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Kallanish Kallanish

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May, 29th 2020

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MAR 31
11:16

Cognor increases billet deliveries, eyes investments despite Covid-19

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Cognor says it does not foresee any long-term impact from Covid-19 on its operations as it sells to a wide range of end-use markets. It is, nevertheless, strengthening its cash position in preparation for a possible deterioration in market circumstances. Its main focus in 2020 is maintaining sales and carrying out investment projects.

Polish apparent finished steel consumption fell -7.9% on-year in 2019 to 14.3 million tonnes. Although demand performed well in some parts of the world, Cognor did not feel a positive impact as its profitability deteriorated due to higher electricity and emission allowance costs.

The “…only silver lining,” says Cognor, was the reduction of scrap costs to be more in line with iron ore prices. “EAF mills, including Cognor, had a chance to compete effectively with BOF mills, especially in the semi-finished product (billet) market,” the firm observes in a report seen by Kallanish.

Construction sites in Poland continue to operate and are likely to do so throughout the Covid-19 crisis, but in the automotive sector most, if not all, plants have ceased production.

“From the start of 2020 we are seeing an accelerating decline in demand, although those mills still operating in the EU and Poland… could temporarily register an improvement in the market situation of certain products because the vast majority of imports into the EU and our country have been blocked by freight transport difficulties and the stopping of production by certain mills,” Cognor explains.

Various EU countries have announced economic stimulus packages that will help steelmakers survive the crisis. “Nevertheless, it should be expected that the operating conditions for steel producers in the EU and Poland will be very demanding in the near future,” the firm says.

Cognor’s finished product sales fell -4.5% on-year in 2019 to 475,905 tonnes, but billet sales rose 11% to 184,919t. Merchant scrap sales fell -17.9% to 141,847t. Revenue declined -9% to PLN 1.9 billion ($458.3 million) and net profit slumped -73% to PLN 19.8m.

Cognor’s Ferrostal Labedy steelworks produced 440,672t of crude steel in 2019, utilising 117.5% of its 375,000 t/year design capacity, while Huta Stali Jakosciowych produced 251,539t, utilising 96.4% of its 261,000 t/y capacity.

At Ferrostal’s meltshop in Gliwice the firm plans to modernise the EAF, replace a transformer and install a new reactive power compensation system all in the fourth quarter of 2020. At Ferrostal’s Krakow rolling mill site the firm will revamp the rolling mill and reheating furnace between Q3 2020 and Q1 2021. This will increase Ferrostal’s crude steel production capacity to 550,000 t/y and broaden its finished product portfolio, as well as reduce production cost.