July 24, 2018 / 7:07 PM / 24 days ago

UPDATE 1-French metals group Eramet warns favourable outlook could be dented by trade rows

PARIS, July 24 (Reuters) - A sharp rise in manganese ore and nickel prices helped Eramet post higher profits in the first half of the year but the French metal and mining group warned on Tuesday that current favourable markets could be hurt by global trade tensions.

In an interim results statement on Tuesday, Eramet reported a current operating profit of 294 million euros ($343 million), up 15 percent from the same period in 2017 and sales of 1.81 billion euros, up 1 percent year-on-year.

“The Group’s markets remain favourable overall at the start of the second half 2018, except some sectors in the alloys division,” Eramet said in a statement.

“In a context of tensions and uncertainty observed in international trade relations, which increase the volatility of raw materials’ prices, the visibility still remains limited.”

Nickel, used in stainless steel and a key ingredient in electric vehicle batteries, rose to an average $13,871 per tonne in the first half on the London Metal Exchange, up 42 percent compared to a year earlier, in a rally driven mainly by falling inventories.

However, it fell sharply since early June like other metals on concerns that a trade row between China and the United States would weaken demand for industrial metals.

“All quoted metals have plunged in the past month ... We are being particularly careful to adapt to any change that could hit our markets,” Chief Executive Christel Bories told reporters.

The United States imposed tariffs this month on $34 billion of Chinese imports. China promptly levied taxes on the same value of U.S. products. U.S. President Donald Trump also hit the EU, Canada and Mexico with tariffs of 25 percent on steel and 10 percent on aluminium at the start of June.

Sales and profits at Eramet’s alloys division fell sharply due notably to a lower production rate in the aerospace industry which accounts for more than two thirds of the turnover of its Aubert & Duval branch.

The group said it was reflecting on its medium-term strategic options for the branch.

“There are different dynamics (within Aubert & Duval) in terms of markets, profitability, strategic positions, market shares, etc. There had never been an inventory of all these elements. We made it and we are thinking about what would be the best portfolio,” Bories said.

Eramet said it had a 98 percent interest in Australian mineral sands producer Mineral Deposits by July 23 and that it had extended for a final period until Aug. 3 its deadline for its all-cash takeover offer, made at a price of A$1.75 per share.

The acquisition was aimed at consolidating the TiZir joint venture, in which each company has a 50 percent stake. TiZir operates a titanium dioxide and zircon business in Senegal and Norway that mainly supplies the paints industry. ($1 = 0.8561 euros) (Reporting by Sybille de La Hamaide; Additional reporting by Benjamin Mallet; Editing by Adrian Croft)

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