Salzgitter has lowered its 2024 forecast for the steel market as signs of a recovery are weaker than originally anticipated, the German steel producer said during its Q1 2024 earnings call on May 13. The company now expects sales of around Eur10.5 billion ($11.30 billion) for full-year 2024 against the previous guidance of Eur10.5-11 billion.
“Neither a continuation of the slight recovery tendencies discernible at the start of the year, nor the originally anticipated gradual brightening of the market environment have so far materialized,” Chief Financial Officer Birgit Potrafki said. “An economic rebound in Germany and in Europe is only likely to manifest at a later point in time and be weaker than predicted a few months ago,” he added.
“In Germany, our key customer markets of construction, automotive and mechanical engineering in particular experienced a partly pronounced phase of weakness throughout the first quarter. This had, and continues to have, a direct impact first and foremost on the performance of our group’s steel-related companies whose results are not a reason for us to be satisfied,” he said.
In Q1 2024, total crude steel production of the company was 1.68 million mt compared with 1.56 million mt registered over the same period in 2023, with order intakes and shipments down across all of the company’s units. Overall company sales went down to Eur2.7 billion compared with Eur3 billion in Q1 2023.
The results of the companies forming part of the Steel Production Business Unit mirrored the ongoing sluggish economy in the first quarter of 2024 with the company’s crude steel production in Q1 being 1.37 million mt against 1.27 million mt in Q1 2023.
“We anticipate that shipments in the strip steel business will be marginally lower due to the persistently subdued demand from the non-automotive sectors. Crude steel production will be slightly curtailed and run on the basis of three-furnace operation,” the company stated.
In terms of the sections business, the company has forecast that volumes are gradually set to stabilize over the course of 2024 following a muted start to the year. In Q1, the unit produced 324,000 mt of crude steel against 310,00 mt over the same period of 2023, with order intake dropping to 462,000 mt from 702,000 mt a year earlier.
For the Steel Processing Business Unit, the company predicted that the economy will remain weak as it expects heavy plate order intake to range around the low year-earlier level, with prices under intense pressure. Pipe plate production is likely to benefit from the awarding of large-diameter pipes projects in the second half of the year at the earliest.
Gunnar Groebler, Salzgitter AG’s Chief Executive Officer said in the earnings call that the oil and gas sector has been “surprisingly low in the first quarter, some pickup to be seen now but relatively low.” The company noticed delays in infrastructure projects compared with their estimations such as the German hydrogen network, which saw a consequent drop in their sales of pipes as well as a decrease in prices.
The company said that its capital-intensive transformation towards its low carbon production SALCOS projects is on schedule. The CEO also stressed that there was large demand for low steel carbon products, which is key for its customers to cut CO2 emissions. When asked if the delays in the hydrogen network could be a problem to deliver SALCO’S project, he stressed that SALCOS can also work with natural gas until hydrogen becomes available, which would already lead to a 60% CO2 reduction.
Salzgitter’s SALCOS
Platts, part of S&P Global, launched its carbon-accounted price assessments in May 2023 following the market trend of demand for lower-carbon steel.
Platts assessed Northwest European hot-rolled carbon-accounted coil stable on the day at Eur770/mt ($829.213/mt) ex-works Ruhr May 10. The assessment was calculated in line with the sum of the Platts daily carbon-accounted steel premium (CASP) and Platts daily hot-rolled coil price in Northwest Europe.
