Nornickel sees stainless steel demand slump, protectionism slowing nickel recovery

The significant drops in stainless steel end-use demand in the US and the EU are prompting increased calls for protectionist measures and slowing down the recovery in the stainless steel industry, which accounts for 70% of the nickel applications, Russian company Nornickel said in its latest market outlook.

Nornickel estimates primary nickel consumption in the US and EMEA falling by 13% this year from 2019 to 47,000 mt and 178,000 mt respectively.

In Europe, while stainless mills are already ramping up production, the impact of the end-use demand contraction remains the biggest concern. Germany, Europe’s largest economy, saw double-digit declines in orders for machinery, electrical appliances and motor vehicles in March.

In the context of the coronavirus pandemic, the European Steel Association (EUROFER) has asked the Commission to slash the quota covered by the safeguard measures for steel, and implicitly stainless steel, by 75% for a period of six months. If approved, the reduction in H2 2020 could result in over 200,000 mt stainless output that could be produced locally instead, the equivalent of 7% of the EU’s half-year production.

The measure will top 6% to 18.9% provisional anti-dumping duties on hot rolled stainless steel products from China, Indonesia and Taiwan the EU imposed in April 2020. The anti-subsidy investigation against Indonesia and China is also underway with a decision due in Q3 2020.

Both the EU and the US are also large consumers of Chinese stainless end-use products. Apart from steel, China exports large volumes of fabricated stainless products, with about a quarter of its stainless production exported either directly or as finished products, Nornickel estimates.

Weak demand from these major end-use markets slows down China’s stainless industry recovery and the financial aid allocated by the Chinese government to the nation’s economy of 2.5-3.5% of its GDP cannot fully mitigate that impact. Nornickel forecasts nickel demand in the Chinese stainless sector will decrease by 4% this year to 1 million mt Ni.

Capacity ramp-ups with stainless rebound in view

Beyond 2020, the company expects the stainless steel industry to recover in line with the global economy. It sees potential for further growth, especially in developing countries where nickel consumption per capita is still low.

Last year, global stainless steel production absorbed 1.74 million mt of nickel, or 71% of the 2.44 million mt total consumed.

Pointing to brighter prospects are some Chinese producers’ pursuit of capacity ramp-ups. In February, Linyi Steel Investment started the construction of the 2.4 million mt/year facility due for commissioning by year-end. The company plans to produce 300 series (350,000 mt), 400 series (280,000 mt), and Duplex stainless steel (70,000 mt).

Also this year, Heibei Bishi Group plans to break ground on a plant with a 1.3 million mt/year 300 series capacity in Naiman, Inner Mongolia.

The country that seems to be even more incentivised to develop stainless capacity is Indonesia. While stainless exports from China declined by 320,000 mt, exports from Indonesia increased by 330,000 mt in 2019.

The availability of large volumes of lateritic ore with high nickel content and the integration of nickel pig iron plants with stainless steel mills in Indonesia has further bolstered the lowest cost industry.

So far, Indonesian stainless production has maintained at the 2018 levels (2.2 million mt) with the primary nickel demand at 173,000 mt Ni in 2019, but the figures may change should new capacities come on line, noted Nornickel.

— Ekaterina Bouckley

ArcelorMittal Italia at lowest-ever output, sources say future in doubt

Italian industry sources this week expressed concern that ArcelorMittal could withdraw from its Italian asset, the former Ilva works at Taranto, which is at its lowest-ever production rate due to COVID-19 related restrictions and a European steel market slump.

ArcelorMittal has an option to withdraw from the troubled works in November. If it does so this could threaten the survival of the Taranto plant, in capacity terms the largest flat carbon steelmaker in the European Union.

“The situation around Ilva is very confused at the moment. It is very unclear what is happening as the company is working at such low rate. It is true that the market is very weak, due to the COVID-19 outbreak, but it seems more a political move to keep the plant at such low production level. Either Mittal is trying to have more help from the Italian government as a lot of mills need some help due to the Coronavirus outbreak or it just wants to leave,” a senior industry source commented.

AM Italia is operating only two of four blast furnaces (numbers 1 and 4) and with most of its cold end lines temporarily shut down, union sources told S&P Global Platts on Thursday. The Taranto site in southern Italy is producing around 7,500 mt/day of crude steel, several sources said.

According to union sources, ArcelorMittal’s Genoa and Novi Liguri sites, in the north of Italy, are also working below capacity. In Genoa the company has two hot dip galvanizing (HDG) lines with a combined capacity of 900,000 mt of galvanized products a year. The Genoa site was expected to reopen one of its HDG lines next week but it will not re-open, and the other was temporarily shut down this week, the union sources said. In Genoa the company is producing tinplate only, at a rate of 130,000 mt/year tinplate on a 200,000 mt/year line. In Novi Liguri the company has two HDG with a combined capacity of 900,000 mt/year and neither are working, according to the union sources.

Unions in the north of Italy have started strike action as the number of temporary layoffs at the company’s north Italian site has reached 800 workers out of 1,000, while in Taranto unions are planning a strike starting Monday as the number of temporary layoffs is now at 6,000 workers, out of a total of 8,000.

Lease-and-purchase accord

ArcelorMittal agreed to buy Ilva, Europe’s biggest single-site steel firm, in 2018 under a lease-and-purchase agreement for Eur1.8 billion ($2 billion) and to invest another Eur2.4 billion in cleaning up and modernizing the plant dogged by environmental issues. Following legal issues with the Italian state, ArcelorMittal in early March this year reached an accord with the Italian authorities over the future of the former Ilva group, amending the existing lease and purchase agreement. The agreement left ArcelorMittal with the right to withdraw from its Ilva purchase by November 2020, subject to the payment of a fine of Eur500 million. The lease-and -purchase agreement may extend until May 2022.

“Mittal, when he bought Ilva, saw an opportunity to make his company the strongest in south-eastern Europe but then so many problems started with the Italian government. Now with COVID-19 and demand unlikely to bounce back any time soon in Europe I think he’s really considering to take advantage of the latest agreement and to withdraw from Italy,” a senior source close to the mill commented.

Italy is the EU’s second biggest steelmaking nation with 23 million mt crude steel production last year and ArcelorMittal Italia is the nation’s largest producer with an installed capacity of around 11 million mt crude steel a year. Due to the coronavirus outbreak Italian mills temporarily shut down for around a month with the exception of ArcelorMittal Italia and Arvedi, the second largest Italian steel plant. ArcelorMittal Italia was kept operative because it uses the blast furnace production route, which is harder to shut down temporarily.

Currently all Italian mills are operative and working at around 50% of their capacity. European steel industry association Eurofer said in its latest report that it does not expect market conditions to improve before the fourth quarter of 2020 or early 2021, although much will depend on the length of the industrial lockdown in steel-using sectors. ArcelorMittal declined to comment when contacted by Platts Thursday.

— Annalisa Villa

O’Neal Steel to begin operations at Missouri facility

US-based distributor O’Neal Steel will begin operations at a new facility in St. Joseph, Missouri, on 1 June, Kallanish reports

The new metal distribution centre will add approximately 64,000 square feet of warehouse distribution space to O’Neal Steel’s operations.

“We are proud that O’Neal Steel has chosen St. Joseph for its next distribution facility. O’Neal Steel’s expansion to Missouri will support multiple industries statewide and show that our state remains a prime location for leading companies,” Missouri Governor Mike Parson said in a news conference on 20 May. “This announcement shows that even in the midst of Covid-19 there are still good things happening and Missouri is still a top location for businesses.”

“We are thrilled about our expansion into the St. Joseph market,” says O’Neal ceo Stephen Armstrong in a statement. “This new facility opening aligns with growing demand in the area, and we are extremely well-positioned to support that demand.”

O’Neal Steel is headquartered in Birmingham, Alabama, and operates 19 distribution centres throughout the US.

Italian minister fears ArcelorMittal Italia departure

The Italian minister of Economic Development Stefano Patuanelli has called a meeting with ArcelorMittal Italia and the unions regarding the negotiations with the company for the purchase of former Italian steelmaker Ilva. This is happening amid workers protests and strikes at ArcelorMittal Italia’s Novi Ligure, Genova and Taranto facilities as the company is preparing to lay off 1000 more workers, Kallanish learns from sources close to the matter.

In an interview with local broadsheet La Stampa, Patuanelli said that the company appears to have no intention of staying. There is a significant delay in the industrial plan and unjustified temporary layoffs. These are signals of a possible departure, the minister says.

Due to the coronavirus crisis and the collapse in orders, production levels at the Taranto site remain too low to allow over 600 laid-off workers to return to their jobs. This is on top of 1000 new temporary layoffs. In a letter to the ministry of economic development seen by Kallanish, the unions highlight the reduction to minimum steel output and the stoppage of almost all downstream equipment at the ArcelorMittal Italia plants. They also comment on the delay in investment and the condition of the facilities at the plants. ArcelorMittal Italia would offer no comment on the matter when approached by Kallanish.

ArcelorMittal Italia signed a new agreement with the Italian authorities earlier this year, The settlement contains a clause allowing the company to leave the former Ilva by the end of the current year subject to the payment of defined sum of money.

German steel stockholder April sales volumes drop heavily: BDS data

Sales volumes at German steel stockholders took the brunt of weak demand in the steel supply chain and dropped heavily in April, according to latest data published by the German steel stockholder association BDS.

Sales of flat steel weakened 31% from March to April this year to 387,238 mt, responding to shutdowns of the key customer group — the automotive industry — during the height of the pandemic in Germany. In year on year comparison, sales volumes also decreased heavily by 28%.

Long steel volumes saw an on-month drop of 13% to 282,261 mt, with a yearly drop of 3.2%. Although demand for construction steel weakened overall and uncertainty over future demand softened long steel prices in April, the construction sector did not see as widespread closures as the automotive industry in Germany.

Germany started to ease lockdowns in late April, but the steel industry is still waiting for demand to pick up. Steel producers remain on lower production rates with no major plan to ramp up significantly by summer as end-customer markets ramp up proved to be slow.

Volumes on stock increased slightly in April with long steel stocks growing 2.6% to the highest volume of the year for the product group so far at 836,140 mt. In on-year comparison, long steel stocks fell 7%.

Flat steel stocks saw a slight increase of 1.5% from March to April to 1.2 million mt, while the year-on-year change amounted to a 19% drop.

Since around mid-March, steel buyers have been in a “wait-and-see” mode, unwilling to book large orders amid the continued market uncertainty.

With the majority of German steel businesses having introduced short-time working schemes, where the government provides financial aid for workers pay amid reduced shifts, retaining liquidity has increasingly become an issue for the entire supply chain.

Since the beginning of March, the hot-rolled coil EXW Ruhr price — a benchmark for flat steel and heavily affected by the auto shutdowns — decreased around 12% to a six month low at Eur425.50/mt May 19 according to the daily Platts TSI index. Rebar prices weakened after intermittent price gains in late March as scrap supply tightened due to restrictions on scrap collection. While European scrap is firming again after a brief drop late March, rebar did not follow the movement and fell since early April by 4.2% to Eur455/mt EXW NW Europe May 15, according the weekly Platts TSI Northwest rebar assessment.

— Laura Varriale