Germany’s Thyssenkrupp is expecting steel production to remain reduced untilthe summer, depending on how end-user markets as well as the pandemic develop, its CFO, Klaus Keysberg, said Tuesday.
Along with other steelmakers such as Salzgitter and ArcelorMittal, Thyssenkrupp has been hit by shrinking demand from end-user markets such as the automotive industry.
Thyssenkrupp cut production following shutdowns in March and took out blast furnace A at semis producer HKM, adjusted blast furnaces at its integrated mills and reduced downstream processes by 30% at its steel unit, Keysberg said.
“Corona hit in April,” said Keysberg in response to a question from S&P Global Platts during a press call on the company’s second fiscal quarter (January-March) results. “We are going to ramp up step by step,” he said, adding that production cuts were likely to be in place until summer depending on how the pandemic and demand unfolds further, adding at an analysts’ call later in the day that Thyssenkrupp might ramp up to a 20% reduction.
Q2 results hit by low demand
Keysberg said the impact of the coronavirus would be bigger in fiscal Q3 was only marginally reflected in the Q2 results. Lower shipments and volumes are expected in Q3. For the steel unit, Thyssenkrupp expects a shipment decline of around a third.
Order intake at distribution unit Materials Services, both dropped year on year in Q2 due to low demand from the automotive sector and price pressure as well as the temporary plant closure of Italian stainless mill AS Terni.
Crude steel production at the steel division fell by 3.1% quarter on quarter and 5.2% year on year to 2.7 million mt.
Cold-rolled shipments dropped 2.8% on the year to 1.78 million mt, while hot-rolled shipments increased by 3.6% to 1 million mt.
Thyssenkrupp is expecting further production and sales declines in the auto industry this year due to demand slump during the pandemic. In Europe, in particular future trading relations with the UK and US remain uncertain. The weakening of the auto market that started last year, will be putting pressure on flat steel particularly. “EU carbon steel flat market contracted by 6% in 2019 due to very weak automotive market and recessionary trends in other sectors; with current high level of uncertainty, the decline in 2020 is expected to be higher, possibly in the two-digit range,” according to Thyssenkrupp.
‘Maintaining liquidity key’
Keysberg said that maintaining liquidity remained important in the current situation and that Thyssenkrupp had taken action to secure that.
Keysberg confirmed reports that Thyssenkrupp received a Eur1-billion ($1.08 billion) credit line to bridge the time until the elevator unit sale is processed.
The sale of the elevator unit would go ahead as planned, Keysberg said, responding to recent press reports saying that the financial consortium comprising Advent, Cinven and RAG Foundation that struck a Eur17.2-billion deal to take over the unit, would now be looking for more investors to offload risk. The sale is expected to be finalized by the end of September.
“Our position compared to our competitors is not so good,” Keysberg said, adding that the company was working on restructuring in its 2030 plan.
“We failed to do necessary things…And with this restructuring program we are trying to work on that,” he said.
Thyssenkrupp will announce further measures at its annual general meeting next week.
— Laura Varriale