Category: Latest Updates

Europe’s largest steel re-roller, Marcegaglia, is in advanced talks to buy Italy-based plate maker Palini e Bertoli from Russian mining and steel company Evraz, several market sources told S&P Global Platts Wednesday.

Sources said another Italian plate producer, Officine Tecnosider, has also showed interest in Palini e Bertoli, but that Marcegaglia is already close to sealing a deal. If this goes ahead, Marcegaglia will expand its existing 400,000 mt/year plate-making capacity to 900,000 mt/year. Tecnosider has an installed plate capacity of 350,000 mt/year.

Evraz has been attempting to divest Palini e Bertoli for some time as plate is no longer part of the company’s core business, according to two industry sources. “Evraz is not making big money from Palini and the market is not bright for plate, but the main reason for the sale is that plate is no longer the company’s staple product and has no place in its future plans,” said a source close to Evraz.

Evraz declined to comment when contacted by Platts. Marcegaglia and Tecnosider did not respond to e-mails and calls on the subject Wednesday.

Evraz stopped being an important player in the steel plate market after selling its Czech heavy plate mill, Vitkovice Steel, in early 2014. After the 2018 sale of Petrovsky Dnepropetrovsk Iron & Steel Works in Ukraine, also equipped with plate capacity, Palini e Bertoli remained Evraz’s only plate facility, but the company’s product range narrowed significantly.

Evraz no longer ships slabs from its Russian steelworks to its Italian reroller. The steelmaker supplies its Italian operations with slabs purchased from Ukrainian group Metinvest, which also owns a plate mill, Trametal, located in the same Italian municipality as Palini e Bertoli. It is cheaper to ship slab to Italy from Ukraine than from the Urals, let alone Siberia, where Evraz makes the semi-finished product.

In the first half, Palini made 198,000 mt of plate – utilizing roughly 80% of its 500,000 mt/year capacity – or just over 30,000 mt/month, according to Evraz’s latest trading update. Two market sources said they considered that a minimum of 40,000 mt/month is needed to generate profit in the current plate market. However, the sources understood that thanks to its simple product range and small number of employees, Palini e Bertoli has the advantage of low operating costs, although the lack of its own distribution system may be a weak point.

“From the plate price angle, the timing for the sale could not be worse,” one market source said, pointing to a surplus of rolling facilities in Italy and in that region [north-eastern Udine province] in particular. There, three mills within a radius of less than 10 km – Palini, Trametal and Tecnosider – are all striving for orders in a climate where several local plate processing manufacturers have been closed.

This source believes one of the reasons Palini e Bertoli has not yet been sold is its price tag being a little unrealistic. “Evraz was looking to get $50 million-$60 million while bids above $20 million-$30 million are not likely,” he said.

At the end of 2018, Evraz had $41 million worth of non-current [fixed] assets in Italy, the company said in its annual report for that year.

— Annalisa Villa and Katya Bouckley

Russian steelmaker and miner Severstal continues to expand its product portfolio as it revamps the pickled hot rolled metal slitting line at coating shop No.1 of its flagship Cherepovets steelworks.

The company is expecting delivery of new equipment supplied by Italy’s FIMI at the end of October. Once commissioned, the previous range manufactured from pickled hot rolled steel produced at the line and used for manufacturing wheel rims, frame girders and other auto components, will expand significantly. This will enable supply to more markets, including for export, the company tells Kallanish.

The commissioning of the RUB 1 billion ($15.3 million) project is due at the end of December. It plans to reach nameplate capacity of 200,000 tonnes/year – 75,000t more than the old line – in the first quarter of 2020. The line will be used to slit coil with thickness ranging from 1.5-6.5mm and increase weight of coils to 36 tonnes.

One of Turkey’s largest steelmakers, Colakoglu Metalurji A.S., has placed an order with Primetals Technologies to upgrade an existing vacuum degassing plant in its Dilovasi meltshop to a vacuum oxygen decarburization (VOD) plant, S&P Global Platts learned Friday. 

With the modernization project Colakoglu will broaden its product range with special steels, like interstitial-free grades, ULC grades or stainless steels. 

With a heat size of 295 mt, the VOD plant will be the largest worldwide and it is expected to be operational in March 2020.

For the VOD plant, Primetals is responsible for the engineering and will supply all the core components. The scope also encompasses the modernization of the existing automation system, Primetals said Friday. 

Colakoglu is one of Turkey’s major longs and flats producers with bar output capacity of 1 million mt/year. It also has 4.5 million mt/year of hot-rolled coil production capacity.

— Cenk Can

Bowim’s consolidated steel sales rose 2% on-year in the first half of 2019 to 261,029 tonnes. This was driven by an 18% surge in sheet sales to 96,284t, which offset a -9% drop in pipe and profile sales to 50,330t and a -10% decline in rebar sales to 46,073t.

The steel structures and metals industry segments increased their share in sales by 4 percentage points and 2pp respectively to 25% and 18%, but the construction segment’s share fell 4pp to 17%.

Revenue rose 0.8% in H1 to PLN 685.7 million ($170.7m), but the firm turned to a PLN 1.96m net loss versus a profit a year earlier of PLN 7.5m.

The improved sales were thanks to the seeking out of new customers and the recommissioning of the modernised Sosnowiec logistics distribution centre. Subsidiary Bowim Podkarpacie also commissioned its distribution warehouse near Rzeszow. The better sales were despite the continued price downtrend since April, Bowim says in a report seen by Kallanish.

The EU produced 84.6 million tonnes of steel in H1, down -2.5% on-year, with Polish output falling -6% to 4.9mt. EU steel demand is being stifled by uncertainty surrounding Brexit, as well as weakening economic growth in various member countries. In Poland raw materials and energy costs are high, while the cost of CO2 emissions allowances is rising rapidly, Bowim says. European mills’ attempts to raise prices in H1 after they fell in the first quarter were unsuccessful.

Besides higher CO2 emissions, energy and coal costs, significant uncertainty over increased global capacity utilisation will present a challenge for the steel industry going forward, Bowim concludes.

Severfield has agreed to acquire in full Harry Peers & Co Limited, a structural steelwork business within the nuclear, process industries and power generation sectors. The net initial consideration is £18 million ($22m), which could increase by £7m depending on performance.

Severfield says the acquisition will extend its current capabilities into attractive complementary market sectors: nuclear, process industries and power generation. “Combining the businesses will enhance Severfield’s position as the UK’s broadest structural steel services group,” the firm says in a note seen by Kallanish.

For the 12 months ended 30 April 2019 Harry Peers & Co achieved audited revenues of £21.2m and profit before tax of £3.4m. The value of the gross assets as at 30 April 2019 was £24m.

“With the scale and capabilities of the Group, there are substantial opportunities to grow Harry Peers through a number of combined operational initiatives such as new business development functions for Harry Peers, European contract opportunities, and investment in technology-driven enhancements,” Severfield comments.

“Harry Peers has also demonstrated capability in modular structural steel offerings, which Severfield will look to develop across its wider product range,” it adds.

The nuclear sector is forecasted to grow through the UK government’s decommissioning investment programme, which will require a budget of £164 billion over the next 120 years. The power generation market, including energy-from-waste (“EfW”) plants, which contribute 5.57TWh of electricity per annum, is forecast to grow on the back of the world economy seeking alternatives to carbon fuels. The UK government has set a target of 15% of final energy consumption from renewable sources by 2020.

Eurofer has welcomed the changes applied by the European Commission on the safeguard system for steel products. However, it notes they are still not sufficient “…for a large part of the sector, especially given that it is facing depressed domestic steel demand.”

From this week, the safeguard measures in place since the beginning of this year have become slightly more stringent. Further clauses have been included in the system, including a limit on hot rolled coil imported by a single country to remain below 30% of the available quotas.

“The largest part of the steel sector is still being squeezed, hampered by unsustainable import pressure – pressure that will not abate, despite the changes made today,” Eurofer director general Axel Eggert says in a note sent to Kallanish. “The steel sector is now back in choppy waters – demand is falling and imports are still at a very high level. We hope that the Commission will, in due course, further review the artificially high tariff free quota level and reduce it to close to the 2015-17 import volume.”

Looking forward, Eggert notes that the association welcomed the suggestion by the new Commission President Vor der Leyen to create a Carbon Border Adjustment. This would be to help industrial sectors re-establish a level playing field with foreign competitors that do not face the same climate cost constraints.

Global overcapacity is expected to remain an issue as well. “The G20’s Global Forum on Excess Steel Capacity must continue its work so that countries such as China, Indonesia, Iran, Russia, or Turkey stop building up excess capacity that endangers the global steel market. The safeguard alone will not be sufficient,” Eggert concludes.

Saarstahl and Dillinger Hütte have developed a detailed action plan for the next few years to enable the two mills in Germany’s Saarland to “…secure our future,” they say in a statement sent to Kallanish.

The title of the announcement, “Dillinger and Saarstahl launch joint future-oriented programme: proactive, carbon-free, efficient,” does not tell the whole story. The plan entails the “…socially responsible reduction of 1,500 jobs and outsourcing of 1,000 jobs in Saarland.”

“The commitment of our employees is high, says Tim Hartmann, ceo of both Dillinger and Saarstahl. “At the same time, our costs are too high when compared with our competitors. We will be adjusting our structures and processes accordingly in the coming months. The goal is double-digit profitability that gives us sufficient scope for growth investments.”

The mills are suffering from the effect of international protectionism, high costs for emission certificates, the current economic downturn and upheavals in core consumer segments such as automotive and mechanical engineering. As a result, Saarstahl has been operating with short-time work schedules since September.

The mills have set themselves a goal of cutting costs by €250 million ($272m) per year. They aim to achieve 60% of this through savings in the cost of materials and external services and 40% in personnel expenses. 14,000 employees worldwide work at Dillinger and Saarstahl under the SHS umbrella, generating total sales of around €4.5 billion per year.

In the wake of the announcement, some 5,500 workers at the mills demonstrated at the start of the week at Saarstahl’s headquarters in Völklingen. A IG Metall union spokesperson told media the European steel industry cannot survive the way things are now. Policymakers must adjust conditions, like the cost of CO2, to provide a future for steel, he said.

European apparent steel consumption will fall -2% over the next 12-18 months as weaker macroeconomic conditions and waning consumer confidence weigh on demand, according to Moody’s.

The credit rating agency has revised down its forecast for eurozone real GDP growth by 0.2 percentage points and 0.1pp respectively in 2019 and 2020 to 1.1% and 1.3%. Moreover, the IHS Markit Eurozone manufacturing purchasing managers’ index (PMI) has been below 50 since February 2019.

“We expect conditions in the European manufacturing industry to remain highly fragile because of the potential for trade tensions between the US and its main trading partners to deepen and because the likelihood of the UK leaving the EU without a deal has increased,” Moody’s says in a report sent to Kallanish.

Automotive steel demand will also weaken – Western European light vehicle sales will decline -2% in 2019 and -3% in 2020, Moody’s adds. Auto steel suppliers “…will face sustained headwinds in the next 12-18 months, with lacklustre auto sector demand constraining steel shipments, orders and top line growth,” the firm says.

European construction industry demand remains healthy, but this is likely to soften in 2020 as confidence deteriorates.

Continued global steel overcapacity is adding to these woes. Impetus for consolidation is unlikely in the next 12-18 months after the European Commission rejected the planned merger of thyssenkrupp’s and Tata Steel’s European steel operations.

Europe continues to face elevated imports despite safeguard quotas. The European Commission has proposed including more products in the quotas and to reduce the annual quota relaxations to 3% for the next two measurement periods of July 2019 to June 2020. This will bring some relief, but “…we believe the EU steel market will remain popular for existing key supplying countries and those not yet affected by country-specific quotas,” Moody’s observes.

European mills are simultaneously exporting less. High-quality flat products shipments to the US remain high, but may not be for long as they go mostly to the automotive sector which is expected to shrink this year and next.

Moody’s expects steel spreads in Europe to remain around their currently low levels of €270/tonne ($294) in 2019, possibly rising towards €300/t during 2020. This compares to the average spread of €385/t in 2018 and €355/t in 2017. “The spread forecasts reflect our expectation that steel prices will remain low and raw material costs will be higher, making it difficult to improve profitability,” the firm says.

“We do not expect further significant raw material price declines in the next 12-18 months and volatility will remain high,” Moody’s comments. “At the same time, potential for steel price improvement remains very limited, given bleak market sentiment and weak demand prospects. Steel prices in China, which accounts for more than 50% of global steel production, have also started to soften after holding up in the first half of 2019.”

Danieli foresees world steel capacity utilisation declining in the fiscal year through 2020 (FY20) after rising 3 percentage points on-year in FY19 to 81%. The technology supplier says the steel market will remain stable or show a slight drop due to the ongoing negotiations on duties.

The steel market downturn is difficult to quantify because of geo-economic and political tensions, the firm observes. Its order-book stands at €3,099 million ($3,381m) compared to €2,954m at end-FY18.

In FY19 Danieli’s revenue rose 13% on-year to €3.06 billion, with net profit up 15% to €66.8m.

The firm’s Steel Making segment saw increased volumes thanks to the restart of ABS Sisak’s steelmaking unit and in spite of losses at the ESW Röhrenwerke pipe mill. Danieli is “…determining appropriate corrective actions” for the latter, it says in a report monitored by Kallanish. Segment volumes reached 1.32 million tonnes in FY19. However, in the next few months the segment will experience a drop in demand, particularly in the automotive and oil and gas sector.

Besides ABS Sisak and ESW Röhrenwerke, the segment includes Italian steelmaker Acciaierie Bertoli Safau (ABS).

“The Plant Making segment was less affected by the serious crisis that steelmakers experienced in 2016, 2017 and 2018, which significantly reduced not only investments but also the purchase prices of new plants,” Danieli observes. Demand for new plants is good but selling prices are still not very profitable due to fierce competition from Germany and Japan.

Martina Merz, current chairwoman of the supervisory board of German steelmaking, elevators and engineering company Thyssenkrupp AG, will become the company’s CEO on October 1, as part of a broader reshuffle as the company pursues new strategic aims.

Merz’s appointment was unanimously decided by the thyssenkrupp supervisory board in an extraordinary meeting Friday, after the executive board mandate of Guido Kerkhoff, the current CEO, was terminated by mutual agreement, thyssenkrupp said in a statement Monday.

Merz will be delegated to the group’s executive board for a maximum period of 12 months, after which she will return to the supervisory board.

Merz will continue with the strategic alignment for thyssenkrupp which was announced by Kerkhoff in May, the new CEO was cited as saying in the statement. She thanked Kerkhoff for his commitment to the company since becoming CEO last year “in a difficult situation.”

The company adopted a new development plan following the European Commission’s prohibition in May of its plans to merge its steelmaking business with Tata Steel Europe. The EC said it could not approve the merger on competition grounds. The merger would have formed Europe’s second-biggest steelmaker, with around 21 million mt/year of steelmaking capacity.

Both thyssenkrupp and Tata have continued with policies of some divestments in Europe since that time. Thyssenkrupp’s new strategic plan involves 6,000 job losses, potential partnerships with other companies and an IPO of its elevators business, considered by analysts at Jefferies International as the company’s “crown jewel.”

In addition, the supervisory board has appointed Dr. Klaus Keysberg to the executive board of thyssenkrupp effective October 1. Keysberg, who will be responsible for the materials businesses on the group executive board, has held various positions at thyssenkrupp since 1996 and has been CEO of the Business Area Materials Services since the beginning of the year. He will continue to hold this position until a successor is appointed.

Merz’s successor at the head of the supervisory board will be Prof. Dr. Siegfried Russwurm, a former Siemens executive board member who has been a member of the thyssenkrupp supervisory board since April.

— Diana Kinch