Category: Latest Updates

Oyak Group has signed an exclusivity agreement to buy British Steel, a spokesperson for the Turkish military pension fund tells Kallanish. Its subsidiary Ataer Holding has received exclusivity to conduct a detailed financial, legal and operational review for a period of two months, scheduled for completion at end-September. The acquisition is expected to be finalised by year-end.

During the exclusivity period, Ataer Holding will hold close negotiations with British Steel’s customers, suppliers, employees and trade unions.

Oyak General Manager Süleyman Savas Erdem says: “We, as Oyak, Turkey’s largest professional pension fund, believe in the importance of merging world league players into our Group. Accordingly, we have achieved one of the biggest achievements of the Turkish steel industry and signed a preliminary agreement to buy the industrial giant of UK, British Steel. We, will continue to evaluate opportunities globally in line with our growth-oriented vision and we will continue our investments to provide sustainable high benefit to our members.”

Oyak Mining Metallurgy Group Head Toker Özcan adds: “Through the acquisition of British Steel, our Group will increase its effectiveness in the value chain and the weight of value-added products in its final product portfolio. We will continue to monitor global markets and take proper actions to contribute to our strategic goals. The acquisition of British Steel under the Ataer umbrella is the first step taken in the future plans of our Group. Our priority will be to increase the production capacity and to invest in clean steel production in British Steel.”

Scunthorpe-based British Steel has a 4.5 million tonnes/year crude steel capacity allocated to production of speciality long steel products including high-quality rail, sections and wire rod. Ataer owns a 49.3% stake Turkey’s largest steelmaker, Erdemir, which counts billet and wire rod among its product range, but is predominantly a flat steelmaker.

Kallanish Steel | Aug 16, 2019

The European Commission (EC) has proposed an adjustment to the existing EU safeguard measures for steel, definitively imposed in February, Kallanish notes.

In a statement the EC says that it informed the World Trade Organization (WTO) on 14 August that the adjustments would make the measures “… more effective in compliance with WTO rules.”

This could be achieved by taking 3 steps, the EC says. The first would be to adjust the functioning of the quota for some products, including hot-rolled flat steel and steel intended for the automotive sector.  Updating the list of exclusions for developing countries on the basis of more recent imports statistics would be the second step. The third action would mean slowing down liberalisation of imports by reducing the pace of progressive increase of the import quotas from 5% to 3%.

The proposed adjustments will now be discussed with all affected WTO members, the EC says. Following these consultations, the adjustments will be submitted for approval to EU member states, so that they can become effective as of October 2019.

ArcelorMittal’s second-quarter results confirm that the currently-challenging environment in the global steel industry will persist for longer than anticipated, and the European steel outlook has worsened. This is according to Moody’s.

In response to the more challenging market environment, including depressed steel prices and costlier feedstock, ArcelorMittal had to adjust its assumptions for future cash flows of its US operations. This resulted in a $600 million impairment for ArcelorMittal USA in the second quarter.

“While we understand that measures have been taken by management to avoid additional impairments, visibility on improving operating conditions and sustainably recovering steel prices is currently very limited, not only in the US,” the credit rating agency says in a report sent to Kallanish.

Falling steel prices coupled with higher iron ore prices adversely impacted the group’s steel-only Ebitda/tonne, which fell to $43/tonne in Q2 from $56/t in Q1 and $127/t in Q2 2018. The sharpest margin deterioration was recorded in the group’s key regions of NAFTA and Europe.

Moody’s now projects ArcelorMittal’s consolidated Moody’s-adjusted Ebitda for full-year 2019 to fall below $6.5 billion. This implies a Moody’s-adjusted leverage ratio of around 3.5x gross debt/Ebitda at year-end 2019, which would exceed its 3x maximum guidance for the assigned Baa3 rating. However, the steelmaker has healthy cash flow generation and liquidity, and has identified non-core assets for disposal valued up to $2 billion.

The UK government plans to step up support to the country’s steel industry, via procurement of steel for new infrastructure projects, identification of domestic market “opportunities” worth GDP 3.8 billion ($4.6 billion) annually, and helping businesses with high energy use to cut their bills, according to a statement from the Department of Business, Energy & Industrial Strategy (BEIS) sent to S&P Global Platts Thursday.

BEIS’s research shows that “significant opportunities exist in this sector, with domestic market opportunities for the UK steel sector that could be worth an additional £3.8 billion per year by 2030,” a Department spokesman said in response to questions posed to new Prime Minister Boris Johnson on his strategy for steel. Many industrialists have expressed concerns that a UK exit from the European Union without a deal could be harmful for the country’s steel sector as tariffs may be imposed on its sales to the EU, its main export customer.

BEIS has recently updated its so-called Steel Pipeline, signalling upcoming steel requirements for national infrastructure projects, the statement said. “This shows how the government plans to procure around three million tonnes of steel, worth around £0.5bn, over the next decade for infrastructure projects such as the construction of Hinkley Point C and the maintenance and upgrading of the UK’s motorway network,” it said.

The UK currently produces 7.9 million mt/year of steel, of which 4.4 million mt are sold domestically and 3.5 million mt are exported, of which nearly two thirds goes to Europe, according to trade association UK Steel. In addition, 3 million mt/year of steel products worth around GBP530 million are imported for use in the construction industry. 
A UK Steel Procurement Charter was drawn up in May, of which BEIS is a signatory. The idea is that government and other authorities should pledge to buy domestically-produced steel for new projects, in a move to help the sector increase its sales. Last month Heathrow Airport became the Charter’s first private-sector signatory.

For the first time this year BEIS has published information from departments and their arm’s-length bodies on how much steel they have procured over the last financial year and how they have applied the steel procurement guidance, including taking into account wider social and environmental benefits when procuring and designing major projects,it said.

“The Government is committed to supporting a sustainable UK steel industry that is productive, innovative and highly-skilled and we’re working with industry, unions and devolved administrations to achieve this,” the spokesman said.

Energy fund

In the most recent UK Budget, the Chancellor announced an Industrial Energy Transformation Fund backed by up to GBP315 million of investment, to help businesses with high energy use to cut their bills and transition UK industry to a low carbon future, the BEIS statement continued.

“We have provided more than £305 million in compensation to the steel sector since 2013 to make energy costs more competitive including over £53 million during 2018,” it said.

According to UK Steel, the UK’s electricity prices for large industrial energy users are higher than in any EU country. “In 2018/19 UK steel producers paid 51% more than German producers and 110% more than French producers, even after the compensation and exemption schemes already provided by the government. This amounts to a GBP55 million/year additional expense for the UK steel sector,” the trade association said in a recent paper.

The steel industry will need to face up to Brexit in any case, BEIS warned.

“The UK will be leaving the EU on 31 October whatever the circumstances. We would prefer to leave with a deal, and we will work in an energetic and determined way to get that better deal,” the BEIS spokesman said in the statement..

The spokesman declined to comment on the situation of British Steel which entered compulsory liquidation May 22. British Steel is the second largest UK-based steelmaker, with 3 million mt annual capacity in the UK and Europe.

— Diana Kinch

Yesterday, the Commission initiated an anti-dumping investigation into imports of hot rolled stainless steel sheets and coils from China, Indonesia and Taiwan.

The investigation follows a complaint lodged by the European Steel Association (EUROFER) on the grounds that the imports from these countries are made at dumped prices and hence causing injury to the European producers.

The complaint requests to calculate the dumping margin in line with the EU new anti-dumping methodology, i.e. taking into account market distortions and distorted raw material prices in China and Indonesia.

The Commission has now up to 8 months to collect evidence and decide whether to impose provisional measures.

This new trade defence investigation is part of the larger Commission action aiming shield EU producers from unfair competition from dumped and subsidies products. So far, the Commission put in place trade defence measures on 52 steel products and investigates on another.

Source: European Commission

German steel distributor Westeisen has been sold by the Sietzky Gruppe to Hofmann-Rieg Stahlhandel, Kallanish learns from the companies.

All three firms are based in the state of Hesse, with Hofmann-Rieg in Darmstadt and Westeisen and its previous parent Sietzky Gruppe both located in Heusenstamm. Westeisen deals mainly with sheet products, while Hofmann-Rieg is a general supplier which includes sections, rebar, and nonferrous metals.

Sietzky Gruppe will retain Stahl-Becker, which specialises in steel strip for springs and spring steel wire, along with nonferrous metals distributor Allmeson and fabricator Hirsch, which makes steel frames and profiles. Sietzky originally intended to expand Westeisen’s portfolio by the addition of stainless steels and nonferrous metals but could not do so because of space limitations.

Sietzky nevertheless plans to expand its other units, by both expansion on existing sites as well as by another acquisition, which is still envisaged for 2019.

The change in government leadership in the UK has caused steel industry umbrella association UK Steel to produce a new priorities policy document for the sector, Kallanish notes. This asks the Boris Johnson government “… to seize upon the opportunity to revitalise and accelerate the Industrial Strategy putting in place the conditions for a strong manufacturing sector whatever the outcome of Brexit.”

‘New Deal For Steel’ restates the industry’s commitment to innovation and investment here in the UK. It also seeks to build a partnership with government to deliver the right business environment, allowing the sector to grow and to prosper, UK Steel says.

The association is calling for six key actions from the government. These are to secure tariff free access to EU markets for UK steel, critically avoiding the imposition of EU steel safeguards on UK exports. The association also wants the administration to deliver competitive electricity prices for UK steel producers in line with those borne by EU competitors.

Thirdly, UK Steel is asking for Incentivised investment via business rates re-structuring, including the removal of plant and machinery from valuations. It also wants the government to maximise the economic value to the UK of its public infrastructure investment, by taking a strategic approach to public procurement of steel.

The final two key actions relate to research and development and carbon pricing. UK Steel is asking for a boost for UK steel industry R&D by using the £225 million ($272m) in returned industry levies from the EU Research Fund for Coal and Steel. It also wants the new government to work with industry to develop a more competitive climate change and carbon pricing policy.

thyssenkrupp Materials Services is continuing to develop digitalisation with the introduction of a flexible IT infrastructure named DESCA (Digital Extended Supply Chain Accelerator), Kallanish learns from the company.

The tool is paving the way for new supply chain services provided by tk Materials. Under its ‘Materials as a Service’ approach, with DESCA, the company gives its customers access to global supply markets combined with in-house process expertise in the form of tailored supply chain solutions, it says.

DESCA is based on the so-called Hana software from SAP. Unlike conventional enterprise resource planning (ERP) systems DESCA allows flexible integration of data from various internal and external sources in real time and via an app. According to tk Materials, this is a particularly attractive option for sectors that place high demands on a flexible supply chain such as the aerospace industry. DESCA was first put through its practical paces therefore at selected branches of thyssenkrupp Aerospace in North America.

Furthermore, the thyssenkrupp unit announces that it is expanding its portfolio in rare earths.

It has just signed an offtake agreement with Australian heavy rare earths producer Northern Minerals Limited. This gives the company exclusive marketing rights to heavy rare earth (RE) carbonate, including dysprosium. The agreement also includes cooperation on possible further beneficiation and separation of rare earths to produce rare earth oxides, and on the future expansion of the project.

RE additions, either as mischmetal or rare earth silicide, are used in many ladle treatment processes in modern ferrous metallurgy. In ironmaking they provide the basis for the control of graphite morphology in cast irons and in steelmaking additions are made to aluminium-killed steels for desulphurisation and the control of inclusion composition and morphology.

The European Commission has reduced the planned increase in tariff-free steel quotas to 3% from 5% across all product categories, noting that 2018 was a record year for shipments to the EU. The announcement, published Wednesday on the EC website, followed a review of market safeguard measures imposed February 2.

“This less-pronounced liberalization means that the total quotas available during the third period will be limited to 31.6 million tonnes, i.e. 1.5 million tonnes below the distorting 2018 record,” the EC stated. “Moreover, this adjustment will fully preserve the liberalisation effect, because the total quotas during the second year would be 31 million tonnes and so are about one million tonnes more than the level of imports measured during 2017.”

For hot-rolled coil (category 1), the EC, in both volume and origin terms, will also establish a limitation of 30% to the share in the global quota that any single exporting country can reach per quarter during the remaining duration of the measures.

With respect to category 1, the EC also said Turkey, India and Serbia “have been able to replace the import shares lost by those countries that reduced their level of imports following the imposition of the anti-dumping and countervailing measures” and that Russia has recovered a “substantial part of its historical trading volume” despite “being subjected to anti-dumping measures.”

The commission is also proposing to amend the hot-dip galvanized products quotas (codes 4A and 4B), so that imports into the 4B quota can demonstrate an end-use in the automotive sector. In addition, India will be granted a country-specific quota for 4A, as it does not export significant volumes of auto-grade galvanized steel.

The EC also said that in two product categories, namely 13 (rebars) and 16 (wire rod), the mechanism put in place to ensure that the TRQ (tariff rate quota) is fully used has led to unintended effects. Countries with country-based quotas were able to “crowd out” traditional import flows from other origins in the last quarter of the period, to which all importers get access.

The EC has therefore considered it necessary to put in place a quantitative cap of 30% per supplying country of product categories 13 and 16 during the last quarter of the measures’ remaining life. “Such a cap…would guarantee sufficient variety in the sources of supply for users in the Union,” the EC stated.

— Annalisa Villa and Len Griffin

Swedish speciality steel producer Sandvik tells Kallanish that its president and ceo will leave the company as of 1 February 2020.

The exotic materials specialist says that its incumbent ceo Björn Rosengren has told the group that he intends to resign and leave the company at that time. No reason has been given for the decision. Sandvik is initiating the search for a successor it says.

“Björn Rosengren has, since he joined Sandvik in November 2015, established a solid decentralised business model for the company and made the organisation more flexible and efficient. The Board is very grateful for his and all the employees’ work during these years. We will initiate the process to assign a very experienced and competent industrial leader that can succeed Björn in the role as president and ceo and continue to develop the company even further,” says group chairman of the board Johan Molin.

The Sandvik group specilaises in advanced stainless steels and special alloys. It also produces tools and tooling systems for metal cutting, equipment and tools for the mining industry and rock excavation within the construction industry.