Polish distributor’s earnings soar, foresees higher mill costs

Bowim saw consolidated sales fall 3% on-year in the first quarter to 127,588 tonnes, but earnings surged. The Polish distributor foresees rising costs for mills that will translate to higher prices for end-users, not all of which will be able to accept.

Revenue surged 29% to PLN 404.1 million ($110.5m). The continuation in Q1 of demand and favourable market conditions that started in Q4 2020, coupled with restricted supply, meant distributors with sufficient finances and ability to react to customer requirements were able to report strong earnings, Bowim says.

Costs grew by only 15.5%, slower than revenue. This helped net profit soar to PLN 32.05m from PLN 2.27m a year earlier.

The expected stabilisation in prices in the first quarter did not occur, with values still rising and reaching new historic highs, the firm points out. A major reason for this is that capacities have been slow to come back online following last year’s idling, while some capacities, such as ArcelorMittal’s Krakow blast furnace, will not return at all.

“The forecasts indicate European steel buyers will need to be ready to accept higher steel costs, also due to the transformation of production processes (furnaces fuelled by hydrogen, which is neutral in terms of CO2 emissions),” Bowim observes in a report seen by Kallanish. Poland is particularly affected due to its dependence on thermal coal, which is becoming increasingly expensive to consume in the EU. These costs are likely to rise further in 2021, the distributor adds.

Although the Covid-19 pandemic has impacted demand in some end-use sectors, there is simultaneously a significant restriction in supply. “European mills have not coped with orders in recent months and are not able to satisfy demand,” Bowim observes. The Covid-19 impact will also be seen in public infrastructure investments in Poland. “The situation is additionally complicated by a level of price increases not seen for years, which raises the question of whether the construction industry will be in a position to accept these prices.”

Adam Smith Germany