Damstahl Stainless Steel Briefing November 2015 Damstahl Stainless Steel Steel Briefing Briefing No. 97 No. November 97 November 2015 2015 Damstahl 2015, 2015, Damstahl Damstahl - a member - a member of the NEUMO-Ehrenberg-Group of the NEUMO-Ehrenberg-Group - 1 -
Report on Market Highlights Contents Stainless Steel at a Glance European Industry News & Business Climate (PMI) Market Performance: Relevant Issues in Germany Netherlands Denmark Sweden Norway Slovenia Finland - 2 -
Stainless Steel at a Glance Welcome to the Bottom! Mills: The market situation in the stainless steel industry has not changed much since the end of the summer holiday season in Europe. But, what has changed is the general agreement that this year will end on a weaker note in Europe than expected earlier. Margins for all mills are remaining unsatisfactory and in fact the situation in Q3/15 has deteriorated. Even though Chinese and Taiwanese are no longer major competitors, the fierce internal competition amongst the four European mills prevented any real upward movement on prices so far. Alloy surcharge: Stainless surcharges for November slightly edge higher after falling for four months in a row. Finnish stainless producer Outokumpu set the surcharges for type 304 (1.4301) at 998 /t, up from 983 /t in October corresponding to a increase of around 2%. November surcharges for type 316 were set at 1,346 /t up from 1,339 /t in October (+1% mom), the first increase since March 2015. Market Segments: Building & Construction: For August 2015 Eurostat reports a decrease in the seasonally adjusted production in the construction sector of -1.2% yoy in the EU-28. The decrease in production was mainly due to civil engineering and building construction falling by -1.9% and -1.1%, respectively. Among the EU member states largest decreases were seen in Slovakia (-5.0%), the United Kingdom (-4.8%) and Slovenia (-4.5%) while increases were reported in Portugal (+0.9%), Poland (+0.6%) and France (+0.6%). Consumer Goods: Exports of German consumer electronics increased to 12.9 bn. EUR in August (+4.1%), with a growth rate well below the average growth rate in 2015 of around 7.7%. Order intake saw strong growth rates from Hongkong (+24.9%), Spain (+22.1%) and Denmark (+17.8%) while deliveries to Taiwan (-25.5%), South Korea (-17.6%) and Japan (-11.4%) heavily declined. For the period from January to August 2015 exports of German consumer electronics are valued at around 114.6 bn. EUR (+7.7 yoy). Automotive: In September new passenger car registrations in the European Union amounted to 1,356,868 vehicles, rising by around 10% compared to the same month last year. The strongest growth is reported in Spain (+23% yoy), Italy (+17% yoy), France (+9% yoy), the United Kingdom (+9% yoy) and Germany (+5% yoy). With around 2.59 mill. car registrations in 2015 the Volkswagen Group (25% of the total market) leads the field, followed by the PSA Group (11%) and the Renault Group (10%). Process Industry: According to the German engineering association VDMA the German mechanical engineering industry is heavily fighting with the current conditions in the global economy. Order intake in September 2015 fell by as much as 13% in total, which adds up from a 1% plus in domestic orders and a 18% decline in international orders. After a strong start into 2015 and a strong July, the growth prospect for the full year 2015 have been significantly dampened. - 3 -
European Industry News / Business Climate Industry News Business Climate at a Glance PMI - 4 -
European Industry News Mills results remain unsatisfactory Melting production down by 5% The European stainless crude steel production amounted to approximately 4.9 mill. t in the first eight months of 2015, which is around 5% lower than in the same period last year. Production in Belgium, Finland, Slovenia, Spain and Sweden increased while production volumes in other European countries declined. Finnish Outokumpu has appointed Roeland Baan as the new president and CEO of Outokumpu as of January 1 st, 2016. Baan has held several global senior management positions in the metal industry and will take on the role of the company s former CEO and president Mika Seitovirta, who left his position on October 26 th, 2015. Reinhard Florey, Seitovirta s former deputy, will take over on an interim basis until Baan assumes his new position at the turn of the year. Outokumpu also announced to have signed an agreement with Lujiazui International Trust Co. regarding Shanghai Krupp Stainless (SKS) in China. The company will sell 55% of its 60% stake in the company to Lujiazui International Trust Co. which was holding the remaining 40%. Outokumpu will hold 5% of SKS and continue to operate the cold rolling mill with a cold rolling capacity of around 290,000 t. For Q3/15 Sandvik Materials Technology (SMT) reports an order intake of 2,847 mill. SEK, corresponding to a decrease of around 15% set against 3,335 mill. SEK in Q3/14. Revenues in Q3/15 amounted to around 3,161 mill. SEK compared with revenues of 3,735 mill. SEK in Q3/14 (-15% yoy). The company s EBIT heavily declined, dropping from 482 mill. SEK in Q3/14 to 49 mill. SEK in Q3/15 (-90% yoy). Earnings of Sandvik Materials Technology continued to be negatively effected by the weak oil and gas industry and the resulting underutilisation of the company s production units. Spanish Acerinox posts revenues for Q1-Q3/15 at 3,316 mill. EUR set against revenues of 3,295 mill. EUR in Q1- Q3/14 (+1% yoy). The groups EBIT almost halved to 121 mill. EUR (-49% yoy) in Q1-Q3/15 down from 240 mill. EUR in Q1-Q3/14. Acerinox EAT in Q1-Q3/15 fell to 56 mill. EUR decreasing by more than 58% from 134 mill. EUR in Q1-Q3/14. Both Melting production and hot rolled production declined by around 2% while cold rolled production increased by around 3%. Inventory levels decreased continually in the course of 2015 and registered a 3-month-turnover in September. - 5 -
Where do we stand in the business cycle? PMI Status September 2015 EU at a steady expansion pace, USA approaches stagnation Sep-15-6 -
China Monthly Exports May 2015 Flat Products recovered throughout the summer and were stable in September while Long Products stagnate Sep-15-7 -
Market Performance in Damstahl-Land Summary: Relevant Issues in Damstahl-Land Germany Netherlands Denmark Sweden Norway Slovenia Finland - 8 -
Relevant Issues in Damstahl-Land Germany, Netherlands Germany: The situation in the demand in the German stainless steel market was unchanged in October. Enduser demand was stable and volumes are on an OK level. Warehouses are still filled and as long as raw material prices and alloy surcharges stay low and volatile, there is little hope for major changes in 2015. Downward pressure on margins remains and lead times remain short. The market seems to pursue the trend to go for low volume purchases in order to minimise capital employed. BASF: Sales of the specialty chemicals producer BASF in Q3/15 totalled 17,424 mill. EUR, corresponding to a decline of 5% compared to 18,312 mill. EUR in Q3/14. But EBIT increased by 8% from 1,742 mill. EUR in Q3/14 to 1,889 mill. EUR in Q3/15. Also BASF s EAT rose to 1,209 mill. EUR in Q3/15, up from 1,014 mill. EUR in Q3/14 (+19% yoy). Due to the subdued economy, the oil price decline and the long-discussed asset swap with Russian Gazprom, BASF now expects a slight decrease in sales and EBIT for the full year 2015 results. GEA Group: The group reports sales of 1,068 mill. EUR in Q3/15, down by 9% compared to 1,168 mill. EUR in Q3/14. GEA s EBIT totalled 83 mill. EUR in Q3/15, corresponding to a decrease of 28% set against the group s EBIT of 115 mill. EUR in Q3/14. As a part of the group s Fit for 2020 programme the workforce was reduced by 300 full time equivalents at the end of Q3/15. Krones: Sales in the period of Q1-Q3/15 totalled 2.271 mill. EUR, corresponding to an increase of 5% compared to 2,164 mill. EUR in the period of Q1-Q3/14. EBIT increased by 15% from 133 mill. EUR in Q1-Q3/14 to 153 mill. EUR in Q1-Q3/15. The company s EAT rose to 108 mill. EUR in Q1-Q3/15, up from 95 mill. EUR in Q1-Q3/14 (+14% yoy). For the full year 2015 the company expects an increase in revenues of around 4%. Netherlands: In the Dutch stainless steel market no major improvements were visible in October. As stainless steel prices are low, the market is not willing to buy more material than absolutely needed. Investment activity in the oil and gas industry remains weak as oil prices did not improve at all and this is likely to continue also through H1/16. Other industry segments such as the building industry and processing industry, except oil and gas, are continuously improving. The Dutch economy is growing slightly and the 2016 forecast leaves market participants optimistic. AkzoNobel: Sales of the specialty chemicals producer AkzoNobel in Q3/15 totalled 3.8 bn. EUR, corresponding to a slight increase of 2% set against 3.7 bn. EUR in Q3/14. EBIT improved by 30% from 335 mill. EUR in Q3/14 to 436 mill. EUR in Q3/15. Also AkzoNobel s EAT rose to 285 mill. EUR in Q3/15, up from 205 mill. EUR in Q3/14 (+39% yoy). According to the company the market outlook is unchanged, seeing positive trends in North America and no improvement for Europe. Nevertherless, the company remains on track with its financial 2015 targets. - 9 -
Relevant Issues in Damstahl-Land Denmark, Sweden Denmark: The constant drop in sales prices has come to an end and the situation in the Danish stainless market is slightly improving. Market activity is rated as ok as demand remained stable and new orders were placed at a steady pace. The Danish economy is strenghtening and the country s real GDP growth will accelerate to 2.1% in 2016 up from 1.7% in 2015. Private consumption is supported by record-low interest rates and a recovering housing market. Additionally exports benefit from favourable exchange-rate developments. Danfoss: In October the company reported to have made two acquisitions. The first acquisition is the Dutch software company Advitronic Engineering B.V., which will be added to the company s food retail services division. The second acquisition is Turkey-based DAF Energy, a manufacturer of flat station solutions for decentralised heating systems. 60% of the shares in DAF Energy will be acquired in 2015 with the option to take over the remaining shares over the coming years. The value of the transactions was not disclosed yet. Dantherm: Dantherm reports revenues of 303 mill. DKK in the period Q1-Q3/15 set against 321 mill. DKK in Q1- Q3/14 (-6% yoy). EBIT in Q1-Q3/15 showed a loss of 17.7 mill. DKK, up by 0.6 mill. DKK compared with an EBIT loss of 18.3 mill. in Q1-Q3/14, negatively impacted by around 20 mill. DKK from the Telecom segment. Dantherm s agreement on the divestment of the Telecom segment to China Technologies Holdings Group has been signed in 2014 with closing still pending. Sweden: Demand in the Swedish stainless steel market stabilised in October after a modest 2015 so far but still the volumes are much lower than anticipated. Alloy surcharges stopped declining and tendencies to get the prices somewhat up again become visible. Market participants expect the harsh competition for volumes at low prices to ease towards the end of the year. Alfa Laval: Net sales of Alfa Laval reached seasonal record levels in Q3/15 when totalling 9,693 mill. SEK, corresponding to a an increase of 5% set against sales of 9,272 mill. SEK in Q3/14. Order intake turned down by 10% to 8,686 mill. SEK compared to an order intake of 9,708 mill. SEK in Q3/14, mainly due to fewer large orders being booked. Alfa Laval s EAT rose by 42% from 697 mill. SEK in Q3/14 to 988 mill. SEK in Q3/15. For Q4/15 the company expects a demand in line with or somewhat higher than in Q3/15. BE Group: The BE Group reports sales of 966 mill. SEK Q3/15, down by 3% set against 998 mill. SEK in Q3/14. In terms of value stainless products accounted for around 19% of the total sales (186 mill. SEK) in Q3/15, the same figure as in Q3/14. Shipping volume for all products totalled 93 kt in Q3/15, corresponding to a decrease of 2% compared with 95 kt in Q3/14. EBIT in Q3/15 totalled -117 mill. SEK, falling by 114 mill. SEK from an EBIT of -3 mill. SEK in Q3/14. - 10 -
Relevant Issues in Damstahl-Land Norway, Slovenia Norway: The situation in the Norwegian stainless steel market remains unchanged. The oil and gas market was not able to recover from the belly landing in mid 2014 and price levels of both Brent and WTI crude oil stay considerably low at around 50 USD/bbl. Investment activity remains weak and workforce reductions in the Stavanger area continue. The strong depreciation of the Norwegian krone and an expansionary fiscal policy so far helped to offset the weak growth in activity but can not be a long-term alternative. Yara International: In Q3/15 revenues of Yara International totalled 30.5 bn. NOK, corresponding to an increase of 27% set against 24.1 bn. NOK in Q3/14. EBIT more than doubled from 2.5 bn. NOK in Q3/14 to 5.9 bn. NOK in Q3/15. Also EAT of Yara International strongly improved to 4.0 bn. in Q3/15, up from 1.7 bn. NOK in Q3/14. The divestment of the company s 50% stake in GrowHow UK to CF Industries created a 3.2 bn. NOK gain. At the end of October Yara International acquired 100% of the shares in Apache Fertilisers, which holds a 100% stake in Yara Pilbara Fertilisers and 20.4% in Yara Pilbara Nitrates. Maersk: The oil and gas unit of Danish A.P. Moller-Maersk announced to reduce its global workforce by around 1,250 employees (approximately 12-15%) until the end of 2015 due to the onholding oil price slump. Maersk expects the job cuts to help to reduce its operating costs by around 20% by the end of 2016. The company further announced to intensely review the business activities in order to remain cost-competitive in the current oil and gas market environment that is also expected to continue throughout 2016. Slovenia: Market activity in the Slovenian stainless steel industry somewhat picked up in October as demand slightly increased. Especially in the manufacturing sector stainless steel is increasingly used as prices remain low. The Slovenian economy is in the middle of an upturn and GDP forecasts are set at around 2.6% for 2015 up from 2.2% anticipated in April 2015. The upturn also reflects in Slovenia s unemployment rate which again slightly decreased Krka: Slovenian pharmaceutical producer Krka officially opened a new plant for the production of active pharmaceutical ingredients in early October. Construction of the 85 mill. EUR investment started in July 2012 and in Summer 2015 the plants second module became operational. SIJ Group: The Slovenian Steel Group SIJ announced that the capital increase of 40 mill. EUR in Perutnina Ptuj was approved after receiving the regulatory permits on October 30 th, 2015. SIJ will also submit a takeover bid for the purchase of the remaining shares in the meat processing company. In order to avoid the movement to become a financial holding company, SIJ prepared a proposal for the management of future investments in Perutnina Ptuj. - 11 -
Relevant Issues in Damstahl-Land Finland Finland: The Finnish stainless steel market is under heavy competition, especially for stockists. Unchanged alloy surcharges amidst low demand keep prices low and stocks full. The end user market shows a mixed picture as some segments are in a very good state while others have to cope with thin orderbooks. The weakness across the Finish industry continues to lift unemployment rates and growing numbers of out of work people are falling into the category of the long term unemployed. Ovako: The company plans to implement a restructuring program to adapt to the current and anticipated future market demand, with a runtime from 2015 through 2017. Restructuring includes the closure of the rolling mill in Hällefors, the production and distribution unit in Forsbacka as well as the closure of the distribution centre in Turenki. Ovako s workforce will be reduced by around 300 employees. Cost saving measures are expected to show full effect from 2018 onwards at around 45 mill. EUR per year. Negotiations with local unions started immediately. UPM: Sales of UPM in Q3/15 totalled 2,530 mill. EUR, corresponding to an increase of 5% compared to 2,415 mill. EUR in Q3/14. EBIT more than doubled from 235 mill. EUR in Q3/14 to 513 mill. EUR in Q3/15. Also UPM s EAT strongly improved to 408 mill. EUR in Q3/15, up from 182 mill. EUR in Q3/14 (+19% yoy). The company s Kymi pulp mill expansion started the ramp-up in Q3/15 and investment in the new UPM Changshu production unit is currently being finalised. UPM also announced plans in its UPM Fray Bentos pulp mill in conjunction with the annual maintenance shutdown during Q4/15. - 12 -
- 13 - Damstahl Stainless 2015, Damstahl Steel Briefing - a member No. 97 of November the NEUMO-Ehrenberg-Group 2015
Damstahl Group: Germany, Denmark, Sweden, Norway, the Netherlands, Slovenia and Finland Damstahl GmbH Raiffeisenstr. 6-8 - D-40764 Langenfeld T: +49-21 73 / 7 97 0 - F: +49-21 73 / 7 97-270 dsde@damstahl.com - www.damstahl.com Office Hamburg: Damstahl GmbH Geschwister-Beschütz-Bogen 6 D-22335 Hamburg T: +49-40 / 3 80 74 27-40 F: +49-40 / 3 80 74 27-50 Office Niederlande: Damstahl B.V. Langesteijn 123 NL-3342 LG Hendrik-Ido-Ambacht T: +31-78 / 303 10-90 F: +31-78 / 303 10-99 Office Magdeburg: Damstahl GmbH Schleinufer 11 D-39104 Magdeburg T: +49-391 / 55 72 26-50 F: +49-391 / 55 72 26 59 Edelstahlservice Frankfurt: Hanauer Landstr. 293B D-60314 Frankfurt/Main T: +49-69 / 2 57 58 83-00 F: +49-69 / 2 57 58 83-20 Office Stuttgart: Damstahl GmbH Zettachring 2 D-70567 Stuttgart T: +49-711 / 21 57 87-10 F: +49-711 / 21 57 87-20 Office Munich: Damstahl GmbH Elly-Staegmeyr-Str. 2 D-80999 Munich T: +49-89 / 8 18 96 40-0 F: +49-89 / 8 18 96 40-40 Office Slovenia: Damstahl GmbH Pesnica pri Mariboru 38/a SI 2211 Pesnica pri Mariboru T: +386-59 / 177 399 M: +386-41 / 362 212-14 -
Visit Damstahl at... November 17th 19th, 2015 Maastricht, The Netherlands MECC - Booth S743-15 -