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UPDATE 2-Kloeckner: Cut steel output to meet lower H2 demand
July 2, 2010 / 10:53 AM / in 7 years

UPDATE 2-Kloeckner: Cut steel output to meet lower H2 demand

* CEO sees steel demand in Europe declining in H2 from H1

* CEO sees European steel prices lower in Q3 versus Q2 * CEO urges European steelmakers to cut output

* Share prices up 0.7 percent

(Adds background, CEO quotes, NLMK)

By Marilyn Gerlach and Tom Kaeckenhoff

FRANKFURT, July 2 (Reuters) - European steelmakers should cut output to stabilise prices during a likely slowdown in demand in the second half, Europe’s biggest independent steel trader, Kloeckner & Co (KCOGn.DE), said.

“If the producers take out capacity from the market, then the prices could go up from the end of the third quarter,” Gisbert Ruehl told Reuters Insider in an interview on Friday.

“In terms of demand in Europe in H2, all in all, it will be likely weaker compared with the first half,” he said.

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Ruehl said he expected hot rolled coil (HRC), a benchmark steel product used mainly in carmaking, could fall to around 550 euros ($673) per tonne in the third quarter.

HRC averaged around 530 euros in the second quarter and peaked at around 600 euros in late June.

Separately on Friday, Novolipetsk Steel (NLMK.MM), Russia’s fourth largest steelmaker, said third-quarter prices would likely fall due to the weak recovery in developed markets. [ID:nLDE66109J]

In June, the world’s top steelmaker ArcelorMittal ISPA.AS said was considering idling three blast furnaces in Europe to meet lower demand. [ID:nLDE65214X]

The demand slowdown was also marked in top steel producer China where prices have fallen more than 10 percent since a peak in mid-April. Some Chinese mills are scaling back output as the government tries to cool the economy. [ID:nTOE66003X]

Also, South Korea’s largest steelmaker POSCO (005490.KS) said on June 22 it was to raise benchmark steel product prices by 6 percent, less than expected. [ID:nTOE65L006]

Ruehl said that based on Europe’s January-May output, full-year production would be around 180 million tonnes. “But the expected demand this year is around 150 million only, so capacities need to be reduced,” he said.

M&A

Turning to acquisitions, Ruehl said he would not rule out another acquisition this year of a company with annual sales of around 50 million euros in Europe or the United States, and he was also eyeing Brazil and China.

Earlier this year, Kloeckner made two acquisitions, including steel service group Becker in a deal worth 207 million euros. [ID:nFAB015652]

Since listing four years ago, the company has acquired 20 firms, but the acquisition spree was put on hold in late 2008 as the downturn bit.

“We cannot rule out making an acquisition in the emerging market. On Brazil and China, we are working out an entry strategy there. In China, it will likely be a greenfield strategy while in Brazil, it can only be through an acquisition,” Ruehl said

He reiterated a forecast for an EBITDA margin of at least 3 percent this year and more than 6 percent next year.

Kloeckner shares were up 0.7 percent at 1229 GMT, in line with the midcap index .MDAX. (Additional reporting by Josie Cox; Editing by Dan Lalor) ($1 = 0.8172 euro)

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