| European plate prices increase slowly, but demand stays low | ||
| European prices for heavy plates have been slowly moving up since last week. with producers increasing their offers to offset the higher raw materials costs and secure profitability, market sources told Platts. In southern Europe the Italian re-rollers, usually the most aggressive, have increased their offer prices for the S235 for export, or S275 for the local market by around €10-15/metric ton to €510-515/mt base ex-works since the beginning of February following the slab increases, but are still having problems to close deals at these levels. Slabs from Russia went up by around $20-30/mt to $500-510/mt FOB Black Sea, and by the end of this week most suppliers are in discussion for March deliveries and the sentiment is for prices to rise by further $10-15/mt if not more. In northern Europe prices for S235 are at €540/mt base delivered, while in Denmark, Sweden or Finland they at €560/mt base delivered. Although prices are generally moving up, they are moving slowly and with difficulties mainly for two reasons: the arrival of some imports and the low demand, although some mills have registered increases of orders since the beginning of the month due to restocking. The imports that are now arriving were booked in October-November when the prices were competitive, for example at €460-480/mt CIF north Italian ports. This week imports from third countries are reported stable to last week levels at around $600/mt FOB Indian east coast port, but European buyers are risk-averse and are preferring not to close deals with long lead-times.
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| Thai safeguard duty of 33.11% on HR flats expected soon | |||||||||||||||||||||
| Thailand's Ministry of Commerce is awaiting the official go-ahead for its planned provisional duty of 33.11% as a safeguard measure on imports of hot rolled flat products in coils and lengths, containing certain amounts of alloy elements such as boron and chromium, classified under customs tariff codes 7225 and 7226. The provisional duty will be enforced the day after publication in the Thai Royal Gazette. “This will be sometime soon, probably by end-February,” a ministry official said. It was pending and awaiting official signature, the official explained. The World Trade Organization has circulated a notice dated February 7 of the planned provisional safeguard measure. “The provisional safeguard measure will remain in force for a period not exceeding 200 days,” the notice stated. Volume of imports of the concerned products into the country has soared. Their volumes rose by 97% year-on-year from 2010 to 2011 and surged again from 2011 to 2012. The market share of the domestic industry fell during the period. Its market share reduced to 74% in 2010 from 78% in 2009 and fell to 66% in 2011, the notice said. Domestic industry’s market share during the first half of 2012 was 62% compared to the 70% during the corresponding period of 2011. “If this situation continues, the domestic industry will inevitably lose more market share and face serious losses,” it said. "The domestic industry is at risk of having to suspend their business activities if provisional safeguard measures are not quickly adopted," it added. China, Japan and Korea were identified as major exporters of the products with their shares of imports in 2012 at 42.39%, 25.26%, and 20.13% respectively.
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| Judge orders release of Ilva's impounded slabs, coils | ||
| The court-impounded finished and semi-finished products of Ilva will be finally released for sale after the preliminary investigating judge Patrizia Todisco gave her green light on Thursday, sources close to the company told Platts. Todisco gave her OK after Taranto-based prosecutors formalized their request to her to market the products because the materials might deteriorate and become unsaleable. At the end of November Todisco seized 1.7 million metric tons of products that had been produced in the four months since the end of July, claiming they had been made “in violation of the law” that ordered some Taranto installations to be closed on pollution grounds. Platts is told that the official custodians of Taranto will be in charge of the sale, while the revenues (the material is estimated to have a value of around €800 million) will go under sequestration and will not be banked by the company. At the end of last month, the judge rejected a request from Ilva for the restitution of the goods to ensure the payment of salaries and the start of work for environmental remediation. In the meantime, late Wednesday Italy's Constitutional Court rejected as “inadmissible” the prosecutors’ two petitions that claimed the Italian government had overstepped authority in attempting to support the troubled steelworks. Prosecutors challenged the government’s decree law passed late last year which allows Ilva to remain in production while the environmental upgrades are carried out. In April the Constitutional Court will decide if the decree law is unconstitutional; a negative ruling could see Ilva losing its ability to produce.
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| Iran barters for billet in 2012, self-sufficiency near: ESCO | ||
| Iranian importers of billet bartered for semi-products in a variety of ways in 2012, but this is unlikely to be the case for much longer as self-sufficiency is only one to two years away, according to deputy managing director of state producer Esfahan Steel Company (ESCO) Mansour Yazdizadeh. “Some [billet] imports were done on 100% pre-payment, but there was also barter trade,” Yazdizadeh told Platts on the sidelines of the Adam Smith Summit in Moscow on Thursday. “To China, for instance, 10 million metric tons of iron ore was exported, while steel came in from there; from Turkey, billets were imported to Iran in exchange for finished longs [with an add-on price].” Steel exports from Iran, meanwhile, were banned as they increased fairly significantly last year to 1.56 million mt – up 32% on-year – even though the country has a higher consumption than supply. Rapid currency devaluation encouraged exports. The stringent economic sanctions imposed on the country forced the barter trade, but they also had the effect of making dormant capacities become utilized again. “Because of the sanctions, empty capacities could be used… also because of the currency devaluation imports became very difficult, so instead buyers compensated with local production,” Yazdizadeh said. Indeed, billet imports actually fell 21% to 3.41 million mt in 2012. Imports of steel slipped 23% to 7.68 million mt. Iran’s steel production, on the other hand, increased to 14.8 million mt, from 13 million mt in 2011. Currently even the largest steelmakers in the country have a significant deficit of semis in their output: Khorasan has 500,000 mt and ESCO has 300,000 mt. Khorasan also has a billet casting facility from which it was banned to export, in order that it supplied local private sector re-rollers in 2012. ESCO plans to produce 11 million mt by 2025, while Iranian steel production could reach 55 million mt that year. According to Iranian Chamber of Commerce data, CIS countries sold 4.1 million mt of steel to Iran last year, China sold 900,000 mt, South Korea 600,000 mt and Turkey 500,000 mt.
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| Special Report: Little downside for Indian steel next fiscal | |||||||||||||||||||||||||||||||||
| The Indian steel industry may not witness a “significant turnaround” during the April 2013-March 2014 fiscal year yet the risk of “downside is limited”, according to JSW Steel joint managing director, Seshagiri Rao. Lower interest rates, growth in the construction sector, and the accelerated pace adopted by New Delhi in granting project clearances and approvals would prevent further downtrends next fiscal, he told Platts Thursday. Citing data from the steel ministry’s Joint Plant Committee (JPC) [see table below], Rao said that finished steel inventory with producers rose by about 2-2.5 million metric tons during April-December 2012 compared to the previous year as demand failed to keep pace with increased domestic production and imports. Furthermore, New Delhi’s forecast of a 5% GDP growth this fiscal ending March 31 is mostly based on projected growth in the services sector, he noted. Government data released earlier this month forecast only a 1.9% y-o-y growth rate for the manufacturing sector, down from 2.7% y-o-y last fiscal. All these factors could see Indian steel demand grow at only about 4-4.5% year-on-year this fiscal, Rao estimated. Nevertheless, several measures being implemented by New Delhi would serve to preclude further declines in steel consumption, he said. Referring to the Reserve Bank of India’s decision to pare interest rates by 25 basis points in January, Rao said: “Many people think 0.25% is not significant, but it makes a huge difference. It is very good from the point of view of (boosting) steel consumption.” He also noted that the central government has forecast a 5.9% y-o-y growth for the construction sector this fiscal. This is mainly from construction activity in rural and semi-urban areas, Rao said, noting that rebar sales from JSW Shoppe, the steelmaker’s retail outlets, have been “reasonably OK”. He also said that over the past three months, the government has accelerated the process of granting project approvals and clearances. “There is some push coming from government, which will soon translate into a lot of activity on the ground,” he reasoned.
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| HDG prices slip in the US market | ||
| Hot-dipped galvanized coil pricing slipped this week in the US, though it still appears to be the most resilient flat-rolled product in the market. Pricing fell from $785-800/st to $780-790/st normalized to a Midwest mill basis, most market sources reported. One northern US trader, however, said he’d heard of deals being done about $20/st below the repeatable level. Both hot-rolled and cold-rolled coil also recently experience dips of about $10/st to $610-630/st and $720-740/st, respectively, as previously reported. One distributor said he expects overall flat-rolled weakness in the near-term, though tightening inventories could make for a rebound in March. “I think there’s service center inventory to be chewed up, and that’s going to take a couple more weeks,” he said. “You could make the case that there’s a coiled spring building right now.”
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| Steelmakers to regain margins at expense of miners in 15 yrs | ||
| The commodities super-cycle is not over, but the growth witnessed in the first decade of the millennium is unlikely to be seen in the years ahead, while the balance of profitability could switch back to steelmakers from miners in the next 15 years, director of metals and mining research at Renaissance Capital, Boris Krasnojenov, said at the Adam Smith Summit in Moscow on Thursday. “The exponential growth witnessed in commodities is over… we now need to analyse each project company [on a case-by-case basis],” Krasnojenov observed. This is not to say that commodity – and steel prices – will be stable: unpredictability of the EU debt crisis and unreliable economic data from China are just some of the factors likely to mean volatile pricing remains present. Following on from this point, Krasnojenov said that vertically-integrated producers may lose some of their competitive advantages in a climate of slower steel production growth. While China is expected to grow until at least 2017 in terms of output, as shown by ISSB statistics, a lowering in demand for iron ore and other mined goods elsewhere could alter the costs of other producers. “15 years ago steelmakers had margins of around 80%; now this is reversed,” Krasnojenov said. “In 2010, miners had a similar profit margin, but in another 15 years this could turn around again.” Krasnojenov added that for at least another 5-10 years, vertically-integrated producers will retain competitive advantages. Only once iron ore and coking coal move closer to cost of production levels will disadvantages appear. Robert Mantse, from Price WaterHouse Cooper’s metals mergers and acquisitions department, agreed with Krasnojenov’s time-scale, and gave the following forecast for 2013. “In 2013 steel prices will be rangebound; if there is a run-up in steel prices, you’ll just see an increase in capacity utilization [currently around 75%], and then a correction,” Mantse said. Despite continuing thin margins, however, neither financier expects Russian steelmakers to begin hedging their finished steel goods. “At the moment there is no incentive for Russian companies to hedge, even those who are non-vertically integrated and buy their raw materials from different markets; for end-users such as Gazprom it does make sense to hedge using pricing formulas based on companies such as Platts’ indices,” Krasnojenov said. On the sidelines of the conference, Mantse predicted no large merger and acquisition activity in the Russian market this year, although medium-sized purchases at $20-100 million could happen.
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| Japanese H-beam stocks dip again | ||
| Stocks of H-beams held by stockists affiliated with Nippon Steel & Sumitomo Metal Corp (NSSMC) at end-January dipped by about 1,800 metric tons to 177,000 mt from end-December and followed the 4,100 mt reduction witnessed over November-December. Yet the steelmaker remains concerned that stocks are still high. “Tokiwakai stocks have declined, but deliveries from distributors to customers have decreased so the stock ratio has widened,” an NSSMC spokesman said. “The stock levels are still high,” he told Platts. This concern was one factor which led NSSMC to roll over its domestic H-beam prices for spot sales for February contracts, the company said. NSSMC never reveals its prices but prevailing market prices of senior sized H-beams in Tokyo are at Yen 68,000-70,000/mt ($728-750/mt), an increase of Yen 1,000-2,000/mt over the past month, dealers said. NSSMC maintained that in January, while deliveries from dealers to customers grew, those from mills to dealers increased by a smaller margin, resulting in a climb in the stock ratio to 2.06 months – from 1.95 months at end-December. “More than 2 months is above what we believe is adequate,” NSSMC’s spokesman said. Though beam demand this month is showing signs of firming – the Tokiwakai forecasts that deliveries from distributors to users in January-March will average 90,000mt/month – NSSMC says that to help thin stocks, it will limit accepting orders this month. In addition to beams, NSSMC's large section mills at Kashima, Sakai and Yawata this month and next are fully tied up producing sheet piles for export projects so spot sales for H-beams “this month will be largely reduced,” Platts is told.
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| Posco sets up joint venture auto tube mill in Japan | ||
| Posco is joining with two Japanese companies to establish Japan’s first foreign-invested joint venture making welded steel pipes, the Korean mill said Thursday. The JV will begin production during the first quarter next year from a plant located inside one of Posco’s coil centers in Japan, Posco-JEPC in Yokkaichi City, Mie prefecture. The new pipe mill will have a capacity of around 10,000 metric tons/year of welded pipes for automotive applications and will supply Japanese carmakers. Posco’s partners in the JV will be Osaka-based Mory Industries, a stainless and carbon steel pipe producer, and Nagoya-headquartered auto parts maker Maruyasu Industries. The JV would be a unit of Posco Japan, the Korean mill’s locally-incorporated subsidiary in Tokyo and will be equipped with two pipe forming lines and two cutting lines. “We will be the majority shareholder owning more than 50% of the equity,” a spokesman from Posco-Japan told Platts without disclosing the actual share split. Most of the coil feeds for pipemaking will be sourced from Posco in Korea but the official refused to disclose whether these would be carbon steel or stainless. In Japan Posco-JEPC has three coil centers – in Toyohashi, Yokkaichi and Kawasaki – with a total processing capacity of 440,000 mt/y. It is providing processed coil to end-users such as carmakers and appliance manufacturers. Mory is a leading producer of stainless pipes, stainless bars and ordinary pipes and produces about 40,000 mt/year of stainless pipes at its Kawachi-nagano plant in Osaka.
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| Japanese H2 export offer prices jump to Yen 35,000/mt FOB | ||
| The export offer prices for Japanese H2 grade scrap to Korean steelmakers rose sharply to ¥35,000/metric ton ($373/mt) FOB this week, Korean trading sources said Thursday. This compared with booking prices of ¥32,000-32,500/mt ($341-347/mt) FOB by Korean mini-mills for the same grade scrap in late-January. Korean mills were bidding at ¥34,500/mt FOB for H2 grade scrap but bullish Japanese dealers appeared unwilling to accept this price level and discussions are ongoing, Korean traders said. Japanese exporters raised their expectations after recent increases in Japanese H2 scrap prices. The export auction held by the Kanto Tetsugen group on Wednesday attracted an increase of ¥750/mt in the highest-priced bid when compared to the group’s previous auction held a month earlier. Also, Tokyo Steel Manufacturing increased its buying scrap prices by ¥500/mt effective February 14 arrivals. Meanwhile, Hyundai Steel, Korea’s largest scrap consumer, did not plan to raise its purchase price for domestic scrap. “We have no plan to adjust our scrap purchasing prices from local suppliers at present,” a company official said Thursday. Rising Japanese scrap export prices were mainly driven by the weaker Japanese currency against the dollar as well as against the Won and therefore, had no effect on Korean domestic scrap prices, he said. “Besides, several maintenances are scheduled during this month and next so we don’t need much scrap,” he added. Nevertheless, Korean domestic scrap dealers are tipped to delay sales in order to achieve higher prices thanks to the bullish sentiment as a result of the firmer Japanese market. Some Korean mills such as SeAH Besteel and Dongkuk Steel Mill lifted their domestic buying prices for certain grades scrap by Won 10,000/mt ($9/mt) this week.
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| Beijing places four provinces on steel 'watch' list | ||
| Steelmakers in the Chinese provinces of Shandong, Hebei, Yunnan and Jiangsu can expect to have their operations more closely scrutinized this year, especially their capacity utilization rates, China’s Ministry of Industry and Information Technology (MIIT) warned in a recent statement. The ministry made specific reference to the four provinces in the statement – released just ahead of the country’s one-week Lunar New Year holiday – identifying them as its first targets in a crackdown it plans for this year aimed at easing steel overcapacity. Positioned as a discussion paper on the steel sector’s situation that identified the ministry’s tasks for 2013, the statement warned that MIIT will press for mergers and acquisitions in the sector and the closure of outdated production capacity. The four provinces were among those that last year recorded steel production growth above the country’s average of 3.1%. MIIT cited statistics showing that output growth in Yunnan was the nation’s highest at over 10%, with Jiangsu's 8% and Hebei at 6.2%. China hosts over 1,000 steel mills – mostly medium- and small-sized and privately-owned – and competition among them is exacerbating steel oversupply, market sources noted. By the end of 2012 the country’s installed crude steel capacity was estimated at 900 million-1 billion metric tons/year though actual output reached only 717 million mt, according to industry sources. MIIT said it will continue to monitor other aspects of the mills’ operations in areas such as production technology, resources consumption and waste management to ensure that industry standards and regulations are being adhered to.
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| India's JSW Steel sees output drop on iron ore shortage | |||||||||||||||||||||||||||||||||
| India’s JSW Steel saw crude steel output fall 2% month-on-month to 716,000 metric tons in January, which was also an 11% dip year-on-year, the company announced to the Bombay stock exchange Wednesday. Output fell owing to “poor quality and insufficient availability of iron ore” to its mills, the company said. JSW Steel operates a 10 million mt/year integrated steelworks in Vijayanagar, Karnataka, and a 1 million mt/y works in Salem the neighboring state of Tamil Nadu. Ore for the Karnataka works comes from the electronic auction sales being conducted in the state. The Salem works was initially being fed with ore from the e-auction sales but as the quality (Fe content) of ore available started to deteriorate, JSW Steel turned to procuring high-grade ore from Odisha state in eastern India, a company official told Platts Thursday. A lack of beneficiation capabilities at Salem means the mill is unable to use the low-grade ore being auctioned in Karnataka. But with Odisha clamping down on supply of locally-mined ore to mills situated outside the state, supplies to the Salem works have been affected, the official added. Capacity utilization at the Salem plant presently averages 80%, the official said, at which its ore requirement totals about 1.3 million mt/year. The official however expected ore availability to increase in Karnataka in coming weeks. Although some mines in the state have been permitted by the Indian Supreme Court to resume operations, about 1 million mt of ore produced at these mines are yet to be auctioned. The delay was because of lack of clarity on who would determine the floor price for these stocks – the miners themselves or the Supreme Court’s monitoring committee that is overseeing the auction sales – the official said.
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| Turkey's Kardemir increases bar prices on stronger demand | ||
| Turkish integrated long steelmaker Kardemir has increased its bar prices owing to stronger demand in the local market, Platts learned from the company. Kardemir’s new sales price for round bar is at TRY 1,100/metric ton ex-works ($621), up TRY 8/mt ($5). Its rebar price is also up TRY 8/mt to TRY 1,083/mt ($611/mt) ex-works, valid from February 14. Kardemir previously lowered its rebar price by $20/mt for local sales on February 8 owing to the softening scrap market. The company’s billet and bloom prices remain unchanged at $532-547/mt ex-works and $650/mt ex-works respectively. All prices mentioned exclude 18% VAT. The company also announced that its order book for most grades of billet is closed. On the export side, Turkish mills’ prices are on the increase, according to market participants. Producers have this week begun to offer rebar at $605/mt FOB; a trader noted that a sale was concluded in the last two days at $602.50/mt FOB. On Thursday the daily Platts assessment for Turkish rebar exports increased by $2.50/mt to $602.50/mt FOB Turkey.
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| Ovako continues adjusting H1 2013 output as demand struggles | ||
| The Sweden-based producer of engineering steel Ovako is set to continue adjusting its output during the first half of this year, using reduced working hours for up to 1,800 employees at is Hofors and Imatra steelworks, Platts learned from the company Thursday. In 2012 the company saw its crude steel output decreasing some 21% y-o-y, to 857,000 metric tons; it calculated that, even adjusting the figure for the stoppage of the Imatra steel mill in Q3 caused by the fire, the fall would have been of some 19% y-o-y. During Q4 the production levels at the sites slowed down further as during that period even the German market started showing signs of weakness regarding automotive production, and overall European industry output was down some further 2% in October-November compared with Q3. Looking forward the company expects Q1 2013 to remain “approximately at the same level as in the second half of 2012, thus below the first quarter of 2012”. In terms of financial results, Ovako recorded a net loss of €3.7m in 2012, while in 2011 the company was profitable by €37.7m. Net sales decreased 16% y-o-y to €937m, mainly due to the lower tonnages sold: 694,000mt in 2012, compared with 854,000mt in 2011. The average selling price/mt increased slightly during the year, as Ovako recorded a level of €1,350/mt in 2012, compared with €1,316/mt in 2011.
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| Outokumpu expects higher deliveries and prices for Q1 2013 | ||
| Outokumpu, the Finnish-based stainless steel producer, expects to see its deliveries more than double during the first quarter of 2013, as the company takes full control of Inoxum assets, Platts learned from the company’s quarterly report yesterday. Outokumpu said that stainless steel deliveries are set to be in the range of 680,000-750,000metric tons in Q1 2013 compared with 337,000mt in Q4 2012. It added that prices are set to remain stable or increase slightly toward the end of the quarter, as the company implemented price increases in January, as did the other EU stainless steel suppliers. During the full year 2012 stainless steel delivery from the group stood at 1.4 million mt, slightly up compared with 2011, while the average stainless steel price stood at €1,172/mt, down from €1,181/mt in 2011. “Outokumpu’s fourth quarter was disappointing but developed in line with our expectations in a challenging environment. Sequentially, our delivery volumes increased somewhat but prices remained flat, reflecting the weak market conditions, especially in the important specialty stainless segments,” CEO Mika Seitovirta said. “We are determined to achieve further price increases to improve profitability.” During the full year 2012 Outokumpu reported a net loss of €535 million, from the loss of €180 million seen in 2011. Overall sales were down by some €500m y-o-y, to €4.5 billion. “The primary reasons for the weak performance were declining stainless steel base prices, a weaker product mix and the decline in nickel prices,” the company said commenting on 2012 full year results.
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| Turkish alloy steelmaker’s sales tonnages down 13% in 2012 | ||
| Turkey’s second largest alloy long steel producer, Cemtas, posted a net profit of TRY 8.5 million ($4.8 million) for full-year 2012, down from a profit of TRY 23.8 million ($13.4 million) in 2011, Platts learned from the company. Cemtas sold 109,534 metric tons of finished steel last year, 13% lower than the 126,190 mt it sold in 2011. Domestic sales totalled 43,112 mt, down 15% year-on-year, while exports amounted to 66,422 mt, down 12%. Crude steel production fell 14% to 114,481 mt in 2012, while billet output declined 13% to 107,607 mt. The alloy steelmaker is still in talks with 25 local and overseas companies to supply them with torque arms, the company stated in its annual report. The company began production at its new torque arm line in October 2011, as previously reported. Cemtas’ meltshop has a 153,149 mt/year capacity, while the company’s rolling mill has a 228,157 mt/y capacity. The company supplies bearing steel, free-cutting steel, leaded steel, spring steel and tool steel.
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| DEMZ may be relit in summer if not idled indefinitely | ||
| Ukrainian billet and bar producer Donetsk Electrometallurgical Plant (DEMZ), part of Russian mining and steelmaking company Mechel, may remain idle indefinitely, a representative of Mechel confirmed to Platts. Andrey Shatsky, the chairman of the administration of eastern Ukraine’s Donetsk region, where DEMZ is situated, is quoted on the administration’s website as saying “the plant is to remain idled until 1 July; redundancies are continuing”. But according to Platts source, “July” was a slip of the tongue – the governor meant June actually. DEMZ is now supposed to resume production in the beginning of summer, the person clarified. The representative of Mechel emailed a statement saying: “taking into account persistent negative trends in the world markets, unfavourable forecasts of their recovery in the near future and also high raw material prices, DEMZ’s shareholders decided to suspend the plant’s production for an indefinite term”. Mechel idled DEMZ in November 2012 with a view to restarting it in April provided steel markets improve. Electric arc furnace-based DEMZ has an annual liquid steel capacity of 1.1 million metric tons.
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| Russian KOKS to restart blast furnace by 2015 | ||
| Russian merchant pig iron and coke producer KOKS is planning to restart blast furnace No 1 at its Tulachermet works by 2015, Sergey Frolov, director of investor relations, said at the Adam Smith Metals Summit attended by Platts in Moscow this week. After the modernisation of the 1.2 million metric tons/year furnace, the group will be able to produce pre-crisis volumes of 2.5-2.8 million mt/y with only two BFs in operation (not three), as BF2 is set to undergo reconstruction after completion of BF1 project. In addition, following the revamp of the BF1, the company will be able to lower its coke rate by 68kg per mt of pig iron. The total capital expenditure related to this project is RUB 4.3 billion. In long-run KOKS aims to direct further capex at measures to increase its self-sufficiency in iron ore and modernize existing pig iron production capacity. “We’re not totally vertically integrated in raw materials but it’s our goal”, Frolov commented. This will be achieved through expanding iron ore operations at the Gubkin mine through construction of a new working level. Targeted annual iron ore production is 7 million mt by 2019-2020 or approximately 3.3 million mt/y of iron ore concentrate. In 2012 KOKS's iron ore output was 4.8 million mt. The group’s management expects that the mine will reach its full production capacity around 2020. At present the company has 65% sufficiency in iron ore and 45% in coking coal. A large number of electric arc furnace development projects may result in a scrap shortage in the Russian Federation that should drive the demand for pig iron, Frolov explained. If all the EAF projects planned between 2013 and 2016 are realized Russian scrap consumption could increase by 21.4 million mt.
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| Russia faces continued imbalance in scrap supply | ||
| Russia’s scrap market is showing a clear split between the European part of the country having surplus of scrap and the Asian part suffering a deficit, Alexander Sidorin, a deputy head of procurement at United Metalurgical Company said at the Adam Smith CIS Metals Summit in Moscow attended by Platts this week. While Russia’s consolidated scrap demand and generation should eventually even out at some 34-35 million metric tons in 2014 (including Belorussian BMZ). This will happen after some additional 3.65 million mt/year of EAF steelmaking capacity comes on stream in Balakovo, Kaluga and Tyumen. The additional capacity corresponds to 2.9 million mt more demand for scrap. In fact the country’s scrap market will remain imbalanced with minimum 6 million mt of scrap surplus expected in European Russia and an equal shortfall in the Asian part. Transporting the excess from the western part of the country or importing to the east are considered cost-ineffective or impossible due to infrastructure barriers. These figures are based on the expectation that scrap consumption in European and Asian Russia is some 15 million mt and 19 million mt respectively, while the scrap generation is at its maximum 21 million mt for the European and 13 million mt for the Asian territories. Russia’s pre-crisis annual scrap collection of 33-34 million mt has not increased. Last year the generation of scrap in Russia totalled 26 million mt and was lower than in 2011. The average price for 3A/3A2 grade was 9,800 roubles/mt ($325/mt at today’s exchange rate) including railway delivery. The exports (mostly from the Baltic, Black and Azov Sea ports) were 5 million mt in 2012 and have been on uptrend since 2009.
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| Russian producers tackle energy costs to remain competitive | ||
| Energy prices in the Russian Federation are higher or comparable to those in the US and Europe, thus posing a threat to local steelmakers' competitiveness, Aleksandr Starczenko, director for energy and fuel at NLMK, said at the Adam Smith Summit in Moscow this week. Retail prices per kWh are currently pegged at 8.3 and 7.3 US cents for Central and Ural Russia respectively, compared with 8.7 in Belgium and 6.6 in the US, Starczenko noted. Wholesale prices for electricity in Russia (excluding transport service charge) are on average €12/MWh below EU levels at €41/MWh, but they are likely to rise, he added. “All mills are trying to optimise and cut costs related to energy, especially EAF mills,” Starczenko said. NLMK is taking measures to increase energy efficiency by modernising all its production units, using secondary resources and utilising heat generated in steelmaking, which is the most affordable and effective in terms of return on investment. “We still have a way to go to reach the best available technology,” Starczenko observed. Energy accounts for over 30% of steelmakers’ production cost and energy efficiency is therefore becoming critical, according to Sergey Kiselev, associate principal at McKinsey & Company. He mentioned the usage of converters and reusing energy as potential measures to achieve higher energy effectiveness.
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| Analyst sees new US sheet price hike, market not sure | ||
| US mills could soon be pushing for another sheet price increase, backed primarily by strengthening raw material pricing, lead times and unattractive import pricing, according to a note penned by analyst Anthony Rizzuto, a managing director at Dahlman Rose & Co. “Prices are flat since the last announcements in late January (of $40-$50/st), but considering the recent strength in iron ore and met coal, improving scrap sentiment (growing optimism for March deliveries up month on month), slightly improving lead times, and more favorable foreign pricing, we think the mills are gearing up for another shot,” the note states. Rizzuto adds that the spread between domestic and imported steel is at its lowest level since October. “Under this backdrop, we believe the incremental ton is being bought from the US mills, which could help extend lead times from currently low levels and help begin a move higher in prices,” he said. At least one distributor, however, said he doubts an expected increase would be supported by market fundamentals. “I hope it happens,” he said. “I mean, I’m not seeing it in the marketplace. I don’t think any (past increase) has been really realized.” A trader also downplayed talks of an increase. “Sure, why not ask for an increase when no one is buying?” he said.
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| Essar Algoma posts fiscal Q2 net loss of $25.1 million | ||
| Sault Ste. Marie, Ontario-based flats producer Essar Steel Algoma posted a net loss for its second fiscal quarter ended December 31, 2012, despite a 19.6% increase in shipments year on year. Essar Algoma recorded a quarterly net loss of $25.1 million on total revenue of $457.1 million. The company attributed the dip to a 5.8% year-on-year decrease in pricing, though costs concurrently fell by 12.3%. During the quarter, shipments totaled 655,609 short tons. “Despite lackluster steel markets, our commitment to safety and the continued realization of our cost reduction strategies combined to generate improved operating results for the quarter,” said CEO Kalyan Ghosh in the company’s earnings review. In addition to the company’s Q2 performance, Essar restated its results for fiscal Q1, resulting in a $19 million reduction in depreciation. “The impact of this restatement has no effect on the company’s revenue, EBITDA and cash position,” the review states.
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| Turkish rebar pricing to the US remains stable: traders | ||
| US-based rebar traders report general stability in Turkish rebar prices, as fluctuations seen in the past month have canceled themselves out. Two traders said Turkish rebar offers to the US are $615-620/mt, CFR Houston from multiple mills. One of the traders said he has not purchased rebar recently. He said he sensed prices were going to come down last week, but he did not see a substantial change. The trader said he’s been busy selling off a previous position. The second trader said rebar prices are essentially the same as they were a month ago, noting that prices came down about $10-15/mt, before climbing back up to the $615-620/mt, CFR Houston level. He does not believe these moves are scrap-related due to a general weakening in the global scrap market. “Scrap prices have not moved up but finished prices have come up. They are just trying to get better returns,” he said, adding that the rebar price increases that were not backed by increasing scrap costs contribute to his flat-to-down rebar pricing outlook for the next two months. Another trader said he has not bought any rebar lately and does not plan to for the “foreseeable future” because the market is flooded with Turkish rebar. “The consensus seems to be that because of the huge influx of imports and a weakening scrap price, rebar will go down in their pricing,” he said. The Platts Steel Business Briefing rebar price assessment remains at $562-580/st ($619-639/mt), CIF Houston, though there's pressure to lower the ceiling.
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| US ferrous scrap exports dip 12% in 2012 | ||
| After reaching a record high in 2011, US ferrous scrap exports declined 12% in 2012 to 21.39 million mt, down from 24.33 mt in 2011. The 2012 total was the fourth highest ever for the US, the world’s leading exporter of steel scrap. The decline in scrap exports was mostly attributable to reduced demand from China, which saw its imports of US steel scrap decline 54% to 1.94 million mt, the lowest level in 12 years. China reduced its consumption as iron ore prices steadily declined throughout most of 2012. The drop in demand from China more than offset record scrap exports to Turkey which, totaled 6.40 million mt, a 13.8% year-on-year increase. It was the third straight year Turkey was the largest importer of US scrap. Over half of Turkey’s purchases of US steel scrap were heavy melting scrap I (3.26 million mt). US scrap exports to Turkey have increased for four consecutive years since 2009 when they totaled 3.68 million mt. Other top destinations for US scrap were Taiwan (3.51 million mt) and Korea (2.82 million) and India (1.22 million mt). Many countries reduced their consumption of US scrap in 2012 compared to 2011 with the notable exceptions of Turkey, Mexico (up 44% to 789,906 mt), Vietnam (up 33.5% to 528,252 mt) and Indonesia (up 111% to 520,008 mt). By grade the US exported 7.33 million mt of HMS I, 6.56 million of shredded scrap, 1.11 million mt of HMS II and 1.01 million mt of plate and structural. Exports of shredded scrap declined 22% to a five-year low.
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| Cliffs produces DR pellets at two Minnesota facilities | ||
| US miner Cliffs Natural Resources produced direct reduction grade pellets at two of its US iron ore facilities during the fourth quarter of 2012, the company announced on Wednesday. Cliffs produced the DR grade pellets at its Northshore Mine and United Taconite Mine, both located in Minnesota. “As DRI becomes more of a reality in the (electric arc furnace) market, we are putting the wheels in motion to capitalize on this new opportunity,” Cliffs CEO Joseph Carrabba said during a conference call to discuss company earnings. “We’re pretty enthusiastic that two of our facilities through test runs and trials and scoping studies have the ability to produce DRI pellets. We’ll be in place if a DRI facility is to be built in the Midwest region of the area as alternatives.” Nucor is close to beginning production on its DRI plant in Louisiana. There are no firm plans in place for a DRI facility in the Midwest although numerous companies have discussed a possible expansion in the area. Essar Steel Minnesota and US Steel have both received permits for DRI facilities in the area but neither has made formal plans to begin work on an expansion. “This is theoretically a new market in the US,” Carrabba said. “This is a new developing technology that’s coming on, while it’s used all over the world, it’s not used in the US.” Over the past few years, falling natural gas prices have been cited by many companies as the main reason for investments and exploration into DRI production in the US.
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| Mexico's Minera Autlán projects 3% revenue growth in 2012 | ||
| Mexican ferroalloys producer Minera Autlán expects to realize a 3% year-on-year increase in its revenue and sales for full-year 2012, according to the company's preliminary financial statement sent recently to Mexico's stock exchange. Specific figures were not yet available. "Record production levels were achieved in the fourth quarter, which allowed us to grow 3% in sales volume (in 2012) to offset the low prices experienced in the second half of the year mainly," said the firm. "In Q4, due to the tough international economic environment, prices of manganese ore and ferromanganese continued their downtrend, affecting income in the period. There (also) was a gap of one export shipment - that did not happen - that will be reflected in the results," the company said. Minera Autlán has six plants in Mexico, located in the states of Durango, Hidalgo and Puebla.
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| DOC extends steel import monitoring system for four years | ||
| The US Department of Commerce determined that it will continue to publish the Steel Import Monitoring and Analysis (SIMA) data through March 21, 2017. The SIMA system allows the public to track statistical steel data seven weeks earlier than would otherwise be available to the public. The system has operated under this authority since March 2005. Under its current authority, the SIMA system cannot be made permanent and is subject to periodic future extensions.
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| TMS International projects 2013 earnings growth | ||
| TMS International, the parent firm of steel mill service firm and raw material broker Tube City IMS anticipates 2013 full year EBITDA to increase 5-10% compared to 2012. The company projects 2013 EBITDA to be in the range of $152-160 million. For 2012, TMS reported revenue of $2.5 billion, down from 2011 revenue of $2.7 billion while net income of $26.1 million was up from 2011 net income of $17.5 million. Revenue after raw material costs, which the company uses to mark its sales performance, was $606.7 million in 2012, up 10.4% from $549.5 million in 2011. TMS International Raymond Kalouche characterized the 2012 market as a “very challenging environment in the industry for much of the year.”
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| DOC to issue AD orders on wind towers from China, Vietnam | ||
| The US Department of Commerce will issue antidumping duty orders on plate-intensive utility scale wind towers from China and Vietnam. On February 8, the International Trade Commission notified the DOC that it determined the US industry is materially injured or threatened by imports of Chinese and Vietnamese wind towers, following affirmative determinations by the DOC. Weighted average dumping margins for Chinese exporters range from 44.99% to 70.63%. The DOC is also correcting a ministerial error in its final determination with respect to CS Wind Group, which includes CS Wind Vietnam Co. and CS Wind Corp. According to government documents, the CS Wind Group’s weighted AD margin is now 51.54%, while the Vietnam-wide entity, including Vina-Halla Heavy Industries Ltd., has a rate of 58.54%.
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| Siderperú loses $38.6 million in 2012 | ||
| Siderperú, the Peruvian subsidiary of Brazil's Gerdau, had a net loss of Nuevo Sol 99.22 million ($38.61 million) in 2012, the company announced in its year-end financial report. In 2011, the steelmaker had net profit of Nuevo Sol 54.74 million ($21.3 million). The longs producer's sales increased from Nuevo Sol 1.58 billion ($614.9 million)to Nuevo Sol 1.68 billion ($653.8 million) in the same comparison. No volume amounts were disclosed. By the end of 2012, the steelmaker's gross loss (considering sales and operational costs) totaled Nuevo Sol 19.67 million ($7.65 million), "which represented a negative gross margin of 1.2%," stated Siderperú. "This result is due to the reduction of steel products prices and, in a lower proportion, to the mark-to-market of the inventories." The company's inventories had big variations between 2011 and 2012. The value of existing rolled products decreased from Nuevo Sol 235.75 million ($91.74 million) to Nuevo Sol 156.76 million ($61 million) in 2012. Semis, however, totaled Nuevo Sol 244.10 million ($94.99 million), versus Nuevo Sol 216.88 million ($84.40 million) at the end of 2011.
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| Torrential rain has minor impact on Peru's Aceros Arequipa | ||
| The heavy rainstorms coming down hard on the Peruvian region of Arequipa, motivating the country's government to declare a state of emergency for the next 60 days, has had little impact on longs producer Aceros Arequipa, an employee told Platts. According to the source, there was no damage at the Arequipa mill from the torrential rain. "However, last Friday we had to slow down the production for around one hour because the workers from the night shift were unable to reach the plant. The transportation system in the city was paralyzed," he said. The operation was not totally stopped, but workers from the previous shift were told to stretch their worktime and slow down the process in order to keep the equipment running until their colleagues arrived. The source could not estimate how many tons of production were lost due to the problem. The Arequipa plant is dedicated to rolling bars, rebars, angles and profiles - all the products from the steelmaker's line, except wire rod - with a capacity of 250,000 mt/year. Aceros Arequipa also has another facility at Pisco, with a 690,000 mt/year electric arc furnace and a 650,000 mt/year longs rolling mill. Additional equipment is expected to be installed by May 2013 for another 650,000 mt/year of rolling capcity.
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| Brazil's pipe and tube imports jump 85% in January | ||
| Total imports of pipe and tube in Brazil spiked 85% month on month in January to 28,986 mt, against 15,629 mt in December, according to data from the national foreign trade ministry, Mdic. Statistics showed that shipments of foreign seamless tubes to Brazil jumped almost 30% last month to 11,637 mt. Of this total, 8,562 mt were exported by Asia, compared with 7,120 mt the previous month. Imports of welded tubes jumped 161% to 17,348 mt last month, from 6,645 mt in December. Chinese welded tubes accounted for 3,931 mt in January, versus 2,143 mt in the prior month. Imports of tubes that are included in the temporary higher import tariffs list, implemented by the Brazilian government this past September, represented 6.7% of total tube imports in January. The import tariffs for tubes were increased from 14-16% to 25%, valid for one year.
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| EU abandons AD case into hollow section imports | ||
| The European Commission has terminated an anti-dumping investigation into imports of hollow sections from Turkey, Ukraine and Macedonia because the parties who initiated the case withdrew their complaint, the European Union official journal said on Thursday. The investigation covered imports into the EU of welded hollow sections, and was prompted a year ago by a complaint from EU producers representing more than a quarter of the bloc’s hollow sections output. The investigation concerned five mills in Ukraine who are capable of producing hollow sections – AG Stal, Dnepropetrovsk and Lugansk Pipe Plants, Dnepropetrovsk Metallurgical Plant after Komintern (Kominmet) and Novomoskovsk Pipeworks (NMTZ), part of Ukrainian pipemaking group Interpipe, the Ukrainian pipe producers’ association, Ukrtrubprom, told Platts. Out of little over 230,000 metric tons of square and rectangular hollow sections Ukraine exported in 2012, 30% (just over 70,000 mt) went to the EU with half of this volume absorbed by Germany, according to Ukraine’s state statistics service. However, EU continues applying a 44.1% antidumping duty for imports of up to 168mm diameter welded pipes originating in Ukraine except for pipes made by Interpipe. The latter are subject to a 10.8% duty. The EU Commission did not say why the complaint was withdrawn. When originally filed it said the complaint contained prima facie evidence of dumping resulting in material injury to the EU industry. But the Commission said Thursday its investigation under way since March last year did not bring to light any reason why terminating the case would not be in the EU’s interest.
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| Rio Tinto's Walsh sees iron ore price fall on rising supply | ||
| Rio Tinto expects greater iron ore supply coming on stream later this year, in part from its own Australian operations, to drive prices lower than current levels which are at the highest in over a year, chief executive Sam Walsh said on Thursday. Walsh had warned in early January, when he was the mining group's top iron ore executive, that a sudden rise in iron ore prices of over 20% in December to the mid-$140s/dry metric ton CFR China level was a temporary effect. Spot iron ore prices since then have risen further to stand at $155.25/dmt over the Chinese Lunar New Year holiday, based on the Platts IODEX benchmark. Walsh stressed that the January-March period drew support partly from strong seasonal purchasing ahead of possible weather disruptions from Australia and Brazil and reduced supply. The effect of further mining capacity will be seen particularly in the second half of the year, he said. "Capacity is coming on in a range of areas," Walsh said. "I expect it would be bullish for prices to remain at current levels." However, in China "mills had been slow to restock," and port stocks were 25-30 million mt below the 95-100 million mt level, he said, indicating there remains some buying ahead. Walsh said the price had also been supported by the removal from the seaborne market of some 80 million mt in Indian exports, which is expected to persist for the time being on delays to expanding mining to keep pace with demand from expanding local steel industries.
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| Rio Tinto appoints Andrew Harding as its new iron ore CEO | ||
| Rio Tinto has appointed Andrew Harding as its new iron ore chief executive, it said Thursday. Harding replaces Sam Walsh who became the group's CEO last month after the resignation of Tom Albanese. Albanese resigned on the back of a $3 billion writedown of Rio Tinto's Mozambique coking coal assets and a further $11 billion loss on aluminum operations. These also contributed to Rio reporting a net loss of $3 billion for full year 2012. Harding was the former Rio Tinto copper chief executive and he will be replaced there by Jean-Sébastien Jacques, former copper president for international operations. Walsh said on Thursday he intends to strengthen the company's existing management. He will focus on only investing in assets "that offer attractive returns that are well above our cost of capital, and which offer a superior return when compared to returning cash to shareholders." Looking ahead, Walsh said Rio Tinto sees the positive momentum witnessed in the fourth quarter of last year being sustained in 2013 with Chinese GDP growth returning to above 8%. "We expect market uncertainty and price volatility to persist as long as the structural issues in Europe and the United States remain unresolved," Walsh said.
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| Market remains stable as manufacturing strengthens | ||
| Steel prices continued to strengthen last week, led by Chinese buyers booking up their final tonnages before shutting up shop for the Chinese New Year. However, activity was slower and The Steel Index’s (TSI) reference price for 62% Fe iron ore fines only increased by $1.90/dry metric ton last week to $155.10/dmt CFR north China. The Platts world HRC tracker climbed again last week by 2.5% month-on-month following a 2.4% m-o-m gain in January. All eyes will be on the Far Eastern market when the Chinese return and iron ore prices are likely to see further strengthening in the short term. Manufacturing data for the world’s dominant steelmaker was again reasonably strong in January with the HSBC purchasing managers index (PMI) rising to 52.3. And whilst the official PMI suggested growth in the sector slipped from 50.6 in December, to 50.4 in January, this still represented increasing output. Elsewhere, Turkish scrap prices slipped slightly last week with the daily Platts assessment for HMS 1&2 80:20 registering a $1/mt week-on-week decline to $390/mt CFR Turkey on February 8, as rebar trading was low on weak demand from Middle Eastern buyers. A large snow storm hit the east coast of the US which threatened to disrupt supply of scrap to the Turkish market. Following the surprise 0.1% GDP contraction in Q4, the US registered strong manufacturing data with its PMI growth of 53.1 in January building on December’s index of 50.2. However, there was little impact seen in steel prices with the Platts rebar and coil price assessments unchanged over the course of last week. In Europe, HRC prices moved above €500/mt for the first time in four months, reaching €502.50/mt ($672/mt) and may see further rises as integrated mills look to implement price increases. Tata Steel has announced a £30/mt increase in coil prices and the strong euro that has been hampering the continent’s mills is starting to weaken against the dollar, which could facilitate price increases. CIS steelmakers sent higher offers for HRC to European and Middle Eastern buyers last week with MMK seeking a “minimum” export level of $580/mt for March HRC output, while CRC was pegged at $680-700/mt, both FOB Black Sea. The Platts daily CIS HRC price assessment went up $5/t to $555/mt FOB Black Sea. This market analysis report is taken from the February 13 issue of Platts SBB’s World Steel Review.
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