Category: Latest Updates

German steelmaker ThyssenKrupp said the strategy, finance and investment committee of its supervisory board approved a realignment plan presented by the company’s executive board, designed to strengthen the group moving forward following the failure of its plans to merge with Tata Steel Europe.

The group may also seek partners for some steel operations, according to statements made by the CEO Guido Kerkhoff over the weekend.

A basic agreement has been struck between the executive board and trade union IG Metall on the strategic realignment of the group, ThyssenKrupp said in a statement issued after Saturday’s approval. This will involve the elimination of 6,000 steel area jobs, out of a total of 27,000, and an IPO for the group’s elevator business, it said.

“The agreement lays out the key principles for the future-oriented management of the thyssenkrupp group and sets the framework for responsible implementation of the new strategy,” it said.

Plans for the realignment follow the EC’s decision not to approve merger plans between ThyssenKrupp and Tata Steel Europe, as announced by the two companies last Friday. The companies said they did not wish to make the further concessions being demanded by the EC — understood to be extra divestments over and above the various asset sales already under discussion.

The JV would have formed Europe’s second biggest steelmaker, with crude steel capacity of around 21 million mt/year. Steel demand is seen declining in the European Union this year and carbon costs are cited by some companies as an impediment to profitability.

ThyssenKrupp committees will recommend that the group’s supervisory board approve the executive board’s proposal on May 21, the steelmaker said.

IG Metall had no immediate response to the announcement Monday.

Kerkhoff reiterated in newspaper interviews over the weekend that the group may be looking for steel partnerships to move its business forward, following an initial announcement of this possibility last Friday. The CEO told Germany’s Handelsblatt news service that in any future steel mergers ThyssenKrupp would remain the majority shareholder.

“Our portfolio will become much more flexible,” Kerkhoff had said in a speech Friday. “Business will be added, partnerships will be established and some businesses will be able to develop better outside of ThyssenKrupp.”

A Tata Steel Europe spokesman confirmed Monday that the Indian-owned steelmaker will honor its existing commitments with trade unions to keep the blast furnaces in operation and make further investments for a number of years at its 3.5 million mt/capacity Port Talbot, Wales integrated steelworks. Tata executives noted in a call Friday that its operations in Europe had recently been challenging.

UK-based trade union Unite has since called on the Tata board to give Tata Steel workers assurances and end the ‘rollercoaster’ of uncertainty following news that the Tata/ThyssenKrupp merger is off, while the GMB union says it is “is ready to fight hard for every members’ job in the UK steel industry.”

— Diana Kinch and Annalisa Villa

According to market sources close to the EU tube import quotas dossier, European tube imports should fall dramatically and be halted for most products in the coming two months. This may result in increasing pressure on Europe’s domestic tube supply.

“Regarding gas pipes, Turkey has already used more than 80% of the quota and should exhaust it before the end of May. The North Macedonia quota is already exhausted, the only country that could export to Europe with free quota until the of end of June is India,” a source close to the matter comments.

“As far as hollow sections are concerned the Turkish quota is already exhausted. Other importers such as Russia, Ukraine and North Macedonia will see their quota fully exhausted this week. the countries that will be able to import within the free quota are Switzerland, and to a lesser extent, Belarus for which quota is forecast to run out in beginning of June. The Turkish quota should also be exhausted in early June for all other welded tubes categories such as small line pipes, medium-sized boiler tube, precision tube and even stainless welded. In summary, there are very few commodity products in gas pipes and hollow section that will be imported in free quotas in June as the usual big importers have more or less already exhausted their individual quotas and there won’t be much residual quota to use,” the source concludes.

Safeguard measures were introduced following a surge in imports into Europe triggered by the US Section 232 measures in 2018. Six categories of steel tube are affected by the regulations. These are seamless stainless tubes, other seamless tubes, welded gas pipes, hollow sections, large welded tubes and other welded tubes. 

The safeguard measures consist of tariff rate quotas (TRQs) for 3 years for each of the six product categories mentioned above. Each annual quota is calculated on the basis of the average of imports in the period 2015-2017 with a yearly increase of 5%. When this free quota is exhausted, a customs tariff of 25% ad valorem is applied. They will be valid for the periods February to end-June 2019, July 2019 to June 2020 and July 2020 to June 2021 (see Kallanish passim).

With the planned merger of Thyssenkrupp and Tata’s European steel holdings likely to fall apart (see other story), Thyssenkrupp CEO Guido Kerkoff said the company would proceed with a “strategic realignment” resulting in a “lean organization,” involving cuts in administrative costs and the launch of a new group-wide performance program including the cutting of 6,000 jobs.

Discussions with employee representatives on this matter would be initiated immediately, he said. The group currently has 27,000 steel employees.

“Our current performance is worse than expected,” said Kerkoff in a conference call Friday. “The bottom line today is that we are still suffering from the long-term consequences of our bad investments in Brazil and the US. The ‘Steel Americas’ adventure cost us a total of $8 billion.”

ThyssenKrupp’s board will propose that the group should no longer be separated into two independent companies and that an IPO of its “elemental and core” elevator business should go ahead. “The economic downturn and its effects on business development and the current capital market environment have led to the separation not being able to be realized as planned,” it stated.

ThyssenKrupp will also reintegrate its Steel Europe Business Area back into the group in the fiscal third quarter which would lead to an adjustment of the forecast for the 2018-19 (October-September) financial year. The board said this would mean an adjusted EBIT of Eur1.2 billion ($1.35 billion), up from the Eur1.1 billion previously estimated, and a net loss for the year.

The group will also increase its provisions for ongoing German cartel proceedings on heavy steel plate: ThyssenKrupp Steel Europe AG is, among other companies, the subject of preliminary investigations into alleged cartel proceedings in both heavy plate and flat carbon steel but noted that the proceedings into the field of flat carbon steel have for the time being been discontinued.

ThyssenKrupp will publish the adjusted group forecast with its Q2 report on May 14, it said.

Heute kam das Feedback der Europäischen Kommission zu dem geplanten Stahl-Joint-Venture zwischen thyssenkrupp und Tata Steel in Europa. 

Tata Steel und thyssenkrupp hatten am 30. Juni 2018 Vereinbarungen unterzeichnet, mit denen sie die Stahlgeschäfte in Europa zu einem paneuropäischen 50:50 Joint Venture zusammenfassen wollten. Heute hat die Kommission das geplante Gemeinschaftsunternehmen mit thyssenkrupp und Tata Steel erörtert. 

Ausgehend von den Rückmeldungen der Kommission wird immer deutlicher, dass die Kommission nicht beabsichtigt, das geplante Gemeinschaftsunternehmen zu genehmigen, da sie erhebliche Abhilfemaßnahmen in Form des Verkaufs von Vermögenswerten des geplanten Unternehmens erwartet. Beide Parteien hatten intensiv mit allen Regulierungsbehörden und insbesondere der Kommission zusammengearbeitet, um die Genehmigung einzuholen. Auf der Grundlage der von der Kommission veröffentlichten Mitteilung der Beschwerdepunkte wurde ein umfassendes Paket von Maßnahmen angeboten, das alle von der Kommission hervorgehobenen Problembereiche abdeckt. 

Bei den angebotenen Abhilfemaßnahmen wurde die Industriestrategie und der komplexe Charakter der Lieferkette berücksichtigt, um ein nachhaltiges Unternehmen aufzubauen, das in der Lage wäre, die strukturellen Herausforderungen der europäischen Stahlindustrie zu bewältigen. 

Die Rückmeldungen der Kommission auf der Grundlage des von ihr durchgeführten Markttests deuten jedoch darauf hin, dass es unwahrscheinlich ist, dass der Vorschlag trotz der umfangreichen Abhilfemaßnahmen genehmigt wird. 

Nach Ansicht von thyssenkrupp und Tata Steel würden weitere Zusagen oder Verbesserungen des Abhilfepakets keine Vorteile bringen und die wirtschaftliche Logik des geplanten Joint Ventures beeinträchtigen. Daher bieten beide Partner der Kommission keine weiteren Abhilfemaßnahmen an, um deren Anforderungen gerecht zu werden. 

Beide Unternehmen gehen mit großer Enttäuschung davon aus, dass die Europäische Kommission das Gemeinschaftsunternehmen nicht genehmigen wird.

Friday’s news that thyssenkrupp and Tata Steel have seen their steel merger fail due to the European Commission’s continued objections came as a surprise to many, but not to everyone.

In their statements (see related article), the companies note that they have offered a comprehensive package of remedies covering all the areas of concern highlighted by the Commission. ”However, the feedback from the Commission based on the market test it has undertaken suggests that it is unlikely to clear the proposal in spite of the significant remedies offered,” one statement reads.

“I’m not sure whether the Commission’s decision has my sympathy,” says analyst Christian Obst of Baader Bank, with an eye on the recent acquisition activity by ArcelorMittal in Europe. “Take a look at the market power of ArcelorMittal, and still they let them buy Ilva – and then AM announces plans to revive capacities there,” he says. And generally, he struggles to follow the logic of the competition commissioner because “… there is rather too much than too little competition in steel in Europe,” he says.

Some points in favour of the Commission’s objections are raised by Roland Döhrn, an economist of RWI Essen institute, and a regular speaker at Kallanish events. The merger would have brought definitely more market power to a combined group, on the purchasing as well as the selling side. And it is the selling side that the Commission is more concerned about, he thinks. “After all, both companies are relatively strong in processing and distribution, too, so I guess many steel consumers were not happy with the merger idea,” he says.

There is however a more general problem within the European steel industry which the merger would not necessarily have remedied. “The main problem is the overcapacities, and the merger would not have solved that, but initially strengthened it,” he says, indicating the long-term concession given by the companies to the workforce to maintain sites in Germany.

Given the somewhat unexpected and very sudden outcome, Döhrn suggests that the surprises may not be over. After all, he says, the companies’ press statements do not clearly state that they are ‘aborting’ the merger, but rather that “… the partners assume with deep disappointment that the European Commission ‘will not approve’ the joint venture.”

This leaves room for the interpretation that “… maybe they just want to exert pressure on the Commission to think again,” he says.

In simultaneous statements, both thyssenkrupp AG and Tata Steel Limited have confirmed that they expect the European Commission to block the proposed merger of the two companies’ European steel operations.

The long-discussed joint venture has been fraught with difficulties since the concept was first publicly launched in 2016. It had in fact been signalled as far back as 2014, Kallanish notes. It has seen criticism from local and national trade union groups especially, concerned about the effect on jobs and a variety of differences in business culture. The European Commission specifically has never appeared comfortable with the proposed deal.

“After today’s conversation with the European Commission, thyssenkrupp and Tata Steel expect that the planned joint venture of their European steel activities will not go ahead due to the Commission’s continuing concerns,” tk says in a statement on its website.

“The European Commission took the improvements of the submitted covenants proposed by thyssenkrupp and Tata Steel as an opportunity to conduct another market test. The new market survey did not resolve the Commission’s concerns, although the partners had offered significant further concessions,” the statement continues.

The statement goes on to say that any further commitments or improvements would adversely affect the intended synergies of the merger to such an extent “… that the economic logic of the joint venture would no longer be valid.”

Tata meanwhile highlighted that the commission’s feedback has indicated that is not intending to clear the proposed joint venture as it expects substantial remedies “… in the form of sale of assets of the proposed venture.”

The tk steel business will now be absorbed back into the main group, the German company says. Tata has given no indication as yet, what the future holds for its European operations.

Steelmakers ThyssenKrupp and Tata Steel expect the European Commission to block the proposed merger of their European steel assets, after remedies the companies suggested earlier this year did not assuage the commission’s concerns.

Thyssen and Tata submitted a package of commitments on 3 April, following an investigation into the venture in response to concerns about reduced competition in the specialty flat steel market. The commission said it would make a provisional decision by 17 June.

“Further commitments or improvements would adversely affect the intended synergies of the merger to such an extent that the economic logic of the joint venture would no longer be valid,” ThyssenKrupp said, adding that its executive board will now propose to the supervisory board that the planned separation of ThyssenKrupp Steel Europe from the company’s other operations should not go ahead.

ThyssenKrupp said “the economic downturn and its effects on business development and the current capital market environment” mean the separation cannot be realised as planned. The company expects to reintegrate steel assets in the third quarter of the current fiscal year.

ThyssenKrupp will instead push for an initial public offering of its elevator manufacturing business.

Over two years of talks were held about the joint venture with Tata, and the companies signed a definitive merger agreement on 30 June 2018.

Tata reportedly agreed to sell a galv line in Belgium, as well as part of its packaging business in south Wales, while ThyssenKrupp offered to divest a Spanish galv line.

Duferco International Trading Holding SA has bought Meridian Metal Trading Ltd., one of the UK’s largest independent steel stockholders and service centers, Duferco said.

The purchase aims to build on Meridian’s well-established presence in the UK and Irish markets to provide a long-term future for the business, it added.

Duferco announced the completion of an agreement with Meridian and its administrators, Alan Watson Graham and Matthew Ingram from Duff & Phelps, at the beginning of this week.

According to its note, “Meridian Steel Limited will complement DITH’s existing distribution and processing facilities which provide tailored services to a broad cross-section of industries including automotive, oil and gas, mining, residential and industrial construction, OEM, high value engineering uses and white goods manufacturing.” Meridian entered administration on April 2.

Established in 1987, Meridian is headquartered in Dudley, West Midlands, and employs around 170 people across five locations in the UK, comprising service centers in Guildford and Sheffield, and sales offices in Bolton and Newport, south Wales. The company is a leading supplier of galvanized, hot-rolled, cold-reduced, electro zinc and aluminized slit coil sheets and sheared blanks in both drawing and high-strength grades. Its Dudley warehouse has over 150,000 square feet of floor space.

Duferco’s global footprint includes 38 steel service centers with closely integrated trading and production activities. DITH in 2018 handled around 17 million mt of steel and raw materials.

— Annalisa Villa

EUROMETAL Regional Meeting of SSC from the region Austria + BENELUX + Germany was convened in Valkenswaard (NL) on 07 May 2019.

The meeting was hosted by MCB. a member of EUROMETAL since 2005.

MCB is a main Western European steel stockholding distributor in longs, flats, tubes, stainless and non-ferrous   having a  performing SSC operation located in Valkenswaard in the Netherlands.

Andreas Schneider from STAHLMARKT CONSULT presented an in-depth analysis od chances, challenges and threats facing today and in future the automotive sector.

Present slowdown in automotive is specifically strong for passenger cars in Germany, less in other parts of Europe. The market for commercial vehicles, on the contrary, is continuing a positive trend.

A key trend was highlighted: For typical German car brands, car production is growing outside Germany and slowing inside Germany, following a new trend: build where you sell.

Regarding automotive suppliers the picture is much more diversified. In fact, in order to analyze a specific market situation you have to go down to grass roots: who supplies whom? in order to understand  specific situations and trends.

Challenges facing EU automotive industry are many fold: Brexit, the new USMCA, section 232 applied to cars, weak Chinese market, slump in Turkish economy, e-mobility

What does this imply for the steel supply chain?

• In past years growth of automotive part suppliers was higher than growth of OEMs
• Trend to higher car production outside Germany was partly balanced by higher direct export by Tier-1 to Tier-3 suppliers
• But global market share of German automotive part supliers has stopped rising
• Big suppliers are following OEM’s into markets outside EU. Corresponding steel demand is transferred outside EU
• Pressure on automotive suppliers producing only in Germany or EU
• These trends may negatively impact the business of German or EU SSC

As a conclusion and considering the prevailing trends, Andreas Schneider indicated that in the course of the second half 2019, steel demand from automotive industry in EU might start to recover again.

In a longer term, it might be excluded that EU comes back to the economic dynamics of last years, but a steady market level might be considered as the most probable scenario. Growth in flat steel demand will happen in automotive demand outside EU. Supply chains and steel mix will undergo serious testing regarding the impact of structural changes in automotive industry.

The meeting was continued by a survey among SSC of the “Arbeitskreis” about missed working days due to incidents/ accidents, etc.

Also the position of SSC in the supply chain to the markets for strip mill products was presented by EUROMETAL as well for the EU market as for the regional market Austria+BENELUX+Germany.

All presentations made at this meeting are available to EUROMETAL members in the login area *Knowledge Center* on eurometal.net.

The working group meeting in Valkenswaard was attended by 30 participants.

ArcelorMittal expects European steel demand to move down by a maximum of -1% this year, compared with 2018, Kallanish learns from the company’s presentation presented in its latest financial results.

The outlook is somewhat more negative that those issued by the World Steel Association (+0.3% year-on-year) and Eurofer (-0.4% y-o-y).

The company posted stable sales in Europe in Q1 2019 compared with Q1 2018. Margins have been strongly compressed however despite steel shipments having increased by almost 1 million tonnes y-o-y to 11.5mt thanks to the inclusion of Ilva’s operations in the figures.

Operating income in Europe stood at a mere $11m, down from almost $600m in Q1 2018.

The company stressed that revenues per tonne in Europe showed the sharpest deterioration for the group. “Our Europe segment was impacted by a negative price-cost effect offset in part by a 9% comparable increase in steel shipment volumes,” the company notes. (Including the impact of ArcelorMittal Italia, steel shipments increased by 14.4%).

Earlier this week ArcelorMittal announced its intention to cut some 3mt of production at its European flat product units. This is in order to face the challenges posed by the market, both in terms of demand and continous pressure from imports.

On the pricing front the company comments: “…. we note that the differential between Europe and China HRC price levels is unusually low. Typically such unusually low differentials have not persisted for extended periods.”