European stainless steel: modernisation and reorganisation?...European stainless steel:...

European stainless steel: modernisation and reorganisation?

Metal Expert European Bulk Ferroalloys Conference, Vienna, 2012

Robert Cartman - Hatch

History of the European stainless industry

Current issues

Prospects

METAL EXPERT EUROPEAN BULK FERROALLOYS CONFERENCE, VIENNA 2012

Contents

© Hatch Associates Limited, 2012 2

Conclusions

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000+

Text

ALZ

Ugine

J&L Specialty Steel

Fabrique de Fer du Charleroi

Acesita


The European stainless steel industry has consolidated into 4 major players (perhaps soon to be 3) from a large number just 20 years ago

© Hatch Associates Limited, 2012

Outokumpu

Avesta

British Steel Stainless

Thyssen

Krupp

AST

Acerinox

North American Stainless

Columbus

Source: Factiva, Hatch Beddows

Overview of EU stainless assets

Acerinox – 1 meltshop in Spain at Palmones, fully integrated cost-efficient site. 2 rolling mills in northern Spain, Inoxfil and Roldan that roll stainless long products from substrate produced in Palmones

ArcelorMittal – 2 meltshop sites in Belgium at Chatelet and Genk. Chatelet integrated down to hot-rolling. Genk ships semis to Chatelet for hot-rolling. HR stainless is shipped to


The 4 major stainless producers each have their own geographical focus within Europe


semis to Chatelet for hot-rolling. HR stainless is shipped to the site at Genk or 1 of 4 sites in France for cold-rolling

Outokumpu – 3 meltshop sites in Europe, 1 each in Finland, Sweden and the UK. Finland fully integrated cost-efficient site. Sweden has non-aligned capacities, relies on another Sweden-based site for some cold-rolling. UK site a meltshop at Shepcote Lane and separate rod mill nearby

ThyssenKrupp – 3 meltshop sites in Europe, 2 in Germany at Bochum and Krefeld, 1 in Italy at Terni. Terni the only fully integrated site. Used to operate a cold-rolling facility in Torino but was moved to Terni. German sites not integrated and are relatively inefficient.

Source: Company reports, Hatch Beddows


European stainless production has barely changed over the past decade, in fact showing a slight fall in recent years. This, combined with a rising scrap ratio, has dented the demand for ferroalloys

6.000

7.000

8.000

9.000

10.000

European stainless steel productionkt

45%

50%

55%

European stainless steel scrap ratio


Source: ISSF, ISSB, EUROFER, Norilsk, Hatch Beddows

0

1.000

2.000

3.000

4.000

5.000

6.000

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

30%

35%

40%

45%

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011


Current issues

Prospects


Contents


Conclusions


The European market for stainless steel have shown little growth over the past decade and the region’s net export position has also come under threat

6.000

8.000

10.000

12.000European stainless steel production Europe’s net export positionkt kt

0

500

1.000

1.500

2.000


Source: ISSF, ISSB, EUROFER, Hatch Beddows

-4.000

-2.000

0

2.000

4.000

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

Production Imports

Exports Apparent consumption

-3.000

-2.500

-2.000

-1.500

-1.000

-500

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

Imports Exports Net exports


China is no longer the main export destination for the European stainless industry as it has become increasingly self-sufficient. Other export markets may also be at risk of decreasing in size

1.500

2.000

2.500European stainless steel exports*kt

� European exports have fallen since the peaks of 2003-06

� China has become a smaller export market for European producers as it has become more self-sufficient

� China also becoming a net exporter, which may threaten


*finished products only


0

500

1.000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

USA Other Asia* Mexico

Turkey China Other

� China also becoming a net exporter, which may threaten European export markets in ‘Other Asia’ e.g. S.Korea, Taiwan, Thailand, India...

� ‘Other Asia’ also set to become more self-sufficient with construction of Bahru Stainless (Acerinox) in the coming years in Malaysia

� USA/Mexico also to become more self-sufficient with construction of TKS’ Alabama mill


As one of Europe’s major markets, the Italian market demonstrates the increasing threat of imports from outside of Europe that the EU stainless industry faces

1.000

1.200

1.400

1.600

60%

70%

80%

90%

100%

Italian stainless steel imports Source of Italian stainless importskt

© Hatch Associates Limited, 2012 9Source: ISSF, ISSB, EUROFER, Hatch Beddows

0

200

400

600

800

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

0%

10%

20%

30%

40%

50%

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

European supply Non-European supply


Current issues

Prospects


Contents


Conclusions

8

10

12


European capacity utilisation is now around 75-80% although the planned closures of TKS facilities in Germany as part of the Outokumpu/TKS merger would help to alleviate this weakness

European stainless steel capacity by company, total production and capacity utilisationMt

91% 88% 90% 90% 84% 95% 82% 80% 61% 77% 77% ?%


0

2

4

6

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Future*

Outokumpu TKS Acerinox Aperam Other Production

11

*includes planned shutdowns of TKS facilities in Germany

Source: Company reports, Hatch

xx% Capacity utilisation


China is no longer the main export destination for the European stainless industry as it has become increasingly self-sufficient. Other export markets may also be at risk of decreasing in size

1.500

2.000

2.500European stainless steel exports*kt

� European exports have fallen since the peaks of 2003-06

� China has become a smaller export market for European producers as it has become more self-sufficient

� China also becoming a net exporter, which may threaten


*finished products only


0

500

1.000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

USA Other Asia* Mexico

Turkey China Other

� China also becoming a net exporter, which may threaten European export markets in ‘Other Asia’ e.g. S.Korea, Taiwan, Thailand, India...

� ‘Other Asia’ also set to become more self-sufficient with construction of Bahru Stainless (Acerinox) in the coming years in Malaysia

� USA/Mexico also to become more self-sufficient with construction of TKS’ Alabama mill


The restructuring of TKS’s global operations will further put a dent in European exports

Existing strategy of TKS Planned strategy of TKS

© Hatch Associates Limited, 2012 13Source: ThyssenKrupp, Hatch

� TKS currently sends material to Alabama/Mexinox for further processing

� Large orders in standard grades, typically HRC

� New TKS mill in Alabama, USA will supply Mexinox

� Shanghai Krupp Stainless to source from local Chinese market

� TKS Europe sites will have to focus more on local markets

40

50

Taiwan

Kg

per

cap

ita


European consumption of stainless steel per capita is likely to have peaked already. The falling population in the continent will add to the restrictions on growth

Per capita consumption of stainless steel vsincome per capita for selected countries, 1997-2008

� Stainless consumption per capita tends to rise with incomes as economies shift into manufacturing, the most stainless-intensive sector of the economy

� As countries get richer, urbanisation also occurs, also


0

10

20

30

0 10.000 20.000 30.000 40.000 50.000 60.000

Source: Vale, IMF, UN, Hatch Beddows

China

SouthKorea

Japan

$’000 per capita, 2008 (PPP)

Kg

per

cap

ita

Europe / USA

� As countries get richer, urbanisation also occurs, also fuelling demand for stainless-containing products

� As countries become more service-orientated, stainless consumption per capita growth starts to slow and may even fall

� Europe’s low/negative population growth through to 2050 will also hold back growth in stainless steel consumption

� The UN forecasts Europe’s population to be 719m in 2050, down from 739m in 2010


Current issues

Prospects


Contents


Conclusions


Thoughts and conclusions…

� European restructuring necessary, capacity closures/relocations inevitable� Outokumpu/TKS plans long overdue. Even if the merger is not approved, restructuring is necessary

� European export markets under threat from increased capacity elsewhere and strategy shifts� China increasingly self-sufficient and a bigger threat in ‘Other Asia’ markets. Acerinox expansion into Malaysia and TKS

expansion in USA will also impact on EU exports


expansion in USA will also impact on EU exports

� Import competition increasing, Europe has to increase its competitiveness. Restructuring will help with this in the long term

� Restructuring will help European firms improve capacity utilisation, thereby improving unit production costs and improving profitability/competitiveness against imports

� Long term outlook for ferroalloy demand from EU stainless industry not good� Stable/falling regional consumption and major threats to export markets. Europe has to become more competitive

against imports and seek new export markets. Further development of Turkey? Russia/Ukraine? MENA? Product innovation?


Contacts for further information

Hatch Beddows Strategy Consulting

+44 20 7906 5100 (switchboard)�

9 Floor, Portland House, Bressenden Place, London SW1E 5BH�


Hatch Beddows is a member of the HATCH GROUP of companies

�

+44 20 7963 0972Fax

+44 20 7906 5119�

ConsultantRobert Cartman

[email protected]

European stainless steel: modernisation and reorganisation?...European stainless steel:...

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