Category: Latest Updates

Italian unions of ArcelorMittal Italia have expressed concern over amendments made to the agreement between ArcelorMittal and Italian authorities on the future of the former Ilva group.

Earlier this week ArcelorMittal agreed with the former Ilva commissioners to amend the existing lease and purchase agreement (see Kallanish 5 March).

A union member tells Kallanish the government’s strategy regarding environmental issues, as well as industrial and workforce perspectives, is not clear. The new industrial plan risks being unsustainable considering it has earmarked less investment than previously into improving vertical integration of tube and re-rolled products output.

Unions have also expressed concern regarding the lack of clarity over the new financial commitment of ArcelorMittal, the role of banks and the public investor, and the mixed BF/EAF production plan. Unions believe the new agreement does not guarantee employment of 12,500 workers.

The amendments are structured around a new industrial plan for Ilva, which involves investment in lower-carbon steelmaking technologies. The core of the new industrial plan is the construction of a direct reduced iron facility to be funded and operated by third-party investors and an EAF to be constructed by AM InvestCo.

In addition, AM InvestCo and Ilva’s commissioners have entered into a separate settlement agreement. AM InvestCo has thereby agreed to revoke its notice to withdraw from the original agreement and Ilva’s commissioners agreed to withdraw their request for an injunction, which was scheduled to be heard in the Civil Court of Milan on 6 March.

In the event the investment agreement is not executed by 30 November 2020, AM InvestCo has a withdrawal right, subject to an agreed payment, ArcelorMittal says.

A new agreement with trade unions has to be signed as a condition to the final closing of the lease and purchase agreement now scheduled by May 2022, the source says.

French authorities are currently considering other offers for the Hayange rail mill of the former British Steel group. This comes as China’s Jingye confirmed the acquisition of British Steel assets located in the UK and Netherlands, but not in France, Kallanish notes.

In a televised interview, French economy minister Bruno Le Maire confirmed that local authorities are considering four existing bids for the mill, of which three are considered very serious. He also noted that the acquisition of the former British Steel group was done without the French unit, indicating therefore that the mill’s inclusion in the sale to Jingye remains unlikely.

“Hayange produces rail for the local national railway system; it is therefore strategic,” Le Maire said. “The company is very solid and I am not worried for the workers at the plant. We are working to secure that a new owner is found under the best possible conditions.”

There have been four offers for French rail producer Hayange, which could lead to the British Steel unit being sold separately from the rest of the company, sources close to the matter told S&P Global Platts Thursday.

The bidders for Hayange are ArcelorMittal, UK-based industrial group Liberty House, special steel producer Ascoval (through its holding company Olympus), and German steel producer Saarstahl, the sources said.

Saarstahl told Platts it was interested in Hayange, while the other three declined to comment.

The French government, which considers Hayange to be a strategic national asset, put it up for sale last year separately, as a contingency plan in case the deal for Chinese Group Jingye to buy British Steel did not go through.

Hayange produces 250,000-300,000 mt of rails per year, mostly for SNFC, France’s state-owned railway operator. The mill currently rolls blooms produced at British Steel UK in Scunthorpe.

A source close to the matter said that while all four companies submitted their offers independently, it could be possible that Liberty will make an offer in a joint venture with Ascoval.

According to market sources, Hayange would seem to have good synergies with all the possible buyers.

ArcelorMittal Europe is one of the leading producers of rail products, covering the main European and export markets, with mills in Dabrowa Gornicza, Poland, Gijon, Spain and Rodange, Luxembourg. ArcelorMittal produces around 550 000 mt of steel rails per year.

Saarstahl has a continuous cast blooming line in Volklingen, which could supply Hayange as it is close to the French mill.

Ascoval is a client of Hayange and recently won an order to supply 140,000 mt of blooms to Hayange for the manufacture of rails for SNCF from this September for four years.

Ascoval was taken over by Olympus in the spring. Liberty is focused on growing and, for the time being, does not have a rail production capability, so if it were to team up with Ascoval it will have good synergies.

Market sources said the offers for Hayange could make it more difficult for Jingye Group to purchase all British Steel units, but the purchase will go ahead with the Chinese mill expected to complete the deal next Monday.

Two days ago, Jingye Group said it had agreed to proceed towards the completion of its purchase of British Steel next Monday.

Subject to the acceptance of employment offers, Jingye will acquire British Steel’s steelworks at Scunthorpe and UK mills at Teesside Beam Mill and Skinningrove, as well as subsidiary businesses FN Steel and TSP Engineering.

Jingye said the transaction does not include the assets of British Steel France, because “the French government has not yet made a judgment on Jingye’s proposed acquisition of British Steel France nor, at this stage, indicated when it may be in a position to do so”.

A spokesman said Thursday Jingye remained interested in purchasing the Hayange plant, hoped to see a positive decision from the French authorities in the near future, but that it “has agreed with the [UK] Official Receiver’s proposal, they will complete the transaction in stages, first completing on the UK and Netherlands”.

Chinese market sources said that, Hayange to one side, British Steel was a good opportunity for Jingye as China has banned capacity expansion and decreed any capacity swaps must lead to capacity reductions.

Jingye will lose about 1 million mt/year pig iron production capacity and 0.4 million mt/year crude steel capacity in 2021, when iron and steel capacity swaps at its Chinese steelworks are done.

Jingye has been looking for overseas investment opportunities. Market sources said it looked at Myanmar and Malaysia before it decided to acquire British Steel. Sources said it remained to be seen how Jingye could keep British Steel’s running costs down.

Jingye Group operates 18 blast furnaces, producing 15 million mt of steel annually and exports to 80 countries around the world. Based Hebei province in China, Jingye had total sales of Yuan 90 billion ($13 billion) and employs 23,500 people. It also has operations in chemicals, hotels, real estate, and trade.

British Steel, which went into compulsory liquidation on May 22, has about 3 million mt/year of production capacity in the UK, France and the Netherlands.

Completion of the purchase will preserve 3,200 jobs in Scunthorpe, Teesside and elsewhere, securing a future for steelmaking in the region. About 100 jobs will transfer to Barrett Steel following the sale of four British Steel distribution centers.

— Annalisa Villa, Jing Zhang & Laura Varriale

Spanish galvanized steel production increased 15% to 650,000 mt in 2019 driven by the energy and construction sectors, Spain’s industry association Asociacion Espanola del Galvanizado (ATEG) said Friday.

For 2020, ATEG president Manuel Lopez Caamano said the sector sees strong growth potential due to increased activity in the renewable sector and the growing globalization of the construction sector. The energy sector provided 40% of 2019 demand for galvanized steel and construction 26%, according to the association.

Spain is Europe’s fourth-largest producer of galvanized steel with 43 plants which make up around 5% of Spanish steel output.

— Gianluca Baratti

ArcelorMittal CLN, the Italian-based service centre and distribution company, has sold back its shares in distributor San Polo Lamiere to the main shareholder. The latter is an independent steel service centre located in the area of Parma, Kallanish notes.

ArcelorMittal CLN previously held 16.67% of the company, having acquired the shares in 1991 from the family operating San Polo. These have been sold back to the original owner, effective from 28 February 2020.

The sale is part of ArcelorMittal CLN’s strategy to focus its attention on the core businesses of the company.

San Polo Lamiere sells around 200,000 tonnes/year of steel products, mainly in the Italian market. The company celebrated its 50th anniversary in 2019.

Turkish wire rod exports declined in January, by -35% on-year to 110,651 tonnes; however, they were up 6.2% from December, according to Turkish Statistical Institute (TUIK) data monitored by Kallanish. Their average price fell to $465/tonne versus $488/t in January 2019. However, they were up from $446/t in December 2019.

January exports of round rod below 14mm diameter comprised 61,938t, down -50% on-year. Israel was the main buyer with 19,908t, up 4.5% on-year. This was followed by Egypt which more than doubled its intake from 3,462t in January 2019 to 8,498t in January 2020. Libya took in 6,155t versus zero last year, followed by Serbia with 3,474t versus only 283t a year earlier.

Compared to 14,389t last year, Romania took in only 2,812t in January, while Bulgaria and Belgium sourced zero this year versus 10,165t and 6,703t respectively last year. This was the result of European quotas being fulfilled by Turkish mills. Lebanon, with 7,605t a year earlier, sourced only 500t in January.

Exports of deformed reinforcing rod, meanwhile, increased 2.1% on-year in January to 45,614t. However, this was down from 52,786t in December 2019. Israel was again the largest destination with 25,554t versus 11,994t a year earlier. Singapore took in 16,547t and Romania 1,036t versus 1,978t and 7,290t respectively last year. Haiti, which sourced 10,307t last year, sourced zero in January.

• Italian government to take a stake in AM Italia
• Plan includes DRI, EAF development
• AM Italia to produce 8 million mt/year of steel by 2025
• Investments planned for lower-carbon steelmaking
• AM InvestCo can withdraw if investment agreement not executed by Nov 30

AM InvestCo, the main holding company of ArcelorMittal Italia (AM Italia, formerly Ilva), and the Ilva Commissioners on Wednesday signed an amendment to the original lease and purchase agreement for Ilva, ArcelorMittal stated. The Italian government will take a stake in AM Italia, but the percentage will be determined by November 2020, according to the official notice.

According to the ArcelorMittal statement, the amendment agreement “is structured around a new industrial plan for Ilva, which involves investment in lower-carbon steelmaking technologies. The core of the new industrial plan is the construction of a DRI facility to be funded and operated by third party investors and an EAF to be constructed by AM InvestCo.”

According to local sources, AM Italia’s current crude steel production rate is 4.1 million mt/year. In Wednesday’s statement the company did not report the production target, but when asked separately by S&P Global Platts, ArcelorMittal confirmed that in the new agreement AM Italia has targeted 8 million mt/year by 2025 and it will also revamp AM Italia’s idled No. 5 blast furnace using “the best practice available.”

AM InvestCo and the Ilva Commissioners, which include Italian government officials who managed the former Ilva when it was in administration, have entered into a separate settlement agreement whereby AM InvestCo agreed to revoke its notice to withdraw from the original agreement and the Ilva Commissioners agreed to withdraw their request for an injunction, which was scheduled to be heard in the Civil Court of Milan on March 6.

If the investment agreement is not executed by November 30, AM InvestCo has a withdrawal right, subject to an agreed payment, that ArcelorMittal did not quantify in its statement, but that according to a draft of this final agreement seen by Platts, should be around Eur500 million. Final closing of the lease and purchase agreement is now scheduled for May 2022 instead of August 2023.

As previously reported, ArcelorMittal signed a non-binding agreement with the Ilva Commissioners in December to continue negotiations on a new industrial plan for AM Italia involving investments in green technology, together with discussions about a government-controlled entity possibly taking a substantial equity investment in the operation. The agreement was signed after the company, in November, announced plans to withdraw from its Ilva purchase as consequence of a law changed by the Italian government that removed ArcelorMittal’s legal protection for implementation of an environmental clean-up plan.

— Annalisa Villa

European steel association Eurofer has urged the European Union and the United Kingdom to reach a trade agreement as soon as possible to guarantee frictionless trade, Eurofer said Wednesday.

“While each side rightly wants to defend its regulatory autonomy, a deal that ensures EU and UK trade interactions are fair, reciprocal and frictionless is essential,” Axel Eggert, director general of Eurofer said.

Eurofer highlighted that mutual market access, as well as alignment of standards on state aid, competition policy, state-owned enterprises, employment, environment, climate change, relevant tax matters and other regulatory measures and practices, would be vital.

During the current transition period, nothing changes in terms of the UK’s trading relationship with the EU. If the EU and UK agree on an extension, they must do so by July 1 to avoid that the transition ends on December 31, even if there is no agreement reached.

“No deal would be the worst possible outcome – erecting barriers to trade overnight that would be needlessly damaging,” said Eggert.

Eurofer cut its 2020 EU apparent steel consumption outlook to an increase of 1.2% at 159 million mt from a 1.4% forecast in its fourth-quarter 2019 report earlier this year.

The association said the major risk factors are escalating trade wars between the US and several of its main trading partners, mostly China, even after signing of the phase one trade agreement on January 15 eased frictions, and persistent uncertainty regarding the final Brexit deal to be agreed by the end of 2020. These factors are set to weigh on trade conditions in 2020, and may even lead to a further deterioration in business sentiment.

— Laura Varriale

NLMK DanSteel, based in Denmark has delivered the first batch of high-strength, high yield strength steel plate to German machine builders, its parent company NLMK tells Kallanish.

DanSteel is supplying its so-called S500MC high-strength plate to the machine builders and the first batch of 1000 tonnes has now been delivered, the company says. This grade has a yield strength of 500 MPa and is used to manufacture heavy vehicle components including wheel axle parts.

The use of high-strength steel ensures strong performance under high static and dynamic loads at temperatures as low as -50°C and increases the reliability of equipment, NLMK adds.

DanSteel launched industrial production of 13-60mm thickness S500MC plate in 2019 after an accelerated cooling system was installed at the site’s plate mill. Thermomechanical treatment ensures high strength and viscosity properties and better plate weldability, the company says.

Slabs used by NLMK DanSteel for the production of high-strength plates are supplied by NLMK Lipetsk, NLMK Group’s flagship site in Russia.

ArcelorMittal has reached an agreement with the Italian authorities over the future of the former Ilva group, amending the existing lease and purchase agreement. The new resolution stops both the ongoing legal procedures and the possibility of ArcelorMittal to immediately terminate its control over the Italian integrated steelmaker.

“The amendment agreement outlines the terms for a significant investment by Italian state-sponsored entities into AM InvestCo, thereby forming the basis for an important new partnership between ArcelorMittal and the Italian government. The equity investment by the Italian Government in Ilva, to be captured in an agreement to be executed by 30 November 2020, will be at least equal to AM InvestCo’s remaining liabilities against the original purchase price for Ilva,” ArcelorMittal says in a note sent to Kallanish.

In the agreement the parties confirmed the intention to invest in lower-emissions steelmaking, including the construction of a DRI facility and an EAF in Taranto. The DRI plant is expected to be funded and operated by a third-party investor, with the EAF constructed by ArcelorMittal.

The agreement finally leaves ArcelorMittal with the right to withdraw from the agreement by November 2020, subject to the payment of an undisclosed sum of money. The close of the lease and purchase agreement is now scheduled by May 2022.

The local trade unions confirm that the agreement was signed and have expressed their concerns over the agreement on many issues. These include the number of workers to be retained and the industrial plan, which is still not completely clear, the unions say.