European stainless steel: modernisation and reorganisation? - Hatch
European stainless steel: modernisation and reorganisation? - Hatch
European stainless steel: modernisation and reorganisation? - Hatch
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<strong>European</strong> <strong>stainless</strong> <strong>steel</strong>: <strong>modernisation</strong> <strong>and</strong> <strong>reorganisation</strong>?<br />
Metal Expert <strong>European</strong> Bulk Ferroalloys Conference, Vienna, 2012<br />
Robert Cartman - <strong>Hatch</strong>
METAL EXPERT EUROPEAN BULK FERROALLOYS CONFERENCE, VIENNA 2012<br />
Contents<br />
History of the <strong>European</strong> <strong>stainless</strong> industry<br />
Current issues<br />
Prospects<br />
Conclusions<br />
© <strong>Hatch</strong> Associates Limited, 2012 2
METAL EXPERT EUROPEAN BULK FERROALLOYS CONFERENCE, VIENNA 2012<br />
The <strong>European</strong> <strong>stainless</strong> <strong>steel</strong> industry has consolidated into 4 major players<br />
(perhaps soon to be 3) from a large number just 20 years ago<br />
ALZ<br />
Ugine<br />
J&L Specialty Steel<br />
Fabrique de Fer du Charleroi<br />
Acesita<br />
Outokumpu<br />
Avesta<br />
British Steel Stainless<br />
Thyssen<br />
Krupp<br />
AST<br />
Acerinox<br />
North American Stainless<br />
Columbus<br />
Source: Factiva, <strong>Hatch</strong> Beddows<br />
Text<br />
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000+<br />
© <strong>Hatch</strong> Associates Limited, 2012
METAL EXPERT EUROPEAN BULK FERROALLOYS CONFERENCE, VIENNA 2012<br />
The 4 major <strong>stainless</strong> producers each have their own geographical focus<br />
within Europe<br />
Source: Company reports, <strong>Hatch</strong> Beddows<br />
Overview of EU <strong>stainless</strong> assets<br />
© <strong>Hatch</strong> Associates Limited, 2012<br />
Acerinox – 1 meltshop in Spain at Palmones, fully<br />
integrated cost-efficient site. 2 rolling mills in northern Spain,<br />
Inoxfil <strong>and</strong> Roldan that roll <strong>stainless</strong> long products from<br />
substrate produced in Palmones<br />
ArcelorMittal – 2 meltshop sites in Belgium at Chatelet <strong>and</strong><br />
Genk. Chatelet integrated down to hot-rolling. Genk ships<br />
semis to Chatelet for hot-rolling. HR <strong>stainless</strong> is shipped to<br />
the site at Genk or 1 of 4 sites in France for cold-rolling<br />
Outokumpu – 3 meltshop sites in Europe, 1 each in<br />
Finl<strong>and</strong>, Sweden <strong>and</strong> the UK. Finl<strong>and</strong> fully integrated costefficient<br />
site. Sweden has non-aligned capacities, relies on<br />
another Sweden-based site for some cold-rolling. UK site a<br />
meltshop at Shepcote Lane <strong>and</strong> separate rod mill nearby<br />
ThyssenKrupp – 3 meltshop sites in Europe, 2 in Germany<br />
at Bochum <strong>and</strong> Krefeld, 1 in Italy at Terni. Terni the only fully<br />
integrated site. Used to operate a cold-rolling facility in<br />
Torino but was moved to Terni. German sites not integrated<br />
<strong>and</strong> are relatively inefficient.
METAL EXPERT EUROPEAN BULK FERROALLOYS CONFERENCE, VIENNA 2012<br />
<strong>European</strong> <strong>stainless</strong> production has barely changed over the past decade, in<br />
fact showing a slight fall in recent years. This, combined with a rising scrap<br />
ratio, has dented the dem<strong>and</strong> for ferroalloys<br />
kt<br />
10.000<br />
9.000<br />
8.000<br />
7.000<br />
6.000<br />
5.000<br />
4.000<br />
3.000<br />
2.000<br />
1.000<br />
0<br />
2000<br />
<strong>European</strong> <strong>stainless</strong> <strong>steel</strong> production<br />
2001<br />
2002<br />
2003<br />
2004<br />
2005<br />
2006<br />
2007<br />
Source: ISSF, ISSB, EUROFER, Norilsk, <strong>Hatch</strong> Beddows<br />
2008<br />
2009<br />
2010<br />
2011<br />
55%<br />
50%<br />
45%<br />
40%<br />
35%<br />
30%<br />
2000<br />
<strong>European</strong> <strong>stainless</strong> <strong>steel</strong> scrap ratio<br />
2001<br />
2002<br />
2003<br />
© <strong>Hatch</strong> Associates Limited, 2012 5<br />
2004<br />
2005<br />
2006<br />
2007<br />
2008<br />
2009<br />
2010<br />
2011
METAL EXPERT EUROPEAN BULK FERROALLOYS CONFERENCE, VIENNA 2012<br />
Contents<br />
History of the <strong>European</strong> <strong>stainless</strong> industry<br />
Current issues<br />
Prospects<br />
Conclusions<br />
© <strong>Hatch</strong> Associates Limited, 2012 6
METAL EXPERT EUROPEAN BULK FERROALLOYS CONFERENCE, VIENNA 2012<br />
The <strong>European</strong> market for <strong>stainless</strong> <strong>steel</strong> have shown little growth over the<br />
past decade <strong>and</strong> the region’s net export position has also come under threat<br />
12.000<br />
10.000<br />
8.000<br />
6.000<br />
4.000<br />
2.000<br />
<strong>European</strong> <strong>stainless</strong> <strong>steel</strong> production Europe’s net export position<br />
kt kt<br />
0<br />
-2.000<br />
-4.000<br />
2000<br />
2001<br />
2002<br />
2003<br />
2004<br />
2005<br />
Source: ISSF, ISSB, EUROFER, <strong>Hatch</strong> Beddows<br />
2006<br />
2007<br />
Production Imports<br />
2008<br />
2009<br />
2010<br />
Exports Apparent consumption<br />
2.000<br />
1.500<br />
1.000<br />
500<br />
0<br />
-500<br />
-1.000<br />
-1.500<br />
-2.000<br />
-2.500<br />
-3.000<br />
2000<br />
2001<br />
2002<br />
2003<br />
© <strong>Hatch</strong> Associates Limited, 2012 7<br />
2004<br />
2005<br />
2006<br />
2007<br />
2008<br />
2009<br />
2010<br />
Imports Exports Net exports<br />
2011
METAL EXPERT EUROPEAN BULK FERROALLOYS CONFERENCE, VIENNA 2012<br />
China is no longer the main export destination for the <strong>European</strong> <strong>stainless</strong><br />
industry as it has become increasingly self-sufficient. Other export markets<br />
may also be at risk of decreasing in size<br />
kt<br />
2.500<br />
2.000<br />
1.500<br />
1.000<br />
500<br />
0<br />
2001<br />
2002<br />
<strong>European</strong> <strong>stainless</strong> <strong>steel</strong> exports*<br />
2003<br />
2004<br />
2005<br />
2006<br />
*finished products only<br />
Source: ISSF, ISSB, EUROFER, <strong>Hatch</strong> Beddows<br />
2007<br />
2008<br />
2009<br />
USA Other Asia* Mexico<br />
Turkey China Other<br />
2010<br />
2011<br />
<strong>European</strong> exports have fallen since the peaks of 2003-06<br />
China has become a smaller export market for <strong>European</strong><br />
producers as it has become more self-sufficient<br />
China also becoming a net exporter, which may threaten<br />
<strong>European</strong> export markets in ‘Other Asia’ e.g. S.Korea,<br />
Taiwan, Thail<strong>and</strong>, India...<br />
‘Other Asia’ also set to become more self-sufficient with<br />
construction of Bahru Stainless (Acerinox) in the coming<br />
years in Malaysia<br />
USA/Mexico also to become more self-sufficient with<br />
construction of TKS’ Alabama mill<br />
© <strong>Hatch</strong> Associates Limited, 2012 8
METAL EXPERT EUROPEAN BULK FERROALLOYS CONFERENCE, VIENNA 2012<br />
As one of Europe’s major markets, the Italian market demonstrates the<br />
increasing threat of imports from outside of Europe that the EU <strong>stainless</strong><br />
industry faces<br />
kt<br />
1.600<br />
1.400<br />
1.200<br />
1.000<br />
800<br />
600<br />
400<br />
200<br />
0<br />
2000<br />
2001<br />
Italian <strong>stainless</strong> <strong>steel</strong> imports Source of Italian <strong>stainless</strong> imports<br />
2002<br />
2003<br />
2004<br />
2005<br />
Source: ISSF, ISSB, EUROFER, <strong>Hatch</strong> Beddows<br />
2006<br />
2007<br />
2008<br />
2009<br />
2010<br />
100%<br />
90%<br />
80%<br />
70%<br />
60%<br />
50%<br />
40%<br />
30%<br />
20%<br />
10%<br />
0%<br />
2000<br />
2001<br />
2002<br />
2003<br />
© <strong>Hatch</strong> Associates Limited, 2012 9<br />
2004<br />
2005<br />
2006<br />
2007<br />
2008<br />
<strong>European</strong> supply Non-<strong>European</strong> supply<br />
2009<br />
2010
METAL EXPERT EUROPEAN BULK FERROALLOYS CONFERENCE, VIENNA 2012<br />
Contents<br />
History of the <strong>European</strong> <strong>stainless</strong> industry<br />
Current issues<br />
Prospects<br />
Conclusions<br />
© <strong>Hatch</strong> Associates Limited, 2012 10
Mt<br />
12<br />
10<br />
8<br />
6<br />
4<br />
2<br />
0<br />
METAL EXPERT EUROPEAN BULK FERROALLOYS CONFERENCE, VIENNA 2012<br />
<strong>European</strong> capacity utilisation is now around 75-80% although the planned<br />
closures of TKS facilities in Germany as part of the Outokumpu/TKS merger<br />
would help to alleviate this weakness<br />
<strong>European</strong> <strong>stainless</strong> <strong>steel</strong> capacity by company, total production <strong>and</strong> capacity utilisation<br />
91% 88% 90% 90% 84% 95% 82% 80% 61% 77% 77% ?%<br />
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Future*<br />
Outokumpu TKS Acerinox Aperam Other Production<br />
*includes planned shutdowns of TKS facilities in Germany<br />
Source: Company reports, <strong>Hatch</strong><br />
© <strong>Hatch</strong> Associates Limited, 2012<br />
xx% Capacity utilisation<br />
11
METAL EXPERT EUROPEAN BULK FERROALLOYS CONFERENCE, VIENNA 2012<br />
China is no longer the main export destination for the <strong>European</strong> <strong>stainless</strong><br />
industry as it has become increasingly self-sufficient. Other export markets<br />
may also be at risk of decreasing in size<br />
kt<br />
2.500<br />
2.000<br />
1.500<br />
1.000<br />
500<br />
0<br />
2001<br />
2002<br />
<strong>European</strong> <strong>stainless</strong> <strong>steel</strong> exports*<br />
2003<br />
2004<br />
2005<br />
2006<br />
*finished products only<br />
Source: ISSF, ISSB, EUROFER, <strong>Hatch</strong> Beddows<br />
2007<br />
2008<br />
2009<br />
USA Other Asia* Mexico<br />
Turkey China Other<br />
2010<br />
2011<br />
<strong>European</strong> exports have fallen since the peaks of 2003-06<br />
China has become a smaller export market for <strong>European</strong><br />
producers as it has become more self-sufficient<br />
China also becoming a net exporter, which may threaten<br />
<strong>European</strong> export markets in ‘Other Asia’ e.g. S.Korea,<br />
Taiwan, Thail<strong>and</strong>, India...<br />
‘Other Asia’ also set to become more self-sufficient with<br />
construction of Bahru Stainless (Acerinox) in the coming<br />
years in Malaysia<br />
USA/Mexico also to become more self-sufficient with<br />
construction of TKS’ Alabama mill<br />
© <strong>Hatch</strong> Associates Limited, 2012 12
METAL EXPERT EUROPEAN BULK FERROALLOYS CONFERENCE, VIENNA 2012<br />
The restructuring of TKS’s global operations will further put a dent in<br />
<strong>European</strong> exports<br />
Existing strategy of TKS Planned strategy of TKS<br />
TKS currently sends material to Alabama/Mexinox for<br />
further processing<br />
Large orders in st<strong>and</strong>ard grades, typically HRC<br />
Source: ThyssenKrupp, <strong>Hatch</strong><br />
New TKS mill in Alabama, USA will supply Mexinox<br />
Shanghai Krupp Stainless to source from local Chinese<br />
market<br />
TKS Europe sites will have to focus more on local markets<br />
© <strong>Hatch</strong> Associates Limited, 2012 13
Kg per capita<br />
METAL EXPERT EUROPEAN BULK FERROALLOYS CONFERENCE, VIENNA 2012<br />
<strong>European</strong> consumption of <strong>stainless</strong> <strong>steel</strong> per capita is likely to have peaked<br />
already. The falling population in the continent will add to the restrictions on<br />
growth<br />
50<br />
40<br />
30<br />
20<br />
10<br />
0<br />
China<br />
Taiwan<br />
South<br />
Korea<br />
Per capita consumption of <strong>stainless</strong> <strong>steel</strong> vs<br />
income per capita for selected countries, 1997-2008<br />
0 10.000 20.000 30.000 40.000 50.000 60.000<br />
Source: Vale, IMF, UN, <strong>Hatch</strong> Beddows<br />
Japan<br />
$’000 per capita, 2008 (PPP)<br />
Europe / USA<br />
© <strong>Hatch</strong> Associates Limited, 2012<br />
Stainless consumption per capita tends to rise with<br />
incomes as economies shift into manufacturing, the most<br />
<strong>stainless</strong>-intensive sector of the economy<br />
As countries get richer, urbanisation also occurs, also<br />
fuelling dem<strong>and</strong> for <strong>stainless</strong>-containing products<br />
As countries become more service-orientated, <strong>stainless</strong><br />
consumption per capita growth starts to slow <strong>and</strong> may even<br />
fall<br />
Europe’s low/negative population growth through to 2050<br />
will also hold back growth in <strong>stainless</strong> <strong>steel</strong> consumption<br />
The UN forecasts Europe’s population to be 719m in 2050,<br />
down from 739m in 2010
METAL EXPERT EUROPEAN BULK FERROALLOYS CONFERENCE, VIENNA 2012<br />
Contents<br />
History of the <strong>European</strong> <strong>stainless</strong> industry<br />
Current issues<br />
Prospects<br />
Conclusions<br />
© <strong>Hatch</strong> Associates Limited, 2012 15
METAL EXPERT EUROPEAN BULK FERROALLOYS CONFERENCE, VIENNA 2012<br />
Thoughts <strong>and</strong> conclusions…<br />
<strong>European</strong> restructuring necessary, capacity closures/relocations inevitable<br />
Outokumpu/TKS plans long overdue. Even if the merger is not approved, restructuring is necessary<br />
<strong>European</strong> export markets under threat from increased capacity elsewhere <strong>and</strong> strategy shifts<br />
China increasingly self-sufficient <strong>and</strong> a bigger threat in ‘Other Asia’ markets. Acerinox expansion into Malaysia <strong>and</strong> TKS<br />
expansion in USA will also impact on EU exports<br />
Import competition increasing, Europe has to increase its competitiveness. Restructuring will help<br />
with this in the long term<br />
Restructuring will help <strong>European</strong> firms improve capacity utilisation, thereby improving unit production costs <strong>and</strong><br />
improving profitability/competitiveness against imports<br />
Long term outlook for ferroalloy dem<strong>and</strong> from EU <strong>stainless</strong> industry not good<br />
Stable/falling regional consumption <strong>and</strong> major threats to export markets. Europe has to become more competitive<br />
against imports <strong>and</strong> seek new export markets. Further development of Turkey? Russia/Ukraine? MENA? Product<br />
innovation?<br />
© <strong>Hatch</strong> Associates Limited, 2012 16
METAL EXPERT EUROPEAN BULK FERROALLOYS CONFERENCE, VIENNA 2012<br />
Contacts for further information<br />
<strong>Hatch</strong> Beddows Strategy Consulting<br />
<br />
<br />
Robert Cartman<br />
Consultant<br />
<br />
Fax<br />
<br />
9 Floor, Portl<strong>and</strong> House, Bressenden Place, London SW1E 5BH<br />
+44 20 7906 5100 (switchboard)<br />
+44 20 7906 5119<br />
+44 20 7963 0972<br />
rcartman@hatch-europe.com<br />
<strong>Hatch</strong> Beddows is a member of the HATCH GROUP of companies<br />
© <strong>Hatch</strong> Associates Limited, 2012 17
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