Category: Latest Updates

Germany’s thyssenkrupp Schulte is to have a new chairman of its management board in January, Kallanish notes.

Detlef Schotten is to take the lead at the company, the German subsidiary of thyssenkrupp AG’s steel and materials distribution unit thyssenkrupp Materials Services.

His predecessor Martin Stillger was appointed ceo of tk Materials Services effective 6 December 2019 (see Kallanish 9 December).

58-year-old Schotten has more than 25 years of experience in various management and executive functions at thyssenkrupp. Following a number of positions in sales and management, Schotten was appointed chief executive of the European steel service group in 2009. In 2012 he became chief operating officer for the German business of the materials distributor, which also includes thyssenkrupp Schulte. The company operates over 40 sites in Germany.

ArcelorMittal representatives met Wednesday with Italian government officials to discuss the future of AM Italia, the largest domestic flat steel producer, after Italian Prime Minister Giuseppe Conte last week rejected AM’s new plan that outlined cuts in production and workers.

According to sources, the Italian government sees the former Ilva producing 8 million metric tons of crude steel a year by 2023 with no jobs cuts, while, as already reported, steel giant ArcelorMittal has outlined a plan under which AM Italia should produce around 4.5 million mt of crude steel next year and then arrive at 6 million mt by 2023, minus 6,000 workers.

According to sources, the government is also ready to enter in AM Italia with an 18% stake in the troubled steel plant through state lender Cassa Depositi e Prestiti or Invitalia, a state-owned investment agency, in a bid to persuade AM to not walk away from the 2018 deal under which it bought the plant. This was not the first time the Italian government intervened in the case of a private company it considered strategic for the economy. The Italian government has through CDP a 25.76% stake in of the share of Italian oil company Eni.

“If the government will enter in AM Italia, we will be favorable,” unions told Platts. AM Italia workers went on strike Tuesday, reacting to the news that AM, in order to keep operating in Italy, would cut thousands of workers.

AM Italia said November 4 that it would withdraw from the Ilva agreement after the Italian Parliament removed legal protection for the company, leaving its managers liable for prosecution over environmental issues. The decision came as a result of the court in Taranto obliging the Ilva extraordinary commissioners to meet certain conditions at the works by Friday, failing which blast furnace No. 2 at the plant would be shut down.

The special commissioners appealed the decision and filed an urgent appeal in court in Milan in response to AM’s decision. The hearing was postponed until December 20, giving AM and the Italian government a chance to find common ground.

The Tribunal of Taranto ruled Tuesday night that BF2 has to stop production by Friday, in a document seen by Platts.

When contacted by Platts, AM said it does not comment on such discussions. The Italian government did not answer a request for comment, nor did CDP.

Sources said an agreement is unlikely to be reached before the Tribunal of Milan’s verdict is released December 20.

AM and government officials will meet again Thursday, this time with union officials present.

— Annalisa Villa

Greybull Capital, the private investment firm that formerly owned British Steel, is in talks to buy Hayange, the company’s French rail producer, a source close the situation said Wednesday.

The British Steel factory in France is for sale separately from the rest of the company, despite a GBP1.2 billion rescue plan presented by the Chinese Jingye Group to buy all of the failed manufacturer, as reported by the Financial Times. Advertisements in the FT and French newspaper Les Echos last week offering for sale an unnamed business located in France’s northeastern region that specializes in producing “steel railway products for railways, subways and tramways” and employs about 450 people. The source confirmed to Platts the rail mill is indeed Hayange.

“The French government met the Chinese Group to seek assurance from Jingye that it will keep running and will give the right special material to Hayange,” the source said. “But it was not convinced of the industrial plan, so it decided to check in the market the possibilities to sale it separately. The deadline to present the bids is December 20.”

Another source told Platts the French government is putting Hayange up for sale, but as a contingency plan in case the deal with Jingye does not go through. Everything will be “hopefully clearer by the beginning of the year,” he added.

Contacted by Platts, a Jingye spokesman said: “Jingye Group has submitted a request to the French authorities for approval of our investment and has been engaged in constructive discussions with the French government.”

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

Ascoval recently won an order to supply 140,000 mt of blooms to Hayange for the manufacture of rails for SNCF. The order will become effective from September 2020 and last for four years. Ascoval was taken over by Olympus in the spring. It controls Greybull and was the former owner of British Steel before it entered into compulsory liquidation on May 22.

Greybull and Ascoval both declined comment Wednesday. The French government agency in charge of this deal did not return request for comment.

— Annalisa Villa

Steelmaker ArcelorMittal said Wednesday it has temporarily stopped both crude and finished steel production at its Hunedoara mini-mill in Romania in response to market conditions and high domestic energy prices.

Part of the company’s ArcelorMittal Europe – Long Products division, Hunedoara makes products including sections, billets and merchant bars, and currently employs 640 people and 200 contractors. The mini-mill produced 300,000 mt of crude steel in 2018 and is understood to have a rolling capacity of at least 400,000 mt/year. Output was suspended on December 1, ArcelorMittal said.

Electricity and gas prices have risen significantly for industrial users in Romania in recent years, with Romanian prices significantly higher than those in other European countries with major steelmaking operations, such as France and Germany, the steelmaker said in a statement.

“With European steelmakers also struggling to compete due to high levels of imported steel and weak domestic demand, the Hunedoara plant – which operates using an Electric Arc Furnace, with energy therefore representing a major cost – is no longer able to compete,” ArcelorMittal said. “The company hopes that a solution can be found to address the issue of high electricity and gas prices, and to allow the Hunedoara plant to have a sustainable future.”

ArcelorMittal acquired the Hunedoara plant in 2003, and has since invested RON550 million ($128 million) to make technical and environmental improvements to the plant.

Employees will be asked to consume their remaining annual leave, with the company granting workers “economic unemployment” for the remaining days, it said.

Sources close to the company indicated that the stoppage is expected to last until the end of the year.

ArcelorMittal announced in May that it was temporarily reducing its European flat steel production by 4.2 million mt on an annualized basis, equivalent to 10% of its European flat products capacity, with cuts to be effected in the second half of 2019. The cuts were designed to bring supply into line with demand: the company said last month that it expected overall European steel demand to be 3% lower this year than in 2018 due to weakness in the automotive and construction sectors.

— Diana Kinch and Viral Shah

The UK construction sector, for so long the bulwark for steel demand in the UK, continues to struggle, according to the latest survey by IHS Markit/Chartered Institute of Purchasing and Supply, monitored by Kallanish.

Output fell in all three broad categories of construction, the survey for November reveals. There was a sharp drop in new work and staffing levels fell for the eighth month in a row.

The headline seasonally adjusted IHS Markit/CIPS UK Construction Total Activity Index rose to 45.3 in November, from 44.2 in October, to signal the slowest drop in overall construction output for four months. Despite this, the sector is now passing through its most negative phase since the 2008-09 financial crisis.

All three broad areas of construction work recorded a fall in output during November, with civil engineering the worst-performing category, followed by steel-intensive commercial building.

The lack of UK political direction is a major cause of the current malaise. “UK construction output fell again in November as Brexit uncertainty and the forthcoming General Election continued to send a chill breeze across the sector,” says Tim Moore, economics associate director at IHS Markit.

“Greater spending on transportation and energy projects had been expected to help boost infrastructure work this year and next, but survey respondents indicated a sustained soft patch for overall civil engineering activity in November. Some construction companies reaffirmed their concern about the delivery of road and rail projects, with delays to contract awards acting as an additional headwind to growth projections for 2020,” Moore adds.

ArcelorMittal has confirmed that it has informed trade unions of the possibility of restarting its blast furnace number 2 on 9 January at the Gijon plant in northern Spain.

The furnace has been idled since beginning of November for maintenance reasons and to reduce output during the low demand cycle of the steel market. The other furnace at the site is operational.

The decision to communicate the possible restart of the furnace came as a request to the unions to cancel labour demonstrations announced earlier. Currently the company and the trade unions are negotiating a new collective bargaining deal for its Spanish units.

Following the company’s initial announcements in May this year, ArcelorMittal has reduced output at its Spanish units by over 800,000 tonnes/year due to a weakening steel market (see Kallanish passim).

By the end of September, inventories at Germany’s stockholding distributors were 12% lower than they were one year earlier, Kallanish learns from the national distributors’ federation BDS.

The volume on 30 September was 2.23 million tonnes, virtually equal to that of 31 December 2018, when inventories are typically kept low for year-end. In the first nine months of 2019, distributors sold 8.36 million tonnes of products, -3.7% less than in the corresponding period in 2018. 

September itself with 940,000 tonnes was actually slightly better than September 2018, but BDS’ head of research, Jörg Feger, is refraining from drawing any conclusions based on trend. In the course of the year, sales dropped mainly for flat products and bars, merchant bar as well as special bar qualities, while sales for rebar maintained a positive curve. Prices in August and September continued to fall for most products, Feger notes.

In recent months, buyers have also continued to tell Kallanish that they remain reserved, so that a further year-on-year fall in volumes is likely during the remaining months of the year.

Moody’s foresees a negative outlook for the European steel sector in 2020, the company says in a presentation sent to Kallanish. The rating agency notes that the outlook could change only if fundamentals for the continent’s economy perform better than expected and margins for steelmakers improve further.

Moody’s expects the slower economic growth and persistent weak demand from key steel-using markets to continue to weigh on the sector. The firm notes that particularly slow automotive demand will weigh on steelmakers’ capacity utilisation.

In addition to soft underlying demand indicators, trade tensions and Brexit uncertainty continue to be major risks for the sector. Moody’s also added that imports will continue to absorb a “… decent” share of the demand, though volumes have fallen in 2019 compared with 2018.

One of the biggest issues for the market will remain profitability of European steelmakers. “We expect steel spreads in Europe to remain at depressed levels with some potential for stabilisation or slight recovery during 2020. Profitability of steel producers will only gradually improve,” Moody’s says.

The rating agency lowered the outlook for ArcelorMittal to negative in November this year. The outlook is stable for thyssenkrupp it says, even though the steelmaker was downgraded slightly in August 2019.

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Germany’s total steel sales from stockpiles dipped by 0.61% in October as destocking from inventories continued at a slower pace, according to data published by German trade association BDS AG.

Stockpile sales increased for long and other product categories, but declined for flat products. Inventory balances continued to decline, with the exception of the “other products” category.

Sales of long products from inventories in October increased by 3,776 mt on the month to 300,482 mt. Other product sales increased by 2% to 100,376 mt.

In contrast, flat product sales from inventories decreased, falling 11,425 mt to 533,174 mt.

Total inventories fell by 13,799 mt to 2.22 million mt, and were down by 12% on the year.

Long steel stockpiles fell to their lowest since December 2018. Inventories fell 3,306 mt on the month, or 0.4%, to 830,237 mt at the end of October.

Flat steel stockpiles fell 0.8% month on month to 1.327 million mt, the lowest in three years. Stocks were 17% lower on the year.

Destocking is continuing towards the end of the year, though at a slower rate than in September.

BDS members include ArcelorMittal Distribution, Jepsen Stahl GmbH and Kloeckner & Co Deutschland GmbH.

— Charlotte Bucchioni