Category: Latest Updates

Sweden’s SSAB tells Kallanish that it will offer the first fossil-free steel products to the market in 2026, according to company president and ceo Martin Lindqvist.   

“We seek to initiate partnerships with our customers around common goals so that they can be the first in the world to include fossil-free steel in their own products,” the ceo said. The steelmaker presented the plan for transitioning to iron-ore based fossil-free steel production, in conjunction with SSAB’s Swedish Steel Prize seminars last week in Stockholm.

In line with SSAB’s global ambitions, the company anticipates that its US operations, which utilise scrap-based electric arc furnace (EAF) technology, will be powered completely by renewable energy by 2022 in its Iowa operations. It will also be able to offer fossil-free steel products starting in 2026, utilising sponge iron developed through the Hybrit joint-initiative in Sweden.

Hybrit, owned by SSAB and partners LKAB and Vattenfall is now building a pilot plant for sponge iron (DRI) at SSAB’s Swedish site in Luleå. The plant will be up and running summer 2020. The companies have invested around SEK 1.7 billion ($177m) and the Swedish Energy Agency has granted government support totalling SEK 599m.

Mechel’s third-quarter consolidated revenue slipped -5% quarter-on-quarter to RUB 74.9 billion ($1.17 billion), dragging year-to-date revenue down by -4% on-year to $3.58 billion.

The decline was on the back of weaker coal markets and lower steel product sales on account of vital blast furnace repairs (see separate Kallanish article).

The mining segment’s revenue from external customers fell -7% on-quarter in Q3 to $367.2 million on lower sales volumes and general weakness of global coal markets. January-September revenue remained stable at $1.15 billion as prices increased, somewhat offsetting slightly lower sales volumes. This affected profitability, reducing it -3 percentage points q-on-q to 32% in Q3 and -4p.p. y-on-y to 32% in the first nine months.

Steel segment revenue from contracts with external customers also decreased, by -3% on-quarter in Q3 to $712.8m and by -7% on-year in 9M to $2.1 billion. Both output and sales volume fell in Q3 on the back of major blast furnace repairs and lower prices. The steel segment’s profitability lost -2p.p. in Q3 to 7% and -7p.p. on-year in 9M to 8%.

Mechel ceo Oleg Korzhov says major planned repairs of steel facilities will continue to affect operational performance in the medium term. However, restoring coal mining and iron ore concentrate production supported Q3 sales. Lower steel output has resulted in Mechel producing more high-value-added products, including rails, and stainless long and flat products. Production of rebar and wire rod has been reduced, as demand for these products also fell towards the end of Q3.

ArcelorMittal an announcement of its carbon reduction target to be achieved by 2030 to be published next year, the company tells Kallanish. The steelmaker is currently exploring three possible ways of significantly reducing carbon emissions in steelmaking but believes the support of policy makers will be essential during the transition ongoing to cleaner steel production.

In a recent article by ArcelorMittal executive Alan Knight, the company confirmed its support, for example, to a border adjustment between regions with a carbon price and those without. Knight is the head of corporate responsibility and sustainable development at ArcelorMittal.

“Steelmaking today contributes 7% of the world’s carbon emissions. So, in a world aligned with the objective of the Paris Agreement to limit the global temperature rise to well below 2 degrees Celsius above pre-industrial levels – an objective ArcelorMittal is committed to – we must change primary steelmaking to emit much less carbon,” Knight explained.

The company will reveal its target for 2030 next year, but it is already working on three main projects aimed at reducing drastically CO₂ emissions within steelmaking. The three projects include the use of hydrogen for iron ore reduction (tested in Hamburg), the use of waste carbon for iron ore reduction and the carbon capture and storage (both tested in Ghent).

“For these projects to be commercially viable in the near-team while avoiding ‘carbon leakage’, not only do we need policies which consider the environmental standards to which steel is made – rather than where it is made – but we also need access to affordable clean energy, public funding, infrastructures for cleaner energy and policies rewarding products for their reusability and recyclability,” Knight concluded.

Tata Steel Europe has outlined its long-awaited restructuring programme, including the reduction of up to 3,000 jobs across Europe, the firm says in a statement seen by Kallanish.

The new programme is aimed at securing positive cash flow for the company from the financial year ending March 2021. “A transformation is needed to mitigate the current structural and cyclical headwinds and create the foundation for the company’s future success,” Tata Steel Europe says. “Stagnant EU steel demand and global overcapacity have been compounded by trade conflicts which have turned the European market into a dumping ground for the world’s excess steel capacity.”

“Together with a significant increase in the cost of emission allowances, this has created an urgent need for improvements to the company’s financial performance,” the company adds.

The plan was anticipated earlier this year as a means of securing the European business following the cancellation of the proposed merger between Tata Steel Europe and thyssenkrupp.

In the plan outlined this week the company included the proposal to cut some 3,000 – mainly office-based – jobs across Europe. Also included is the target to increase sales of high-value added products, and the reduction of procurement costs through better cooperation with other Tata Steel group companies.

UK-based GMB, the union for steel workers, says the news of job cuts is “…disappointing” and that it is currently seeking confirmation from the company that the Port Talbot mill will not be impacted. In an interview to the UK press Tata Steel Europe ceo Henrik Adam confirmed that the operation of Port Talbot will not be reduced as part of the restructuring programme.

Mit dem Programm möchte das Unternehmen, trotz Gegenwind am Markt, der zu einem starken Rückgang der Rentabilität geführt hat, Erfolge erzielen. Dies soll als Grundlage für Investitionen dienen, die für eine klimaneutrale Stahlerzeugung erforderlich sind. 

Mit den Plänen möchte Tata Steel die finanzielle Leistungsfähigkeit verbessern, um das europäische Unternehmen gewinnorientiert auszurichten. Neben der Steigerung der Produktivität ist der Abbau von Bürokratie ebenso vorgesehen wie die Steigerung des Absatzes höherwertiger Stahlprodukte und -lösungen. 

Henrik Adam, CEO von Tata Steel in Europa, sagte: “Heute unterbreiten wir wichtige Vorschläge für den Aufbau eines finanzstarken und nachhaltigen europäischen Unternehmens. So soll die Zusammenarbeit verbessert werden, um schnellere Entscheidungen zu ermöglichen. Das wird uns helfen, trotz der schwierigen Marktbedingungen gewinnorientiert zu arbeiten um den Weg in eine klimaneutrale Zukunft zu ebnen.” 

Das Programm konzentriert sich auf vier Bereiche zur Verbesserung der finanziellen Leistungsfähigkeit:

• Steigerung des Umsatzes mit höherwertigen Stählen durch Verbesserung des Produktmix und der Kundenorientierung,
• Effizienzsteigerung durch Optimierung der Produktionsprozesse, unterstützt durch den Einsatz großer Datenmengen und fortschrittlicher Analysen,
• Senkung der Beschäftigungskosten, was zu einem geschätzten Rückgang der Mitarbeiterzahl von bis zu 3.000 in den Betrieben von Tata Steel Europe führt,
• Reduzierung der Beschaffungskosten durch intelligente Beschaffung und Stärkung der Zusammenarbeit mit Unternehmen innerhalb der Tata Steel-Gruppe.

Mit dem vorgeschlagenen Transformationsprogramm strebt Tata Steel Europe zunächst einen positiven Cashflow bis zum Ende des Geschäftsjahres Ende März 2021 an. Darüber hinaus liegt eine EBITDA-Marge von rund 10% über den gesamten Marktzyklus im Fokus. 

Eine Transformation ist notwendig, um den aktuellen strukturellen und zyklischen Gegenwind abzumildern und die Grundlage für den zukünftigen Unternehmenserfolg zu schaffen. Die stagnierende Stahlnachfrage in der EU und die weltweiten Überkapazitäten wurden durch Handelskonflikte noch verschärft, die den europäischen Markt zu einem Deponieplatz für die weltweit überschüssigen Stahlkapazitäten gemacht haben. Zusammen mit einem deutlichen Anstieg der Kosten für Emissionszertifikate hat dies einen dringenden Bedarf an Verbesserungen der finanziellen Leistungsfähigkeit des Unternehmens zur Folge. 

In den ersten sechs Monaten des laufenden Geschäftsjahres (ab April 2019) verzeichnete Tata Steel Europe einen Rückgang des EBITDA um 90% auf 31 Mio. £. Der Umsatz betrug 3,25 Milliarden Pfund. 

Tata Steel Europe wird mit verschiedenen Interessengruppen zusammenarbeiten, um die Einhaltung aller europäischen und nationalen Verpflichtungen sicherzustellen. 

Quelle und Foto: Tata Steel Europe

China’s Jingye Steel has been looking closely at how to turn the current British Steel operation into a profitable supplier focussed on the local market, a source close to the takeover tells Kallanish. The plant requires significant investment and regulatory assurances but this cannot happen until the deal is finalised, he adds.

British Steel has not been profitable because of a lack of investment and inefficient operations, the source explains. As operations at the plant worsened over several years, it was forced to reduce production, but that only served to increase unit costs. Utilisation rates at its rolling mills are low, and some lines are not being operated at all. The workforce at British Steel however is very knowledgeable however, and could do much more with a better plant, the source suggests.

Details of Jingye’s strategy are still being finalised, and will ultimately depend on the final deal for the plant being concluded. The overall strategy however will be influenced first by the strength of the existing products. The goal would be to lift utilisation in order to reduce unit costs. The additional volume would be primarily to serve the domestic market, replacing imports from Europe. That would depend on full utilisation of rolling lines and, to be competitive, would require some investment upstream.

Moving forward, Jingye is also exploring further development of the business. This could include the addition of new product lines, and a possible significant investment in British Steel’s Teeside plant.

All of Jingye’s plans will depend on the successful conclusion of the deal to buy British Steel however. The source notes that there remain a number of hurdles, including regulatory issue and government approvals, details around the procurement of raw materials and electricity, and possible rival bids. 

Chinese private-sector mill Jingye’s proposed acquisition of British Steel may not yet be a done deal as concerns remain about its high cost.

“The deal is a long way off from being concluded. I do not think Jingye would pay as high a price as £70mn to buy British Steel, as nearly no one else is interested in buying this company to begin with,” said a Chinese source in close contact with Jingye officials and familiar with the deal negotiations.

The purchase agreement announced last week does not guarantee the sale.

Jingye was one of the buyers interested in the initial bids for British Steel. Its executives visited the Scunthorpe site in July. The Turkish military pension fund Ataer Group was named a preferred bidder in August but its two-month exclusivity period expired without a deal.

Now Jingye is the frontrunner, but initial agreements with Chinese companies have not always led to deals. Chinese steel producer Hesteel entered into an agreement to buy Tata Steel’s Singapore assets earlier this year but the deal fell through. Jingye’s proposed acquisition of Malaysian steel slab producer Eastern Steel has also not yet been finalised.

“Corporate culture in the UK is quite dissimilar to China and southeast Asia. I doubt culture was a key reason why the Turkish company did not conclude the British Steel deal,” the source said.

The conclusion of a deal of this size and high profile will require financing by China’s state banks and there is little clarity on the financing of the deal by Jingye, the source said. Jingye is not even among the 10 largest Chinese mills, ranking as the 37th largest steel producer in 2018 with 11.25mn t production, according to the World Steel Association.

British Steel was part of Tata Steel UK, before finding a new owner in Greybull Capital in 2016. The company went into liquidation six months ago. It produced 2.8mn t of steel in 2018 and has a capacity of 4.5mn t.

Another area of concern for investors is the lack of clarity on the regulatory environment for British steel producers after the country’s exit from the EU.

Tough environmental regulations and negotiating with local trade unions could prove difficult, a Jingye executive told Argus. But Jingye’s product portfolio aligns itself with British Steel in long products and the acquisition can guarantee market share in the UK to Jingye, he said.

Chinese governments, especially in polluted provinces such as Hebei, where Jingye is located, have encouraged mills to shift capacity overseas. But few have so far set up and operated overseas plants. The only China-owned steel mill in Europe is in Serbia where Hesteel acquired an existing company, while Guangxi Beibu owns Malaysia’s Alliance Steel.

Apulia region president Michele Emiliano met on 13 November with new ArcelorMittal Italia chief executive Lucia Morselli, according to a regional government statement.

During the meeting Morselli reassured the president that the company will keep its commitments and pay the contractors of former steelmaker Ilva. While the news will be welcomed by the Italian supply chain, a source at a company supplying raw materials for the Taranto plant stressed to Kallanish that many local banks say they will not at present insure credits to ArcelorMittal Italia.

Meanwhile, ArcelorMittal denied when contacted by Kallanish reports from the local press that say the company will keep managing all former Ilva facilities until May 2020. Next May the tribunal in Milan will decide whether ArcelorMittal can legally withdraw from the purchase of the Italian steelmaker.

When ArcelorMittal started the procedure to officially withdraw from the Ilva purchase, “…it asked the Special Commissioner to take back responsibility for Ilva’s operations and employees within 30 days from receipt of the withdrawal letter,” a source close to the company confirms.

A new meeting between Lucia Morselli, trade unions and the Ministry of Economic Development (Mise) is scheduled for 15 November in Rome.

India’s Supreme Court has cleared the way for ArcelorMittal to complete its acquisition of bankrupt flat steelmaker Essar Steel.

The court set aside a July National Company Law Appellate Tribunal (NCLAT) ruling that Essar’s operational creditors have to be treated on a par with financial creditors when splitting the proceeds. Essar’s corporate insolvency resolution process (CIRP) was subsequently halted after lenders to the bankrupt steelmaker challenged this ruling in court (see Kallanish passim).

In its latest ruling the Supreme Court says it is up to Essar’s Committee of Creditors to decide how the proceeds are distributed. The court says: Essar’s CIRP “…will take place in accordance with the resolution plan of ArcelorMittal dated 23.10.2018, as amended and accepted by the Committee of Creditors on 27.03.2019, as it has provided for amounts to be paid to different classes of creditors.”

This brings to an end a more-than-year-long legal dispute that has prevented the completion of ArcelorMittal’s acquisition of Essar Steel, which was initially agreed to by the creditors committee in October 2018.

ArcelorMittal plans to operate Essar Steel in partnership with Nippon Steel. The world’s largest steelmaker said last week that, assuming a favourable Supreme Court ruling, it expects to close the transaction for Essar Steel by year-end.

ArcelorMittal and Nippon have said they intend to increase Essar’s finished steel shipments to 8.5 million tonnes/year over the medium term. Over 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.

Essar currently produces 6.5m t/y of crude steel in western India and also has 14m t/y of iron ore pelletising capacity in eastern India.

ArcelorMittal Italia’s new chief executive Lucia Morselli has informed unions of the plan to shut down equipment of the former Ilva steelmaking plant in Taranto.

A union source confirms to Kallanish that blast furnace no.2 will be idled on 13 December. Blast furnaces no.1 and 4 are scheduled to shut down on 15 January and 30 December respectively. Strip mill no.2 will be idled on 26 November, while strip mill no.1 is currently not working. When all blast furnaces are idled, power plants 2 and 3 together with the coke plants will also be shut down. Blast furnaces no.3 and 5 have been idled for several years.

ArcelorMittal confirmed the above dates to Kallanish.

When ArcelorMittal started the procedure to officially withdraw from the Ilva purchase at the beginning of November, “…it asked the Special Commissioner to take back responsibility for Ilva’s operations and employees within 30 days from the receipt of the withdrawal letter,” a source close to the company confirmed earlier this month.

A meeting between Lucia Morselli, trade unions and the Ministry of Economic Development (Mise) is scheduled for 15 November in Rome.