Salzgitter expects higher FY earnings despite ‘strained market conditions’

Salzgitter expects its earnings to rise in 2018 despite “strained market conditions,” the German steelmaker said in its first-quarter results published on Tuesday May 14.

The company expects volatility in raw materials prices as well as “massive distortions of competition in countries outside the EU, and sustained import pressure and foreign policy developments,” it said.

Salzgitter raised its full-year earnings forecast at the end of April – it now expects sales to rise to more than €9 billion ($10.7 billion), a pre-tax profit of between €250 million and €300 million.

The steel market will remain volatile this year due to high volumes imports from countries such as Turkey, India and South Korea, it said.

Meanwhile, the volume of cheap Chinese imports will decline in the European strip steel market following the EU’s adoption of anti-dumping measures, such as the 18.1-35.9% duties applied on hot-rolled coil (HRC) imported from China.

The EU heavy plate market is dominated by high volumes of imports from non-EU countries, while increases in other material costs, such as for graphite electrodes and alloying agents, are a constricting factor on region’s steel sector, the company added.

Suppliers with aggressive pricing policies, such as Ukraine, are preventing a stronger recovery in these product segments, it also said.

Changes in the costs of raw materials, precious metal prices and exchange rates, along with global trade policy measures, could have a considerable influence on its financial results this year, Salzgitter predicted.

It hopes the EU will receive full exemption, with no application of a quota system, from the Section 232 import tariffs threatened by the United States, which pose a significant risk for the company, it said.

It claims to have been only moderately affected by US trade defense measures through anti-dumping action against imports of heavy plate and wide steel strip. It brought an appeal before the US International Court of Trade against what it says is an “unjustified” anti-dumping duty of 22.9% that was imposed in May 2017.

During the first quarter of 2018, Salzgitter’s crude steel production rose by 34,200 tonnes to 1,773,800 tonnes from 1,739,600 tonnes in the first quarter of 2017.

Salzgitter’s earnings before interest, taxes, depreciation and amortization (Ebitda) increased by €8.2 million to €193 million during the first quarter of 2018, from €184.8 million during the first quarter of 2017. Still, Salzgitter’s sales dropped by €46.4 million to €2.31 billion from €2.35 billion.

Salzgitter attributed higher selling prices of its strip steel products to the positive first quarter reported by its strip steel unit, which boosted orders and shipments from a year earlier due to improved demand for steel in Germany and elsewhere in the EU.

Metal Bulletin’s price assessment for domestic hot-rolled coil (HRC) in Northern Europe averaged €564 per tonne ex-works in the first quarter of 2018 compared with an average of €563 per tonne in January-March 2017.