Author Archives: Christopher Rivituso

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The European steel industry faces three major challenges, following the impacts of the COVID-19 global and the 2008-09 financial crisis, management consultancy McKinsey & Company stated.

“European steel producers should consider making a series of short-term operational and medium- to long- term strategic moves to ensure economic and environmental sustainability going forward,”
McKinsey said in its March 15 report, “The future of the European steel industry.”

“These strategic moves could encompass restructuring steps aimed at capacity reduction, steps toward strengthening the position of steel companies by diversifying their capabilities and sustainability moves toward low- and no-carbon steel,” McKinsey added.

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European steel needs to address overcapacity

The first move the sector needs to address is the increase in structural overcapacity. That is particularly true after a demand loss of between 5 million and 10 million metric tons demand loss as a result of the pandemic, the group stated.

“European steel players need to adjust overcapacity to be in sync with next normal steel demand,” McKinsey said.

Adjusting for a greener future

Steelmakers also need a short-term response to compensate for higher costs with profitability improvements and incremental measures that will reduce CO2 emissions. For example, they can do so by increasing the scrap rate, the report added.

Meanwhile, producers need to make investments with a view to medium- and long-term decarbonizing of the steel industry. In short, they should tailor long-term plans and technology choices towards CO2 neutrality, McKinsey noted.

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Continued tight supply for hot rolled coil in Western Europe has further pushed up prices for the flat product over the past 10 days.

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Hot rolled coil heats up

Some producers’ offer prices from late last week are now at least €900 ($1,060) per metric ton exw. Meanwhile, delivery times extend as far out as October, market participants said.

Cold rolled coil is on offer for €980 ($1,155), they added.

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“It’s impossible to get anything before June,” one trader said.

Hot rolled coil offers in mid March reached €850-900 ($1,000-1,060) for May rolling and June delivery. However, traders warned then that the price and lead times were not certain and could rise further.

Import offers for hot rolled coil are now $900-910 cost and freight (CFR) for European ports. That is up from $890-900 transacted earlier in March for material from India and Japan, respectively for May and June delivery, sources also noted.

Import prices could also face more increases, a second trader warned.

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A lack of local availability, plus anti-dumping measures on some third-country imports into the European Union, have further pushed up hot rolled coil prices in Western Europe.

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Hot rolled coil price surge

Offers for the flat rolled product from Western European mills are now €850-900 ($1,015-$1,070) per tonne ex works for May rolling and June delivery, traders told MetalMiner. That moved up by an average one-third from the €750 ($894) that producers were offering in early February.

Production cuts by Western European mills could, however, make it difficult to secure finished product at those times and prices.

“You cannot buy a single tonne,” one trader said about acquiring hot rolled coil from Western European mills at present.

Rises in raw material prices and reported difficulties in securing ferrous scrap are also pushing up prices, a second trader said.

Hot rolled coil is used in construction applications. The flat rolled product is also used as feedstock for welded pipe production. It’s also used for rolling cold rolled coil and and to produce further downstream.

Anti-dumping measures, Chinese demand

Also supporting prices on the Western European domestic market are EU anti-dumping measures on HRC from Turkey and China. In addition, high demand for finished product from China has offered support, sources said.

“The Chinese [economy] is doing very well,” the first trader said.

High hot rolled coil demand in Southeast Asia for building and infrastructure projects is also supporting Western European prices, sources noted.

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ArcelorMittal has strong prospects in the United States.

This is even after the group sold in 2020 almost 14 million tons of integrated crude capacity to Cleveland-Cliffs.

“It is one of the major steel markets, even though many steel plants in the United States have shut down in the past 10 years,” one analyst said.

ArcelorMittal completed the sale of its US division to Cleveland-Cliffs in December. That came after concluding a $1.4 billion agreement earlier in September to sell six steelmaking plants to the Ohio-based company.

However, the Luxembourg-headquartered group did retain several sites in the country.

“They kept the top-quality assets,” a second source said of ArcelorMittal.

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ArcelorMittal’s remaining footprint in the US

Chief among those assets in the United States is the AM/NS Calvert flats rolling plant in Alabama. The plant is a 50/50 joint venture between ArcelorMittal and Japan’s Nippon Steel. The two groups acquired the plant from ThyssenKrupp in 2013 for $1.55 billion.

The plant can roll 5.3 million metric tons per year of hot and cold rolled coil, information from its website stated. Further downstream, AM/NS Calvert can produce 1.5 million metric tons per year of coated products, including hot dipped galvanized coil and aluminized sheet.

Finished products from the site go for use in white goods, HVAC, automotive, construction as well as the pipe and tube sectors, the site said.

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ThyssenKrupp has ended discussions with London-based Liberty Steel over the potential sale of the German conglomerate’s steel unit.

The parent company made the announcement Wednesday evening, Feb. 17.

“We opened the door for negotiations, but in the end our ideas about the corporate value and the structure of the transaction were far apart,” ThyssenKrupp Chief Financial Officer Dr. Klaus Keysberg said.

Keysberg added ThyssenKrupp regrets the decision because it perceived Liberty Steel “as a serious partner in the process.”

“There was a close exchange between ThyssenKrupp and Liberty Steel on a number of complex topics. As a result, however, no common solution could be found for key requirements addressed by ThyssenKrupp,” the group also stated.

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ThyssenKrupp, Liberty talks end

ThyssenKrupp had sought approximately €1.5 billion ($1.8 billion) for its steel assets. Liberty, however, wanted either to acquire it for nothing or receive extra payment with it, one industry watcher in Germany said.

Liberty Steel officials were also unavailable for comment. A ThyssenKrupp spokeswoman declined to comment beyond the group’s original statement.

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Impacts from the COVID pandemic and asset sales saw ArcelorMittal report a 20.4% decline in its crude steel production in 2020.

“The countries worst affected by COVID were the ones that saw drops in their production,” one industry watcher added about lower production at the group’s assets in Europe, Brazil and the United States.

ArcelorMittal output down 20.5%

ArcelorMitttal poured a total 71.5 million metric tons of liquid steel in the 12 months of 2020. Meanwhile, it poured almost 90 million metric tons in 2019, the group noted Feb. 11.

Shipments for the year came to 69.1 million metric tons, down 18.2% year on year from 84.5 million metric tons, ArcelorMittal added.

The Europe segment recorded a decline of 22.6% to 34 million metric tons from almost 44 million metric tons. Meanwhile, shipments in that segment fell to 32.8 million metric tons. That total marked a decline of 22.5% from 42.3 million metric tons.

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Demand boost

Improved demand from the automotive and manufacturing sectors pushed up crude production in the last quarter of 2020. Q4 2020 production rose by over 15% to 9.11 million metric tons from the 7.9 million metric tons produced in Q3.

Overhaul of a blast furnace in Belgium, however, offset that increase.

“Although the company has restarted capacity, some steel-making capacity during [Q4] remained idled, including a blast furnace at Ghent, Belgium, that is due to restart mid-February 2021 following a planned major reline,” the group said.

Higher flats demand also helped to boost quarter-on-quarter shipments 4.7% to 8.6 million metric tons from 8.2 million metric tons, ArcelorMittal added.

The December sale of ArcelorMittal USA to Cleveland Cliffs pushed down crude production in North America 18.7% to 17.8 million metric tons from almost 22 million metric tons, the group said.

Shipments for the year were down to 9.41 million metric tons, the group noted, reflecting a 15.9% decline from almost 11.2 million metric tons.

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Crude steel production at Evraz’s North American assets dropped 15.1% year over year in 2020. The drop was due mainly to the COVID-19 pandemic’s impact on the global economy, the Russian group noted.

Evraz output in North America drops

Production for the 12 months totaled 1.58 million metric tons from slightly over 1.86 million tons over the same time in 2019, Evraz stated Jan. 29.

“Turbulence in the oil and gas markets led to lower demand, resulting in decrease of production volumes at Evraz North America,” the group noted.

Increased demand for flat-rolled and construction products drove up Q4 crude production by 27%. Production rose to 423,000 metric tons from 334,000 metric tons in Q3 2020.

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Evraz in North America

Evraz North America has six plants throughout the United States and Canada. The wholly owned subsidiary can produce up to 2.3 million metric tons per year of crude steel via electric arc furnaces at Pueblo and Regina in Colorado and Saskatchewan, respectively.

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Prices for hot rolled coil in Western Europe appear to be moving away from increases seen in late 2020, as steelmakers there and in Central Europe restart their own crude production and the Lunar New Year in China approaches, market sources told MetalMiner.

“It looks they are more decreasing, rather than rising,” one trader said.

Hot rolled coil prices cool

Some producers have indicated in the past two weeks prices as high as €750 ($900) per metric ton EXW for Q3, traders said. However, they did not say if any transactions have yet occurred at those levels.

The latest offers are up by 25% from the €600 ($720) that Western European mills sought in early December for February rolling and March delivery, due then to higher demand and lower availability (including in the auto sector).

A lack of available transistors needed for vehicles has also prompted automakers to warn of production delays at European, North American and Chinese operations, also impacting demand for the flat-rolled product, sources and news reports noted.

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Swedish steelmaker SSAB has ended discussions with India’s Tata Steel over potential acquisition of IJmuiden plant, or Tata Steel Netherlands, the Stockholm-headquartered group stated Jan. 29.

“After deeper analysis and discussions, it became clear that there were limited possibilities to integrate IJmuiden into the SSAB strategic framework,” SSAB said in a statement. “Discussions with Tata Steel have therefore concluded.”

The Swedish company cited its desire to move toward fossil-free steel production as one of the reasons behind its decision.

“The group’s goal is to be the first in the world, in 2026, to supply fossil-free steel to market and to be a fossil-free company by 2045,” SSAB stated.

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SSAB walks away from costs

Prospective synergies would not justify necessary costs and investments into IJmuiden for SSAB’s desired transformation, the Swedish group added.

Tata Steel acknowledged SSAB’s withdrawal from interest in IJmuiden. However, Tata said it remains committed to a strategic resolution for its European portfolio.

“Currently, around two third of the business of Tata Steel is based in India with best in class, highly cost competitive assets and strong cash flows and Tata Steel remains committed to undertake significant de-leveraging in FY21 and beyond,” the Indian group said.

Tata Steel’s European assets include IJmuiden and the integrated Port Talbot works, or Tata Steel UK.

SSAB originally announced in November that it was speaking with Tata about acquiring IJmuiden. However, at the time it warned there was no guarantee of any deal.

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New passenger automobile registrations in the European Union fell by almost a quarter in 2020, due directly to the COVID-19 pandemic, the European Automobile Manufacturers Association (ACEA) said.

“Indeed, containment measures – including full‐scale lockdowns and other restrictions throughout the year – had an unprecedented impact on car sales across the European Union,” the Brussels-based organization said Jan. 19.

European automobile registrations plunge

Registrations in the 27-member bloc fell to 9.94 million units from January to December. The total marked a 23.7% decline from slightly over 13 million in 2019, the ACEA noted.

The E.U.’s largest economy, Germany, recorded a 19.1% decline in registrations to 2.92 millions from 3.61 million.

Spain, another major auto market in Europe, reported 851,211 automobile registrations. The country’s registrations fell by a third from 1.26 million, ACEA noted.

Meanwhile, Croatia and Bulgaria saw the largest decreases in new automobile registrations over 2020. Registrations in the two countries fell by 42.8% and 36.8%, respectively.

The automotive industry is one of steel’s largest end-users in flat rolled steel products, including cold rolled coil, hot-dipped galvanized sheet as well as painted sheet.

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