Salzgitter: Q1 steel output declines 7.5%, but expects demand to rise

German steel and technology company Salzgitter produced 1.58 million mt of steel in January-March, down 7.5% year on year, but it said May 10 that it expected demand to increase in the rest of 2023 as supply chain problems ease, especially in Europe’s automotive industry.

The downturn in shipments and lower prices brought an 11% year-on-year decline in Salzgitter’s Eur3.3 billion sales over the first quarter, the company said in releasing its first-quarter results. The group said that despite lower revenue and political and economic uncertainties, it delivered Eur290 million EBITDA and Eur184 million pretax profit.

Its Steel Production unit, which makes hot-rolled, galvanized and coated cold-rolled coils, sections and tailored blanks, produced 1.27 million mt of steel. Its rolled output amounted to 1.12 million mt, 100,000 mt lower on the year, and steel shipments fell 50,000 mt to 1.45 million mt.

Roughly 1 million mt, or two-thirds, of the company’s Q1 steel output was made at Salzgitter Flachstahl in Lower Saxony; 250,000 mt, or 16%, of that comprised the output of sections manufacturer Peiner Träger, with both mills integrated in the Steel Production unit.

Steel Processing, represented by steel pipe and heavy plate making assets, contributed to the consolidated steel production 311,000 mt, 11,000 mt less than in the same quarter last year. The unit’s rolled output, at 276,200 mt, slipped by 15,000 mt, while shipments grew by a comparable amount to 433,100 mt.

The Steel Processing unit’s portfolio includes line pipes, precision and stainless steel and nickel-based tubes; its heavy plate production is provided by the Ilsenburg mill, which specializes on high-strength and sour-gas resistant plate, and the mill operating out of Mülheim an der Ruhr and producing plate for onshore and offshore pipelines. This unit’s input material is provided through a 30% stake Salzgitter has in Hüttenwerke Krupp Mannesmann, an integrated iron and steel works in North Rhine-Westphalia.

Shipments by Salzgitter’s Trading unit contracted by a quarter to 788,400 mt in Q1 as demand for steel tended to be weak in the majority of the unit’s markets, except for the US, and the increase in banks’ interest rates put a damper on trading. The unit sells Salzgitter steel and tubes and those of other producers.

Salzgitter;s Technology unit groups three machinery manufacturers, with 90% of sales generated by filling and packaging equipment supplier KHS focusing on expanding its international presence. Klöckner DESMA Elastomertechnik manufactures injection molding machinery for rubber and silicon products, and DESMA Schuhmaschinen specializes in machinery for the shoe industry. The unit generated Eur27.2 million EBITDA, up from Eur19 million in Q1 2022.

Outlook

The companies of the Steel Production business unit expect higher demand supply chain problems ease in Europe’s automotive industry.

The cost of raw materials is expected to remain stably high, with eased energy prices to remain influenced by political decisions. To secure its supply of pig iron, Salzgitter approved the relining of Blast Furnace A at Flachstahl and awarded the main contract. Production losses from the assembly phase of the project due later this year will be offset through slab stockpiling and by restarting currently idled Blast Furnace C at the same mill.

Sazlgitter is seeing an order backlog in the strip steel business and expects a recovery in demand for sections. The markets served by its Steel Processing business are showing positive signs as well, while the sound demand for large diameter pipes should benefit the company’s plate production.

SALCOS

Q1 disbursements for capital expenditure were appreciably higher year on year due to spending on SALCOS — the Salzgitter Low CO2 Steelmaking transformation program. Negotiations with supply companies have reached an advanced stage, and the final investment budget has been affirmed for the program’s first stage.

Until the end of 2026, the company will be investing Eur2.3 billion in the transformation of primary steel production. Through the funding approval awarded in April 2023, SALCOS will be supported in its first stage with Eur700 million from the German government and Eur300 million from the federal state. Together with Eur1 billion funds released by the company itself, the first development stage of SALCOS has been secured, and construction is in progress, according to Salzgitter CEO Gunnar Groebler.

The acquisition in February of Must-Metalle-Container-Recycling contributes to Salzgitter’s scrap strategy ahead of scrap-intensive unfolding of SALCOS, while the sale of the Berg Pipe Group took place in line with the best-owner principle, with the two transactions being a blueprint for further activities in the same vein.

Author Ekaterina Bouckley