Category: Latest Updates

The current “relaxation” of the European Commission’s safeguard measures on steel imports – with a 5% enlargement of import quotas in February this year, another upward revision of 5% scheduled for July 2019 and another in July 2020 – operates out of step with the anticipated decline of the EU steel market in 2019, European Steel Association Eurofer said Tuesday.

Eurofer is “a key stakeholder in the safeguards process so will argue on the procedure,” said Karl Tachelet, Eurofer’s director of international affairs, on a webcast with reporters. The situation in which the current 3-year safeguard was first set up, becoming effective from July 2018, has “changed dramatically since,” he said.

In mid-2018 prices for hot-rolled coil in Europe were at a “healthy” level around Eur545/mt ($609/mt), but have fallen in Southern Europe to around Eur460 and remain depressed, according to Tachelet. The excess steelmaking capacity problem globally “is getting worse and worse” as capacity being built to replace imports, for instance in the Middle East and North Africa, will impact EU producers particularly in southern Europe, he said.

“Algeria could become an exporter of rebar to the south of Europe,” he said.

With higher imports and a depressed market, with expectations of EU apparent steel consumption falling by 0.4% over 2019, more steelmakers could follow ArcelorMittal’s lead in cutting output, announced this week, Tachelet said.

The OECD recently put global steel overcapacity at 550 million mt, Eurofer reported.

“The 15% increase in import quota allowed in the final safeguard measures risks squeezing the EU steel sector, as it will be exposed to rising import pressure in a shrinking market,” Eurofer said in a statement.

“The impact of imports having surged over 2018 has squarely hit home. In an EU market that grew by 3.3% last year, imports grew by 12.6% and domestic deliveries by only 1.7%,” Axel Eggert, director general of Eurofer, said in the statement. “This represents yet further loss of market share for domestic producers.”

Imports, at 9.6 million mt, accounted for 24.7% of EU steel demand in Q4 2018, according to Eurofer.

— Diana Kinch

Der Umsatz von Klöckner & Co ist im 1. Quartal 2019 preisgetrieben um 4,6 % auf 1,7 Mrd. € angestiegen. Das operative Ergebnis (EBITDA) lag mit 34 Mio. € unterhalb des Wertes aus dem 1. Quartal 2018 von 56 Mio. €. Während Klöckner & Co im 1. Quartal des Vorjahres von einem sehr positiven Preisumfeld profitieren konnte, wurde das Ergebnis in den ersten drei Monaten des Geschäftsjahres 2019 durch negative Preiseffekte belastet. Zusätzlich entwickelte sich auch die Nachfrage, insbesondere durch die Schwäche im europäischen Automobilsektor, rückläufig. Das Konzernergebnis belief sich auf -10 Mio. € nach 21 Mio. € im Vorjahresquartal. Das Ergebnis je Aktie betrug entsprechend -0,10 € (Q1 2018: 0,21 €).  

Zentrale Bausteine der Strategie „Klöckner & Co 2022“ sind die Digitalisierung der Liefer- und Leistungskette sowie der Ausbau der unabhängigen Industrieplattform XOM Materials. Der über digitale Kanäle erzielte Umsatzanteil wurde im 1. Quartal 2019 weiter auf 27 % (Q1 2018: 19 %) gesteigert. Auch XOM Materials ist weiter dynamisch gewachsen. So belief sich die Zahl der bei der Plattform unter Vertrag stehenden Händler und Kunden im April 2019 auf 17 bzw. 230. Zudem wurde bereits im 1. Quartal 2019 der Launch von XOM Materials in den USA realisiert. Die Digitaleinheit kloeckner.i ist im Berichtszeitraum in die Beratung von externen Unternehmen eingestiegen. Ein erstes Beratungsprojekt mit einem DAX-30-Unternehmen wird bereits umgesetzt.  

Vor dem Hintergrund negativer Preiseffekte sowie der rückläufigen Nachfrageentwicklung – insbesondere im Automobilgeschäft – geht Klöckner & Co davon aus, im zweiten Quartal ein operatives Ergebnis (EBITDA) von 50 bis 60 Mio. € und im Gesamtjahr ein EBITDA von 180 bis 200 Mio. € vor wesentlichen Sondereffekten zu erreichen.  

Bezogen auf das EBITDA nach wesentlichen Sondereffekten werden diese negativen Auswirkungen durch den Verkauf eines Standortes in Großbritannien mit einem voraussichtlichen Effekt von mehr als 30 Mio. € größtenteils kompensiert.  

Quelle: Klöckner & Co SE

At the 7th YISAD Flat Steel Conference & SteelOrbis Market Talks held in Istanbul on April 30, Alexander Julius, presidency member of the European association of metals distributors and service centers EUROMETAL, said that in the second half of 2018 apparent steel consumption in the EU rose by 1.4 percent, while imports rose much more strongly, by 15.3 percent, despite of preliminary safeguards, while EU domestic steel supplies fell by 2.5 percent, all year on year. According to EUROMETAL, the share of imports in the apparent steel consumption in the fourth quarter of 2018 totaled 25 percent, while the 2.6 percent rise in steel demand in 2018 benefitted mostly third-country suppliers with imports rising by 12.3 percent. Mr. Julius stated that apparent steel consumption in the EU is forecast to increase by only 0.5 percent in 2019, followed by a 1.2 percent rise in 2020.

According to Mr. Julius, Europeans are not in need of imports, with all of their demand being supplied by EU steel mills and steel service centers. He went on to say that non-EU supplies have no major impact on the supplies of EU steel service centers. The EU steel service centers remain cautious in view of unpredictable price developments, lower demand and the short lead times of European supplies versus longer import lead times, he said.

Commenting on Turkey’s exports, the EUROMETAL official pointed out that, in addition to replacing blocked competitors, higher Turkish exports have been driven by the poor domestic economy in Turkey, which is likely to continue in its current state. He said that, although Turkey is making efforts to diversify its export markets, it faces barriers in several markets, including the high-growth markets in Asia. He underlined that not only Turkey but also others are having the same thought and are exploring alternative countries, resulting in shifting of competition to those countries where there is tremendous price pressure and low consumption volumes.

Mr. Julius stated that, if the UK leaves the EU, all the trade agreements between the UK and every other single country will be invalid and this also applies to trade measures, which will have to be reviewed. He pointed out that most of the steel-related safeguard measures will be copied from the EU and out of 72 trade measures, 42 will remain in place. On the other hand, the EUROMETAL official said that the EU will need also to modify its trade measures if the UK leaves because they were designed for 28 states.

Ve dnech 25. a 26. dubna 2019 se v Praze uskutečnilo zasedání EUROMETAL, mezinárodní organizace sdružující obchodníky s hutními materiály.

Téměř stovka specialistů v oboru, ředitelé a klíčoví představitelé hlavních hráčů na trhu, projednávali nejnovější poznatky a trendy v oboru.

Akce se konala v hotelu Grand Majestic Plaza a součástí doprovodného programu byly i oslavy 190. let výročí založení společnosti Ferona – generálního partnera.

Dalším hlavním partnerem setkání pak byla společnost XOM Materials GmbH, která na trh přichází s evoluční myšlenkou možnosti prodeje hutních polotovarů prostřednictvím tzv. „on-line digitální tržnice“.

Tim Milde, COO (Chief Operations Officer) společnosti XOM Materials k tomu uvedl, že digitalizace se stává nevyhnutelným procesem i v případě prodeje
hutních výrobků.

Firmy by podle něj neměly zůstat dlouho stranou a měly by být hned na začátku tohoto procesu proto, aby jim „neujel vlak“. Jeho slova potvrdil i Georges Kirps – do 1. dubna generální ředitel EUROMETAL.

Ten naznačil, že ti, kteří budou digitalizovat již dnes, budou mít v budoucnu významnou konkurenční výhodu.

Korea has requested that a World Trade Organization forum discuss the concept of “particular market situation” (PMS) in anti-dumping investigations, following use of this trading instrument by the US, particularly in the steel trade, an informed source with knowledge of the May 1 meeting of the WTO Committee on Anti-Dumping Practices said Thursday.

At the same meeting at WTO’s Geneva headquarters, Russia argued that the EU’s new Anti-Dumping Regulation, introduced in 2016, and its amendments in 2017, are inconsistent with WTO rules, the source said.

Korea and Thailand separately raised concerns in Wednesday’s WTO meeting about the US Commerce Department’s use of PMS legislation in investigations involving imports of various steel products from their countries, according to the source. Korea has called for this topic to be put on the agenda of the next anti-dumping practices and trade remedies meeting, to occur in early November. China and Brazil also support further discussion on this matter.

Under WTO’s anti-dumping agreement, an AD duty may be imposed where investigators show that goods are being imported at a price less than their home market price, or “normal value.” However, in the case of PMS calculations, investigators may use alternatives to the home market price (such as prices in third markets or “constructed” prices based on production costs in the home country plus administrative, selling and general costs, and profits), and it is the validity of this approach that is now being challenged. Typically, PMS could be used in cases where there are no domestic sales of a specific product, meaning that “normal value” cannot be calculated.

Under Section 504 of the US Trade Preferences Extension Act of 2015, the US Commerce Department can address market distortions in the production of foreign merchandise as part of its calculation of dumping margin. These market distortions include those resulting from the activities of state-owned enterprises and other state actors.

The first US investigation employing the expanded PMS method was used in 2017 in Commerce’s investigation on oil country tubular goods (OCTG) from Korea then expanded to investigations on large diameter welded pipe, heavy walled rectangular welded carbon pipes and tubes, and corrosion-resistant steel. Korea and Indonesia have since raised concerns about the Commerce Department’s use of the methodology in AD investigations targeting their exports, alleging it is discriminatory, used without justification and had resulted in much higher product dumping margins, according to the source.

Thailand also complained at the meeting about the US use of PMS, using factors such as global steel overcapacity, in its investigation into imports of Thai circular welded carbon steel pipe and tube, the source said.

Russia took aim at the EU’s new Anti-Dumping Regulation and its amendments during the meeting, also on the basis of the concept of “normal value,” according to information provided by the source.

The regulation replaces the previous basis upon which the EU determined normal value for imports from non-market economy countries with a new methodology for determining normal value where “significant distortions” exist, i.e. cases where reported prices or costs, including the costs of raw materials and energy, are not the result of free market forces because they are affected by substantial government intervention.

Russia and China expressed concern at the meeting that this methodology is inconsistent with WTO rules. This was however denied by the EU.

Russia also criticized Mexico for maintaining anti-dumping duties on imports of Russian steel based on its application of a non-market methodology in the investigations, the source said.

— Diana Kinch

A French court in Strasbourg has determined that British Steel can acquire the troubled French EAF-based steelmaking plant of Ascoval in Saint-Saulve, northern France. The takeover is expected to be finalised in mid-May, Kallanish learns from a statement by the court.

The takeover brings to an end the uncertainty over the future of the plant after former owners Ascometal had filed for bankruptcy four years ago. The plant had been run as a joint venture by former owner Vallourec and Asco Industries before the sale of Asco Industries to Schmolz + Bickenbach. That sale did not include the Saint-Saulve plant, which has been up for grabs since then.

British Steel is now set to use the plant to feed its rolling mills for special long products and rails located in the UK, France and the Netherlands.

Ascoval can produce between 250,000-600,000 tonnes/year of continuous cast bars depending on the product mix. It is equipped with one electric arc furnace and in 2018 its output reached 225,000 tonnes, according to the company’s website.

Germany’s carmakers have reduced their production activity so far this year, and have considerably lowered their intake of steel accordingly. The extent of this however is not all that clear, market sources tell Kallanish.

While some say that this was already visible in December 2018, even a major player such as Klöckner & Co was caught off-guard by the true impact, and forced to issue a profit warning last week. According to Klöckner ceo Gisbert Rühl, German car production has fallen by -19% year-on-year. Opinions on this can vary however, depending on timing, and the parameters used in comparing the data.

Regarding the effect on strip, one manager tells Kallanish that he has heard of a figure of -35% to -40% less being ordered from colleagues at some service centres. “Normally, -5% used to be called a disaster, so I’m not sure how to interpret what I hear,” he says.

At Klöckner, certainly an experienced company with many activities associated with flat products, its (strip) service centres are especially seeing difficulties, while rebar bending shops do fine. “We had actually expected stable call-off figures from the automotive industry, but they were amended,” Rühl admitted when talking to Kallanish.

Given that production activity in the mechanical engineering industry is still quite healthy, Klöckner could divert sales in that direction, where, however, “… it is mostly a spot business at lower prices,” Rühl says.

This development is naturally bringing down steel prices, especially for higher grades (see separate article). One manager primarily active in the galvanized sector tells of the bad habits that big customers demonstrate when the market softens. They not only call off lower tonnages, “… but may even refuse to call off anything at all despite existing contracts, and go buying at spot prices at someone cheaper,” he claims.

Turkish finished steel consumption plunged -38.7% on-year in the first quarter to 5.4 million tonnes, according to Turkish Steel Producers Association (TCUD) data monitored by Kallanish. Finished steel output fell -25% to 7.8mt.

This indicates the fall in March consumption was at more or less the same rate as the decline in January-February, but the drop in production deepened from -23.6%.

Long product consumption slumped -50% in Q1 to 2.1mt and flats use was down -28.6% to 3.3mt. Output of longs fell -34.1% to 4.3mt and flats production declined -9.4% to 3.5mt.

Lower domestic consumption was partly offset by increased exports. In March alone overall steel shipments abroad rose 14% on-year to 2.1mt. These were driven by a 35.2% surge in flats exports to 583,000t and an eight-fold growth in semi-finished product shipments to 270,000t, but longs exports fell -15.2% to 836,000t.

Imports of steel in March, meanwhile, were down -42.7% to 879,200t. Flats imports declined -26% to 498,000t and longs imports were down -15% to 119,000t.

For every 100t of steel imports, 194t were exported in March, compared to 120t in March 2018.

In Q1 Turkish steel exports rose 15.5% on-year to 5.8mt, driven by a five-fold increase in semis exports to 596,000t and 41% growth in flats shipments to 1.7mt. Longs exports, however, fell -8.8% to 2.5mt.

Turkish billet exports in Q1 were propelled by surging demand from Africa, while rebar exports slumped -14% on-year to 1.32mt due to the retreat from the market of the US and Canada (see Kallanish passim).

E-commerce trend : Klockner share of sales via webshop 27% in Q1/2019 vs 19% in Q1/2018

In an otherwise disappointing first quarter (see separate article), one thing that went well for Germany’s Klöckner & Co was the development of its sales via e-commerce and other digital activities. The share of sales achieved via webshop has now reached a considerable 27%, up from 19% in the first quarter of 2018, ceo Gisbert Rühl said at a conference call joined by Kallanish.

The German-based distribution group has been promoting for some time the platform known as ‘Xom’ that it set has up for the wider industry to join. To make the platform really independent, Klöckner intends to lower its own stake to 25% in the long run. It is currently talking to investors and will “… close a first financing round in the coming weeks.” Rühl explained that the process of wooing investors is not all that easy because Klöckner finds itself in an untypical niche.

Normally in the IT sector, “… you have a small start-up, which then gains a corporation as investing partner,” Ruhl says. In the case of Klöckner’s Xom, this has rather worked the other way round, he adds. “It scares off venture capital firms, which shun investments [… in the situation] where a strong corporation is leading the way,” he explained. In fact, “… we did have an offer from the USA from someone who wanted to take 40% – but we could not do that because it would go against the idea of an independent platform,” he added.

Earlier this week, Klöckner announced that its digital subsidiary, iKlöckner, has intensified its cooperation with longstanding digital partner diva-e, which it describes as “… Germany’s leading Transactional Experience Partner (TXP), with a history of 20 years.“ The partnership has most recently developed the online shops into platforms through which 30 third-party vendors now sell complementary products.

Steel distribution group Klöckner & Co has ended the first quarter with a net loss of €10 million ($11m). This outcome was still unforeseen as late as mid-March, when the group expected revenues to rise this year, Kallanish notes.

At a conference phone call five days after the group issued an ad-hoc profit warning with a downward-adjusted guidance, ceo Gisbert Rühl was clear in his statement. The company had had a “… very bad start” to the year, he said, essentially because the group’s characteristically strong business with the automotive industry suffered from reduced production at carmakers.

Although weakening demand from automotive has been a topic among German steel players since late last year, the dip has apparently turned out to be more pronounced than foreseen. According to Rühl, car sales are -19% below those in the previous year, which is especially painful for the group’s strong German service centre business. Sales within the mechanical engineering industry are also affected, to a lesser extent, while business with construction continues to flourish, especially in Switzerland.

On its sales volume of 1.5 million tonnes. Klöckner actually achieved an increase in revenues of 4.5% to €1.7 billion on higher prices year-on-year. It had however still suffered from the recent price deterioration, which lead to windfall losses, Rühl explained.

The group fared quite well in the US market, as it achieved slight growth against the overall trend, as the market in total fell by -6% in Q1, Rühl added. Windfall losses however were also an issue for the group in America. “We have three main profit engines: automotive, USA and Switzerland. If two out of three fail, we have a problem,” Rühl said.