DB sees more cuts and bumpy Q4 for European metals makers as energy crisis bites

Boliden AB

08/09/2022 11:24

** Deutsche Bank sees more steel output cuts in Europe and a
bumpy Q4 as the producers are under threat from sky-high
electricity prices, power rationing and weaker demand 
    ** It believes that production cuts of 12-15% so far in
Europe could easily double and that the sector is likely to
suffer a combined supply and demand shock in the fourth quarter
    ** "This could take the EU steel market back to where we
were in early 2020 - empty supply chains and a large amount of
idled capacity - and this could ultimately lead to another sharp
rebound in prices once demand begins to recover," DB says
    ** According to DB, aluminium smelter curtailments could
increase further in Europe and the U.S. due to near-term
exposure to spot power prices and power rationing is also a
potential threat 
    ** "Even for smelters with competitive contracts, it is
currently much more profitable to sell surplus power than
produce aluminium", DB says
    ** DB says that while there are no "winners" in Europe, the
Nordic-based assets, such SSAB  SSABa.ST  and  Outokumpu
 OUT1V.HE , are best positioned, while the world's
second-largest steelmaker ArcelorMittal  MT.LU  and  Spain's
Acerinox  ACX.MC  should benefit from the highest exposure to
non-European assets
    ** It sees Norsk Hydro  NHY.OL  and Boliden  BOL.ST  well
positioned, as they are covered by long-term contracts, while
Glencore  GLEN.L  should be one of the leading shareholder
return companies in the market, driven by expect elevated coal
prices 
    
    

 (Reporting by Diana Mandiá)
 ((diana.mandiaalvarez@thomsonreuters.com))