EUR 200.00 For Business Accounts Only

ACERINOX: MEETING WITH THE COMPANY (ANÁLISIS BANCO SABADELL)

Highlights from the meeting held today with the company:
 US market (~45% sales): The situation remains very positive, with a base price hike announced for the market starting on 1 January’21 (US$ 65-80/Mt; +4-5%). Demand remains strong, stockpiles are low and imports are under control. Moreover, Allegheny’s move away from the conventional stainless steel market could offset a potential change to Section 232. In any event, Asian producers are expected to remain subject to harsh restrictions.
 European market (~30% sales): Demand improved throughout 4Q’20, with utilisation levels rising to >75% (vs. ~60% seen to that point in 2020). This, along with stockpiles at average levels, means we expect the market situation to improve, which could lead to improved prices. However, the feeling is that unless more aggressive protectionist measures are put in place in Europe (which could come in April with the antidumping measure on cold-rolled steel in Indonesia and India), we should not expect a return to base prices above € 900/Mt (previous record low and vs. the current €~600/Mt) in the short term.
 Columbus/Bahru (~15% of sales): As for the South African plant, the company is betting on cost and product optimisation to improve its efficiency. It remains a strategic asset for the Group. The situation of Bahru is different, as the possibility of a sale remains, although the company believes that this is not the only option on the strategic level (we understand that the company mulls the possibility of creating a JV). In any case, it does not seem that a decision will be taken in the short-term.
 VDM (~10% of sales): The company sees some recovery in certain key sectors such as Oil & Gas, although it does not expect this to be reflected in its results until the 2H’21 due to the type of product and the duration of the portfolio.
In general, the operating message is apparently favourable and the positive newsflow could continue over the coming months, as low inventories largely underpin this situation. The most evident risk apparently stems from the current situation in the US and from whether the current protectionist measures will remain unchanged. In this regard, and assuming some modifications, the formula and, especially, the reach for Asian manufacturers will be key. However, we stress this is one of the key factors to foresee higher EBITDA generation over the coming years (price improvement in Europe), and we see reasons to be optimistic (with room to upgrade our estimates), in addition to a possible improvement of VDM’s situation (with around € 30 M of EBITDA contribution’20e vs. ~ € 80 M normalised).