Damstahl Bi-Monthly Stainless Steel Briefing June 2012

Transcription

1 Damstahl Bi-Monthly Stainless Steel Briefing June 2012 Report: Bi-Monthly Briefing No. 30, June 2012 Damstahl 2012, Damstahl - a member of the NEUMO-Ehrenberg-Group - 1 -

2 Damstahl Bi-Monthly Stainless Steel Briefing Issue 30, June 2012 Contents Stainless Steel at a Glance European Industry News & Business Climate Market Performance: Relevant Issues in Germany Netherlands United Kingdom Denmark Sweden Norway Damstahl 2012, Damstahl - a member of the NEUMO-Ehrenberg-Group - 2 -

3 Stainless Steel at a Glance Increasing Recession Fears in Europe Demand: Stainless steel demand disappointed since a short legged boom early this year. Falling nickel prices lead to reduced orders from stockists since April. In addition, orders from end users substantially weakened since April. Demand indicators such as new car sales, order intake in the process industry or the European PMI (purchasing manger index) are all heading south. The market in Damstahl-Land is however still much better than in the rest of Europe. In Damstahl-Land, stainless fabricators suffer from falling exports to South-Western Europe and China. Also former bright spots such as the Middle East, Brazil and India are rather stagnant export destinations. The only export destination that is so far intact is the USA. Euro Crisis: The debt crisis is far from being solved. The new Greek government wants to re-negotiate the austerity package and in Spain the banking sector is in a very poor shape making the credit situation for Spanish companies increasingly difficult. European politicians are looking for ways to get out of the crisis but there is no quick fix and it seems that things will get worse, before they get better. What is new in June is that the crisis has now also arrived at the previous healthy parts of Europe such as Germany and Scandinavia, demonstrating that these are also no Teflon economies as previously assumed. We are not yet in a recession but the risk of that happening in HY2/12 is increasing. Stocks: Stainless steel stock levels are inhomogeneous. Whilst being at normal levels in the North- and Central Europe, they are high in Southwest and also eastern Europe. There is definitely no intention to restock before the summer holidays as few expect a strong demand for Q3. A strong price signal from the LME is also unlikely before the end of summer. It seems that Ni prices will continue to move sideways for some time (current 3-month price: 16,000-17,000 US$/t). Mills: Profit situation at European stainless steel mills remains difficult. They fear a return of a situation like 2008/2009, which is however highly unlikely. The Outokumpu/Inoxum merger is (again) delayed to October 24 th anti-trust authorities seem to have a more difficult job than previously expected. At the end of the day there has also to be a political decision, as this merger is one needed step towards a healthier E.U. stainless steel industry. Damstahl 2012, Damstahl - a member of the NEUMO-Ehrenberg-Group - 3 -

4 European Industry News Falling Production Levels lead to increasing Uncertainty in the European Stainless Steel Community The European stainless steel crude steel production has dropped by 4% yoy in the first four months of Production volumes declined since February and in April 2012 they were even 13% below (the relatively strong) April 2011 level. It is expected that May and June crude steel production was pretty stable on a similar low level (600, ,000 t). At current comparatively low nickel prices, European mills and distributors are increasingly concerned about their profitability for the rest of As a result of the growing concern Schmolz+Bickenbach (Germany) and BE Group (Sweden) replaced their top management. Acerinox has cut ~40 jobs in Q2/12 in Spain (mainly sales personnel). On the other hand, Acerinox plans to increase its staff in South East Asia (particularly Malaysia, Vietnam and Indonesia) and Russia. Acerinox also confirmed to fully continue with the expansion of its Bahru plant in Malaysia. Outokumpu/Inoxum: EU anti-trust authorities have delayed its decision to approve the merger to October 24th. Miko Seitovirta (CEO Outokumpu) announced in a meeting with union members that Outokumpu will secure the location Krefeld they will invest around 240 mill. in equipment related to the transfer from Benrath to Krefeld. They will also invest 20 mill. in R&D facilities there. Outokumpu will issue an 150 mill. 4-year bond with an annual coupon of 5.875% in order to refinance its business. Schmolz + Bickenbach: the board of the company has announced that contracts with CEO B. Niemeyer and CFO A. Euchner are terminated immediately without having successors for these positions. The company stated that the change in management is caused by a new company policy of transparency after issuing a 258 mill. high yield bond (interest rate 9.875% p.a to 2019). Damstahl 2012, Damstahl - a member of the NEUMO-Ehrenberg-Group - 4 -

5 Where do we stand in the business cycle? Status May 2012 PMI fell in all Regions - Europe remained the worst May-12 Damstahl 2012, Damstahl - a member of the NEUMO-Ehrenberg-Group - 5 -

6 China Monthly Exports Chinese Exports somewhat down in April but remained on a comparatively high Level China monthly Exports* 200, , ,000 Flat Products Long Products 140,000 [ metric tonnes] 120, ,000 80,000 60,000 40,000 20,000 - *excl. internal trade Damstahl 2012, Damstahl - a member of the NEUMO-Ehrenberg-Group - 6 -

7 Relevant Issues In Damstahl-Land Germany, Netherlands, United Kingdom Germany: Stainless steel market is suffering from weaker demand from process industry related end uses. Particularly demand from bars has softened in recent weeks but the market is still far from being depressed. Nevertheless, a higher price pressure in the stainless market is obvious. It is expected that the situation will not change much before end of Q3/12. Machinery/process equipment: VDMA reported that orders dropped in the sixth consecutive month in April Order intake declined by 11% yoy. Missing orders from Southern Europe and China contributed to this downturn, while orders from Russia and Eastern Europe grew. VDMA is still optimistic for the rest of the year, but the current trend is negative. However, current stainless demand is better than order development due to (still) full order books. The German PMI dropped by 0.8 points to 48.5 in June and the index for the industry was even worse with 44.7, which is the lowest reading in three years. Such a drop has not even occurred at the climax of the 08/09 crisis. Germany is losing substantial export orders due to weak global economic development from European countries particularly. Automotive: car registrations in Germany declined by 5% (yoy) in May 2011, production even by minus 20%. Production remained 6% behind last year in January-May. The trend provides reason for concern: the yoy gap to 2011 is widening since March (March: -6%, April -9%, May -20%). Netherlands: The average output generated by Dutch manufacturing industry in April 2012 was approximately the same as in April Weakening orders from the important chemical industry and petrochemicals in the Netherlands are explained by an uncertain trend for these products in HY2/12. Dutch consumer confidence was in June at a historic low. Private sector investments fell by another 6% in April, after declines in all months between January to March. United Kingdom: The market activity is below average and prices remain flat. Although the day to day business is quieter, there is an increase in project based orders. The most notably project is a 1 mill. contract to supply stainless steel tubes and fittings for the construction of a new dairy for Arla Foods on the outskirts of London. Industrial output dropped surprisingly by -0.7% in April. Falling export markets could intensify the industrial crisis in the course of Due to the weak economic situation, the government considers to support the construction sector with infrastructure projects and allowing state borrowing to stimulate the housing market. Also all stimulus from the Olympic games investments ceased now as all infrastructure in London is now in place. Damstahl 2012, Damstahl - a member of the NEUMO-Ehrenberg-Group - 7 -

8 Relevant Issues In Damstahl-Land Scandinavia Denmark: The Danish market is showing good activity and sub-suppliers are still optimistic. There is a strong competition among the dealers. The order intake is satisfying and there are good reasons to look forward towards HY2/12. Consumer Confidence: Danish consumers' faith plunged further than expected in June. The negative slide that started the month earlier continued. The consumer confidence indicator fell to -2.6 in June, from -0.4 in May. Analysts have expected a drop to only -0.8 in June. Denmark's GDP grew by 0.3 percent in Q1/12 after two consecutive quarters with negative GDP. However, bank analysts warned to consider this as turning point. Denmark as export oriented country is highly dependent on the further development in the -zone. Sweden: Some promising signs on the Swedish stainless steel market just before the summer holidays get started in July. This is a quite normal pattern, many customers produce "some extra" before they close down for a couple of weeks. Prices are right now quite stable, and according to several stockists - HY2/12 is expected to be stable in volume, which sounds better than in many other European countries. BE Group: Roger Johansson has resigned as CEO of BE Group but will remain in the position until January The Group (> 900 employees) reported sales of 5.9 bn SEK in 2011 (after 5.1 bn SEK in the previous year) and a margin of 1.6% on operating results (2010: 1.9%). Alfa Laval has received a significant order to supply heat exchangers to a refinery in South Korea. The order value is about 120 mill. SEK and delivery scheduled for A second order (60 mill. SEK) has been received from a Russian distillery for dried distillery grain equipment (co-product of ethanol process), also scheduled for Norway: The Norwegian industrial market is mostly good, especially the part related to oil & gas is very strong. The recent green light for the start-up on field development of a few minor oil/gas fields will eventually increase demand for all sorts of steel products. The traditional land-based export industry is facing tougher challenges, due to the turbulent world economy. But even with a good market there is a pressure on prices. For some products, the price level in Norway is now lower than the rest of Europe. Aker Solutions has gained a contract for all Statoil s recent major discoveries on the Norwegian Continental Shelf; the Skrugard and Havis fields in the Barents Sea and the Johan Sverdrup discovery in the North Sea. Contract values are undisclosed. Aker will open a centre for subsea and umbilical services in Malaysia in order to expand in the S.E. Asian market. Damstahl 2012, Damstahl - a member of the NEUMO-Ehrenberg-Group - 8 -

9 Report: Stainless Steel in Damstahl-Land, No. 11, March 2012 Damstahl 2012, Damstahl - a member of the NEUMO-Ehrenberg-Group - 9 -