Cognor foresees reduced competitiveness after posting record profit

Cognor says it could reduce billet sales if the trend continues of scrap prices increasing faster than basic oxygen furnace mill feedstocks, thereby making the Polish electric arc furnace-based steelmaker less competitive.

The firm produced 2.8% on-year less crude steel in the first quarter as all its meltshops were already running at full capacity, it says without providing tonnages. Consolidated shipments fell only 0.7%.

The feedstock cost position of EAF producers versus BOF mills remained positive, but there are signs of deterioration. “If the current trend which manifests itself with a faster increase of scrap metal price as compared to the increase of the mix of main input materials used by BOF manufacturers continues, Cognor may lose its competitive advantage at some point in time, which could result in a decline of sales of our billets,” the firm says in a report seen by Kallanish.

Conversion spreads grew considerably in Q1 due to the faster pace of billet and finished steel price growth versus scrap prices. This was further supported by lower prices for certain production components, as well as by lower consumption of various inputs as a result of completed efficiency investments. This was slightly offset by a 6.3% and 5.4% fall in scrap and finished steel shipments respectively, Cognor says.

First-quarter revenue rose 27% on-year to PLN 584.1 million ($155.1m), while Ebit soared 250% to PLN 66.77m and net profit hit a quarterly record PLN 45.9m versus only PLN 2.8m last year.

Cognor expects to be eligible for a total of PLN 15.2m CO2 emission rights compensation in 2021 based on the act adopted by the Polish parliament in 2019.

Adam Smith Germany