EU HRC market gears up for mill consolidation
The European hot-rolled coil (HRC) market is gearing up for potential consolidation over the coming year, as mills grapple with tough market conditions.
The share prices of key European producers have rallied in recent days, despite continued weakness in HRC prices. Global steelmaker ArcelorMittal’s shares traded above €22/share ($24/share) on the Luxembourg Stock Exchange at 12:30 GMT today, up from €19.70/share on 10 September. This strength is partly attributable to the expected release of economic stimulus measures in China, and the US Federal Reserve’s recent interest rate cut, sources suggest. But market strength could also be because of growing talk that a new wave of consolidation is on its way, fuelled by decarbonisation efforts and the strained positions’ of some mills.
There has long been talk that steel coil producer Tata Steel Netherlands could be sold, after the Dutch state agreed to contribute to its decarbonisation spend. Recent difficulties at Germany’s ThyssenKrupp have also sparked suggestions it could be an acquisition target. Czech Republic energy company EP Corporate Group (EPCG) recently completed its purchase of a 20pc stake in ThyssenKrupp’s Steel Europe division, and could increase this to 50pc in the near future. EPCG owner Daniel Kretinsky may be seeking a strategic partner to help run the business, sparking talks that other mills could bid for a stake in the company.
ThyssenKrupp shares were trading at €3.20/share on Deutsche Borse Xetra at 12:30 GMT today, up from €2.78/share on 10 September.
Concerns over strong positions in niche markets, particularly tin plate, saw Tata Steel and Thyssekrupp call off their proposed joint venture in May 2019. But the market is in a different position now. Some mills have reduced capacity but new entrants are trying to join the market as green producers. And the global market is oversupplied, putting European producers in a difficult financial predicament, especially given their capital-intensive efforts to decarbonise. In the case of ThyssenKrupp, expectations that the mill will reduce its production footprint could partially alleviate potential competition concerns in the event of a takeover.
Thyssenkrupp lines up Steel supervisory board chairman successor
Following the departure of several members of the executive and management boards of thyssenkrupp Steel last week, the next chairperson of the supervisory board could be Ilse Henne, chief executive of thyssenkrupp Materials Services.
Although an appointment has not yet taken place, parent thyssenkrupp AG says its executive board has proposed Henne, the company tells Kallanish upon request. Henne became ceo of the distribution division after the departure of Martin Stillger. She has been with the division for a while. As head of a unit in the Benelux, she improved the coordination of local companies in Belgium and the Netherlands to achieve synergy.
Stillger took his leave due to a disagreement with tk AG ceo Miguel López, insiders say. They also believe that Henne has a much better standing with López, as she not only became a divisional ceo, but earlier also a member of parent AG’s board. Her potential new appointment would support that assumption.
Her earlier appointment at tk Materials was one of two decisions that were preceded by a standoff in the supervisory board at the AG, between the representatives of shareholders and of employees. The decision came about on the basis of chairman Siegfried Russwurm executing his double vote. The same move served to release the sale of a 20% stake in tk Steel to Czech energy firm EPCG.
Both decisions were followed by harsh criticism from union and employer representatives, who called it a violation of the corporate culture of fair co-determination. The ongoing dispute between tk AG’s management and employer factions came to a head with last week’s mass exodus from tk Steel’s board.
In a statement this week, union IG Metall reiterated that the confidence between employees and ceo López was shattered. It asked López and Russwurm to return to a sensible dialogue with employees, rather than push through decisions against the other faction. The union mentions a campaign branded “López is not our ceo”, which has been signed online by several thousand members.
Christian Koehl Germany
Thyssenkrupp to cooperate with BlueScope on low-carbon steel research
The focus of the joint research will be on smelting units and direct-reduced iron (DRI) plants, it added.
The cooperation between the two companies will continue for four years, intended to enhance the understanding of smelting technologies and to optimize the management of Thyssenkrupp’s new DRI complex in Duisburg, now under construction.
BlueScope Steel has already gained experience in these technologies by operating smelters in New Zealand using DRI made from iron sand, Thyssenkrupp said.
Thyssenkrupp already had plans to replace one of the four blast furnaces at its Duisburg site with a DRI plant and two downstream smelters in 2027, a company spokesperson told Fastmarkets. This would allow the company to make its first steps toward carbon-neutral steel production, Thyssenkrupp added.
The other three BFs will gradually be replaced with climate-friendly alternative technologies by 2045, the spokesperson told Fastmarkets.
The new plant will have capacity for 2.5 million tonnes per year of DRI. The company also planned to be able to produce around 5 million tpy of low-carbon steel by 2030.
Thyssenkrupp has obtained €2 billion ($2.2 billion) in German state funding for its green steel transformation project.
The DRI module at Duisburg will be powered by green hydrogen, which is seen as a strategic renewable fuel in Europe.
According to the hydrogen import strategy approved by the country’s Federal Cabinet at the end of July, demand for hydrogen and hydrogen derivatives in Germany will amount to 95-130TWh in 2030.
“In the smelters, DRI and aggregates are melted to form hot metal,” Thyssenkrupp said. It added that two identical smelters, each electrically powered and with capacity for 100MW, were being built to process the 2.5 million tpy of DRI output.
Thyssenkrupp added that, ideally, renewable electricity would be used to power the smelters.
“The smelters offer numerous advantages in an integrated metallurgical network,” Thyssenkrupp said. “They enable the production of equivalent ‘electric furnace iron’ while all other process stages, including the steel mill, remain in place, and [further] investments in plants and equipment are minimized.”
The company added that, by retaining all processes from the steel mill stage onward, Thyssenkrupp would continue to provide its customers with “the entire range of steel grades in the usual high quality.”
According to the company, the use of a smelter offers a flexible raw material basis, since DR pellets can also be used in the DR plant.
Another advantage of this technology was that the molten slag could be processed further and used in the cement industry, thus contributing to recycling management.
Demand for green steel remains slow in Europe
Demand for flat green steel was still sporadic in Europe. This was a result of both seasonal factors and relatively low green steel uptake across supply chains, industry sources have told Fastmarkets.
During the assessment week ended August 15, offers of green steel with Scope 1, 2 and upstream Scope 3 carbon emissions of less than 0.8 tonnes per tonne of steel were reported at €200-350 ($221-386) per tonne from European suppliers, stable week on week.
But due to the slow demand, producers were apt to give discounts. As a result, a booking of flat steel with carbon emission content of around 0.6-0.8 tonne per tonne of steel was reported at €170-200 per tonne in late July/early August.
Fastmarkets’ latest weekly assessment of the green steel domestic, flat-rolled, differential to HRC index, exw Northern Europe, was €170-200 per tonne on August 15, narrowing downward from €170-250 per tonne seven days earlier.
Hüttenwerke Krupp Mannesmann owners prefer sale over stake increase
Salzgitter and thyssenkrupp Steel, co-owners of Hüttenwerke Krupp Mannesmann (HKM), have no interest in taking over the 20% stake in the Duisburg mill still owned by Vallourec.
In fact, thyssenkrupp Steel, the largest owner with 50%, has now made it clear that it also wants to divest its stake. “We are aiming for a sale of [our stake in] HKM,” thyssenkrupp chief financial officer Jens Schulte told Kallanish during a conference call on Wednesday. He referred to a statement to that effect made last week by Sigmar Gabriel, the supervisory board chairman at tk Steel.
The decision makes sense from the view of thyssenkrupp, given the company recently decided to reduce its capacity and intends to sell 50% of its tk Steel division to EPCG. The Czech energy group recently bought an initial 20% and continues negotiations to take another 30%. While thyssenkrupp and EPCG did not disclose details of the transfer, Manager Magazin writes that EPCG paid €140 million ($155m) for its 20%, citing inside sources.
As far as Salzgitter is concerned, its chief executive, Gunnar Groebler, said on Monday the company does not intend to increase its 30% shareholding in HKM, although it earlier expressed an interest in doing so. Salzgitter has not specified if it wants to divest or keep it stake.
Pipemaker Vallourec has long kept its stake because HKM’s slab is ideal for making tube. It was however reported last year to be seeking to divest its interest. Retaining the stake would be a reasonable path for Salzgitter, too, considering its Mannesmann Tubes business, in addition to the obvious kinship of roots in the traditional Mannesmann company.
Christian Koehl Germany
ThyssenKrupp Schulte to close seven sites
ThyssenKrupp Schulte will close seven sites as part of its restructuring drive, market sources told Argus today.
The company will close stockholding warehouses in Braunschweig, Rheine, Munich, Nuremberg, Freiberg, Mannheim and Frankfurt, according to multiple market sources.
Last month the company said it would be closing sites and cutting around 450 jobs, but did not reveal which sites would be affected.
“Fundamental structural adjustments are necessary to better respond to market changes in the future”, the company said when it announced the restructuring, citing declining materials demand and increasing demand for materials-related services. All the impacted locations are stockholding sites and do not provide additional processing.
ThyssenKrupp Schulte is part of ThyssenKrupp Materials Services and distributes stainless, carbon and non-ferrous metals from around 40 locations.
A ThyssenKrupp Materials Services spokesperson said it could not comment on the affected locations, as “discussions with the respective co-determination bodies have only just begun and the details of the transformation are the subject of these discussions”.
“At ThyssenKrupp Schulte we are aiming to transform the business model in order to increase the company’s profitability and enable Schulte to respond even better to changing customer needs,” the spokesperson added.
Price gap of ‘green’ and ‘gray’ steel to close steadily until mid-2030s: Thyssenkrupp
Prices of reduced carbon emission steel and conventional steel will continuously align until the 2030s, Thyssenkrupp CEO Miguel Ángel López Borrego said Feb. 2.
At a public shareholder meeting, Lopez said that customers of the German steel unit of Thyssenkrupp would understand that prices of lower carbon emission steel would be at a premium, particularly once it will be produced with green hydrogen.
“However, also gray steel will become more expensive with rising carbon costs,” Lopez said.
Platts assessed the current premium of carbon-accounted HRC at Eur140/mt Feb. 2., up Eur15/mt day on day.
One of the main costs will be green hydrogen, and the company aims to run its new direct-reduced iron plant, which will replace one blast furnace, to be fully run by green hydrogen by 2029. Thyssenkrupp will finalize tenders for the supply this year. Lopez added that he expects Thyssenkrupp to form more joint ventures for hydrogen in the years to come.
Steel JV talks progressing
Shareholders of Thyssenkrupp, which owns Germany’s biggest steelmaker, Thyssenkrupp Steel, questioned the availability of energy for the decarbonization of the steel operations.
“The energy question is the key question,” Lopez said. “That’s why we are favoring a JV with EPH.”
He said that the current favorite option for the steel unit would be a joint venture with Czech energy provider EPH owned by Czech billionaire Daniel Kretinsky. He refused to elaborate on the ongoing talks despite requests by multiple shareholders at the event.
Lopez also said Thyssenkrupp would still be looking at a plan B if the JV would fail but said he would not expand on the alternative.
Thyssenkrupp will be spinning off its steel unit no matter of more government funding to decarbonize the steel industry. The tinplate plant Rasselstein will also be part of the steel JV. The company will invest Eur3 billion in the decarbonization of the steel unit, which includes the support of Eur2 billion from the German government.
The Thyssenkrupp steel mill accounts for 2.5% of Germany’s entire CO2 emissions.
Previous attempts at deals
Thyssenkrupp has had several failed attempts at previous JVs or sales of the struggling steel unit. It ended talks in 2021 about selling its steel unit to Liberty Steel, saying “ideas about the corporate value and the structure of the transaction were far apart” and would drive forward a “sustainable position” for steel on its own.
Prior to that, a steel joint venture with Tata Steel Europe was called off in 2019 following the blocking of the plan by the European Commission without further divestments.
In the fiscal year 2022-23 (Oct 2022-September 2023), Steel Europe shipped 9.4 million mt of steel, down from 9.5 million mt the previous year, while lower spot steel prices caused sales to fall 6% year on year to Eur12.4 billion. In particular, high raw material and energy costs in the first half of the year affected earnings.
Author: Laura Varriale, laura.varriale@spglobal.com
Klaus Keysberg to step down as thyssenkrupp CFO
Keysberg has worked almost 28 years in various management positions in the thyssenkrupp group, most recently as a member of the executive board of thyssenkrupp AG, since October 2019. Before that, he was executive at steel distribution unit thyssenkrupp Materials Services for seven years.
He turned finance chief in April 2020 and held that position during the tenure of Martina Merz, who stepped down as chief executive in spring. During that period, Keysberg became the group’s second face to the public, as it was mostly he who moderated annual and quarterly results conferences, regularly attended by Kallanish.
The personnel committee of the group’s supervisory board has started the search process in order to be able to propose a successor as soon as possible.
Christian Koehl Germany
