Damstahl Bi-Monthly Stainless Steel Briefing September 2013 Damstahl 2013, Damstahl - a member of the NEUMO-Ehrenberg-Group - 1 -
Damstahl Bi-Monthly Stainless Steel Briefing Issue 35, September 2013 Contents Stainless Steel at a Glance European Industry News & Business Climate (PMI) Market Performance: Relevant Issues in Germany Netherlands Denmark Sweden Norway Slovenia Damstahl 2013, Damstahl - a member of the NEUMO-Ehrenberg-Group - 2 -
Stainless Steel at a Glance Is this the turning point? First signs of spring in autumn Demand: The European stainless market showed no improvement in the first half of August, but many market participants reported a slight improvement in order intake after the end of the summer period at the end of August. Most positive signs come from the domestic markets in Damstahl Land whilst export bookings are mostly lagging behind. The all European PMI exceeded the level over 50 index points in July 2013 for the first time since mid 2011, pointing to a beginning market expansion. It is however to early to see already the turning point but it is a sign that Europe stopped its long term contraction. Mills: Market situation for European mills remains very difficult margins were already low, but in Q2 also volumes declined creating a double whammy situation for the European producers. Base prices continuously declined in recent months but might have bottomed out in August. Cost reduction programs helped to limit losses, but could not fully offset the weakening price levels. In August, Acerinox took action and announced 2 price increases of 50 for September and October sales. This move was also supported by Aperam. Stocks: Unfortunately stainless steel stock levels are only reported in Germany. There, stocks increased in Q1/13, but were reduced already again in Q2/13 by stockholders amid falling nickel prices. Throughout Q2/13 they were kept unchanged and at the moment stockholders are reluctant to re-stock as the nickel price shows no clear direction at the moment, stagnating~14,000 USD per t at the beginning of September. End Use: Stainless steel demand remained quiet in August. Building and Construction: According to the association Euroconstruct the demand in the European building and construction market is lacklustre in 2013 (-2.8% compared 2012). A stabilisation is expected for 2014 and 2% growth could be reached in 2015. Consumer Goods: Sentiment surprisingly improved in Southern Europe (Spain, Portugal and Italy) where people are getting more confident that the situation is bottoming out in Q4/13. Surprisingly also consumers are getting more pessimistic in France and Germany, as they expect tax increases. Automotive: New registrations of passenger cars in Western Europe increased by 4.4% in July (yoy). Spain, Portugal and Greece showed even double-digit growth in July (yoy) Spain +15%, Portugal +17% and Greece +12%. Process Industry: German machinery and process industry association (VDMA) reports that German investments in machinery and plants where up 10% in July compared with the previous year. Damstahl 2013, Damstahl - a member of the NEUMO-Ehrenberg-Group - 3 -
European Industry News Operating Results in HY1/13 are lower then last year The European stainless crude steel production remained ~2% below last year s production level in HY1/13. Due to weakening demand mills have reduced their production in the summer period (July and August). For instance AST (Terni, Italy) has stoppped its melting production for a full month in August for the first time. European Mills published their HY1/13 results Financial key figures are shown in the table below: Financial Key Figures (EUR million) HY1/13 HY1/12 Change 12-13 HY1/13 Outokumpu Stainless: Ramp-down of Krefeld melt shop is on plan shift reductions from 2 to 1shift in July 2013 will bring total cost savings during 2013 of around 8 mill. EUR (higher than initially planned). Headcount reduction progresses according to plan HY1/13 reduction: 339 positions. The target is to reduce headcount by 770 in 2013. Outokumpu received a contract to supply stainless steel for the facade of the Ping An Finance Center in Shenzhen, China. The skyscraper s facade will be the largest stainless steel facade in the world. The building is expected to be finished in April 2016, with a height of 660 meters, and it is set to be the highest skyscraper in China and the second highest in the world. The Ping An Finance Center will cover almost 0.5 square kilometers of building area. Schmolz+Bickenbach: The board of directors rejected the first two takeover bids for Schmolz+Bickenbach AG together with subsidiary S+B KG made by the Russian investor Renova. The recent offer has left many wondering about the group s future. Schmolz+Bickenbach AG is also considering to sell its subsidiary Schmolz+Bickenbach Distribution Germany in order to curb losses and return the group to profitability only 15% of Distribution Germany s sold products come from S+B AG s own mills. HY1/12 Change 12-13 HY1/13 HY1/12 Change 12-13 Aperam 2,635 2,760-4.5% (6) (30) 34.2% (39) (40) 1.2% -0.2% -1.1% Acerinox 2,072 2,419-14.4% 51 91-43.7% 16 40-59.9% 2.5% 3.7% Outokumpu* 4,285 2,558 n.a. (246) (124) n.a. (402) (110) n.a. -5.7% -4.8% Schmolz+Bickenbach 1,741 1,975-11.9% 30 66-54.0% (19) 16 n.a. 1.7% 3.3% *HY1/13 results incl. Inoxum Net Sales Operating Result (EBIT) Net Profit / Loss EBIT Margin HY1/13 HY1/12 Damstahl 2013, Damstahl - a member of the NEUMO-Ehrenberg-Group - 4 -
Index of 50 = Break Even Point Where do we stand in the Business Cycle? PMI Status July 2013 Sharp upswing in the U.S., constant improvement in Europe since beginning of 2013, China is sluggish 65 EU USA China 60 55 50 45 40 35 30 Damstahl 2013, Damstahl - a member of the NEUMO-Ehrenberg-Group - 5 -
[metric tonnes] China Monthly Exports June 2013 Chinese exports dropped in May/June after strong increase in the first months of 2013 220.000 200.000 180.000 160.000 Flat Products Long Products 140.000 120.000 100.000 80.000 60.000 40.000 20.000 - *excl. internal trade Damstahl 2013, Damstahl - a member of the NEUMO-Ehrenberg-Group - 6 -
Relevant Issues in Damstahl-Land Germany, Netherlands Germany: The stainless steel market in Germany is still in its dull summer vacation period. Distributors are hesitant with new orders as they have sufficient material on stock. They are struggling with low margins due to a sustained decrease in the alloy surcharge in HY1/13. Seems to be that prices reached their lowest possible level and a slight recovery can be expected in HY2/13. The situation is slightly better among end-users, but still not satisfactory. The ZEW s (Centre for European Economic Research) indicator of economic sentiment for Germany has increased by 5.7 points in August 2013 and stands now at the 42.0 points-mark (historical average: 23.7 points). This is the highest mark since March 2013. First signs of an end to the recession in important Eurozone-countries and the economic optimism due to the robust domestic demand in Germany may have contributed to the indicator s rise. GEA Group: Order intake in Q2/13 increased by 12.3% (yoy) to 1,574 mill. EUR. In HY1/13 order intake improved by 2.6% (yoy) to 3,021 mill. EUR due to several major orders in the food and beverage sector (+11% in this period). Revenues in Q2/13 rose by 3.6% (yoy) to 1,442 mill. EUR and in HY1/13 by 0.7% (yoy) to 2,675 mill. EUR. EBITDA in HY1/13 rose by 1.4% (yoy) to 250.7 mill. EUR and the net profit in Q1/13 rose by 37.2% (yoy) to 116.2 mill. EUR. According to VDIK (Association of International Motor Vehicle Manufacturers) the German passenger car market closed in HY1/13 with a minus of 8.1% (yoy). June 2013 has seen roughly 283,000 new registrations (+4.6% yoy). VDMA, the German Engineering Association reported that German machinery and tool orders fell 3% in July 2013 in real terms of last year's result. Domestic sales surged by 10% while demand from abroad dropped by 9% (yoy). HY1/13 showed an overall decline of 1% (yoy) domestic orders recorded minus 6% and foreign orders up by 1%. Netherlands: The Dutch market depends widely on export orders for its equipment manufacturers. These show some early signs of a post-summer improvement, but the signals are not strong enough yet to see a direction for the rest of the year. According to Statistics Netherlands, the Dutch economy declined by 0.2% in Q2/13 compared to Q1/13. This is the fourth quarter in a row showing economic decline, although with each quarter the decline became less severe. The economy was down 1.8% compared to Q1/12. Most sectors faced output declines. In Building and Construction the output decreased by 5.9% in Q2/13 (yoy). Output in the sector mineral extraction increased by 7.5% due to higher domestic and foreign natural gas consumption. The average output of the manufacturing industry was 1% down in June 2013 (yoy). The largest output decline was recorded in the sectors electrical products and machinery (-6.9%), basic metal products (-5.8%) and transport equipment (-4.7%). Damstahl 2013, Damstahl - a member of the NEUMO-Ehrenberg-Group - 7 -
Relevant Issues in Damstahl-Land Netherlands, Denmark, Sweden DSM and Shell published their Q2/13 results Financial key figures are shown in the table below: Financial Key Figures Net Sales Operating Result (EBIT) Net Profit / Loss EBIT Margin Denmark: The first month after the holiday period shows some positive trends. Prices are still on a very low level, but the good news is that no further decline is expected. The low prices have a big impact on the daily competition and therefore the stainless steel market is still tough. Stock levels are still at a low level compared to same time last year, and imports are only increasing on material bought from Asia. The proposed antidumping on butt welded fittings has been terminated, thus the price level on these products will remain low. Danfoss: The Group reports net sales of 16,815 mill. DKK in HY1/13 against 17,222 mill. DKK in HY1/12, equal to a 2% decline that was mainly due to developments in the solar inverter business. Operating profit (EBIT before other operating income/expenses) amounted to 1,665 mill. DKK compared to 1,833 mill. DKK in the year- earlier period. The HY1/13 results were satisfactory, but slightly below the strong HY1/12. Sweden: The stainless steel market in Sweden shows still no signs of improvement. Activity among end users is still on the slow side and the market strongly affected by the drop in alloy surcharges over the summer months. Some promising signs have lately been seen on the macro economic side, but the general opinion in the Swedish market is that an upturn still is quite far away. Alfa Laval: Order intake in HY1/13 was 14,718 mill. SEK compared to 15,799 mill. SEK in HY1/12, corresponding a decline of 7%. In August 2013, Alfa Laval has won an order to supply heat exchangers to a petrochemical plant in India. The order has a value of approximately SEK 185 mill. Deliveries are scheduled for 2013 and 2014. Alfa Laval and BE Group published their Q2/13 results Financial key figures are shown in the table below: Financial Key Figures (SEK million) Q2/13 Q1/13 Change Q2/13 Q1/13 Change Q2/13 Q1/13 Change Q2/13 Q1/13 DSM (EUR million) 2,468 2,268 8.8% 209 168 24.4% 141 114 23.7% 8.5% 7.4% Shell (USD million) 112,669 112,810-0.1% 5,372 13,298-59.6% 1,741 8,226-78.8% 4.8% 11.8% Net Sales EBITA Net Profit / Loss EBITA Margin Q2/13 Q1/13 Change Q2/13 Q1/13 Change Q2/13 Q1/13 Change Q2/13 Q1/13 Alfa Laval 7,549 6,535 15.5% 1,237 1,067 15.9% 644 703-8.4% 16.4% 16.3% BE Group 1,237 1,032 19.9% 5 (17) n.a. (8) (27) 30.5% 0.4% -1.6% Damstahl 2013, Damstahl - a member of the NEUMO-Ehrenberg-Group - 8 -
Relevant Issues in Damstahl-Land Norway, Slovenia Norway: Despite a high exchange rate and high wage costs, the Norwegian PMI index rose from 48.0 in July to 53.0 in August. The way the Norwegian industry has shifted over to become an equipment supply industry for oil & gas has been a success, but it also means that Norway is vulnerable if oil investments fall. But so far the Norwegian equipment producers enjoy strengthening demand for their products as shown below. The total production in the Norwegian manufacturing sector increased by 2.5% in Q2/13 compared to Q1/13. External Trade: In July 2013 exports increased by 7.5% (yoy) and imports were 2.6% higher (yoy). The value of crude oil exports increased by 13.4% to 27.3 bn NOK, whereas exports of natural gas fell by 2.1%. The total exports of mainland goods grew by 10.9% in July 2013 (yoy). In the main group machinery and transport equipment the export value was up for general industrial machinery by 17% and for electrical machinery by 37.2%. Aker Solutions: The company won a contract from Statoil to conduct an extended concept study for the floater for the Johan Castberg oilfield development in the Barents Sea. The contract is worth 250 mill. NOK. In July 2013, Aker Solutions has acquired UK specialist engineering company International Design Engineering And Services Ltd (I.D.E.A.S) to boost its asset integrity management services. Aker Solutions and Scana published their Q2/13 results Financial key figures are shown in the table below: Financial Key Figures (NOK million) Net Sales Operating Result (EBIT) Net Profit / Loss EBIT Margin Q2/13 Q1/13 Change Q2/13 Q1/13 Change Q2/13 Q1/13 Change Q2/13 Q1/13 Aker Solutions 11,907 11,060 7.7% 222 529-58.0% 124 269-53.9% 1.9% 4.8% Scana 507 504 0.6% (28) (33) 7.3% (30) (47) 16.7% -5.5% -6.5% Slovenia: Demand on the Slovenian market further declined in August. However a slight recovery is expected in September 2013. Prices reached their lowest level and stockholders are starting with re-stocking. The situation for the Slovenian industry is pretty much unchanged dull in August compared to the previous months and a recovery is not expected to happen this year. The GDP outlook for 2013 is bad at -3% and even -9% for 2014 respectively. Building and Construction: The value of construction put in place in June 2013 declined by 2.5% (yoy). Construction of buildings it decreased by 15.2%, while as regards civil engineering it increased by 3.3%. SIJ Group: The Slovenian Steel Group and its subsidiary Metal Ravne signed an agreement the SMS Group to finish investment into a ladle furnace and a new vacuum station (VD/VOD) in the Steel Plant of Metal Ravne s secondary metallurgical center. The contract value is 12.5 mill. EUR. This investment is part of a broader, 18.2 mill. EUR investment project which is planned to close in March 2015. Damstahl 2013, Damstahl - a member of the NEUMO-Ehrenberg-Group - 9 -
Report: Stainless Steel in Damstahl-Land, No. 11, March 2012 Damstahl 2012, Damstahl - a member of the NEUMO-Ehrenberg-Group - 10 -