Category: Latest Updates

The European steelmakers’ association, Eurofer, has called for Europe and the UK to negotiate a deal regarding Brexit that is “… fair, reciprocal and frictionless.”

In a note sent to Kallanish, Eurofer says that negotiations on the future relationship between Europe and the UK are starting this week. “We welcome the official start of the negotiations, given the importance of protecting the prosperity of citizens and businesses on both sides of the channel,” says Eurofer director general Axel Eggert. “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.”

European steelmakers are convinced that maintaining a level playing field should be the leading principle in this negotiation. Both entities involved should ensure continuity of a series of actions, Eurofer says. These include logistical procedures, mutual market access and alignment of standards on state aid, competition policy, state-owned enterprises, employment, environment, climate change, tax matters and other regulatory measures.

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

ArcelorMittal Nippon Steel (AMNS) India has acquired the 500MW Bhander Power plant from Edelweiss Asset Reconstruction Company. ArcelorMittal India (AMIPL) was also selected as preferred bidder for Thakurani iron ore mine in Odisha.

The Hazira-based power plant will be captive to AMNS India’s steelworks in the same location. It will help the steelmaker increase its self-sufficiency in power supply.

Meanwhile, Thakurani block in the district of Keonjhar, with estimated reserves of 179.26 million tonnes, is expected to make a valuable contribution to AMNS India’s long-term raw material requirements. Once the licence is awarded, AMIPL will proceed to seek requisite clearances, as well as mine development and production agreements, before commencing mining operations.

The acquisitions are “…in line with an intent to secure a robust captive power and commodity supply chain as we continue to make strong strides in our production and operational performance,” AMNS India chief executive Dilip Oommen says in a note seen by Kallanish.

“Efforts to become increasingly self-reliant, in this case through the procurement of a key energy source in Gujarat and an iron ore rich reserve in Odisha, form part of AMNS India’s medium to long term strategy to significantly grow our production capacity in India,” he adds.

ArcelorMittal and Nippon Steel completed the joint takeover of Essar Steel last November, thereafter renaming it AMNS India. The new owners plan to complete by 2022 the doubling of the Paradeep iron ore pelletising plant’s capacity to 12 million tonnes/year.

Chinese steelmaker Jingye Steel has announced that it has agreed to proceed towards the completion of its purchase of British Steel from the UK receiver. It has meanwhile now made job offers to certain employees whilst having signalled to others that they will not be needed in the new company.

In a statement monitored by Kallanish, the steelmaker says that completion of the deal will take place on 9 March. 3200 jobs will be preserved, Jingye says, while 100 jobs will transfer to Barrett Steel following the sale of four British Steel distribution centres. Although neither specified by the company or the Unite and Community trade unions in their statements, local media report that 400 current employees will not be offered positions in the new company.

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.

The completion of the deal will also unlock the pledged investment of £1.2 billion ($1.54 billon) to modernise the Scunthorpe site as well as improving its energy efficiency and environmental performance, Jingye adds.

“Jingye has agreed to the Official Receiver’s proposal, supported by the UK government, to complete the transaction in stages, first completing on the UK and Netherlands assets before completing on the French assets,” the steelmaker continues. The French government has not yet made a judgement on Jingye’s proposed acquisition of British Steel France nor, at this stage, indicated when it may be in a position to do so, the steelmaker adds.

Jingye Group has agreed to proceed towards the completion of its purchase of British Steel from the Official Receiver, the Chinese steelmaker stated Tuesday in an official note. Completion is due to occur March 9, unlocking Jingye’s pledged investment of GBP1.2 billion ($1.53 billion) to modernize British Steel sites.

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.

Following the announcement by Thai-based Sahaviriya Steel Industries company (SSI) that it intended to exercise its pre-emptive rights over the 50% stake in Redcar Bulk Terminal (RBT) owned by British Steel, the transaction does not include the shares owned by British Steel Limited in RBT. Neither does it currently include the assets of British Steel France, at Hayange. According to Jingye’s note, 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.

“We are delighted to have reached this agreement and look forward to completing the initial transaction over the coming days so we can begin a new chapter in British steelmaking. I want to thank everyone who has been involved in making this deal happen, including British Steel employees, the Unions, and the British government. We will not misplace the trust that they have placed in us”, Jingye CEO Li Huiming said.

“We remain interested in purchasing the Hayange plant, which we firmly believe would have a bright future as part of a united group, and hope to see a positive decision from the French authorities in the near future,” he stated.

According to the official note Jingye has agreed to the Official Receiver’s proposal, supported by the UK government, to complete the transaction in stages, first completing on the UK and Netherlands assets before completing on the French assets, nevertheless the company said that it “will continue to work hard to reach a positive conclusion on the future of the Hayange plant in France”.

The agreement follows comprehensive and constructive discussions with the government, unions, suppliers and employees in the UK and the Netherlands, Jingye said.

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. A further approximately 100 jobs will transfer to Barrett Steel following the sale of four British Steel distribution centres.

Michael Gibbs, British Steel’s Official Receiver, said Tuesday he had nothing further to add on the planned transaction.

— Annalisa Villa

Serbia is expecting balanced public finances with only a small budget deficit in 2020, giving the government the opportunity to invest into more steel-consuming infrastructure projects. However, EU safeguard tariffs are hampering Serbian steel exports and therefore its economic growth, according to Mihailo Vesovic of the Chamber of Commerce and Industry of Serbia.

“EU safeguards are the elephant in the room,” Vesovic told delegates at Monday’s Irepas meeting in Belgrade attended by Kallanish. The bloc considers Serbia a third country. However, HBIS Serbia is one of Serbia’s largest exporters and of strategic importance to the nation’s development, he continued.

“Also smaller producers in Serbia are facing big competition [… in exports to Europe]… from Turkey, Ukraine, from India… so they are having a problem to stay and survive in the market, and at the same time to be competitive,” Vesovic observed.

The Chamber and Serbian government are negotiating with the EU to secure a higher quota. “In July last year they [… the EU] said, ok, from this January there is going to be a 5% rise of the quota – we are expecting to push them a little bit higher because steel is one of the main export products coming out of Serbia and it’s one of the drivers of our economy,” Vesovic explained.

The country is also hoping to negotiate the removal of Kosovo’s 100% tax on Serbian products, he added.

The expectation is for Serbia to accede to the EU by 2025, although this could be delayed on account of the bloc’s own internal issues, Vesovic said.

Economic activity in the so-called “West Balkan 6” countries is on the rise, but the region suffers from a shortage in skilled workers. The Chamber is lobbying for a “… small Schengen” to provide free movement within the region.

Foreign direct investment has boosted employment, “… but to make it sustainable we need to have a much clearer goal of free movement of goods, people and investment,” Vesovic said. Improved connectivity of rail and roads, and the reduction of delays at borders could boost regional economic growth by 0.5-0.7%. However, this is a highly political process and will take time, he concluded.

Activity by companies in the French construction sector remained stable month-on-month in February, according to a l’Institut National de la Statistique et des Études Économiques (Insee) report monitored by Kallanish.

Last month companies said they were more optimistic about the prospects for future activity and the general state of the French construction industry. More construction sector managers than in the previous month indicated an increase in their activity over the last three months.

In February fewer companies than in January reported that they increased their staff size in the last three months. Employment prospects are deemed more favourable than in January however, the report says. 

As many companies as in the previous month considered their order-books to be well-filled. Companies also assess their order-books as providing almost eight months of work, higher than the long-term average of 5.7 months.

The production capacity utilisation rate rose last month. At the same time, 45% of companies reported production bottlenecks due to workforce shortages, a little higher than the previous month.

As many companies as in January announced that they will increase their prices over the next three months, the report reveals.

The UK Manufacturing Purchasing Managers’ Index (PMI) rose above the 50-point neutral mark in February according to the latest survey by IHS Markit and the Chartered Institute of Purchasing and Supply (CIPS). Output rose at the fastest pace since April 2019 and vendor lead times lengthened as coronavirus supply-chain disruption rose, the survey results monitored by Kallanish revealed.

The seasonally-adjusted IHS Markit/CIPS PMI rose to 51.7 in February, up from 50.0 in January, but below the earlier flash estimate of 51.9. The PMI posted above the 50.0 neutral mark for the first time in ten months.

Manufacturing output increased at the fastest pace since April 2019, as growth strengthened in both the consumer and intermediate goods sectors. In contrast, the downturn at investment goods producers continued.

“The main factor underlying output growth was improved intakes of new work. Business optimism also strengthened, hitting a nine-month high, reflecting planned new investment, product launches, improved market conditions and a more settled political outlook,” Markit/CIPS says.

The effects of the COVID-19 outbreak had a noticeable impact on supply chains during February. Average vendor lead times lengthened to the greatest extent since July 2018, while the eight-point drop in the level of the seasonally-adjusted ‘Suppliers’ Delivery Times Index’ was the largest in the 28-year survey history.

UK crude steel output rose year-on-year in January, bucking the general European trend, but the sector now faces the combined effects of Brexit uncertainty, poor weather, and coronavirus-induced economic inertia.

Turkish long steel producer Koc Metalurji, which worked with reduced capacities throughout the year due to sluggish market sentiment, has broken the output record at its meltshop late last week by reaching 51 castings into billet within a day, Murat Umur, general manager at the company, told S&P Global Platts Monday.

“We have thus reached an output of 5,108 mt/day this weekend at our meltshop, which could be even a world record,” Umur said.

“As the most active period begins with spring, we are expecting the rise in domestic demand to continue in the coming weeks,” the GM added.

Koc Metalurji, based in Osmaniye, southern Turkey, has the capacity to produce 1.2 million mt/year of liquid steel and 500,000 mt/year of rebar.

Due to a notable decline in Turkish steel consumption and slow export demand, some Turkish longs producers announced successive production cuts last year, while some of them, like Koc Metalurji, temporarily stopped production, as reported.

Turkish producers’ capacity utilization has been improving since the last quarter of 2019, with some recovery signs for demand.

Turkish producers received some orders for prompt shipments in the previous weeks, as some overseas buyers directed some of their unfilled orders to Turkey amid Chinese absence due to COVID-19 outbreak. This has also has given some support to Turkish mills’ output figures and product pricing in recent days.

However, the military situation in Idlib, northern Syria, and the COVID-19 outbreak could be a determinant factor for demand and price direction in the coming days, amid sharp exchange rate fluctuations in Turkey, some industry sources observed.

Some major Turkish long steel producers, which continued efforts to keep their domestic rebar offer prices above $440/mt in this sentiment, meanwhile hiked their lira-denominated domestic rebar list prices again on the first trading day of the week, amid lira depreciation, and started offering 12-32 mm rebar to the domestic market at Lira 3,300/mt ex-works Monday, including VAT, Platts learned.

— Cenk Can

German sections mill Stahlwerk Thüringen kept output steady in 2019 and plans to continue to invest up to €15 million ($17m) in the current year in both maintenance and upgrading equipment.

2019 internal expenditure included a new crane in the scrap yard, a renewal of the high voltage power feed at the electric arc furnace and a new rolling stand, Kallanish learns from the company. Despite a slackening economy, production was nearly on par with 2018, slipping back by only 15,000 tonnes to 791,000t. While 2018 was “… highly satisfactory,” 2019 also proved to be a “… good year” but remained slightly behind expectations, according to the management.

The mill’s order books are well filled, the management says, but notes that customers have become more demanding regarding different sizes of sections, which requires additional conversion time in the rolling mill.  The mill has also lost attractive customers among rig and pant builders for the oil industry in South America due to international trade barriers. On the other hand, it has increased sales to the USA, where last year it was the only candidate – together with a Swiss partner – that was licensed to supply railway sleepers.

Stahlwerk Thüringen is located in Unterwellenborn in the eastern German state of Thuringia. It had previously been owned by Arcelor and Gallardo before taken over by Brazil’s CSN eight years ago.

ArcelorMittal Italia and the Italian government are said to be close to signing a draft of agreement before the upcoming March hearing that will rule on the ownership of Italian former steelmaker Ilva.

So far unconfirmed reports suggest that the draft agreement contains a clause allowing ArcelorMittal to leave Ilva as from 1 November upon payment of a total of €500 million penalty ($552m). If the company however decides to stay it will have to pay €1.2 billion. According to sources close to the matter interviewed by Kallanish, ArcelorMittal is said to have conceded to making temporary layoffs instead of job cuts, although this is once again unsubstantiated.

Meanwhile over the past days a cloud of toxic smoke emitted from equipment at the Taranto site has created more pressures for the company. The mayor of Taranto Rinaldo Melucci has issued an injunction against the company and the former Ilva commissioners giving them 30 days to resolve the issue. If this is not resolved, the parties will have to shut down the equipment within 60 days, a source at the city hall confirms.

ArcelorMittal and the Italian government agreed on 7 February to postpone the tribunal hearing over the ownership of the former Italian steelmaker Ilva.  Just a few hours before the hearing was due to take place, both parties submitted a draft agreement and asked the tribunal to delay the ruling. The hearing has therefore been postponed to 6 March (see Kallanish 9 February).