Klöckner forecasts stable stronger demand, higher prices in US, EU in 2018

German metals distributor Klöckner expects its 2018 earnings to be supported by higher demand and steel prices in both Europe and the United States, the company’s two main markets, it said on July 24.

As an example, Metal Bulletin’s weekly price assessment for domestic hot-rolled coil (HRC) in Northern Europe has averaged at €559.17 ($653.57) per tonne ex-works in the second quarter 2018, already up from €530.19 per tonne ex-works in the same period of 2017.

SSAB expects a significant rise in sales for its European business in 2018. Gross profit, however, might decrease because last year’s results were especially high.

The European Commission set preliminary measures in its safeguard case on July 18, in the form of tariff rate quotas on 23 steel product categories, based on average import volumes over the past three years. Imports will only face a 25% tariff if the quota is exceeded, and imported flat steel products are included on the product list.

As a result of these measures, domestic prices for coil and plate are expected to grow in 2018, according to market sources.

While SSAB Americas will contribute significantly to both sales and profit in 2018 due to price rises and higher shipments across almost all key product groups.

American Metal Market’s price index for US domestic hot-rolled steel sheet averaged $884.09 per short ton fob mill in the second quarter of 2018, significantly up from the average price assessment of $614.23 per short ton fob mill in April-June 2017.

The US authorities imposed a 25% import tariff on steel products originating from Canada, Mexico and the EU from June 1, under its Section 232 powers, which has boosted domestic prices in the US.

Due to this positive market environment, particularly in the US, the company expects its earnings before interest, taxes, depreciation and amortization (Ebitda) to reach €65-75 million ($79-92 million) in the April-June quarter of this year.

In view of the ongoing positive market environment, Klöckner forecasts its earnings before interest, taxes, depreciation and amortization (Ebitda) to be €55-65 million in the third quarter of 2018, compared with an Ebitda of €19 million in the same quarter of 2017.

In the meantime, the company’s Ebitda in April-June 2018 was €82 million, compared with €63 million in the same three months of 2017.

The company’s sales increased 9.09% year on year to €1.79 billion in April-June of 2018, while second-quarter shipment volumes were up 2.25% year on year at 1.61 million tonnes.

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