Pre-New Year rebar import market flat in Singapore

Friday, 04 February 2011

Import buying of rebar has slowed down in Singapore over the past week due to the Chinese New Year holiday. Theoretical-weight rebar in Singapore was last booked at $720-730/tonne cfr, but offer prices are higher at $730-750/t cfr. Turkish material was sold at $720/t cfr and Korean at $725-730/t cfr , trading sources report.

Before the holidays, Turkish rebar was offered at around $730/t cfr and at $750/t for Korean material. “The market is quiet, but some mills have indicated that they will raise their asking prices after Chinese New Year,” a trader tells Steel Business Briefing.

Boron-added rebar from China was heard booked around ten days ago at $710/t cfr Singapore. A trader who heard the booking was for 10,000-20,000 tonnes, believes there were no bookings made after that. 

“Mills will continue to hike offer prices after Chinese New Year. But I am unsure if rebar imports will transact at higher prices, because domestic demand cannot support the continued price hikes,” another trader tells SBB.

Nippon Steel plans to merge with Sumitomo Metals

Friday, 04 February 2011

Nippon Steel Corp and Sumitomo Metal Industries – Japan’s largest and third largest steel producers – are discussing a merger. If agreement is reached they could combine in October 2012. It would be the biggest consolidation in the Japanese steel industry since 2003 when NKK and Kawasaki Steel merged to create JFE.

An NSC-SMI merger would form the world’s second largest steel company with a production capacity exceeding 50m tonnes/year of crude steel. This would remain some way behind the largest, ArcelorMittal with about 100m t/y, but would be ahead of JFE (34m t/y).

NSC and SMI already have cross-shareholdings in each other and operate a number of joint ventures producing stainless steel, sheet piling and other products. They established a strategic alliance, which also involves smaller steelmaker Kobe Steel, in 2002.

“The merger still has to be approved by the Fair Trade Commission and, given that the combined entity’s crude steel output will amount to 44% of the country’s total output, it may not be approved,” a Tokyo-based security analyst tells Steel Business Briefing. But he noted that the FTC had given its approval to the creation of JFE – “so, it’s still possible it will go ahead”.

The companies said the merger meant they would be better placed to meet growing demand for steel in developing countries and compete in a more challenging global environment.

Japan produced 109.6m t of crude steel in 2010, of which NSC contributed 34.5m t, and SMI 13.3m t.

Rebar demand in Morocco seen rising 5-10% per year

Friday, 04 February 2011

Demand for rebar in Morocco is set to increase by 5-10% per year until 2015, boosted by government-funded construction and infrastructure projects, Steel Business Briefing learns from local sources. 

“The government announced an important social housing plan. We expect around 200,000 new houses to be built every year,” a steel trader in the country explains to SBB. Meanwhile new projects for highways, high-speed railways and infrastructure for the Soccer African Cup in 2015 are also expected.

In 2010 around 1.6 million tonnes of rebar were consumed in the country, while production capacity is set to be over 2.5mt/y. “The increasing demand in the country will help the producers to work together. Local producers should compete against imports, not each other,” a source at a domestic mill explains to SBB, stressing that rebar offers are now at around $790-810/t ex-works.

Meanwhile, Sonasid, the largest rebar producer in the country, is currently producing at 70% of its melt shop capacity, according to the company. “Two years from now, we expect that demand will increase and our capacity utilisation will get close to 100%,” the company tells SBB during a visit to the company’s Jorf Lasfar facility.

Sonasid has a capacity of 1mt of crude and 1.1mt of rebars and wire rod. The company imports billets for the production of wire rod at its facility in Nador, northern Morocco.

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Brazil loans US$2.9bn to mining and steel in 2010

Friday, 04 February 2011

Mining and steelmaking businesses received around R$4.9bn ($2.9bn) in loans from the Brazilian development bank, BNDES, in 2010. The businesses accounted for about 6.2% of the R$78.8bn ($47bn) loaned by the bank to the country's industries last year.

Vale, ArcelorMittal Brazil, Companhia Siderúrgica do Atlântico (CSA) and Aços Villares were among the top loan recipients in the mining and steelmaking sector, Steel Business Briefing learns.

Iron ore miner Vale received around R$422m from the bank in 2010, compared with R$1.1bn in 2009. Steelmaker ArcelorMittal Brazil received the highest amount in the sector at R$1.6bn. It received only R$67m in 2009.

New slab mill CSA, a Vale-Thyssenkrupp joint venture, obtained R$908m in 2010. Specialty steel producer Aços Villares, currently incorporated into Gerdau SA, was loaned R$252m and R$305m by BNDES in 2010 and 2009, respectively. 

According to the bank, Brazilian steel companies spent US$20.3bn between 2000-2009, mainly in modernization, expansion and technological upgrades, adding 13.5m tonnes/year of capacity. The bank projects that the industry will invest US$27.7bn during the 2010-2013 period.

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North European coil buyers anticipate yet higher mill offers

Friday, 04 February 2011

Most coil producers in northwest Europe remain out of the market and continue to “hint at” an increase in offer prices when they return. Anticipated offer levels have grown again, after a leading regional producer quoted firmly for April production and the remaining mills “feel out” an acceptable price level for the market, sources tell Steel Business Briefing.

Although most mills are not quoting, material can be bought if the buyer proposes a concrete deal, detailing the specifications and volume required, a Benelux trader says. March production is more or less sold out and mills believe they can achieve higher prices for April production, he adds. Buyers, however, continue to wait it out, and some already factored in second quarter stock when purchasing in December.

Although coil consumption outside Germany has strengthened moderately, new bookings are few, as material is being consumed from stock. “It is a wait and see situation,” another Benelux trader says. “There is minimal buying happening for Q2 production,” he adds.

Imports are not expected to play a significant role in the first half of February at least, as sources of imported material are currently hard to find and the earliest delivery time is June. “This is too far away to cover needs for Q2,” a Benelux trader comments. “Moreover, the Far East is effectively closed for business due to holidays,” he notes.

Domestic mills are expected to follow the lead of the one producer which has quoted so far, but at €660-680/tonne ($900-928/t) base ex-works for hot rolled coil, sources are sceptical whether the market will accept these offers. Cold rolled coil is expected to be offered at €750-760/t.

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SBB Special Report: Black Sea billet prices sliding

Friday, 04 February 2011

Black Sea billet prices have declined considerably this week, in what market sources call the beginning of a major correction caused by a combination of several factors, but ultimately decided by the force majeure situation in Egypt. "Billet is under a lot of pressure right now; the only direction available is down," one traders tells Steel Business Briefing.

Already struggling to remain at the last month's levels of over $650/tonne fob Black Sea, the lowest billet offers from traders so far have been at $590/t fob Black Sea. But no-one is rushing to buy at these levels, sources say, as buyers are not in the market and traders await further declines.

"The pool of demand is out of the market – Far East celebrating New Year and Iran has enough arriving cargoes to keep it supplied for a couple of months," one trader says. Cargoes destined for Egypt – normally a large billet importer – are being diverted to Turkey, which is reported to have bought two small distressed billet cargoes at $610/t cfr, he adds. 

"Add large – perhaps as much as 20 cargoes – consignments of scrap currently en route to Turkey (see separate report), and Turkish producers' own inability to sell longs, as Egypt was – again – a major buyer, and one can see that the market can do nothing to remain where it is," another trader says. 

Next week sentiment looks glum, as Russian producers are expected to come out with March allocations, followed by Ukrainians towards the end of the week. "There is little chance they will be able to sell, but the good news is that they won't have excessive volumes," a Russian producer says. Another positive factor is that those who can switch to casting slab – Evraz and Metinvest – most certainly will do it, one trader says.

The end of the month, when the "expensive cargoes" will start arriving, is going to be more difficult still, and is likely to see the bottom of the current descent, he concludes.

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Sandvik builds tube mill near Chinese service centre

Friday, 04 February 2011

Sandvik Materials Technology has built a specialist mill to make hydraulic and heat exchanger tubes alongside its existing stainless steel strip service centre in Zhenjiang, Jiangsu province, China,Steel Business Briefing learns from the Swedish producer.

The tube line was completed in late 2010 and has undergone testing but has yet to begin producing commercially, Sandvik says. The outgoing ceo of Sandvik, Lars Pettersson, described it as “the most advanced tube plant in the whole of Asia”.

The move is part of SMT’s long-term strategy to expand its presence to the Asia-Pacific region, SBB notes. The company could not be reached for comment before deadline on details of the tube mill’s operations.

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NSSC lifts austenitic CRC and plate prices

Friday, 04 February 2011

Nippon Steel & Sumikin Stainless (NSSC) is lifting its domestic prices of austenitic cold rolled stainless coils for February shipments and plate for February contracts/April shipments by ¥10,000/tonne ($122/t), Steel Business Briefing learns from the company.

The price hike is to absorb higher nickel prices in January, which rose by US69 cents/lb to $11.63/lb. The total price rise for austenitic CRC since August 2010 has become ¥40,000/t ($488/t). NSSC is also lifting the extra quality charges for SUS316 and SU316L coil by ¥20,000/t, according to molybdenum content.

NSSC’s price for austenitic CRC below 2mm for February shipments becomes ¥380,000/t ($4,634/t), with an alloy surcharge of ¥85,000/t ($1,037/t), and a base price of ¥295,000/t ($3,598/t). The company is retaining its ferritic CRC prices at ¥255,000/t ($3,110/t), with an alloy surcharge of ¥10,000/t, and a base price of ¥245,000/t.

The company notes that the price increase for chrome is because of a chronic electronics deficiency and also a shortage of coal, which is causing anxiety of further electronics deficiency. Coal prices have risen because of the supply shortfall caused by the Australian floods and overall higher raw materials costs.

Other Japanese stainless producers, Nisshin Steel and Nippon Metal Industries, have decided to lift their austenitic CRC prices by ¥20,000/t ($244/t) for February contracts. These changes have also been made to absorb higher nickel prices following the ¥20,000/t increase from November contracts, SBB notes.

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Semi-soft coal producers win 26% increase, hard coal dips

Friday, 04 February 2011

Australian producers of semi-soft coking coal have won a 26% price increase for January-March contracts, settling with Japanese steel mills at $180/tonne fob compared with $143/t in the fourth quarter of last year.

The settlement brings semi-soft coking prices in line with low-volatile PCI coal contracts for January-March, which were settled at $180/t in December, up 20% on the $150/t for October-December contracts.

Japanese traders – who were yet to receive confirmation from mills of the settlement – told Steel Business Briefing that as semi-soft coking coal normally trades at a discount to PCI coal, the new contract price was “comparatively high.” 

“But the circumstances are unusual with the [Queensland] floods, so they may consider it a reasonable price in the current market,” a Tokyo-based trader said.

Analysts in Australia said the new contract price was lower than expected given the ongoing supply constraints caused by the recent severe weather. But traders and mills in Japan, Korea and India have consistently told SBB that their metallurgical coal supply situation was not desperate, and that they could draw on sources outside of Australia, notably the US, Canada and Russia.

Despite the supply constraints in Queensland’s Bowen Basin, hard coking coal spot prices have retreated by $15-35/t from highs of $380/t early last week, tempering expectations that second quarter HCC prices could be well beyond $300/t.

BHP Billiton-Mitsubishi Alliance (BMA) is expected to cite the price volatility seen in recent weeks to push hard for monthly rather than quarterly coking coal contract prices.

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Noble and Australian explorer ink Mongolian alliance

Friday, 04 February 2011

Australia’s Xanadu Mines has formed a strategic alliance with Hong Kong trader Noble Group aimed at developing coking coal, iron ore and ferro-alloys projects in Mongolia.

Under the terms of the alliance, Noble will boost its stake in Sydney-based Xanadu to almost 10% via a share placement, with the funds used for exploration work in Mongolia. Future projects could be set up as 50:50 joint-ventures between the two companies.

Xanadu’s existing Mongolian thermal coal projects in Galshar and Khar Tarvaga will not come under the terms of the alliance with Noble. Xanadu chairman Brian Thornton told Steel Business Briefing that, despite the flurry of international interest in Mongolia’s untapped resources, there were “still a lot of exploration opportunities.”

He said Xanadu had been operating in Mongolia for six years and would carry out exploration work, while Noble would focus on marketing raw materials produced at the projects. “A big challenge is how you market the product out of Mongolia which is landlocked,” he said.

He noted that the Mongolian and Russian governments had recently agreed to build a new rail link from coking coal projects in Mongolia to the Russian border, from where it would join the Trans-Siberian railway. Despite this, Thornton said the "obvious market" for coking coal was China – though the Chinese were making it difficult for companies looking to export.

“It’s not easy selling coking coal from Mongolia into China; very few people are allowed to do it, but Noble has a contract to import into China from Mongolia,” he told SBB.

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Japanese mills plan to boost output in January-March

Friday, 04 February 2011

Japanese steel mills are targeting crude steel production of 28.4m tonnes in the January-March quarter, 2.6% higher than the previous quarter and up 7.1% year-on-year, Steel Business Briefing learns from data provided by Japan’s Ministry of Economy, Trade & Industry (Meti).

But a Meti spokesman expresses concern that mills have lifted their production plans primarily with exports in mind, and that output may be “too much for actual demand.” He says that, while export demand in Asia is still strong and growing in dollar terms, the appreciating yen will reduce margins and could limit export volumes.

According to Meti, the mills plan to lift steel production destined for the domestic market by 5% from October-December, and by 1.4% from January-March 2010, to 15.66m t. Steel output for exports in January-March could increase to 9.2m t, up 2.4% quarter-on-quarter, and 8.4% y-o-y.

The Meti spokesman noted that current production would be mainly fulfilling orders made in anticipation of higher raw materials costs pushing up steel prices. As a result, he said mills needed to plan their production schedules carefully.

“It’s possible that orders may fall after the anticipatory buying, which could cause a production drop in the next quarter,” he added.

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Works proximity should aid Nippon Steel-SMI merger

Friday, 04 February 2011

The joint taskforce Nippon Steel and Sumitomo Metal Industries (SMI) are forming to action the integration announced on 3 February can look to rival JFE Steel for clues to a successful merger. 

JFE Steel, created from the April 2003 joining of Kawasaki Steel and NKK Corp, is a template for successful corporate mergers in Japan where not all company marriages begin as happily. Indeed, the 1970 merger of Yawata Iron & Steel and Fuji Iron & Steel that produced Nippon Steel was still creating sparks two decades later. 

Works proximity has played an important part in JFE’s smooth evolution. For example, what were then Kawasaki Steel’s Chiba works and NKK’s Keihin works sit at opposite ends of Tokyo Bay, allowing the easy integration of logistics and exchanges of personnel and raw materials when necessary. Nippon Steel’s Kimitsu works in Chiba, and SMI’s Kashima works in neighbouring Ibaragi should enjoy the same advantages. 

Similarly, in western Japan the former Kawasaki Steel’s Mizushima works and NKK’s Fukuyama plant lie only 50 kms apart and today are jointly managed as JFE’s West Japan Works. Nippon Steel’s Yawata complex and SMI’s Kokura plant are together on Kyushu’s northern tip while SMI’s Osaka works and Nippon Steel’s Sakai plant are less than 20kms distant. 

Nippon Steel and SMI are already partners in East Asia United Steel Corp which owns Sumikin Steel – operator of upstream facilities at SMI’s Wakayama works near Osaka. Sumikin Steel is supplying to slabs to Nippon Steel’s Hirohata works (which has no blast furnace), as Steel Business Briefing has reported.

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Cognor gets go-ahead to acquire Zlomrex companies

Friday, 04 February 2011

Shareholders of Polish steel distributor Cognor have consented to it acquiring three subsidiaries of its own parent company Zlomrex,Steel Business Briefing learns. The subsidiaries are: steel mills Ferrostal Labedy and Huta Stali Jakosciowych and scrap business Zlomrex Metal. 

Cognor is 64%-owned by Zlomrex, which backs the sale but did not take part in the voting. 

Zlomrex offered Cognor the opportunity to acquire the three companies in December. The proposal was originally rejected by Cognor’s shareholders at an extraordinary general meeting at the end of December, which was attended by only 2% of the minority shareholders with voting rights.

The selling price of the three companies will not exceed PLN 703m (€180m) and will be adjusted to take into account various monetary settlements between Zlomrex and Cognor.

Cognor itself is close to exiting the distribution sector, having agreed in November to sell its Polish trading branches to ArcelorMittal Distribution Solutions, and being on the verge of selling the multi-national part of its distribution business, Cognor Stahlhandel.

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Rautaruukki sees its steel business improve markedly

Friday, 04 February 2011

Finland-based producer Rautaruukki saw its move towards speciality steels and emerging markets bear fruit last year, according to its latest results conference call monitored by Steel Business Briefing.

Net sales improved from €1.9 billion in 2009 to €2.4bn ($3.3bn) last year on the back of improvements in its steel business, where order intake grew 52%. Russia experienced strong growth, as did Sweden where the company bolstered its product offering. 

Its new special steel markets of Brazil, China and Turkey also performed well, with special sales doubling on 2009. The company plans to increase special products to 60% of its steel business, up from 27% last year and 30% in Q4, as reported. To this end it will continue to develop its distribution network in emerging markets. 

However, Rautaruukki, similar to most other producers, was afflicted with a weak fourth quarter as steel selling prices fell and its solutions business remained unprofitable. The company made a Q4 loss of €5 million, which was below the expectations of some analysts. It expects steel prices to rise this year on the back of improved demand and higher raw material prices, and sees group net sales rising 20-25%.

Ruukki Metals worked to 90% of capacity from June, after the modernisation of Raahe blast furnace 1, and produced 2.2 million tonnes in the year. The company is now building slab inventory ahead of the Q3 modernisation of BF2 at Raahe. It currently has 200,000t of slab and sufficient coking coal inventories to last until summer.

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Turkish flat steel buyers waiting for foreign market signals

Friday, 04 February 2011

Flat rolled steel buyers in Turkey are waiting to see the price and demand signals from the foreign markets as well as demand from the local end-users. The CIS producers are expected to announce their new import offers next week, and these prices are expected to be higher than the previous offers. 

The crisis in Egypt may lead to a shortage of 1.2mm and 1.4mm thick hot rolled coils, that could result in further price increases, sources tell Steel Business Briefing.

Turkish domestic flat steel prices have not changed in the last 3-4 weeks. HRC is sold at $830-850/t, and 0.5mm thick hot-dup galvanised coil is quoted at $1,000-1,050/t from the producers. Turkish producers and traders say demand is weak because the buyers had made bookings at lower prices when prices started to increase.

The possible shortage of flat rolled steel will be an advantage for Turkish producers, sources contacted by SBB believe, as it will lead to more demand from the country’s Middle Eastern and European export markets.

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ArcelorMittal to relight idled blast furnace in Germany

Friday, 04 February 2011

ArcelorMittal’s Eisenhüttenstadt steelworks in eastern Germany will relight its No 1 blast furnace in the coming days, a group spokesperson tells Steel Business Briefing.

No 1, the smaller of Eisenhüttenstadt’s two blast furnaces, was idled in December because of lower steel demand in Europe in the fourth quarter, as reported. It has a capacity of 550,000 tonnes/year of pig iron. The larger furnace, with a capacity of around 1.7m t/y, is in operation.

Eisenhüttenstadt produces hot rolled, cold rolled, hot-dip galvanised, galvannealed and organic coated coils, and has been largely serving eastern European markets.

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Celsa cuts billet production in Norway

Friday, 04 February 2011

Reinforcing bar producer Celsa Armeringsstål in Norway is reducing billet output in response to high local electricity prices, Steel Business Briefing learns from local press reports. 

The plant in Mo i Rana has been trimming melt shop output since early December after electricity costs surged, SBB learns. Since late December the company has been halting billet production for up to six hours a day, during peak hours for electricity costs in the morning and mid-afternoon. 

This is estimated to have reduced the plant’s billet output by 110 tonnes/hour. However, the mill’s rebar production has not been affected, SBB understands. 

In late 2010, Celsa completed a NOK 320m ($56m) investment project to preheat steel scrap for the EAF, which will increase production capacity and reduce costs. As part of the investment Celsa has also installed a new dust filtering system to remove heavy metal from the plant’s emissions. Contamination allegedly arising from the Mo i Rana industrial estate had previously been a source of tension with the local authorities, SBB understands.

Celsa Armeringsstål has an annual nameplate capacity of 500,000 tonnes of rebar and 200,000t of billet. At full capacity, the EAF's annual scrap demand is 750,000t.

Celsa did not respond to requests for comment by SBB’s deadline.

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Outokumpu puts staff on notice at pipe and fittings plant

Friday, 04 February 2011

Finnish stainless producer Outokumpu is laying off 30 staff at its Örnsköldsvik pipe and fittings plant in Sweden, the company tellsSteel Business Briefing.

The move is designed to reduce costs. Örnsköldsvik, which employs 170 people, has a theoretical capacity of 6,500 tonnes/year and is not currently running at full tilt. The reduced headcount is unlikely to see any further fall in utilisation rates, SBB understands. 

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Ferro-silicon market still quiet in Europe, should pick up

Friday, 04 February 2011

The price for ferro-silicon in Europe has softened in recent weeks as business wanes and the Chinese New Year sees markets slow down in February, Steel Business Briefing learns from trading sources.

“The price has come off a little and there’s very limited buying. The Chinese had increased production, but they’re on holidays now and the market has slowed,” a trader tells SBB.

The price of FeSi is now trading at around €1475/tonne, which is down from €1,500/t from last month.

“Demand is very poor, however sentiment is quite optimistic. People seem to have bought before Christmas and have some Q1 material left-over, so they’re not buying,” another trader says.

Consumers have bought all their requirements for Q1, and they should be coming back to market in four weeks time to start buying for Q2, the trader says.

“The price should hover around €1,450/t for the next few weeks and we’re hopeful things will pick up after that.”

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Turkish mills stop deep-sea scrap bookings, prices stable

Friday, 04 February 2011

Turkish steel mills stopped their deep sea scrap bookings this week after securing around eleven cargos from various suppliers in USA and EU which are totalling around 300,000 tonnes, Steel Business Briefing learns from the market sources.

They say that the offers remain stable but not determinative for the market since there is no booking. US suppliers are currently asking $495-500-505/tonne cfr for HMS 1&2 80:20, shredded and bonus respectively, while the EU offers remain at $485/t cfr Turkey, SBB learns.

The impact of the situation in Egypt on the scrap market remain unclear. It is heard a 30,000 tonnes of scrap cargo was stuck in an Egyptian, but this has not been confirmed. “A lot depends on when Egypt returns to some form of normality,” comments a US supplier. 

In the CIS region there is some downwards correction on recent business. Some short-sea A3 grade scrap cargoes were sold around $475/t cfr, SBB hears.

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Ferro-chrome price in Europe remains steady, may weaken

Friday, 04 February 2011

The market for ferro-chrome in Europe is steady with prices stable and not likely to make too many movements anytime soon, traders tell Steel Business Briefing.

“There’s excess stainless steel and ferro-chrome capacity at the moment, so markets are relatively quiet,” an analyst says.

High carbon prices for FeCr are now trading in the range of $1.22-26/pound, up from $1.20-1.22/lb last month.

“Demand is steady, but it is creeping up slowly. There’s also plenty of material around, so the price is not being driven by demand at this stage,” a trader tells SBB.

The market remains relatively steady and prices will “likely hold firm, dropping back only a few cents/lb”.

South African FeCr producers have been trying to push up prices recently, saying their costs have risen due to high electricity prices and a strengthening rand. But the trader says: “Europeans are tired of this argument as they’ve been saying this for the past two years,” so he doubts that any major price increase will come soon.

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EU real steel demand to grow solidly in 2011: Eurofer

Friday, 04 February 2011

Real steel consumption in Europe is forecast to continue to grow in 2011 and into 2012, Steel Business Briefing learns from steel producers’ federation Eurofer. 

The prospects for final demand “look positive”, Eurofer says in its latest market report. In addition to rising demand from the manufacturing sector, demand for construction steel is likely to increase slightly this year, after having detracted from real steel demand growth for three years. 

Overall, real consumption growth exceeded expectations to reach 4.2% in 2010, which owes much to the “robust recovery of manufacturing recovery” in 2010. Real consumption grew 7% in Q3 2010 and 8% in Q4. Eurofer predicts rises in real consumption of 4.4% in 2011 and 3.8% in 2012, based on expectations that rising investment in machinery and equipment would drive higher steel intensity.

By comparison, apparent steel consumption in the EU, which reflects movements in stocks, is forecast to slow to 5.7% y-o-y in Q1 2011, after double-digit growth throughout 2010 of 21.3% y-o-y overall and 11.9% in Q4. The boost from restocking in the steel supply chain abated after the first half of the year, and end-users purchased for their immediate needs for the middle of the year onwards, Eurofer notes.

Stock levels among end-users and distributors remain low to normal. Despite the risk that steel prices could rise in response to rising raw materials costs, the market looks to remain relatively well balanced for the time being. Eurofer forecasts apparent consumption growth of 4.4% this year, broadly aligned with likely growth in final steel consumption.

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Most carbon exchanges 'in no rush' to restart spot trading

Friday, 04 February 2011

Most spot carbon credit trading markets remain closed today, Steel Business Briefing is told. Five national carbon credit registries will, however, reopen, allowing transfers for some 44% of European Union Allowances (EUAs). However, exchanges are wary of resuming spot trades until outstanding issues have been resolved.

Exchanges are waiting to ensure that questions over security and the location of stolen credits have been resolved, they say. “We are in no rush” to restart spot trading, Henrik Hasselknippe of the New York-based Green Exchange, tells SBB. The London-based European Climate Exchange is also not conducting spot trading until further notice. Paris-based BlueNext was the only major exchange to begin spot trading today.

The registries of France, Germany, the Netherlands, Slovakia and the UK are to reopen today, the European Commission tells SBB. After a series of hacking attacks and the theft of some credits, all European registries were closed on 19 January. This forced exchanges to stop spot trading of EUAs, although futures trading was unaffected. 

Even in the reopened registries there could be credits missing and traders in possession of stolen credits could have them confiscated without compensation, according to Trevor Sikorsky, head carbon analyst at Barclays Capital. He adds that this risk could discourage traders from re-entering the spot market.

March 2011 EUA contracts settled at €14.76/t ($20.29/t) on 2 February, up from €14.69/t a week earlier. 

Trevor Sikorsky and others will be discussing the future of the Emissions Trading System and its impact on the steel industry at SBB's Green Steel Strategies event on 5-6 April in Brussels.

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Czech steelmakers agree to limit emissions to stave off smog

Friday, 04 February 2011

Steelmakers ArcelorMittal Ostrava and Evraz Vitkovice are among eight industrial companies in the Czech Republic to have signed a voluntary agreement to limit dust emissions, including by reducing production if “operational conditions allow.”

Authorities in the Moravian-Silesian region, in the east of the country, encouraged companies to engage in the initiative as forecasters warned of impending smog in the area. Smog in the Ostrava-Karvina district already prompted ArcelorMittal Ostrava to cut output in January 2010 and, more recently, in December, when it lowered sinter and coke output.

“The companies will accept the voluntary reduction of their production, only if operational conditions allow it,” deputy governor of the Moravian-Silesian region, Miroslav Novak, noted.

“For us [the voluntary agreement] is another step in our environmental measures, which we carry out continually,” ArcelorMittal Ostrava tells Steel Business Briefing. “All dust creating activities, such as coke production, are stopped,” it says.

“We are taking steps resulting in the decrease of dust levels, which will not affect our employees’ safety, production technology or our obligations towards customers,” Evraz Vitkovice tells SBB. “Limiting dust emitting activities does not necessarily mean a decrease in the volume of production,” it comments. “We use slabs from stock, so lower production does not affect plate output,” it adds.

Fellow Czech steelmaker Trinecke Zelezarny declined to sign the agreement, saying it has invested considerably in environmental measures already, and pointing to a potential loss of competitiveness.

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Severstal sways Sollers and AvtoVAZ to accept price hikes

Friday, 04 February 2011

Russian steelmaker Severstal has agreed a new annual supply contract with Russian carmaker Sollers. The contract specifies delivery volumes of hot and cold rolled coil and base prices, as well as a mechanism for adjusting the final price according to indices tracking spot markets. Severstal uses indices of world steel prices published by Steel Business Briefing and indices of Russian domestic prices from Russian information provider Metalltorg. A 20% deviation in either direction in the indices’ average value triggers a change in effective prices, SBB learns from Sollers.

Sollers appreciates Severstal using independent price assessments. However, “According to the formula based on the indices, coil prices should have hardly increased in 2011. But in January Severstal raised them by 20% month-on-month, as the old contract expired and it proposed applying the formula resting on much higher base prices,” a Sollers representative claims. Sollers had to accept: Severstal supplies 65% of its automotive sheet requirements and withdrawing orders would be critical for production, the representative adds.

Severstal supplied 40,500 tonnes of coil to Sollers last year. Sollers’s Ulyanovsk Automotive Plant (UAZ), its only subsidiary currently buying autosheet, produced 55,000 SUVs and light commercial vehicles in 2010, and aims to make 57,000 this year.

Along with fellow carmaker AvtoVAZ, Sollers filed a complaint with Russia’s federal antimonopoly service (FAS), after Severstal notified it of the price hikes, but FAS did not find any breach of competition law in Severstal’s behaviour. As reported by SBB, AvtoVAZ has signed a contract with Severstal, accepting a 30% price rise for February. “On six specifications, Severstal supplies coil that we cannot source elsewhere in a tight schedule,” an AvtoVAZ representative comments.

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Metalloinvest to raise iron ore concentrate output by 10%

Friday, 04 February 2011

Russian miner and steelmaker Metalloinvest plans to raise its production of iron ore concentrate by 10% to 38.5m tonnes in 2011, it tells Steel Business Briefing. 22mt should be produced at its Lebedinsky mining and beneficiation plant and 16.5mt at its Mikhailovsky plant. Metalloinvest is Russia’s largest iron ore producer.

The company may also make a decision in the second half of the year on its long mooted initial public offering (IPO) of shares, it adds. The IPO is likely to take place on the London Stock Exchange in autumn 2011 or in 2012, depending on the company’s preparedness, SBB understands.

Metalloinvest exported 4mt of iron ore products to China last year, and its relatively small trading volumes with Asia, particularly China, dissuade the company from considering the Hong Kong Stock Exchange as a serious alternative to London, it says.

In 2010, Metalloinvest produced 35.1mt of iron ore concentrate, up 18% on 2009, 18.5mt of pellets, up 15%, and 2.3mt of hot briquetted iron (HBI), up 5%. It extracted 91.6mt of raw iron ore last year, compared to 79mt in 2009.

The company’s pig iron output, though, fell by 6% to 2.6mt in 2010, and its crude steel output fell by 7% to 6mt. Its steel products’ output was roughly stable at 5.6mt, down just 1% on 2009.

Metalloinvest produces steel at Oskol Steel Plant (OEMK) and Ural Steel. Steel production at OEMK was stable, exceeding 3mt, while production at Ural Steel decreased by over 10%, SBB hears from analysts. Ural Steel closely watches changes in the economic value of pig iron and steel production and adjusts volumes accordingly, Metalloinvest tells SBB.

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Deacero starts construction of new longs mill

Friday, 04 February 2011

Mexican steel producer Deacero started construction of its new longs mill in Coahuila state, close to its existing facilities in Monterrey, Steel Business Briefing learns from the company.

With an initial investment of around US$500m, the plant will be able to produce 1.5m tonnes/year of rebar and wire rod upon completion of the first stage, scheduled for the fourth quarter. A second phase, with an additional investment of US$250m, will increase the facility's longs output to 3m t/y in August 2012.

Deacero president Raul Gutierrez said during a ceremony to lay the first stone earlier this week, that the Mexican steel industry should continue to invest in capital improvements to increase its competitiveness. "We need to review certain policies to fight Asiatic competition in a proper way," he added.

The executive previously told SBB that this new project will help the company increase overall output by 50% and that it aims to meet both Mexican and US market demand. 

As previously reported, equipment for the new mill will be supplied by Italian plantmaker Danieli.

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Northwest to expand Kansas pipe mill capacity 50%

Friday, 04 February 2011

Northwest Pipe Co plans to expand its Kansas pipe mill’s total capacity by at least 50% this year, Steel Business Briefing reports. 

The Vancouver, Washington based firm expects its mill in Atchison, Kansas, to produce 200,000 short tons of pipe by the fourth quarter, according to a company representative. 

The mill will also up its maximum wall thickness from 0.281 inches to 0.375 inches, which is standard. 

“Being able to produce standard wall pipe products will greatly increase the markets available to us and enhance our ability to serve both our API and ASTM customers,” said CEO Rich Roman. 

Financial details of the expansion were not disclosed. 

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PTC hikes US ERW prices by $105/s.t

Friday, 04 February 2011

US tube producer PTC Alliance is hiking its ERW product line by $105/short ton effective with orders beginning February 21.

The increase affects all non-contract hotrolled and coldrolled products, Steel Business Briefing understands. 

Existing orders scheduled to ship before February 21 will not be subject to the increase.

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DOM pipe moving up 8% in US market

Friday, 04 February 2011

PTC Alliance, Metal-Matic and Wheatland Tube are moving up 8% for all non-contract drawn-over-mandrel pipe orders, Steel Business Briefing understands.

The increase will take effect with shipments beginning February 21. 

Current orders scheduled to ship prior to February 21 will be price-protected. 

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Canada drill forecast for 2011 revised upward

Friday, 04 February 2011

Higher crude oil prices mean Canadian energy firms will drill 500 more wells in 2011 than previously forecast, according to the Calgary-based Petroleum Services Association of Canada (PSAC).

The revised forecast is a 4% increase from the previous forecast, which was released in November. 
Assuming an average price of $85/barrel (West Texas Intermediate), PSAC now forecasts 12,750 wells drilled for 2011, or a 5% increase year-on-year. 

Saskatchewan is predicted to lead all provinces in the number of new wells drilled, rising 11% y-o-y as the Bakken shale formation draws additional oil rigs, Steel Business Briefing understands.

Alberta will have 8,390 wells drilled in 2011, up 3%. 

"We continue to see an escalation in not only the amount of horizontal wells being drilled, but also in the length of these wells," said Mark Salkeld, president of PSAC. "The industry should see north of 5,000 horizontal wells drilled in 2011."

Salkeld also mentioned that a shortage of skilled labor would be a primary constraint on drilling capacity in the coming year.

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Carpenter, Latrobe hike tool steel base prices

Friday, 04 February 2011

Pennsylvania specialty steel producers Carpenter Technology Corp and Latrobe Specialty Steel are hiking base prices for their tool steel product lines.

Carpenter will increase base prices by 5-7% for its tool steel and specialty powder metal products slated to ship in March, Steel Business Briefing reports.

Latrobe Specialty will increase prices by 5-15% for its tool and high-speed steel lines, as well as its powder metal products, air-melt stainless steels and remelted alloys. 

The increases are effective with new orders beginning February 14. 

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US Steel names transport, procurement chiefs

Friday, 04 February 2011

US Steel says Malisa Sommers has been appointed president and managing director of transportation of Transtar Inc - the steelmaker's transportation subsidiary.

Sommers' responsibilities will include the logistics services group at US Steel facilities in North America, as well as operations at the railroad and barge companies that comprise Transtar Inc - including Birmingham Southern Railroad Co, Fairfield Southern Co, Gary Railway Co, The Lake Terminal Railroad Co and Texas & Northern Railway Co.

In addition, Miroslav Kiralvarga will relocate to the US from the Slovak Republic to succeed Sommers as GM of global materials management and procurement operations. Elena Petraskova will return to Slovakia after a four-year assignment in North America to assume Kiralvarga's former role of VP of management services and administration for US Steel Kosice, the company said in a release seen by Steel Business Briefing.

Kiralvarga and Petraskova's advancements are effective March 1. Sommers' appointment is effective February 1, but she will maintain responsibilities associated with her previous role until Kiralvarga's appointment takes effect.

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AD action against Turkey still pending in Argentina

Friday, 04 February 2011

Antidumping actions against Turkish longs entering Argentina are still being prepared by domestic producer Acindar, the company tellsSteel Business Briefing. 

Although these measures were not on the backburner, January is a notoriously slow business month for Argentina in general, which led to a slight delay in studying the proposal. 

“January is typically a vacation period, which slows things down, however, we are still working on the measures,” Acindar tells SBB.

Since more shipments from Turkey are expected to arrive, the producer is under pressure to finalize proceedings as soon as possible.

Further longs imports from Turkey are still unconfirmed, sources tell SBB, since January and February are slow months in terms of Argentinean consumption. However, March may bring a rise in imports from the country. 

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Brazil tube imports still high in December; exports up

Friday, 04 February 2011

Brazilian tube and pipe imports reached 204,682 tonnes in 2010, a 32.8% increase over 154,126 t in 2009. December imports increased 32.7% compared with November. Also, the country's exports rose 16.9% month-on-month.

Steel Business Briefing learns from the country's custom data that December imports increased to 20,358 t from 15,347 t in November. Japan and China accounted for most with shipments of around 6,190 t and 3,765 t, respectively. 

December exports were 28,267 t, up from 24,186 t in November. However, total 2010 Brazilian tube exports fell 8.2% from 2009 to 198,139 t.

According to Brazilian tube and pipe producer group Abitam, around 45% of the total amount of tubes imported in 2010 came from China. Further actions such as tariff barriers - import duties, customs valuation and several fees - are to be imposed in the Brazilian market this year to discourage high import levels, it says. 

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Pricing behavior mixed for midwestern Brazil charcoal

Friday, 04 February 2011

After two consecutive hikes in January, charcoal prices from the midwestern Brazil state of Mato Grosso do Sul are said to be fluctuating in early February depending on buyer location, Steel Business Briefing learns from domestic charcoal producer group Sindicarv.

Currently, steel mills from Minas Gerais state, in the eastern part of the country, are purchasing the raw material for around R$420-480/tonne (US$251-288/t) delivered. This is a decrease of R$60/t (US$36/t) from the R$480-500/t (US$288-300/t) del registered in mid-January. The decrease could be the result of a slight fall in charcoal demand in the region in early February, SBB notes.

Meanwhile, buyers in Mato Grosso do Sul are paying about R$340-370/t (US$204-222/t) del, which is a slight increase of R$7/t (US$4/t) from the previous R$334-363/t (US$200-217/t) del for the local product.

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Maghreb Steel's new EAF and plate mill to start in Q2

Friday, 04 February 2011

The new electric arc furnace and plate mill at Moroccan flats producer Maghreb Steel are set to start operating in May-June,Steel Business Briefing learns during a site visit.

The equipment, supplied by SMS Siemag, is currently being installed at Maghreb’s Casablanca works. The capacity of the EAF is expected to be 1 million tonnes/year, while the plate mill should produce 0.5m t/y. “The plate production will be directed both to the domestic and the external market,” Faycal Sekkat, commercial director of Maghreb Steel, explains to SBB.

The furnace is expected to boost demand for scrap in the region. “At the moment the quantity of the domestic scrap is not enough for our production, so we will import material from the international market. The furnace’s input will comprise of 70% scrap and 30% of hot briquetted iron,” Sekkat continues.

Meanwhile, the company's new hot strip mill is currently producing around 50,000 t/m, of which 25,000 t/m are used for the internal production of CRC, HDG and PPGI. The rest is offered domestically and into the international market. Trial deliveries have been already sent to clients in Europe and Middle East and the company says these were "successful".

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Italian rebar and wire rod export to Algeria and Libya weak

Friday, 04 February 2011

Italian bar and rod mills are not concluding many deals with buyers in Algeria and Libya, Italian industry sources tell Steel Business Briefing. The two countries are the main export markets for Italian mills in North Africa. 

Algerians are not buying because internal demand is weak and Algerian buyers are waiting for prices to fall. Rebar prices are reported to be €520-530/tonne ($710-723/t) fob, while wire rod prices are reported to be €530-540/t. In turn, Italian sellers are not reducing their prices because they need to offset higher scrap costs. 

Recent regional developments are also influencing exporters' decisions. “I hear that a few Turkish ships full of rebar cannot delivery them and are stuck in Alexandria port [in Egypt]. I am afraid that the same [civil unrest] could happen in Algeria so I am waiting before taking any orders”, a mill producer tells SBB.

Italian mills are selling less to Libya because demand is slightly lower than usual, despite the fact that the Turkish mills are less competitive because their prices are close to those of the Italians at the moment. Turkish rebar prices are around $720/t fob (€523/t), SBB is told.

“In Algeria, the Turkish mills can’t compete because they face import duties, but they are planning to build a 1m t/y rebar mill in Algeria, and this could affect Italian exports,” a trader comments.

Striking Hernic Ferrochrome miners in SA return to work

Friday, 04 February 2011

Some of the 500 workers at Hernic Ferrochrome's smelter operations in South Africa have returned to work after beginning a strike on Monday, the company tells Steel Business Briefing.

Employees walked out over a wage dispute, after demanding a 15% wage rise, while the company offered a 13% rise.

"The strike has had a limited affect on operations and alternative arrangements have been made to minimise the impact by redeploying no-striking staff to critical areas. One shift at the main plant was lost due to the strike," an official says.

“We continue to discuss the matter with the contractors and have encouraged them to engage with the National Union of Mineworkers (NUM) to resolve the strike," says Emmy Leeka, CEO of Hernic. 

Hernic will continuously work with affected contractors to find sustainable long term solutions to resolve the labour issues, the company said.

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Israeli flat steel buying slow, stocks adequate

Friday, 04 February 2011

Demand for flat rolled steel in Israel is weak, as the buyers are waiting for new price offers from import sources, mainly CIS countries. Steel Business Briefing is told by Israel traders that the political problems in the Middle East and North African countries do not affect the country.

HRC was offered to Israel at $790-800/tonne cfr from CIS countries, but the importers believe these prices will increase soon. Israeli flat steel end-users are expecting a price increase as well, but they are not making big bookings because the stock levels are sufficient, SBB was told.

A flat steel trader comments “Prices have no relation to the general business atmosphere; producers are in 2008 mood again. They keep increasing their prices but this has nothing to do with (weak demand) reality.” He adds that the producers should be more cautious if they want to avoid sudden price falls.

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UAE rebar prices follow producers up, but slowly

Friday, 04 February 2011

This week UAE rebar prices have moved up to around AED 2,800/tonne ($762/t) as they had been expected to surpass last week’s retail prices of AED 2,750/t ($748/t). Demand is still reported to be weak, and the retreat in international market prices is dampening the UAE market, local sources tell Steel Business Briefing.

According to market sources, after the announcement of new prices with around AED 200/t ($54.4/t) increase to AED 2,750/t, retail prices followed at a slower pace, and only could reach as the same level as what producers have been offering for February this week, although the February prices were announced two weeks ago.

Some traders comment that they preferred to book imported material from Turkey, seeing the price gap and also the correction in Turkish rebar export offers as an advantage for the current market. Turkish offers have been around $690-700/t fob in the last two weeks.

Regarding recent political instability in the Middle East, UAE sources do not see the long steel market being affected in the short term, SBB was told.

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Chinese New Year weighs on freight rates

Friday, 04 February 2011

Ocean freight rates remain close to or below breakeven levels as market activity slowed even further before the Chinese New Year,Steel Business Briefing learns from shipping market analysts.

Demand was being impacted by cyclones, which have disrupted exports from Australia, as well as the pre-Chinese New Year slowdown. At the same time owners are being forced to absorb higher bunkering costs on the back of increased oil prices. 

The immediate outlook for freight rates looks bleak from an owners’ perspective. As such, there is some evidence that owners are “willing to wait rather than fixing in the current climate,” an analyst at Norwegian shipbroker Fearnleys says. However, SBB has yet to hear much evidence that owners are opting to lay up their vessels.

Rates for Western Australia-Qingdao iron ore shipments have fallen marginally to $6.46/tonne (from $6.60/t last week). The rates for Tubarão-Rotterdam iron ore have fallen to $7.22/t from $7.64/t a week earlier, while Tubarão-Qingdao iron ore shipments have also decreased to $16.56/t, from $17.30/t the preceding week.

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58% Fe iron ore price rebounds up to new peak - Steel Index

Friday, 04 February 2011

The latest daily iron ore reference prices released by The Steel Index (TSI) yesterday, show that the price for 58% Fe content iron ore has moved upwards again during the past week to a new peak. 62% Fe content reference price is back at its recent high, though transactions were limited as trade wound down ahead of Chinese New Year. 

The reference price for 58% Fe content iron ore fines is $1.90/dmt, or 1.2%, higher at $159.40/dmt. This is above the previous high achieved in January.

The reference price for 62% Fe content iron ore fines yesterday was unchanged, after easing slightly and finished at $185.60/dmt. This is still just below the 2010 peak of 21 April. 

Daily freight rates from Brazil to China dropped steadily during the week, finishing 5% lower. Rates from Australia also fell by 2%. Daily freight rates for shipments from east coast of India were unchanged, while rates from west coast eased but recovered to finish unchanged. 

TSI is majority-owned by Steel Business Briefing and specialises in compiling steel, scrap and iron ore reference prices based on actual transaction data. Further details of the methodology and specifications for the two grades of iron ore can be found on the website www.thesteelindex.com. Companies wishing to subscribe to the full set of reference prices or apply to submit iron ore, scrap or steel price data can do so on the website.

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Iron ore supply outlook remains tight

Friday, 04 February 2011

Global iron ore demand will continue to outstrip supply for a while, keeping prices high. 

This supply constraint will continue over the next two-to-three years allowing the major iron ore producers to carry on setting the pricing agenda, notes the latest edition of SBB Insight. 

Most, but not all, investment bank analysts seem bullish about spot prices over the next 2-3 years as significant new production will not come onto the market until 2013-14. The relatively small amount of new capacity coming on stream before then is set to be swallowed by expanding steel mills in China and other Asian countries.

Globally, Australia and Brazil will continue to be dominant producers and exporters in 2011, and Australia will this year further strengthen its position as the world’s largest iron ore producer with overall capacity predicted to increase by almost 10% to 435m t.

For more on the dynamics of the iron ore market outlook see “Tight supply to keep iron ore prices high”, SBB Insight No.136, 3 February

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Rate of price increases slows, and in some cases falls

Friday, 04 February 2011

Long product prices and trading activity weakened last week, as scrap prices fell. With the lower prices, Turkish steel mills returned to the international scrap market: some seven cargoes were booked, totalling approximately 250,000 tonnes. The buying price was down by about $25/t to around $500/t cfr from previously confirmed bookings. 

In contrast, coil prices remained firm, with mills claiming that their prices were insufficient to cover their raw material costs. Macquarie Research noted in a report on 28 January “steel prices have been over and above the raw material input cost pressures seen thus far,” with the US clearly leading the way. Its estimates of the recent increases in margins ranged from $90-145/tonne in the USA to a mere $8/t for a small Chinese mill.

However it would seem that the recent upward price trend is running out of steam. The rise in global scrap, long product and US coil prices, which began in early November now seems to be slowing. US HRC prices only rose $2/s.t last week, according to TSI. Elsewhere coil prices may have longer to rise, but SBB’s HRC price tracker did not start to increase until early December, a month after longs. 

In China, producers are still claiming they expect demand to remain strong after New Year, and that this would be a key factor behind the continued steady rise in spot iron ore prices. If true, and Q2 is normally a strong construction period, then these prices may help extend the bull run. But in East Asia, coil prices though also increasing, face soft demand.

TSI 62% Fe iron ore ended January on $185.6/t, up 9% from a month earlier. This, together with the rise in December, suggests another sharp increase in Q2 contract prices. Coking coal prices too are set to rise, but global demand may not be strong enough to support further substantial increases in finished product prices.