Metals

COVID-19 impact shows in March steel data

Steelmakers in Europe and Asia were at the forefront of a March 2020 cutback in crude steel output. The spread of COVID-19, the disease that results from the new coronavirus, and subsequent shutdown measures contributed to double-digit production reductions in nations including Italy, Germany, India and Taiwan.

According to Brussels-based Worldsteel, global crude steel production for the 64 countries reporting to the association amounted to 147.1 million metric tons for the month, a 6 percent decrease from the 156.5 million metric tons produced in March 2019.

Joining Italy, France, India and Taiwan in the reduced output category were two of the world’s other major steel producers: Japan and the United States. Output in Japan fell by 9.7 percent, while it fell by 6 percent in the U.S.

In the People’s Republic of China, where COVID-19 first had a major impact and where gross domestic product shrank by more than 6 percent in the first quarter, steel output in March fell by 1.7 percent compared with March 2019.

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Worldsteel adds, “World crude steel production was 443 million metric tons in the first three months of 2020, down by 1.4 percent compared to the same period in 2019.”

According to the association, Asia’s first-quarter output dropped by just 0.3 percent compared with 2019, propped up largely by China increasing its output by 1.2 percent during the quarter.

Meanwhile, production in the European Union declined by 10 percent compared with the same quarter of 2019, and it fell by 4 percent in North America.

In North America, steelmakers of all types have reduced output based on shifts in demand, but the cost competitiveness of electric arc furnace (EAF) steelmaking versus integrated basic oxygen furnace production points to different outcomes and balance sheets between these two sectors this year. (See http://bit.ly/eaf-advantage for more details.)

In late March, Pittsburgh-based U.S. Steel Corp. announced actions it was taking “to preserve [its] strong long-term future” that included idling blast furnaces in Gary, Indiana, and Granite City, Illinois. Tellingly, U.S. Steel also indicated it was adhering to its construction schedule to open its EAF tubular mill in Fairfield, Alabama, in the second half of 2020.

BlueScope puts North Star expansion on hold

BlueScope Steel Ltd., Australia, has announced it is taking preemptive steps to bolster its financial strength amid the global economic uncertainty caused by the COVID-19 pandemic.

Among the steps the company is taking is rescheduling the expansion of its North Star steel operations in Delta, Ohio, BlueScope notes in a news release. The electric arc furnace (EAF) minimill is being expanded to produce an additional 850,000 metric tons of steel annually. The mill currently produces 2.1 million metric tons of steel per year.

BlueScope says that as of early April, construction and installation programs at North Star were being rescheduled for the next six months to minimize spending while preserving flexibility to resume the project when conditions improve. Project spending in the second half of BlueScope’s 2020 fiscal year is expected to be approximately $90 million to $100 million, while it is expecting to spend approximately $180 million in the first half of its 2021 fiscal year, which is at the low end of the previously advised annualized range. “Conditions will continue to be monitored, and the date of expected commissioning will be advised in due course,” the company says.

Other interventions BlueScope is taking to bolster its financial position amid the COVID-19 outbreak are reducing nonessential capital expenditures, ceasing nonessential operational spending and canceling the on-market share buy-back program.

BlueScope Managing Director and CEO Mark Vassella says, “We are drawing on all our resources, experience and expertise to keep our employees, customers and communities safe and to look after their health and well-being. We are also taking direct action to maintain the financial strength of our business.”

Arconic takes measures to mitigate COVID-19 impacts

Arconic Corp., headquartered in Pittsburgh, says its board of directors has approved several measures designed to further mitigate COVID-19-related impacts on the company.

These mitigating actions will continue until market conditions warrant and are estimated to reduce operating costs by approximately $150 million on an annualized run-rate basis, according to the company. These actions combined with capital reductions of $50 million, or 30 percent, are designed to improve Arconic’s financial profile by $200 million:

• The CEO’s salary and the board of directors’ annual cash retainer will be reduced by 30 percent.
• Senior-level management will incur a 20 percent salary reduction and all other salaried employees will incur a 10 percent salary reduction.
• Salaried workforce has been reduced by 10 percent.
• Its Tennessee and New York facilities have been idled to adjust to reduced demand. Arconic’s Massena, New York, plant produces aluminum extrusions, including cold-drawn rod and bar, extruded forge stock and extruded rod and barm, while its Alcoa, Tennessee, plant produces aluminum rolled products for the automotive and industrial and commercial transportation markets.
• All other U.S.-based rolling and extrusion facilities have decreased production and operate with a reduced labor force through shortened work weeks, shift reductions, layoffs and the elimination of temporary workers and contractors.
• All rolling mill facilities in Europe, China and Russia have modified schedules, adjusted work hours, lowed costs and delayed raises.
• The 401(k) match program has been suspended for salaried employees.

“The board supports management’s plan to swiftly and actively mitigate the impact from COVID-19,” says Frederick Henderson, Arconic board chairman. “We are taking these actions as well as others as necessary to preserve our financial strength for the long-term benefit of all of our key stakeholders.”

Novelis closes Aleris acquisition

Atlanta-based Novelis Inc. says it has closed on its acquisition of Ohio-based rolled and secondary aluminum producer Aleris. Regulators in the European Union gave the green light in early April to an acquisition that was originally announced in July 2018.

Aleris operations are likely to be merged into those of Novelis, which itself is part of India-based Hindalco Industries Ltd. Hindalco, in turn, is part of the Mumbai-based conglomerate the Aditya Birla Group.

“The Aleris deal marks a major milestone for Novelis on its path to global leadership,” states Kumar Mangalam Birla, chair of Aditya Birla Group and Novelis. “The closure of this deal amidst challenging market conditions reflects our conviction in the Aleris business and its value to our metals portfolio.

“The Aleris deal crucially enables the further diversification of our metals portfolio into other premium market segments, most notably aerospace,” Birla continues. “At the same time, with this further expansion in our aluminum portfolio, we have taken a decisive step towards a more sustainable future.”

Novelis acquires Aleris’ 13 plants. Most plants are in North America, along with an aluminum rolling mill in the Jiangsu province in China and an aluminum casting facility in Germany. To satisfy regulatory conditions, Novelis has been required to divest itself of the Aleris plants in Lewisport, Kentucky, and in Duffel, Belgium.

The Belgium facility is tentatively headed to the Alvance aluminum production business unit of Liberty House Group, which is a part of the London-based GFG Alliance. There is not yet a reported buyer for the Lewisport aluminum auto sheet mill.

The transaction purchase price of $2.8 billion consists of $775 million for the equity value, as well as approximately $2 billion for the assumption or extinguishment of Aleris’ current outstanding debt and a $50 million earn-out payment, according to Novelis.