Market for steel service companies

BE Group and other steel distributors play an important role in the value chain. They bridge the gap between steel producers’ delivery capacity and steel consumers’ needs. The individual steel producers provide a limited selection of products, often in bulk and with relatively long lead times. However, many steel consumers seek a single coordinated supply of several different products in smaller quantities with short delivery times. Purchasing is then normally conducted via a steel service company, where BE Group is one of the leading producer-independent suppliers.

The road to market – from producer to customer

The chain from production of the steel to its final use by the purchaser of the steel can mainly take place in two ways, either the tonnage is supplied directly from the steel mills to the customers or delivered through distributors and steel service centers, i.e. BE Group’s market.

The steel mills most often sell directly to customers that consume large volumes of steel in, for example, the shipbuilding and automotive sectors. Direct deliveries are more common in the flat products segment, where volumes are often large and the need for further processing before delivery is lower.

Purchases through distributors and steel service centers meet an important need among customers by being able to offer single coordinated supply of several different products in smaller quantities with short delivery times. The materials are more often delivered in a further refined condition.

Competitors

BE Group is one of the market´s leading actors in both Sweden and Finland. A significant competitor in these markets is Tibnor. Other competitors are for example Stena Stål in Sweden and Kontino and Flinkenberg in Finland.

Amounts in SEK M  
Company Sales Change 2017/2018 Operating profit Operating margin
Belopp i MSEK
Bolag Omsättning Förändring 2017/2018 Rörelseresultat Rörelsemarginal
BE Group BE Group 4,803 +10% 132 2.8%
Tibnor Tibnorkoncernen 8,434 +8% 230 2.7%
Stena Stål 1) Stena Stål 1) 2,360 +8% 86 3.6%
1) Information refers to the financial year September 2017 to August 2018.

Steel market

In its “Economic and Steel Market Outlook – Quarter 1, 2019” from January 31, 2019, Eurofer makes the assessment that steel consumption in the EU has entered the late stage of the current business cycle. This implies that while economic fundamentals will remain mildly positive, production growth is expected to slow down in 2019 and 2020.

Demand for finished steel products is expected to increase by 0.5% to 164 million tons in 2019. Domestic demand will be driven by on-going, but weaker, investments and private consumption. The slowing growth is primarily attributable to the mechanical engineering industry and metal goods. The largest risk comes from the global economy, which has become increasingly more uncertain due to rising protectionism that can potentially lead to further escalation of the strained relationships between the U.S. and its trading partners.

 

Growth forecast per end user in steel for EU 2014 2015 2016 2017 E 2018 F 2019 F 2020
Tillväxtprognos per slutanvändare inom stål för EU 2014 2015 2016 2017 E 2018 F 2019 F 2020
Construction Byggindustri +1.7% +1.6% +0.4% +4.3% +4.6% +2.1% +1.2%
Mechanical engineering Verkstadsindustri +1.5% +0.1% +0.7% +4.9% +4.5% +1.6% +1.5%
Automotive Fordonsindustri +4.9% +7.5% +5.2% +3.7% +1.3% +1.0% +2.4%
Domestic appliances Vitvaruindustri -0.3% +4.3% +1.5% +3.7% -0.8% +1.5% +2.1%
Metal goods Övriga metallvaror +2.5% +2.2% +2.4% +5.0% +3.9% +1.2% +1.8%
Source: Eurofer “Economic and Steel Market Outlook – Quarter 1 2019”