Germany-based steelmakers Dillinger, Saarstahl fear earnings losses to continue in 2020. Both the companies slipped into losses in 2019 amid global overcapacity and dumping of low-cost steel into Europe. In 2020, Dillinger, Saarstahl expect steel demand to pick up in the second half.
In 2019, global overcapacity, high level of steel imports and US protectionist tariffs hurt Dillinger, Saarstahl ’s sales and revenues. The European steel industry faced tough competition from steel imports originating from low-cost steel producing countries like China despite the anti-dumping measures, which proved inadequate. Besides, high raw material prices and cost additions due to carbon emissions trading, pushed EU steel producers like Dillinger, Saarstahl’s to bear losses in 2019.
Both the companies face tough market condition and have cut production in the light of adverse economic impact of COVID-19. Dillinger, Saarstahl’s blast furnaces are currently operating at their lowest limits. In 2019, Dillinger produced 2,338mt crude steel, compared to 2334mt a year ago, while Saarstahl produced 2,281mt crude steel compared to 2,782mt in 2018.
Dillinger, Saarstahl expect challenges from overcapacity, imports and economic downturn to impact revenues in 2020. These factors would limit Dillinger, Saarstahl’s capacity utilisation and ability to raise prices. However, demand is expected to pick up in the second half of 2020. The two companies will continue with their efforts to become state-of-the-art steel producers in the EU region and focus on their “proactive, carbon-free, efficient” program, which aims to cut costs and increase profitability. In 2019, Dillinger, Saarstahl successful entered the rail market and the proposed EU provisions to mandate domestic procurement of steel for national infrastructure projects will benefit both the companies.
In 2019, Dillinger group’s net sales dropped by 5.2pc to €2.09bn, while Saarstahl group’s sales dipped by 12.7pc to €2.21bn from a year ago. Dillinger earnings before interest and taxes (EBIT) was negative €116,1mn compared to an EBIT of €38,5mn in 2018. Saarstahl’s EBIT was negative €127,6mn compared to an EBIT of €98,8mn in 2018.