uk-damstahl briefing january 2018 · 2018-01-30 · on the one hand more truck drivers are...

Damstahl Stainless Steel Briefing No. 119 – January 20181 © Damstahl 2018. Damstahl - a member of the NEUMO-Ehrenberg-Group

DamstahlStainless Steel Briefing #119

January 2018


Stainless Steel at a Glance 3

European Industry News 6

Where do we Stand in the Business Cycle? (PMI) 8

China Monthly Exports 9

Relevant Issues in Damstahl Land 10

�Germany

� The Netherlands

�Denmark

�Sweden

�Norway

�Slovenia

� Finland

Contents


Stainless Steel at a Glance

Market: Setting the course for 2018: Margin before volume!

• Stainless steel demand has been good in 2017 and only the low margins, especially during the summer, have prevented the year from being a real good year. This is what the industry will work on this year – improving margins throughout the supply-chain. But this means that buyers will have to accept higher prices! The outlook is promising, order books are good and the market activity remains on a robust level. Thus, the stainless steel industry should prepare for a busy year with increasingly ‘fair’ margins.

• European economies are gaining momentum. All EU countries will most likely match the so called Maastricht budget criteria in 2018 for the first time. But the growth is still fragile in some countries and even small disruptions might have severe consequences. Brexit, protectionism especially in the USA, a tax war, financial bubble, etc., are possible obstacles in the nearer future. All that needs a strong European Union with member states that are working closer together and not against each other.

Alloy Surcharge:

• The alloy surcharge dropped in January 2018, but will increase again (substantially) in February.

• Outokumpu set the surcharge for type 304 (1.4301) to 1,290 EUR/t in January 2018, down from 1,362 EUR/t in December 2017. The surcharge for type 316 (1.4401) was set to 1,844 EUR/t in January 2018, down from 1,919 EUR/t in December 2017.

• Outokumpu’s graphite electrode surcharge remains at 30 EUR/t, since its introduction in September 2017. Acerinox announced not to impose any electrode surcharge at all.



Building & Construction:

• According to Eurostat, production in construction in the euro area grew by 2.7% in November 2017 yoy and by 2.7% in the EU28. The increase in the euro area is due to building construction rising by 2.7% and civil engineering by 3.0%. The increase in the EU28 is due to building construction rising by 3.3% and civil engineering by 1.1%.

• Highest increases were seen in: Hungary + 30.7% yoySlovenia + 21.2% yoyPoland + 16.0% yoy

• Largest decreases were recorded in: Romania - 4.1% yoyFrance - 0.2% yoy

• Other Damstahl countries: Germany + 5.6% yoyNetherlands + 8.0% yoySweden + 4.3% yoy

Consumer Goods:

• According to the German Association ZVEI, order intakes in the German electronics industry increased by 10.2% for the first 10 months in 2017 compared to the same period in 2016. From January to October 2017, production rose by 4.3% yoy and the revenue by 7.1% yoy.

• The business climate index slightly declined in November. While the current business situation was evaluated better than in September, the business expectations diminished clearly.



Automotive:

• According to the VDA, the German passenger car market grew for the fourth time in a row and reached the highest volume in this decade. In 2017, new passenger car registrations totalled 3,441,300 units, which is a plus of 3% compared to 2016. While new car registrations of non-German carmakers gained 8%, the German car production (incl. group brands) remained stable. The German carmakers’ production, however, dropped by 2% yoy to 5,647,100 units in 2017.

• According to ACEA, passenger car sales in Europe amounted to more than 15 mill. units in 2017, up by 3.4% yoy. It is the first time that the 15 mill. mark was exceeded since 2007. Among the five big markets in the EU, new car registrations increased in Italy by 7.9%, in Spain by 7.7%, in France by 4.7% and in Germany by 2.7%, whereas they declined in the UK by 5.7%.

• Some of these strong increases in registrations were fuelled by incentive programs of car manufacturers and dealerships. Thus, some forecasters see a ‘cooling off’ in 2018.

Process Industry:

• According to the German engineering association VDMA, the production in the mechanical engineering sector in Germany increased by price-adjusted 3% from January to November 2017 when compared to the same period 2016. This interim result meets exactly the forecast of 3% for 2017, set by the VDMA.

• Both domestic and foreign incoming orders rose by 12% yoy from September to November. While orders from euro member states grew by 13%, orders from non-euro member states increased by 11%. This points to a gaining momentum at the end of the year.


European Industry News / PMI Status

• European Industry News

• Where do we stand in the Business Cycle? – PMI Status

• China Monthly Exports


European Industry News

• At the end of October, Sandvik Materials Technology announced to divest its welding wire business to ESAB, a global leader in the welding industry. The agreement with ESAB includes the production units in Sandviken, Sweden and Scranton, USA, as well as the global sales and product management organisation. The welding wire business had a revenue of 470 mill. SEK in 2016 and employed about 120 people.

• In November, ThyssenKrupp‘s CEO Heinrich Hiesinger confirmed plans to sell AST (Acciai Speciali Terni), but did not yet specify whether a prospective buyer already exists. However, AST reported a significant profit (EBIT) for 2017 after 7 years of losses before.

• In December, Fidelium Partners (a German investment fund) has acquired OKS Otto Knauf GmbH from UK trading and distribution company, Stemcor. OKS Otto Knauf GmbH is a steel service center in Iserlohn, Germany, processing 250 kt of hot- and cold rolled galvanised strip and stainless steel per year.

• Acerinox will invest 5 mill. EUR in a new slitting line at the Columbus Stainless factory, South Africa. Over 3 mill. EUR will be invested for replacing the melting shop refrigerated vault of electric furnace number 2 at its Campo de Gibraltar plant. This replacement will reduce refractory and electrodes consumption (reduction of graphite electrode consumption of 10%) and increase the furnace availability time.

• Outokumpu announced on 28 November, 2017, to extend its product portfolio with Ultra Alloy 825, which is a titanium stabilised austenitic nickel-based alloy with an addition of copper. Main field of application for Ultra Alloy 825 are processing equipments in the chemical and oil&gas industries.

Stainless Steel base prices quite stable in the beginning of 2018


Where do we Stand in the Business Cycle?

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PMI Status December 2017In December, the European index reached a new record high since the start of the survey in 1997. Also for the USA the index improved, while remaining constant for China


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350000Flat Products Long Products

China Monthly Exports

Exports of Flat Products slightly increased and exports of Long Products continued to decrease in October


Relevant Issues in Damstahl-Land

Germany

The Netherlands

Denmark

Sweden

Norway

Slovenia

Finland



Germany:

• 2017 has been a successful year for the stainless steel industry in Germany. Also over the Christmas holidays the demand has been healthy. This is partly based on the fact, that the relatively “warm” temperatures stimulated the pipeline construction market.

• All signs imply a positive HY1/18. Prices are stable and a small upwards trend is expected. Price increases by the mills due to the rise in costs for graphite electrodes could be passed on to the end-customers. Orders from end-customers reach into the second half of the year and reflect the currently booming economy. In the chemical sector some large projects will be announced in the coming months.

• Rather problematic is the situation in the logistics sector. On the one hand more truck drivers are currently needed and on the other hand there is a shortage of European pallets. Driven by the booming economy, the demand for European pallets used for transporting and storing goods has been skyrocketing. Although the approximately 440 domestic producers of these pallets produced the record high number of 110 mill. pallets in 2017 and, thus, 7 mill. more than in 2016, the production is still not able to meet the growing demand. Furthermore, new laws for transport companies will increase logistical costs in 2018. E.g. the expansion of the “LKW-Maut” (truck toll) to the whole road network, which will be coming into force on 1 July 2018.

• Damstahl Germany is expanding its business to Belgium. A new sales manager will develop the market and Belgian customers will be supplied from the closely located German central warehouse.



The Netherlands:

• 2017 has been a good year for the Dutch stainless steel market due to strong demand and stainless steel prices that were on a good level. Overall, the Dutch economy has improved in 2017 compared with 2016. This is due to the fact that the export market pushed the economy to a higher constructive level. Projects in 2017 became more regular, only the oil and gas market was still in bad weather.

• The start into 2018 was good with a higher demand for stainless steel products than in January last year. An expected rise in stainless steel prices and continuing strong end-use demand is very promising for the first quarter of this year.

• AkzoNobel’s Specialty Chemicals business announced on 19 December, 2017, to study plans about an expansion of its high-purity vacuum salt site in Delfzijl, Netherlands. The production output at the site would increase by around 25% and would meet the increasing European demand for high-purity vacuum salt. The ongoing study will be completed in the first half of 2018 and it is planned to complete the project within three years.

• Furhtermore, AkzoNobel’s Specialty Chemicals business is increasing the production capacity in Sweden for its Levasil CC-branded product line of patented surface modified colloidal silica. The investment totals more than 4 mill. EUR and strengthens the company’s market leadership position for colloidal silica. Colloidal silica is a versatile product made of sand and water. It enhances and improves key functionalities of other products and manufacturing processes and is used in markets such as electronics, coatings, construction and catalysts, as well as batteries.



Denmark:

• The stainless steel market in Denmark had its up-and-downs in 2017, but overall it has been rather positive. For 2018, an increase in sales is anticipated and stocks will be filled up for that. Damstahl has increased the number of purchase and sales people and expanded its stock programme within fittings, sheets and tubes.

• Damstahl is now able to support its customers with material from the German stock three times a week - in 2017 “only” two deliveries per week were sent from Damstahl Germany in Langenfeld.

• The digital web-shop is gaining more and more momentum and Damstahl continues to invest in digital solutions that makes the customers’ everyday work much easier.

• The company Frontmatec, part of the equity firm Axcel, is a leading global player for high-tech slaughter equipment. Frontmatec is the result of a merger between the six companies SFK LEBLANC, Attec, ITEC, Carometec, Accles & Shelvoke and Frontmatec. End of November 2017, Frontmatec has entered into an agreement to acquire Jining Xinglong Food Machinery Manufacturing Co., Ltd. (“Xinglong”) in China. It will provide Frontmatec with market access in China, which is the world’s single largest market accounting for approx. 50% of all pigs slaughtered globally.

• Danfoss will deliver drives to the crane vessel Sleipnir, which is now being built in Singapore. Sleipnir will be the largest of its kind in the world and will be 220 metres long and 102 metres wide, once constructed in 2019.The financial results in the first nine months of 2017 have been very positive for Danfoss. The Group sales increased by 12% yoy to 4.4 bill. EUR and net profit improved by 8% yoy to 326 mill. EUR.



Sweden:

• 2017 has been a good year for the stainless steel industry with a lot of activity in the market. Despite the drop of the alloy surcharge, 2018 began with a good spirit and healthy demand from end-users spilled over into 2018.

• Bravida, a leading multi-technical service provider for buildings and plants in the Nordics, reported net sales of 12.366 mill. SEK from January to September 2017, up by 18% yoy and an operating profit of 684 mill. SEK, up by 16% yoy.

• The construction start of the skyscraper Karlatornet in Gothenburg, Sweden, is planned for the year end 2018. Karlatornet, will be the tallest building in the Nordics with approximately 250 metresheight, containing around 590 apartments and a hotel with 350 rooms. Bravida, in cooperation with the Builder, Serneke, will be responsible for the projecting, calculation and planning of all installations in the tower.

• Alfa Laval - a world leader in heat transfer, centrifugal separation and fluid handling – has won an order with a value of approximately 65 mill. SEK. It will supply Alfa Laval Packinox heat exchangers to a petrochemical plant in India, with delivery scheduled for 2018.



Norway:

• Rolls-Royce is considering to sell most of its marine business and to simplify its organisational structure from five to three divisions: Civil Aerospace, Power Systems and Defence. Since 2015, Rolls-Royce has responded to weak demand from the offshore oil and gas market and divested non-core businesses and reduced production sites worldwide from 27 to 12 and reduced the workforce by 30% to 4,200 people. Of the 4,200 employees in the marine business, 3,600 are working in the commercial business area, which is subject of the potential divestment. 1,600 employees in Norway, 500 in Finland and 200 in Sweden might be hit by the actions. The complex business areas such as naval marine and nuclear submarines will stay at Rolls-Royce and would be included in the defence division. The strategic review of the Commercial Marine business will be undertaken during 2018.

• On 18 December, 2017, Aker Solutions announced to deliver two subsea manifolds, a controls system and umbilicals for Skogul. It will also provide umbilicals and detailed engineering of the topside for a normally unmanned installation (NUI) for Valhall Flank West. Fabrication will be handled at the facilities in Tranby, Moss and Egersund in Norway. The value of the orders are not yet disclosed.



Slovenia:

• The Slovenian stainless steel market is quite stable. The Slovenian distribution business is however, under price pressure from Italian and Austrian competitors.

• The steel producer SIJ reported sales revenues in the metallurgical division of 571.4 mill. EUR from January to September 2017, which is a plus of 17.3% yoy. The EBITDA was comparable to 2016 and amounted to 61 mill. EUR. In September, the new AOD with an investment of 30 mill. EUR was launched. According to SIJ, the investment has already shown positive effects on the fourth quarter and will increase its production capacities and competitiveness in the production of stainless quarto plates.



Finland:

• On 6 December, Finland celebrated 100 years of Independence. Congratulations Suomi!

• 2017 has been a turning point for the Finnish industry and especially the shipyard and pulp&paper industry got upwind. All in all, 2017 has been quite satisfying for the stainless steel industry, besides the price drop of about 20% during summer. Since September 2017 the stainless steel market is running well. In December and early 2018 the demand for stainless steel is even better than in autumn and delivery times in the Finnish industry have lenghtened. The outlook for 2018 is ‘cautiously‘ optimistic.

• Caverion, one of Europe’s leading providers of technical solutions for buildings and industries, and AstraZeneca, a global biopharmaceutical company, announced on 17 January, 2018 to sign a Services agreement. The agreement is covering AstraZeneca’s research facility in Gothenburg and production facility in Södertälje, Sweden. The value of the contract was not disclosed.

• YIT, the largest residential construction company in Finland, reported its preliminary financial information on 12 January, 2018. The company achieved a revenue of 1,908 mill. EUR in 2017, up from 1,784 mill. EUR in 2016. Its adjusted operating profit improved from 79.9 mill. EUR in 2016 to approximately 122 mill. EUR in 2017. The positive result is due to a strong last quarter in all segments and especially a strong December. Drivers at the end of the year are the good residential sales in Finland and in the CEE countries. Also residential sales in Russia picked up compared to the beginning of the year 2017.

uk-damstahl briefing january 2018 · 2018-01-30 · on the one hand more truck drivers are...

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