Category: Latest Updates

There is growing concern about the financial health of certain European steel service centres, with some sitting on high stock levels relative to demand and struggling with squeezed margins as they seek alternative destinations for material previously bound for the automotive industry.

Northern European service centres are extremely reticent to purchase given the uncertainty over prices, and as they do not want to have too much material by the end of the year. Those that have excess inventory are still destocking to free up working capital; this means the drop in apparent demand is still bigger than the reduction in real demand, which is feeding bearish sentiment.

The potential for any recovery in automotive demand in the fourth quarter is an added complication, especially in the north given the amount of coil that is sold to original equipment manufacturers.

One service centre has seen its order intake dwindle to almost nothing this week, and is operating at low capacity utilisation as a result. This situation is mirrored by some others, who are having to drop outsell prices to win business with little thought about replacement cost. The margin squeeze is also exacerbating the situation.

Given mill production cuts, weaker financials and the general economic environment, some credit insurers are reducing their appetite for the sector. This is particularly so in the UK, where Brexit and a host of issues at major mills and service centres have caused alarm. This is spreading from the decoiling sector into general steels stockholding.

While mills continue to bemoan their margin squeeze and cite high costs — for carbon as well as iron ore and coal — the cost push has so far failed to materialise because of sluggish demand. With the premium for northwest European HRC to China at just $19.56/t yesterday, and the negative margins of mills, something has to give.

Argus‘ daily headline northwest European HRC index was static at €471.75/t ex-works today, while the Italian index was also stable at €449.50/t ex-works.

South Korean conglomerate Doosan Group has started construction of an electric vehicle (EV) copper foil plant in Hungary to capitalise on rising demand for battery materials.

The plant in northwest Hungary’s Tatabanya industrial park is scheduled to be completed next year. It will have capacity to produce 50,000 t/yr of battery copper foil, enough to supply power packs for about 2.2mn EVs.

Doosan, which entered the copper foil business by buying Circuit Foil Luxembourg in 2014, aims to gain a proximity and cost advantage by building its plant in Hungary. South Korean EV battery producer SK Innovation is building its second plant in northwest Hungary, where it will have combined production capacity of 17 GWh/yr. LG Chem has a battery factory in Poland, where it is expanding. South Korea’s other EV battery producer Samsung SDI also has a plant in Hungary.

Doosan sees demand for battery copper foil rising 13-fold by 2025. An affiliate of SK this year agreed to buy KCF Technologies, a producer of copper foils and flexible copper clad laminates used primarily in EV battery cathodes, for 1.2 trillion won ($1bn).

Reliance Steel and Aluminum Co.’s metals shipments decreased 5% year over year in the second quarter as the company’s average selling price per ton decreased by 3% sequentially compared to Q1, the leading US distributor reported Thursday.

The Los Angeles-based company sold 1.51 million st of metal products in Q2, down 5% year over year compared with the 1.58 million st the company sold in the year-ago quarter.

Reliance’s average selling price per ton during the quarter was $1,904/st, up slightly from $1,890/st in Q2 2018, but down roughly 3% sequentially compared with an average selling price per ton of $1,958/st in Q1.

Overall, Reliance reported net income of $183.1 million on sales of $2.88 billion in Q2. This is down from net income of $230.8 million on sales of $2.99 billion in the same period a year ago.

“We had a solid second quarter characterized by relatively steady demand conditions in most of the key end markets we serve,” Reliance CEO Jim Hoffman said in a statement. “…Overall, metal pricing during the second quarter was slightly weaker than we had anticipated, with our average selling price per ton sold down 2.8% compared to the first quarter of 2019, outside of our expected range of flat to down 1%. While there were multiple mill price decreases on many of the carbon steel products we sell, our broad diversification of products, customers and end markets helped mitigate the impact on our business.”

Demand from the aerospace and automotive markets remained strong throughout the quarter, while demand from the non-residential construction sector was steady, the company said. Demand from the energy sector softened further in Q2, with the company expecting to see a steady near-term slowdown in this market.

Looking ahead, Reliance expects Q3 demand to be relatively steady subject to normal seasonal patterns, including a decline in shipping volume due to customer shutdowns and vacation schedule. Reliance expects its tons sold to be down 4%-6% in Q3 compared with Q2.

Average selling prices per ton are also expected to be down 1.5%-2.5% compared to Q2, Reliance said.

ArcelorMittal Poland (AMP) has suspended its order from Mostostal Zabrze of a new bending line for V shapes at its flagship Dabrowa Gornicza steelworks due to deteriorating steel industry conditions, says the Polish contractor.

The conditions of the contract allow for the full or partial suspension of the order for a period of up to 12 months. The two sides are now in the process of working out a new schedule for the contract.

Mostostal Zabrze has already completed almost all of the project’s design work and part of the prefabrication of steel structures and specialist devices. During the suspension the contractor is obliged to maintain the hitherto completed work in a good condition. All related costs will be settled by the ordering party.

In May AMP announced it will temporarily idle its blast furnace and converter operations in Krakow due to increased volumes of imports, higher costs and reduced demand. However, it postponed this decision on Thursday (see related Kallanish story).

En el siguiente enlace pueden acceder a la edición de Julio de nuestra revista Infoacero: INFOACERO JULIO

A continuación destacamos algunos de sus contenidos:

1. Opinión – D. Fernando Moraga – Vice-Presidente de la UAHE.

1. Evolución del Índice de Precios de Productos Siderúrgicos – UAHE. 

1. Próximos Eventos: MINDTECH (Vigo, 10-12 septiembre),REBUILD (Madrid, 17 -19  septiembre).

1. Siderurgia: Previsión de Eurofer sobre el mercado europeo del acero- (Informe del 3er trimestre)

1. Asesoría Legal: Novedades en los créditos hipotecarios

Stuck between an expensive rock — iron ore — and a hard place — the finished steel market — European steelmakers are becoming more creative and flexible in their pricing mechanisms.

European steel mills offered to transition half-year contracts to quarterly contracts over July-December, in response to the €50/t reductions sought by buyers after a substantial drop in spot prices from the fourth quarter of last year. Argus’ headline northwest Europe hot-rolled coil (HRC) index had fallen to €474.75/t on 15 July from €535/t on 12 November 2018, as a decline in automotive demand rippled through other sectors and led to an intense bout of destocking over the first half of this year.

Production of crude steel at German mills in the first half of 2019 was -5% down on H1 2018, Kallanishlearns from steel federation Wirtschaftsvereinigung (WV) Stahl.

“The intermediate result for the first half of year 2019 has been disappointing,” it says in its monthly statement.

Crude steel output totalled 20.7 million tonnes, with 14.4mt made at oxygen converter-route mills and 6.3mt at electric arc furnace mills, the federation details. The year-on-year dip was more pronounced at EAF mills with -6.5%, against -4.5% at BOF mills. WV Stahl offers no interpretation for the difference, so it remains unclear why EAF mills produced less despite the booming construction sector in Germany and its hunger for long products, mainly rebar and beam.

In June alone, output came to 3.4mt, a drop by some -6% on-year. Here, the drop at EAF mills was very steep, at -14.9%, while BOF mills reduced output only by -1.4%. This, however, may have to do with summer closures, which are scheduled at different times for different mills, and also at different times in the two summers of comparison. It remains to be seen if figures for July and August show an inverted picture.

Günter + Schramm (G+S), a German stockholder specializing in special bar qualities (SBQs), stainless steel and aluminium products is investing around €65,000 ($72,000) in another high-performance annealing furnace.

G+S is continually expanding its machinery to meet ever-increasing demand for services, the company tellsKallanish. The new annealing furnace is part of its machining centre in Königsbronn. A capacity of up to 1,000kg and a usable space of 800×1,400x800mm allow for customer-specific annealing processes at up to 850C, G+S says.

The plant is used in particular for machining cast iron, quenched and tempered steels and commercial steel, along with aluminium and copper/copper alloys. Among other things, the annealing furnace supports process control for the annealing of various materials and also optimises the process documentation, the company explains.

The large loading volume of the furnace makes it possible to process orders more effectively. With a total of three annealing furnaces at different locations, G+S claims it is well equipped to deal with increasing customer enquiries as a system service provider. “An efficient machine park is an important prerequisite for this,” says managing director Bernd Seibold.

NLMK and Europe’s leading manufacturer of transformer components and power generation devices LTC Group have signed a long-term strategic partnership agreement, the companies say.

Under the terms of the agreement, NLMK will regularly supply grain-oriented (GO) and non-grain-oriented dynamo steel to LTC Group from its mills in Russia’s Lipetsk and Yekaterinburg. The agreement also provides terms for deeper cooperation in development and marketing of new products.

NLMK and LTC have been working together for a considerable length of time. The signing of the agreement reflects both parties’ commitment to developing longer-term joint cooperation. It is fully in line with NLMK’s strategy to “…expand deliveries of premium products to the key markets,” according to Ilya Guschin, NLMK Group vice president.

NLMK Group is Russia’s only GO dynamo steel producer, while its non-GO dynamo steel output share in the Russian market totals 81%, the company tellsKallanish.

LTC is a leading GO steel processor in Europe and Middle East, with several production facilities in Italy and United Arab Emirates. A producer of magnetic cores for various types of transformers and reactors, its key focus is green energy, supplying to companies specialising in wind, photovoltaic, hydroelectric and cogeneration power generating plants.

EU automotive production is forecast to fall by -1.4% on-year in 2019 and to rise by 2.2% in 2020, according to European steelmakers association Eurofer.

EU car registrations fell -3.1% on-year in the first half of 2019. Commercial vehicle registrations, however, rose 6.5%, with Germany recording almost 15% growth. Vehicle exports to third countries remained under severe pressure due to weakening demand in key global markets.

EU automotive production fell -5.1% on-year in the first quarter. This was due to reduced domestic sales, model changes and strong base effects from stock building prior to the implementation of new procedures for emission testing (WLTP), Eurofer observes.

Strong replacement demand in recent years and uncertainty about the impact on car ownership cost of switching to electric vehicles are expected to dampen new car sales in 2019.

“Sluggish car demand from key markets such as the US, China and Turkey will continue to dampen exports; rising domestic production in emerging markets is another headwind for EU car manufacturers,” Eurofer says in a report seen by Kallanish. Some relief is, however, provided by the commercial vehicle market segment owing to companies investing in a greener transport fleet.

“In 2020, the WLTP distortions fading out combined with a mild pick-up in car demand and the introduction of new (electric) models by most European car producers should lead to car sales resuming a positive trend,” Eurofer explains.

Besides these demand factors, “…major intra-European production shifts are to be expected as OEMs increasingly put their stakes on the shift towards electric powertrains, motivated by rising demand, government policies and new entrants into the market,” the association adds.

Various car manufacturers have already said their entire passenger car range will be electrified within a decade to a significant degree. This implies that they will have to curtail excess capacity to free up funds for further investment in alternative powertrains solutions, Eurofer concludes.