The coronavirus and its impact on global supply chains
Coronavirus is quite rightfully receiving ample attention from a healthcare perspective. One less discussed aspect is its potential effect on global supply chains.
Supply chains are becoming increasingly complex and intertwined. To improve efficiency and gain greater return to scale, firms along the supply chains specialise in ever-finer parts of the entire process. This leads to two major outcomes.
First, it is not uncommon for supply chains to have six tiers or more. Consider, for example, the apparel industry. For one garment, the process embeds multiple steps, such as fibre production, spinning of the fibre, weaving, dyeing, cutting, sewing, and finishing of the garment. Keeping in mind that other parts of the garment (buttons, zippers) are often produced by other suppliers and that distribution and logistics engage even more players in this complex network of goods delivery to customers. In other industries, such as automotive, electronics and aerospace, the products are far more complex resulting in even longer supply chains.
Second, firms – which now have developed expertise in very specialised parts of the production process – play a role in simultaneously providing components to numerous companies that ultimately interact with end consumers. That is, if in the past one could have envisioned a supply chain being a pyramid where the base of the pyramid corresponds to all raw material suppliers and the top of the pyramid is the consumer, now supply chains are so intertwined that one can only imagine a large lattice, or a fisherman net where, on one side you have many suppliers, on the other side you have the consumers, and in between you have endless chains of interactions between them.
The disruption in China will immediately affect lean supply chains and in particular those based on speed.
Professor Benny Mantin
Given this complexity, firms totally lose visibility and transparency into their own supply chains. Global shocks illustrate this very well. Take the 2011 flood in Thailand. Although it has attracted only limited attention in the global media, it had long lasting supply chain effects. The magnitude of the effects has reduced the global supply of hard drives by about 30% well into 2012 and caused companies like Honda to cut production around the world due to component shortages. It was only then when some companies have realised that many of their components were sourced, one way or another, from Thailand.
China is a far larger player in the global economy. It is hard to think of many goods that do not pass through this major economy. With its increased sophistication and advanced manufacturing, more and more components are produced in China. With entangled and complex supply chains, closure of facilities in China will have far-reaching consequences. Lean supply chains are also quite fragile. The disruption in China will immediately affect lean supply chains and in particular those based on speed – think aeroplanes. Longer, and especially slower (think container ships), supply chains will not feel the impact immediately as shortages down the supply chain will take weeks to emerge.
To demonstrate the issues of supply chain complexity and transparency, sourcing and supplier managers need to figure out what companies operate in and around Wuhan and then ask themselves: is any of these companies a supplier of one of the components in my supply chain? The answer in most cases would be “I don’t know” and only time can provide answers.
In the case of the coronavirus there is another level of impact: movement of employees. Since the effect took place right during the Chinese New Year, many employees who work at other manufacturing hubs such as Guangdong and Shenzhen actually live in Wuhan or any of the other quarantined areas. They cannot go back to work at the moment. As a result, manufacturing is slowing down elsewhere in China, with far-reaching consequences.
The coronavirus could be the black swan of our generation.
Professor Benny Mantin
Impacts of this disruption are being already felt. Some companies are closing or slowing down their operations in China, at least temporarily, like General Motors, Toyota and Volkswagen. Effects are not limited to China though. Firms worldwide start feeling the broader effects. For instance, Hyundai was the first automotive firm outside of China to halt production due to components shortages.
The coronavirus could be the black swan of our generation. The duration of the disruption will determine what comes next. In the race for the looming Brexit, some companies have choked up the pipelines with inventories. Those companies can cruise the disruption relatively easily (so thanks Brexit?). If the virus spread will subside in the coming weeks, then all is likely to go back to normal. However, a longer disruption will result in severe shortages, price hikes, and firms will start rethinking their supply chains. This is a slow, long-term strategic process, but clearly, companies around the globe will more seriously consider their supply chain practices and policies, will seek to enhance the level of transparency. Among other things, they might reconsider concepts such as how they embrace lean manufacturing, dual sourcing, and supply chain resilience.
Professor Benny Mantin is the director of the Luxembourg Centre of Logistics and Supply Chain Management (LCL) at the University of Luxembourg, which is a member of the MIT’s Scale network. His research, which covers different aspects of supply chain management, dynamic pricing and revenue management, as well as transportation economics, has been published in numerous leading journals. Professor Mantin is involved in projects where he is guiding students to improve processes at different firms. He provides consulting services for companies and aviation policies.
Source: Paperjam.lu
Grundsteinlegung im niedersächsischen Rotenburg
thyssenkrupp Materials Services hat gestern im niedersächsischen Rotenburg den Grundstein für den Bau des neuen Logistikcenters gelegt. An dem Standort entsteht ein hochmodernes Logistikcenter, welches Mitte 2021 in den Betrieb gehen soll. Insgesamt investiert der Werkstoff-Händler & -Dienstleister rund 60 Mio. € in das Projekt.
„Dieser innovative Logistikstandort wird Ausdruck der Leistungsfähigkeit von Materials Services sein. Hier werden wir die individuellen Wünsche und Anforderungen unserer Kunden in Norddeutschland noch besser bedienen“, sagt Martin Stillger, Sprecher des Vorstands von Materials Services. „Wir werden hier ein völlig neues Logistikkonzept erproben, unseren Maschinenpark digital vernetzen und mit unserer Künstlichen Intelligenz „alfred“ die Warenströme verbessern.“ Rund 70 Mitarbeiter werden ab Mitte nächsten Jahres in Rotenburg beschäftigt sein.
Branchenweit neuartiges Logistikkonzept
Mit dem neuen Standort führt thyssenkrupp Schulte, ein Tochterunternehmen von Materials Services, ein branchenweit neues Logistikkonzept im Unternehmen ein: Künftig wird die Ware zum Lkw geführt, der über Ladebuchten be- und entladen werden kann. Bisher haben die Lkw verschiedene Stationen in den Hallen angesteuert. „Mit dem Konzept ‚Ware-zum-Lkw‘ begehen wir in unserer Branche einen völlig neuen Weg“, so Tobias Hegmanns, Chief Operating Officer von thyssenkrupp Schulte. „Wir versprechen uns eine signifikante Produktivitätssteigerung durch die optimierten Logistikabläufe.“
Das neue Konzept hat vielseitige Vorteile: Der optimierte Materialfluss sowie Einsatz fahrerloser Transportsysteme sorgen für schnellere und effizientere Be- und Entladung und damit auch für eine deutliche Verkürzung der Standzeiten. Das Konzept bietet größtmöglichen Gesundheitsschutz bei den Mitarbeitenden, da es keinen Querverkehr mehr im Lager- und Anarbeitungsbereich gibt.
State-of-the-Art Logistikcenter
In dem hochmodernen Logistikcenter werden die Werkstoffexperten auf rund 36.000 m2 20.000 Tonnen an Materialien wie Aluminium, Edelstahl und Stahl für ihre Kunden vorrätig halten und so größtmögliche Materialverfügbarkeit und Leistungsfähigkeit gewährleisten. Zudem werden die digitalen Innovationen von Materials Services zu vollem Einsatz kommen: Die Künstliche Intelligenz „alfred“ sorgt für optimale Koordinierung von Lieferströmen für Kunden. Darüber hinaus verspricht toii, die von Materials Services eigenständig entwickelte IoT-Plattform, effiziente und abgestimmte Abläufe der modernen Anarbeitungsanlagen.
Quelle und Fotos: thyssenkrupp Materials Services GmbH
Challenging regional market hits Tata Steel Europe result
Tata Steel Europe saw a difficult regional market adversely affect its results in the third quarter of parent company Tata Steel Limited’s 2020 fiscal year. Despite having increased its liquid steel production, revenues fell sharply and earnings slipped into the negative, according to the group’s quarterly operating report, monitored by Kallanish.
Liquid steel output by the Indian groups’ European segment grew by around 3% quarter-on-quarter to 2.51 million tons. Deliveries [… of finished steel] also grew by around 3% to 2.35m tons on the same basis.
Revenue from operations decreased however to INR 13,821 crore ($1.93 billion) primarily due to a sharp decline in European steel prices. This resulted in a loss at Ebitda level of INR 956 crores, itself primarily due to a £75/ton ($96.7/ton) decline in realisations, according to Tata Steel Limited cfo Koushik Chatterjee.
Tata Steel Europe is committed to making its operations, simpler, leaner and sustainable to ensure its long-term success, the group says. It has launched a transformation programme with “… an aim to become self-sufficient and cash positive,” the parent company adds.
The European operations also launched six new products in Q3FY20. These included a nickel-plated steel for battery makers, an automotive steel with improved corrosion resistance and a construction steel requiring less coating but still offering the same level of performance.
UK gov highlights retained EU steel trade actions
The UK Department of International Trade has issued a list of EU trade remedies that it will either maintain or terminate when Brexit is fully implemented. These include a range of trade actions for iron and steel products, Kallanish notes.
The table below summarises which existing definitive EU anti-dumping (AD) or anti-subsidy (AS) trade remedy measures the UK will maintain or terminate as part of its independent trade policy. The UK will continue to impose the same trade remedy measures as the EU until the end of the transition period on 31 December 2020 when it ceases to apply the Common External Tariff.
There are a total of 54 trade actions listed by country covering a range of iron and steel products, along with ancillary materials such as graphite electrodes and ferroalloys. From these, 25 actions are to be terminated of which 2 are under EU expiry review. The balance of 29 measures will be maintained of which 3 are under EU expiry review.
Source: UK Department of International Trade
Note: * indicates case is under EU Expiry review
Civil Society Dialogue with EU Trade Commissioner Hogan
On 18 February 2020, a Civil Society Dialogue with EU Trade Commissioner Phil Hogan will take place in Brussels. During the meeting, the Commissioner will present the latest developments on EU trade policy, as well as exchange views with civil society organisations on this topic. Kindly note that registration closes on 13 February 2020, at midday.
Arcelor Mittal expects pick up in steel consumption, after very tough 2019
Luxembourg-based Arcelor Mittal expects an expansion in global apparent steel consumption in 2020 of 1.0%-2.0% compared with 1.1% in 2019, after a “very tough year.”
“Although market conditions remain challenging, there are encouraging early signs of improvement particularly in our core markets of US, Europe and Brazil. With inventory levels having reached a very low level following a period of de-stocking, we are seeing customers return to the market, supporting an improved pricing environment.” Chairman and CEO Lakshmi Mittal, said.
In Europe, the company’s main core business, segment crude steel production decreased by 13.4% on the quarter to 9.0 million mt in the fourth quarter of 2019.
The 4.2 million mt of annualized flat steel production curtailments announced in May 2019 to bring supply in line with addressable demand were completed as scheduled in Q4.
In a call with journalists the president and CFO of ArcelorMittal and CEO of ArcelorMittal Europe, Aditya Mittal, said “all the operations are running.” He added that at ArcelorMittal Italia, the former Ilva, specifically all three blast furnaces are running and that although there are still issues at Pier Four that was shut down due to a fatal accident, creating problems with discharging raw materials, they are making progress and aim to be fully up and running by the end of Q1.
In its results statement, ArcelorMittal said it believed the coronavirus outbreak would likely have a small impact. “Absent a degradation of the situation and/or a further extension of the holiday period, we believe the effect of the coronavirus will likely have a short-term negative demand impact in China and to a lesser degree elsewhere. Our current view is that the vast majority of the impact on Q1 2020 demand is expected to be recovered throughout the remainder of the year. Our perspective on the fundamentals of the Chinese steel market remain unchanged”.
In China, ArcelorMittal said it expected overall demand in 2020 to grow within a range of zero to 1.0%, compared with estimated growth of 3.2% in 2019. The company has two mills in China that it continues to operate. In the call, Mittal said that “in January the two mills were running at a budget and tin February are working at a lower rate mainly due to the extension of the New Year festivities and the difficulties in moving the materials out”.
Overall, the steelmaker produced 89.8 million mt of crude steel in 2019, down 2.9% year on year.
Total steel shipments in Q4 were 2.3% lower on the quarter at 19.7 million mt primarily due to 4.2% lower steel shipments in Europe, the company’s core business, NAFTA (2.1%) and Brazil (3.3%), offset in part by a rise in of 9.8%, across Ukraine and Kazakhstan.
Overall the company swung to a net loss of $1.88 billion for the three months ended December 31, 2019 against a net profit of $1.19 billion from the same period a year earlier, the steelmaker said, citing lower shipment volumes and selling prices. “2019 was a very tough year, clearly reflected in our significantly reduced profitability,” Lakshmi Mittal said.
“Having now completed the acquisition of Essar Steel India in partnership with Nippon Steel, we have also secured a new opportunity for the group in the fast-growing Indian market. The asset is performing well and offers considerable brownfield potential aligned with the country’s ambition to triple crude steel production over the next 10 years,” he added.
The joint venture has a crude steel production capacity of 9.6 million mt/year centered in Hazira, Gujarat.
— Clement Choo
Spain’s Celsa to upgrade sections mill in 2020-2021 summer shutdowns
Celsa Group, the largest Spanish long steel group, is to revamp its medium sections mill in Castellbisbal, near Barcelona in Northeastern Spain, equipment provider SMS Group said on Thursday.
The revamp, which will take place over the summer maintenance periods in 2020 and 2021, involves the upgrade of the compact roller straightener (CRS) this summer, to allow it to straighten heavier products, and the installation of a new cooling bed in the summer shutdown of 2021.
“The planned revamp will enable Celsa Barcelona to add HEA and HEB 600 [grades] to its portfolio and further enhance its production efficiency,” SMS group said.
The Castellbisbal medium sections mill has an annual capacity of 1 million mt, and produces a range of I and H beams as well as U sections in the S235JR, S355JO and S355J2 grades.
Platts European medium sections price (category 1, S235 JR) was assessed at Eur540/mt delivered Wednesday, unchanged week on week, as European mills looked to hold domestic steel sections prices stable, despite sharp falls in the bellwether Turkish import ferrous scrap market.
In June 2019, Celsa Group started construction of a new Eur60 million rolling mill at its French plant, in the Bayonne region in Southwestern France.
— Viral Shah
Polish financial investor in talks to acquire steel mills in Romania: source
Warsaw-based financial firm Sunningwell International Polska is in discussions to acquire several billet, rebar and wire mills in Romania, a source at one of the targeted assets told S&P Global Platts Thursday.
The mills eyed by Sunningwell are galvanized wire producer Ductil Steel Buzau and billet casting and rebar rolling plant COS Targoviste, the source said.
Sunningwell wasn’t immediately available for comment on the matter.
Targoviste is capable of casting 45,000 mt/month of billet. This includes around 20,000 mt/month of spare capacity: the plant’s own rerolling rebar mill can process about half of in-house billet. The spare tonnage is supposed to be shipped to Ductil Buzau to feed its wire operations. Both plants are expected to resume production in March, provided Sunningwell seals a takeover agreement.
Sunningwell has already committed to and made a partial payment towards the purchase of Laminorul Braila, the Romanian producer of bulb flats used predominantly in shipbuilding, according to a mill source. The mill has made 5,000 mt of the product since its restart under Sunningwell management in late 2019.
In October, Sunningwell was granted a 12-month lease for Polish plate producer Huta Czestochowa and restarted operations at the mill the following month. The investor also had plans to attempt to acquire Huta in ownership nearer its lease’s expiration date.
— Ekaterina Bouckley
SMS upgrades Celsa medium sections mill
Germany’s SMS Group is to upgrade Spanish long steel supplier Celsa’s medium sections mill at its Castellbisbal plant, Kallanish learns from the plant maker.
Celsa has agreed a contract with SMS to replace its existing cooling bed with a new, higher-capacity one. The engineering company will also upgrade the compact roller straightener (CRS), making it capable of straightening heavier products, as well as modify the existing electrical and automation systems.
“The new cooling bed will come with an aerosol cooling system that will boost the cooling efficiency and, consequently, the mill’s productivity,” says SMS. The new equipment includes a turning device designed to turn I and H beams through 90 degrees into or out of the upright position, the German company adds.
The installation of the straightening equipment is expected to be completed this summer, while the commissioning of the new cooling bed is expected in mid-2021.
The project will enable the company to add the new product sizes HEA and HEB 600 beams to its portfolio and further enhance its production efficiency.
Celsa’s steel production facilities in Castellbisbal comprise an electric arc furnace meltshop, bar rolling and wire rod mills, as well as medium sections mill. The annual production capacity of the plant is 2.4 million tonnes.
Jingye visits France to accelerate British Steel acquisition
Executives from China’s Jingye visited British Steel’s French Hayange plant this week to try accelerate the possible acquisition of the troubled UK steelmaker’s assets.
French authorities have in recent weeks often stressed that they would veto the sale of British Steel to Jingye if the French unit was put under threat from the acquisition (see Kallanish passim). During the visit this week the executives announced a series of investments for the French rail mill if the sale is concluded.
According to the announcement, Jingye would increase the plant’s production to 500,000 tonnes/year, investing in a new finishing line and new stock areas.
The executives also confirmed they are expecting a final decision by the end of the first quarter.