EU takes aim at Turkish steel sector

Further EU caps on steel could force some Turkish mills to close. (Shutterstock)
Updated 18 January 2019

EU takes aim at Turkish steel sector

  • The Commission said it will extend and beef up its existing ‘safeguard’ steel import caps until July 2021
  • For Turkey’s vast steel sector, the fourth largest contributor to the country’s economy, the caps could prove particularly painful

LONDON: The European Commission’s move to extend its steel import restrictions threatens to force Turkish mills, already buckling under the weight of US tariffs, to cut production further or in some cases close down, sources said.
The Commission said on Wednesday it will extend and beef up its existing “safeguard” steel import caps until July 2021 to counter concerns that European Union markets are being flooded with steel no longer being exported to the US.
For Turkey’s vast steel sector, the fourth largest contributor to the country’s economy, the caps could prove particularly painful as the EU has given it additional “country-specific” quotas.
Under the safeguards, Turkey has a tariff-free quota for rebar, a construction steel that makes up most of its steel exports, of around 300,000 tons for the first nine months of the respective quota periods, down 60 percent from its 2018 exports.
Country-specific restrictions do not apply in the last three months of the quota periods and Turkey could make up some sales then, but its annual export levels will still be sharply lower.
“Our export markets have disappeared, the local market hardly exists, we’ve got lots of capacity and no market,” said a London-based Turkish steel trader.
He added that hopes the US would soon cut its 50 percent tariff on Turkish steel imports were also fading given it is demanding that in return, Ankara hold fire on Kurdish forces in Syria, something Turkish President Tayyip Erdogan cannot do ahead of local elections.

 

 Major Turkish mills such as Cebitas and Ekinciler said they had, before the EU announcement, already slashed output while Koc Metalurji said it had stopped output for about a month.
Erdemir, Turkey’s largest producer, said it was producing as normal.
Investment bank Jefferies estimates EU caps on rebar from all countries combined should reduce its total rebar imports by at least 28 percent a year, adding that producers such as ArcelorMittal and CMC should benefit most from EU caps on long products like rebar.
“(EU) quotas for (Turkish) rebar are extremely low and will be exceeded in the first one or two months. Local demand is also extremely poor,” said Turkish Steel Exporters’ Association (CIB) head Adnan Aslan.
The CIB estimated late last year, before the latest EU move, that Turkey’s steel production, consumption and exports would fall 30 percent this year.
Wednesday’s beefed-up EU safeguards come after the US placed tariffs of 25 percent on
imported steel early last year, while singling out Turkey later in the year with tariffs of 50 percent due to political tensions with
Ankara.
The US had been Turkey’s largest steel export destination in 2017, but the country’s steel flows to the EU ballooned 80 percent last year, according to Jefferies, making the EU Turkey’s the largest steel export destination.
“Traditional export destinations (for Turkish mills) are closing one after the other. Most probably, the (EU) quotas will be filled immediately, so EU producers will have a relatively good year,” the International Rebar Producers and Exports Association said in a note.

FASTFACTS

The US had been Turkey’s largest steel export destination in 2017, but the country’s steel flows to the EU ballooned 80 percent last year.


HP rejects Xerox takeover bid, says open to acquiring Xerox instead

Updated 18 November 2019

HP rejects Xerox takeover bid, says open to acquiring Xerox instead

  • In rejecting Xerox's $33.5 billion cash-and-stock acquisition offer, HP said the offer “significantly” undervalued the personal computer maker
  • Xerox made the offer for HP on Nov. 5 after resolving its dispute with its joint venture partner Fujifilm Holdings Corp.
NEW YORK: HP Inc. said on Sunday it was open to exploring a bid for US printer maker Xerox Corp. after rebuffing a $33.5 billion cash-and-stock acquisition offer from the latter as “significantly” undervaluing the personal computer maker.
Xerox made the offer for HP, a company more than three times its size, on Nov. 5, after it resolved a dispute with its joint venture partner Fujifilm Holdings Corp. that represented billions of dollars in potential liabilities.
Responding to Xerox’s offer on Sunday, HP said in a statement that it would saddle the combined company with “outsized debt” and was not in the best interest of its shareholders.
However, HP left the door open for a deal that would involve it becoming the acquirer of Xerox, stating that it recognized the potential benefits of consolidation.
“With substantive engagement from Xerox management and access to diligence information on Xerox, we believe that we can quickly evaluate the merits of a potential transaction,” HP said in its statement.
The move puts pressure on Xerox to open its books to HP. Xerox did not immediately respond on Sunday to a request for comment on whether it will engage with HP in negotiations as the potential acquisition target, rather than the acquirer.
HP on Sunday published Xerox CEO John Visentin’s Nov. 5 offer letter to HP, in which he stated that his company was “prepared to devote all necessary resources to finalize our due diligence on an accelerated basis.”
Activist investor Carl Icahn, who took over Xerox’s board last year together with fellow billionaire businessman Darwin Deason, said in an interview with the Wall Street Journal last week that he was not set on a particular structure for a deal with HP, as long as a combination is achieved. Icahn has also amassed a 4% stake in HP.
Xerox had offered HP shareholders $22 per share that included $17 in cash and 0.137 Xerox shares for each HP share, according to the Nov. 5 letter. The offer would have resulted in HP shareholders owning about 48% of the combined company. HP shares ended trading on Friday at $20.18.
Many analysts have said there is merit in the companies combining to better cope with a stagnating printing market, but some cited challenges to integration, given their different offerings and pricing models.
Xerox scrapped its $6.1 billion deal to merge with Fujifilm last year under pressure from Icahn and Deason.
Xerox announced earlier this month it would sell its 25% stake in the joint venture for $2.3 billion. Fujifilm also agreed to drop a lawsuit against Xerox, which it was pursuing following their failed merger.

Test for new HP CEO
In 2011 as the centerpiece of its unsuccessful pivot to software. Little over a year later, it wrote off $8.8 billion, $5 billion of which it put down to accounting improprieties, misrepresentation and disclosure failures.
More recently, HP has been struggling with its printer business segment recently, with the division’s third-quarter revenue dropping 5% on-year. It has announced a cost-saving program worth more than $1 billion that could result in its shedding about 16% of its workforce, or about 9,000 employees, over the next few years.
Xerox’s stock has rallied under Visentin, who took over last year as CEO. However, HP said on Sunday that a decline in Xerox’s revenue since June 2018 from $10.2 billion to $9.2 “raises significant questions” regarding the trajectory of Xerox’s business and future prospects.