Category: Latest Updates

A slowdown in the real estate sector may pressure China’s steel demand next year, according to analyst forecasts.

Steel demand from the construction, automobile and shipbuilding sectors will decline in 2020, state-controlled Chinese think-tank the Metallurgical Planning and Research Institute said. It expects demand from the machinery industry to stay mostly unchanged but said consumption in the energy and home appliances sectors will continue to grow.

Construction, including both real estate and infrastructure, accounts for over 60pc of China’s total steel demand. Real estate investment and new project starts have increased by around 10pc this year, fuelling 7pc growth in steel output to 904.18mn t in January-November.

“Demand will be supported by higher infrastructure investment by government, as well as a single-digit recovery in auto sales, despite the slowdown in housing construction,” said ratings agency Fitch.

Any slowdown in the real estate sector is unlikely to be drastic, as demand for property remains robust and the government looks to support economic growth.

“Our 2020 outlook for China’s property sector is stable. But credit risks are mounting as sales growth slows and funding conditions remain tight,” said fellow ratings agency Moody’s. “Weaker demand in lower-tier cities and a high base of comparison (with) last year will weigh on sales growth. Central government will maintain current tight measures over the sector with an objective to maintain stable property and land prices.”

Beijing will continue to restrain liquidity in the real estate sector, with banks maintaining higher interest rates on loans to property developers. But it may allow prices of selected property projects to increase mildly if the economy slows sharply next year, said Singapore-based DBS Bank.

Fitch is forecasting that housing prices in tier 1 and 2 cities will be flat in 2020 while prices in tier 3 cities may fall by around 3pc because of oversupply and weaker demand. But prices are likely to find some support from new regulations that encourage rural populations to move to lower-tier cities.

“The government may opt to relax regulatory restrictions on mortgages and home purchases should economic conditions weaken more sharply than we expect in 2020 in an effort to stabilize house prices, particularly in Tier 3 markets,” said Fitch.

By Prasenjit Bhattacharya

US service centre chain and fabricator Worthington Industries saw its fiscal 2020 second-quarter earnings fall despite a hefty pre-tax gain related to the sale of its WAVE joint venture, Kallanish reports.

Worthington earned $52.1 million on sales of $827.6m in the quarter ended 30 November, down from earnings of $34m on sales of $958.2m in fiscal Q2 2019. 

Fiscal Q2 2020’s earnings include a pre-tax gain of $23.1m from the sale of its WAVE joint venture with Armstrong World Industries. 

“We delivered solid results for the quarter despite some market softness and challenging conditions in steel pricing,” says ceo John McConnell. “Pressure cylinders volumes were up, led by strong demand in the consumer products and oil and gas businesses. Overall, we returned to year-over-year earnings growth for the quarter and I’m pleased with the way our teams continue to perform in markets that are being impacted by trade wars and economic uncertainty.”

Shipments by Brazilian independent flat steel distributors and service centers in November increased 11.8% year on year to 293,200 mt, the most recent data from Inda, the national flat products distributors association, showed Tuesday.

However, shipments fell 7.7% compared with October, the data showed.

October’s domestic purchases rose 3.6% year on year to 280,000 mt, according to Inda, which added that the total was down 6.3% compared with October.

Flat product inventories amounted to 762,100 at the end of November, up 9% from the end of October, while the inventory-turnover average closed the most recent month at 2.6 months of supply, the data showed.

Inda expects shipments to decrease by 30% and and domestic purchases to increase 7% in December, it said.

According to Inda’s president Carlos Loureiro, it is expected a price increase on flat steel portfolio of 10% in early 2020.

“This one has conditions to be absorbed,” said Loureiro, opposing the attempt to 2019 when prices fell throughout the year despite several price rise attempts.

Loureiro also expects an increase of 5%-7% on automakers annual contracts, yet under ongoing negotiations.

— Jose Guerra

Through its subsidiary, Intsel Steel East, US distributor Triple-S Steel Holdings has acquired the assets of Bushwick Metal, a Connecticut-based wholesale distributor of structural steel products, Triple-S said late Monday.

The acquisition was completed effective December 2, Houston, Texas-based Triple-S said. Financial terms of the transaction were not disclosed.

Bushwick Metals, which has locations in Connecticut, New Jersey and Delaware, employs roughly 110 people and will operate as a part of the Intsel Steel East division, according to the company.

— Justine Coyne

The Port of Antwerp in Belgium is aiming to further reduce CO2 emissions through possible carbon capture, utilization and storage (CCUS) infrastructure, Europe’s second-largest seaport said Tuesday.

Eight leading companies in the port area — Air Liquide, BASF, Borealis, Ineos, ExxonMobil, Fluxys, Port of Antwerp and Total — have signed a collaboration agreement to move toward the possible development of CCUS.

Carbon capture and storage (CCS) and the use of CO2 as a raw material for various industrial applications (carbon capture and utilization, or CCU) are seen as important avenues in the transition to a lower emissions port.

The consortium will carry out a joint study into the economic and technical feasibility of such facilities, with the analysis expected to take around a year to complete.

While Port of Antwerp did not give costs for the project, it said “financial support from Flanders, the Belgian federal government and the EU is essential for further successful implementation of the project. One important part of this is preparation of subsidy applications.”

If the proposals turn out to be technically and economically feasible, development of such facilities could lead to reductions in CO2 emissions in the run-up to 2030.

The feasibility study will also investigate possibilities for CO2 storage. Belgium does not have suitable geological formations for storing CO2 underground, and so international collaboration would be needed.

— Annalisa Villa

ArcelorMittal has completed its acquisition of Essar Steel (ESIL). It has simultaneously established a joint venture with Nippon Steel – called ArcelorMittal Nippon Steel India Limited (AM/NS India) – to own and operate ESIL.

ArcelorMittal president and chief financial officer Aditya Mittal has been appointed AM/NS India chairman, with Essar Steel managing director Dilip Oommen appointed chief executive.

“India has long been identified as an attractive market for our company and we have been looking at suitable opportunities to build a meaningful production presence in the country for over a decade,” ArcelorMittal chairman and ceo Lakshmi Mittal says in a note seen by Kallanish. “Both India and Essar’s appeal are enduring. Essar has sizeable, profitable, well-located operations and the long-term growth potential for the Indian economy and therefore Indian steel demand are well known.”

“The transaction also demonstrates how India benefits from the Insolvency and Bankruptcy Code, a genuinely progressive reform whose positive impact will be felt widely across the Indian economy,” he adds.

Nippon Steel president Eiji Hashimoto says: “Nippon Steel and ArcelorMittal will bring out AM/NS India’s potential by providing it with their respective business experience and world-leading advanced technologies… We will strive to establish a prominent presence in India, conforming with its policy to increase domestically-produced steel products.”

Essar currently produces 7.5m t/y of crude steel in western India and also has 14m t/y of iron ore pelletising capacity in eastern India.

AM/NS India plans to increase finished steel sales to 8.5m t/y over the medium term by completing ongoing capital expenditure projects and implementing best practice to deliver efficiency gains, ArcelorMittal observes. Additional assets will thereafter be commissioned. In the longer term the aim is to increase finished steel sales to 12m-15m t/y through the addition of new iron and steelmaking assets.

The European association for steel distributors and service centres (SSC), EUROMETAL, confirms to Kallanish that activity at SSC and distributors deteriorated again in October.

According to the latest data release, during the first ten months of 2019 shipments from EU flat steel service centres dropped -3.6% year-on-year. The fall accelerated by 0.2% compared with that registered during the January-September period.

Shipments from multi-products distributors, meanwhile, were down -4.8% y-o-y during the first ten months of the year, compared with a deceleration of -4.1% y-o-y registered during the first nine months.

Stocks at steel service centres were calculated to be of 70 days-worth of sales at the end of October. This was 2 days less than in September 2019 but still high compared with the 65 days registered in October 2018. Multiproduct distributors also reduced their stocks compared with September 2019 and continued to have significantly lower stocks than in the same month of last year.

Global apparent steel consumption will grow only 1% on-year in 2020. However, capacity utilisation and margins will improve in the second half of the year as long as old, polluting plants close in China and more balanced supply is achieved in Europe. So says Fitch Ratings, adding it forecasts a negative outlook for the steel sector.

Fitch has identified four factors to watch. One is trade tensions and protectionism across the globe and their impact on economic growth, particularly industrial production, light vehicle sales and construction. Also important are the evolution of economic and environmental policies in China, as well as its net steel export position; and the European climate change agenda. Finally, significant is the investment discipline of US companies to maintain adequate capacity utilisation.

“Over the past two years companies have talked at length of their investment plans to increase capacity and/or debottleneck existing assets,” Oliver Schuh, Lead Analyst Metals & Mining at Fitch Ratings, says in a report sent to Kallanish. “With weaker economic conditions in 2019, the supply push from those investments has negatively affected capacity utilisation and margins, particularly in Europe.”

“While we expect a moderate recovery in 2020, risks are more skewed towards the downside, linked to geopolitical tensions and political uncertainty in some countries as well as progressive reforms in China coinciding with a managed slowdown of growth ambitions,” he adds.

Fitch expects Chinese steel exports to rise to 70 million-80m tonnes in 2020 from 60m-70m in 2019. This is as domestic steel demand in 2020 weakens and operational capacity reduces as steelmakers consider their options to manage their assets in line with new environmental standards. However, this export growth will be limited by the rise in international protectionism.

Tata Steel says its transformation programme in Europe plans to improve the company’s run-rate Ebitda to £750 million ($899m) by March 2021 – equal to about 10% Ebitda margin.

About three-quarters of the performance uplift will come from productivity improvements, reduced bureaucracy and increased sales of higher-value steels, the steelmaker informed the European Works Council. Employment cost savings will make up the remainder.

Tata Steel in Europe chief executive Henrik Adam says: Steel has a bright future in Europe – enabling everything from low-carbon transportation and energy production to energy-efficient homes and fully-recyclable food packaging – and we want to be part of that future as an industry leader… Our future relies upon our ability to fund investments needed to raise the bar in innovation and carbon-efficient steelmaking.”

Last month Tata said it plans to cut 3,000 jobs, of which 1,600 will be in the Netherlands and 1,000 in the UK (see Kallanish passim). The company started on 27 November the employee consultation process with the European Works Council.

ArcelorMittal Europe has announced a CO2 roadmap to reduce emissions -30% by 2030. This is in line with the steelmaker’s plan announced in May to be carbon neutral in Europe by 2050.

The roadmap, for ArcelorMittal Europe – Flat Products, is based on three distinct pathways that have the potential to deliver a significant reduction in carbon emissions.

These include “clean power steelmaking”, i.e. using clean power as the energy source for hydrogen-based steelmaking, and longer term for direct electrolysis steelmaking. “Circular carbon steelmaking,” meanwhile, is using circular carbon energy sources, such as waste biomass, to displace fossil fuels in steelmaking, thereby enabling low-emissions steelmaking. “Fossil fuel carbon capture and storage” is maintaining the current method of steel production but then capturing and storing the carbon, or re-using it rather than emitting into the atmosphere.

Among the initiatives under way to contribute to the goal are the €65 million ($73m) investment to use hydrogen for the direct reduction of iron ore at the Hamburg site. Also being carried out is the construction of a carbon capture and storage pilot project, 3D, which will begin at ArcelorMittal Dunkirk in 2020.

ArcelorMittal Europe – Flat Products chief executive Geert Van Poelvoorde says the roadmap is “…not a one-size-fits-all model, as different parts of our business are at varying starting points. For some sites, certain technologies will work while others will be suited to another route. We’ve spent the last few years testing a range of technologies and now is the time to scale up and put them into action, with the support of the EU and member states, to ensure we are able to fully decarbonise.”

Last week ArcelorMittal voiced its support for the European Commission’s European Green Deal package (see Kallanish passim).