Europe in Focus

Metal Expert
Europe in Focus
March 2016
EU plate segment likely to recover
only in 10 years or later
Steel consumption growth in Poland
is only beneficial for overseas suppliers
Beltrame:
Consolidation of profitability and
cash generation – main focus for today
Long journey of European steel industry
to new eco standards begins

Metal Expert
Iran in Focus
May 2016
Nuclear deal to breathe new life
into Iran’s steel export
Khouzestan Steel’s billet export
potential yet to be unleashed
Mobarakeh Steel:
exports the only way out
of recession in Iran
Interview:
EAF producers should become
more aware of DRI use
Metal ExpertSquare Billet in FocusApril 2016
Nuclear deal to breathe new lifeinto Iran’s steel export
Khouzestan Steel’s billet exportpotential yet to be unleashed
Mobarakeh Steel:
exports the only way outof recession in Iran
Interview:
EAF producers should becomemore aware of DRI use
Metal Expert
Iran Perspectives in Focus
December 2015
Iran’s export potential
in longs and semis yet to be
unleashed
Mobarakeh Steel:
increasing exports is the only
way out of recession in Iran
IGISCO:
Metal ExpertSquare Billet in FocusAugust 2015
Billet imports
to replace foreign scrap in Turkey
Al Jazeera Steel:
“No point in own steel making”
Iron ore surplus not to risein 2015
Metal ExpertEurope in FocusMarch 2016EU plate segment likely to recover
only in 10 years or later
Steel consumption growth in Poland
is only beneficial for overseas suppliersBeltrame:
Consolidation of profitability and
cash generation – main focus for todayLong journey of European steel industry
to new eco standards begins
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Europe in Focus | March 2016 | 3Metal Expert
CONTENTS
STEEL PLATES
Own steelmaking becomes
trial to plate producers
in Eastern Europe 9
Eastern European steel plate sector is
seeing just a slow recovery, even though
the economic growth in the region is the
most rapid in Europe.
IRON ORE IN EUROPE
Why European steel mills
could not fully benefit from
collapsing iron ore 22
Despite the well-publicized plunge in
global iron ore price, steel mills in Europe
failed to benefit from it as much as the
Chinese did. Quarterly/monthly lags,
higher quality of ore they consume, and
depreciation of national currencies stand
among the main reasons why.
EASTERN EUROPE
Steel consumption growth
in Poland is only beneficial
for overseas suppliers 12
Steel consumption in Poland is expected
to grow in 2016, but local producers can
hardly benefit from it as imports pressure
persists.
Czech steel industry goes out
of recession, but threatened
by growing imports into EU 15
Czech steel industry is showing signs
of growth on economic upturn in the
country, but a recovery is still fragile as its
dependence on export markets remains
strong.
Cloudy future for USSK 18
The future of the U.S. Steel Kosice (USSK),
the major producer, which represents
the Slovak steel industry, and belongs to
American still giant US Steel Corporation,
has become cloudy by the end of 2015.
TOP COMPANIES
EU steel giants prepare
to challenging year 2016 24
Despite expected apparent steel
consumption growth in EU by 2-2.2%
in 2016 amid improving construction
and automotive industries’ performance,
major European mills anticipate further
steel markets weakening mainly due to
remaining pressure of growing imports.
Ilva:
Production drop makes Italy
world largest HRC importer 28
More than 1 million t loss of crude steel
output in Italy due to the historically lowest
production level of the troubled Italian steel
producer Ilva in Taranto made Italy the big-
gest importer of HRC in 2015.
Beltrame:
Consolidation of profitability
and cash generation –
main focus for today 30
Almost a year ago at Made in Steel Exhibition
& Conference held in May 20-22 in Milan
(Italy) a recently appointed CEO of the leading
EU manufacturer of merchant bars Riccardo
Garre’ told Metal Expert about the company’s
ongoing restructuring and the strategy for
further development.
Feralpi:
Survival strategy in truggling
long product market 34
Considering an extremely unfavourable situ-
ation in the European long product market
(low capacity utilization, plummeting prices,
bankruptcy and closures of mills), one of the
Europe’s leading producer of the construction
steel – Feralpi Group – focuses on business
internationalization, vertical integration and
switching to niche segments.
STEEL PLATES
EU plate segment
likely to recover only
in 10 years or later 6
Despite an anticipated economic
upturn in the region, the plate segment
in the EU is not expected to show fast
recovery. The participants of the market
believe demand and supply will become
balanced in 10 years at the earliest.
FACTS & FIGURES
RISKS
Long journey of European steel industry
to new eco standards begins 40
During one year after the adoption of the new EU framework for climate
and energy, European still mills have been investing into the ecological
projects in order to reduce carbon footprint and remain competitive.
Most important steel sectors still
lack protection from EC 43
Despite a threat of oversupply hanging over the European steel sector
in 2015 amid high imports, the Regulatory Authorities are still too
slow to implement necessary measures to defend the market.

4 | Europe in Focus | March 2016 Metal Expert
EDITORIAL
A positive influence of the decline in global
iron ore prices that steelmakers started
to feel in mid-2014 has faded away by H2
2015. The 2015 financial results will range
from worse to disappointing. While the
global steel industry is undoubtedly subject
to cyclicity, this year it is approaching the
bottom. No one in the market can exactly
say when the next phase of growth starts
and how intensive it will be.
European steelmakers are in a very tight
situation. Following the economic crisis
of 2008, consumption has plunged in the
EU, with a negative impact being seen
up to now – the performance in the key
consuming sectors (like construction)
remains below the pre-crisis levels. This
leaves mills no chance to restore capacity
utilization as well as adversely affects
production costs and competitiveness.
Meanwhile, European steelmakers
say the key problem is influx of cheap
imports, mainly from China, preventing the
companies in Europe to make use even
of a slight upturn in consumption. In 2015
steel product exports from China amounted
to 112 million t, hitting an all-time high,
which corresponds to the North America’s
steel yearly steel output. The situation is
aggravated by the fact that the European
Commission is reluctant to promptly launch
AD investigations, while the procedure
can take twice as much time as in the
USA, where local mills have developed the
effective means to protect their interests.
Lakshmi Mittal, Chairman and Chief
Executive of the world largest steelmaker
ArcelorMittal said: “It is clear that China has
a challenge to restructure its steel industry
for a lower growth economy, but we are
somewhat encouraged by recent comments
concerning capacity closures. Until this
situation is fully addressed the effective
and swift implementation of trade defence
instruments will be critical and we expect
to see more positive rulings in this regard
during the year.”
European steelmakers are adapting to this
situation in different ways: some actively
prepare AD investigation requests to protect
their positions in European markets, while
others keep switching to other sectors,
like production of auto components, where
competition is softer, or even consider
exiting steel sector at least in Europe.
Almost all companies continue to implement
long-term production cost optimization
programmes, but the financial reports show
they still cannot catch up with the plunging
prices for steel products.
Tough year
for European
metallurgy

editorial
As for the present state of European steel
market, it is important to mention the
anticipated launch of new eco-standards to
comply with which market participants will
have to invest billions in the next few years.
Metal Expert: Europe in Focus has
attempted to cover all these issues citing
the particular cases of certain large
European steel companies. Besides, we
have paid special attention to plate market
as well as to the situation in Eastern Europe
showing the fastest pace of consumption
recovery, compared to other regions of
Europe, as Metal Expert estimates.
Enjoy your reading,
Andrey Pupchenko
Deputy Managing Director
Metal Expert

EU plate segment
likely to recover
only in 10 years
or later
Despite an anticipated economic
upturn in the region, the plate
segment in the EU is not expected to
show fast recovery. The participants
of the market believe demand and
supply will become balanced in 10
years at the earliest.
For the past few years European plate
makers as well as mills in other EU steel
segments have suffered from weak demand
and economic recession resulting in tougher
competition on the back of overproduction
even despite reduced capacity utilization
rates. This caused non-stop pressure on
prices and consequently mills’ profits.
Positive forecasts for plate consumption in
Europe as well as the planned investments
into the EU economy (EUR 315 billion in
2015‑2017) encourage optimism. However,
there will be no fast rebound.
Due to weak market sentiment, European
plate producers had to gradually reduce
production increasing costs. European plate
rolling facilities run at 90% in 2007, while in
STEEL PLATES

STEEL PLATES
the recent couple of years the rate dropped
to 60‑65%. “Profitability of any production
facility directly depends on capacity
utilization. Current margins of steelmakers, in
particular mills producing commercial-quality
plate, stay extremely low,” commented a
board member, head of sales and marketing
department at Germany’s Dillinger Hutte, Dr.
Gunter Luxenburger. Some participants think
that “European plate producers will have no
chance to improve profitability, and it will take
at least 10 years to achieve demand-supply
balance.”
According to Eurofer’s forecast, steel
consumption is likely to increase on growing
GDP in the EU in 2016 and 2017 (2% and
1.9% up respectively). Specifically, plate
demand in Europe will add no more than 2%
year-on-year in 2016. However, the upturn
will barely give strong support to European
steel industry given stiffer competition with
Ukraine and China.
In 2015 average monthly supplies of plates
from the third countries to EU‑27 amounted
to some 220,000 tpm which corresponds
to 32% rise compared to 2014, Eurofer’s
data showed. China accounted to 53%
(116,000 tpm) of supplies and Ukraine
despite some reductions in volumes took
the second place (23% or 51,000 tpm).
Current events gave place to discussions
on the need to launch restrictive measures
against plate imports from China and
Ukraine. The official investigation is yet to
be launched, and interested parties realize
that the review can run over many months
given too flexible policy of the European
Commission. “The European Commission
puts to death EU steel industry by its inaction
against imports as well as environmental
requirements,” conference members say.
Eurofer continues to lobby tightening of the
quality control for steel imported to the EU.
European plate suppliers can get support
from the euro weakening which will make
their products more attractive abroad.
However, there are just few new potential
destinations, with the USA being the key
market. Thus, Vincent Pairet, CEO of
Industeel, suggests switching to niche
segments with focus on clients’ specific
needs. He also thinks that standard material
always can find its buyers, so steelmakers
should diversify production to maintain
revenue position.
„„ EUROPEANPLATEPRODUCERS
WILLHAVENOCHANCETOIMPROVE
PROFITABILITY
„„ PLATEDEMANDINEUROPEWILLADD
NOMORETHAN2%Y-ON-YIN2016

STEEL PLATES
European countries can get support from
decreasing prices for oil and gas as well
as a European investment plan (EUR 315
billion in 2015‑2017) to jump-start economy.
On the other hand, a decline in power
sources costs can affect investments into
gas pipeline construction projects, so the
market recovery will slow down. “There is
no direct macroeconomic influence on plate
market rebound. We should wait somewhat
to see positive results, though the situation
will surely improve,” said Dr. Luxenburger.
„„ EUROPEANPLATESUPPLIERSCANGET
SUPPORTFROMSWITCHINGTONICHE
SEGMENTS

STEEL PLATES
Own steelmaking
becomes trial
to plate producers
in Eastern Europe
Eastern European steel plate sector
is seeing just a slow recovery, even
though the economic growth in
the region is the most rapid in
Europe. A steady overcapacity and
surging imports from the CIS and
Asia undermine margins of local
mills, pushing the prices down
further. The strict climate policy
is adding to the market picture.
In such circumstances, most mills
have to reconsider their production
strategy or even stop their own
steelmaking.
Despite the fact that two main plate
consuming industries, construction and
shipbuilding, have been performing well
in the region during the recent two years,
regional producers have not managed to
benefit from that. The share of plate imports
in the EU rose from 15% in 2013 to 20%
in 2014 and continues to grow further,
according to Eurometal.
In Eastern Europe, deliveries from the
non-EU countries surged by 15% to
530,000 t in 2014, which accounts for 26%
of total imports from outside the region.
The number already reached 427,000 t
in January-August of 2015 (28% of total

STEEL PLATES
imports from outside the region). Among
the major suppliers are Ukraine, Russia,
South Korea and China. Despite the
constantly falling raw materials, this has
been putting a non-stop pressure on prices
and, consequently, the profits of mills.
“Nowadays margins of mills producing
commercial-quality plate are staying
extremely low,” a Polish mill told Metal
Expert.
Besides, the competitiveness of steel
producers in Eastern Europe is undermined
by the necessity of significant investments
in the environmental protection, according
to the EU climate policy. In this part of
Europe, a pressure of the new ecological
policy is more tangible than in other regions,
as the operation life of most equipment in
the local mills exceeds 20 years. Therefore,
the companies have to combine in-house
steel production with slab imports to remain
competitive.
Poland’s major plate producer ISD
Huta Czestochowa in September 2015
resumed slabs deliveries from Alchevsk,
almost a year after it commissioned its
own steelmaking complex. Currently, the
company is producing plates using both
own and Ukrainian slabs. But the company’s
management highlights that the mill would
like to import “as much as possible to
reduce production costs.” “Making own
slabs at reduced capacity is expensive,
given tough competition in the Polish plate
market. Except traditional CIS suppliers
we can see now increasing volumes from
China, which doesn’t make it any easier,” a
company representative told Metal Expert.
ISD Huta Czestochowa was forced to com
mission its steelmaking complex in mid-
November 2014, facing slabs supply problems,
as the Ukrainian supplier stopped shipments.
In 2015, the company has been producing
35,000‑40,000 t of slabs monthly, while an
annual capacity of the EAF is 700,000 t.
Czech Vitkovice Steel, another important
plate producer in Eastern Europe, idled
its steel melting complex in September
2015. The company did not want to invest
in the environment-friendly equipment to
comply with the new ecological standards
and decided to continue producing heavy
plates as a re-roller. A designed slab CCM
capacity of the mill is 965,000 tpy, but
“operating rates did not exceed 50% for the
last few years,” as a source close to the mill
told Metal Expert. In 2014, Vitkovice Steel
imported about 130,000 t of slabs, with
almost half of the volume being ordered
from Ukraine’s Alchevsk Iron and Steel
Works. Now the company is going to source
semis from the EU and Russia, Metal
Expert learnt from the company’s statement.
An estimated need of Vitkovice Steel is
400,000‑500,000 tpy of slabs.
Also, Vitkovice Steel is going to reinforce
its position as a leading producer of high-
quality heavy plate in Europe in the near
„„ THECOMPANIESHAVETOCOMBINE
IN-HOUSESTEELPRODUCTIONWITHSLAB
IMPORTSTOREMAINCOMPETITIVE
„„ PLATESPRODUCTIONBECAME
UNPROFITABLEDUETOSHARP
COMPETITIONWITHCHINA

STEEL PLATES
future. “Our current condition is at a decent
level, and during the next few years we
expect it to improve, because closure of the
steelworks will allow us to further develop
the operations of our Company,” said Dmitrij
Scuka, Chairman of Vitkovice Steel.
Huta Batory, one more Polish plates re-
roller (180,000 tpy), part of Pietrzak Holding,
is facing serious financial problems. It
is unable to successfully compete with
imports, which challenges the company’s
future as a steel producer. Pietrzak Holding
filed for bankruptcy at the end of November
2015. The main reason for the company’s
financial insolvency was falling steel prices.
Plates production became “unprofitable due
to sharp competition with China,” a local
source commented.
ArcelorMittal Galati, the sole Romanian
plate producer, is running only one BF
(2 million tpy) of five (a total capacity is
6.13 million tpy). ArcelorMittal Europe CEO
Aditya Mittal underlined that the Romanian
market remains fragile and the “growth is
very poor.” The company prioritizes exports
in its sales strategy. In 2014, plate exports
from Romania reached almost 300,000 t,
while in the first eight months of 2015 the
number climbed to 236,000 t, according
to Metal Expert data. Almost 50% of that
volume goes to Turkey. Among other
destinations, big volumes are being delivered
to Poland, Germany, Czech Republic.
The economy of Eastern Europe is
expected to grow a still healthy 3% in 2016,
benefiting from the Eurozone’s ongoing
economic recovery amid low oil prices and
an expansionary monetary policy. This
could be reflected in somewhat better plate
consumption. The planned investments
into the EU economy (EUR 315 billion
in 2015‑2017) also encourage optimism.
However, there will be no fast recovery.
“There is no direct macroeconomic
influence on plate market rebound.
We should wait maybe years to see
positive results, though the situation will
surely improve,” a source in the market
commented.

EASTERN EUROPE
Steel consumption
growth in Poland
is only beneficial
for overseas
suppliers
Steel consumption in Poland is
expected to grow in 2016, but
local producers can hardly benefit
from it as imports pressure persists.
Competition with overseas suppliers
is sharp due to high electricity tariffs,
taxes and costs for upgrades of the
equipment which has been in service
for 30‑40 years.
Poland’s apparent steel consumption
in 2015 was 12.5 million t, up from 12.1
million in 2014, with only about one-third of
domestic material, Poland’s Metallurgical
Chamber of Industry and Commerce
(Hutnicza Izba Przemyslowo-Handlowa,
HIPH) reports. This figure is expected
to climb by another 2‑3% in 2016 as
the largest steel consuming sectors –
construction and automotive – maintain
positive growth, Metal Expert learns.
By 2020 apparent steel consumption will

EASTERN EUROPE
reach 20 million t, the Polish Minister
of Economy reported. Statistics are in
favour of such optimism. In 2015 Polish
mills melted 9.106 million t of steel,
6.4% up year-on-year, according to the
World Steel Association, which is the
highest figure since 2008. The increase
is due to improvements in buying by
the main consumers – builders and car
manufacturers primarily.
However, domestic producers cannot fully
benefit from steel consumption growth as
imports eats up a major part of it. In 2015
imports share had almost reached 70% in
overall domestic consumption. Taking into
account such tendency, local producers
insist that production increases become
viable only if imports do not “eat up” some
of consumption.
Polish market players report low
competitiveness of domestic industry
comparing with both the CIS and other
EU countries. The national currency
devaluation in Russia and Ukraine promoted
higher supplies from these countries.
Specifically, imports of HR coils from
Russia to Poland in January-September
climbed by 22% year-on-year. Besides,
Byelorussia has significantly extended
its presence in Poland’s rebar market: in
January-September 2015 rebar imports
from Byelorussia to Poland jumped to
137,000 compared to 41,000 in 2014. Polish
steelmakers fear that “they are losing their
own market.” With high electricity costs
and environmental expenditures, plants
are becoming more vulnerable to cheap
imports. Besides, CIS exporters spend
much less on raw materials, in particular
scrap, as compared to EU suppliers. “It is
impossible to compete with mills that source
scrap by an average of EUR 100/t lower,
than we do,” a Polish mill told Metal Expert.
Growing quantity of non-European cheap
material coming to Poland and other EU
countries hampers the price growth, which
will depress margins of local mills. “In early
December 2015, CIS HRC were quoted an
average of EUR 30‑40/t below domestic
material. In the longs segment, the gap
is some EUR 15‑20/t,” a representative of
Polish mill told Metal Expert.
The companies running blast furnaces
have problem with increasing costs for CO2
emissions and need to take measures to
make production more environmentally
friendly in line with the EU standards. In
particular, ArcelorMittal’s Polish division
reported a need to invest about EUR 400
million into equipment upgrade to correspond
to the new environmental policy of the
European Commission. New technologies
require increased gas consumption, instead
of coal and coke, while prices for gas in
Poland are among the highest in the EU.
Moreover, steelmakers are concerned
about the EU decision to create Market
Stability Reserve (MSR) ahead of time – in
2019 instead of 2021. They believe this will
affect competitiveness of both European
and Polish steelmakers, as quotas for CO2
„„ APPARENTSTEELCONSUMPTION
INPOLANDWILLREACH20MILLIONT
BY2020
„„ IN2015IMPORTSSHAREHAD
ALMOSTREACHED70%INOVERALL
DOMESTICCONSUMPTION

EASTERN EUROPE
emissions will get more expensive. “Pre-term
introduction of MSR will affect our positions
against overseas suppliers who face no
expenses related to CO2 emissions,” a
member of the BOD of ArcelorMittal Poland
Surojit Ghosh told WNP.
Poland’s government started to come from
words to actions in July 2015, granting local
steelmakers support in an important area
that had been undermining competitiveness
of the Polish metallurgy over recent years,
namely environmental projects. In early
July 2015, the government of Poland has
accepted a Slask 2 programme for Silesia
region envisaging reduction of excise
duty on electricity for steelmakers, Metal
Expert learns. About 1/3 of the country’s
steelmaking companies are located in this
region including assets of ArcelorMittal
Poland in Krakow city, Dabrowa Gornicza,
Swietochlowice, Sosnowiec, Chorzow and
CMC Zawiercie, ISD Huta Czestohowa
and others. “A decision to partially free
producers from electricity excise duties and
renewable energy duties included in its cost
will drive down production costs. In case with
metallurgical plants, this should boost steel
smelting…,” documents of the Slask 2 state.
Besides, manufacturers will be able to use
money means of environmental funds to
subsidize their own environmental projects.
Thanks to this programme, local mills will
be able to annually save about PLN 1 billion
(EUR 224.7 million; EUR 1 = PLN 4.45), the
Polish Steel Association HIPH calculated.
„„ PLANTSAREVULNERABLETOCHEAP
IMPORTSAMIDHIGHELECTRICITYCOSTS
ANDENVIRONMENTALEXPENDITURES

EASTERN EUROPE
Czech steel
industry goes out
of recession,
but threatened
by growing
imports into EU
Czech steel industry
is showing signs of
growth on economic
upturn in the country,
but a recovery is
still fragile as its
dependence on export
markets remains strong.
Up to 70% of total
steel output in Czech
Republic is exported
predominantly to other
European countries, so
growing imports from
third countries to the
EU is a threat to local
steel mills.

EASTERN EUROPE
The Czech economy has finally started to
recover from recession. In 2014 GDP has
inched up 2%, while in 2015 the increase
is forecasted to reach 2.5%, according to
Czech Steel Federation. Nevertheless,
the dependence on external demand is strong
as exports account for 84% of the country’s
GDP. In 2015 crude steel output in Czech
Republic reached 5.262 million t, which is
almost equal to 2014 results. That is the
second result in Eastern Europe after Poland.
One of the main consuming industries –
automotive – provided a strong support
to steel sector in 2014 and 2015, while
construction is recovering slowly.
“Automotive industry is showing us a
strong support each month. Construction
is running not so well, but it also is
starting to show minor signs of recovery.
We expect some slowdown throughout
summer, but in general prospects are
more than positive,” a local trader told
Metal Expert.
Automotive industry is expected to grow
4.8% in 2015 and 4.3% in 2016. “Lately
we’ve been enjoying an increase in orders
in Europe,” a local mill commented to
Metal Expert. The country hosts major car
manufacturers like Skoda, Toyota/PSA joint
„„ AUTOMOTIVEINDUSTRYGROWTH
AT4.3%PROVIDEDASTRONGSUPPORT
TOSTEELSECTORIN2016

EASTERN EUROPE
venture, Hyundai. These three companies
together produced over 500,000 vehicles at
the Czech factories in 2014, Metal Expert
has learnt from Czech Steel Federation
report. Nevertheless, major part of this
amount have been exported. For example,
out of 1 million units sold by Skoda in 2014
only 70,000 went to the Czech domestic
market.
Exports are the most important part of
the Czech economy. Having a national
currency (Koruna) makes it beneficial as
its depreciation encourages companies for
overseas sales and makes exports more
competitive. This effect is being supported
by the government, whose policy of
interventions is aimed at keeping the CZK/
EUR exchange rate above 27. A recovery
currently observed in most EU countries
should secure sustainable growth of
exports in 2015.
Nevertheless, the rising imports from third
countries to the EU remain a serious risk
factor for Czech steel industry. About 80%
of the country’s exports goes to the EU
countries. In 2014 67% (3.568 million t) of
overall Czech steel output was exported,
including almost 30% (997,100 t) to
Germany alone, and 18% (651,980 t) to
Poland. According to Eurofer, in 2014
imports volume to EU countries from China
only grew by 49% to 5 million t, which puts
additional pressure on local steel producers
as their competitiveness is undermined the
necessity of significant investments in the
environmental protection, according to the
EU climate policy.
„„ IMPORTSREMAINASERIOUSRISK
FACTORFORCZECHSTEELINDUSTRY

EASTERN EUROPE
Cloudy future
for USSK
The future of the U.S. Steel Kosice (USSK), the major producer, which represents
the Slovak steel industry, and belongs to American still giant US Steel
Corporation, has become cloudy by the end of 2015. Despite the recovery of
the Slovakian construction industry, close proximity to numerous facilities
of globally renowned automobile producers and government support, the
performance of the company itself and of its owner in 2015 has been hit by
cheap imports which made the American investor unsure about the future
prospects of the Slovak mill within the group’s structure.
Slovakia has not been left untouched by
the growing volumes of dumped steel
imports from third countries into EU. As
the USSK is usually not very flexible in
pricing, availability of cheap imports in
the company’s main outlets undermined
its position. In a response to difficult steel
market conditions in Europe USSK has
idled one BF (1.975 million tpy) in early
December 2015 to cut production. The
mill, able to produce 5 million t of pig iron
in three BFs annually, now operates only
one BF (1.2 million tpy). “We are currently
facing massive import of products from
countries which do not have to bear the
same financial and regulatory obstacles
faced by producers in the European Union,”
the spokesman confirmed.

EASTERN EUROPE
On the back of the mentioned above
situation since mid-December, 2015, the
rumours regarding a possible sale of
U.S. Steel Kosice to another Czech steel
company Moravia Steel has been circulating
in different sources. Both companies
declined to bring the light to the situation.
But it seems to be clear that American
owner again started to look ways to get
rid of the asset, despite the government
support and quite promising location with a
good approach to other EU markets.
Being the only flat steel producer in
Slovakia, U.S. Steel Kosice is the key
supplier for construction (38% of shipments)
and transport (16%) industries at home and
in neighbouring countries. The company
focuses on the construction segment
because it specializes in high value-
added products, with coated products
(HDG, PPGI, tinplate) accounting for
almost one third of the overall sales,
according to the information provided in
the company’s report. Considering that the
Slovak construction industry jumped out of
recession in 2015 with an increase of 15%
y-o-y over the first nine months of 2015
and in view of Eurofer’s positive forecasts
for 2016 (steel demand from construction
will gain 2.6% in the EU), the mill is likely to
improve its position.
The automobile industry, another important
sector for the supplier, is expected to be
„„ USSKISTHEKEYSUPPLIER
FORCONSTRUCTIONANDTRANSPORT
ATHOMEANDINNEIGHBOURING
COUNTRIES

EASTERN EUROPE
more promising. Slovakia, one of the top
twenty automobile producers in the world,
hosts plants of Volkswagen (Bratislava),
PSA Peugeot Citroen (Trnava), KIA Motors
(Zilina) and facilities of global suppliers of
components and spare parts. According to
the European Automobile Manufacturers
Association (ACEA), production of
passenger cars to rise by 4.6% in 2015.
The mill’s output is mostly shipped directly
to end users (67%); shipments to service
centres account for 16%, those to trading
companies and other distributors – 7%. U.S.
Steel Kosice says in its annual report that
50% of the material is shipped under the
long-term contracts, while the rest is sold in
the spot market. However, the mill seeks to
increase the share of long-term contracts
with both local and foreign customers,
participants of the European market told
Metal Expert. Apart from the domestic
market, the main sales markets are Poland,
the Czech Republic, Italy, Germany,
Hungary and Turkey.
The company is not very flexible in pricing.
“U.S. Steel Kosice traditionally offers the
highest surcharges for its products. In this
case it is more reasonable for us to buy a part
of volume from other suppliers, for example
from Hungary’s ISD Dunaferr, who offers the
same base price and lower surcharge,” a
Slovak service centre told Metal Expert.
In order to retain the market share U.S. Steel
Kosice keeps pace with other European
mills in development of new products,
particularly of extra high strength and light
steel for car bodies and components, which
reduce car weight and consequently CO2
emissions. “In order to stay competitive in
the current circumstances, every steelmaker
should invest into development of innovative
products with high added value,” the
company management comments in the
2014 report.
The company’s operating income increased
five-fold in 2014, to $133 million, but in
2015 the result dropped again by almost
40% y-o-y amid more challenging market
starting from H2. “Full-year 2015 results
for our European segment decreased from
2014 as the benefits from our Carnegie Way
[optimization programme] efforts could not
counteract the negative price and foreign
currency impacts,” U.S. Steel management
commented. Besides, the fact that the
parent company, the US Steel Corporation,
posted a net loss of $1.5 billion in FY 2015
brings even more concerns over the future
of its Slovakian asset.
In 2012, the mill already was under a
threat of losing its main investor because
of negative outlooks for the European
steelmaking industry. However, owing
to efforts of the Slovak government and
optimistic outlooks for the domestic
automobile industry, the US parent in 2013
decided not to sell the mill in Slovakia.
In order to save thousands of jobs, the
Slovak government and US owners
of the mill signed a memorandum of
understanding on March 26, 2013. Under
the agreement, in 2013‑2018 U.S. Steel
Kosice received discounted electricity
tariff and environmental tax and assured
the government that it would not lay off
its personnel. According to preliminary
estimates, this will help the company save
around EUR 14 million annually.
„„ STEELMAKERS SHOULD INVEST INTO
DEVELOPMENT OF HIGH VALUE ADDED
PRODUCTS TO STAY COMPETITIVE

EASTERN EUROPE
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Metal Expert
Iran Perspectives in Focus
December 2015
Iran’s export potential
in longs and semis yet to be
unleashed
Mobarakeh Steel:
increasing exports is the only
way out of recession in Iran
IGISCO:
Metal ExpertSquare Billet in FocusAugust 2015
Billet imports
to replace foreign scrap in Turkey
Al Jazeera Steel:
“No point in own steel making”
Iron ore surplus not to risein 2015
Main Topics
in Focus
COMPLIMENTARY
TO WSN SUBSCRIPTION

Why European
steel mills could
not fully benefit
from collapsing
iron ore
Despite the well-publicized plunge in global iron ore price, steel mills in
Europe failed to benefit from it as much as the Chinese did. Quarterly/
monthly lags, higher quality of ore they consume, and depreciation of
national currencies stand among the main reasons why. Still, owing to better
parameter of steel the Europeans produce as compared to the Chinese, tight
competition observed in the low-grade segment only.
IRON ORE IN EUROPE

IRON ORE IN EUROPE
The first answer to the question why is
quarterly or monthly lags, still preserved
by some companies, meaning that the
index part of the price they pay in Q2,
for instance, is a reflection of Q1. With
iron ore almost halving in 2015, this is
something to offset the fast collapse, too.
“I hear that one of the largest companies in
Germany still has lags,” one of the sources
said. Nonetheless, the number of such
steelmakers has been falling for several
years already and it is expected that mills
will continue to retreat from this kind of
contracts further. “We used to have lags till
2011, but had to give up on that in order to
be able to keep up with the times,” a mill
source told Metal Expert.
Also, there are only few mining companies
to satisfy iron ore requirements of the
EU mills, which results in lower price
competition in higher-grade segment.
“Those miners are in position to ask
for high pellet Premiums, as the quality
from other countries, for example CIS,
is not comparable with what we can
purchase from Brazil and Canada today.
While chemical characteristics are good,
mechanical strength and metallurgical
behaviour in the BF is not complying with
our needs,” a mill source from Western
Europe said. Premiums for pellets, which
the EU consumes more than China in
terms of ratio, have varied within $30‑40/t
in 2014‑2015 depending on quality of the
product. Moreover, the gap between the
medium-grade 62% Fe and low-grade 58%
Fe – benchmarks Chinese steelmakers buy
in large quantities – and the most popular
within the EU Carajas fines 64‑65% Fe
although thin now, could reach up to $10/t
and $16/t respectively one a year ago.
Less beneficial situation was also driven by
depreciation of national currencies against
the US dollar, with the latter used as a
reference in most iron ore contracts. In 2015
the euro lost 20% and according to analysts,
it will continue to slide throughout 2016.
Western Europe is known for producing
high-quality steel with prices, although
dampened by cheap material from
China, but still profitable given uplifts for
higher grades. The true concerns rise
for companies that produce commercial
steel, though. This has already resulted in
a number of anti-dumping investigations,
which are to be completed later in a year.
Until then, however, mills will most probably
be very much squeezed by less expensive
import from China.
„„ THERE ARE ONLY FEW MINING
COMPANIES TO SATISFY IRON ORE
REQUIREMENTS OF THE EU MILLS

EU steel giants
prepare
to challenging
year 2016
Despite expected apparent steel consumption growth in EU by 2‑2.2% in
2016 amid improving construction and automotive industries’ performance,
major European mills anticipate further steel markets weakening mainly
due to remaining pressure of growing imports. EU top steel producers have
already revised their future profit targets and make a bid mainly for the
successful implementation of optimization programmes and diversification
of businesses in 2016.
A steel giant ArcelorMittal which financial
performance in 2015 was hit by falling
steel prices and imports pressure expects
2016 to remain challenging for the industry,
with the modest apparent consumption
pick-up of up to only 1% y-o-y. However,
ArcelorMittal hopes for the more effective
trade defence measures from the EU.
“…2016 will be another difficult year for
our industries. It is clear that China has a
challenge to restructure its steel industry
for a lower growth economy but we are
somewhat encouraged by recent comments
concerning capacity closures. Until this
situation is fully addressed the effective
and swift implementation of trade defence
instruments will be critical and we expect
to see more positive rulings in this regard
during the year,” Lakshmi Mittal, ArcelorMittal
Chairman and CEO said. The company
intends to reduce its net debt by around $ 4
billion in 2016 by the issue of $3 billion worth
of shares alongside with sale of 35% stake
in Spain’s automotive metals component firm
Gestamp for $1 billion till June 2016.
TOP COMPANIES
„„ 2016WILL BE
ANOTHER DIFFICULT
YEAR FOR STEEL
INDUSTRY

TOP COMPANIES
Despite being less affected by negative
price trend, Austrian voestalpine is
concerned about further deterioration
of steel markets in Europe in 2016 amid
imports pressure, chronic overcapacity and
overall unpromising situation in global steel
market. “Up to now, voestalpine has only
been marginally affected by the negative
development of steel prices due to its focus
on premium products in both the energy
and steel sectors and was able to largely
compensate it by concentrating on other
industrial segments and economic regions.
But this strategy will now become more
difficult in the second half of the business
year [September 1, 2015 – February 29,
2016], despite the overall slight upward
trend in Europe and a largely stable
economic development in North America,
as very little demand to speak of can
be expected from other global regions,”
according to company’s statement.

TOP COMPANIES
Voestalpine has adjusted downwards
its revenue target from EUR 20 billion to
EUR 15 billion by the end of the five-year
programme “Strategy 2020” ahead of
complicated market prospects. Steel will
continue to remain the core material base
for the Group in the future, but at the same
time, the company has an intention to use
more of other metals such as titanium
and aluminium in processing activities.
Additionally, voestalpine is going to
follow its internationalization strategy. In
particular, the company targets to increase
revenue share generated outside the EU
from 25% to 40% by 2020. Voestalpine
plans to focus more on NAFTA region
(Canada, USA, Mexico). Besides, the
company plans to obtain EUR 800 million
revenue from its 10 operating mills in China
by 2020.
Sweden’s SSAB anticipates slight upticks
in demand both in Europe and in North
America during 2016. Despite that, SSAB
sees that the global situation still involves
many factors of uncertainty that will take
a long time to resolve. “Although SSAB
considers free trade to be important with
regard to development of the global steel
industry, the current situation of unhealthy
competition means measures are called
for to preserve the steel industry in Europe
and North America,” SSAB’s CEO
Martin Lindqvist commented in the Q3
2015 report.
SSAB has several initiatives to reduce
costs, targeting to save SEK 2 billion (EUR
190 million), mainly through synergies
following the acquisition of Rautaruukki
in 2014. SSAB is also focusing to grow its
Special Steel Division through developing
unique applications of high strength steels
and growing its service offering, including
the after-market business.

TOP COMPANIES
Thyssen Krupp Steel Europe in
FY 2015‑2016 (October 1, 2015 – September
30, 2016) expects to achieve positive key
performance indicators thanks to the “Best-
in-Class Reloaded” programme which
includes differentiation initiatives for steel
grades and extensive sales optimization
efforts. Company’s CEO, Heinrich
Hiesinger, expects that risks connected with
overcapacity, as well as regulatory decisions
will lead the market to the consolidation.
“The steel industry is now facing enormous
risks and has to fight for its existence. If the
opportunity to consolidate arises, we will be
involved in it,” the company’s head said in
the interview to the Welt am Sonntag.
Tata Steel Europe which suffered the most
among EU steel producers in 2015 from high
imports from third countries and a strong
British pound, sees the way out by focusing
on value added products. In FY 2013‑2014
the company managed to launch 30 new
products, in FY 2014‑2015‑35, in the first
six months of 2015‑14. In 2016 Tata Steel
Europe hopes for governmental support to
implement defending measures. “Across
Europe we are calling on governments to
ensure the European Commission upholds
international trade rules firmly and more
speedily,” said Dr Karl-Ulrich Kohler, MD &
CEO of Tata Steel in Europe. As a result of
adverse market conditions, last year company
closed hot strip mill in Llanwern (3 million t
of HRC), suspended operations of a hot-dip
galvanizing line in Shotton, mothballed its plate
mills in Scunthorpe (625,000 tpy), Dalzell and
Clydebridge (400,000 tpy) and one of two coke
ovens operating in Scunthorpe. Moreover,
seeing no perspectives, the company decided
to sell its Long Products Europe business in
northern England by April 2016.
So the upcoming year seems to bring more
risks for the EU steel sector. And the most
important steps that need to be done to
support the industry are the activation of
defence measures, focusing on downstream
segments and intensification of the
consolidation process, according to major
EU steel companies.

TOP COMPANIES
Ilva:
Production drop
makes Italy
world largest
HRC importer
More than 1 million t loss of crude
steel output in Italy due to the
historically lowest production
level of the troubled Italian steel
producer Ilva in Taranto made Italy
the biggest importer of HRC in 2015.
Considering still unclear future of
the major Italian steel mill which
is currently in the process of sale
to the private investor, the country
has all chances to remain one of the
most desirable destinations for the
HRC suppliers all over the world at
least for the next year.
Ilva, which, according to the European
Commission (EC), is the largest steel
plant in Italy and in the EU is capable of
producing 10 million t of steel annually
(11.6 million of HRC & sheets) or 40% of
Italian steel production. Despite the fact
that Ilva’s crude steel production has never
exceeded 9 million t per year, since the start
of the pollution scandal in 2012 it has been

TOP COMPANIES
facing output reductions. From recorded in
2011 8 million t Ilva’s output dropped to less
than 5 million t in 2015 which corresponds
to 40% decrease. The most significant
drop happened in 2015 when the company
had to stop production at its biggest BF
No5 (3.7 million t of pig iron) to run an
environmental modernization and had some
production interruptions at BF No2 due to
the mortal accident with the worker. This led
to a loss of more than 1 million t in output.
Currently, the mill runs only two blast
furnaces of five existing – BF No.2
(2 million t) and BF No.4 (2.3 million t). The
company is producing around 14,500 t of
steel per day since late September, 2015.
Such capacity utilization rate causes EUR
40‑50 million loss every month as the
breakeven point is 22,000 t per day, Metal
Expert learns from local sources. Moreover,
Ilva keeps losing customers staying aside
of new technologies implementation and
new steel types development, local unions
warn. “The company has not managed to
fully regain the customers trust and it is still
considered as unreliable supplier,” Italian
trader told Metal Expert. “If the situation
does not change in near future, the mill may
completely give up its market share which
used to be 7‑10% of EU market before
2012,” another market source commented.
This situation led to the activation of foreign
HRC suppliers into Italy. In January-
November of 2015 the country imported
6.210 million t of HRC (+23.3%), of which
3.578 million t (+71.2%) came outside the
EU. The most impressive supply growth
showed China with 916,700 t (+291.1%) and
Iran with 698,100 t (+137%) in eleven month
of 2015, according to Metal Expert data.
Among the important suppliers remained
Russia with 651,100 t (+29.4%). Have not
missed the opportunity to increase their
presence in Italy in 2015 also Ukraine
(+43.5%), South Korea (+157%) and
Turkey (+24.3%), but the volumes these
countries sold to Italy remained in the range
of 200,000‑300,000 t of HRC per year.
Given that EC has started an antidumping
investigation against Chinese HRC and
Ilva’s future still seems to be cloudy on
the back of searching of a new investor,
Italy will remain an attractive destination
for the foreign suppliers in 2016. First of all
Iran will keep using this opportunity as it
is eager to increase its exports to Europe.
CIS suppliers will maintain the market
share, but considering the introduction
of the antidumping duty on CRC they will
hardly take risks by significantly increasing
their presence in Italy in HRC segment. On
the other hand South Korean and Turkish
exporters will not hesitate to improve their
presence in Italy. Also in case of favourable
market conditions, Brazil and India can be
back to the market.
Ilva’s future is set to be decided by the end
of H2, 2016, when the government hopes
to close the deal with the private investor.
Among the 19 companies permitted to take
part in the next round of the tender there
are ArcelorMittal, Arvedi, Marcegaglia,
Eusider, Tecnotubi, Brazil’s CSN Steel and
Switzerland’s Trasteel International and
Turkish Erdemir.
„„ ILVAKEEPSLOSINGCUSTOMERS
STAYINGASIDEOFNEWTECHNOLOGIES
ANDNEWSTEELTYPESDEVELOPMENT
„„ HRCIMPORTSTOITALYROSE
BY23.3%TO6.21MILLIONTOFHRC
DURINGJANUARY-NOVEMBER,2015

TOP COMPANIES
Beltrame:
Consolidation
of profitability and
cash generation –
main focus
for today
Almost a year ago at Made in Steel Exhibition & Conference held in May 20‑22
in Milan (Italy) a recently appointed CEO of the leading EU manufacturer of
merchant bars Riccardo Garre’ told Metal Expert about the company’s ongoing
restructuring and the strategy for further development. Since the situation has
not changed much over the year, Metal Expert is sharing again the strategy of
the powerful player in the EU struggling market.
You have been appointed CEO of Beltrame Group at the end of the year, a
time believed to be a turning point for the European steel industry. But so far
business conditions, especially in longs segment of Europe, remain challenging.
What helps the company to survive?
I think that in this very challenging
environment what is supporting the
company and allowing it to survive is
the differentiation, which is going on in
terms of service and its availability for
our customers. What we try to do is to re-
establish our range of products which was
partially lost in a few countries, especially
in France, in order to be able to supply the
customers with all products and to be fast
in processing. And then also to measure
a performance by service rates, which
are now showing that we perform well
vis-a-vis to the customers concerning the
supply chain and offer them quality and
reliability.

TOP COMPANIES
So I think today, despite the poor demand,
these are supporting the group and giving us
the possibility to achieve a price premium,
which is a strong competition advantage.
Beltrame is the biggest merchant bars producer in Europe. As far as Metal
Expert concerned, in the previous years, Beltrame covered approximately 50%
of the EU needs and had presence almost in all the EU countries. How would you
describe the position of Beltrame in the EU market at the moment?
With over 2,000 employees (800 in
Italy), three steel mills and ten rolling
mills operating in six production plants in
Italy, France, Switzerland and Romania,
production of about 2 million tonnes of
rolled steel profiles and a consolidated
turnover of EUR 1.1 billion in 2014, the
Beltrame Group keeps being a leading
European player in the steel sector.
During the last period, we consolidated the
market share in all countries. Our focus now
is to develop in those countries where our
presence is poorer. I am thinking about
Germany, Eastern Europe, markets outside EU.
In those countries, we are aiming to
strengthen the sales team to improve the
proximity to the market and to be more
effective with supply chain in the way this
can give us a possibility to increase the
volumes and our market shares.
Which countries in Eastern Europe are you going to approach?
We already have a company in Romania
named S.C. Donalam SRL (Bucharest),
which is now developing well. It produces
SBQ and plates, and the volumes are
growing during last 2 years.
From Romania we can cover other eastern
markets. In particular, we try to grow in
Poland, Hungary and Czech Republic. Also
it is important to improve our presence
in Switzerland where we also have a
production site which is operative [Stahl
Gerlafingen, 1.05 million tpy].
So we are trying to get volumes from
increasing market shares in those countries.
If you were to characterize the essence of what is happening in Europe’s long
steel market today in a few words, what would you say?
I think it is clear that with crises and
shrinking volumes there is an increasing
overcapacity all over Europe. This caused
excessive competition, sometimes very
cruel competition, which has already
affected a few players.
Today we are observing the picture, where
there are only few players struggling, while
others are trying to survive with existing
volumes.
That’s why in Europe we should
achieve consolidation of production
in the long products market. I believe
it will come soon, because we have
many producers and high overcapacity
which is of course deteriorating
„„ OUR FOCUS IS TO DEVELOP IN THOSE
COUNTRIES WHERE OUR PRESENCE IS
POORER – GERMANY,EASTERN EUROPE,
MARKETS OUTSIDE EU

TOP COMPANIES
the market in terms of commercial
margins and profitability. I believe
that now when we have a few companies
suffering is a good point to start a
consolidation process.
As you already mentioned some companies in the segment you work are in
troubles. In particular, the Italian market has recently lost Stefana Spa. Has the
competition softened due to this fact?
We are more involved in merchant bars
business than beams, so Beltrame did
not get so much advantage from Stefana
stoppage. That’s true that we won some
volumes, but this is not a real difference.
But for sure this will change a bit the market
from the commercial margin point of view.
I mean that in Southern Europe the collapse
of Stefana may give a possibility to be more
ambitious with prices for merchant bars.
Beltrame is now going through restructuring. You have recently put on sale
equipment of production sites in Luxemburg, Belgium and Italy, but at the same
time are willing to reopen San Giovanni Valdarno mill. What is this decision
connected with, considering excessive supply in the EU?
The decision to stop and sell assets in
Belgium and Luxemburg has been made
because the overcapacity was very high
and we have not managed it. We also
decided to stop the steel mill in San Didero
[800,000 tpy] in Italy, but to keep the rolling
mill [650,000 tpy] there operative.
We will continue production at San Didero
and San Giovanni Valdarno [200,000 tpy]
in Italy because they are supporting our
strategy of being best in service and to
complete the range of products. By keeping
only French factory [Lamines Marchands
Europens, 950,000 tpy] and Italian factory
in Vicenza [1.2 million tpy], it would be
impossible to produce all products and to
be flexible.
So, finally, now our team is durable and solid.
We have two main plants for merchant bars
in France and Italy and two smaller plants,
which give us a possibility to be reactive
and flexible and to complete the range
of products, which is a real competitive
advantage of the Beltrame Group today.
Do you plan to extend your presence outside the EU, considering better
opportunities thanks to weak euro?
Yes, we try to do that. At present, we are
trying to cover all countries or to grow
where the currency is US dollar. This
is not a massive part of our business,
but it is developing and supporting the
possibility to reach a saturation of our
plants in Italy and in France.
„„ EUROPE SHOULD ACHIEVE
CONSOLIDATION OF PRODUCTION IN
THE LONG PRODUCTS MARKET
„„ NOW IT IS NOT A GOOD MOMENT
OF THINKING ABOUT INVESTMENTS

TOP COMPANIES
What measures have you already introduced to comply with the EU
environmental plan?
I think that the EC has been efficient
since ever in terms of regulation of CO2
emissions and energy saving. We have
already developed a few actions at our
plants, fulfilling the rules. We try to be strict
with EU law because we believe that it is
giving some advantages from the image
point of view. All plants all around the
perimeter are managed in the fulfilment with
the EC environmental regulation without
exceptions.
Are you going to obtain any support from the EU huge investment initiative
called Junker’s plan?
Today the main focus of Beltrame is the
consolidation of profitability and cash
generation. It does not make any sense for
us to invest even if we can get the money
from the EC funds at very low interest rate.
At this moment, we have to show that our
profitability is improving. We are on track
of doing that. We are consolidating further
the production perimeter and saturating
further our production capacity. Only after
this phase is completed, we will take care
of evaluating whether with public money
we can get an advantage. But right now
it is not a good moment of thinking about
investments when the main purpose is to
maintain profitability and enhance the trust
of the banks.
About AFV Beltrame Group
The AFV Beltrame Group has been operating in the steel industry for more than a
century, producing rolled sections for construction, shipyards and excavators. 2016 will
be the year of the company’s 120th anniversary. Five entrepreneurial generations led
the Beltrame Group to become a leader in Europe in the production of merchant bars
intended for construction, mechanics, shipbuilding and earth-moving machines. The
GroupisalsoaleadingproducerofrebarfortheSwissmarketandspecialprofilesforthe
automotive and mechanical manufacturing sectors.

TOP COMPANIES
Feralpi:
Survival strategy
in struggling long
product market
Considering an extremely unfavourable situation
in the European long product market (low capacity
utilization, plummeting prices, bankruptcy and
closures of mills), one of the Europe’s leading
producer of the construction steel – Feralpi Group
– focuses on business internationalization, vertical
integration and switching to niche segments.
Even though most European companies consider
the asset optimization programme (sale or closure
of non-core assets) as the only way to regain
profitability in the current conditions, Feralpi
Group continues investing into acquisition of new
facilities to optimize the supply chain and get
closer to its key customers.
The EU long product market, especially in
Italy, has witnessed no improvements in the
past six years. Even in 2015, when many
European countries enjoyed the economic
growth, Italy ran risks due to the weak
construction sector. “The construction
sector edges towards recovery but remains
Europe’s weakest as it is still around 40%
below the highest pre-crisis level that was
registered between September 2007 and
August 2008,” the Eurostat’s research said.
Earlier, reduced domestic consumption
of longs was completely compensated
with sales to Algeria, accounting for more
„„ SALES TO ALGERIA ACCOUNTING FOR
MORE THAN A HALF OF ITALIAN LONGS
SUPPLIES –3.5MILLION TPY

TOP COMPANIES
than a half of Italian longs supplies (some
3.5 million tpy), but starting from 2016 the
situation in the key export destination will
get worse. The new Algerian government
elected in April 2014 has a clear intention
to reduce the country’s dependence on
imports. The country is deeply concerned
about the falling oil prices which make
it even more eager to cut import flows.
The tightening, by the means of import
licenses, that will affect the ongoing
year, depreciation of the local currency
and numerous projects of domestic steel
capacity expansion are among the main
challenges for EU longs suppliers to Algeria.
According to the information coming
from Algerian distributors, since 2016,
Algerian rebar market may become much
narrower for foreign rebar suppliers after
the introduction on January 14 of a quota
restricting rebar imports to 2 million t per
year. Practically that means that Southern
European exporters (Italy, Spain, Portugal)
will lose around 500,000 t or 20% of their
total yearly rebar supply to Algeria, Metal
Expert estimates. Despite this, Feralpi
has decided to avoid leaving the market.
Besides, the company cautiously seeks to
strengthen its influence and become nearer-
located to its major customers.
The first steps towards Feralpi’s stronger
presence in Algeria were made back
in 2013 by launching the commercial
company Feralpi Algerie in Oran, owned
by 70% by a Feralpi holding and by 30%
by an Algerian partner. The company has
a storage premises capable of holding
30,000 t of rebar and wire rod. “With this
new company we intend not to replace our
traditional channels (30% of international
traders and 70% of direct imports) but
integrate them from the point of view of
the direct knowledge of the market in the
country,” Giuseppe Pasini, the President of
Feralpi, explained this strategic step.
Much tougher competition and a more
complicated process of finished product
sales from Europe to Algeria could push
Feralpi Group to establish its own longs
production in the country. In spring of 2015,
it announced a project for construction of
a rolling mill in Algeria for a total of some
EUR 35 million. According to the current
regulations in Algeria, Feralpi may not
own more than 49%, so the remaining
51% will be left to an Algerian investor.
The designed capacity of the mill will be
300,000‑400,000 t per year, the company
has declared. Now in the situation with
imports limitation this step seems to have

TOP COMPANIES
a great potential to succeed. “We will
not abandon the plan to build a steel mill
in Algeria even if we intend to proceed
with extreme caution,” Giuseppe Pasini
commented.
Billets will be purchased in international
markets. Owing to cancellation of a 15%
import duty on square billet in 2013, the
material of CIS, Turkish, Chinese and other
origins became available in the Algerian
market. However, semis imports in Algeria
amount just to 200,000‑250,000 t annually
so far. CIS exporters are the leading
suppliers, accounting for 50% of that
volume, Metal Expert’s data show.
Before the introduction of import quota for
rebar, Giuseppe Pasini, mentioned that the
Algerian market would remain attractive
to European exporters at least for the
next three years in spite of large-scale
expansion projects in the country. Longs
capacity in Algeria, according to Metal
Expert data, may gain additional 3.5 million
tpy by 2017, so the total designed capacity
will be 6.9 million tpy which is twice as
much as the current longs import from the
EU. “Algeria will remain a key importer of
European steel products for the next three
years. Only after this period manufacturers
will have to face competition from new local
companies. Today Algeria imports nearly
4 million t of steel products, with a domestic
output no more than 1.2 million tpy locally.
Therefore, we are still far from Algerian self-
sufficiency,” he said in one of the interviews
to local media. But even with the quota
which is now restricting only rebar imports,
Feralpi as a key player in the market will
hardly lose its positions being closer than
any other supplier to the customers. “The
news that Algeria is decreasing its steel
imports, although it is not a welcome news
and causes problems of volumes reduction,
it is not such as to undermine Feralpi’s
production. This reduction, surely is not a
disaster,” the company told Metal Expert.
Feralpi is not going to back down in the
unfavourable Italian market either. In the
context of stiff rivalry amid a lack of orders,
the company has decided to strengthen the
downstream integration by acquiring shares
of two companies specialized in longs
processing for the construction industry. In
January 2015, Feralpi bought a 48% stake
in Italian enterprises Presider SpA and
Metallurgical Piemontese Machining (MPL)
owned by Ferrero Group. Presider has been
active for decades in the field of supply and
installation of reinforcing steel for concrete,
as well as all the ancillary products for
construction. MPL is known as a supplier
„„ REDUCTION OF STEEL IMPORTS
IN ALGERIA IS NOT A DISASTER
FOR FERALPI’S PRODUCTION

TOP COMPANIES
and processor of the beams and other long
products.
One more strategic direction of the company
is entering the segment of high value
added products to compensate losses from
permanently falling prices in the segment for
standard products. For that purpose, Feralpi
and Duferco established a strategic alliance
to buy a mill producing high quality wire rod
owned by Lucchini Group. The consortium
will invest EUR 5 million within the next five
years into the enterprise with a new name
Caleotto Spa in Lecco to gradually restore
production at the site (to 300,000 tpy). The
target of about 60,000 t has been achieved
in 2015, while the forecast for 2016 is
160,000 t, 2017‑250,000 t, 2018‑300,000 t
(around 100% operation rates), according
to company’s balance sheet. Semi-finished
products for operations will be supplied in
equal shares from the facilities of the parent
companies – Feralpi Acciaierie di Calvisano
and Duferco San Zeno Acciai.
Besides, the company is backed by
well-developing German market, where
it operates Elbe-Stahlwerke Feralpi,
a 900,000 tpy rebar and wire rod mill.
“Germany is going well opposite to Italy.
Berlin never actually stops, it can only slow
its march for some time,” Pasini said.
Despite the negative environment in the
European longs market, Feralpi is now one
of the few producers in the segment, which
has been showing positive balance and
raising production volumes and revenues
from sales for the last two years. In 2014,
the company managed to raise production
volumes and revenues from sales by 10.1%
and 2.9% to 2.091 million t and EUR 971.2
million respectively, as well as to almost
double EBITDA achieved EUR 49.8 million,
according to the company’s balance sheet.
In the first half of 2015, the output of steel
gained 11.7% compared to the same period
last year. “The achieved results confirmed
the validity of the choices made by the
Group to respond to the new structure of
the markets. We will keep moving along
three strategic lines: vertical integration,
diversification and internationalization…,”
chief of the company highlighted.

60708090100110120
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
40 45 50 55 60 65 70 75 80
100
120
140
160
180
200
220
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
FACTS & FIGURES
„„ PRODUCTION OF HOT ROLLED LONG
PRODUCTS IN EU282005-2014
milliont
„„ PRODUCTION OF HOT ROLLED FLAT
PRODUCTS IN EU282005-2014
milliont
„„ CRUDE STEEL PRODUCTION IN EU282005-2015
milliont

FACTS & FIGURES
34%
18%14%
14%
13%
3% 2% 2%
Construction
Automotive
Metal goods
Mechanicalengineering
Tubes
Domestic appliances
Other transport
Miscellaneous
0
10
20
30
40
50
20152014201320122011201020092008200720062005
0
2
4
6
8
10
12
14
16
18
20152014201320122011201020092008200720062005
7,1 9,1 11,5 10,7 5,6 6,7 7,9 7,6 7,4 7,6 7,1
2,7
4,4
6,1
5,6
2,5
2,9
3,8 3,3 3,3 3,9
2,7
27,2 36,3 37,4 34,3 20,6 27,5 28,2 26,1 27,6 27,9 31,9
9,6
14,8 14,9 13,6
7,7
10,5 11,7 9,5 10,7 11,3
14,5
FACTS & FIGURES
„„ EU STEEL CONSUMPTION
STRUCTURE IN2015
%
„„ IMPORTS OF PLATES INTO EU (EUROPEAN DELIVERIES AND OUTSIDE THE REGION)
milliont
„„ EU APPARENT STEEL
CONSUMPTION
milliontpy
„„ IMPORTS OF HRC&SHEETS INTO EU (OUTSIDE THE REGION AND EU DELIVERIES)
milliont
100 110 120 130 140 150 160 170 180 190
2008
2009
2010
2011
2012
2013
2014
2015
2016*
2017*

During one year after the adoption of the new EU framework for climate and
energy, European still mills have been investing into the ecological projects
in order to reduce carbon footprint and remain competitive. Ahead of Paris
Climate Conference in December 2015 Metal Expert summarizes the first
steps of European steel companies on their difficult path towards sustainable
development.
ArcelorMittal, the world’s largest steel
producer, leads this race. The company
invests millions into the environment-
friendly equipment at its European
facilities. ArcelorMittal Ostrava
(3.2 million tpy), major steelmaker in
Czech Republic, commissioned 13
investment projects in 2015 only. The
total cost of the projects is CZK 3.1
billion (EUR 114 million). However 90%
of this sum will be subsidized by the
EU government because the projects
are configured in accordance with the
new environmental law of the European
Union, which takes effect in 2016, as the
company spokesperson told Metal Expert.
In July 2015, ArcelorMittal Poland announced
it would invest PLN 500 million (over EUR
130 million) in its Krakow mill modernization.
The company is going to invest more than
EUR 400 million totally into its facilities in
Krakow over the next few years.
Around EUR 40 million was spent on the
modernization of a 1.65 million tpy coke
oven and a 4.8 million tpy hot-rolling mill at
ArcelorMittal’s Fos-sur-Mer plant in France.
Long journey
of European steel
industry to new
eco standards
begins
RISKS

RISKS
In Romania, ArcelorMittal is going to start a
new investment project worth EUR 3 million
to cut the energy consumption at Galati
steel-making plant by 15% during the next
five years.
Troubled Italian steel mill Ilva, which sets
an example that non-compliance with
environmental standards is fraught with
fines and production shutdowns, keeps
implementing its environmental plan. The
company invested about EUR 638.3 million
in the government-required environmental
protection: EUR 204.9 million was invested
into the area remediation, EUR 93.7 million
in an 11 million tpy sinter plant upgrade and
EUR 143.9 million in a 3.5 million tpy coking
plant modernization. However, there is still
a threat of closure for Ilva due to lack of
working capital.
Despite the fact that the cost related to the
new climate policy of the EU may come for
voestalpine to around EUR 3 billion over the
next 15 years, the company management is
going to keep investing in Austria to support
their strong position in the domestic market.
Practically, this means that voestalpine will
not move its production sites outside the
EU at least in the short run. “Our investment
focus is to improve existing production
processes and a continuous expansion of
our product portfolio,” the Board member and
CEO of the Group Dr. Wolfgang Eder said.
In spite of the challenging market
environment in Europe, Tata Steel Europe
plans to invest EUR 25 million in the new
metallurgical technology HIsarna, developed
at Tata Steel IJmuiden, Netherlands. The
project will improve the efficiency of raw
material use in the steelmaking process
and reduce CO2
emissions by 20%. If tests
of the new technology are successful, the
company will build a new facility to apply
the technology in the industrial scale. “We
need the European Union’s continued, long-
term support for the HIsarna project. If next
year’s tests are successful, the following
stage would be developing, constructing
and testing an industrial-scale plant at a
cost of 300 million euro,” Karl Koehler,
Chief Executive of Tata Steel’s European
operations, said.
Development of eco-projects involves
very high costs, which is problematic
for many companies against the
background of steadily falling
steel prices globally and stiffening
competition. According to calculations of
Eurofer and Ecofys, direct and indirect
costs for the European steel companies
related to the CO2
emission will come
to EUR 34 billion in the period from
2020 to 2030. “The average EBITDA of
the EU steel industry over the last five
years was EUR 35/t of steel produced.
A cost of up to nearly EUR 30/t of crude
steel in 2030 would wipe out most of the
industry’s profit margins,” Axel Eggert,
Director General of Eurofer, said.
As Metal Expert reported earlier, the
main goals of the climate programme,
set back in end-October 2014, were
reduction of CO2
emissions by 43%
by 2030 compared to 2005 and the
increase of the share of renewable
energy sources to no less than 27% by
the same time. Besides, the European
Commission will introduce Market
„„ THE MAIN GOALS OF THE CLIMATE
PROGRAMME IS TO REDUCE CO2
EMISSIONS BY43%BY2030

RISKS
Stability Reserve in 2019. The reform is
intended to reduce the surplus of carbon
credits available for trading in order to
support the price of the emission rights.
Currently, steelmakers receive free
permits for emissions, but in 2019 they
will have to buy them, and the price can
exceed EUR 20/t.
Despite numerous attempts of the industry
leaders to convince the EU institutes that the
adopted strict measures hamper the EU steel
industry development, the EC commission
is not willing to step back. The only positive
moment for the EU steel companies is
the introduction of EUR 315 billion EU
Investment Plan to finance new projects.

RISKS
Most important
steel sectors still
lack protection
from EC
Despite a threat of oversupply hanging over the European steel sector in 2015
amid high imports, the Regulatory Authorities are still too slow to implement
necessary measures to defend the market. Despite being more active in
2014‑2015, the European Commission (EC) keeps ignoring the steel segments
that are most hurt by imports, paying attention mostly to the narrower
segments. The absence of trade defence instruments remains one of the main
obstacles for the recovery of the EU steel sector.
The GDP growth of EU‑28 is anticipated
at 1.9% in 2016. As a result, the apparent
steel consumption in Europe is expected
to grow by 2% in 2016 after a 1.5% rise in
2015, according to Eurofer. Meanwhile, the
EU steel mills will hardly benefit from this
growth due to imports invasion, especially in
the flat steel sector, where the consumption
growth in 2015 was being “eaten” by
imports. “Steel demand in the EU is growing
year after year but this allocation of extra
volume is mainly going to import. European
steel producers are not picking a big part of
this growth,” Robrecht Himpe, President of
Eurofer, said in an interview to Metal Expert.
Plate and HRC segments are the most
affected by growing imports. The total
volume of plates delivered to the EU from
non-European suppliers grew by 32% to
2.156 million t in January-October of 2015,
of which 55% was the share of Chinese
products (1.189 million t or 119,000 t per
month on average), according to the
Business Dynamics Statistics (BDS)
statistics. The share of Ukrainian suppliers
„„ STEEL DEMAND IN THE EU
IS GROWING,BUT LOCAL
PRODUCERS ARE NOT PICKING
A BIG PART OF THIS GROWTH

RISKS
reached 23.5% (507,000 t), of Russian 9.4%
(203,000 t).
Total HRC imports from non-EU countries
in January-October of 2015 inched up by
9% to 5.5 million t. Chinese coils imports
to Europe have been increasingly stronger,
with HRC deliveries topping 600,000 t
in 2014 (twice as much as in 2013) and
900,000 t during the first ten months of
2015, according to Metal Expert data.
An absence of any barriers for HRC
and plate imports, combined with
permanently falling prices for raw
materials and semi-finished products
in the international market, resulted in
significant price drops for both HRC and
plate over the year. Prices for plates
in Italy, Germany, Czech Republic and
Poland have fallen by EUR 120‑140/t
depending on region, according to Metal
Expert data. Prices for domestic HRC
in the EU have lost EUR 100‑110/t over
January-December 2015. “Demand
was better this year. The main problem
was oversupply caused by uncontrolled
growth of imports. Local mills in such
conditions will have no choice but to cut
capacities in the near future,” a major
German HRC producer commented. “Too
high stocks and low prices of imported
steel bring to the knees participants of
the market chain. AD investigation might
become a saving boat, but so far [there
are] no actions,” a German trader added.
At the same time, there were only some
defence activities last year, which might
help the EU steel industry cope with
unfair competition. The most important
step was the AD investigation against
of CRC imports from China and Russia
started on May 14. “We have not ordered
Chinese and Russian CRC starting from
January delivery because of antidumping
investigation,” a German service centre
said. “Imports of CRC are coming now from
Brazil and South Korea mainly as buyers
have stopped booking Chinese and Russian
CRC being sure that antidumping will be in
force in early 2016,” an international trading
company confirmed. The decision regarding
the amount of the duty is expected to be
released on February 14, 2016.
Moreover, starting from December 19, all
CRC shipments from China and Russia
were made subject to registration till the
second half of 2016. Registration allows
the EU to impose duties on the previous
transactions.
In mid-October, 2015, the EC prolonged the
antidumping duty of 7.9‑24% against wire
rod originating from China imposed in 2009.
On January 29, 2016, European
Commission imposed a 9.2‑13% provisional
antidumping duty on high fatigue
performance (HFP) rebar originating in
China. But this decision was highly criticized
among EU steel associations (UK Steel,
Eurofer) as the provisional dumping margins
have been previously set in the range of
51.5‑66%.
All other EC measures are related to
specific narrow segments, such as grain-
oriented electrical steel, stainless steel
cold-rolled flat products, tubes and pipes of
ductile cast iron, steel ropes and cables etc.
„„ THE MAIN PROBLEM IS OVERSUPPLY
CAUSED BY UNCONTROLLED GROWTH
OF IMPORTS

RISKS
Unlike in the USA, where the authorities
immediately close any market if there is
at least a little threat of dumping, the EC
continues to defend only small segments,
while strategically important ones remain
being hurt by growing imports as the trade
cases take too long in the EU. “Europe
needs to rapidly modernize its trade
defence instruments. Presently, it can take a
year and a half from complaint to definitive
antidumping measure. This is too slow,”
Robrecht Himpe said.
In 2016 more measures are expected
to be implemented, including, first of all,
an antidumping duty against plates and
HRC originating in China. According to
ArcelorMittal, the complaints were already
filed on December 23 and the investigations
start was awaited in mid-February.
„„ ANTIDUMPING CASES IN EUROPE
Country Product Date Amount of AD duty, %
China, Russia CRC (cold rolled coils)
Investigation started
on May 14, 2015
decision is expected on
February 14
China
HFP rebar
(High Fatigue Performance)
AD duty imposed
on January 29, 2016
9.2‑13
China, Russia, USA,
Japan, Korea
GOES
(grain-oriented electrical steel)
AD duty imposed
on May 12, 2015
21.6‑35.9
China
WR
(wire rod)
AD duty imposed
in 2009, prolonged
on October 15, 2015
7.9‑24
China, Russia,
Belarus
Welded tubes and pipes of iron
or non-alloy steel
AD duty imposed
on January 25, 2015
10.1‑90.6
India Tubes and pipes of ductile cast iron
AD duty imposed
on September 18, 2015
15.3‑31.2
hina, Taiwan
Stainless steel cold-rolled
flat products
AD duty imposed
on March 24, 2015
10.9‑25.2
China, South Korea Steel ropes and cables
Investigation started
on November 24, 2015
pending investigation
China HRC (hot rolled coils)
Complaint filed
on December 23, 2015
investigation’s start
expected
in mid-February, 2016
China Plate
Complaint filed
on December 23, 2015
investigation’s start
expected
in mid-February, 2016

2
nd
Steel Plate
Conference Europe
On The Agenda:
Chances for restoring
capacity utilization
Lack of efficient tools
to restrict strong
import flows
Necessity of
modernization to fit
upcoming ecological
standards in EU
For more information, attendees updates and to book your place
visit www.europesteelplate.com
FRIDAY, 11 MARCH 2016
Derag Livinghotel De Medici, Düsseldorf, Germany
In partnership with
Aleksandra
Kozlowska
European Commission
Evgeniy Sarkits
NLMK DanSteel A/S
Tadaaki
Yamaguchi
JFE Steel America
Dr. Martin
Theuringer
German Steel Federation
Wirtschaftsvereinigung
Stahl
Dmitrij Scuka
Vitkovice Steel
David Phillips
Off-Highway Research
Limited, UK
Georges Kirps
Eurometal
Prof. Dr. Andreas
Kern
Thyssenkrupp Steel
Europe AG
Peter Schmitz
SMS Group GmbH

RISKS
Programme
FRIDAY, 11 MARCH 2016
8:30-9:30 Registration
9:30 – 11:30 Session 1: Growth of Competition in European Market
· Aleksandra Kozlowska, Policy Officer, European Commission, Belgium -
The European Steel Action Plan: Implications for Steel Plate Market
· Dr. Martin Theuringer, Director economics, German Steel Federation
Wirtschaftsvereinigung Stahl, Germany - The steel industry in Germany in a difficult
international environment - a trade policy perspective
· Dmitrij Scuka, CEO, Vitkovice Steel, Czech Republic - Steel Plate Trade and
Distribution on the Buyer’s Market
11:30 – 12:00 Coffee-break
12:00 – 14:00 Session 2: Changes in Consumption Structure
· Andrei Syedykh, Senior Economist, Metal Expert, Ukraine - Key drivers for EU’s steel
plate consuming industries in 2016
· David Phillips, Managing Director, Off-Highway Research Limited, UK - Changing
Structure of the Global Construction Equipment Industry
· Georges Kirps, Director General, Eurometal, Luxembourg - The systemic role of steel
distribution and SSC in supply of EU steel and plates markets
· Evgeniy Sarkits, Sales Director, NLMK DanSteel A/S, Denmark - European steel
plate market outlook. Meeting consumers needs.
14:00 – 15:00 Lunch
15:00 – 17:00 Session 3: Business Opportunities
· Tadaaki Yamaguchi, President, JFE Steel America, Inc., USA - Global plate market
review and business opportunities
· Prof. Dr. Andreas Kern, Head of the Department for Quality and R&D within the Heavy
Plate Unit, Thyssenkrupp Steel Europe AG, Germany - Production of heavy plates
made from special structural steels for highest requirements
· Mike Brammer, Director Plate & Aluminium Mills, Primetals Technologies Limited,
UK - Future-Proofing the Plate Mill – a Mill Builder’s View of Adapting to Changing
Customer Needs
· Peter Schmitz, Project Director Technical Sales Hot Rolling Mills / Plate Mills,
SMS Group GmbH, Germany - Added value products for heavy plate mills –
a technological perspective
17:00 – 17:30 Networking Buffet
Register today at www.europesteelplate.com
Email: events@metalexpert-group.com
Tel.: +38 056 375-79-12

This publication is for information purposes only. The information contained in this document has been compiled from sources believed to be
reliable. Metal Expert cannot be made liable for any loss no matter how it may arise.
© Metal Expert 2004-2016. All rights reserved. No part of this publication (text, data or graphic) may be reproduced, stored in corporate data
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Metal Expert
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