Russian steel company NLMK reckons the continuing turnaround of its European Strip Products division will support the group’s European and American businesses to return to break-even by 2017. Three-four years ago the strip business (with 1.7 million metric tons/year capacity) was the weakest in NLMK’s European assets. Comprising small mills, it was not as efficient as bigger competitors in the segment and did not share the niche product capabilities of NLMK’s EU plate mills.
But following an aggressive efficiency program, EU Strip has developed what it sees as a flexible, lean model and is on the way to become operating cash positive. Between 2011 and 2015, it reduced its fixed costs by a fifth to €79 million and aims to curtail them further to €70 million this year. 2015 and 2016 have marked a turning point for the division. Last year, it grew its output by almost a quarter on-year to 1.3 million mt, with over 90% of this sold in the EU.
This year, EU Strip will finish its restructuring with the mothballing of its electro-galvanized plant in Beautor, France and will now comprising hot rolling, pickling and cold rolling at La Louvière in Belgium and hot-dip galvanizing and pre-painting in Strasbourg, France. Company officials say it is in a better position to grow its domestic market share to 5% in a few years as demand from its key markets (including automotive and white-goods) continues to recover while competition from imports abates.
NLMK acquired these assets in 2011 in a move to hedge slabs sales from its expanded operations in Lipetsk, Russia. “Before joining NLMK the strip plants’ situation was quite bad from the viewpoint of cost, service reputation and also culture: we had a long history of labour tension,” Ben de Vos, head of NLMK Europe Strip division and of NLMK International, told Platts.
The group proceeded with a deep restructuring which it decided to realise with a local government affiliated partner. The Société Wallonne de Gestion et de Participations (SOGEPA) – an investment company of the Belgian Walloon Region – became a shareholder, believing that despite the tough measures, the restructured plants combined with the stable supply of Russian semis could carve out a place in the European market as a flexible smaller supplier.
The deal was sealed in October 2013, and in March 2015 SOGEPA increased its stake in NLMK Belgium Holdings (NBH) to 49%. As a result, the measures undertaken have led to 915 people being made redundant without halting operations for more than a day, de Bos added.
In the past five years, NLMK Europe Strip’s labour productivity increased by 70% from roughly 800 tons per employee in 2011 to 1,370 tons in 2015. This year it aims to drive its productivity further to 1,700 tons, according to de Vos.
Asked about Europe in general, de Vos opined that it would be good if it becomes a small (5%) net steel importer and that, apart from a couple of further adjustments, the region has done enough to bring its supply into balance with demand.
That said, along with the rest of the world, Europe is going to struggle with abnormally high market volatility for another couple of years or so. “The Chinese steel industry crisis may take a decade to resolve, but European mills have a strong moral argument to no longer be punished for newly constructed
overcapacity elsewhere. In the current environment the world may see more anti-dumping and countervailing duties from the EU,” he said.
- Ekaterina Bouckley
Source : SBB