Bloomberg News

Aperam CEO Forecasts Pause in Stainless Steel Consolidation

February 27, 2012

Aperam (APAM), the stainless-steel producer spun off by ArcelorMittal, doesn’t see any further consolidation in the stainless-steel industry before the planned merger of Outokumpu Oyj (OUT1V) and a unit of ThyssenKrupp AG (TKA) is final.

“The scene is changing, everybody wants to see what will happen in the coming months,” Chief Executive Officer Philippe Darmayan said at a press meeting in Amsterdam.

Outokumpu’s planned 2.7 billion-euro ($3.6 billion) takeover of ThyssenKrupp’s Inoxum stainless steel unit is good news for the industry, as it will reduce excess capacity that has raised costs and suppressed prices, Darmayan said.

The company created by the Outokumpu deal plans to cut about 1.4 million metric tons of steelmaking capacity in Europe by shutting plants. Western European stainless steel capacity exceeds requirements by more than 1 million tons, according to steel consultants MEPS International Ltd.

Aperam looked at the ThyssenKrupp unit in the past year and “didn’t find any way to make a deal that would be attractive to shareholders,” Darmayan said.

The company's stock declined 2 percent in Amsterdam trading today, reducing the market value to 1.19 billion euros. Since ArcelorMittal (MT), the world’s biggest steelmaker, spun off the Luxembourg-based business in January 2011, Aperam’s share price has dropped by about 50 percent in the face of weak demand.

Earnings Target

Darmayan, who took the helm in December, is reducing costs and lowering inventories to revive earnings after the company posted a net loss of $60 million in 2011. He has a target for the company to be profitable this year as volumes rise at a similar rate to 2011. Because Aperam is operating in a “very volatile environment” and it’s early in the year, Darmayan said the company can't guarantee that the target will be achieved.

The trend in the stainless-steel industry is improving as the company is “fully booked” in March and April, and mills are running almost at full capacity, Darmayan said. “The company is getting some good signs at the market at the moment,” Darmayan said.

“Real demand is good in Northern Europe,” Darmayan said, adding that a pick-up in the company’s markets is partly the result of a restocking effect.

Aperam, which is providing stainless steel for the top of the Orbit tower in London’s 2012 Olympic Park, predicts demand for stainless steel will rise less than 2 percent a year in Europe in the coming years, compared with growth of 7 percent a year in South America.

To contact the reporter on this story: Maaike Noordhuis in Amsterdam at mnoordhuis@bloomberg.net

To contact the editor responsible for this story: Benedikt Kammel at bkammel@bloomberg.net


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