In Europe ArcelorMittal and NLMK to face challenges, but others see opportunities
The European market is still slow after the Easter holidays. Prices are flat, and import activity remained subdued due to the safeguards measures taken by the EU to keep imports at bay. For instance, the Port of Antwerp in Belgium, a leading port for steel in Europe, has received much less imports of steel, including flats products compared to the preceding year. The most significant reductions were from India and China, due to antidumping measures took place last year. These measures have now also deterred the redirected imports from the US, after the 25% tariff impositions, entering the EU.
Meanwhile, ArcelorMittal is potentially going to sell some of its key European assets to gain EU approval for Ilva acquisition. The European Commission has reservations that Ilva acquisition by ArcelorMittal can lead to a capacity concentration and could potentially increase flat steel prices in southern Europe. The commission is expected to make a final decision by 23rd May.
ArcelorMittal plans to sell its sole galvanising steel plant, ArcelorMittal Piombino, in Italy. It also plans to divest assets in Belgium (Hot dipped galvanising lines 4 & 5 in Flemalle; hot-rolled pickling, cold rolling and tin packaging lines in Tilleur), Czech Republic (ArcelorMittal Ostrava), Luxembourg (ArcelorMittal Dudelange), Macedonia (ArcelorMittal Skopje), and Romania (ArcelorMittal Galati).
However, some European governments, such as Luxembourg and the Czech Republic are requesting the European Commission to revert its decision. They are concerned that facilities located in their countries may eventually be closed.
The question is that who will be interested in acquiring these assets. There would be some potential buyers. However, Russian mills which are already operating in some of these markets can be better suited. NLMK has now been facing 25% tariffs on slab supply to its rolling mills in the US. Consequently, NLMK is going to end up with a huge slab surplus, which it would be difficult for it to sell in the merchant market for a number of reasons. (For further discussion on the merchant slab market please visit here). We also expect that some Chinese and Indian mills will also likely to be interested in acquiring these assets.
On the demand side, the European automotive sector is worried about their market share in the US, as Mr Trump already suggested a 25% tax on German cars. On the other hand, the Turkish government is discussing the possibility of reducing the tax on the purchase of cars. Currently, there is a VAT (18%) plus a special consumption tax (45%). Commodity Inside expects that the reduction can boost cars sales in Turkey and can help European automakers.
The article is an excerpt from our April issue of Flat Steel Insider. To get a free trial or want to learn more about our steel expertise, please contact visit us at info@commodityinside.com