Klöckner plays down Europe price recovery
Klöckner & Co is remaining low-key about the pace of price recovery in Europe. Its chief executive, Guido Kerkhoff, says he is hesitant to describe the development too positively, given the market is still shaky in its effort to stabilise.
“I do not yet see a positive trend on the horizon,” he told Kallanish during a conference call on Wednesday. Prices are picking up but very slowly, because customers remain reserved with making big investments. “The market is still delicate and needs to be preserved and nurtured with care, so to speak,” he said.
It would take a government investment incentive programme to ensure activity picks up. The German-based company is therefore pinning its hopes on the new German government. This is currently being formed in a coalition of the conservative CDU and social democrat SPD parties, as well as possibly one further partner party.
Obvious sectors for investment are residential construction, infrastructure and defence, Kerkhoff said. The latter field is cited increasingly as a cause for public spending. Klöckner recently installed an advanced laser facility in Kassel, mainly targeting agricultural machinery, mechanical engineering, and defence. Moreover, if the war in Ukraine came to an end soon, and the county regained peace, its reconstruction would be a task for foreign steel suppliers, Kerkhoff noted.
The company’s US business had to concede even steeper price falls than in Europe last year, by 40%, but managed to handle them reasonably well due to its shift to higher value-added services. “This would not have been possible six or seven years ago,” Kerkhoff concluded.
Christian Koehl Germany
Klöckner sports new image as metals processor company
Klöckner & Co is promoting a new image as it is developing from a steel distributor to a service centre and higher value-added business company.
The German-based group “is seen as a steel distributor, but actually we have become a metals processor company,” chief executive Guido Kerkhoff said during a conference call on Wednesday.
The company has in recent years significantly shifted its focus to its higher-value processing and metalworking business in its core markets of North America and the DACH region – Germany, Austria and Switzerland. It divested the distribution-only sites in western Europe and in Brazil. In 2024, the group already generated over 80% of its sales from the steel service centre and higher value-added business.
Through targeted investments, distribution centres were transformed into production and processing hubs for higher-value metal solutions, Kerkhoff pointed out. “Despite the difficult environment last year, we have continued our investments, rather than postponing them, which sent a positive signal,” he said.
In Switzerland, a country with a night ban for road haulage, the company optimised logistic links between railway and road haulage, using trains at night, and reloading to trucks for close-range delivery in the morning. That allowed it to close several warehouses used only for close-range distribution.
The group’s many activities in North America, especially, have spurred the development, Kallanish heard Kerkhoff say during the call. One major move there currently is the firm’s investment in a flat-rolled aluminium processing facility on the campus of Aluminum Dynamics LLC (ADL), a subsidiary of Steel Dynamics Inc. (SDI).
Another signal for Klöckner’s new image is the relocation from Duisburg to Düsseldorf, although it did not highlight this during the call. Duisburg, the unofficial capital of Germany’s rust belt, was Klöckner’s headquarters for decades. Along with the demise of the city’s steel industry and overall social environment, Klöckner moved to a new home in Düsseldorf last year, a city known for arts, fashion, and techno culture.
Christian Koehl Germany
German distributors still postponing restocking: Klöckner’s Kerkhoff
Distributors in Germany remain reserved when buying larger volumes of steel for their inventories, according to Klöckner & Co chief executive Guido Kerkhoff.
The point of replenishing the shelves has not yet been reached, Kerkhoff said during a conference call on Wednesday when asked by Kallanish for the status quo of distributor and service centre buying behaviour. Regular business with a continuous turnover of products is not yet in sight. “I think the status quo is that people buy only as much as they are expecting to sell,” he replied.
He alluded that prices are starting to see some gentle recovery, but real demand is yet to improve. Nevertheless, he is not completely pessimistic. “Warehouses are still relatively empty, but, yes, I do believe that the point of return to business will come,” he noted.
His estimation is reflected in the outlook the company gives for the fourth quarter, and ultimately for the whole of 2024. In Europe, it sees a drop in real steel demand by 1-3%, with the transport/automotive segment pointing more steeply downwards than construction, mechanical engineering, or household appliances. The one sector with relatively stable demand is energy. “It does not look like activity will increase, but we are at an already low level,” Kerkhoff said.
The group is overall more upbeat about performance and prospects in its other big market, the USA, but here, too, sees a slight dip of between 0% and 1% in demand from its customer industries. However, “this is quite normal in an election year with the insecurities this brings,” he concluded.
Christian Koehl Germany
Klockner & Co Q3 shipments rise, sales fall on low steel prices FY24 look positive
In Q3 Klockner & Co increased shipments to 1.1 million tons, up 2.8% on the prior-year quarter and up by 3.4% to 3.4 million mt in the first nine months of 2024, the Company announced on Nov 6 in its earnings.
The year-on-year shipments increase is mainly due to the acquisitions in Mexico and the US, but due to the lower steel prices, the company’s sales fell to Eur1.6 billion in Q3 down from the Eur1.8 billion recorded in the same period of 2023 and down by 3.8% to Eur5.1 billion in the first nine months of the year.
Despite the continued weak demand in Europe and the steel price correction during large parts of the reporting period, Klockner & Co expects an overall positive fiscal year 2024.
Klöckner & Co continues to forecast EBITDA between Eur120 million and Eur180 million and expects a strong and significantly positive cash flow from operating activities, although this is likely to be below the prior-year level. From January to September the company’s EBITDA reached Eur179 million, down by Eur86million resect the same period of the year before.
“In a challenging market environment, we have made major progress in implementing our Group strategy,” Guido Kerkhoff, CEO of Klöckner & Co SE said. “Through targeted investment in selected sites in the US and Germany, we have been able to expand the higher value-added processing and metalworking business.. In addition, winning the German Sustainability Award once again is a great confirmation of our success in decarbonizing the steel industry.”
Klockner & Co expanded its higher value-added business, in the US, targeted investments have enabled the Charlotte and Dallas sites to evolve from a pure distribution operation to a higher value-added fabrication and metalworking operation. Further progress was also made in Germany, for example with the investment in a fully automated sawing and drilling system in Landsberg, aiming to increase Klöckner & Co’s profitability and reduce its dependence on volatile commodity markets.
On digitalization and automation the quantity of digital quotes increased by more than 27% in the first nine months of 2024 compared to the same period of the previous years the company continues in its progress towards its vision of “zero-touch” and minimum manual intervention.
Platts, part of S&P Global Commodity Insights, assessed hot-rolled coils, down in Q3 from Eur635/mt registered on July 1 to Eur545/mt recorded on Sept 30.
Since the beginning of the year, HRC prices dropped by Eur135/mt from Eur690/mt registered on Jan 02 to Eur555/mt ex-works Ruhr November 5, down Eur5 on the day.
Klockner & Co SE is one of the largest producer-independent distributors of steel and metal products and one of the world’s leading steel service center companies. With its distribution and service network of around 120 sites, primarily in North America and the “DACH” region (Germany, Austria and Switzerland), Klockner & Co supplies more than 60,000 customers.
