Damstahl Bi-Monthly Stainless Steel Briefing November 2014

Transcription

1 Damstahl Bi-Monthly Stainless Steel Briefing November 2014 Damstahl 2014, Damstahl - a member of the NEUMO-Ehrenberg-Group - 1 -

2 Damstahl Bi-Monthly Stainless Steel Briefing Issue 40, November 2014 Contents Stainless Steel at a Glance European Industry News & Business Climate (PMI) Market Performance: Relevant Issues in Germany Netherlands Denmark Sweden Norway Slovenia Damstahl 2014, Damstahl - a member of the NEUMO-Ehrenberg-Group - 2 -

3 Stainless Steel at a Glance Déjà Vu a weak Fall Demand: At the beginning of Q4/14, the European stainless steel demand dropped to similar (low) levels as in the same period Despite this backdrop, the European stainless steel industry will grow by around 4% in The current slowdown indicates that a similar growth might not be achieved in 2015 (1-2% seem to be realistic for 2015). Economic institutes have recently lowered their growth expectations for Germany for 2014 and 2015, which will have a negative impact on stainless demand. But, following a usual industry pattern, Q1/15 will be stronger again. Mills: European mills were not able to get any noteworthy base price increases from the market in HY1/14 due to a very strong competition from Asian mills. At the moment, mills strive to stabilize base prices in order to prevent further erosion of margins. The profit situation remains challenging, thus cost cutting is top priority for all European mills. Prices remain a headache for producers and distributors. The key question is: When and at what level nickel, chrome and molybdenum will bottom out. Stocks are on comparatively high levels in Europe after a re-stocking phase in HY1/14 and many stockholders are considering their stocks as too high now. There is no price stimulus for additional buying at the moment except for companies who want to cumulate stocks of Asian material before potential import duties will be enforced in Q1/15. End Use Segments: Building & Construction: The European building and construction industry will continue its positive trend in the next 2-3 years, although growth rates will remain comparatively low. For 2015, a growth of ~1% is expected by Euroconstruct, followed by around 3% in the years after. Stainless steel will most likely grow above the sector average level. Consumer Goods: Consumer confidence in Germany is deteriorating. A sentiment survey released by GfK (Gesellschaft für Konsumforschung) gives an indication that tensions between Russia and Ukraine, as well as the turmoil in the Middle East are taking their toll on the mood of European businesses and households. Automotive: New passenger car registrations in the EU rose by a healthy 6.4% in September (yoy). New passenger car registrations expanded for the thirteenth consecutive month, totaling 1,235,501 units. Substantial growth prevailed in all major markets, Spain (+26.2%), France (+6.3%), UK (+5.6%), Germany (+5.2%) and Italy (+3.3%). Process Industry: The German Engineering Association (VDMA) reported that incoming orders in the mechanical engineering industry in Germany stagnated in August 2014 compared with the previous year. However, based on a three-month comparison, incoming orders rose by 3% (yoy) between June and August 2014 (both domestic and international orders +3%). VDMA forecasts a 2% growth in production for 2015 with increasing orders expected from the U.S. and China, the industry s two largest export markets. Damstahl 2014, Damstahl - a member of the NEUMO-Ehrenberg-Group - 3 -

4 European Industry News Earnings improved at European mills in Q3/14 The European stainless crude steel production was 1.7 mill. t in Q3/14 (+13% compared to 1.5 mill. t in Q3/13). In the same period the stainless crude steel production substantially increased in the Damstahl countries Sweden (+12%) and Slovenia (+15%), while on the other hand Germany reports a 4% lower stainless crude steel production. Stalatube: The Finish hollow stainless steel section manufacturer has selected Outokumpu s duplex stainless steel as one of the main construction material for its new StalaWind wind power towers. Stalatube has designed steel hybrid towers, made of stainless steel tubes that can take turbines up to heights of 160 meters. Outokumpu awarded the German equipment supplier SMS Siemag to revamp the 45-years old 20-high cold rolling mill in Krefeld. The mill with a strip width of 1,570 mm and entry strip gauge of up to 10 mm and 0.5 mm minimum in the exit section will be able to produce thin-gauge ferritic strip (even BA) in the future. It is planned to re-commission the modernized mill in July Acerinox: Net sales rose to 1,125 mill. EUR, compared to 967 mill. EUR in Q3/13. The company nearly quadrupled its operating result in Q3/14. EBITDA was mill. EUR, up from 37.6 mill. EUR in the corresponding period Acerinox's melt shop production in the first nine months of 2014 increased by 7.8% (yoy) to 1,809,253 tonnes. Sandvik Materials Technology (SMT): Order intake improved by 2% in Q3/14 amounting to 3,335 mill. SEK (Q3/13: 3,152 mill. SEK). Operating profit grew by 176% to 482 mill. SEK (Q3/13: 175 mill. SEK). During the quarter, a major order was booked for steam generator tubes for a nuclear power plant in China (order value: ~200 mill. SEK). ThyssenKrupp: TK s Materials Services, which includes VDM and Acciai Speciali Terni (AST), performed well in Q3/14 (order intake +8% compared to Q2/14). AST and VDM contributed ~700 mill. EUR to order intake in Q3/14 (Q2/14: ~300 mill. EUR). TK AST: ThyssenKrupp and Italian trade unions have failed to reach agreement on the future of the stainless steel works of AST. Thus, ThyssenKrupp has resumed the process of laying off 550 workers which was answered by several strikes by its employees. TK VDM: ThyssenKrupp advances only sluggishly with the sale of VDM, although some bids have been submitted in the first bidding round ending on October 22, The interested finance investors such as Lindsay Goldberg and KPS Capital are not willing to offer ThyssenKrupp s price expectations. Damstahl 2014, Damstahl - a member of the NEUMO-Ehrenberg-Group - 4 -

5 Index of 50 = Break Even Point Where do we stand in the Business Cycle? PMI Status September 2014 Slump in the U.S. at the end of Q3/14, Europe is down to break-even-levels and China is moving sideways 65 EU USA China Damstahl 2014, Damstahl - a member of the NEUMO-Ehrenberg-Group - 5 -

6 [metric t] China Monthly Exports September 2014 Flat Products down from ~350,000 t in April to ~260,000 t at the end of Q3/14, Long Products are very stable in Q3/14 at ~35,000 t Flat Products Long Products *excl. internal trade Damstahl 2014, Damstahl - a member of the NEUMO-Ehrenberg-Group - 6 -

7 Relevant Issues in Damstahl-Land Germany, Netherlands Germany: Stainless steel demand declined throughout Q3/14 and didn t meet the earlier expectations. Falling nickel prices are creating a wait-and-see situation with a very low market activity. Some market participants are worried. Distributors are still acting very passive as they apparently have sufficient material on stock. Retail distributors order from master distributors rather than directly from mills at the moment in order to reduce risk in a downward market. GEA Group: The company will build a new large milk powder plant for New Zealand s dairy giant Fonterra. The plant in Lichfield, New Zealand with an output capacity of 30 tonnes per hour will match the size of the world s biggest existing dairy plant which GEA built for Fonterra at Darfield, New Zealand in GEA s scope of supply has a value of ~90 mill. EUR. GEA will acquire the Dutch cheese technology firm De Klokslag (supplier of equipment for cheese production in Europe). GEA already acquired Scan Vibro in Denmark, a smaller company making powder conveying systems for various food applications. Both acquisitions combined have ~160 employees and achieved revenues in 2013 of around 40 mill. EUR. GEA published its preliminary financial figures for Q3/14. Order intake of 1,165 mill. EUR was on par with the prior-year level. During the same period, sales were up 5% at 1,147 mill. EUR. Krones: The German manufacturer of beverage filling and packaging technology, had a successful Q3/14. Revenues increased by 11.2% (yoy) from mill. EUR to mill. EUR. Krones revenue for the first nine months was up 6.5% (yoy) from 2,032.9 mill. EUR to 2,164.4 mill. EUR. Net income increased by 16.4% to 95.1 mill. EUR in the first three quarters of New orders also continued to rise. At 2,198 mill., new orders in the first three quarters exceeded the high volume achieved in the previous year by 4.5%. Automotive: In September, new registrations in Germany amounted to 260,100 cars (+5% yoy). In the same period the production was 527,800 units (+3% yoy). In the first three quarters, new registrations were up 3% (production and exports, both +4% yoy). The ZEW s (Centre for European Economic Research) indicator of economic sentiment for Germany dropped by 10.5 points in October and now stands at minus 3.6 points. Decreasing for the tenth consecutive term, the index has returned to negative territory for the first time since November of Netherlands: Prices in the stainless steel market in the Netherlands are going downwards, due to the development of the nickel prices. Also demand in October was disappointing. Customers live from hand to mouth. The economic situation in Q3/14 is unchanged to the previous quarter, but with a lot of differences across segments. The demand in stainless steel in the food industry is on a quite good level. The same applies to the machining building industry (output generated by the electrical products and machinery sector rose by 5.9% in August 2014 from August 2013). The forecast for the last months of 2014 is a stable market situation. Royal Dutch Shell plc (RDS): Oil and gas production in Q3/14 was 5% lower (yoy) at 2.79 million barrels of oil equivalent per day. Shell achieved earnings of 5.3 bn USD compared with 4.2 bn USD in the same quarter Damstahl 2014, Damstahl - a member of the NEUMO-Ehrenberg-Group - 7 -

8 Relevant Issues in Damstahl-Land Denmark, Sweden Denmark: Since mid-september market activity has been at a low level. But business in the food industry is fine. The wind mill sector is fine too (sub suppliers have a lot of orders to Siemens and Vestas). Falling alloy surcharges, which puts prices under pressure, and the uncertainity about the future price developement influences the market. Arla Foods: The Danish food processor will acquire the Swedish cheese company Falbygdens Ost, which has sales of around 470 mill. SEK and is currently owned by Atria Scandinavia. The price has not been disclosed. Arla is expected to complete the acquisition by early January 2015, following a decision from the Swedish Competition Authority. Arla Foods is to expand its dairy plant in Uphal, Germany. The 24 mill. EUR investment (part-funded by the state government of Mecklenburg-Vorpommern), will create 58 jobs. Currently the facility employs 414 people. The expansion is scheduled to be complete in Grundfos: The Danish pump group s Indian subsidiary plans to set up a plant in the north-west of India to double its revenues in India to 100 mill. USD over the next five years from 50 mill. USD at present. About mill. EUR investments would be undertaken in the next five years in India. Danfoss and Dantherm published their Q3/14 results Financial key figures are shown in the table below: Financial Key Figures Danfoss DKK mill. Dantherm DKK mill. Net Sales EBIT Net Profit / Loss Q3/14 Q2/14 Q3/13 Q3/14 Q2/14 Q3/13 Sweden: The stainless steel market in Sweden in October is quite weak and uncertainty prevails. Many endusers are reporting less business, and of course the declining nickel price makes customers buy short term only. Alfa Laval: Two new orders were booked in October 2014 (total value of ~350 mill. SEK), including a record-size order for air cooled heat exchangers to be installed in an oil and gas production facility in Kazakhstan. The order has a value of approx. 290 mill. SEK. Delivery is scheduled for 2015 and The second order is for the supply of exhaust gas cleaning systems (order value: approx. 55 mill. SEK, delivery scheduled for 2015 and 2016). BE Group: Consolidated net sales rose by 1% in Q3/14 (yoy) amounting to 923 mill. SEK (Q3/13: 916 mill. SEK). Net Shipped tonnage fell by 7%. Gross profit amounted to 120 mill. SEK (Q3/13: 121 mill. SEK), corresponding to a gross margin of 13% (Q3/13: 13.2%). The operating result decreased to -1 mill. SEK (Q3/13: +13 mill. SEK). In the first nine months of the year sales fell by 3% (yoy) amounting to 2,953 mill. SEK (2013: 3,037 mill. SEK). OSTP: The welded stainless steel tubular product manufacturer opened a new laboratory in Örnsköldsvik, Sweden. Damstahl 2014, Damstahl - a member of the NEUMO-Ehrenberg-Group Q3/14 Q2/14 Q3/13 8,784 8,617 8,712 2% 1% 1,323 1,042 1,175 27% 13% % 17% % -1.5% % 400% % 90%

9 Relevant Issues in Damstahl-Land Norway, Slovenia Norway: The stainless steel market activity in Norway has slightly fallen, same as the prices. Some industries are struggling with these circumstances. Thus, a lot of dismissals within the oil and gas sector can be seen these days, due to expected less investments for 2015 (an expected decrease of 8 15%). While on the other hand some industries as waste water and drinking water are still on an satisfactory level. Aker Solutions: The company will cut another 175 jobs this year in platform maintenance and modification division. The new round of job cuts brings the total number of layoffs at Aker this year to 575. Statoil: In October 2014 Statoil entered into an agreement with the Malaysian oil and gas company Petronas to sell its remaining 15.5% interest in the Shah Deniz project and the South Caucasus Pipeline for a cash consideration of 14.2 bn NOK (2.2 bn USD). The transaction is expected to be closed in HY1/15. Statoil and co-venturer Exxon Mobil announced a new natural gas discovery offshore Tanzania. Statoil proved new oil resources in the vicinity of the Grane field in the North Sea. The estimated volume of the discovery is in the range of mill. barrels of recoverable oil. Statoil continues to expand in Australia, with the award of 100% equity share in a large exploration permit located in the prolific Northern Carnarvon Basin on the Northwest shelf of Australia. This is Statoil s third asset in Australia. The downsizing in the oil and gas industry also affects Statoil and the company plans to cut 500 jobs between now and the end of Statoil and Scana published their Q3/14 results Financial key figures are shown in the table below: Financial Key Figures Statoil NOK bn Scana NOK mill. Net Sales EBIT Net Profit / Loss Q3/14 Q2/14 Q3/13 Q3/14 Q2/14 Q3/13 Slovenia: Demand for stainless steel fell in October and a further decline is expected in November/December. This inspite of the Slovenian economy improving (GDP growth of +2.9% in Q2/14 compared to the previous quarter), mainly driven by increasing exports. Gorenje: The Slovenian home appliances maker completed a five-year 73 mill. EUR bond issue in October 2014, with a maturity on 10 October The annual interest rate has been fixed at 3.85%. It is the Group s first bond issue as a listed company. The paper was heavily oversubscribed as the company initially sought 50 mill. EUR. Building and Construction: The construction output in August 2014 increased by 27.7% (yoy) but it was 1.9% lower than in the previous month. Damstahl 2014, Damstahl - a member of the NEUMO-Ehrenberg-Group Q3/14 Q2/14 Q3/ % -9% % -57% % -135% % -4% % 84% % 69%

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