German steel stockholder Kloeckner sees strong market to persist

German steel stockholder Kloeckner is expecting the current steel shortage and high steel prices across the sector to linger and will continue focusing on a "margins over volume" approach, Kloeckner said Aug. 10.

At the Q2 2021 financial results press call, CEO Guido Kerkhoff said that because of the approach of focusing on achieving higher margins and be strict with inventory control, the company was able to have a better supply and delivery situation than its peers. "We did not sell the complete stock just because the price environment was good," Kerkhoff said.

Kerkhoff also said that there is a trend of more customers moving away from spot purchasing to long-term contracts during the current environment.

Shipments of steel were up 21% year on year at 1.3 million mt in Q2. Sales increased 57.8% year on year to Eur1.8 million.

Kloeckner experienced some windfalls as well by purchasing material when prices were lower and selling when prices went up, which accumulated to a windfall effect in Europe and the US particularly of Eur190 million. It was countered by higher operational and shipping costs as well as some negative forex effects. There Eur12m directly price-linked expenses.

The daily Platts hot-rolled coil assessment stood at Eur1,150/mt EXW Ruhr Aug. 10, having experienced some decrease over the last weeks due to low spot volume trading, but was nevertheless up Eur465/mt since the beginning of the year.

The company is seeing investments in the US infrastructure as big growth opportunity and has strengthened its partnership with the US producer Nucor.

The mechanical engineering industry, is expected to grow heavily in both the US and Europe, while the construction and auto industries also expected to grow in both regions. The energy industry is forecast to move sideways in Europe with some slight upward movement in the US. Shipbuilding is projected to go down on the back of fewer cruise liner demand in Europe while in the US, military demand will boost growth in the shipping industry.

For Q3, Kloeckner expects a significant increase in sales due to pricing dynamics and a slight decrease in shipments due to seasonality as the summer months are usually quieter.

For the full year sales are expected to go up "significantly" with shipments slightly above prior-year level.