradually suspending production at its European plants, which will also affect components plants of the larger VW group, Kallanish learns from a corporate announcement.

The duration of the measure will initially be for two weeks, concerning car production facilities in Wolfsburg, Emden, Dresden, Osnabrück, Zwickau (all Germany), Bratislava (Slovakia), Pamplona (Spain) and Palmela (Portugal).  Also affected are German components plants at Brunswick, Chemnitz, Hanover, Kassel, and Salzgitter.

“The spread of coronavirus in Europe is increasingly having an adverse impact on the demand situation. At the same time, it is becoming increasingly difficult to supply our plants with outsourced parts,“ says Ralf Brandstätter, coo of the Volkswagen Passenger Cars brand. For this reason, and in the interest of the health of its workforce, VW will run production down in a coordinated way from the end of the late shift on Thursday.

In Italy, Automobili Lamborghini has intensified measures against the coronavirus, in support of new government directives, closing its premises from 13 March until 25 March, according to a VW statement.

The Daimler group has also decided to suspend the majority of its production in Europe, for an initial period of two weeks. The suspension applies to Daimler’s car, van and commercial vehicle plants in Europe, and will start this week. Connected to this is an assessment of global supply chains, which currently cannot be maintained to their full extent, the carmaker says.

French car makers have stopped production this week, closing down most of their plants to carry out sanitisation procedures, Kallanish learns from local car manufacturers.

French car maker PSA is shutting down all its plants in Europe. “Due to the acceleration observed in recent days of serious Covid-19 cases close to certain production sites, supply disruptions from major suppliers, as well as the sudden decline in the automobile markets, the company decided the closure of its production sites in Europe starting on 16 March until 27 March… The closure of the mechanical sites will be adjusted accordingly.” PSA says in a note.

As from 16 March Renault has also shut down its 12 plants in France, Spain, Slovenia, Morocco and Portugal “… until further notice, depending on the evolution of the health situation”, the company confirms in a note. The continuity of production activities at the group’s plants in other European countries depends on the situation in each country.

Renault plans to restart production activities “… as soon as conditions permit and will implement appropriate measures to respond effectively to commercial demand,” the carmaker adds. The factory in Cacia, Portugal is closed from Wednesday 18 March while the company’s Moroccan sites in Tangier and Casablanca will be idled as from Thursday 19 March. The site in Revoz was also idled on 17 March.

Spanish seamless tube makers, Tubacex and Tubos Reunidos (TR), have joined the growing number of Spanish steel companies halting production due to the coronavirus outbreak, Kallanish notes.

The two companies are closing their plants in Llodio, Amurrio and Trapaga in the Basque Country in a controlled way, local trade union sources reveal.

The measures were initiated by the Tubacex and TR workforces, despite the fact that the two companies had guaranteed all health and safety conditions, unions say. “The most convenient thing was to stop production as a preventive measure. We hope that both companies take advantage of the measures that the Spanish government is taking and that there is no unemployment in this exceptional case,” a workers’ representative comments.

Tubacex has “… shown an attitude both open to dialogue and the search for solutions to maintain production activity, aware of the impact of this decision on the future of the plant and employment in the region,” the company says.

TR, meanwhile, confirmed that has decided to temporarily halt its production plants ahead of the Saint Joseph’s Day, holiday starting 19 March. It also intends to have a conversation with unions during the four-day Basque-country holiday to find the most reasonable way to restart production as soon as possible and reduce any impact on its workers.

Similarly the special steel supplier Sidenor is also halting production this week, at least until the beginning of next week, Kallanish understands.

Spanish-headquartered stainless producer Acerinox has also reportedly taken all necessary steps to maintain production. The company, however, is prepared to cut its output and to take decisions on restrictions according to how the pandemic evolves, trade unions add.

ArcelorMittal has confirmed in statements to Kallanish that its European flat products’ operations will reduce production due to the coronavirus outbreak. Among others, the biggest operations impacted so far are set to be those in Italy and France.

“Given the extent of the outbreak, and particularly the impact it is having on several European countries in which ArcelorMittal operates, as an initial response the company intends to reduce production from its European Flat Products operations. We will continue to monitor the evolution of the coronavirus and its implications for steel demand in each of our operating markets,” the company says.

The halting of a number of ArcelorMittal production units has already been implemented in Italy this week, including the temporary idling of a blast furnace, but the situation is in constant evolution.

In France the company is confirming output reductions due to the fall in demand, with the exception of that linked with the packaging industry. In the south of the country the company will halt a blast furnace and a steelmaking unit for a period of seven days. Some rolling mills in Fos-sur-Mer will also be halted, starting from this week.

In Dunkirk, in the north of France, one blast furnace will also be halted from next week, while finishing lines will reduce output there and also in Florange.

In Spain the local unions at the company’s integrated sites in the north of the country have requested that the steelmaker considers output reductions or stoppages to protect workers. In Sagunto some rolling lines are already planning to stop production due to the expected fall in automotive demand.

Since the end of last week, a number of major European steelmakers have decided either to stop or drastically reduce output due to the spread of coronavirus and emergency measures taken by different countries.

The first stoppages were witnessed in northern Italy, but now the trend is becoming more widespread in Europe. Companies in Spain, the second-most impacted country in term of coronavirus spread have now also begun to take preventative action. More of the same is expected in key steel-producing countries such as France and Germany.

While stoppages are intended to protect the health of the workforce at the mills, the market is expected to benefit from reduced output at a time of market uncertainty and lower demand. Going forward nevertheless, some availability issues could arise, putting even more stress on the existing European Commission’s steel safeguard measures.

The biggest challenge can be seen in the rebar market. A number of producers in northern Italy announced production halts and some are part of groups with activities in other countries such as Spain, France and Germany.

The lower availability of rebar will not pose an immediate problem, but difficulties may arise when demand returns. Imported product is not widely available due to the safeguard measures. Almost all the quotas for Turkey, Russia and Ukraine for rebar have been used up. From the beginning of April until the end of June only around 40,000 tonnes of quotas for each of the countries will remain available.

“It is still too soon to say, but if the coronavirus emergency continues for longer than expected there could be the possibility for Turkey and other key importers to put pressure for a change or revision of the safeguard measures in Europe,” a trader tells Kallanish. “Turkish, Russian and Ukrainian mills are expected to be much less impacted by the virus and they could become important suppliers in a period of emergency going forward. Not to mention Asian producers that have undergone the impact of the virus before Europe and the US have done.”

In addition to rebar, other quotas either exhausted or at a critical level include merchant bar, hollow sections and gas pipes. In the flats’ sector, metallic coated coils both in the 4a and 4b classifications from Asia have also mostly been taken up. These sectors could well be impacted by the ongoing growth in the number flats suppliers halting production in Europe.