Posted on 15 Nov 2021
German steelmaker Salzgitter has benefitted from higher steel price margins, but its third-quarter order intake was hampered by lower buying activity in flat steel, the company said Nov. 12.
Supply chain disruptions due to the semiconductor shortage in the auto industry also had direct repercussions since the end of the summer quarter on the books, it said.
Crude steel production at Salzgitter grew to 1.7 million mt in Q3, up from 1.4 million mt in Q3 last year.
One of the blast furnaces that has been idled in 2019 due to low demand and had been expected to restart around the end of this year remains out of operation due to "sufficient volumes of slabs available within the group of companies," according to the company's Q3 earnings report.
The green steel expansion has been brought forward by two years, it said. Salzgitter is now planning to start hydrogen-based steel production by end 2025 and with an annual production of more than 1 million m2 of low CO2 steel.
In the strip steel division, order intake fell from last year's Q3 of 1.2 million mt to 840,600 mt in Q3 this year. This was caused by order activity dropping due to the semiconductor shortages, while also reflecting an increase in bookings in the second half of 2020 due to catch-up effects from the pandemic, Salzgitter said.
With an overall increase in shipments however and a boosted order backlog, pre-tax profit of the unit increased to Eur133.1 million, up from a loss of Eur25.7 million the same quarter last year.
The plate and sections unit also saw momentum waning in the summer, particularly in heavy plate.
"Against the backdrop of dwindling demand, prices came under increasing pressure from high inventory levels and the growing volume of imports, accompanied by greater slab availability," Salzgitter said.
Furthermore, section orders were affected by hesitant buying. Salzgitter said this was due to "speculative buying patterns" at stockholders and end-users that expected material tightening that did not occur, resulting in higher inventory levels and weaker buying activity.
Order intake of the unit dropped from 434,300 mt Q3 last year to 284,400 mt Q3 this year. Pre-tax profit of the unit increased to Eur19 million, up from a loss at Eur37.8 million Q3 last year.
The trading business unit of Salzgitter benefitted the most from steel price rises this year. Shipments grew from 636,700 mt in Q3 last year to 910,000 mt in Q3 this year as the international steel trade recovered. A pre-tax profit of Eur133.1 million was recorded.
Looking to the end of the year, Salzgitter said it expects the strip market to remain on a "high price level", noting however that operating costs of raw materials and of energy and electricity will rise sharply.
For heavy plate, Salzgitter expects stable demand while the sections demand situation will remain under pressure.
The agreement between the US and the EU on the introduction of tariff-rate quotas for US imports from the EU is likely to generate a positive contribution in the medium-diameter line pipe segment from the first quarter of 2022 at the earliest.
The large-diameter pipe business is expected to remain difficult, despite Salzgitter's Europipe joint venture with other German steelmaker Dillinger securing major orders such as delivering 300,000 mt of pipes to the Scarborough gas pipeline.
Source:Platts
