Voestalpine sees auto sector issues limiting flat steel sales well into 2022

Voestalpine expects supply chain problems in the auto manufacturing sector will continue to limit its flat steel shipments well in to next year, it said Nov. 10, but on the positive side anticipates some benefit from the removal of section 232 tariffs on EU steel exports to the US, which were landing it with a Eur40 million/year duty bill.

On a press call for the Austrian steelmaker's half-year results (April-September 2021), CEO Herbert Eibensteiner said Nov. 10 that the European economy was notably lagging other regions due to the semiconductor shortage in the automotive industry, which is limiting production at automakers and is expected to last at least until the end of H1 2022.

Voestalpine said it had seen short-term changes in volume demand or cancellations by auto industry customers resulting in reduced working hours at Voestalpine sites in Germany.

Market participants have told S&P Global Platts that several Western European steelmakers were currently searching for warehousing space to store excess coil volumes initially allocated for the auto industry.

Voestalpine said that its volumes shipped to the auto industry had decreased but that this was somewhat offset by better margins on the back of higher steel prices and other customer groups improving.

"The contract prices for flat steel products rose dramatically in the past few quarters due to the massive increase in the cost of raw materials and the excellent momentum in the steel industry," said Voestalpine, adding that spot prices were now stabilizing at a "high level" following some weakening.

The daily Platts assessment for hot-rolled coil EXW Ruhr dropped Eur190/mt since its record high June 25 to Eur1,000/mt EXW Ruhr Nov. 9.

The company also said the current shortage of zinc has not had impact on its coating lines as it has sufficient supply to last into next year.

Hefty duty bill

Voestalpine said it expects the US market to remain strong across most customer segments and it sees the switch from section 232 duties on EU steel exports to a tariff-rate quota system as a positive.

Eibensteiner said Voestalpine had continued exports to the US despite a "high administrative burden" to get exemptions for its shipments and an annual duty bill on pipe exports to the US oil and gas sector of Eur40 million.

The volume of quotas assigned to EU countries has not been made public yet, with the new system expected to start on Jan. 1, 2022. The US administration under former President Donald Trump introduced tariffs on steel and aluminum exports to the US in 2018.

EBITDA from the steel division decreased by 1.8% from the Q1 (April-June) to Eur258.2 million in Q2 (July-September), with the EBITDA margin sliding from 19.9% to 18.5%. For H1 (April-September), EBIDTA improved to Eur521.2 million, with a margin of 19.2%, from Eur161.6 million with a margin of 8.8% in H1 last year.

In terms of green steel developments, Voestalpine noted that it has received Responsible Steel certification for sustainable steel production. Responsible Steel is a not-for-profit organization formed to establish global, multi-stakeholder standards and certifications.

The hydrogen pilot plant at Voestalpine's Linz site, which started tests in 2019, is set to be expanded though details have yet to emerge. There are still challenges in refining the green hydrogen and transport.

Voestalpine will convert two blast furnaces at its Linz site and one at its Donawitz site to electric arc furnace-based steel production by 2030 as it seeks to reduce carbon emissions by 30%. The company aims to achieve climate-neutral steel­making by 2050 using renewable electricity and green hydrogen.