ArcelorMittal expects real steel demand this year in Europe to be "at least stable if not slightly positive," despite current headwinds, the major steelmaker's CFO said on a conference call.
In the auto sector, "we can be cautiously optimistic about seeing higher volumes moving into the second half, even though there was no significant improvement in the first half," Genuino Christino said in a conference with analysts following release of the company's Q2 results July 28.
"Forecasts are still showing growth on year in terms of [auto] production," he said. Christino said it was positive that steelmakers are applying discipline in production, with World Steel Association data showing the magnitude of recent production cuts.
Worldsteel's latest report showed a 5.9% year on year drop in June in crude steel production worldwide, to 158.1 million mt, with production in the EU-27 down 12.2% at 11.8 million mt, and the rest of Europe producing 3.8 million mt, down 10.9%.
"We are adapting our supply to meet demand," the CFO said, noting that schemes in place such as the possibility of reducing working hours in Germany help make the company "confident that we can navigate this crisis."
CEO Aditya Mittal said on the call that it "makes sense" to cut production in the weaker demand environment such as being seen in H2.
ArcelorMittal on July 12 took one 1.5 million mt/year capacity blast furnace out of production at Dunkirk in France and a 2 million mt/year furnace was also taken out of production the same week at Acciaierie d'Italia, where ArcelorMittal is a shareholder, for around six weeks. Trader and market reports of further capacity to be taken out at Italy's biggest steelmaker were not immediately confirmed by the company July 29.
Other steelmakers have also reduced output in Europe and elsewhere. Christino noted that in China, where markets have continued to be impacted by COVID-19 lockdowns and steelmaking margins are very thin, the government "has made it clear it doesn't want production increasing... it's not our expectation that we'll see structurally higher levels of exports from China."
Significant economic incentives recently announced in China should impact domestic demand levels positively in Q4 and in 2023, the CFO said.
In Ukraine, ArcelorMittal's iron mines are operating at around 50-60% capacity, and the company is working with one blast furnace, representing about 20% of its local capacity, and has some billets inventory, Christino said.
"Most coal for this operation is sourced domestically with some from Poland and for the time being we don't expect much change... logistics continue to be a significant challenge," he said. Prices stabilizing In Europe, ArcelorMittal expects steel market activity " to pick up after the summer break," Christino said. While the company is currently experiencing destocking in Europe, this is "not excessive" and expectations are now for more stability in shipments. The incentive for importing steel into Europe has come down significantly, especially with the weaker euro, "which makes everything more expensive," he said.
European steel prices have been "relatively stable" over the past two weeks, while international prices are also showing signs of normalization, the CFO continued. "After the initial shock coming from the war [in Ukraine], we have seen prices stabilize in some regions, after a quite significant correction, but raw materials have also corrected. This will clearly impact our results in Q3... but we are working through the inventories we have on our books."
Domestic prices for hot-rolled coil across the EU remained largely stable July 28 as market activity slowed down in line with the typical seasonal pattern.
Some European mills have started summer maintenance, with others expected to follow soon. Buyers are reportedly holding back from new bookings, awaiting a revival of market activity in September. In addition, distributors are reported to have sufficient stocks of material.
Platts assessed HRC in North Europe at Eur850/mt ($867/mt) ex-works Ruhr July 28, down by Eur5/mt day on day, according to data from S&P Global Commodity Insights. The price peaked at Eur1,460/mt March 18.
Elsewhere, ArcelorMittal is seeing "relatively stable volumes" in its NAFTA division and Brazil, with perhaps lower exports from Brazil, Christino said.
"Some increase in shipments from the CIS in H2 should provide some support as we face the impact of the strike [at ArcelorMittal's works] in South Africa," he said.
Source: S&P Platts