Category: Latest Updates

Under the slogan “Bright World of Metals” the Düsseldorf fairground will host Metec, the International Metallurgy Trade Fair, along with its sister events Gifa, Thermpricess and Newcast, from 25-29 June.

After the fair passed in 2015 the mark of 2,000 exhibitors for the first time in its 60-year history, this year will feature 2,360 companies.  One dominating topic will be “Industry 4.0” along with additive manufacturing with respect to the tremendous potential offered by lightweight structures in the automotive industry, says organiser Messe Düsseldorf.

Ever more sophisticated sensor technology is providing growing data from the production process in foundries and steel mills, Kallanish hears from Messe Düsseldorf. Thousands of data are needed for every slab that is cast and every strip of steel that is rolled, which can no longer be analysed by classic IT methods, the organisers say about the focus of the fair.

Burkhard Dahmen, ceo of SMS group, is the new president of Metec, appointed in April at the executive board meeting of the trade fair quartet. Only last year, it had appointed Guido Kleinschmidt, also of SMS group. The replacement became necessary as Kleinschmidt left SMS.

The EU’s definitive steel safeguard review is increasingly expected to lead to a country-by-country quota for product category one, hot-rolled coil (HRC), according to sources close to the European Commission.

European steel association Eurofer has been a major proponent of switching HRC to a country-by-country quota, but there could also be a lobby of exporters to Europe in favour of such a move. Turkey and Russia’s Severstal have been the largest beneficiaries from the global quota, but potentially at the expense of other regions with more stable, long-standing volumes.

The EU’s steel safeguard is designed to secure established, fairly traded import flows, rather than reduce them. It is also primarily designed to stop redirection of material previously destined for the US — Turkish shipments to the EU rose by over 53pc on the year to 1.4mn t over the first four months of 2019.

Turkish mills are likely to argue that moving to country-by-country quotas would not reflect market dynamics or the fact they are filling the supply gap left by exporters to the EU affected by anti-dumping duties. They would also allude to increasing European exports to Turkey, which has traditionally been the biggest overseas market for EU sellers.

Eurofer has requested quarterly quotas, but these would likely be more restrictive than the commission would like. Once the quota becomes critical — meaning 10pc or less of the volume is remaining — duties become payable. So a quarterly system could reduce imports more than desired by the commission. Around 373,300t of the global HRC quota is currently available, meaning 82pc of the 2.09mn t is utilised.

Quotas for product categories 4A and 4B, representing hot-dip galvanised steel, are also expected to be amended. Importers had asked for the quotas to be global, in line with HRC’s, but this does not seem likely should they move to a country-by-country basis. European mills suggest structural-grade galvanised steel is being sold using the automotive quota, circumbventing an existing duty on non-automotive grade Chinese galvanised steel.

EU wire rod allocations are also likely to be amended to become more favourable to consumers. As with HRC, the argument is that the market is dynamic and the quota does not reflect the latest volumes.

Two German coil processor interest groups have expressed their concern over efforts by the European Commission (EC) to reduce the quarterly import quotas.

In a letter in mid-May, the Commission had announced that it will review the current quotas to see if they adequately reflect the market situation. Although the EC did not explicitly say so, its move appears to follow pressure by steelmakers to limit the tonnage quotas, which were planned to be raised gradually each quarter.

The natural opponents to this are coil processors such as the German sheet formers represented by federation IBU (Industrieverband Blechumformung) and the independent cold-rollers, represented by FVK (Fachverband Kaltwalzwerke). In a joint letter, the associations are asking the EU to expand the quotas for steel categories 1 (hot-rolled coil) and 4B (hot-dip galvanized coil). “… Or at least keep them as they are,” explains Andreas Schneider of Stahlmarkt Consult on behalf of the two associations.

The concern is mainly about deliveries from China and South Korea, which were depleted all too quickly in the first shortened quarter of the quotas (February and March). While mills argue that imports have still been excessive in 2018/19 despite duties, the processors cite various reasons why this was so.

“For one thing, there has been a building-up of inventories late last year, to prepare for the shortage from the looming duties,” Schneider explains to Kallanish. There was a shortage of galvanized product in 2017 and 2018, which created a need for imports from China and South Korea. Now, the trading relationships newly-established during that period are at stake.

Essentially, the associations are criticising the EU for launching a review after the duties have been in effect only for several months. “It is totally inadequate to assess a situation after such a short time – you would need a full year to be able to do this,” he says.

Thyssenkrupp spokesmen dismissed as “rumors” Friday a magazine report that the German steelmaker had approached metals distributor Kloeckner & Co. about a possible takeover or link-up just a month after Thyssenkrupp’s bid to merge with Tata Steel Europe fell through.

German business publication Manager Magazin reported Thursday that Thyssenkrupp was eyeing a takeover of Kloeckner, a move that would boost its Thyssenkrupp Materials Services unit.

Thyssenkrupp spokesmen said they could not confirm the existence of talks on this specific subject between CEO Guido Kerkhoff and Kloeckner CEO Gisbert Ruehl. However, one spokesman noted that Kerkhoff and Ruehl regularly meet and talk “as Kloeckner is just round the corner from us in Duisburg. The rumors have been going on for at least two years.”

According to the magazine report, Thyssenkrupp aims to use the proceeds from the planned IPO of its elevator business to fund the acquisition.

One Thyssenkrupp spokesman noted that Kerkoff recently stated the company wishes to carry out the IPO “to restructure the company.” After the European Commission blocked merger plans between Thyssenkrupp and Tata on grounds that the companies were not prepared to offer sufficient concessions to ensure healthy competition in the marketplace, Kerkhoff said that the group may be looking for other steel partnerships to move its business forward.

Kloeckner had no immediate comment on the report when contacted Friday by S&P Global Platts. The company has previously been reported as saying that it would be interested in linking up with Thyssenkrupp’s Materials Services’ steel stockholding and trading businesses.

Last week, Thyssenkrupp announced that it has slimmed down its steel segment executive board. The former CFO of ThyssenKrupp Steel Europe, Premal Desai, has been appointed as chairman of this entity, while company steel manager Bernhard Osburg will become the board’s chief commercial officer. Former board members Andreas Goss and Heribert Fischer have left this entity.

Kerkhoff said at the time that the group’s “steel business is facing major challenges,” and that the new team needs to “develop a sustainable strategy for steel following the cancellation of the joint venture [with Tata Steel].”

— Diana Kinch

The RWI – Leibniz Institute for Economic Research is lowering its forecast for German economic growth slightly to 0.8 percent this year and 1.4 percent next year. The higher rate for 2020 is mainly due to significantly more working days. The unemployment rate will decline only slightly to 5 percent this year and 4.9 percent in the coming year. The inflation rate is expected to remain moderate at 1.3 percent this year and 1.4 percent next year. Public budgets are expected to reach surpluses of 42 and just under € 32 billion in 2019 and 2020, respectively. The drop is due to a significantly lower increase in government revenues and noticeably higher monetary benefits.

The most important results:

The RWI lowers its forecast of German economic growth for 2019 compared to March of this year slightly from 0.9 to 0.8 percent. For 2020, it expects 1.4 instead of 1.5 percent. The higher rate for 2020 is mainly due to significantly more working days.

The expansion is likely to be driven by domestic use, in particular private consumption and construction investment. Both are expected to continue to benefit from strong income growth. Construction investment will also be stimulated by increased demand for housing and the continued low cost of housing loans.

The investment activity of companies is in conflict with opposing factors. The continued low financing costs, the still high capacity utilization and the investments in digitization are having a stimulating effect. The uncertainty about the economic and trade policy framework has a dampening effect. As a result, companies are likely to be cautious about larger investment projects, and investment in equipment is likely to expand only slightly.

Employment momentum seems to be easing in the labor market. Thus, the number of registered vacancies has tended to fall since October 2018. In addition, the decline in temporary agency work and the increase in the number of registered unemployed in May are likely to be accompanied by changes in legislation and coverage as well as economic factors. Against this background, the unemployment rate is expected to fall only slightly to 5.0 percent in this year and 4.9 percent in the coming year.

Inflation is expected to remain moderate at 1.3 percent this year and 1.4 percent next year. Falling energy prices have a dampening effect. However, core inflation (prices excluding energy) will rise slightly to 1.4 percent in the forecast period, as production costs, which have risen comparatively markedly in recent quarters, are increasingly being passed on to consumers.

The state budget surplus is expected to fall to 42 billion euros this year and to almost 32 billion euros in 2020. The government’s surplus ratio is expected to fall to 1.2 percent of GDP this year and 0.9 percent next year. The reason is that, on the one hand, a significantly lower increase in government revenues is to be expected and, on the other hand, that monetary social benefits are significantly expanded.

Commenting on the current state of the German economy, RWI Chief Economist Roland Döhrn says: “There are increasing signs that the growth of the German economy is slowing down. This is suggested, among other things, by lower order intake in the industry and a weaker job creation in the labor market. “

Source: RWI

Spanish long products producers Gallardo and Megasa are interested in buying German steelmaker Stahlwerk Thüringen (SWT), owned by Brazilian mill Companhia Siderúrgica Nacional (CSN), a source close to the deal told S&P Global Platts Thursday

Megasa and Gallardo are reported each to have submitted an offer in the range of Eur300-350 million for the sections producer.

Two weeks ago CSN President Benjamin Steinbruch said the sale of SWT was very close to being announced. But this is not the first time that a similar announcement has been made.

The decision to sell the German unit was taken to help reduce CSN’s debt of about Real 25 billion ($6.5 billion). In order to achieve the debt reduction the company has also been looking into divesting its shares in steelmaker Usiminas and seeking mine streaming contracts to raise cash.

“Steinbruch’s target price for SWT is around Eur400-450 million — higher than what’s been offered — so we have to see if it will accept one of the two,” the source said.

All of Megasa’s mills are based in Spain. The company recently increased its longs production range with the acquisition of ArcelorMittal’s mill in Zaragoza that has 300,000 mt/year of sections capacity, so acquisition of a mill in Germany could help increase its European market share. Megasa did not reply to enquiries by S&P Global Platts on this matter.

Gallardo used to be the owner of SWT. It sold the company back in 2012 to CSN, after having bought it in 2006 from ArcelorMittal. Gallardo did not respond to a Platts enquiry, nor did CSN.

According to sources close to the deal, SWT has turnover of around Eur420-450 million with Ebitda at around 10%. The company has one EAF at 1.1 million mt/year capacity, and in recent years has produced around 800-850,000 mt/year of sections.

According to an informed industry analyst, ArcelorMittal has around 45% of the European sections market. According to European Steel Association Eurofer, in 2018 the EU’s market supply of beams totaled approximately 7.4 million mt. Imports accounted for less than 6%. 

— Annalisa Villa and Adriana Carvalho

Attempts, by a number of EU mills, to lift prices for strip mill products, were limited, during the past four weeks. Buyers across northern Europe inform MEPS that they were able to negotiate rollover values, or even small discounts, with regional steel producers. Meanwhile, a small price upturn is noted in the Italian market.

Steelmakers’ profit margins are being squeezed. Nonetheless, the current imbalance between supply and demand is restricting the mills’ ability to lift steel selling figures. Furthermore, several regional steel producers, needing to fill their order books, did not follow the recent price hike initiative of the first tier suppliers.

Many EU steel distributors continue to purchase cautiously, concerned about their own tight resale margins. They lack confidence that they will be able to pass the producers’ proposed price hikes on to their customers. 

Nonetheless, European coil values appear to have reached the bottom of the current cycle. Elevated mill input expenditure should prevent steel prices from falling further. Moreover, steelmakers are actively trying to redress the supply/demand imbalance by cutting production.

ArcelorMittal had previously announced its intention to reduce output from its sites in Italy, Spain and Poland. Subsequently, the company issued details of additional supply restrictions in Spain and production cuts in France and Germany. Other EU steelmakers are, reportedly, reducing output by bringing forward, or extending, summer maintenance programmes at their facilities.

Another factor affecting supply is the European Commission’s import quotas. The EC is currently expediting a scheduled review of the safeguard measures, which was originally intended to be concluded by September 30, 2019. Various groups are lobbying for their own proposed amendments, with the current measures, seemingly, satisfying the requirements of few steel supply chain participants. Some parties wish for the quota allowances, for certain product categories, to be tightened up, and for it to be set country by country, rather than being on a global basis. Others want the reverse of these proposals. 

Although unlikely to be altered, one feature of the EC measures that appears to be to the detriment of the majority of affected groups is the quarterly aspect of the quota system. Having three-month periods encourages buyers to rush to purchase material, which can then languish at the ports waiting for the opening of the new quota allowance. This disrupts the traditional steady flow of material into the market, which is an important feature of the supply chain.

Source: MEPS – European Steel Review – June 2019 Issue

Also See: MEPS All Products Composite Purchasing Price & Index

If you have any questions, or would like to discuss a subscription to either of the attached reports, then please feel free to contact Kaye Ayub kayub@meps.co.uk.

A discount of 10% is available to all EUROMETAL delegates.

ArcelorMittal Italia, Italy’s largest steelmaker, is calling on the Italian government to change the current text of the Crescita law decree that will cancel the steelmaker’s criminal immunity as regards pollution. Without the change it is impossible to manage the former Ilva, ArcelorMittal stated.

According to the Crescita law, as also announced by Minister Luigi Di Maio in Taranto, immunity ends on September 6. The Crescita law decree removes the legal safeguards existing when ArcelorMittal agreed to invest in the Taranto plant. “These safeguards are necessary until the company has completed the environmental plan to avoid incurring liability for issues that it did not create,” ArcelorMittal said.

“If ratified as currently drafted, the provision concerning the Taranto plant would impair any operator’s ability to operate the plant while implementing the environmental plan approved by the Italian Government in September 2017, including for ArcelorMittal,” ArcelorMittal stated, stressing that the Taranto plant cannot be operated without legal protection until the environmental plan is fully implemented.

The decree is to be ratified into law by June 29. 

The Taranto mill has been under seizure since 2012 due to pollution. ArcelorMittal has planned to invest Eur1.15 billion on its environmental plan “to address the Taranto plant’s long-standing issues.”

— Annalisa Villa

After eight consecutive months of deceleration across Europe, new car registrations moved upward very modestly in May, according to the latest release by the European carmakers association ACEA.

Passenger car registrations in May increased 0.1% year-on-year, mainly supported by demand in Central Europe. Among the largest markets Germany and France showed good results (+9.1% and 1.2% respectively), while Italy, UK and Spain continued to suffer from falling demand compared with last year’s levels. Automotive production in the vast majority of European countries has been well down in 2019.

Overall during the January-May period passenger cars registrations in Europe remained over -2% below the same period in 2018, at 6.7 million units.

The last monthly y-o-y rise European passenger cars registration was in August 2018, according to ACEA data.

Automotive demand has been among the main uncertainties for steelmakers since the mid of 2018. Some market observers explained during recent weeks that the bottom of the current negative trend in demand appears to have been reached. This implies that the second half of the year could well be carachterised by a slight recovery in registrations with an associated knock-on effect on production.