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EUROFER Higlights Severe Impact of COVID19 Pandemic on European Steel
Steel News - Published on Thu, 06 Aug 2020

The COVID-19 pandemic has slashed steel consumption forecasts as well as the overall economic outlook across the EU and the world. Shutdown measures implemented by governments starting from March 2020 hugely impacted manufacturing activity and steel-using industrial sectors with future data likely to show further sharp declines as it becomes available. European Steel Association EUROFER Director General Axel Eggert said “The coronavirus pandemic has cut the legs out from under the European steel industry, causing severe damage to the whole sector and its value chains. The data now available confirm that the downturn that had begun in 2019 has been compounded by the crisis with the sector now in a state of emergency”.

EU28 apparent steel consumption fell by 12% year-on-year in the first quarter of 2020, the fifth consecutive quarter of decline, following a drop of 10.8% in the fourth quarter of 2019. Total apparent consumption and amounted to 37.6 million tonnes in this first quarter. The figure for the first quarter of 2020 reflects the early statistical impact of the crisis compounding deterioration in steel demand due to the negative factors that had already materialised in the preceding quarters. Together, this has led to a sharp reduction in steel consumption.

The continued downturn in steel demand led to the fifth consecutive fall year-on-year in domestic deliveries in the EU in the first quarter of 2020 (i.e. -8%, same rate as in the fourth quarter of 2019).

After a considerable drop of 24% in the fourth quarter of 2019, the downward trend in imports from third countries continued in the first quarter of 2020, with a year-on-year fall of 20%. This equated with 8.4 million tonnes in absolute volumes, accounting for 21.2% of EU consumption.

The Covid-19 outbreak has further hit EU industrial sectors at a time when these had already been experiencing a severe downturn and were coping with serious challenges Over the course of 2019, business conditions in the manufacturing industry have continued to deteriorate. This downward trend has gained speed in the second half of 2019, particularly in the automotive industry, while the construction sector has continued to outperform other major steel-using sectors.

This resulted in a pronounced slowdown in output growth in steel-using sectors. As a result of this trend, total output in steel-using sectors fell by -7.2% in the first quarter of 2020 after falling by -1.3% in the fourth quarter of 2019. The annual 2019 figure (formerly, a decrease of -0.2% compared to 2018) has been revised compared to EUROFER’s previous Market Outlook, so that steel-using sectors’ output increased by a meagre 0.3% in 2019 (after +2.9% in 2018).

The outlook for the global economy has been hugely impacted by the COVID-19 pandemic. The outbreak has resulted in the shutdown of major economic activities across the EU, particularly the manufacturing and automotive sectors from the second half of March until late April/early May, including steel mills.

In its latest Economic Outlook (June 2020) the IMF predicted an unprecedented global recession of -4.9%, thus reviewing downwards its April forecast (-3%), with the US economy experiencing recession of -8% and the euro area of -10.2%, all followed by a rebound in 2021. The European Commission released its Summer Forecast in early July with a slightly less pessimistic outlook, i.e. a recession of 8.3% in the EU and of 8.7% in the euro area, against Eurostat’s figures for the first quarter of 2020 that already show a drop of -3.2% quarter-on-quarter (-2.6% year-on-year) in the EU in the first quarter.

Even after the return to normal business conditions, the EU economy will still be particularly vulnerable as it is exposed to fluctuations in international trade. As the largest contribution to growth during the previous cycle came from exports, a slowdown in export markets will further exacerbate the difficulties that EU economies are likely to face..

Source : STRATEGIC RESEARCH INSTITUTE
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Supreme Court to Hold Final Hearing in BPSL Case on 8 September

The Supreme Court said that will hold the final hearing in the Bhushan power and steel Ltd insolvency case on 8 September and has directed all the parties to file their affidavits, replies and rejoinders within four weeks.

The current appeal has been filed by the Enforcement Directorate challenging the sale of the bankrupt BPSL to JSW Steel. ED has filed a complaint stating that the cases against the BPSL should continue and argued that National Company Law Appellate Tribunal has no jurisdiction to unfreeze assets attached under PMLA and allow sale of those assets.

JSW Steel, whose resolution plan has been approved by the National Company Law Tribunal and the appellate tribunal to take over the bankrupt Bhushan Power and Steel, told the Supreme Court that it iss not possible for it to pay the lenders and then wait for the outcome of the Enforcement Directorate’s proceedings against the old management in an alleged money laundering case. JSW Steel had offered to pay INR 19,350 crore to the financial creditors as part of its resolution plan, which was a near 60% haircut for the lenders and had earlier missed the deadline of March 17 to make the payment as per approval from National Company Law Appellate Tribunal.

On the other senior advocate Abishek Manu Shinghvi, who appeared for Committee of Creditors, submitted that the as per the provisions of the new law, it is the new management which is held liable and accountable for the cases pending on the old company.

Source : STRATEGIC RESEARCH INSTITUTE
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Italy Inaugurates Genoa Bridge Made of Metinvest steel

On 3 August, a new bridge was opened in Genoa inItaly, in place of the one that tragically collapsed two years ago. Metinvest supplied 18.5 thousand tonnes of high-strength steel for it, the majority of the total used.
The opening of the bridge was a major event for Italy. The inauguration ceremony was attended by Sergio Mattarella, the president of Italy; Giuseppe Conte, the prime minister; Marco Bucci, the mayor of Genoa; Giovanni Toti, the governor of Liguria; and Renzo Piano, the project architect. Metinvest, the main supplier of steel for the project, was represented by the managing director of Metinvest Europe, Roberto Re, a native of Genoa. The first car to cross the bridge was the Italian president’s Maserati. At the end of the ceremony, planes decorated the sky in the colours of the Italian flag.

The old Morandi Bridge passed over the Polcevera river and railway tracks. It connected the two parts of Genoa, as well as Liguria with the port and main European transport corridors. The bridge was named after engineer Riccardo Morandi, known for his interest in reinforced concrete.On 14 August 2018, one of the spans collapsed while dozens of cars were on the bridge. The tragedy claimed the lives of 43 people, and mourning was declared across Italy. Nearly a year later, the remainder of the bridge was blown up to build a new one, called San Giorgio.

Pergenova, a joint venture between Salini Impregilo and Fincantieri Infrastructure, carried out the design and construction of the bridge. Fincantieri Infrastructure is part of Fincantieri Group, one of the world’s largest shipbuilders, with which Metinvest has worked for more than a decade.

The project architect, the renowned Genoa native Renzo Piano, is one of the founders of the high-tech style. He is the creator of the Pompidou Centre in Paris and the Shard skyscraper in London, which also used Metinvest steel.

The new bridge is designed like a hull of a ship, emphasising Genoa’s shipbuilding history. In memory of the victims of the catastrophe involving the old one, 43 lights run along the spans.

The new structure is a “smart” one. Robots carry out structural inspections of its parts. The lighting comes from photovoltaic panels, which collect sunlight and produce the energy required.

The bridge is just over 1 kilometre long. It is made of 19 steel and concrete spans and stands on 18 piers totalling 1,500 metres. The steel part of the deck is 26 metres wide and made of steel sheets of different thicknesses. The structure stands 45 metres above the ground.

The bridge was built in less than a year and investments totalled EUR202 million. Its stability and durability come from the metal frame. Overall, 24 thousand tonnes of steel were used, the equivalent of three Eiffel Towers.

Source : STRATEGIC RESEARCH INSTITUTE
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Nanjing Steel Group Commissions Upgraded Continuous Bloom Caster from SMS Concast

Nanjing Iron & Steel Group Co Ltd has commissioned the upgraded four-strand bloom caster at its Nanjing plant No 2 together with SMS Concast, a company of SMS group. The modernized caster, designed for an annual production of 800,000 tons of blooms, has successfully achieved the targets of the project, namely improvement of the product quality and more flexibility of production thanks to a wide portfolio of steel grades. The four-strand continuous casting machine, having a nominal radius of 12 meters, is designed to cast two bloom section sizes. Currently in operation is the 255 x 300 millimeter format. Commissioning of the second bloom size 330 x 420 millimeters is planned for the end of 2020. High-carbon grades, such as bearing and spring steels, and the full range of steel grades to serve the automotive industry represent the majority of the production. This product portfolio provides NISCO greater production flexibility and enhanced responsiveness to the market demand.

NISCO is a leading Chinese steel producer with approximately ten million tons of steel produced per annum.
Source : STRATEGIC RESEARCH INSTITUTE
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HYBRIT - Successful Trials Using Fossil Free Fuels in Pellet Process

Trials using fossil-free fuels in LKAB’s pellet plant have produced successful results within the framework of the HYBRIT initiative. The world’s very first fossil-free iron ore pellets are within touching distance. SSAB, LKAB and Vattenfall intend to be the first in the world with a value chain for fossil-free steel. Fossil-free steel production starts in the mine and the processing plants. The development of the next generation of pellet plants is under way, and one of LKAB’s challenges and contributions to HYBRIT is to develop fossil-free pellets, which requires a change of heating technology in the process.

Full-scale tests are currently under way to replace fossil oil with bio-oil in one of LKAB’s existing pellet plants in Malmberget, reducing emissions for the operation by 40 per cent during the test period, which will last until 2021. These tests are part of the pilot phase in HYBRIT, where the overarching goal is to be first in the world with a fossil-free value chain from mine, using fossil-free electricity and hydrogen, to finished steel product, thereby cutting Sweden’s carbon dioxide emissions by ten per cent.

In addition to this, alternative fuels to heat the pellet process, based on fossil-free electricity and biofuels, have been tested on a pilot scale. These include hydrogen and plasma. The results are promising, but require further development before full-scale implementation is possible.

Construction of the pilot plant for fossil-free sponge iron (DRI/HBI) in Luleå will be completed during the summer, and preparations are under way to build a temporary hydrogen storage facility to store fossil-free hydrogen in caverns.

Source : STRATEGIC RESEARCH INSTITUTE
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Tata Steel Builds Framework for Future Schools in the UK

Tata Steel is at the forefront of creating the next generation of schools in the UK which will give thousands of children access to education in safe, purpose designed environmentally efficient buildings. The company, working with construction industry experts in the UK, is developing a kit of parts allowing highly energy efficient schools to be built off-site and then shipped to their final location. This will reduce waste created during traditional building as well as allowing the buildings to be quick to build, give good value for taxpayers and be 100% recycled at the end of their life.

The news comes just weeks after the UK Government announced a scheme to modernise the nation’s schools. The rebuilding programme will start in 2020-21 with the first 50 projects supported by more than £1 billion in funding. Further details of the new ten-year construction programme will be set out at the Government’s next Spending Review. The government aims to reduce the construction costs and whole life costs of buildings by a third, while seeing those same buildings delivered in half the time and with a 50% reduction in carbon emissions from the construction sector.

The UK Research and Innovation (UKRI)-funded project will show how standardised components can be mass-produced to deliver better quality, performance and value for sectors including education and healthcare.

The consortium behind the project is made up of: off-site building experts Blacc; the Manufacturing Technology Centre (MTC); two off-site manufacturers, Elliott Group and the McAvoy Group; Tata Steel; the Active Building Centre (ABC); and the National Composite Centre (NCC).

Source : STRATEGIC RESEARCH INSTITUTE
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EC Extends Antidumping Duties on Imports of Chinese Corrosion Resistant Steel

The European Commission has extended its anti-dumping duties on imports of Chinese corrosion-resistant steel to a larger selection of products. The measure will apply to all Chinese exporters with the exception of one cooperating company. The decision aims to counter circumvention of the existing EU trade defence measures. Laying grounds for its 2019 steel safeguards review, the Commission discovered that imports of Chinese corrosion-resistant steel subject to antidumping measures almost disappeared.

On the other hand, imports of other corrosion-resistant products increased to as much as 1 million tonnes or EUR 650 million per year. The Commission therefore decided to take a closer look at this trade pattern. A specific anti-circumvention investigation now confirmed that the anti-dumping measures were the only reason for that shift. To prevent further sales of only slightly modified Chinese products at dumped prices, the Commission extends its antidumping duties to corrosion-resistant steel products modified by plating or coating by magnesium, an alloy with silicon, an additional surface treatment such as oiling or sealing, or a slightly modified content of carbon, aluminium, niobium, titanium, and/or vanadium.

The European Union had set duties in February 2018 of between 17.2% and 27.9% for imports of certain corrosion-resistant steels from China to counter what it said were unfairly low prices.

Source : STRATEGIC RESEARCH INSTITUTE
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Mr Mark Bush is New CEO of JSW Steel USA

JSW Steel said that JSW Steel (USA) Inc and JSW Steel USA Ohio Inc, collectively known as JSW Steel USA, the subsidiaries of JSW Steel Ltd, appointed Mr Mark Bush as the new Chief Executive Officer. In his new role, Bush will lead both the businesses comprising slab, coil, pipe and plate production and sales at Baytown in Texas and Mingo Junction in Ohio

Mr Bush succeeds Mr John Hritz, who will continue on the company board and assist JSW Steel USA on strategic and other legal matters.

Source : STRATEGIC RESEARCH INSTITUTE
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thyssenkrupp Steel Investing in New walking Beam Furnace at Duisburg

hyssenkrupp is paving the way for the first investment within the scope of the Strategy 20-30. The first project is the construction of a new walking beam furnace in Hot Strip Mill 2 at the Duisburg location. The new unit is intended to ensure a significantly improved surface quality of premium sheets, which are used, for instance, for exterior car body shells. The first orders will be placed shortly. Completion of the unit is scheduled for 2022. The project involves an investment volume in the mid double-digit million range.

The new unit, over 50 meters long, will be built in Hot Strip Mill 2 in the Beeckerwerth plant at the Duisburg location. It is aimed at further revamping and flexibilizing the plant. The walking beam furnace ensures that surface defects are prevented during the reheating and rolling of slabs. This is achieved by special lifting and lowering devices, which prevent dam-age to the surfaces of the slabs weighing up to 30 tonnes. Before the new furnace is built, the old unit will first be dismantled from autumn 2022. Once the necessary official approvals have been obtained, the new plant will be built in the following year. Completion of the unit is scheduled for 2022.

The focus of the Steel Strategy 20-30 is the targeted optimization of the production network and the consistent orientation of the product portfolio to future markets and profitable steel grades. These include multiphase steels, lightweight construction steels and grades with a high surface quality. Moreover, the production base of high-quality, non-oriented electrical steels is strengthened, which will be of essential importance for e-mobility.

Source : STRATEGIC RESEARCH INSTITUTE
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TMK Seversky Installs Condrive Oscillation Drives from SMS Concast on 5 Strand Bloom Caster

TMK’s Seversky Pipe Plant in Polevskoy in Russia has successfully commissioned CONDRIVE oscillation systems from SMS Concast, a company of SMS group, on its five-strand bloom casting machine. or more than six months now, the CONDRIVE direct-drive systems have been operating with the expected high precision and reliability and for the first time ever on a resonance oscillation system of a bloom casting machine. The caster is designed for the production of round blooms in diameters from 150 to 400 millimeters. The installed direct oscillation drives from SMS Concast have fully met the customer’s requirements and specifications. The central aims of the installation were to enhance the control of the continuous casting process, improve the product quality and guarantee long-term process reliability along with minimized operating costs. Especially during the casting of small-diameter blooms, which takes place at higher casting speeds, TMK Seversky has been able to reduce the breakout rate to basically zero – thanks to the CONDRIVE oscillation technology.

The CONDRIVE equipment was installed without delaying the production plan. On each strand, the installation took only half a regular maintenance shift. The CONDRIVE systems were immediately ready to start operating, without any additional adjustment.

TMK Seversky is now able to adjust the oscillation curves, frequency and stroke, highly flexibly in an online process, with special consideration of the requirements of the individual steel grades and bloom diameters being cast. Given TMK Seversky’s range of Special Bar Quality tube grades and its various round bloom formats ranging from 150 to 400 millimeters in diameter, the online adjustment of the oscillation curve will contribute significantly to an enhancement of the product quality.

The main component of CONDRIVE is its powerful torque motor with an eccentric shaft connected to the oscillation table by means of a lifting rod. In combination with its highest-precision digital control system, CONDRIVE performs significantly better in terms of acceleration and speed control than other types of systems.

Source : STRATEGIC RESEARCH INSTITUTE
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Danieli Spooler Line in Operation at Nucor Steel Sedalia

A new spooler line for the production of rebars and rounds in coils weighing up to 5-tons has just been started up at the Nucor Steel Sedalia minimill in Missouri in USA. High efficiency and highest material yield during downstream processing due to ECR endless casting rolling process allows the lowest production costs. High mechanical characteristics and good weldability of the finished product, plus optimized coil handling, complete the benefits of the new line, which will be managed by Danieli Automation Q-VID system and deliver twist-free compact and regularly shaped coils at up to 30 m/s.

The spooler line consists of a 4-pass Delta-type fast finishing block (which will extend the Nucor Steel Sedalia product range to rebar #3); five water-boxes for heat treatment; cropping and high-speed shears; two 5-ton horizontal spooler machines; and a coil handling, strapping and collecting area.

The equipment was strategically installed in parallel with the start-up of the MIDA ECR minimills in order to minimize plant downtime needed for its commissioning.

Source : STRATEGIC RESEARCH INSTITUTE
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Rode cijfers voor Outokumpu

FONDS KOERS VERSCHIL VERSCHIL % BEURS
Outokumpu Oyj
2,438 0,00 0,00 % Helsinki Stock Exchange

(ABM FN-Dow Jones) Outokumpu heeft in het tweede kwartaal de omzet onder druk zien staan en eindigde daardoor in de rode cijfers. Dit maakte de Finse fabrikant van roestvast staal vrijdag bekend.

De omzet daalde in het tweede kwartaal op jaarbasis met 16,5 procent van 1,7 miljard naar 1,4 miljard euro. De levering van roestvast staal lag afgelopen kwartaal 10 procent lager dan een jaar eerder. De prijzen stonden daarbij onder druk. Deels werd dit gecompenseerd door lagere inkoop- en vaste kosten. In het eerste kwartaal van dit jaar lag de omzet nog op 1,6 miljard euro.

De EBITDA halveerde grofweg van 91 miljoen naar 45 miljoen euro.

Netto leed Outokumpu een verlies van 37 miljoen euro, terwijl er in het tweede kwartaal van 2019 nog een winst werd gerealiseerd van 6 miljoen euro.

Vanwege de onzekerheden in de markt door de corona-uitbraak, gaf Outokumpu geen outlook voor het derde kwartaal af, maar meldde het slechts dat de leveringen 10 procent lager zullen liggen dan in het tweede kwartaal.

Heel dit jaar denkt de fabrikant nog last te hebben van het virus. Daarbij lijdt de Europese roestvast staal sector onder prijsdruk en de import van goedkoop staal, aldus Outokumpu.

Door: ABM Financial News.
info@abmfn.nl
Redactie: +31(0)20 26 28 999

© Copyright ABM Financial News B.V. All rights reserved.
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Chinese Steel Sector to Face Oversupply as 80 Million Tonne Capacity Comes in 2020

China News reported that China Metallurgical Industry Planning and Research Institute’s chief engineer Mr Li Xinchuang rsaid that oversupply concerns weigh heavily on the steel sector in China as some 80 million tonnes of fresh capacity will hit the market this year amid dwindling demand due to the COVID-19 epidemic. He told “New capacity was primarily a result of the capacity replacement program that was outlined by the Ministry of Industry and Information Technology with aim to help steel companies shed outdated capacity and give permission to those companies for new capacity at certain levels. New steel capacity released in a relatively short time will have a great impact on the market, especially as the COVID-19 epidemic crimped demand in both domestic and foreign markets. The steel industry is likely to witness a serious oversupply situation again.”

He added "If steel companies' production exceeds market demand, destocking will be difficult to accomplish. High inventories may become the norm in the steel market this year. At the same time, high inventories will cause fund erosions and impact total turnover."

Mr Li said crude steel production is likely to cross 1 billion tonnes this year in the country and steel production is likely to account for over 56 percent of the global output this year.

According to data released by the National Development and Reform Commission, China produced 499 million tonnnes of crude steel during the first six months of this year, up 1.4 percent on a yearly basis.

Source : STRATEGIC RESEARCH INSTITUTE
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Nippon Steel Files Appeal Against Asset Seizure Order

Japanese media reported that steelmaker Nippon Steel Corp filed an immediate appeal on Friday over the court ordered seizure of some of its assets in South Korea stemming from a 2018 South Korean top court wartime labor compensation order against it. The district court will now decide whether to accept the appeal. Even if the appeal is rejected, it is expected to take at least several months from the time of the rejection before the assets can be liquidated upon a court order and proceeds from the sale can be paid to the plaintiffs. A lawyer representing plaintiffs in the case has said an appeal by the steelmaker lacks reasonable grounds and would be a delaying tactic.

The Daegu District Court’s Pohang branch this week approved seizing the assets owned by the Japanese steelmaker, including around 81,000 shares it had acquired through its joint venture with the Korean firm Posco. The court completed the prerequisite monthlong task of delivering legal documents to the company Tuesday. The court decision on asset seizure would have been finalized if the Japanese firm didn’t file an appeal within a week from Tuesday.

The assets were seized last year, following a decision by the South Korean Supreme Court in 2018 ordering the Japanese steelmaker, then Nippon Steel & Sumitomo Metal Corp., to provide compensation of about JPY 40 million to four Koreans who had said they were forced to work against their will for the firm’s precursor, Japan Iron & Steel Co, under Japanese colonial rule.

Source : STRATEGIC RESEARCH INSTITUTE
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POSCO & Hyundai Steel to Cut Production as COVID19 Bites Demand

South Korean recently reported that Posco and Hyundai Steel are plannig to cut crude steel production due to a sharp decline in global steel demand over the coronavirus pandemic. As per media reports, earlier this year, Posco had planned to produce 36.7 million tonnes of crude steel in 2020, but it revised down its estimates of output to 35.3 million tonnes. Reports quoted a company official as saying that "The revision came due to the fallout of the Covid-19 pandemic, as demand from key clients automakers, construction companies and shipbuilders declined due to the virus.”

Hyundai Steel also plans to flexibly adjust its output this year if economic recovery is delayed due to the coronavirus pandemic. Hyundai Steel produced 9.8 million tonnes in the first half of this year, compared with its annual target of 21 million tonnes in 2020.

Source : STRATEGIC RESEARCH INSTITUTE
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US Steel Imports in July Surge 20% MoM

Based on the Commerce Department’s most recent Steel Import Monitoring and Analysis data, the American Iron and Steel Institute reported that steel import permit applications for the month of July totaled 2,007,000 net tons. This was a 20.5% increase from the 1,666,000 permit tons recorded in June and a 44.2% increase from the June preliminary imports total of 1,391,000. Import permit tonnage for finished steel in July was 1,219,000, down 6.9% from the preliminary imports total of 1,310,000 in June. For the first seven months of 2020 (including July SIMA permits and June preliminary imports), total and finished steel imports were 14,394,000 NT and 9,852,000 NT, down 22.9% and 27.2%, respectively, from the same period in 2019. The estimated finished steel import market share in July was 19% and is 19% year-to-date (YTD).

Finished steel imports with large increases in July permits vs. the June preliminary imports included reinforcing bars (up 71%), tin plate (up 49%), tin free steel (up 48%) and heavy structural shapes (up 32%). Products with significant year-to date (YTD) increases vs. the same period in 2019 include tin free steel (up 27%) and light shapes bars (up 14%).

Source : STRATEGIC RESEARCH INSTITUTE
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NLMK La Louvière Introduces Digital Supply Planning

NLMK La Louvière, an NLMK Group company and one of the leading strip product manufacturers in Belgium, has introduced a digital inventory management solution, which enables the company to minimize warehouse stock levels and ensure uninterrupted order fulfilment. Since the start of system testing in April, stock turnover for the most in-demand feedstock product steel slabs improved by 30%.

NLMK La Louvière manufactures coils from slabs supplied by NLMK Lipetsk. The supply volume is approximately 1.6 million tonnes of slabs per year. Previously, a traditional supply planning model was used: a planner would make projections of demand by evaluating order volumes, stocks in the warehouse, and slab lead times. The new digital solution goes beyond analyzing the supply cycle and changes in stocks, incorporating numerous other factors, such as demand and lead time variability.

The new digital solution is based on the DDMRP model (Demand driven material requirements planning).

Source : STRATEGIC RESEARCH INSTITUTE
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Danieli Shears Improve Wirerod Quality at Liberty Ostrava

Higher reliability, reduction of maintenance costs and increased productivity are the main benefits highlighted by Liberty Ostrava following the replacement of two crop shears with new Danieli units. Installed in a two-strand wirerod mill producing 5.5-14 mm-dia wirerod, originally provided by a competitor, the new crop shears efficiently cut head and tail ends of the bar before the final rolling, helping to eliminate defects.

The project was carried out by Danieli Service with close collaboration with Liberty Ostrava’s project team which claimed:

Source : STRATEGIC RESEARCH INSTITUTE
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ArcelorMittal Update on ACIS

ACIS segment crude steel production in 2Q 2020 decreased by 34.7% to 2.0Mt as compared to 3.0Mt in 1Q 2020 primarily due to weak demand caused by the COVID-19 pandemic effects in all regions, in particular due to the lockdown measures in South Africa.

The direct COVID-19 impact in 2Q 2020 in the CIS region was more limited than in South Africa. During the quarter, ArcelorMittal South Africa took several steps (including significant production cuts across all operations) to support the country’s lockdown.

However, the economic activity levels remain weak and having reassessed its strategic asset footprint for 2020, the Company has decided to idle blast furnace C at Vanderbijlpark and the Vereeniging electric arc furnace until demand recovers.

Steel shipments in 2Q 2020 decreased by 8.4% to 2.4Mt as compared to 2.6Mt as at 1Q 2020, mainly due to COVID-19 impact in South Africa (down 54.1%) offset in part by improved shipments in Kazakhstan.

Sales in 2Q 2020 decreased by 18.2% to $1.2 billion as compared to $1.4 billion in 1Q 2020 primarily due to lower steel shipments (-8.4%) and lower average steel selling prices (-13.4%).

Operating loss in 2Q 2020 was $70 million as compared to an operating loss of $60 million in 1Q 2020 and an operating income of $114 million in 2Q2019.
EBITDA was $5 million in 2Q 2020 as compared to $47 million in 1Q 2020, primarily due to deteriorating results in South Africa during the lockdown period.9

EBITDA in 2Q 2020 was lower as compared to $199 million in 2Q 2019. primarily due to negative price-cost effect and lower shipments (-24.7%) driven by COVID-19 impact.

Source : STRATEGIC RESEARCH INSTITUTE
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ArcelorMittal Outperforms On Costs As The Industry Deals With Absent Demand
Aug. 7, 2020 9:06 AM ET

Summary
ArcelorMittal sold far less steel in the second quarter, but made significant progress on reducing costs, driving a big beat at the EBITDA line even as steel unit profitability plunged.

There's quite a lot of idle steel capacity in North America and the EU right now, and that could limit price leverage even as important end-markets (autos and manufacturing) recover.

Weak pricing has kept steel stocks from a cyclical turn, but ArcelorMittal could do well as pricing firms later this year and into 2021.

A laggard so far in 2020 and over the past year, ArcelorMittal (MT) has nevertheless shown some solid momentum since the company's unexpected capital raise back in May. All in all, despite pretty undemanding valuations for most steel names, the sector still hasn't followed the rally in shorter-cycle industrials as investors remain concerned about excess capacity and the likelihood of more sustained weakness in prices and margins.

Those concerns are valid, but also reflected in the price. What I think may not be so well-appreciated is the company's opportunity for further self-help (including asset disposals), as well as the improved liquidity position and improved agreement on the Ilva business. While ArcelorMittal isn't the best-run steel company (by a large margin), that's not really an impediment in cyclical upturns, and I see this as a name worth considering if investors want to start positioning themselves for a cyclical upturn.

Better Than Expected Results, Largely On Costs
This was by no means a strong quarter for ArcelorMittal, but it was at least better than expected as management's cost reduction and restructuring efforts produced larger than expected benefits. Revenue beat just slightly due to higher-than-expected shipments offsetting weaker-than-expected prices, but EBITDA came in almost 50% ahead of expectations, with every business unit contributing to the beat.

Revenue declined 43% yoy and 26% qoq, driven in large part by a 35% yoy and 24% qoq decline in steel shipments. EBITDA declined 55% yoy and 27% qoq, with margin staying pretty much stable sequentially in the low 6%'s. ArcelorMittal also reported a loss at the adjusted operating income line - the first such loss in over a decade (the last time was during the global financial crisis).

In the NAFTA business, revenue declined 45% yoy/36% qoq on a 30%/31% decline in shipment volume and weak pricing. Relative to Steel Dynamics (STLD), ArcelorMittal underperformed on both volumes and pricing, while EBITDA fell 85%/88%, driving margin to just over 1% and per-ton EBITDA to under $9 (versus $92 at STLD).

The Brazilian business saw revenue decline 44%/25%, with pretty equal pressure from both volume and pricing. That's significantly worse than Gerdau's (GGB) performance - volume up 5% qoq on flat pricing - even when excluding the benefits of Gerdau's exports from Brazil. EBITDA declined 46%/23%, with margin falling modestly from the year-ago period and rising slightly sequentially to just over 14%.

ArcelorMittal's European operations reported revenue down 44%/24%, with the declines driven overwhelmingly by volumes (realized prices actually improved slightly on a sequential basis). EBITDA declined 65%/38%, with margin falling to just over 2%. While Arcelor is far and away the largest European producer, it looks as though the company curtailed production more than some of its rivals.

The ACIS business saw revenue declined 38%/18%, with EBITDA down 38%/18%. The mining business reported a 25% yoy revenue decline, but a 7% qoq increase on stronger results (volume and pricing) in the iron business. Mining EBITDA fell 31% yoy and rose 32% qoq, helping offset the weaker steel results.

Is The Industry Ripe For A Turn?
Although ArcelorMittal management wouldn't provide guidance for the third quarter, they did say that they were seeing improvements in all markets.

To be sure, the industry is starting off from a pretty low bar, with utilization over the last three months averaging around 57% in Europe and scarcely better in the United States. Generally speaking, it takes capacity utilization of at least 70% for there to be any real pricing power, and typically more on the order of 75% to 80% for good results.

A recovering auto industry will certainly help. The auto sector represents about 20% to 30% of steel demand in most geographical markets, and while auto production dove in the second quarter and will likely be down double digits in Q3, there should be sequential improvement and then growth again in 2021. As the producer of around 20% of the auto steel used around the world, that's clearly relevant to ArcelorMittal.

Demand from "general manufacturing" should also pick up more significantly toward the close of 2020 and into 2021, and I expect non-residential construction to remain relatively healthy in 2020 before slowing in 2021 and 2022 (unless project pipelines start refilling very quickly). Oil/gas, aerospace, and energy are not likely to be strong drivers in 2021, but there could be some improvements in 2022 and beyond.

Can all of this drive a turn in the industry? We should be seeing the bottom in pricing, but so much depends on that very uncertain demand environment in 2021 and beyond. The industry seems to be acting generally more responsibly than in the past, even though there's a fair bit of new hot-rolled capacity coming online in the U.S. over the next few years, and companies have gotten a lot more careful about margins and returns. I don't expect a booming rebound - I think it will it take around five years for Steel Dynamics to reach new revenue highs (helped by a new plant), and it could take Arcelor more than a decade, but I do see business conditions improving.

The Outlook
Clearly, a lot of ArcelorMittal's outlook rests on how aggressive management wants to be in trimming away less-profitable capacity. I expect that to drive a better level of FCF margins over the next decade, but I expect growth will still be in the very low single digits. In other words, there will be less revenue growth, but it will be more profitable revenue. One issue that does concern me a little, mostly from a perception/sentiment aspect, is that I worry that analysts and investors are overlooking the consequences of Arcelor management's efforts to variablize its fixed costs - it will mean less profit leverage when the business turns.

The Bottom Line
Between discounted cash flow and ROE-driven price/book, I believe ArcelorMittal is still undervalued. The steel sector has yet to turn, but has delivered pretty strong trough-to-peak stock moves in the past. The real question is whether it'll be different this time - I don't believe that the steel industry is about to turn the corner into boom times, but I do think results will be significantly better in 2022-2025 than 2020 or 2021.

Again, this isn't my favorite company in steel, and stocks like Steel Dynamics, POSCO (PKX), and Nucor (NUE) will pay you to wait, but lower-quality companies often outperform higher-quality companies in cyclical turns, and ArcelorMittal could have enough upside on that basis to be worth consideration, though the timing of any such turn is clearly an unknown.

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Vertraagd 19 apr 2024 09:16
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Verschil -0,110 (-0,46%)
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