Category: Latest Updates

European distributors and flat service centres saw their shipments fall during the first four months of the year, according to the latest data published by distributors’ association EUROMETAL.

Flat service centres saw shipments decrease -1.9% y-o-y during the period to the end of April, while multi-product distributors saw a fall of some -3.9% y-o-y, Kallanish notes.

Despite the reduction in shipments, both service centres and multi-product distributors registered higher stocks in April compared to the same period twelve months before. The stock volume index closed at 116 in April 2017, compared to 104 in April 2016 (average 2015 = Index 100), EUROMETAL says.

This indicates that while real demand has suffered somewhat so far in 2017, apparent demand has remained relatively firm.

Thyssenkrupp Steel Europe has hinted that there could be further consolidation following its potential merger with Tata Steel, analyst firm Jefferies said in a note Thursday, suggesting that Thyssenkrupp’s Material Services could be “combined” with Klöckner’s distribution services.

“Interestingly, TKA [Thyssenkrupp] noted additional consolidation post-Tata is possible, further improving the regional market and also admissible under antitrust rules,” the note about Thyssenkrupp’s roadshow hosted by Jefferies said. The analyst firm highlighted that according to Thyssenkrupp, neither the ArcelorMittal-Ilva nor a Thyssenkrupp-Tata Steel tie-up would lead to “immediate” capacity closures.

In addition, Thyssenkrupp’s management has emphasized that any operational measures at Thyssenkrupp are likely to be “less severe” in a merger situation, according to the note.

However, Jefferies said that the Material Services unit, including the metals distribution and Italian-based special steel maker Acciai Speciale Terni, is no longer likely to be a core division. “We believe a combination with KCO [Klöckner] could finally consolidate Euro distribution and is increasingly likely as Tata is a core supplier to KCO,” said Jefferies.

A potential merger of the German industrial firm’s steel arm and Tata Steel’s European business is getting closer to being finalized after Tata reached an agreement over its pension contributions last month. This is now pending to be signed off by the pension regulator. The likely structure will be a 50-50 jv with Thyssenkrupp possibly saving €500 million in synergies as well as seeing benefits from steel pricing.

The financial results of the German steelmaker are likely to be pressured in H2 as raw material prices take around six months to be reflected in the company’s books “and with ~50% of contracts half year or longer, H2 margin expectations were squeezed,” said Jefferies.

Laura Varriale, PLATTS

The minister of economic development has signed the decree that authorized the special commissioners to sell Ilva, Italy’s largest steel company, to AM Investco Italy, owned 85% by ArcelorMittal and 15% by Marcegaglia, the government stated late Monday.

AM Investco’s victory came after days of protests by trade unions that on Monday struck in Genoa, and on Thursday in Taranto, as the industrial plan foresees a sharp downsizing of the staff. However, the government statement said AM Investco has pledged to improve proposals to employ around 10,000 workers.

The statement said “an exclusive negotiation phase will be held between the special commissioners and the successful tenderer, with the possibility to improve the binding tender”.

In these negotiations the commissioners will aim, among other things, to increase the numbers to be employed, to establish a research center at the Taranto steelworks, and to identify and pursue the most sustainable and efficient technological solutions with the least environmental impact including the introduction of DRI.

According to the official government statement AM has expressed willingness to reduce the time for the realization of environmental investments at Taranto, to assess the economic sustainability of DRI ironmaking, and not to modify its plans in the event of any constraints imposed by anti-trust authorities.

The government’s decision came regardless the fact that over the weekend the rival joint venture Acciai Italia – involving JSW Steel and Delfin (the holding company of businessman Del Vecchio) – increased its bid to around €1.85 billion and, in order to have the unions on their side, added that it would “immediately” hire 9,800 employees. It also extended this offer to 30 September. An extension that could still play an important role in case of withdrawal of AM in case of antitrust problems, sources commented to Platts.

On Monday late afternoon before the decree went out, JSW and Delfin wrote another letter to the government saying that the offer of Acciai Italia was “the only one that would have allowed the closing of the operation and the award of the company in the quickest time” not only as the unions were keen to agree with their terms but also as “for sure they don’t have antitrust problems”. The JV asked also the attorney general for an opinion on antitrust matters.

In the meantime the government also managed to get back from Switzerland the so called “Riva treasury” – the €1.2 billion seized from Ilva’s former owners, the Riva family, which now will be used by Ilva to do the upgrades necessary to meet environmental standards.

Ilva was placed under court administration in 2013 after magistrates seized the assets belonging to the Riva family, amid allegations that toxic emissions were causing high rates of cancer. The government took over administration of the business in 2015 to try to save jobs and clean up the hot end of the integrated steelworks in Taranto. In 2016 the government put Ilva on sale via an international tender. AM Investco and Acciai Italia submitted binding offers to financial advisor Rothschild on March 6, in what became the most heated M&A bid of the year in the steel industry.

Annalisa Villa, Steel Business Briefing 

Traders active in southern Europe have welcomed the decision by Ilva’s administrators to appoint the ArcelorMittal/Marcegaglia consortium as the winner of the race to take over the Taranto-headquartered mill, Kallanish learns from sources.

“I believe it is good news as with this acquisition ArcelorMittal will occupy the space that would have been occupied otherwise by a new competitor in the European market,” a senior trader comments.

As reported, the other consortium bidding for the acquisition of Ilva was a joint venture lead by Indian steelmaker JSW, currently among the main suppliers of coil into Europe.

Traders in southern Europe believe that ArcelorMittal will work towards increasing the pricing power of European mills, while the boost in production will be limited. “I believe they will find it difficult to boost output at the blast furnace, but certainly they will focus on supplying the rolling lines located in Genova and Novi Ligure with slabs from their other operations in Europe to increase vertical integration further,” a trader notes.

ArcelorMittal earlier explained that it plans to boost the output of Ilva to 9.5 million tonnes of finished steel products in 2018, significantly above the 5.9mt sold by Ilva in 2016.

Another trader located in Italy concludes that independent service centres in the country might fear that prices from Ilva could increase slightly as a result of the integration into the ArcelorMittal group. However, on the imports front the Indian suppliers could increase slightly their aggressiveness and traders will have more space to offer alternatives to European supplies.

kallanish.com

Sales at German steel distributors saw a 19.1% month-on-month fall in April, whereas stock levels remained largely stable, reflecting the limited buying activity last month, latest figures from the stockholders’ association Bundesverband Deutscher Stahlhandel (BDS) show.

Sales amounted to 858,012 mt in April, of which long products saw an 18.7% drop from the previous month to 272,080 mt while flat products fell to 491,538 mt, down 21.2%. On a year-on-year comparison sales decreased 10.1%.

Stock levels for April, which showed fairly high levels over the past months compared to previous years, saw a slight drop of 1.2% from March to April at 2.4 million mt, but a y-o-y increase of 3.6%.

“Inventories are still high: stockholders say not only that they are full but also their external stocks are high and in the Ruhr area there is no more room to put anything,” said a source close to a mill.

Broken down by product, longs showed a 6.7% y-o-y increase to 860,229 mt and flat products grew by 6% y-o-y to 1.5 million mt. Other products showed a contrary y-o-y development, decreasing from 66,401 mt to 60,298 mt, thus explaining the rather modest overall y-o-y growth rate of 3.6%.

Sources in the flat steel market in particular told Platts that buying activity was limited in April while stocks remain high as steel service centers bought more than usual in Q4 and early Q1.

Figures for Q1 this year show that stock levels amounted to 2.44 million mt, up 8% on year and remaining fairly high compared to previous years. Average figures topping those levels were last seen in Q3 2014, when stocks stood at 2.51 million mt. However, sales volumes also grew on a quarterly comparison, rising 6.4% y-o-y to a monthly average of 963,284 mt. Similar averages were also last seen in 2014, when monthly sales levels reached 962,793 mt in Q1 that year.

Laura Varriale, PLATTS

Digitization the Asian way – with a swathe of the latest IT solutions rolled out across various sites in a matter of weeks – might not be suitable for Europe with its older infrastructure, plants and old-school workers. In addition, digitization itself is really only a transition period, overshadowed by the bigger movement called “Industry 4.0” in Germany, “Industrie du Futur” in France and “Catapult” in the UK, where the mastering of other processes and tools (e.g. automation, sensors, changing a workforce’s mindset) are just as important, S&P Global Platts heard during Eurofer’s recent European Steel Day 2017.

Limited funding, the increasing age of firms’ capital assets and personnel, a cautious approach to change, plus over-careful premeditation were cited as the key features preventing European steelmakers from making choices on IT solutions rapidly, as is the case in Asia.

“It’s much easier if you build a new plant in China where you start with an absolutely new technology. In Europe, the industry is comprised of mostly brownfield enterprises with existing IT technologies. We cannot replace them from one moment to another,” said Harald Peters, head of the Measurement and Automation division at VDEh-Betriebsforschungsinstitut (BFI) – the institute for applied research and development in steel technology.

European governments and companies should focus more on investing in infrastructure starting with fast internet access for all, according to Reinhard Bütikofer, a member of the European parliament’s industry research and energy committee.

The issue of insufficient investment activity and funds emerged repeatedly throughout the event. “The EU Commission has spent €20-22 million ($22.4 million-$24.7 million) on future-orientated projects over the last 10 years. It’s nothing if you want to create breakthroughs,” said Peters.

The Research Fund for Coal and Steel (RFCS) is the only EU government fund dealing directly with steel research. For European steel companies, it is difficult to get funding from other sources, some said.

“As a steel industry, we tried to apply several times to Manufacturing the Future (a program run by UK government agency, EPSRC, investing £800 million/year ($1.03 billion) in engineering and the physical sciences) because they have much more money than RFCS – one call at Manufacturing could fetch double the RFCS funding we have for one year, ” Peters said. “But it turns out that if you want to get this funding, you have to achieve 35% energy savings with your proposed solution: it is impossible to do this with one technological change or application, as the steel industry is already running at near- optimum. The message is that we need more instruments for funding research.”

“Germany has led the way in this area with Industry 4.0. Its steel workers have been very constructive in their attitude with regard to digitization and the government is putting money on the table to push digitization, but if you compare this with what the Chinese are doing, that’s [the latter] a hundredfold [larger],” Bütikofer said.

Andreas Goss, CEO of ThyssenKrupp Steel Europe, said he had been to Asia many times and one thing was clear to him. “Even without contemplating it, they are embracing digitization as a way of life. I don’t want us to fully replicate this, but as we are facing a competitor who acts in this way we must at least ponder and make a decision to what extent we want to go that way,” Goss said.

Peters shared his own encounter with sorting out Chinese-style digitization. “One Chinese company ordered an IT solution for a research organization and asked for it to be ready in two weeks. After two weeks, it requested of the organization: ‘Please roll out your IT solution across our many different sites.’ That’s the difference; in Germany, we think again and think once more again, trying to foresee the consequences and in the meantime the others [Asians] are just doing it,” he said.

That said, Francisco Verdera Mari, director at the European standardization body CEN CENELEC, cautioned against doing things with the same vigor and speed. “Technology companies, selling to steel companies, are often driven by the solutions that they sell. It’s important to see exactly which solutions steel companies and steel buyers need and then develop the case for these specific IT applications. Otherwise, there is a risk of investing a lot of money in technology that is not adapted to our sector needs and leaves us without a result,” he said.

According to Mari, more study may be needed. “We are facing completely new challenges. Industry 4.0 is beyond just digitization: the steel sector has been digitalizing processes for a long time, but now new elements are being introduced such as sensors talking to sensors,” he said. “And who knows if data obtained by sensors is not going somewhere else, maybe to an industrial spy, a competitor, a tax authority or someone who wants to know what you are producing. There are still many issues with regards to cyber security and functional safety.”

Ekaterina Bouckley, PLATTS

L’associazione europea delle aziende del commercio dell’acciaio si confronta a Made in Steel

RHO (MI) – La competitività per le aziende del commercio dell’acciaio passa attraverso la forza delle dimensioni.

Questa è una delle tesi emerse durante il meeting di EUROMETAL, l’associazione europea del commercio di acciai e metalli non ferrosi, che si è svolto a Made in Steel.

Focalizzato sugli centri servizio dell’Europa meridionale, il convegno ha necessariamente posto l’accento sull’Italia, evidenziando come, nel mondo dell’acciaio, «non si sia ancora giunti a quel livello di concentrazione che caratterizza invece molti altri settori, dal farmaceutico all’alimentare – sottolinea Cesare Viganò, vice presidente di Eurometal e chairman del SSC Southern Europe Work Group -. L’esperienza della joint venture tra l’italiana CLN e ArcelorMittal dimostra come un player di grandi dimensioni possa essere protagonista sul mercato, anche quello più competitivo».

Durante l’incontro di Eurometal si è parlato anche delle norme antidumping, pensate dall’Ue per contrastare la concorrenza sleale sui prodotti siderurgici.

«È giusto guardare con attenzione all’effetto che questi interventi hanno e potranno avere sullo scenario comunitario – evidenzia il direttore generale dell’associazione di categoria Georges Kirps durante il convegno -. Ricordiamoci però che già quindici anni fa l’Unione Europea utilizzò strumenti simili per limitare gli ingressi di merce sul continente».

Durante il meeting (sono intervenuti anche Emanuele Norsa di Kallanish Commodities e, per un saluto, il presidente di Assofermet Roberto Lunardi), sono anche stati approfonditi alcuni aspetti del “White Paper” di Eurometal, vademecum del settore commerciale dell’acciaio.