Damstahl Stainless Steel Briefing May 2017 · Damstahl Stainless Steel Briefing No. 112 ... Damstahl Stainless Steel Briefing May 2017. ... 8 China Monthly Exports 9

Damstahl Stainless Steel Briefing No. 112 - May 20171 © Damstahl 2017. Damstahl - a member of the NEUMO-Ehrenberg-Group

DamstahlStainless Steel Briefing

May 2017

Damstahl Stainless Steel Briefing No. 112 - May 20172 © Damstahl 2017. Damstahl - a member of the NEUMO-Ehrenberg-Group

Stainless Steel at a Glance 3

European Industry News 6

Where do we Stand in the Business Cycle? (PMI) 8

China Monthly Exports 9

Relevant Issues in Damstahl Land 10

�Germany

� The Netherlands

�Denmark

�Sweden

�Norway

�Slovenia

� Finland

Contents

Damstahl Stainless Steel Briefing No. 112 - May 20173 © Damstahl 2017. Damstahl - a member of the NEUMO-Ehrenberg-Group3

Stainless Steel at a Glance

Market:

Mood is up but prices go down

• The market has peaked in March and the order activity is slowing amid lower alloy surcharges and re-filled stocks. But, the underlying market mood is still upbeat and we will see (moderate) volume growth throughout Europe in the rest of 2017. However, concerns have shifted more to pricing and margins, which are under pressure. The fact, that one European flat products mill*announced to increase its market share substantially over the next two years is not very helpful in maintaining the base price increases that have been gained in Q1/17.

Alloy Surcharge:

• Due to the drop in benchmark prices for ferrochrome and weakening nickel prices, monthly alloy surcharges fell sharply in May.

• Outokumpu set the surcharges for type 304 (1.4301) to 1,350 EUR/t for May 2017, down from 1,455 EUR/t in April 2017 (-8.2% mom) .

• For type 316 (1.4401), Outokumpu set the May surcharges to 1,936 EUR/t down by 85 EUR/t from 2,021 EUR/t in April 2017(-4.2% mom).

* The mill is Italian Acciai Speciali Terni having announced plans to increase their production of both crude steel and

finished products (already in 2017 by 10-15%). In order to achieve that, they have removed parts of the equipment that was taken out from their Turin plant three years ago and implemented them in their Terni production.



Building & Construction:

• Production in construction in February 2017 increased by 7.1% in the euro area and by 5.2% in the European Union. The increase in the euro area was mainly due to civil engineering rising by 10.3% and building construction by 6.2%. In the European Union the increase was due to civil engineering rising by 5.6% and building construction by 4.8%.

• Highest increases were seen in: Slovenia (+21.4%)Hungary (+15.1%)Sweden (+13.2%)Germany (+11.6%)

• Largest decreases were recorded in: Slovakia (-10.6%)Czech Republic (- 5.5%)Poland (- 5.1%)

Consumer Goods:

• According to the German Association representing the appliance industry (ZVEI) the German electronics production improved by around 4.4% in the first two months of 2017. In spite of the good start into the year and optimism in the market, the association sticks to its cautious 2017 forecast +1.5%. Political risks regarding the changes in external trade with the USA due to uprising protectionism and the UK due to the Brexit as well as tensions with Turkey will have a major impact on the result this year.



Automotive:

• New passenger car registrations in Europe marked the highest March total on record, posting an increase of 11.2% yoy at 1,891,583 units. The strong improvement was supported by Easter falling into March in 2016 and into April in 2017. All major markets saw very strong performances during the month. Italy (+18.2%), Spain (+12.6%) and Germany (+11.4%) posted double-digit percentage gains while the UK and France reported robust growth at 8.4% and 7.0%, respectively.

• The VW Group maintains its leading position in the European Union at a market share of 21.3%, having the PSA Group and the Renault Group as main competitors (9.5% each). The takeover of Opel/Vauxhall (market share of 6.8%) by the PSA Group from General Motors will then make the PSA Group the undisputed number 2.

Process Industry:

• According to the German engineering association VDMA world machine sales decreased slightly by a nominal 1% in 2016, totalling 2,530 bn. EUR. China maintained its leading position at an overall turnover of 964 bn. EUR (-2% yoy), followed by the USA at 335 bn. EUR (-4% yoy). Germany was the third-largest machine producer with a nominal turnover of 262 bn. EUR (+1% yoy). Strongest improvement in the Top 10 country ranking was reported from Japan (placed 4th rank), who improved its machine sales by 11% yoy, totalling 238 bn. EUR.

• By region, Asia remained the largest machine-builder (55% share), followed by Europe (29% share) and North America (14% share).


European Industry News / PMI Status

• European Industry News

• Where do we stand in the Business Cycle? – PMI Status

• China Monthly Exports


European Industry News

• Melt shop equipment manufacturer Primetals has finished modernization works at Italian steelmaker Acciaierie Valbruna’s three-stand continuous billet caster. The upgrade was carried out during a planned shutdown in September 2016. In early April 2017 Valbruna picked up production on the caster again. Aim of the modernisation was to enable Acciaierie Valbruna to produce stainless steel and special alloy billets with larger cross-sections of up to 180 mm. Also the radius of the plant was increased to 9 m up from 7 m setting the basis subsequent production of even larger billets with cross-sections of up to 200 mm.

• In early April Luxembourg-based stainless steel producer Aperam has completed the sale of its welded tube business in France comprising of tubemaking plant in Ancerville, northeastern France, and a distribution center at Annecy near Geneva. The assets were taken over by German turnaround investor Mutares, whereby the transaction value was not disclosed. In 2016 the two units had combined sales of 64 mill. EUR and shipments of 22,000 t.

• The following tables show the key financials of three main European stainless steel mills:

Financials of European stainless steel mills significantly improved in Q1/17

Q1/17 Q1/16 Variation Q1/17 Q1/16 Variation Q1/17 Q1/16 Variation

[ % ] [ % ] [ % ]

Turnover 1.252 953 31% Turnover 3.275 3.231 1% Turnover 1.757 1.386 27%

EBITDA 191 41 367% EBITDA - - - EBITDA 309 46 572%

EBIT 146 1 - EBIT 334 216 55% EBIT 252 (12) -

EAT 98 (8) - EAT - - - EAT 182 (41) -

Outokumpu

Financials[in mill. EUR]

Sandvik Materials Technology*


Acerinox



30

35

40

45

50

55

60

65

Ind

ex

of

50

= ‘

Bre

ak

Ev

en

Po

int’

EU USA China

Where do we Stand in the Business Cycle?

PMI Status March 2017The strong growth in the USA maintains albeit at a somewhat lower level while Europe continues to increase the pace of expansion


0

50000

100000

150000

200000

250000

300000

350000Flat Products Long Products

China Monthly Exports

Lunar New Year 2017 saw China’s stainless steel exports flat and long products go down significantly


Relevant Issues in Damstahl-Land

Germany

The Netherlands

Denmark

Sweden

Norway

Slovenia

Finland



Germany:

• Demand in the German stainless steel industry remains on a steady good level and only the decline in alloy surcharges is taking out the fun of Q2/17 so far. Stocks in German warehouses are on sufficient levels, which is mainly due to still strong inflows of stainless steel from outside Europe. In general the German economy is experiencing a strong upturn, driven by a broad-based uptick in domestic and foreign demand.

• German pump manufacturer KSB reported a strong increase in new order intake , which improved to 603.4 mill. EUR in Q1/17 up from 522.7 mill. EUR in Q1/16 (+15.4% yoy). Sales in Q1/17 totalled 522.5 mill. EUR, corresponding to an increase of 3.2% when set against Q1/16 sales of 506.4 mill. EUR. The increase mainly came from the company’s business segments Industry and Water / Waste Water and Service, where demand was growing.

• BASF ended Q1/17 with a considerable rise in sales, posting revenues of 16.9 bn. EUR, up from 14.2 bn. EUR in Q1/16 (+19% yoy). Sales volumes increased by around 8% yoy and also sales prices were significantly higher (+8% yoy). BASF’s EBIT in Q1/17 came in at 2.5 bn. EUR, corresponding to an increase of 29% set against the company’s EBIT in Q1/16 of 1.9 bn. EUR. The company’s EAT improved by around 322 mill. EUR to 1.7 bn. EUR in Q1/17 (Q1/16: 1.4 bn. EUR). For full year 2017 BASF nevertheless remains cautiously optimistic with its forecast, expecting an increase in sales of around 6% as considerable risks with regard to macroeconomic development and the political environment remain critical factors.



The Netherlands:

• The Dutch stainless steel market saw demand growing so far in 2017. Increased activity becamevisible in all major end use segments, with only the oil and gas industry still lacking momentum. Short delivery times demanded by end users face lengthening delivery times at European mills, which will on the long run cause end users to place orders more in advance. Dutch stocks are stated to be on sufficient levels to meet the current demand. In general the Dutch economy is experiencing an upturn, reflecting in higher-than-expected exports in the first four months of the year.

• On May 1st Royal Dutch Shell announced the completion of the transaction to separate assets, liabilities and businesses of Motiva Enterprises. Saudi Aramco assumes full ownership of Motiva Enterprises including the refinery at Port Arthur, Texas and 24 distribution terminals. Royal Dutch Shell assumes sole ownership of the Norco refinery with its 11 distribution terminals, which are now fully integrated with Shell’s North American downstream business.

• The takeover battle for Dutch chemicals and paints producer AkzoNobel heats further up. PPG Industries, who appears to be the main contender for the takeover has tabled a third bid worth 26.9 bn. EUR, marking the last full, fair and compelling with no space for further attempts of friendly discussions.



Denmark:

• The Danish stainless steel market had a tough start into Q2/17 as news from declining surcharges for May spread early and end users started to hold back orders. In reaction to that also the battle for orders became more fierce again. Some major projects in the food industry were booked last month. Stocks in the Danish market are as always well equipped and likely to meet the demand for the forthcoming months.

• Arla Foods announced to invest 12 mill. EUR in an upgrade to its Akafa plant in Svenstrup, northern Denmark. The investment will allow Arla to add infant milk formula production to its existing powdered milk capacity without an additional site expansion. Production of the new product is expected to begin in August 2018.



Sweden:

• The Swedish stainless steel market is still in very good shape. All fundamentals are there - strong export, strong domestic industry, construction is doing very well. Only worries in the stainless steel market for the next few months are declining raw material prices and falling alloy surcharges alongside a high number of public holidays. This will put pressure on prices and on profitability after a very strong and profitable Q1/17.

• Order intake of Alfa Laval in Q1/17 increased by 9% totalling 8,801 mill. SEK, up from 7,710 mill. SEK in Q1/16. The increase mainly came from improved activity in the company’s marine and food & water divisions. Sales dropped from 8,199 mill. SEK in Q1/16 to 8,126 mill. SEK in Q1/17 (-6% yoy). The company’s EBITDA in Q1/17 came in at 1,279 mill. SEK, corresponding to a decline of 4% set against the Q1/16 EBITDA of 1,333 mill. SEK. Also Alfa Laval’s EAT in Q1/17 decreased by 11% yoy to 776 mill. SEK (Q1/16: 871 mill. SEK). For Q2/17 Alfa Laval expects demand to be in line or somewahat lower than in Q1/17.



Norway:

• The activity in Norwegian offshore segment continues its positive development, and the negative trend is about to turn, which will spur stainless steel consumption in the oil-dependent country. The number of exploration wells in the Barents Sea is expected to reach new record levels this year and the initiation of several larger projects from Norwegian oil majors will support the industry’s recovery.

• Aker Solutions secured an engineering and procurement contract for new offshore field installations with Aker BP in early April 2017. The framework agreement will last for six years with an option to be extended by another four years and covers all project phases including early-phase studies, front-end engineering and design (FEED), detail engineering and follow-on engineering. The work will mainly involve employees in the Stavanger and the Oslo area.

• Petrobras oilfield sale to Norwegian Statoil was suspended in mid-April after a union demanded that there should have been an open bidding process, forcing Statoil to suspend any activities in the field. The sale of Petrobras’ 66% stake in the Carcara field had been approved by regulators and was closed with Statoil in November 2016. Also Petrobras has already used half of the 2.5 bn. USD in proceeds to pay mounting debts of 21 bn. USD.



Slovenia:

• After stumbling in March the stainless steel market in Slovenia is back on track again as activity levels are close to the ones seen at the very beginning of the year. Stocks for commodity products did so far meet the demand and no real supply issues are known. Declining prices have somewhat intensified the battle between distributors again.

• Slovenian steel producer Acroni fired up its new argon oxygen decarburization (AOD) furnace on April 27th 2017. The 30 mill. EUR investment increases the company’s production capacities for stainless steel quarto plates and special steels and will also speed up the production cycle. The equipment was supplied and installed by Primetals Technologies and Esotech.

• White goods manufacturer Gorenje launched activities in preparation for a new bond issue, which will be used to improve the average maturity of financing sources and to optimise financeexpenses. Activities regarding the issue and offering of bonds are managed by financial services company Nova Ljubljanska banka (NLB).



Finland:

• Demand in the Finnish stainless steel market remains on a steady level, with no big ups or downs in the major end use segments. In order to maintain market shares, some distributors are reported to undermine current price levels, especially for larger inquiries. Regarding the end use segment activity, pulp and paper is reported to see healthy demand while building and construction is still weakening. Nevertheless no major projects outside the shipbuilding industry were announced.

• Caverion's revenue for Q1/17 was 582.3 mill. EUR up by around 4% on the company’s Q1/16 sales of 560.6 mill. EUR. The company’s EBITDA in Q1/17 came in at 6.8 mill. EUR, down by 41% on Q1/16 EBITDA of 11.5 mill. EUR. Caverion’s EBIT turned from a 4.8 mill. EUR profit in Q1/16 into a 0.8 mill. EUR loss in Q1/17. Also the company’s EAT in Q1/17 saw a minus of 2.5 mill. EUR, down from a profit of 3.3 mill. EUR in Q1/16. According to the company, the market environment remains favourable and the decline was mainly due to the corrective actions completed last year.


We’re exhibiting - Come and visit us!

For more information please visit http://www.stainless2017.com/

Brno, Czech Republic – May I7th - I8th 20I7

9th International Stainless Steel Exhibition

Stand IOO


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Damstahl Stainless Steel Briefing May 2017 · Damstahl Stainless Steel Briefing No. 112 ... Damstahl Stainless Steel Briefing May 2017. ... 8 China Monthly Exports 9