| Raw material hikes look set to pile pressure on steel prices | ||
| Rising prices for iron ore, coal and scrap could add $150-160/tonne to the cost of producing hot rolled coil and wire rod starting from the second quarter of this year, industry executives in Europe tell Steel Business Briefing. A senior source close to ArcelorMittal says such cost increases will make it necessary for all steel companies to raise prices significantly. While it is not yet clear how mills will apply it, the price rises already announced for quarter 2 will not cover the rise in costs. One industry executive says his iron ore suppliers are indicating the 2010 benchmark price – if there is one – will be close to the current spot price. This implies an increase of about 50% over 2009. Suppliers are also indicating the benchmark price may only be quarterly, not annual as in the past, and that a larger tonnage will be sold on spot terms. All this implies growing volatility in steel production costs. For coking coal, current spot trading at $200-240/tonne implies a contract price increase of close to 60% year-on-year. Scrap prices will also increase as steelmakers try to substitute high-cost iron ore with scrap. The executive notes that the sharp cost rises are reminiscent of 2008, except that steel producers were making profits at that time. To restore company profit margins and cover the rise in costs, he suggests steel prices need to rise by around $200/tonne from their quarter 1 levels. This equates to hot coil prices rising from €400/t to €550/t in Europe and from $500 to $700/short ton in the USA.
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| SBB Special Report: Canacero's lobby works in Mexico | ||||||||||||||||||||||||||||||||||
| A lobby led by Mexican steel association Canacero has succeeded in postponing domestic tariff reductions for steel imports. Several duties were to be reduced or cut to zero this year, but the Mexican government restructured the exemption calendar, making it gradual through 2011 and 2012, Steel Business Briefing learns from the country's economy secretariat. In 2008, a decree established that beginning in January 2010 several rolled products, from rebar to hot-dipped galvanized coils, would be exempt from import tariffs. However, in light of the economic downturn, Canacero and several domestic mills coordinated an action for postponing or changing the decree's clauses to avoid injuring the domestic industry. Based on the latest announcements from the Mexican government, Canacero's lobbying efforts appear to have paid off. Tariffs will not be extinguished at all this year, but will be gradually reduced or cut to zero through January 2012. Thus, most flatrolled products and wire rod will see tariffs drop from 5% to 3% on January 1, 2011, and then go to zero on January 1, 2012. For tubes and pipes, no changes will occur in 2011, but some products will have their duties reduced from 7% to 5%, and others will be exempt from a current tariff of 5%, beginning January 1, 2012. Also, most tariffs on ferro-alloy imports, currently at 3%, will go to zero on the same effective date.
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| Spot ship plate import prices rise in SE Asia | ||
| Ukrainian-origin ship plate is being offered in the spot market at around $630/tonne cfr Singapore. “Prices are inching upwards,” a regional trader in Singapore tells Steel Business Briefing. This compares with offer and transacted spot prices of ship plate of below $600/t cfr at $580-590/t cfr Singapore in mid-January, SBB is told. “Demand is slow,” says another trader. While many traders believe that there is very little recent buying interest because of the Chinese New Year, some report hearing that ship plate from Ukraine was last week booked at $630/t cfr Singapore and Indonesian ship plate at $640/t cfr. The bookings are believed to have been for 8mm thick plate which enjoyed higher demand and premium prices in Singapore. Chinese-origin ship plate was last offered at $610-620/t cfr two weeks ago but since this is for 12mm and up thick plate, there is less demand for Chinese plate, SBB understands. Commercial A36 plate from Ukraine is heard offered at $620-625/t cfr India. It is unclear if there are any bookings.
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| China's Wisco gets 21.5% of MMX with $400m cash | ||
| Chinese steelmaker Wugang Iron & Steel Co (Wisco) next week will pay US$400m in cash for a 21.5% stake in Brazilian miner MMX. The two companies agreed to the deal late last year. It includes iron ore shipments to Wisco's mills and a steelmaking joint venture in Brazil, as previously reported by Steel Business Briefing. MMX says the cash payment will be transacted through a Wisco subsidiary in Brazil, Wisco Brasil Investimento em Metalurgia Ltda.
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| Reliance fears BOF restarts could threaten US price rises | ||
| Distributor Reliance Steel and Aluminum is being cautious about offering financial guidance through the first quarter due to the planned restart of three major blast furnaces by US mills. As previously reported by Steel Business Briefing, restarts planned by US Steel, Severstal and ArcelorMittal could re-introduce up to 8.1m tonnes of formerly idled capacity to the domestic market. That could threaten recent carbon sheet price increases, Reliance executives stated in the company’s annual earnings conference call. Reliance posted a net income of $148.2m for 2009, down from a record high of $482.8m in 2008. Total sales were $5.32bn, down 39% from 2008’s figure of $8.72bn. “We anticipate overall demand to recover slowly as the year progresses,” Reliance CEO David Hannah said in a conference call monitored by SBB. “We also expect pricing to stay at or near current levels through the 2010 first quarter.” To negate the damage of a sudden drop in prices, Reliance spent 2009 paring down its inventory levels. The process is expected to continue throughout 2010. “We’re always cautious,” one executive noted. “We’re very pleased that there have been price increase announcements and we’ve been able to pass those along actually quicker than they came into our inventory. But anyone in the business would question whether they are sustainable because of the question of demand. Our way of thinking is – be conservative, play it close to the vest and if demand picks up more than we think it will, that’s terrific.”
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| NSW met coal miners and port finally working together | ||
| Port Waratah Coal Services (PWCS) is into its second month of exporting coal from Newcastle, New South Wales, under the new long-term contract system agreed with the 14 Hunter Valley coal miners. The export plan began on 1 January this year after receiving Australian Competition & Consumer Commission approval in December. The miners, which include Rio Tinto subsidiary Coal & Allied, Xstrata Coal, Anglo Coal and Gloucester Coal, now operate within a framework of long-term ‘take or pay’ contracts lasting for ten years. Steel Business Briefing understands that the previous system was ad-hoc and disorganised, with little or no coordination between the miners, rail operators and loader. With demand growing for both metallurgical and thermal coal, particularly from China, there was a move to contractually align the industry to optimise operations. Certain New South Wales politicians were also instrumental in “banging some heads together.” “There is now a solid foundation of certainty in place, which will make it much easier to secure future investment to keep improving the coal supply chain,” a port official tells SBB. To meet its contractual obligations PWCS recently approved A$670m (US$600m) to expand capacity at Newcastle port, north of Sydney, by an additional 20m tonnes/year by end-2011. PWCS plans to handle contracts totalling 123.6m t of coal in 2012. Expansion will include a new loading berth and the extension of two storage ‘pads’. PWCS spent A$458m (US$410m) on lifting its capacity from 102m t/y to 113m t/y in 2009.
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| Australian uranium explorer touts iron ore find | ||
| Southern Uranium has re-tested samples taken from a drilling program on South Australia’s Eyre Peninsula and discovered what it describes as “significant iron ore potential.” The Queensland-based explorer had originally drilled for iron oxide-copper-gold-uranium deposits at the Jungle Dam prospect over the past two years. However, it re-assessed the samples with a view to diversifying its target commodities and in the knowledge that a number of iron ore projects are being developed in the region. The company said the potential 14km iron ore strike lay on the same magnetic trend as IronClad Mining’s Wilcherry Hill and Hercules deposits, which are just 20km from Jungle Dam. OneSteel’s 6m tonnes/year Middleback iron ore operation is located in the area, and Iron Road is also developing the 5-10m t/y Warramboo deposit on the Eyre Peninsula. A source close to Southern Uranium, which as its name suggests is primarily an explorer of uranium, said the company will look at all options for developing the iron ore deposit. These could include seeking a joint venture partner or contracting out the mining and marketing of iron ore produced at the site. Steel Business Briefing notes that Southern Uranium’s two major shareholders are the Talbot Group and China’s Citic Group with over 14% equity each. Iron ore developers in the region are relying on the construction of Port Bonython by Flinders Ports, which is expected to begin operating within the next three years. Until then producers will continue to use Port Adelaide.
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| Filipino galvanizers press for import duty removal | ||
| The Filipino Galvanizers Institute (FGI) is seeking the removal of the 7% import duty on hot and cold rolled coil. The duty on hot-dip galvanized and prepainted galvanized is zero and the FGI contends that local HDG manufacturers are denied a level-playing field when slapped with an import duty on CRC or HRC feed while imports enjoy free entry into their market. “This tariff situation is unfair and disadvantageous to the local industry," Salvio Perez, FGI president, tells Steel Business Briefing. The FGI’s petition for the duty’s removal is pending with the Technical Committee of the Cabinet Tariff Reform & Related Matters (TRM) office. Ten steel galvanizing companies continue to operate but many are functioning at reduced capacity since they are losing market share to imported finished products arriving at zero duty, SBB is told. Galvanizers are being adversely affected by the recently implemented ASEAN-China Free Trade Agreement (CFTA) which allows Chinese steel imports of galvanized and pre-painted steel roofing materials at zero tariff, the FGI argues. But CRC imports from China are levied with a 7% tax under the CFTA, SBB is told. The FGI also points to Beijing’s 13% export tax rebate on HDG and pre-painted HDG sheets to the Philippines that enables Chinese steel exporters to lower their export prices. The Philippine galvanizers include Puyat Steel Corp, Union Galvasteel Corp, GalvaPhil Inc., Sonic Steel Industries Inc, Tower Steel Corp, Philippine Steel Coating Corp, Steel Corp of the Philippines, Chuayuco Steel Manufacturing Corp, Group Steel and AC Steel Industries.
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| Japanese stainless scrap exports plunge | ||||||||||||||||||||||||
| Japan’s exports of stainless scrap dropped by about 20% last calendar year to around 220,000 tonnes, according to Japanese Customs data, though the decline was more a reflection of buoyant shipments in 2008. In that year Japan exported 270,000 t, up 23% on 2007’s 219,800 t, Steel Business Briefing notes. Within last year’s shipments, Korea – read Posco – was again the largest buyer, taking about half of total Japanese shipments. The Japanese data do not identify whether the scrap is austenitic or ferritic. Significant in the Japanese data is that the largest shipment port for Japanese scrap was Tobata in the southern island of Kyushu. Some 41,500 t left the port last year – up 24% on 2008 – of which 32,000 t went to Korea. Tobata is close to Nippon Steel’s Yawata steel works and Sumitomo Metal Industries’ Kokura plant though neither of these produces stainless. The area is not notable as a stainless consumption base but it is close to Korea and China. A similar mystery surrounds shipments from Sakai Semboku port near Osaka where these plunged by 34% to 30,200 t. Of this, 22,100 t sailed to Korea. One source suggests that some of this material might have been gathered by Posco’s trading arm in Osaka, PIO, and that shipments fell because Posco temporarily halted ferritic stainless production earlier in the year when the market turned unfavourable.
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| China's January coke exports down 52% y-o-y, prices up | ||
| Chinese exports of coke in January were down over 52% year-on-year to 40,000 tonnes Steel Business Briefing learns from China Customs data. The figure also compares with 70,000 t last December. The average unit price in January was $412/t fob, compared with $385/t in December and $365/t in January 2009. While no explanation was given for the drop, SBB notes that Beijing’s 40% tax on coke exports has slowed the industry considerably since the second half of last year and many traders have not exported coke for some time. Sources told SBB back in January that they don’t expect China’s coke exports to turn positive in the near term as the country is currently facing a shortage of coking coal. This shortage was caused in part by Shanxi province, China’s former No.1 coal producer, consolidating a number of its coal mines. From May of last year coal producers with capacities under 300,000 tonnes/year were closed. These shutdowns caused coal output in the province to drop and cost the province its No.1 status. China’s largest producer is now the Inner Mongolia autonomous region, as SBB reported.
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| Ore grinders arrive at Sino Iron project in the Pilbara | ||
| Two large grinding mills, which will be used to process magnetite ore at Citic Pacific’s Sino Iron project in Western Australia, have been unloaded at Cape Preston port near Karratha. Citic Australia chief executive Barry Fitzgerald said the arrival of the mills was a “major milestone for the technical exchange between China and Australia.” He told the Australia's ABC on Thursday that 12 mills in six grinding lines will be installed in total, making it one of the world's largest magnetite processing facilities, and “certainly by far the largest one in Australia.” Citic expects first production from the Pilbara project to begin later this year, after earlier targeting 2009 for initial output. The project will have capacity of 27m tonnes/year of iron ore concentrates and pellets, producing 6m t/y of pellets and 21m t/y of concentrates. Output will supply Citic’s three special steel mills in China, with surplus ore sold to the market, Steel Business Briefing notes.
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| Coalworks gets Japanese funding for Vickery South | ||
| Australian coal explorer Coalworks has concluded an agreement with Japanese trader Itochu to fund exploration and feasibility studies of its Vickery South coking and thermal coal tenement in Gunnedah, central New South Wales. Itochu Minerals & Energy Australia has pledged A$11m (US$9.8m) for a 49% stake in the project in exchange for an offtake agreement for all Vickery South production. Though Coalworks md Andrew Firek describes the tenement as “one of the best available addresses in the Gunnedah region,” he declined to estimate the size of the coal reserves or the ratio between coking and thermal coals. “We don’t know that yet until we get a JORC estimate,” he told SBB. In January when Coalworks announced the start of a drilling programme for Vickery South, it estimated 50-70m tonnes of coking/thermal coal. The company hopes to have a JORC statement by March-April and to have completed the pre-feasibility study by July. The company wants a bankable FS by mid-2011. Vickery South is wedged between tenements owned by Whitehaven Coal and Bloomfield Coal. Earlier this month Whitehaven paid A$31.5m to Coal & Allied Industries for its Vickery tenements, as SBB reported. Itochu officials in Tokyo refused comment on the agreement. Among its other Australian coal investments, Itochu holds 5.5% of Gloucester Coal, 10% of the Cumnock and Ashton thermal and semi-soft coking coal projects, 35% of the Newlands coking and thermal coal project, and 20% of the Oaky Creek coking coal venture.
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| China's Tangshan closed 3.6m t/y of steel capacity in '09 | ||
| Northern China’s Tangshan city shut down 5.5m tonnes/year of ironmaking capacity and 3.6m t/y of steelmaking capacity last year, Steel Business Briefing learns from the city government’s 2009 annual report. The city supplies about half of the steel produced in China’s largest steelmaking province of Hebei. The Tangshan closures were part of the 9m t/y of iron capacity and 4m t/y of steel capacity closed in Hebei province last year. As Tangshan’s steel mills are predominately small- to medium-sized longs producers, the city is a key in the province’s decommissioning campaign. SBB notes some capacity closures may be part of mill efforts to upgrade their steel capacity and therefore may not have an effect on Tangshan’s overall steel capacity. In 2009, Tangshan dismantled 15 smaller blast furnaces with volumes of 200-300 cu m, which are regarded by Beijing as “obsolete” capacity and should be closed by the end of this year. Beginning in 2008, Tangshan started to shut around 60 blast furnaces of 200-300 cu m in the city, as well as about 13m t/y of old iron capacity and an unknown capacity for of steelmaking. The closures are to be completed by the end of this year, according to the Tangshan Industry and Information Technology Bureau (IITB). The IITB also says the city produced 60.34m t of iron last year, up 15% year-on-year, and 65.47m t of steel, up 15% y-o-y, SBB notes.
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| ArcelorMittal restarts Florange blast furnace | ||
| ArcelorMittal relit the P3 blast furnace at its Florange steelworks in France on Monday, as foreshadowed by Steel Business Briefing, a company spokesperson confirms. The strip products plant is now running two blast furnaces, but how long this will continue depends on the market situation and the evolution of demand, the spokesperson says. The plant’s other furnace, P6, is expected to be stopped in some months' time for repairs, but it is not clear exactly when, a representative of the CFE-CGC trade union tells SBB. There is a lack of visibility concerning the order situation for the whole of 2010, he notes. Together the two furnaces have the capacity to supply pig iron for the production of 2.2m tonnes/year of slabs, SBB understands. Florange is also preparing to restart an electro-galvanising and a pre-painting line this month as planned, the union representative adds.
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| Italian long production remains at 45-50% of capacity | ||
| Italian production of long products remains at a low ebb in the first quarter of 2010 after falling by more than 33% in 2009. Mills are still operating at just 45-50% of capacity, the same as towards the end of 2009, market participants told Steel Business Briefing. “Demand is still low and producers have an inventory over-hang. That’s why producers are operating at half capacity,” said one trader. Another told SBB: “I placed an order last week and it was ready in seven days. This shows that mills have a lot inventory”. The fall in production is also affecting jobs. Many mills, particularly those in the Brescia region of northern Italy, are making use of a state-subsidized layoff programme. Italian long steel product output in 2009 fell by 33.6% to 1.06m tonnes from 1.66mt in 2008, according to the Italian producers’ association Federacciai. The large drop was due largely to depressed demand from the struggling construction and structural steelwork sectors in Italy and the rest of Europe. European construction activity was hit badly in 2009 by the financial crisis and the economic recession that followed. Total European construction and structural steelwork output is estimated to have fallen 21.8% in 2009, according to Eurofer data. Italian construction sector output fell by 13.6% in the third quarter of 2009 compared with the same quarter in 2008, according to the latest Eurostat data.
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| IMS aims for breakeven this year after €105m loss in 2009 | ||
| French special steel distributor IMS reported an operating loss of €105m for 2009, down from a profit of €60.5m in 2008. It blamed “an unprecedented crisis” which cut its sales volumes by 41% to 386,771 tonnes and turnover by 48% to €727m. The group’s Italian unit accounted for 40% of the losses, as it was forced to sell off high-priced stocks at lossmaking prices. Stocks have been reduced, management changed, and the situation is now under control, IMS says. In a statement obtained by Steel Business Briefing IMS says it expects to return to operating profitably in mid-year and break even for the year as a whole. The company is facing a hostile takeover bid from stainless plate distributor Jacquet Metals which already owns 33% of IMS.
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| New drawing facility for German longs re-roller Einsal | ||
| Walzwerke Einsal, a German processor of speciality steel long products, will be installing a new state of the art drawing line, Steel Business Briefing has learned from its managing director, Bodo Reinke. With the new facility, the input material will be reheated via induction rather than by immersion, a process that saves energy and also allows for better employment of lubricants. The process minimizes material losses at the ends of the bars, which amount to 150 tonnes/year, Reinke says. The federal environment ministry is contributing €780,000 to the investment costs of €2.5m. Walzwerke Einsal, a hot roller and drawer which has existed for 330 years, considers itself as a multi-niche vendor, Reinke says. It processes flat and rectangular billets in speciality steel quality, mostly sourced from Deutsche Edelstahlwerke, addressing customers mainly in mechanical engineering and plantbuilding as well as chemicals, he says. The company has an annual turnover of around €100m, and an output of 25,000 t/y.
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| Eramet Alloys posts 2009 loss, expects H1 improvement | ||
| Eramet Alloys, the division of France’s Eramet Group which includes high-speed steel producer Erasteel, reported an operating loss of €49m for 2009. The loss was put down to “heavy slumps” in the company’s markets, particularly for tool steel. Losses for the second half of the year represented €23m of the total. Eramet Alloys’ turnover for the full year decreased 32% to €750m. Revenues from the tooling sector fell by a greater 52%, reflecting in particular the slump in the automotive sector and inventory reduction throughout the supply chain. The Erasteel division’s financial situation was particularly affected by the drop in turnover, parent company Eramet said. The outlook for Eramet Alloys in 2010 remains “very difficult”, but a gradual recovery is expected in the first half of this year, a company representative tells Steel Business Briefing. “We have already seen some improvement in our order books,” the spokesman said, adding that demand for tool steel products is stronger in the USA and Asia than in Europe. The company confirms that it will continue to prepare for the future through “strategic capital expenditure”, including the construction of a new atomisation tower in Sweden, which will enable it to strengthen its position in powder metallurgy. The project should be online in 2011. Erasteel is the world's largest producer of high-speed steels, with production facilities in France, Sweden, the UK, China and the USA.
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| Deutsche Edelstahlwerke streamlines product terminology | ||
| Speciality long products maker Deutsche Edelstahlwerke (DEW) has given new names to its main product lines, Steel Business Briefing learns. Three years ago DEW was established after the takeover by the Schmolz+Bickenbach group of four plants operated by former Edelstahl Witten-Krefeld and Krupp Edelstahlprofile. Product names at the several plants were not uniform, says DEW’s deputy managing director Jürgen Horsthofer. Separated into the three main product groups of engineering steels, tool steels and stainless steels, the new product names consist of a front end denoting the material’s properties and the suffix “-dur”. For instance, micro-alloyed engineering steels become “Microdur”, high-speed steels are “Rapidur”, and heat-resistant steels “Permodur”.
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| Severstal considering six offers for Lucchini | ||
| Russia’s Severstal has shortlisted potential buyers for its Italian unit, Lucchini, Mario Ghini, national secretary of the steel industry union UILM, tells Steel Business Briefing. “There have been nine expressions of interest, which Severstal has reduced to six after the first round,” Ghini said. It is understood that short-listed buyers will start their due diligence on Monday, which must be completed by 9/10 March, presumably in time for the early April sale. The names of shortlisted potential buyers remain unclear with both industrial and hedge fund-backed financial buyers considered possible. The perfect synergy could be achieved with Ukrainian Metinvest Holding, a senior industry executive says. The Ukrainian company has extensive captive raw materials base, has two flat products re-rolling plants in Italy already and enjoys a monopoly in production of rails at home. Another possibility is an Italian consortium “with insider knowledge of possible future support from the state,” another source speculates. A working group was created by the ministry for economic development to ensure that the sale has an industrial logic for Italy and will safeguard employment. “It is of extreme importance to find a solution that avoids a decline in the important steel industry of Italy”, minister Claudio Scajola declared, adding that a fundamentally important steel group like Lucchini “cannot be lost.” The task force will report its findings at a meeting to be held within 15 days.
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| SBB Special Report: European car output revving up, for now | ||
| Carmakers in Germany and other western European countries appear to have started 2010 with decent production levels, but many steel suppliers to the automotive industry express doubts on whether the momentum will last. Germany increased output of passenger cars by 17% year-on-year in January to 362,700 units, according to German automotive federation, Verband der Automobilindustrie (VDA). Steelmakers and component producers contacted by Steel Business Briefing confirm that demand from carmakers is reasonably good. One manager at a supplier even speaks of a “surprisingly high level”, given that his company was anticipating a lateral movement at best. “We are somewhat bewildered by the development” he concedes. The increase in German output is attributed to exports, whereas domestic new car registrations fell compared to an already weak January 2009 (see related article). The assumption is that current capacity utilisation at Germany’s passenger car plants is 70-80%, one steel mill source estimates. All sources are wary that the increased activity may be temporary, and “many in the steel industry believe this is mainly a replenishing of inventories,” the manager says. “We just do not know about the budget behind this, and we are missing a confirmation for the next half year,” a source at another supplier comments. Six months is the time span cited by most sources as the extent of market visibility. Analysts at Germany’s BHF bank estimate that new registrations in western Europe this year will be 10% below the 13.8m units of 2009. “The first half year will be good due to effects from national scrapping schemes and exports, but the second half will be weaker,” BHF’s Hermann Reith says. But views on the impact of car scrapping premiums expiring differ. Some believe this will not bring any big breaks to production, as consumer demand in 2009 was largely fed from previous overproduction, the mill source claims. “We saw the crisis start in September 2008, but carmakers just kept on merrily producing, and we kept supplying them; but a year later they could feed the boom of orders from their surplus stocks,” he says.
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| Lack of credit insurance still hampers Euro stainless trade | ||
| The availability of credit insurance, or rather the lack of it, continues to play havoc with business transactions in what is already a subdued market for stainless steel in Europe, regional market participants tell Steel Business Briefing. Mill sales to small and medium size customers in particular continue to be a real headache, SBB is told by one of Europe’s stainless mills. And apart from difficulties all round, others single out sales from Western to Eastern Europe as especially problematic. Says one German distributor of the overall situation: “Insurance companies are being very, very careful. It’s ridiculous. They are not giving insurance.” As a result companies have increasingly been assessing and, where they judge it appropriate, assuming the risk themselves. Further evidence that the credit insurance famine continues to affect the whole steel industry came just days ago when European steel distributors’ grouping Eurometal said that one of the main uncertainties in the market was “very tight” credit insurance and the availability of trade financing. In this respect it seems that everyone in the supply chain could learn something from Sweden’s metals trading environment, where, Steel Business Briefing is told by local sources, credit insurance has never played a role in the market.
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| European car sales up, but still below 2008 levels | ||
| New passenger car registrations in Europe increased by almost 13% in January compared to the same month in 2009, latest figures from the European Automobile Manufacturers Association (ACEA) show. Of the major national markets for cars there was a particularly marked upturn in registrations in Italy and the UK last month (both up about 30%), while Spanish registrations increased by 18% and those in France by 14%. But in Germany, Europe’s biggest vehicle market, there was a more than 4% decline year-on-year. ACEA comments that the overall increase was due to the continuation of fleet renewal schemes in a number of Western European countries. But it adds that the discontinuation of such schemes in Germany last autumn is the reason for that country’s drop in activity. However, despite the overall uptick in sales, Steel Business Briefing notes that January’s total was more than 17% lower than EU car registrations in January 2008. In full year 2009 about 14.5m new cars were registered in Europe, only marginally down on 2008 (-1.6%), but 9.5% below the 2007 total, as previously reported.
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| Spanish construction shows signs of improvement | ||
| The recovery of the Spanish construction sector could finally be on its way as it registered Europe’s highest year-on-year increase in construction activity in December, Steel Business Briefing learns from the EU’s statistical office Eurostat. Construction output rose in Spain by 7.5%, this was followed by Poland 2.5% and the Czech Republic 2.3%. The largest decreases were registered in Bulgaria 33.3%, Slovakia 19.7% and Slovenia 18.8%. In terms of monthly comparisons, construction activity fell in eleven European countries and rose only in Romania 6.9% and again in Spain +6.2%. The largest decreases were recorded in Slovakia 11.3%, Slovenia 8.1% and Bulgaria 7.9%. Meanwhile civil engineering decreased by 2.2% in the euro area and by 0.5% in the EU27, after marginal increases of 0.9% and +0.4% respectively in November.
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| January’s French steel output up on ‘09 but down on ‘08 | ||
| Production of crude steel in France rose by 32.3% to 1,134,100 tonnes in January 2010 compared to January 2009, the French Steel Federation (FFA) tells Steel Business Briefing. The recovery was in steel produced via basic oxygen converters, which grew by 70.7% year-on-year to 743,400 t. Production via electric arc furnaces in fact fell by 7.3% y-o-y to 390,700 t. However, total production in January 2010 is still almost 30% below the level of January 2008: -20% for BOC steel and -43% for EAF steel, the federation notes. Last month’s total inched up by 2.9% compared to December 2009. BOS production fell by 6.0% month-on-month, but EAF production rose by 25.6% m-o-m.
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| Russian government to invest less in steel in 2010 | ||
| The Russian government will cut spending on the ferrous metals sector in 2010, Alexey Pinchuk, deputy director of the ministry of industry and trade, told journalists during the Adam Smith CIS Metals Summit, held in Moscow this week. Pinchuk told Steel Business Briefing that the government will invest 100bn roubles (€2.5bn) in the iron and steel sector this year. SBB understands the funds will help support industry investment projects. The cut comes in spite of Pinchuk’s acknowledgement that government guarantees to companies have proved to be an efficient way of supporting the steel industry during the crisis. Pinchuk also speculated that the crisis may not yet be over for the Russian steel industry. “There are signs of stability, but companies are overleveraged and a lot of investment is needed to develop the resource base,” he said.
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| Metallservis and consortium acquire 48% in Estar's Kuzmin | ||
| A consortium consisting of Russia's largest metal trader and distributor Metallservis and investment companies Zheldorfinance and Mosprominvest has acquired 18.25%, 10.5% and 19.25% of Kuzmin Novosibirsk steelworks (NMZ), Metallservis's spokesperson tells Steel Business Briefing. Metallservis has been operating NMZ since July 2009, having taken over from the cash-strapped Elektrostal Rossii (Estar), as previously reported. The initially stalled production has since been restored, most of the creditors paid and the client base reinstated, SBB is told. February will see NMZ producing at full capacity, having reached "pre-crisis" volumes of 15-17,000 tonnes/month of small diameter pipes and structural steel. Estar is currently in the process of liquidation. The company declined to comment on the deal at the time SBB went to press. The consortium sees 2010 as a positive year for NMZ. "It is one of the very few producers of certain types of steel products in the region, so there is no issue with demand," the spokesman says. "Those producers who have survived the last two years look to have a positive year ahead,” he adds.
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| Severstal NA raises spot sheet prices | ||
| Severstal North America is raising its spot sheet transaction prices, effective immediately, Steel Business Briefing learns. A spokeswoman for the Michigan-based flats maker confirmed yesterday that its new non-contract price for hotrolled coil will be $640/short ton, fob mill, a roughly $30 increase over its most recently announced price for the material, SBB understands. Severstal's coldrolled now lists for $750/s.t - up about $40 - while hot-dipped galvanized (substrate) is roughly $30 more at $760/s.t and galvalume (substrate) is $40 more at $770/s.t. Electro-galvanized sheets also are up $40 to $830/s.t, the company said. The increases follow spot sheet price hikes of $40/s.t by Nucor and $50/s.t by AK Steel earlier this week. While demand remains tepid in the US market, sheet prices have been rising recently on the back of tight supply, long lead times and harsh winter weather, SBB understands.
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| Algoma warns market about expiring labor pacts | ||
| Essar Steel Algoma cautioned that operations "could be affected by labor interruptions and difficulties" due to the upcoming expiration of two collective bargaining agreements covering more than 96% of its roughly 3,400 full-time employees. In management's discussion and analysis of the Canadian sheet and plate maker's fiscal third quarter financial results, Algoma said the majority of its workforce is represented by two locals of the United Steelworkers union (USW) under three-year collective bargaining agreements set to expire on July 31. "The company may be unable to successfully negotiate new collective bargaining agreements without any labor disruption," Algoma said in the note, posted on its website. "Any such activities, disruptions or difficulties could result in a significant loss of production and sales and have a material adverse effect on the company's financial condition or results of operations." Algoma reported a net loss of C$64.7m (US$61.9m) for its third quarter ended December 31, 2009, primarily due to "ongoing weakness in steel prices and low shipments due to damage in blast furnace No 7 caused by failure of the bustle main." Fiscal Q3 sales totaled C$308m versus C$533.6m for the year-ago period. The Sault Ste. Marie, Ontario-based steelmaker said fiscal Q3 shipments were 471,343 short tons, down 28% from the prior quarter and down 7.3% from the same quarter last year, Steel Business Briefing understands. Average net steel sales price per short ton shipped (excluding freight) for fiscal Q3 2010 was $559, compared to $982/s.t for Q3 of fiscal 2009.
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| ArcelorMittal investing $54m in US rail production upgrade | ||
| ArcelorMittal said yesterday it will invest $54m to upgrade the rail production process at its Steelton, Pennsylvania works with a new walking-beam reheat furnace with advanced energy and environmental technology. The company says the investment reaffirms its commitment to domestic Class I and passenger rail customers and enhances Steelton's ability to participate in slated rail infrastructure improvements, as well as the growth of US high-speed passenger service. The new reheat furnace is projected for start-up in 2012, Steel Business Briefing understands. ArcelorMittal said it will provide additional details about the project going forward.
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| Wheatland Tube hikes pipe prices between 5-10% | ||
| Wheatland Tube Co of the US has posted a round of pipe price increases effective with new orders beginning February 17. Transaction prices for continuous weld black pipe, diameters 1/8-inch through 4-in, will be raised 8%. Continuous weld galvanized pipe in the same size range will see a 10% price hike. ERW pipe with 2-6in diameters will receive a $75/short ton price increase, while A106 seamless pipe with diameters between 1/8-in and 2-in will see a 5% price increase. Current orders that are shipped before March 1 will be price-protected, Steel Business Briefing notes. Market sources report spot fob mill domestic pricing for 4in Grade B standard pipe to be $845-930/s.t, fob. If the increase sticks, the new price range will be about $913-1,004/s.t. Wheatland, a subsidiary of John Maneely Co, attributes the increases to rising raw material costs. The company manufactures standard pipe, electrical conduit, OCTG and other varieties of tubing at its Sharon, Pennsylvania facility. Trader opinions are mixed regarding recent price increases for tubular goods other than OCTG. “From what I understand from my customers, they’re still saying, ‘Demand is not strong. It’s just because of the scrap.’ But people must be paying at least a part of the increases because they keep coming.”
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| AM Castle opens new oil and gas facility in Alberta | ||
| Specialty metal distributor AM Castle has opened a new facility in Edmonton, Alberta that it has geared toward the Canadian oil and gas industry. “We have had a long-standing business relationship with the Canadian oil and gas industry and despite the current tough economic times the Canadian market remains a critical piece of our global oil and gas portfolio,” said company CEO Michael Goldberg. The new facility, which officially opened in December, is about 50,000 square-feet, Steel Business Briefing notes. Castle is a global distributor of carbon, stainless, alloy and plastic products. Its oil and gas product line consists primarily of bars and tubular goods.
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| Universal joins 5% US stainless wire rod price increase | ||
| Universal Stainless & Alloy Products of the US has followed a leading stainless wire rod price increase by North American Stainless. Universal announced Thursday that base prices would be increased by 5% on all its wire rod products. NAS similarly raised its base prices for wire rod by 5%, as previously reported by Steel Business Briefing. The increase will be effective with new orders beginning March 1. “The price adjustment is necessary to support our continued reinvestment in equipment and facilities to better serve our customers,” a Universal release states.
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| US scrap exporters see solid Asian market | ||
| US scrap market sources have confirmed a Korean booking of 40,000 tonnes US scrap from the country's west coast, as previously reported by Steel Business Briefing in Asia. The shredded scrap was sold for $330/long ton, fob port, according to a knowledgeable source on the west coast. He said that price is down by about $10/l.t from the beginning of the month, though he doesn’t think the market is headed lower. “We see the market being up - I guess as soon as China comes back in (next week),” he said, noting that Chinese buyers aren’t in the market this week because of New Year holidays. He added that demand is steady in Asia, as well as within the US. As SBB reported earlier this week, bad weather has tightened US scrap supplies. “I don’t see prices falling significantly,” he said. “We’re going to buy all the scrap we can.” US shredded scrap is about $330-345/l.t, delivered mill, SBB notes.
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| Sims NA sales down in H1, but ferrous scrap strenghtening | ||
| Australia-based Sims Metal Management said its fiscal first-half North American revenue (ended December 31, 2009) was down 47% from the prior corresponding period - to A$2.2bn (US$1.98) - mostly due to declines in ferrous trading and ferrous brokerage. "In North America we continued to encounter headwinds principally in the ferrous markets, which resulted in relatively weak scrap intake and tight spreads," CEO Daniel Dienst said. "Scrap intake in North America declined 18% sequentially to 2.3m tonnes in the second fiscal quarter." Dienst said Sims' NA export business in the eastern and northwestern markets performed well, while its southwestern and southern markets produced disappointing results due to weak intake. "Softer demand meant our bulk stainless and nickel alloy businesses struggled in the second fiscal quarter," Dienst added. The NA results were part of Sims' overall sales for the first half of its fiscal year of A$3.4bn. As Steel Business Briefing has reported, Sims had overall net income of A$39.9m for fiscal H1 2010. The company said H1 ferrous markets were volatile, though they have strengthened since December primarily due to improved demand from developing countries. "Scrap intake may continue to be challenged in developed, mature economies of the world such as North America and the United Kingdom, primarily due to lingering effects of the global credit crisis and recession," Sims said. "A recovery in scrap flows is subject to a sustainable economic recovery in these regions evidenced by increased consumer spending, business investment and greater employment."
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| Mexican miner dispatches its first 2010 iron ore cargo | ||
| Mexican mining company Minera México-Sinaloense has shipped the first 2010 cargo of iron ore from its Dos Hermanos project, located in Sinaloa state, Steel Business Briefing learns from port authorities. The miner dispatched around 40,000 tonnes of iron ore to the Chinese market through Topolobampo port, in the country’s northwest region, on February 14. The names of the companies involved in the transaction were not disclosed. As SBB previously reported, México Sinaloense plans to export roughly 50,000 t of iron ore every two months through Topolobampo port. It controls estimated resources of 9m t of ore at its mines.
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| Cliffs predicts higher NA iron ore sales for 2010 | ||
| Cliffs Natural Resources says its 2010 North American iron ore sales volume could reach 25m short tons, up from a previous estimate of 23m s.t, due to improving demand. The US-based miner also said it expects NA iron ore revenue per ton to be $90-95 this year. In 2009, NA iron ore pellet sales fell from last year's record by 6.3m s.t - to 16.4m s.t - while NA revenue per ton was off by 11% y-o-y to $82.48/s.t. Cliffs said 2009 NA metallurgical coal sales volumes totaled 1.9m s.t, while revenue per ton was virtually the same as in the prior year at $93.44. Total NA coal production dropped from nearly 3.5m s.t in 2008 to about 1.7m s.t in 2009, Steel Business Briefing notes. Cliffs released the sales data as it reported 2009 income of $204m on sales of $2.34bn. It expects improved results in 2010, including hard coking coal prices of about $125/s.t, fob mine, and increases of 40% for world blast furnace iron ore pellet price settlements, as SBB has reported.
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| Economist: US Recovery will be export-driven | ||
| The recovery from the current economic recession will be export-driven in the US, according to economist Marci Rossell. Other parts of the world, such as Latin America, are growing strongly – and those are America’s customers, Rossell said, speaking yesterday at the Metals Service Center Institute’s Carbon Conference, attended by Steel Business Briefing. “This recovery is an export-led recovery,” she said. Rossell, former chief economist for CNBC and co-host of "Squawk Box," spoke on the roots of the current financial crisis and the ongoing recovery. She said not much is said about US export growth because it is a complicated economic issue and doesn’t fit most peoples' image of the US economy - a consumer-driven one. She added that the US auto industry could lead this export push “if they could ever make a car that people want to drive.” She said consumer goods and investment goods could fill this role as well. As SBB has previously reported, a number of US mills such as Nucor and Gerdau Ameristeel, have made no secret of their plans to grow exports to other parts of the world, such as Latin America and the Middle East.
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| Russel posts 2009 loss, hoping for firmer 2010 prices | ||
| North American distributor Russel Metals saw fourth quarter 2009 revenue drops of at least 40% in its metal service center, energy tubular and steel distributor segments, but mill price increases announced in early 2010 seem to be setting a more positive tone for the upcoming year. Russel’s service center group, which distributes steel and other metals throughout the US and Canada, saw a 44% drop in Q4 revenue year-on-year to C$236m (US$226m). Q4 energy tubulars fell 50% to C$147m y-o-y, but increased 27% relative to Q3 2009 due to “a few low margin orders.” The company’s steel distribution segment saw a Q4 revenue drop of 61% y-o-y to C$47m. As a whole, the company posed a full-year 2009 loss of C$92m, Steel Business Briefing notes. “I am glad 2009 is behind us,” said CEO Brian Hedges. “Early 2010 activity levels have increased for both our metals service center and energy tubular product operations compared to the end of 2009. The mill price increases announced for the first quarter of 2010 have firmed pricing in the market.”
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| Amid price hike attempts, Usiminas grants a 3% discount | ||
| Losing market share to other domestic mills since last year, Usiminas has surprised some customers with 3% discounts on hotrolled coil deals over the last few weeks. The discounting is taking place at the same time other mills are eager to increase their prices, Steel Business Briefing notes. The average ex-works prices for commodity HRC produced by Usiminas is now R$50/tonne lower than the competition, reaching R$1,650/t (US$902/t). Coldrolled coil prices are unchanged at R$1,900/t ex-works, excluding extras. While most Brazilian mills continue attempts to raise prices for flats, as chronicled by SBB over the last two months, many buyers are not willing to pay more and base prices have not increased. However, average transaction prices have increased since December.
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| ArcelorMittal Vega do Sul increases exports in February | ||
| Brazilian coldroller and galvanizer ArcelorMittal Vega do Sul may export more than 7,000 tonnes this month, up from about 3,300 t exported in January, Steel Business Briefing learns from the government. Port authorities said a 3,238 t cargo of hot-dipped galvanized coils left São Francisco do Sul terminal in early-February, but a second cargo of HDG of 4,200 t is scheduled to be shipped later this month. Vega re-rolls and galvanizes HR coils supplied by the group's integrated mill in Tubarão, selling most of its production domestically. A small portion of the output, though, is usually exported, mostly to Argentina.
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| Chile's 2009 rebar shipments down 34% | ||
| Chile’s rebar/construction bar shipments to the domestic market during 2009 were negatively affected by the economic slowdown, which impacted several steel-consuming industries. Last year’s rebar dispatches came to only 354,679 tonnes, down 34% from 2008, when it was 536,700 t. This decline is mainly related to poor first-half business, since sales have been stable since July. December shipments totaled 30,423 t, flat when compared to December 2008 and to November 2009, when rebar dispatches were at 29,512 t and 30,052 t, respectively. These figures include sales of Compañía Siderúrgica Huachipato, Gerdau AZA, Aceros Quinta Normal and Famae, SBB notes.
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| Brazil’s Pecém port dispatches its first iron ore cargo | ||
| Brazil's northeastern state of Ceará will dispatch its first cargo of 70,000 tonnes of iron ore this weekend through its Pecém port to China, Steel Business Briefing learns from port authorities. According to the port’s commercial manager Mário Lima, Pecém has just started handling raw material cargoes, and its iron ore exports might reach 350,000 tonnes by the end of 2010. SBB notes that the inaugural cargo includes the first iron ore tonnage produced in Ceará by the Chinese miner Globest, which was set up in Sobral city in mid-2009. The mining company says that its holdings are estimated to supply iron ore for a five-year period.
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| Brazil sees higher coal prices for Q2 contracts | ||
| As Brazilian mills' coking coal contracts for the first quarter are concluded, higher prices are being seen in the domestic market for the upcoming quarter, Steel Business Briefing learns from traders. For the April-June quarter, low-volatile coal is being quoted at around US$158-160/tonne fob US, while high-volatile coal is being negotiated at US$170-175/t fob. Meanwhile, traders say coke purchases from Poland and Egypt are around US$450/t cfr Brazil. Moreover, deals from China and India were closed at US$520/t cfr and US$500/t cfr, respectively. As previously reported, the higher raw material prices reflect rising demand for iron ore, coal/coke and scrap. Growing demand, particularly in Asia, is expected to mean tighter markets in all three products.
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| Argentina's Jan. output up from 2009, but down from Dec. | ||
| Argentinean crude steel output totaled 336,900 tonnes during January, up 18.6% over the same month in 2009, but down 14% from December, Steel Business Briefing learns from the country’s steelmakers group CIS. According to the association, this month-on-month drop is mainly related to maintenance work carried out by mills during January. January flatrolled steel output came to 354,200 t, a 45.5% increase over January 2009. Compared to December, however, last month’s production declined 4.9%, from 372,400 t. Meanwhile, Argentinean coldrolled output reached 132,900 t during the first month this year, up 96.9% and 8.7% over January and December 2009, respectively. As SBB previously reported, Argentina’s steel demand has been increasing so far this year, and mills might see a solid 2010 rebound. Learn more about the Argentinean steel industry at SBB's Steel Focus Argentina conference on March 19 in Buenos Aires.
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| Egyptian flat steel demand slows down | ||
| The flat rolled steel market in Egypt has slowed down since last week. Steel Business Briefing is told by traders that one of the largest sheet consuming sectors, home appliance manufacturing, is having difficulty in finding a market for export in Europe, so steel demand is falling. Some Egyptian traders think that the market is waiting to see China return after its new year holiday. This is because big volumes allocated for export from China may cap price increases. On the other hand, some market sources believe a price increase is inevitable because of iron ore and scrap price increases all over the world. Hot rolled coil from the CIS is offered to Egypt at $600/t cfr. Saudi Arabian HRC is offered at $600/t fob and freight to Egypt costs $25-30/tonne. Locally produced HRC is sold at $588/tonne ex-works. Egyptian buyers do not expect a sharp increase in flat rolled steel prices in March. But a decline is also not expected.
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| Syrian sheet demand is low, may pick up after winter | ||
| Demand for flat rolled steel is very low in Syria. Steel Business Briefing is told by Syrian traders that it is possible to find material at lower prices in the local market than current import offers, so buying is very slow. Syrian flat steel demand did not pick up in the new year, unlike many of the neighbouring countries. Importers in Syria are offered hot rolled coil at $590-610/tonne cfr, while it is possible to find the same material at $580/tonne in the market. Hot-dip galvanised coil is offered to Syria at $850-900/t cfr while it is possible to find the material at $800-850/t in the market. Syrian market sources say price is not the reason for the market slowdown in the country. It is the lack of demand. But they believe buying will pick up after March, when winter is over.
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| UAE rebar demand is firm, March booking prices increase | ||
| The UAE rebar market is showing signs of recovery, local sources tell Steel Business Briefing. The run-down of excess stocks makes it possible for the local producers to be in greater control of the market. Local production for March is being offered at around AED 1,960/tonne ex-mills ($534/t). Emirates Steel Industries is expected to announce its March price next week. UAE rebar prices have been increasing for the last two months, and local producers now are the main price setters in the market. Turkish imports are still reported be very low in tonnages. This helps stockists to maintain reasonable stock levels. Rebar’s retail price in the UAE is around AED 2,060-2,080/t ($560-566/t). There are growing rumours in the market regarding a possible removal of the import duty exemption for cut and bend facilities. Cut and bend facilities are being planned to be considered as a fabrication unit, as opposed to a manufacturing unit which is the case now. If the new arrangement enters into force, cut and bend facilities will have to pay a 5% duty to import rebar. The market sources say that this new regulation is likely to change the fundamentals of the steel trade in UAE.
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| Star Steel starts sections production in UAE | ||
| Star Steel, part of the Eta Star Group, has announced the start-up of sections production at its mill in Hamriyah Free Zone, Sharjah. The company will have 240,000 tonnes annual sections, beams and channels production capacity. The company has already started test runs for the production of 160mm IPEs, and plans to continue with the rolling of 140mm down to 100mm. Commercial production will start in March, Steel Business Briefing was told. The equipment is supplied by an Italian company, and it is designed to produce IPEs, HEA/HEBs, UPN /UPEs and Japanese quality channels. Ali Asgar Matcheswalla, senior trading executive of the company, tells SBB: “Star Steel International would be the first and only company in the entire GCC which will manufacture both rebars and structural sections at the same location in two independent lines, making it the sole supplier of entire range of construction steel products.” The company plans to sell its production locally and also export to GCC countries, Iran and Iraq.
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| UAE pipe demand sluggish, prices unchanged | ||
| The demand for tubes and pipes in the United Arab Emirates is very sluggish and sellers are struggling to collect payments, Steel Business Briefing learns from local producers and traders. In the local market hot rolled welded pipes 0.5-4 inches diameter and 2-3.8mm wall thickness are being offered at AED 2,450-2,500/t ($666-680/t), a price in effect since December. The base prices for 100mm square hollow sections and 50x100mm rectangular hollow sections of 2-3.8mm wall thickness are also stable at AED 2,450-2,500/t since December, SBB learns. “The prices are very much the same, but there is no demand in the local market. The payment scenario is very bad, it has become very difficult to get the payment from the local market,” says a producer. Also there is a shortage of pipemaking raw material hot rolled coil (see related article).
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| Kumba sees ore demand rising, upward pressure on prices | ||
| Rising steel production in China and elsewhere will leave the global iron ore market “structurally tight” this year, South African producer Kumba says. Growing demand for seaborne iron ore is already being manifested by the sharp rise in steel scrap and spot iron ore prices, it adds. In 2009 Kumba raised its export sales by 37% or 9.3m tonnes to 34.2mt. As demand weakened in its traditional markets of Europe, Korea and Japan, it switched more volume into China. Shipments to China jumped by 130%, accounting for 75% of Kumba’s total exports. This year Kumba sees sales to China returning to more normal levels of 60% of the total. Sales to Europe, Korea and Japan are increasing but remain below pre-crisis levels, Kumba CEO Chris Griffith told a webcast monitored by Steel Business Briefing. Asked about the outlook for iron ore prices, Griffith noted the industry consensus that these are likely to rise in 2010-11. With spot prices about 75% above benchmark prices, Griffith said there is upward pressure on the benchmark price. He added that Kumba is open to new pricing models, though the Big Three miners would determine in what direction this goes. Kumba regards it as important to secure long-term contract sales, but these could be priced on a shorter-term basis than annually, Griffith said. Kumba also said the proposed BHP Billiton-Rio Tinto joint venture is strengthening its own position as Kumba is already picking up customers who are anxious to diversify away from the Big Three. Despite the 40% fall in iron ore prices, Kumba reported operating profits of R12.9bn ($1.7bn), down only 5% from 2008.
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| Metinvest increases iron ore exports to China | ||
| Ukraine's Metinvest will supply 701,000 tonnes of iron ore to China this month, the company tells Steel Business Briefing. Last month Metinvest shipped 894,000t of iron ore to China. The shipping of iron ore to China takes place in Capesize vessels, and only began last November. It is understood the deliveries are being made to one company in China, on a long-term basis. Metinvest produces 40m tonnes/year of iron ore in Ukraine.
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