CRC import prices expected to move upwards in SE Asia

Cold rolled coil import prices in Southeast Asia are expected to rise further after the lunar new year holidays. Offers from China for 1mm base annealed CRC were prevailing at $820/tonne fob which did not attract much buying. Traders speculate that these prices would be hiked to $850-860/t fob when China re-opens. 

“Many mills have suspended offers because of the holidays and they aim to hike their new offer prices,” a regional trader tells Steel Business Briefing. Mills are attributing rising prices to higher coal and iron ore prices, and the weakening of the US dollar against regional currencies. The price of hot band rose sharply last month. 

Offers for CRC from Taiwan were around $800/t fob and bookings to the Philippines were concluded at $820-830/t cfr one-to-two weeks ago, Taiwanese trading sources tell SBB. A small volume of Taiwanese material is claimed to have been sold at $820/t fob last week to SE Asia. 

“The mill then raised its offering price to $870/t fob which is not workable,” a local trader says. Given that regional mills are aiming at $750/t fob for their HRC, $850/t fob would be the target price for CRC, he adds. Malaysian-origin CRC was heard offered at $860/t cfr Philippines last week.

On whether importers can accept higher prices, traders say that regional importers have little choice because prices are rising due to cost pressures. “Those committed to completing projects will have to buy,” a regional trader notes. “Importers will buy according to their requirements but not more,” another says.

Egypt may face steel shortage, rising prices

A shortage of steel could rapidly develop in Egypt as local production has been reduced by the current unrest, and problems at the ports mean there will be few imports of billet or rebar, according to information obtained by Steel Business Briefing from a regional steel market analyst.

Egyptian steel prices could therefore rise. When the unrest subsides and reconstruction work starts, there will be a greater than usual demand for steel. It will be quicker to import than restart idle plants, so bookings of foreign steel could surge, the analyst adds.

In addition, steel mills would probably have run down their raw material stocks, so they will rush to the market for new supplies, pushing up prices for scrap and other inputs. 

Last year Egypt imported an average of 215,000 tonnes/month of scrap, mostly from the USA, UK, Belgium and Canada. If Egypt stops buying because of the current disturbances, a surplus of scrap could build up in the Mediterranean; while this could depress prices, any excess tonnage would most likely be bought up by Turkey, the analyst suggests.

Data from the London-based Iron & Steel Statistics Bureau indicate that Egypt imported almost 2.7m tonnes of steel products in the first nine months of 2010. The 45% decrease on the same period of 2009 was mostly because of a slump in rebar imports from Turkey. These data are based on other countries’ export reports, and exclude Egyptian imports from other Middle Eastern and North African countries.

Turkey was the biggest supplier, with 853,000t in that period, followed by Ukraine with 739,000t.

Northwest European rebar/rod mills to hold firm on price

Producers of rebar and wire rod in northwest Europe may struggle to achieve the very top offer prices they are quoting. However, they are not in a mood to respond to any modest softening in scrap prices by reducing steel prices below the latest concluded levels, market sources indicate.

Rebar prices appear highest in Germany, where offers are €620-630/tonne ($850-863/t) delivered and latest transactions €600-620/t, according to a local producer. In France, latest transactions for 12mm diameter rebar are around €610/t delivered, another producer says, although local distributors believe this remains a target and large volume buyers have so far paid €580-590/t.

Rebar prices in Belgium have risen by €70/t since the end of December, a local industry source reports, roughly characterising the scale of scrap-driven hikes across the region in this period. Mesh quality wire rod prices in northwest Europe reached €590-610/t delivered, depending on volume, in January, a French distributor and a fabricator tell Steel Business Briefing.

The scale of reinforcing steel price hikes over the quiet winter months is not fully justified by the leap in scrap prices over the period, the distributor claims. There is a small downwards correction in regional scrap prices currently, some sources add. 

However, mills are still suffering from the higher scrap costs, the producer and fabricator say. Also, prices for old scrap may be weakening, but this is not the case for new scrap in Germany, the producer maintains. Moreover, mills fear a fresh increase in scrap prices in March.

Inventories in the supply chain are low, because of mills’ extended winter breaks and cautious, short-term purchasing just to cover immediate needs.

Severstal, Renco could be near deal for US mill assets

New York-based investment firm The Renco Group and Severstal North America could be nearing an agreement for the acquisition of several of the company's US steelmaking assets, Steel Business Briefing learns.

As previously reported, the United Steelworkers union (USW) recently identified Renco as the preferred bidder for SNA's Sparrows Point, Wheeling and Warren sheet mills. The union must sign off on any potential sales agreement, so the backing was considered a significant step in the potential successful divestiture of the facilities.

SNA CEO Sergei Kuznetsov told SBB yesterday he could not comment on rumors in the market or published reports contending Renco has signed a letter of intent to acquire the assets. A company spokeswoman reiterated that "Severstal has been exploring strategic alternatives for certain of our assets," but would not confirm that an agreement - preliminary or otherwise - has been reached.

"At this time the strategic review is ongoing, and I cannot comment further," she said. "I will provide updates when appropriate."

A Renco spokesman also declined SBB's request for comment, but said an announcement could be forthcoming. The USW declined comment, saying only "at the appropriate time, the union will update our members and release information to the press."

Renco, which has the financial backing of Los Angeles-based hedge fund Aurora Capital, is a private, family-owned investment company with revenue of more than $5bn and interests in mining and metals, among other areas.

North China mills secure scrap by paying more

Major scrap consumers in China’s northern regions have begun to compromise on offering higher prices for their suppliers, while steelmakers in the east of the country are still struggling to keep current buying prices, Steel Business Briefing learns from market sources.

In northern China’s Hebei province, Shougang Qian’an Iron & Steel (Shouqian) has begun offering some of its major scrap suppliers RMB 3,800/tonne ($576/t) with 17% VAT for their heavy melting scrap (over 6mm). This price is around RMB 200/t higher than the steelmaker’s previous buying price and took effect from 29 January.

“Shouqian had to raise its buying price before the Chinese New Year holidays to collect as much scrap as possible, since its inventory levels are low due to tight supply,” a source with a northern steelmaker tells SBB.

According to the source, Shouqian’s offer price has encouraged some suppliers to sell their material, and this has enabled the company to secure a scrap inventory sufficient for around 30 days’ use. 

Meanwhile, Lingyuan Iron & Steel, a state-owned company in northeastern China’s Liaoning province, is offering some suppliers RMB 3,780/t ($573/t) with VAT – the highest price in the region – for scrap of the same grade. The mill’s scrap buying price has seen an accumulated increase of RMB 550/t ($83/t) since 4 January.

In eastern China’s Jiangsu province, some major mills are also offering higher prices to secure scrap, but traders are unmoved. “This is a gamble between mills and traders; we will wait and see whether the mills can pay higher prices,” a major Jiangsu-based trader says.

Russia out of market for plate, Ukraine gets higher prices

There were no offers of plate for export from Russia in January, as strong domestic/CIS demand in the construction and pipe making sectors along with output adjustments continued to squeeze the availability, industry sources tell Steel Business Briefing.

"I have not heard anything on Russian plate. In fact, nobody is offering any plate at all from the CIS at the moment, so I guess we have to wait until after the 10th, when the mills are expected to come out for March production discussions," a major trader says.

Another source, close to Severstal, confirms that there is no availability of plate for export at the moment, whilst MMK also said not to have had anything for export. Ashinsky is understood to still be going through production adjustments, having decommissioned its last open hearth furnace at the end of last year and switched to the EAF-based production route.

Meanwhile, Ukrainian producers achieved considerable price increases in January, and are understood to be targeting higher prices this month. "$700/tonne, which they achieved, is little higher than today's price of slab – we think Ukrainian producers will try to push for price increases of about 10% again," sources say.

Wisco deal cancelation to aid FMO output recovery

The dissolution of Venezuelan iron ore producer CVG Ferrominera Orinoco’s (FMO) deal with Wuhan Iron & Steel Group Corp (Wisco) will facilitate the company’s return to improved productivity and spur needed plant improvements, FMO told the local press.

The partnership with Wisco, which involved the supply of 40m tonnes of ore to the Chinese company over seven years, would have affected domestic supply. However, this output will now be available to the domestic market. FMO plans to produce 15-18m tonnes this year, up from the 13m t produced last year, however that falls short of the 20-22m t the company used to produce.

“With a production of 12m t or 13m t, then subtracting what we would have had to send to Wisco, what remained was little for the domestic market, and we could not increase production because we didn’t have enough income," stated FMO. "We had energy cuts as well as the global (economic) crisis (as factors)."

FMO is also able to recover financially by canceling the deal, since the Venezuelan government is paying off Wisco’s $1bn advance to FMO, giving the company room to invest in much-needed capital improvements, which have not been carried out for two years, Steel Business Briefinglearns.

“We can now recover our production by replacing equipment," concluded FMO.

Queensland met coal producers await 'deadly' cyclone

Coking coal producers in Queensland, still recovering from the recent flooding, are bracing themselves for the arrival this week of 500km-wide cyclone Yasi, which the state government is calling a “potentially very deadly event.”

Dalrymple Bay and Abbot Point coal shipping terminals are closed, while Hay Point is monitoring the weather after closing at the weekend for cyclone Anthony, which brought more rain to the area. Rail operator QR National has shut operations on the Newlands and Goonyella coal railways.

Rio Tinto has suspended operations at its 8m tonnes/year capacity Hail Creek hard coking coal mine in the Bowen Basin. BHP Billiton-Mitsubishi Alliance will not comment on the current status of its operations.

Metallurgical coal producers are operating at around 80% of capacity after severe flooding in late December and early January, with force majeure on most contracted shipments still in place. Damage to rail and port infrastructure was not as severe as initially feared, but could take several months to repair fully. 

A spokeswoman for Gladstone Port said the facility was outside the cyclone area and was operating as normal. She said the port was getting back to full capacity and was expecting around 1m t of coal this week, compared with normal levels of 1-2-1.3mt. “Our stockpiles are sitting at over 1mt and we have ten vessels in the queue,” she told Steel Business Briefing. Dalrymple Bay had been operating at around 70% of capacity.

Category four cyclone Yasi is expected to hit Queensland on Wednesday night or Thursday morning, bringing winds of more than 250km/hour.

Chinese domestic HRC supply falls as mills look offshore

China’s steel exports have increased since early January in both price and volume on the back of recovering overseas demand. Mills have lifted their exports of hot rolled coil in January and February at the expense of domestic supply in a bid to capitalise on the strength in foreign markets.

In February, China’s Anshan Iron & Steel (Angang), Benxi Iron & Steel and Beitai Iron & Steel will deliver just 25-35% of contracted HRC to their domestic trading agents, while Shougang will deliver just 65% and Shagang 28%, Steel Business Briefing learns from market sources.

Although maintenance stoppages at Angang and Shagang in February will also contribute to lower HRC deliveries, the improved export market has played an important part in falling domestic supplies, some market sources say.

SBB notes that HRC export offer prices have jumped about $70/tonne since mid-January due to rising steel production costs and overseas stocking activity. Currently, offers of boron-added HRC are around $700-710/t fob. In light of rising raw materials costs and maintenance works at major steel mills in February, export prices are expected to rise further when the Chinese market resumes after the New Year holidays (2-8 February), market sources suggest.

However, they warn that the Chinese government could further strengthen restrictions on steel exports during the second half of this year by lowering or removing tax rebates from some steel exports, such as boron-added HRC, which could slow down exports again.

Nippon Steel to stop Kimitsu plate mill for maintenance

Nippon Steel plans to stop the plate mill at its Kimitsu works near Tokyo from early June for over 40 days to revamp the mill’s aging facilities. The company is now rearranging rolling schedules to meet orders.

The Kimitsu plate mill has been operating since March 1968 and Nippon Steel says it intends to overhaul the roughing mill and change the motor in the finishing mill. No increase in capacity will result, it stresses. The mill is currently producing about 180,000 tonnes/month, which Nippon Steel says is almost at full capacity. Despite this, the steelmaker says it will try to ensure to meet all delivery obligations. 

Measures will include negotiating with customers to place orders earlier or to arrange for a required plate grade to be made at other of its plate mills where production will also be stepped up to compensate for reduced supply from Kimitsu, a spokesman tells Steel Business Briefing.

Nippon Steel produces heavy plate at its Nagoya works in central Japan and at its Oita plant in Kyushu. Though the company refuses to reveal capacities or production levels, Nippon Steel says demand for plates from shipbuilders and industrial machinery makers is strong and its output last year came close to that of 2008. 

SBB notes that Nippon Steel produced 3.72m tonnes of plate in the year to last March, 17% down from 2008's total of 4.48m t.

“The Kimitsu stoppage will surely tighten plate supply and Nippon Steel may limit the acceptance of orders,” a Tokyo-based plate trader warns. End-December stocks of plates and hot cut sheets in Japan were at 661,000 t, down 9,000 t from November, SBB notes.

Taiwan rebar producers expect post-holiday price rise

Taiwanese rebar producers are not putting out new offers this week due to Chinese New Year holidays, but they believe local prices could rise further after the break on strong demand and rising scrap prices.

“I believe prices will rise after the new year. Everyone is short of materials now,” a senior official from Wei Chih Steel Industrial Co tellsSteel Business Briefing. This is also the case for Taiwan and Southeast Asia, he says, adding that the company is still receiving a lot of enquiries.

A spokesman with Feng Hsin Iron & Steel says Taiwanese scrap prices have eased after scrap supply increased in Taiwan. “It is hard to predict how scrap prices will move after the holidays,” he says. “But it seems like international scrap prices will rebound,” he adds.

Taiwanese rebar producers have mostly raised or kept prices stable since December on rising scrap prices but they dropped prices by TWD 300/tonne ($10/t) last week on softening scrap prices and in anticipation of slower demand as Chinese New Year approaches, as SBB reported.

Feng Hsin’s ex-works list price for medium-sized SD280 rebar was at TWD 21,300/t, and Hai Kwang Enterprise Corp’s selling price for the same product was at TWD 20,800/t last week. Wei Chih’s transacted prices were around TWD 20,500/t last week.

Singapore Exchange seeks views on proposed billet contract

The Singapore Exchange (SGX) plans to launch a steel billet futures contract, together with contracts for lead and tin, and is consulting the public on the proposed introduction of these new contracts for trading on SGX’s derivatives market.

The proposed new contracts follow that of its first three LME-SGX metal contracts (copper, aluminium and zinc) to be launched on 15 February. This series of tradable metal contracts arises from SGX’s collaboration with the London Metal Exchange late last year. These new contracts are standard, cash-settled metals futures contracts based on settlement prices from LME.

“This (billet) contract will bring more wide-spread derivatives trading into the region as the current Asian instruments are concentrated in closed markets,” a SGX spokesperson tells Steel Business Briefing. The trading unit for the contract will be one lot of 10 tonnes. 

The spokesperson adds: “SGX's offering of steel billet futures and the current clearing of SGX iron ore swaps provide participants in the iron ore and steel industry a convenient suite of products for managing their price exposure.”

The deadline for submission of views on the proposed contracts is 9 February 2011.

China’s seamless pipe exports jumped 20% in 2010

China’s exports of seamless pipes rose to 3.81m tonnes in 2010, up 20% compared with the previous year. The increase, which took market observers by surprise, was attributed to rising global demand and mills’ continuing efforts to develop new markets outside of the USA and Europe. 

Though December’s seamless pipe exports of 354,721 tonnes were largely unchanged from November, they were up by 23% compared with the same month of 2009, according to Chinese customs data. 

But despite the sharp increase, a recovery to export levels of over 6m t seen in the boom year of 2008 is unlikely, an industry source says, as the majority of China’s seamless products have been effectively barred from the US and Europe by trade action. 

Nevertheless, the maximum impact of the trade cases is already in the past, he continues. Seamless pipe exports started to improve in the second half of 2010 and have stabilised at a level of 300,000-400,000 t/m, he explains. 

Traders have now diversified their exports markets, minimising the risks associated with trade cases, another market source adds. However, he expects China’s seamless pipe exports will grow slowly in 2011 as mills are facing increasing competition from international mills - particularly those in Eastern Europe.

Products used in energy sector such as seamless oil country tubular goods (OCTG) are expected to benefit from the increasing global energy development activities this year. Seamless OCTG exports rose 6% y-o-y to 1.59m tones in 2010. Steel Business Briefing notes China’s domestic output of seamless pipes climbed 15% to 25.25m t in 2010, a record high.

China added 1mt of new stainless capacity in 2010

China added 1m tonnes of new stainless steel production capacity in 2010 and this in part led to a 28% or 2.45m tonne rise in China’s crude stainless output to 11.26m t last year, said the Stainless Steel Council of China Special Steel Enterprises Association (SSC) in a statement issued late last week.

The 1m t increase comes mainly from the commissioning of new capacity at Guangzhou Lianzhong Stainless Steel, Jiuquan Iron & Steel and Zhejiang Dongfang, and the production restart at Tangshan Stainless Steel, according to the announcement seen by Steel Business Briefing.

Major mills – like Taiyuan Iron & Steel, Baosteel, Zhangjiagang Pohang Stainless Steel, Dongbei Special Steel, Southwest Stainless, Yongxing Special Steel and Taishan Stainless – were unaffected by power curbs in the second half of the year and had increased production.

China’s apparent consumption of stainless steel increased 14.4% or 1.18m t to 9.4m t last year due to economic growth and strong sales in downstream sectors like the automotive, electrical appliances, furniture, and construction and furnishing.

Chinese stainless imports fell 17.8% to 1.07m t while exports doubled to 1.54m t in 2010. Other than semi-finished steel and strips which were net imports, other products like hot rolled and cold rolled sheets and coils, long products and pipes were net exports.

Zhongyuan Special Steel to expand forging capacity

Zhongyuan Special Steel (Zhongyuan), China’s largest retained mandrel maker and a major maker of heavy precise forgings and drill tools, plans to spend $167m on raising its forging capacity. Output will target the growing domestic demand for high-grade precision forgings. 

The project includes a new precision forge and its upstream raw material supply lines, which will add 57,400 tonnes/year of new capacity and boost Zhongyuan’s total capacity to 188,000 t/y. Zhongyuan is located in northern China's Henan province.

Through the project, Zhongyuan expects to increase its manufacturing capacity of “high clean” grade heavy machinery and equipment. This includes retained mandrel, oil/gas drilling tools and commercial precision forgings, the Shenzhen-listed company said in a release. 

Construction of the key production line, a RF70 1,800-t radial forging machine, was started in December 2010 and construction of the remainder of the project will begin in June 2011. The whole project will be completed in 2013.

The 57,400t/y of new capacity includes 15,000 t/y of drill tool capacity, 13,000 t/y of retained mandrel capacity and 29,400 t/y of precision forgings capacity, according to data from Zhongyuan. 

As Steel Business Briefing reported, the company previously planned to upgrade one of its existing forging mill to realise its capacity expansion. But in order to avoid the risk of losing market share during the upgrade period, it changed its plan, instead opting to build a new mill while maintaining output at the old facilities. 

TSML and STX to collaborate for HBI production in Pakistan

Tuwairqi Steel Mills Ltd (TSML) is to start producing hot-briquetted iron in Pakistan for export to Asia. The company, a subsidiary of Al Tuwairqi Holding of Saudi Arabia, is collaborating with STX Corp of South Korea to advance TSML’s DRI plant by producing HBI as well, Steel Business Briefing learns from the company.

The capacity of the HBI production will be around 50% of the planned DRI plant, around 600,000 tonnes/year to begin with. The remainder of the plant capacity will produce DRI for domestic consumption, says the company’s spokesperson.

The completion of the DRI plant and the HBI unit is set for mid-2011, he adds.

Sang-min Han of STX says: “we foresee an export potential to South Korea, Japan and China for HBI, produced in TSML, in the range of around 400,000-500,000 tonnes/year.”

Rising raw materials costs dent Indian steelmaker's margins

Rising raw materials costs continue to hurt the profit margins of Indian steelmakers, with JSW Steel reporting a 26% year-on-year slide in pre-tax profits to Rs 5.3bn ($115.4m) for the October-December 2010 quarter. 

Compared with the previous year, JSW’s expenses on raw material consumption rose by more than 40% to about Rs 36bn ($784m) during this period, Steel Business Briefing learns from a company statement.

JSW is largely dependent on external sources for meeting the iron ore and coking coal requirements of its 6.8m tonnes/year integrated steelworks in southern India’s Karnataka state. The firm’s captive ore mine in the state provides about 17% of the mill’s 14m t/y iron ore requirement. The balance is purchased from domestic miners, including NMDC. By March, crude steel production capacity at Vijayanagar will be ramped to 10m t/y, lifting ore requirement to 27m t/y, as SBB has reported. 

JSW's coking coal requirement of 4.5m t/y comes entirely through imports. About 70% of these come from Australia, with the balance from the US and South Africa. 

So far, the firm’s steelmaking operations have not been impacted by coal supply constraints from flood-torn eastern Australia, JSW Group CFO and joint md, Seshagiri Rao, told SBB last month. “As of 1 January, we have sufficient coal stocks to support operations for two months,” he said. The firm also has access to 123m t of coal reserves in the US, which it acquired last May.

Chinese manufacturing begins 2011 on a strong footing

China's manufacturing sector began 2011 on a strong footing, according to HSBC. Its China Manufacturing Purchasing Managers' Index (PMI) rose in January to 54.5 from 54.4 in December. The pick-up was due to an increase in new domestic orders. Steel Business Briefing notes that a PMI rating above 50 indicates the manufacturing activity is expanding.

The increase in new business has caused manufacturers to stock up on raw materials, including steel, and companies say they are paying higher prices for those materials than they were last month.

As SBB reported, Q235 5.5mm hot rolled coil is currently offered at around RMB 4,780/tonne ($724/t) with 17% VAT in Shanghai, up from RMB 4,450-4,480/t at the end of December. Prices have risen on the back of higher ex-works prices and maintenance work which resulted in less HRC reaching the spot market.

Hongbin Qu, HSBC's chief economist for China, said the uptick in the PMI is a positive development as it will allow the Chinese government to focus on managing inflation.

“The strong growth momentum leaves room for Beijing to fully focus on checking liquidity and inflation pressure. Quantitative tightening in the form of reserve requirement ratio hikes will remain the most effective policy tools,” he says.

End-December stocks up in Japan

Steel inventories held by Japanese steelmakers and dealers at end-December climbed slightly over end-November levels but the Japan Iron & Steel Federation (JISF) that assembled the data is unconcerned.

“The stock increase must be due to seasonal reasons – because of fewer business days in December,” suggested a JISF official. “I doubt this reflects a decrease in demand or any other major reason.”

Carbon steel stocks held by steelmakers and wholesalers totalled 6.33m tonnes at the end of last month, up by 148,000 t or 2.4% from end-November. The ratio of stocks to shipments stood at 104%. This represented the first time inventories had sneaked past the 100% level in two months and is a trend the JISF is watching closely.

Within the total, steelmakers accounted for the first 5.13m t - up 3.7% from a month ago - while dealers were nursing 1.2m t, down 3.1%. By allocation, stocks for domestic sale were equivalent to 5.15m t, up 3.1% from a month ago, while those for export were at 1.2m t, down a tiny 0.8%.

Domestic steel deliveries rose in December but export shipments declined by about 4% year-on-year, the JISF notes, possibly because bad weather conditions in December disrupted ship departures. “But I haven’t heard of any factors suggesting a demand decrease abroad so I’m unconcerned about the stock level,” the federation spokesman tellsSteel Business Briefing.

Among the key product categories, stocks of hot rolled coils were up by 66,000 t at 1.68m t from end-November; those of rebars were up by just 11,000 t at 586,000 t, and H-beam stocks were higher by 14,000 t at 229,000.

India’s AICL to double ironmaking capacity by late-2012

Indian pig iron producer Atibir Industries Co. Ltd (AICL) expects to double capacity at its plant in Bhorandiha in the eastern Indian state of Jharkhand to 600,000 tonnes/year from the current 300,000 t/y by late-2012, Steel Business Briefing learns.

As part of the expansion, the company is adding a new 850 cubic metre blast furnace with a capacity of 300,000 t/y, plus a 300,000 t/y pellet plant and a 600,000 t/y coke facility. But AICL says it intends to run the coke plant only at half capacity initially and increase output as and when demand arises.

Already AICL hosts an 850 cu m furnace with a 300,000 t/y pig capacity, together with a 300,000 t/y pellet plant. Iron ore for the plant is being sourced domestically while coking coal is being imported.

Most of the pig iron produced will be supplied to sister company Atibir Hi-Tech (P) Ltd – also located in Bhorandiha adjacent to the AICL plant – for manufacturing rebars. The rest will be sold in the domestic market. 

Atibir Hi-Tech producers rebars in a diameter range of 6-32mm. It is also undertaking an expansion to lift its capacity to 330,000 t/y from 120,000 t/y, also by late-2012 SBB understands, and possibly to 600,000 t/y later. But Atibir Hi-Tech officials were unavailable for comment and whether the barmaker's expansion also includes lifting meltshop capacity remains unknown. 

Beijing gets serious in plan to eliminate outdated capacity

China’s central government is increasing the pressure on steel producers to force them to shut down their outdated steelmaking capacity, Steel Business Briefing learns from the country’s Ministry of Industry & Information Technology (MIIT). 

According to a 31 January announcement by MIIT, Beijing plans to intensify assessment procedures to ensure targets in its plan to eliminate "obsolete" capacity in nine industrial sectors - including steel - are met. The plan was announced by the State Council in April last year, as SBB reported. 

“First, we are giving local governments until the end of March to report on the progress of closures,” a source with MIIT tells Steel Business Briefing. “Following this, work teams from 18 government departments, including MIIT and the National Development & Reform Commission, will be conducting on-site spot checks,” he says. These checks will be completed before the end of April. 

The teams will be looking to confirm that the main steelmaking facilities and production lines have been removed or destroyed in order to ensure they will not be able to resume production once the inspectors have departed.

Strict punitive measures, including revoking business licences, withholding banking loans and cutting off electricity supplies, will be applied to companies failing to close their obsolete facilities. Local governments who falsify their reports or fail to meet their closure targets will be denied central government funding, according to the announcement.

Tata Steel hikes plate prices £95/tonne

Tata Steel Europe increased its reversing mill plate prices by £90/tonne effective yesterday, the company tells Steel Business Briefing.

The price hike is the result of higher than anticipated international steel demand last year and expected continued growth in 2011, the company says. “All plate consuming industrial sectors are showing improvement and lead times from our mills are extending,” says Paul Parkins, commercial manager, plates, for Tata Steel in Europe.

As well as increased consumption, adverse weather conditions in Australia and Brazil have led to higher spot prices for raw materials such as iron ore and coking coal. “Tata Steel will continue to monitor the situation as the full impact on raw material availability and prices becomes clear,” it says.

Current prices for S275 from Tata Steel are around £570-580/tonne delivered, so the increase, if implemented, will take prices towards £650-660/t (€760-772/t) del, sources suggest. “I have seen similar sorts of prices being touted from other European mills. They were taking about £640/t for 275, which is not a million miles away from where that Tata figure would be,” one stockist says. 

If all mills follow suit, people will have no choice but to pay higher prices, sources concur. And most producers are likely to increase prices for late Q1/Q2 rollings to try and offset rising raw material costs, SBB hears: other European mills have stopped selling their March rollings as they believe they will achieve a higher price in the near future.

Turkish domestic flats prices stable

Locally produced hot rolled coil prices in Turkey have not changed as demand is not very strong and raw material price increases have stopped. Besides, the price rise in December and January was faster than expected. Steel Business Briefing is told by informed sources that the Turkish producers are now accepting orders for April production.

HRC is sold at $830-850/tonne ex-mills but it is possible to find HRC at $800-820/t in the local market. Turkish market players do not expect a price decrease despite the slow state of trade, because global price levels are similar to Turkish prices.

Demand from the industrial users like pipe producers, automotive and construction is good and steady, Turkish producers say. Traders are also expected to resume bookings because their stock levels are getting lower.

UK's Falcon saved from administration by Newport coater

Newport-based coated steel producer Coilcolor rescued Falcon Steel from administration on 27 January, managing director Dean Proctor tells Steel Business Briefing.

Coilcolor produces around 30,000 tonnes/year of colour coated material, which it says could increase to 130,000t/y with the acquisition of Falcon. Currently it buys around 40,000t/y of feedstock, which could go up to 140,000t/y. The company mainly sources its steel from Asia, Proctor says. Falcon will be renamed Coilcolor West.

While Falcon was not initially a competitor, “they became so later on because they were chasing cashflow and dropping prices,” he continues. However, that was not the motivation for the purchase. 

There will be no place for Falcon's senior management, but Coilcolor has taken on 15 former Falcon workers, which equates to one shift. It hopes to take on another 14-15 in a few months if everything goes according to plan. 

Initially, it will operate Coilcolor West at around 50% of capacity. “It was a very quick deal this one. It will take time for us to get steel in to feed the plant,” Proctor continues. The plant will get “properly” going 2-3 months down the line, he concludes.

Evraz Palini e Bertoli changes management

The ceo of Palini e Bertoli, the Evraz group’s Italian plate mill, has stepped down, Steel Business Briefing learns directly from the company.

Evraz has abolished the role of ceo as part of an overhaul of its management structure, it says. The company has created a post of general manager instead. 

As a result, Nicola Lemetti, the ceo of Evraz Palini e Bertoli, has stepped down from his role. Roberto Bissacco, mill operations director of the company since 2007, has been promoted to become general manager with effect from 1 February 2011. In his new role, Bissacco will continue to act as mill operations director.

Bissacco has over 27 years of steel industry experience since obtaining his engineering degree in 1983. Prior to joining Evraz Palini e Bertoli in 2006, he spent over 4 years as coo at Acciaierie Bertoli Safau.

Germany’s Dillinger Hütte sees plate market in balance

Plate stocks are at a healthy level in Germany, and there is little competition from overseas imports, Steel Business Briefing hears from Günter Luxenburger, sales chief at German plate producer Dillinger Hütte.

At an estimated 470,000 tonnes in Germany, “stock levels are absolutely fine to allow me to sleep soundly,” Luxenburger said at the Stahldialog meeting near Düsseldorf yesterday.

Plate imports into the European Union have settled at a comparatively low level, with few volumes sitting at the ports, he observed. “In 2007, the Chinese endlessly threw material into Europe, but that has reduced massively,” he said. These days Ukraine and maybe Russia are more likely origins than Asia, given their lower costs linked to local availability of iron ore.

One issue that could return is a shortage of slabs, as seen in the first half of 2010, as slabs can be held back and diverted to production of coils. “The slabs we need, you do not get at every corner, so if that market tightens, you will have to pay a price,” Luxenburger commented. Dillinger had to purchase some slabs and pig iron from third parties around the beginning of this year, after its pig iron joint venture Rogesa suffered some damage.

Speaking about customer sectors, Luxenburger is especially astonished how “yellow goods were rock bottom but have recovered rapidly,” and how in Asia shipbuilding nearly swallows up the entire new capacity that has come on stream, namely in Korea. “Maybe that is an explanation of why imports have fallen,” he concluded.

German firm opens Turkish structural steel plant

The German steel fabricating company Tröster Systeme und Komponenten (TSK) will start production in its sections and profiles service centre in Bandirma, Turkey on 18 February, Steel Business Briefing learns from the company. 

The company will prepare steel for construction projects with its cutting, blasting, coating, welding and forming facilities. Production capacity is 12,000 t/y.

The company is aiming to supply 60% of its products to the Middle East and North African countries, mainly Libya, in the first phase. It will source its sections, profiles and hollow sections from the Turkish domestic suppliers, says Asli Gul Yokas, the partner of the company.

TSK owns 80% of the €7m investment operation and the rest is owned by Asli Gul Yokas and Omer Uludag 10% each.

Yokas also says that they are planning to invest €45m in automotive supply industry soon. The land is secured for this new investment and the plant will be completed by the end of the year. It will produce car bumpers at first phase and other car parts afterwards.

Turkish domestic rebar demand slow, prices unchanged

Turkish mills’ domestic prices for rebar are unchanged at around TL 1,350/tonne ($849/t) this week and some producers just refrain from making offers. Trader prices are available at around TL 1,250-1,280/t ($786-805/t), market sources tell Steel Business Briefing.

Demand is reported to be slowing mainly because of the seasonal reasons, and instability in market prices as well as the fall in scrap prices are affecting demand negatively.

The expectation is for market prices and demand to recover towards mid-February, for March consumption, SBB was told. In the domestic market billet offers are reported at around $650-660/t fob.

UK stainless bar demand good, prices rising

Suppliers of stainless steel bar in the UK are busy, with strong demand generating plenty of enquiries, and base prices are increasing. 

Despite the slight dip in the economy last quarter, UK manufacturing actually recorded some growth. Demand for stainless bar seems to reflect this, moving into 2011 in good shape. 

All producers supplying this market have good orders, sources tell Steel Business Briefing, resulting in delivery times stretching into September and October. 

Delivery on martensitic grades are even longer, with some order books now into December. This, in part, reflects the more robust demand now being seen in end use markets like oil/gas, petrochemicals, power generation and automotive (where the proportion of martensitics used is said to be steadily increasing). 

European mills selling into the UK are looking to add around £100/tonne to base prices, SBB is told, though not necessarily in one step. “We are faced with fairly substantial price increases and are putting our prices up almost weekly,” one prominent stockist comments. 

Stocks in the supply chain are generally low with some gaps, and there are still issues with credit limits influencing buyer behaviour, SBB hears.

Erasteel increases production, sees higher prices

High-speed steels producer Erasteel, which is owned by French group Eramet, increased its production dramatically last year, particularly in the second half, ceo Victor Polard tells Steel Business Briefing.

The “most important” increase came from its powder metallurgy business, where output was higher than 2008, driven by demand from American and Asian markets. The company did not comment on its capacity last year or at present.

Erasteel continues to invest in modernising and improving its PM capacity, and its new gas Durin atomisation plant in Söderfors, Sweden, will come online in the fourth quarter. The Durin unit, its largest investment to date, will double the company’s capacity to 15,000 tonnes/year, allowing it to “follow the high speed steel demand.”

Demand is currently high and lead-times have risen “dramatically,” supporting a new base price increase worldwide in 2011, Polard continues. The company returned to profitability last year after production rationalisation and cost cutting measures in 2009/10, but the full impact will be felt in this year’s results.

Erasteel has eight production plants in France, Sweden, the United Kingdom, US and China.

Montenegrin steelmaker looks to ramp up output, cut jobs

Montenegrin steelmaker Zeljezara Niksic (ZNK) envisages ramping up production at its new electric arc furnace meltshop in the second quarter, the company tells Steel Business Briefing. It also expects to reduce its workforce by over half through a programme of voluntary redundancies designed to adapt staffing levels to the scale of its operations.

Niksic, which is thought to have some 1,400 workers, commissioned the meltshop as well as a dedusting plant, water treatment plant and other equipment in the past months, increasing crude steel capacity to between 450,000 and 600,000 tonnes/year. The company will also soon equip the meltshop with a static var compensator - which reduces electricity consumption - supplied by automated technology manufacturer ABB.

“This installation will temporarily reduce output for two to three weeks, but production has been on and off during Q1 as it is,” the company tells SBB. “There are small volumes of just special steels being produced at 30-40% capacity utilisation over the past two weeks,” it continues. “Production will probably be ramped up in Q2,” it comments.

Niksic is looking to reduce its workforce to 600 before this happens. This is “…inevitable in order for ZNK to survive and to be staffed appropriately for the size and scale of its operations,” the company says. “The sooner it is made, the quicker ZNK can operate normally… becoming a competitive and market driven producer,” it adds. The company will carry out redundancies in the second half of March.

Niksic produces special quality round bars and square billets, as well as rebar and wire rod.

Italian bar/rod producers abandon merger talks

Italian mini-mills Feralpi, Alfa Acciai, Ferriera Valsabbia and Ferriere Nord have called off a proposed merger, Steel Business Briefing learns from sources close to all four companies.

The two advisors to the proposed merger, Rothschild and Mediobanca, have ended efforts to reach an agreement after one year of talks, SBB understands. A merger between the companies could have created one of the largest longs producers in Europe with over 3m tonnes/year of capacity, if it had been approved by competition authorities.

“The merger had widespread support, and this news is not good for the Italian steel industry. There is still the problem of over-capacity, particularly in long products”, a market participant tells SBB. “Long products are suffering because the recovery in the construction sector is slow and weak, so if the industry does not start to do some mergers and acquisitions, some Italian companies will soon start closing”, a trader adds.

According to sources close to the talks, the different strategic market opinions and the different temperaments of the owners prevented the merger from taking place, but “due their differences, the merger talks were doomed before they began”, a source comments.

When contacted by SBB, the companies’ managements did not want to comment.

Turkish mills see 40% rise in flat product output this year

Turkish steel mills expect to produce 33m tonnes of crude steel in 2011, and crude steel production for flat products is expected to rise by around 40 % to 10.5mt from 7mt in 2010. In this respect, Turkey’s crude steel production for flat products will have more than doubled in two years, according to Veysel Yayan, secretary general of the Turkish Iron & Steel Producers Association (DCUD).

Yayan told a conference in Istanbul, attended by Steel Business Briefing, that due to the increasing steel production capacity of Turkey, recovery in export markets and increasing product prices because of the rising raw material costs, Turkey’s steel export value this year is expected to reach $15bn, up by around 20%. 

“New capacities coming on stream, especially in flat products segment, will substitute the imported material and lessen the import requirement: thus steel import is expected to decline by 10 % in 2011. We expect that the performance of the Turkish steel industry will be better in 2011 compared to 2010,” he adds.

In addition, he says that Turkey’s total finished steel consumption is expected to rise by 30 % to 23.5mt. The growth will be mainly in flat steel which is expected to increase by around 50 %. 

With the broadening product range in the Turkish steel industry, consumption per capita increased to around 320 kg in 2010 from 244 kg in 2009.

Flats rebound, longs weaken for EU stockholders

Internal market sales by European Union steel stockholders and service centres recovered in 2010 compared to 2009, distributors’ association Eurometal says in its latest report sent to Steel Business Briefing. 

Sales volumes of all steel products at EU stockholders grew by 9% year-on-year in 2010, bolstered by rebounding sales of strip mill products by service centres, which grew by 26%. “Sales recovered strongly for steel products linked with expanding end use sectors like automotive, consumer durables and mechanical engineering,” Eurometal notes, adding that restocking activity had also supported flats sales.

By comparison, long product sales in 2010 “were negatively influenced by a depressed demand” in the European construction sector, as well as destocking by end-users in the construction sector, Eurometal says. Longs sales by EU stockholders fell by 6% y-on-y in 2010.

However, both flats and longs sales remained below pre-crisis levels, with flat steel service centres reporting sales 8% below 2008’s level, while the general steel stockholders’ sales were 20% lower.

Dham steps down as president of Eurometal

Jacques Dham’s term as president of Eurometal ended at the European distributors' association’s general assembly on 26 January 2011, Steel Business Briefing learns from the organisation. 

The assembly will nominate a new president at an extraordinary general assembly to be held between October and December this year, when the delegates will also decide on a new management structure for Eurometal. 

Georges Kirps and Juergen Nusser remain the acting executive vice presidents of Eurometal, and will be responsible for the day-to-day management of Eurometal until the appointment of a new president.

Finnish fabricator sees Nordic construction revival

Finland-based structural steel fabricator Peikko Group sees clear signs that the construction market in German-speaking areas of Europe and Scandinavia is picking up, Steel Business Briefing learns from the company. 

The company is on track to return to pre-crisis turnover in 2011 after a strong recovery last year, ceo Topi Paananen says. However, outside Peikko’s “home markets” of Scandinavia and northern Europe, construction activity remains subdued, he confirms. The company specialises in fabricating steel ties for concrete structures, SBB notes.

Peikko is expanding into the CIS region by opening a technical service centre in Minsk, Belarus, Paananen tells SBB. The ready availability of welding skills and the region’s tradition of steelwork are advantages, along with wage differentials. The relative strength of the local market is also attractive, compared to the Ukraine, where construction activity remains low.

The company purchased around 15,000 tonnes of plate and 8,000t of rebar for its connector and deltabeam products in 2010, but expects volumes to increase by up to 20% this year. The company turned over aroud €79 million ($108m) last year.

Polish steel prices still climbing; correction may come

Steel prices in Poland are expected to continue climbing throughout February and into March, after weeks of increases already, Steel Business Briefing learns from the Polish Union of Steel Stockholders (PUDS).

“I think the rising trend will be maintained for another month, two tops,” said Jan Klusko, chief executive of Polish distributor Ekoinstal. “After this a stabilisation of prices awaits us and eventually a correction,” he forecast. “The market will verify whether the mills’ pursuit of constant price increases is sustainable over a longer period,” he added.

“I expect further increases will occur in the immediate future,” said Janusz Koclega, vice-president of distributor Konsorcjum Stali. “This is caused mainly by hikes being implemented by producers,” he noted. “A similar trend will continue for another few weeks. We can expect it to be reversed in March,” he predicted.

PUDS’ director Andrzej Ciepiela told local media that both mills’ actions and raw material costs are behind the higher prices. “The mills maintaining a low level of supply is favouring the rise in prices,” Ciepiela is quoted as saying. “The floods in Australia, which is a significant producer of coking coal, are causing an increase in coal prices, and this translates into costs of producing steel,” he added.

PUDS’ price index shows a €40/tonne jump in rebar prices in the past two weeks, and pegs 12mm diameter rebar at PLN 2,208-2,297/t (€566-589/t). Hot rolled coil has risen by €2-17/t to PLN 2,492-2,600/t (€639-667/t), while 200mm H-beams have gone up by €15-23/t to PLN 2,517-2,616 (€646-671/t).

Polish distributor close to sale of foreign branches

Polish steel distributor Cognor is on the verge of selling a 99.9% interest in the multi-national part of its distribution business, Cognor Stahlhandel, after pre-requisites to the sale were fulfilled, Steel Business Briefinglearns from Cognor.

The company signed a conditional agreement to sell Cognor Stahlhandel to Vienna-based investment funds Eff eins Beteiligungsverwaltung and Eff zwei Beteiligungsverwaltung in December last year.

The agreement covers Cognor’s current 74.9% stake in Cognor Stahlhandel, as well as the remaining 25% stake Cognor has agreed to buy from Austrian steelmaker Voestalpine in the first half of this year.

“The buyers [investment funds] have obtained permission from the relevant competition authorities and an escrow account agreement has been reached [between the funds and Cognor],” Cognor says.

Mechel Service Global, the steel distribution arm of Russia’s Mechel group, also said in December it was considering acquiring Cognor Stahlhandel. The company applied to both the Austrian federal competition authority and German federal cartel office for permission to acquire a 100% stake, as reported by SBB.

Cognor Stahlhandel has distribution centres in Austria, the Czech Republic, Slovakia, Hungary, Romania, Slovenia, Croatia and Bosnia.

AvtoVAZ and Severstal agree 30% price rise for February

Russia’s largest car producer AvtoVAZ has agreed a 30% price increase for deliveries of cold rolled automotive sheet from steelmaker Severstal, for this month only. “The negotiations are ongoing for the longer term deliveries,” a source at AvtoVAZ tells Steel Business Briefing.

The two companies are locked in a row over prices, with AvtoVAZ repeatedly claiming that Severstal’s price increases are unjustified. Partially state-owned AvtoVAZ’s latest petition to Russia’s federal anti-monopoly service (FAS) was unsuccessful, as FAS recently said it found no breach of competition laws in Severstal’s conduct.

Severstal, which supplies 60% of AvtoVAZ’s monthly requirements of 40,000 tonnes of thin gauge autosheet, is set to supply less than half of the usual amount this month, “just enough to cover the needs,” the source at the carmaker says. 

Magnitogorsk Iron & Steel Works (MMK), another supplier to AvtoVAZ, has also increased its prices, but the increase is around 8%, SBB learns. “It’s logical and calculated in accordance with the existing formula,” the source adds.

As reported, this month’s cold rolled sheet prices in the Russian domestic market have risen by up to 10% on average to 27,500-29,000 roubles/tonne (€673-710/t) ex-works, including VAT, for thicknesses of 1-2mm.

Russia’s Severstal signs sheet supply agreement with Renault

Russian steelmaker Severstal has signed a six-month agreement with French carmaker Renault to supply automotive sheet used to produce body parts for the Logan and Sandero models manufactured at Renault’s Moscow-based subsidiary Avtoframos. This should enable Severstal to triple deliveries of pickled, cold rolled and hot-dip galvanised (HDG) coils to Russia-based stamping companies working with Avtoframos.

In the second half of 2010, Severstal increased its deliveries to supply up to 90% of Avtoframos’s coil needs and 100% of coils the plant sources locally, and the mill hopes Renault will continue to increase the volumes of material it procures locally for its Russian operations. This should enable Severstal to boost its deliveries, possibly tripling them in the coming months, a Severstal representative tells Steel Business Briefing.

Renault currently sources 53% of components for its Russian operations in Russia, but aims to take this to 74% by 2012, according to Russian analyst firm Autostat. Renault is also considering expanding car output at Avtoframos this year, thus raising its steel requirements, Autostat notes.

Avtoframos made roughly 87,300 cars in 2010, up 70% year-on-year. Its sales in Russia reached 96,500 units, giving it a 5% share of the country’s car market. This year it aims to sell 110,000 cars. Avtoframos manufactures the Logan and Sandero models and imports ready-made components to assemble the Megane and Fluence models. This year, it will also start making the Duster crossover model.

Renault approved Severstal’s material in 2005, when the mill delivered its first cold rolled coils to Avtoframos. Two years later, Avtoframos started receiving Severstal’s HDG, the mill says.

Russian watchdog rejects carmakers’ plea on sheet pricing

Russia’s federal anti-monopoly service (FAS) did not find that Severstal breached anti-trust laws when setting 2011 prices for automotive sheet supplied to Russian carmakers AvtoVAZ and Sollers, FAS says in a statement obtained by Steel Business Briefing.

The news is good for Severstal and two other Russian flat rolled steel producers, NLMK and MMK, whose exports are currently threatened by the potential imposition of export duties by the government. The objective would be to curb exports and make steelmakers dispose of extra material cheaply domestically.

Steel producers argue that instead of lowering prices, they are likely to cut ouput, as the Russian domestic market is unable to absorb extra quantities of steel. 

AvtoVAZ and Sollers complained to FAS at the end of last year, claiming Severstal was pushing them to lesser profitability, by unreasonably increasing prices of thin gauge cold, hot rolled and hot-dip galvanised flat rolled products.

However, FAS concluded that the reason for price increases in 2011 is Severstal’s increasing costs, caused by sharp increases in raw materials prices and rising natural monopolies’ tariffs. It was also satisfied that AvtoVAZ - which is 25% owned by the state - buys “considerable tonnages from Severstal while enjoying the most privileged supply terms, as compared to other producers, who buy identical products from Severstal.”

While noting that prices of some thin gauge flat rolled steel products from Severstal are currently compatible with world prices, FAS is quick to point out that any subsequent price increases will be “scrutinised,” while it continues monitoring prices of steel, coking coal concentrate and iron ore products.

Russia’s Izhstal gets new managing director

Russian producer of special steel long products, Izhstal, has got a new managing director, Konstantin Kretov, Steel Business Briefing learns from Izhstal’s parent company Mechel.

Kretov, who has held various posts at Izhstal from 1985, took up his new position on 1 February. He succeeds Valery Moiseyev, who managed the plant from 1992 and will now “concentrate on dealing with strategic issues” as chairman of its board of directors.

US Gulf import offers up, lead times still prohibitive

US Gulf port flats import offers have been increasing in recent weeks, often at attractive prices in a market that's seen hotrolled rise by as much as $300/short ton since November. However, extended lead times still keep most imports from seriously competing with domestic material, sources tell Steel Business Briefing.

One southern trader says "the level of import offers has been elevated for the last three to five weeks," and delivered prices have even been lower than those for domestic sheet and plate.

He says the latest HRC offers have ranged from $790-820/short ton, while coldrolled and galvanized substrate have been around $900/s.t, all cfr Gulf port. The latest spot fob US mill prices for HRC have been around $840-850/s.t, CRC at $900-920/s.t and HDG about $950-1,100/s.t.

Domestic A36 plate is selling for about $880-900/s.t, while import offers have been around $900/s.t, cfr Gulf port.

"Import prices for all products almost mirror domestic mill prices," the trader says. "The kicker is in the deliveries."

If an offer is made from February overseas production, it won't arrive until April or May. If trying to buy ahead, say for May shipment, it's unlikely to be here before July. "How does one translate 'no thank you' into Chinese?" the trader says.

Another trader's had competitive offers to New Orleans and Houston in recent weeks, as domestic spot prices spike. "It seems the US mills are shortening their leashes now, and the lead-times are further out towards spring with much higher prices," he says.

Timken invests $35m on high-performance steel

Specialty steelmaker Timken of the US has announced it will invest $35m at its Faircrest rolling mill in Canton, Ohio to install a high-volume, in-line forge press, Steel Business Briefing has learned.

The company said this investment, which comes on the heels of its $50m commitment to capital improvements initiated at the end of last year, reflects the significant increase in demand it has seen for its high-performance steel across all markets.

“This open-die in-line press will be the first step of the forge-rolled process for all Faircrest products,” said Tom Moline, VP of manufacturing. "Adding this step prior to rolling will provide better yield and production efficiencies to significantly improve our operations," he said.

The new press, which is expected to be particularly valuable to customers in markets with extreme operating conditions, such as oil and gas, heavy machinery, wind energy and power generation, is slated to begin operation in early 2013.

Timken's steel group, an SBQ bar and tube producer, posted 2010 sales of $1.4bn, SBB notes.

US rod maker sees higher volume, lower margins in Q4

Diversified manufacturing firm Leggett & Platt saw higher volumes but lower metal margins in its industrial materials segment, which includes wire rod, drawn wire and tubing, the company noted yesterday.

The Missouri-based firm reported $33m in fourth quarter 2010 net earnings on $802m in sales, compared with $43m on $770m in sales in the year-ago quarter. 

Its industrial materials segment accounted for $170m of the sales, up from $157m in the year ago quarter, but down from the $183m it reported in Q3, Steel Business Briefing learns.

US imports up 10% on oilfield tubes strength

Licenses to import steel products into the US were more than 1.8m tonnes for the month of January, suggesting a 10% rise in steel import tonnages from the month prior.

Although the license count by the US Import Administration is not final, it's used as an indicator for what actual imports will total for the month,Steel Business Briefing notes.

Licenses to import OCTG jumped to more than 210,700 t in January after less than 142,500 t were imported in December. January licenses to import OCTG from Korea more than doubled from the month prior, but December’s imports of 28,300 t of Korean OCTG were a nine-month low.

Line pipe licenses jumped to more than 124,450 t, also due to a large increase for Korean line pipe.

AK raising electrical steel surcharge $80

The surcharge levied by US producer AK Steel on its electrical steel products is rising by $80/short ton for March deliveries.

AK will add a $430/s.t surcharge for March, Steel Business Briefingunderstands. That's up from the current surcharge of $350/s.t.

Competitor Allegheny Technologies has already announced its own March surcharge of $485/s.t for its grain-oriented electrical steel products. The two companies calculate their surcharges with a different formula but manipulate base pricing to keep transaction prices similar, SBB notes.

In recent earnings conference calls, the two leading US electrical steel producers gave differing predictions for the electrical steel market this year. ATI predicted a flat market, while AK said demand is likely to grow significantly.

US scrap prices might dip, but bottom won't fall out

US scrap prices may dip this month, but don’t look for the bottom to fall out of the market anytime soon, scrap sources tell Steel Business Briefing.

“While prices are just a bit softer at the end of January versus the beginning of January because of the Chinese (being) out of the market it does not mean that prices will be down, but rather they will be sideways,” one exporter predicted. 

“Weather in the east is still a factor,” he said, referring to large snow and ice storms expected in the US midwest and east coast. “I look for slightly higher prices in March.”

One market survey placed the price of US domestic shredded scrap at $474 a long ton delivered mill last week, down $3/l.t from the previous week's price, as previously reported.

“I don’t think our markets have been affected by the Chinese New Year,” said one Mid-Atlantic states source. 

“I have heard of shred being bought at down $25/long ton this week with more to come, and I hear that shred is the only item overhanging the market," he added.

"That very well may lead the way down for other grades, but it remains to be seen, as to how much. From all accounts the steel business is ‘booked up’ and while shred may be plentiful at this time, I still think the overall scrap supply remains thin, so I don’t think the bottom will fall out anytime soon. The arrival of spring is probably the biggest factor we can look forward to at this time.”

Alpha-Massey merger to focus on met coal exports

Met coal exports are the focus of a $8.5bn merger between US miners Alpha Natural Resources and Massey Energy, Steel Business Briefingnotes. 

The proposed deal was announced Sunday but must still be approved by shareholders and clear regulatory hurdles.

Published reports quote Alpha CEO Kevin Crutchfield as telling analysts, "We'll become a true global leader. We'll be a leading supplier of metallurgical coal globally and in the US," adding that the company would have among the world's largest and highest-quality reserves of coking coal.

A Massey presentation viewed by SBB estimates global met coal imports will increase 61% in the coming years, from 222m tonnes globally in 2009 to 357m t possible by 2015.

Massey has posted consecutive losses since an explosion in April 2010 left 29 miners dead, the worst mining disaster in the US in decades.

Strong 2011 start for US manufacturing sector

The US manufacturing sector started 2011 extremely strong, with robust new orders, production and employment driving the Institute for Supply Management’s purchasing managers index (PMI) to its highest level since May 2004.

The PMI came in at 60.8 for January – more than two points higher than the December 2010 level - indicating continued expansion in the manufacturing sector for the 18th consecutive month and expansion in the overall economy for the 20th consecutive month, Steel Business Briefing understands.

The new orders index jumped by nearly six points to 67.8 and production continued to be strong at 63.5. The employment index rose above 60 also for the first time since May 2004.

IHS Global Insight economist Brian Bethune points out that production and employment will likely have to be ramped up even further this month for the manufacturing industries to catch up with the recent strength in orders.

SBB notes that the PMI for December and the rest of 2010 were recently seasonally adjusted, which is why December's PMI of 58.5 is higher than the originally reported 57.0.

Metals USA: Scrap shortage causing steel price rises

Rising steel prices are the result of an "endemic shortage" of scrap in the US, says Metals USA CEO Lourenco Goncalves.

Scrap generation over the past two years has been way too low because of reduced industrial activity, so there's not enough scrap now, Goncalves said in an earnings conference call monitored by Steel Business Briefing.

American mills did not take advantage of lower scrap prices to build up scrap inventories throughout 2010, so when scrap prices rose sharply and quickly, they were caught with low scrap inventories and are being forced to buy at the elevated prices. "Now they have to pay or not have steel to deliver," he said.

That being said, Goncalves does not believe that steel prices are currently too high. When high steel prices are causing inflation and are being talked about by everyone from the Wall Street Journal to CNN, that’s when prices will be too high, he said, but "we are far from that."

For current pricing to be maintained, mills must practice "controlled order entry," he said. Market conditions have a "good chance of remaining favorable" well into the second half of this year if mills don't overproduce or allow their backlogs to become too overextended, he cautioned.

Just because orders are increasing doesn't mean that demand is going through the roof, he said. In fact, he said his company is not seeing end users building inventory but only buying what they really need to supply their own customers' orders.

Metals USA sees positive trend after Q4 profit

Service center chain Metals USA is optimistic for the first half, as the combined effect of the economic recovery in the US and recent steel price increases should support the positive momentum the company is currently seeing, Steel Business Briefing understands.

The outlook from Metals USA CEO Lourenco Goncalves came as the company reported fourth quarter 2010 net income of $3.1m on sales of $324m. Sales were up 32% from the same quarter in 2009 but were 6% lower than the third quarter of 2010. Q4 metal shipments of 267,000 short tons were up 22% year-on-year but down 2% from Q3.

For all of 2010, the company made $11.5m on sales of $1.3bn. Its product mix (based on net sales) was: 34% carbon flatrolled, 21% non-ferrous, 19% plate, 13% structural and 13% other minimill products.

Goncalves said the company continues "to operate with a high sense of urgency" and expects to benefit in the current quarter from rising steel prices. He predicts an improving nonresidential construction market and hopes mills can practice "controlled order entry" to keep steel prices steady (see other stories).

Metals USA sees slow, steady non-res market gains

Echoing the sentiments of other American executives, Metals USA CEO Lourenco Goncalves says the worst has passed in the nonresidential construction market and forecasts slow and steady improvements in the sector this year.

Speaking during an earnings conference call yesterday, Goncalves said he is 100% sure that the struggling sector will not deteriorate further.

Credit is being progressively restored, he said, and Metals USA is beginning to see more orders and more non-res projects moving forward.

As for other end use markets, Goncalves is confident that the automotive and aerospace markets will be "good" and continue to pick up throughout the year.

Goncalves cautioned, however, that the Gulf coast oil and gas market has not yet recovered and he isn't expecting it to improve much for "an extended period of time."

Conditions in the northeastern US are getting much better, Goncalves told analysts in the call monitored by Steel Business Briefing, and the southeast and south central US are "not bad" except for the oil and gas markets there.

Peru's Aceros Arequipa sees 2010 sales rise 18%

Peruvian longs producer Aceros Arequipa reported 2010 net sales of 1.94bn nuevos soles (US$702m), up 17.6% over the 1.65bn soles (US$597m) reported in 2009, Steel Business Briefing learns from the company.

The company's Q4 net sales came to 454m soles (US$164m) against 388m soles (US$140m) during Q4 2009. Compared with Q3 2010, however, Q4 sales dropped 11.7% from 514m soles (US$186m) because of lower shipments, says the mill.

Meanwhile, Arequipa saw its 2010 net profit reach 132m soles (US$47.7m) against net losses of 37.3m soles (US$13.5m) during 2009, SBB notes. The steelmaker's 2009 performance was negatively affected by the world economic crisis, which contributed to reduced global steel demand.

Brazil's Açotubo expects to double market share

Despite heavy competition from imports, major tubes and steel distributor and service center Açotubo is optimistic about 2011 and expects company revenues to surpass the R$1bn (US$600m) mark. 

Steel Business Briefing learns from the company that it is focused on meeting the steel demands of markets ranging from oil and gas to agricultural, machinery and equipment, and automotive.

"Since we are grabbing opportunities from several sectors, we believe Açotubos revenues may surpass the R$1bn mark, which means the company will double in size and market share by 2012," says Açotubo president Luiz Eugênio.

The company recently established its sixth plant in São Paulo, where demand is increasing from the agricultural machinery sector. Last year, it signed a partnership with Brazil's Gerdau Aços Especiais to sell specialty steel to auto parts producers. Also, Açotubo is finishing tubes from Vallourec & Mannesmann and TenarisConfab. 

The company also expects to see an increase in the domestic market share of stainless steel subsidiary Artex from the current 8% to 16%, which is second only to Aperam, formerly ArcelorMittal Inox. 

Specialty distributor plans for jump in oil demand

Major Brazilian specialty steel distributor Aços F. Sacchelli raised its 2011 capital improvement plan from around R$20 million (US$11.9m) to R$33m (US$19.8m). Its goal is to establish new distribution and processing centers and expand two existing plants to meet increasing demand, particularly from the oil and gas sector, Steel Business Briefing learns. 

Oil and gas accounted for 35% of Sacchelli's orders in 2010 compared with 12% in 2009. Demand also is growing from the sugarcane sector, the company notes.

Currently, the distributor is in talks with state-owned energy giant Petrobras regarding a supply contract for specialty steel parts for the pre-salt drilling project, which aims to develop the potentially large oil reserves off the coast of Brazil. The deal may be signed in the coming months, the company says. In addition, Sacchelli recently signed a supply contract with Brazil's Villares Metals, a subsidiary of Austrian specialty steelmaker Böhler-Uddeholm.

Last year, company shipments totaled 37,000 tonnes of specialty steel parts, an increase of 45% from 2009. Also, revenues jumped 46.5%, well above the previously estimated growth of 26%. For 2011, the company expects sales to grow by about 20-25%. "However, this target might be reached as early as mid-year, if strong demand continues to be sustained," it says.

Saudi Arabian flats market waiting to see Egypt calm down

The flat rolled steel market in Saudi Arabia is quiet, as participants wait for the Egyptian protests to calm down to see what will happen. Steel Business Briefing is told by informed sources that the country’s biggest steel producer Hadeed SABIC has not announced its new prices for February bookings yet. It was asking $750-760/tonne for HRC, $830-855/t for CRC, and $930-955/t for HDG in January.

Hadeed SABIC is expected to increase its flat steel prices because the company’s prices are lower than the global market prices. The company has almost filled its March order book and will be accepting orders for April production. Demand is also good in Saudi Arabia and its export markets, SBB is told.

A Saudi Arabian trader comments that, even if the Suez Canal is working as usual, the insurance costs as well as other fees to pass through the canal may increase; this would result in a cost rise for the Middle East’s imports from the CIS and Europe. Therefore, the country’s flat steel users prefer to wait and see before making any import bookings.

Saudi Arabian rebar prices remain unchanged for February

Despite the rumours and widespread expectations for an increase in rebar prices in Saudi Arabia, no change has yet been announced by the producers, local market sources tell Steel Business Briefing. Rebar prices are still unchanged at around SAR 2,900/tonne ($773/t).

Demand is reported to be at around the same level as it was last week, while some traders say that bad weather conditions and floods slightly affect the business in the country.

Some market sources report that disturbances in Egypt might be an opportunity in the next couple of months to export some material to this destination, since the steel production in Egypt is interrupted and a shortage might develop there (see related article).

Sabic gets credit guarantee for new billet plant

The Italian credit guarantee agency SACE has secured a $435m loan provided by HSBC to Saudi Basic Industries Corporation (SABIC) for the expansion project of its steelmaking branch, Hadeed, in Jubail Industrial City, the company tells Steel Business Briefing.

As reported previously by SBB, Italian plantmaker Danieli will supply a plant for the production of 1m tonnes/year of billets and 500,000 t/y of rolled products. It will raise Hadeed’s total production to 6m t/y. 

“By supporting this loan SACE confirms its commitment to sustaining the competitiveness of Italian firms at a time of market uncertainty, covering risks to strengthen the capabilities of the banking system to fund major projects involving Italian enterprises” SACE tells SBB.

January sees record tonnage for iron ore swaps

The volume of iron ore swaps cleared in January hit a record high of 2.62m tonnes worth approximately $470m. The previous record was in April 2010 when 2.59mt worth $450m were cleared.

In January the Singapore Exchange SGX cleared 2.2mt and LCH.Clearnet in London 416,000t. Swaps cleared by SGX and LCH are settled exclusively against the 62% Fe reference price provided by The Steel Index, a subsidiary of Steel Business Briefing.

In addition, the volume of "open interest" on iron ore swaps cleared by SGX reached a record high of 2,867 lots in January. 

The strong growth is a result of moves within the physical market towards monthly price contracts, suggests Kerry Deal, a senior iron ore broker with Clarksons. He points out that the increase in volume came mainly from existing market participants. "[They] increased their volumes in the expectation that ‘fresh blood’ would join the market soon,” he explains. 

Moves by bigger players to actively add depth to the swaps volume has seen the iron ore swaps market grow into a “serious hedging tool”, comments John Banaszkiewicz, chairman of the Iron Ore & Steel Derivatives Association. He adds that there has been a growth in confidence that price indices for iron ore accurately reflect the underlying market.

Separately, TSI has launched two new iron ore reference prices: 62% Fe low alumina (2%), and 63.5%/63% Fe standard alumina (3.5%). Both are basis CFRFO Qingdao port, China. The former is in line with qualities exported from Western Australia and southern Brazil, while the second is relevant to many Indian ores.

Xstrata targets Asia with new magnetite plant

Switzerland-based mining group Xstrata has completed construction of a plant to produce magnetite iron ore as a by-product at its Ernest Henry copper mine in Australia. 

In a statement sent to Steel Business Briefing, Xstrata Copper executive Steve de Kruijff said the plant will produce approximately 1.2m tonnes/year at full capacity, for export to Asia. 

Meanwhile, Xstrata also reported a 47% increase in ferro-chrome production last year “in response to a recovery in market conditions and improved demand, following the suspension of up to 80% of operation capacity in 2009”. In 2010 the company produced 1,165,000 t compared to 786,000t in 2009. 

The firm increased its Australian coking coal output by 1.3m t, or 20%, reaching 7.7m t in 2010 compared with 6.4m t in 2009. Also, the company’s vanadium operation, Rhovan, achieved record volumes of 4,311,000 kg in 2010 compared with 2,284,000 in 2009.

US demand outlook rises, but fewer expect higher prices: TSI

In a sign that the US economy may be strengthening, the latest market survey results from The Steel Index (TSI), released this week, show that more companies in North America expect higher demand since last week. However, the number of companies expecting higher prices in the next three months has fallen in all regions. 

Among US companies, 78% predict higher offtake in the next three months, up from 64%, and 18% expect stable demand. Globally, 57% of respondents expect higher demand, down from 61%, while an almost unchanged 36% predict stable offtake and 7% forecast lower demand. In Europe, 44% of companies expect higher demand in the next three months. 

65% of respondents globally expect prices will increase in the next three months, sharply down from 81% in the previous week's survey. In Europe, 64% of companies expect higher prices, down from 85%, with 24% foreseeing steady prices in the next three months. The number of North American companies expecting higher prices fell to 65% from 73%, and those foreseeing lower prices rose to 22%. 

48% of US companies noted higher stocks than a week earlier, up from 38%, as restocking increases. However, 16% of respondents in Europe reported higher steel inventories, down from 22%, while 57% had unchanged stocks. For companies globally, 24% noted higher stocks and 52% had steady inventory levels, up from 47% in the previous survey. 

More information about TSI - which is majority-owned by Steel Business Briefing - is available on its website www.thesteelindex.com .