Cognor earnings surge, sees scrap-based cost advantage turning

Cognor says the competitive advantage of scrap-based steelmakers over iron ore-based mills is narrowing after the Polish firm recorded a massive surge in third-quarter earnings, Kallanish notes.

The competitive advantage currently enjoyed by electric arc furnace mills over their blast furnace-oxygen converter-based counterparts could soon reverse after the gap in feedstock costs between the two routes narrowed in Q3. This would put pressure on Cognor’s profitability and semi-finished steel sales tonnages, it observes.

Cognor nevertheless increased crude steel production by 16% on-year in Q3, while overall sales, including of scrap, rose 4.5%, the firm says without providing tonnages. However, finished steel sales fell 4%.

Revenue surged 93% on-year in Q3 to PLN 716.9 million ($180.7m) and net profit soared to PLN 113.48m versus PLN 1.5m in Q3 2020. Spreads widened considerably in the quarter thanks to the faster rise in steel prices compared to scrap prices.

The extraordinary steel market boom seen in Q3 has prompted Cognor to delay the finalisation of two large investment projects until Q1 2022.

In the nine months through September Cognor thus reported a 57% on-year revenue surge to PLN 2.02 billion, while net profit ballooned over nine-fold to PLN 238.2m.

Adam Smith Germany