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The European Commission could soon start an antidumping investigation on hot rolled coil (HRC) from Turkey, said Fabrizio Di Gianni, a lawyer with Van Bael & Bellis during the EUROMETAL SSC Regional Meeting Southern Europe held in Milan on November 21. Mr. Di Gianni said that, based on import volumes, there would appear to be grounds to initiate such an investigation as the annualized volumes of HRC imports to Europe should reach 3.474 million mt in 2019, against 2.944.396 mt in 2018 and even lower volumes in previous years. The volume of imports from Turkey has increased five-fold over the 2015-19 period, he said. “However the statistics also demonstrate an increase in the unit price of HRC between 2015 and 2019,” he added.

Tayfun Iseri from Turkish steelmaker Colakoglu, speaking at the same event, said that everybody is protecting themselves against Turkey because it is only now that Turkey has begun to benefit, i.e., exporting more than importing. He also underlined that the increase in Turkish exports was due to European customers having to rely on Turkish imports since 2018 after the imposition of antidumping duties on HRC coming from China, Russia, Iran, and Brazil.

Mr. İseri also stressed that the US has not won a single antidumping case against Turkey so far, meaning that Turkey is respecting international free trade agreements. The US is the largest complainant in the world based on the probes it has started in the past few years, while China was the largest defendant, said Mr. Iseri, adding that the US should focus on improving its productivity instead of opting for protectionist measures. Asked whether Turkey could start applying retaliatory measures against other countries, he replied that he did not think Turkey will do so as both Turkish consumers and producers are against this.

Iseri went on to say that “steel is not everything”. Steel is an important part of Turkey’s exports with a share of 9.3 percent of total exports, but it comes after automotive, textiles, and chemicals. He said that no one is complaining about Turkey’s auto exports because these are made with European components or by European car manufacturers in Turkey.

An invitation to calm and an appeal to everyone’s sense of responsibility – this sums up the words spoken by Riccardo Benso, president of Assofermet, the Italian association of local steel and scrap distributors, during the EUROMETAL SSC Regional Meeting Southern Europe held on November 21 in Milan. “At the moment it is very premature to imagine a solution” for the Ilva case, said Mr. Benso. “We have to give all players the necessary time to handle this complicated issue. But I would invite everyone to maintain calm and to respect each other”. This recommendation was addressed not only to the parties involved in the Taranto plant crisis, but also to steel distributors and producers.

Between these two sides, “there are without any doubt points of conflict,” said Mr. Benso, referring in particular to the issue of import measures. “No one says that we must leave our doors open, but we must understand that there are worlds within the supply chain that live on these import flows”, he added Mr. Benso. Hence, the need to “understand the other side’s reasons, find points of equilibrium and to work on what we agree on,” he said.

Interviewed by SteelOrbis on the sidelines of the event, the Assofermet president stated that the unpredictability of the Ilva case “is already supporting an increase in prices in the market, although this is also due in part to international factors”. He said he expects that in the short term there will be a slight shock relating to received orders and presumably delays in deliveries, though “the market has already moved and will move to find a solution” in the short term. In the medium-to-long term, everything will instead depend on the decisions that will be reached on the Ilva situation.

“If the outcome is Ilva producing 3.0-4.5 million metric tons, then the impact will be quite insignificant compared to what has happened in the past 12 months… If, on the other hand, Ilva’s output is reduced further, then we will see important distortions that will have to be addressed, especially considering that in a market like Italy there is strong demand for coils for structural reasons,” he stated. Consequently, according to the Assofermet president, the closing of markets, the quotas and the safeguards will make even less sense, especially for a product like hot rolled coils.

Riccardo Benso then criticized the European Steel Association (EUROFER) for its recent comments on the need for further safeguard revisions, judging them “inappropriate” at a time when the crisis of the largest integral-cycle plant on the continent could very well result in “a strong reduction in production and therefore a shortage situation”. Benso went on to say that he is aware of the fact that producers’ and distributors’ positions are diametrically opposed, but he wanted to underline that this is not the time to do battle: “Let’s wait. Let’s try to understand the situation. There are important players who must have the right to organize themselves, to find supplies that could be delayed or not be available at all”.

In the scenario of a European steel market without Ilva or with Ilva producing much less than usual, “We will all have to make an organizational effort and to find solutions, talk to the European Commission to make it clear that it is necessary that certain restraints have to be removed so that European buyers have their freedom back”.

Thyssenkrupp Steel Europe will shape its future without a partnership, executives maintained at parent thyssenkrupp AG’s annual press conference monitored by Kallanish.

The company “…is all set for regaining its competitiveness by itself, and there is nothing more to say about it,” Klaus Keysberg said in reply to questions about the failed merger with Tata Steel Europe. Klaus Keysberg, ceo of distribution unit tk Materials Services, was only recently appointed to a newly-created post at AG level dedicated to steel activities.

The annual press conference was also a debut for the AG’s intermediate ceo, Martina Merz, who highlighted the importance of a realignment of several activities under the slogan “New tk”. These changes concern activities like System Engineering and Plant Technology, but not the steel business, for which the group plans further investments.

Still, the group will address performance issues and structural challenges in the steel sector. To this end, the Steel executive board is currently working on a concept for the future. This will be discussed in December with co-determination bodies which represent employees.

In the past fiscal year ending 30 September, thyssenkrupp reported 1% revenue growth to €42 billion ($46 billion), but had to concede a net loss of €304 million compared to a €62m loss a year earlier. The group plans to axe 6,000 jobs worldwide, 4,000 thereof in Germany.

Personnel director Oliver Burkhard, the longest-standing member of the board, expressed self-criticism about mistakes that were made in the past because of an authoritarian management style. “We have asked our employees to submit proposals and demands, and it was impressive how toughly-worded many of the demands were,” he said.

The group’s realignment will also mean halving the number of staff at the headquarters from 800, as part of the intention to give more independence to the business divisions.

Germany-based steelmaker Thyssenkrupp will present a new steel business development strategy to its supervisory board in December in view of current losses and has already put its heavy steel plate business under review, CEO Martina Merz told reporters Thursday.

The move is part of a broader “transformation roadmap” now proceeding at the entire Thyssenkrupp Group due to a demand downturn in the European steel market and fundamental changes in the automotive sector, although the group does not foresee a long-term crisis emerging in the global economy, Merz said. The restructuring is expected to take two to three years, she said.

Internal preparations for an IPO for the company’s more lucrative elevators division are due to be completed by the end of the year, and a final decision on the form of the IPO should come in Q1 2020, Merz said.

The company is pursuing mergers and acquisitions for divisions or for the entity as a whole, she said. There is more than one potential partner currently in talks, including in the steel area, she said.

The macroeconomic factors, plus the European Commission’s prohibition of its planned steel division merger with Tata Steel Europe in May, have contributed to financial results at Thyssenkrupp Group which are “nothing to be happy about”, Chief Financial Officer Johannes Dietsch said.

The company made a net loss of Eur260 million ($288.22 million) for the 2018-19 fiscal year (October-September), compared with a loss of Eur12 million in the previous year, and a “significantly higher” net loss foreseen for 2019-20, which is set to be a “challenging” year with a lot of work to do, he said.

The group has decided not to pay dividends this year, and group-wide job losses beyond the 6,000 announced earlier this year “cannot be ruled out,” executive board member responsible for human resources, Oliver Burkhard, said, with 2,100 of the announced cuts already made. Thyssenkrupp was “removing bureaucracy,” starting at the top, he said.

Thyssenkrupp “will therefore not achieve the medium-term targets set in August 2018 in fiscal 2020/2021 as planned,” the company said.

‘Low bar’

The group is “setting a low bar for FY20” Jefferies International analyst Alan Spence said, noting the results had “a significantly stronger tone of accelerating restructuring and aggressive portfolio optimisation.”

Merz added that the company is already “well on track to bringing corporate costs to below Eur200 million,” from Eur306 million in the past year.

A major management reshuffle has resulted in a new executive board being put in place on October 1. New CEO Merz, just seven weeks in the role, will however leave the group in coming months, she said.

Thyssenkrupp is in a “very difficult” situation, possibly due to lack of focus, she told analysts.

“There has been a lack of accountability … and we are fixing this,” Merz said, adding that the company had suffered in recent years from having “some big egos” at the top, and stressing that investment decisions can be expected to be “more rational” in future.

Despite the “difficult economic environment,” group order intake and sales nonetheless both rose to Eur42 billion in fiscal 2018/2019, up 1% year on year, the company said. The capital goods businesses made a major contribution, with orders in the elevators division hitting a new high, while the materials businesses were “slowed by the increasingly weaker global economy, the substantial slowdown in the automotive sector and continued high import pressure on steel.”

Adjusted EBIT at Eur802 million was 44% lower than a year previously, but in line with the company’s forecast adjusted in August 2019.

‘Far-reaching’ steel restructuring

Merz said the planned steel restructuring would involve “far-reaching measures,” including higher levels of investment in areas that are guaranteed to give a return.

“The steel cycle is at its lowest ebb,” she said.

She said the company would move its “production portfolio ever more to the higher-value end of the range … and turn the CO2 emissions challenge into an opportunity.”

The group is breaking new ground in emissions control, and it “achieved a world first by injecting hydrogen into a blast furnace,” she said.

Thyssenkrupp Steel Europe’s adjusted EBIT sank to Eur31 million in the year, from Eur687 million in the previous year, with a marked loss on heavy plate, as “drastically” higher iron ore costs combined with a significantly lower volume of sales to the automotive business, impacted by the new WLTP emissions test. The unit was hit by the Rhine’s historic low tide, it said.

The group’s fiscal year Q4 shipments to the automotive industry fell to 10.5 million mt from 11.3 million mt a year previously, said Dietsch.

“The complicated situation with the automotive industry [is set to] prevail for the Q1 fiscal year … with limited visibility for after that,” he said.

In a brighter spot for Thyssenkrupp, it inaugurated a new hot-dipped galvanizing line in Dortmund at the end of October in a Eur250 million investment, Merz said.

For the fourth quarter of the fiscal year, the EBIT results were “weak,” down 57% from a year ago to Eur118 million, and 8% below consensus, Bank of America Merrill Lynch said.

The company “was still negatively impacted by the lower demand for car components in China, Western Europe and the US,” BofA Merrill Lynch research analyst Tom Gibney said. “The weak momentum in the auto industry also weighed on Material Services and Steel Europe.”

American investment fund Kohlberg Kravis Roberts (KKR) has acquired a 100% stake in Spanish steelmaking group Gallardo Balboa, Kallanish notes.

According to media reports, the group has breached its commitments to KKR, including the capital investment that was necessary to protect the interests of shareholders and the company.

Workers’ representatives and KKR held a meeting on 20 November at the headquarters of Gallardo Balboa in Jerez de los Caballeros. During this meeting the fund confirmed its intention to give solvent continuity to the company and preserve the workforce, say local unions.

Meanwhile, the regional Government of Extremadura expressed its concern over a foreign investor taking control of Gallardo Balboa. It does, however, consider it positive that KKR will enable the continuity of the company’s activity.

The company did not issue a comment before deadline.

In August the European Commission approved the acquisition of majority control in Gallardo Balboa by KKR. The EC concluded that the proposed transaction would raise no competition concerns given the minimal horizontal overlaps and vertical links between the activities of the companies (see Kallanish passim).

KKR had already taken control of other assets belonging to the group headed by Alfonso Gallardo in 2014, specifically in the cement and paper production sectors.

Gallardo Balboa produces steel through the EAF route at a number of sites in Spain. It specialises mainly in the supply of long products and tube.

Italian steel service centre (SSC) sources debated the impact on the Italian market of the possible idling of Ilva’s production at this week’s EUROMETAL meeting in Milan attended by Kallanish.

The situation with Ilva is fluid following ArcelorMittal’s announcement of its intention to relinquish control of the company and start the procedure to stop production units. Italian service centres are thus getting prepared for a number of different scenarios.

A senior executive noted that he believes the Italian supply chain started preparing for this possibility from August onwards. He added that Italian SSCs have showed in the past that they are quick to react to changes, meaning the lack of supply from Ilva would not represent a major issue.

Other sources nevertheless noted that in the short term some problems may arise. A major coil buyer stressed that imports might be the sole solution for SSCs needing to replace the lack of volumes from Ilva.

“I am sure we will be able to find the material we need, but at what price it is still unclear,” a source at an SSC said. “We will receive more expensive offers and we might need to re-discuss the safeguard system with the EU as a consequence of the lower supply from Ilva.”

In 2018 Ilva produced some 4.5 million tonnes of steel products. Before its decision to leave the company ArcelorMittal said that production levels this year would have reached a similar level, despite previously targeting an output of 6mt.

This week ArcelorMittal reopened negotiations with the Italian government over its presence in the country. The outcome of such negotiations remains very much uncertain but sources at the EUROMETAL event were all negative about the possibility of a U-turn from ArcelorMittal on its decision to leave Ilva.

The possible opening of an anti-dumping investigation against imports into the EU of Turkish hot rolled coil remains on the table of European authorities, sources at this week’s Eurometal meeting in Milan said.

Fabrizio di Gianni from Van Bael & Bellis explained that the investigation could be launched soon, due to the fact data show Turkish HRC imports increased by over five times since 2015. These are expected to surpass 3.5 million tonnes this year, up from the 668,000t in 2015.

Tayfun Iseri from Turkish supplier Colakoglu spoke of the current concerns regarding Turkish exports globally. He said concerns are growing only because Turkish suppliers expanded their export activity into Europe since 2018, after a decade of being net importers from the continent.

Turkish suppliers were helped by the imposition of an AD duty by the EU on a number of other sources including China, Brazil, Russia and Iran during the last year. Now the latest review of safeguard measures has capped imports to 30% of the available quarterly quota, limiting Turkish imports into the EU going forward, Kallanish notes.

Despite the large number of trade barriers imposed against Turkey by many countries during the last years, Turkey has avoided any sort of retaliation with similar trade barriers so far. Iseri explained that while the local government could well push for it, Turkish steelmakers and steel users are still opposing any trade barriers.

German steel distribution group Knauf Interfer has spun off a site in Bremen in a management buy-out. The facility is now owned by its managing director Bill Talayman and is continuing operations under the name Bremer Stahl Service GmbH.

In its statement on the sale, Knauf Interfer says that the group “… intends to focus on offering flat steel and processing services”, and therefore decided to sell the Bremen facility. The line of differentiation falls between coil/strip and heavy plate products. “Knauf Interfer is staying with the light materials, while we do the heavy materials,” Talayman says.

Bremen primarily sells plate with processing services such as flame cutting. Due to its coastal location it serves the shipbuilding industry, but also services other associated industries such as mechanical engineering, plant-builders and yellow goods, he tells Kallanish. The new owner has 37 years of experience working in the sector, he confirms.

Bremer Stahl Service is planning investments in new technologies to have processing services even more suited to the requirements of customers. Some of these are coming from outside the wider Bremen area, Talayman adds.

The European Commission has approved the acquisition by Marcegaglia of plate re-roller Palini & Bertoli from Russian steelmaker Evraz. The transaction is scheduled for closing on 2 December, a source close to Marcegaglia tells Kallanish.

The Commission says it concluded that the proposed acquisition would raise no competition concerns because the companies’ combined share of the market for manufacturing of heavy quarto plate is limited.

Marcegaglia is set to acquire the entire corporate capital of Palini Bertoli through its unit Marcegaglia Plates. Evraz Palini e Bertoli is located in San Giorgio di Nogaro, in the Udine province of northern Italy. Palini e Bertoli sells its products in Europe and North America. Marcegaglia’s plate production division is also located in the dedicated unit of San Giorgio di Nogaro. It has a production capacity of 400,000 tonnes/year.

Palini e Bertoli was idled for three years until mid-2016 due to the weakness of the heavy plate market. In 2018 the unit produced over 300,000t of finished product from a capacity of 500,000 t/y, Kallanish understands.

The association for European steelmakers, Eurofer, has called for a further review of the EU steel safeguards system in an open statement this week. This comes less than two months after the changes applied by the review of the system came into force, Kallanish notes.

The association believes the quota volumes were set far above traditional EU levels originally when the safeguard system was launched in early 2019. “Since then market conditions have considerably deteriorated,” Eurofer adds.

During the latest review of the safeguard system the original 5% increase of quotas planned was reduced to 3%. Eurofer still considers however that the level of the quotas approved in the first place was too high.

The statement by Eurofer comes ahead of the foreign affairs council trade configuration this week. Eurofer is asking the Commission to rediscuss safeguard measures during the meeting and also consider the fact China has officially opposed the continuation of the Global Forum on Steel Excess Capacity.

“Europe is still flooded by steel imports, even as domestic demand stalls. We have seen a contraction of at least -3% this year, even as raw material prices and CO₂ costs have boomed. In particular, these CO₂ costs are not borne by any other producers around the world,” says director general of Eurofer, Axel Eggert. “This year, European steel companies have had to announce production cuts of at least 15 million tonnes; 15,000 jobs have been lost or put at risk. This is in addition to the- 20% decline in the steel workforce since 2008.”