Mills continue to hike HRC export prices to SE Asia

Regional mills in Asia continue to raise their hot rolled coil prices in tandem with climbing raw materials costs. Offers from Taiwan and Korea for 2mm base re-rolling HRC were prevailing at $730-760/tonne fob for April shipments last week. Offers in mid-January were at $710-720/t fob.

Traders tell Steel Business Briefing of fewer offers and lower buying interest in the market because of the Chinese New Year holidays that commence this week. A small volume of Chinese commercial quality boron-added 4-12mm HRC was recently booked at $710/t cfr, a Chinese trader claims. There were bookings at $685/t cfr Vietnam in mid-January.

“Traders do not have much allocation because many mills are closing. We expect new offers from China to be higher after they re-open,” he says. In Vietnam, Taiwanese 2mm HRC was heard offered last week at $780/t cfr Vietnam and Chinese-origin 2.5mm at $750/t cfr.

Some 20,000 tonnes of Korean-origin 1.8mm re-rolling HRC was heard booked at $810/t cfr Indonesia. Last week, traders considered the price high (equivalent to $765-770/t fob for 2mm HRC) but after the holidays, it will be considered reasonable, SBB is told.

"Prices are rising because of increased raw material prices. There is no signal that these will drop, so steel buyers have to follow this uptrend in prices," a regional trader says. 

Some traders are concerned about the rapid price hikes. “Everyone seems bullish. But some of the buying is speculative,” a trader warns. Prices could fall sharply after March if these traders’ position cargoes – when released into the market – exceed demand. Another trader says: "It's coming to the point where buyers will start to resist the higher prices."

China’s Hegang raises Feb rebar/rod list prices by $15-23/t

Following the path of eastern Chinese longs producer Shagang Group, northern China’s Hebei Iron & Steel has raised its February list prices for rebar by RMB 150/tonne ($23/t), along with a RMB 100/t ($15/t) increase for wire rod.

After the increases, the list price for Hegang’s 16-25mm HRB335 rebar rises to RMB 4,770/t ($724/t) with 17% VAT, and its 6.5mm Q235 wire rod reaches RMB 4,750/t with VAT. 

Its settlement prices for its January-delivery rebar and wire rod prices were raised by RMB 70/t and RMB 50/t respectively, reaching RMB 4,620/t for rebar and RMB 4,650/t for wire rod.

The increase was within market expectations after price hikes of major domestic flats producers including Baosteel, Wuhan Iron & Steel and Anshan Iron & steel, due to soaring raw material prices, Steel Business Briefing learns from the market.

Mills’ higher ex-works prices and continuing rising raw material costs have helped firm up steel prices and increased confidence in the market, as SBB reported. As of press time, most traders had left the market for the Chinese New Year holiday (2-8 February), SBB notes.

The China Iron & Steel Association predicted in a report on 25 January that steel prices are likely to increase after the holidays as market demand will recover at that time from its current holiday lows.

Brazil's Gerdau mulls rail production

Brazil's Gerdau group discloses to Steel Business Briefing that it is studying the feasibility of producing rails. This comes in light of the plan by Brazil to expand its rail system by around 20,000 km by 2025. Brazilian steelmakers have not produced rails since 1996; international companies have been meeting the country's needs (see table).

A Gerdau spokesperson says the favorable railway scenario is prompting it to study the viability of producing rails at the company's Açominas works, Minas Gerais state. It hasn't disclosed further details.

According to the country's railroad industry association, Abifer, domestic rail production is only viable if demand is above 500,000 tonnes per year. In 2010, Brazil's demand reached 496,368 t compared with 147,178 t in 2009. 

"The volume of rail projects, and consequently demand, varies greatly because of political, economic and environmental issues," a spokesperson for Abifer says. 

Establishment of a rail plant means an investment of about US$1.5bn, explains Abifer. It says "investors are unsure whether the market demand and profit exist to pay for this investment.” In 1996, CSN's rail mill in Brazil shut down due to a lack of orders.

As reported, Brazil's engineering and railway construction company Valec is soliciting bids for 244,597 t of rails. The average price of US$864 per tonne is nearly seven times the crude ore export price to countries such as China, SBB notes. Brazilian projects currently under way will account for over 3,700 km of railroad by 2014.

Nucor proceeding with flats improvement projects

Nucor is moving ahead with several capital projects aimed at improving the quality of its flat products and increasing its market share.

Speaking during a recent earnings conference call monitored by Steel Business Briefing, chief operating officer John Ferriola said Nucor's sheet group is "continuing to move up the value chain with margin-enhanced products."

Nucor will install a second sheet mill vacuum degasser at its Hickman, Arkansas, facility. "As the westernmost flatrolled facility in the United States with a vacuum-degasser, Nucor Steel Arkansas will be strategically positioned to take advantage of the growing markets to the west, southwest and in Mexico," Ferriola said.

Nucor says more than 20% of all degassed steels sold in the US are purchased by OEMs located in states adjacent to Arkansas.

"In addition to the opportunities to expand our current market share with existing customers in automotive, HVAC and oil country tubular goods, the Hickman degasser will enable us to develop new customers in target markets such as motor laminations, garage doors and lawn and garden," Ferriola said. "We expect commissioning to occur in the fourth quarter of 2012."

Nucor also recently approved the installation of a vacuum degasser at its Hertford County, North Carolina plate mill. "Commissioning is expected in the first quarter of 2013," Ferriola said. "This will further broaden our product mix to include armor plate and certain alloyed plate grades."

Tata Steel hikes UK sections prices, as expected

Tata Steel is hiking UK sections prices by £95/tonne effective from 6 March, it says in a release sent to Steel Business Briefing.

This will take UK sections prices towards £600/tonne (€697/t) delivered, give or take £10-20/t, sources suggest. Nobody is surprised by the increase after precipitous rises in raw material costs, with flooding in Queensland, Australia, tightening coking coal supply and pushing up spot prices, and thus likely Q2 contract settlements. 

Iron ore prices are still strong and scrap has been increasing on Turkish buying, though this has tapered off recently, as reported. UK-based traders recently surveyed by SBB bemoaned domestic sections prices, which have been comparatively low compared to the likes of merchant bar. 

The consensus is that mills, including Tata Steel Europe, cannot afford to absorb these increases as margins are already under pressure: the poor weather in December meant results were weaker than anticipated, a source from Tata tells SBB. 

“The steel supply chain has no choice but to take robust action to recover… rapid increases in raw materials costs,” says Mick Maloney, Tata Steel commercial manager for sections. 

It is generally accepted that constructional steel demand in the UK will fall marginally this year compared to 2010, because of austerity measures. Some improvement is likely from mid-2012, according to the British Constructional Steelwork Association. Prices are likely to recede in the autumn when coil availability improves, the BCSA adds.

Baosteel's high-strength auto steel sales surge 46%

Baosteel’s focus on increasing the ratio of high-end auto steel in its product mix is paying off. The Chinese steelmaker says that last year its high-strength auto steel sales topped 1m tonnes, a 46% jump over 2009. This will mean less business for the Korean and Japanese mills that had been China's chief suppliers. 

“We’re benefitting from China’s fast developing auto market; our orders last year were especially strong,” a Baosteel source tells Steel Business Briefing. This year growth of its high-strength auto sheet sales will be larger than the growth rate likely for China’s auto sector as a whole, he predicts, which is expected to be around 20%.

Baosteel’s sales of this high-end sheet are also a boon to the steelmaker’s revenue. Currently, the company’s high-strength steel is priced at RMB 8,000-10,000/t ($1,215-1,519/t) excluding VAT, while prices of ordinary cold rolled auto sheet are RMB 5,500-6,500/t, SBB notes.

“Still our prices are cheaper than the same grade of sheets from the Japanese and Korean mills so it is likely that Shanghai General Motor and Shanghai Volkswagen will purchase more from us this year,” SBB is told.

Baosteel commissioned a new CR mill for high strength steel in March 2009 that can produce 800-1,300MPa sheet. Shanghai General Motor and Shanghai Volkswagen have used some of Baosteel’s 1,000MPa high strength steel since third quarter 2009. 

In the second half of 2010, Baosteel started to supply the two automakers with 1,300Mpa high-strength steel, but for now the volume remains low, according to the source.

Japanese sections prices climb on scrap costs, lower stocks

Prices of sections in Tokyo and Osaka strengthened by ¥3,000-5,000/tonne ($36-60/t) last week. This followed price rises tabled by leading producers but was also helped by thin market stocks. Sections producers have raised their prices by a total of ¥13,000/t ($157/t) for December and January contracts to transfer higher input costs and regain profits, they claim.

JFE Bars & Shapes lifted prices of its channels, equal angles and unequal angles by ¥5,000/t for February contracts because of scrap costs; Shinkansai Steel is adding ¥7,000/t to its flat and square bars; and Oji Steel is lifting its prices of flat and square bars by ¥5,000/t, also for February contracts. 

“We had raised prices over previous months but scrap costs have increased further and we need the additional rise to generate profits again,” an Oji spokesman tells Steel Business Briefing.

An Osaka-based distributor admits hearing that building sector demand has bottomed, yet he says he doesn’t feel a solid increase in actual demand. “But orders are rising as buyers anticipate higher prices in the future,” he says. 

Stocks of sections have been decreasing and the thinning inventory levels are helping to ensure that higher prices penetrate the market, he says. Further rises in market prices are inevitable following the additional hikes by mills.

Inventories of sections at steelmakers and distributors at the end of November reached 396,000 tonnes, an 11% decrease from end-October, according to the most recent data from the Japan Iron & Steel Federation. Current market prices of channels (100x50mm) in Tokyo and Osaka are around ¥80,000-83,000/t and those of angles (50mm) are around ¥80,000/t.

Prices for round bars climb in India

A revival of infrastructure projects that has strengthened demand – plus higher input costs – has led Indian producers of round bars to raise prices by around Rs 3,000/tonne ($65/t) over the past month.

The rise in prices now is not unexpected however, a Mumbai-based producer tells Steel Business Briefing, noting that demand usually strengthens as construction activities peak from November till the next monsoon season in June. “Also, many steel consumers maximise purchases from January to fully utilise their budgets before India’s financial year ends in March,” he adds.

Nationwide, producers are selling 16mm mild steel rounds at Rs 33,000-35,500/t ($721-775/t ) ex-works, excluding 10.3% excise duty and VAT. Mild steel rounds mostly used in construction account for 80% of India’s round bar market.

The producers – led by major integrated mill Rashtriya Ispat Nigam Limited – are blaming higher raw materials costs for the need to lift prices. “Buyers are complaining about the current high prices but we can only reduce our prices if scrap costs come down,” a rounds producer based in Visakhapatnam in south India’s Andhra Pradesh state tells SBB.

Moreover, stronger raw materials prices aside, the market is likely to remain buoyant at least until mid year. “The rounds sector never really weakens,” explains another producer based in Ahmedabad in the western state of Gujarat. “Even after the peak season for construction is over, sales tend to remain fairly constant – supported by orders from other sectors such as auto and industrial machinery manufacturing.”

Pakistani rebar prices follow billet upwards

After the price increase announced by Pakistan Steel, local market sources report that rebar prices have risen to PKR 72,000/tonne ($841/t) from PKR 68,000/t ($794/t).

Although Pakistan Steel’s billet supply is limited, it still determines the market price trend. One trader tells Steel Business Briefing: “Pakistan Steel supplies 2,000 tonnes/month now, whereas they have capacity for 30,000 t/m, but after the increase they announced in the beginning of last week, prices have seen a hike.”

Pakistan Steel’s decision to increase prices is in line with the rising international prices, but still lower compared to international prices, market sources tell SBB.

Drawing quality wire rod offers to Pakistan market are around $800/t, SBB was told.

China’s Yulong aims to sell shares to fund pipe expansion

Eastern China’s major welded line pipe maker Jiangsu Yulong Steel Pipe is restarting its efforts to list on the Shenzhen stock exchange. Yulong is currently waiting for its listed enterprise environmental protection verification to be approved by China’s Ministry of Environment Protection (MEP).

According to a related report seen by Steel Business Briefing, Yulong is hoping to use the funds raised from its initial public offering to fund a 420,000 tonnes/year capacity expansion for high-grade oil/gas linepipe. 

Yulong failed its last IPO attempt on 23 August 2010, as its financial report didn’t meet CSRC’s regulations, SBB notes.

The company’s capacity expansion has two parts: a 250,000 t/y project in western China’s Xinjiang Uyghur autonomous region and a 170,000 t/y project in Wuxi city in eastern China’s Jiangsu province. 

Yulong aims to raise its total welded pipe capacity from its current 760,000 t/y to over 1m t/y. Its products includes longitudinal submerged arc welded (LSAW), spiral submerged arc welded (SSAW), hollow section and electric resistance welded (ERW) pipes. 
SBB learns from a company source that the project in Xinjiang – which includes one 120,000 t/y LSAW mill and two SSAW mills with a total capacity of 130,000 t/y – is under construction now. There is no construction timetable for the Jiangsu project.

Eastern China scrap trade slow, prices stable

There were few transactions in China’s domestic scrap market last week ahead of the Chinese New Year holidays. Consequently throughout the country prices remained generally stable.

In eastern China’s Jiangsu province, the region’s largest scrap consumer – Shagang Group –kept its buying price for heavy melting scrap (over 6mm thick) unchanged since 21 January at RMB 3,650/tonne ($554/t) with 17% VAT. Other major mills such as Xingcheng Special Steel and Sugang also held their scrap buying prices.

“Recently, the domestic market has been sluggish since most traders have closed their businesses for the coming holidays,” an eastern mill source tells Steel Business Briefing. She adds that most mills will continue their melting and rolling operations during the holidays so by mid-February their scrap stocks could be close to being exhausted. 

“Since mills will have to buy more scrap to supplement their inventories, market prices for heavy melting scrap may climb to around RMB 3,900/t ($592/t) over the coming three weeks,” the source predicts.

Meanwhile, SBB hears that some mills continue to quietly offer higher prices to secure scrap but traders are unmoved, expecting prices to strengthen further.

Currently, market prices in eastern China for heavy melting scrap (>6mm) are around RMB 3,650-3,700/t ($554-562/t) with VAT, almost the same as levels a week ago.

Indian exchanges launch iron ore futures trading

Two Indian commodity market operators announced last Friday that they would begin trading iron ore futures from 29 January. The Indian Commodity Exchange (ICEX) and the Multi Commodity Exchange (MCX) both said the new contracts had received regulatory approvals from India’s Forward Markets Commission.

ICEX says it plans to use the reference prices of The Steel Index, a subsidiary of Steel Business Briefing, as the benchmark for its contracts. It will trade four monthly contracts for 62% Fe fines starting with deliveries for March, April, May and June. The first contract starts from 31 March. These contracts will be cash-settled, and eventually physical settlement would be introduced. Lot size is 100 tonnes. This will enable “smaller market players to participate,” a senior company official tells SBB. 

The main delivery centres will be the east coast ports of Ennore, Vishakhapatnam, Haldia and Paradip, ICEX says. Trading will be focussed domestically, targeting Indian suppliers and exporters of iron ore. In the case of foreign companies, only those with registered offices in India are permitted to participate directly on Indian exchanges, SBB is told.

MCX will offer trading for twelve months forward, on a FOB Chennai basis. Lot size is also 100t. Contract settlement will be calculated as the average of spot prices in the contract month, denominated in rupees.

E. Asian scrap import market slows down ahead of holidays

The scrap import market in east Asia was quiet last week as the region prepared for lunar new year holidays. Offers are very limited and buying interest is reduced. Most traders describe the current market as soft and weak; others say that the market is flat. But the current lull is expected to be temporary because the regional mils have not been actively importing and will need to replenish their scrap inventories.

Offer prices for bulk scrap composite 80:20 HMS 1&2 and shredded were prevailing last week at around $510/tonne cfr Singapore/Malaysia. A regional trader says that offers would be around $500/t cfr to Northeast Asia, and that prices have come off by $5-10/t from recent peaks.

A bulk cargo of 30,000-35,000 t of scrap from Hong Kong was booked at an effective $505/t cfr Malaysia. It comprised mostly HMS and some Bonus (plate and structural). Traders tell Steel Business Briefing that the deal was done two to three weeks ago.

The regional containerised scrap import market is also weak. A Taiwanese mill reportedly booked 3,000 t of 80:20 from west coast USA at $455/t cfr late last week, down from another import booking by another local mill at $460/t cfr the previous week.

In Vietnam, SBB is told of a booking last week of containerized scrap from Australia at $473/t cfr for 80:20 and $478/t cfr for shredded. 

Market sources report that they have hardly any bulk offers to Vietnam recently. Offers for small bulk cargoes of 2,000-5,000 t were last heard at around $500/t cfr and bigger bulk cargoes at $520-530/t cfr.

Takeovers boost Anshan Iron & Steel's output

Mergers and acquisitions boosted crude steel output by northern China’s Anshan Iron & Steel to around 30m tonnes in 2010, up by 10m t or 50% from 2009’s 20m t.

In mid-2010, Angang took over southwestern China’s Panzhihua Iron & Steel (Pangang), which has a crude steel capacity of around 8m t/y. This raised Angang group’s capacity to around 33m t/y from the previous 25m t/y.

Steel Business Briefing notes that Pangang is currently constructing a 4m t/y integrated works to make hot rolled coil in Sichuan province’s Xichang city. After the commissioning later this year, Angang’s crude steel capacity will reach 37m t/y, and its output is expected to rise further in 2011.

Meanwhile, Angang has submitted a proposal to China’s Ministry of Industry & Information Technology (MIIT) to merge with south-eastern China’s Sangang Group in a bid to build up a 10m t/y integrated steelworks in Fujian province’s Ningde city. 

Although there is no firm timetable for this project, it is expected to be put on stream over 2011-2015 as Angang and its merger partner Benxi Iron & Steel together are set to boost their combined capacity to over 60m t/y by the end of 2015 from the current 50m t/y.

India's Sail mulls new upstream project with Japan's Kobe

Ongoing discussions between state-owned Steel Authority of India Ltd (Sail) and Japan’s Kobe Steel for a steelworks joint venture have taken a different turn – and one that apparently excludes the latter’s proprietary ITmk3 iron-making technology. 

This comes with Sail’s announcement on Friday that it is in talks with Kobe for setting up a steel plant using gas-based direct reduced iron-making and electric arc furnace steelmaking at the premises of the Jagdishpur Sail Unit (JSU) in central India’s Uttar Pradesh state. Unclear is whether Sail would action this alone or in a venture with Kobe.

Sail does not propose to use the ITmk3 technology for this project, a company official tells Steel Business Briefing. A joint feasibility study for the project is likely to be concluded by March, Sail states. Subject to the outcome of the study, the project will represent the second phase of the ongoing revival of the JSU. 

The Jagdishpur plant is an 850,000 t/y pig iron plant that was idled in 1998 till Sail bought its assets in February 2009, as SBB reported. Last July, Sail broke ground on a 150,000 t/y thermo-mechanically treated rebar mill at Jagdishpur. This unit is scheduled for commissioning by November, Sail says. 

However, the two mills continue to discuss an ITmk3-based 500,000 tonnes/year steelworks jv on the premises of Sail’s alloy steel plant at Durgapur in eastern India’s West Bengal state. “A joint feasibility study is being conducted to assess the technical viability of this project,” the Sail official tells SBB. Kobe Steel officials in Tokyo were unable to comment.

Though the reasons for a proposed jv at Jagdishpur are unclear, SBB notes that India’s newly appointed steel minister B. P. Verma hails from Uttar Pradesh.

Chonggang to see output up 38% in 2011 due to capacity boost

Southwestern China’s Chongqing Iron & Steel (Chonggang) is planning to produce about 6.3m tones crude steel in 2011, up 1.74m t or 38% from 2010’s 4.56m t. The output increase this year is due to Chonggang’s third blast furnace, which will be commissioned around June of this year in Chongqing’s Changshou district.

With the commissioning of its third 2,500 cubic metre blast furnace in June, the first phase construction of Changshou steelworks will be completed. The works will have a total crude steel capacity of 6.5m t/y, while its existing steel works at the city’s downtown Dadukou district will be shut. 

Chonggang has already started relocating its 1.3m t/y 2,700mm wide plate mill from Dadukou to Changshou, and has also launched construction of one bar mill with a capacity of 600,000 t/y and one 400,000 t/y mill for both bar and wire rod in rural Jiangjin district to replace longs capacity at Dadukou.

The company has planned to further boost its crude steel capacity to more than 10m t/y by adding an unknown number of electric arc furnaces and one Finex iron-making facility between 2011-2015. The downstream facilities of this extra crude steel capacity are expected to be longs and pipe mills.

Meanwhile, Chonggang will also add a new cold strip mills of around 2m t/y downstream of its 3m t/y 1,780mm hot strip mill at its Changshou steel works. The new cold rolling capacity is expected to be commissioned around 2013, Steel Business Briefing learns.

Turkish flats export markets sluggish

Demand for Turkish flat rolled steel is not satisfactory in the country’s export markets, especially EU countries. Steel Business Briefing learns from Turkish producers that domestic demand is supporting their production, and therefore output cuts are not planned.

Turkish sources say their prices are higher than other exporters to the EU region, especially China. Some Chinese producers have offered their materials at low prices to the market before their Lunar New Year holidays start, Turkish sources say.

Turkish producers are offering hot rolled coil at $820-840/tonne fob for export, similar to domestic prices.

Turkish domestic rebar market prices are stable

Turkish domestic rebar market prices were reported to be stable late last week, although the export markets have seen a rebound. Turkish producers are hesitant to reduce their current official offers down from TL 1,350-1,380/tonne ($839-857/t) including 18% VAT, whereas traders’ prices are around TL 1,300-1,260/t ($807-782/t), Steel Business Briefinglearns from the market.

Some producers are reported to be making deals at lower rates than their official list price to maintain the cash flow. But they are not willing to adjust their prices according to the current market situation in order to avoid depressing the market further, and they expect domestic prices to recover in line with rising export prices.

In Iskenderun region, in the southern part of the country, prices have edged up to around TL 1,290/t but demand was low at the end of last week, whereas Aegean region prices are reported at around TL 1,240-1,260/t.

Producers deny rumoured capacity closure in Greece

Greek long producers denied a rumoured intention to close capacities in the next months, Steel Business Briefing learns from local sources.

The three companies controlling crude steel and rebar production denied planning to halt one of the melt shops in the country. “All of our production facilities are and will remain in continuous operation. Production levels are continuously optimized to the variable demand of domestic and international markets,” a spokesperson from Sidenor explains to SBB.

Nevertheless, rumours in the market continue spreading. Overcapacity remains an issue in Greece, together with volatile raw materials prices and high energy costs.

“I believe this won’t happen in the next months, mainly for the difficult situation of the labour laws in the country. Nevertheless, this possibility has been raised by the producers themselves since the end of last year. I believe Greek mills could halt some production further during 2011, if the international price situation continues maintaining margins very low,” a local trader explains, stressing that some of the mills currently have low levels of stocks both for scrap and rebars.

Meanwhile, rebar prices remain firm at around €600-650/t delivered in Greece, but the international correction in prices is believed to have increased the possibility for buyers to get discounts from mills, SBB notes.

Greece has an installed capacity of approximately 3 million tonnes of crude steel, split between Sidenor group, Hellenic Halyvourgia and Halyvourgiki. In 2010 the country’s mills produced 1.8mt of crude, down 8.1% year-on-year, according to worldsteel data.

Price assessments differ in European merchant bar market

Merchant bar prices in the northwest European market appear to differ widely currently. While €700/tonne appears to be the mean average cited by market participants, different sources are adamant that the prices they pay are €50/t or more above or below this level. 

“We had the mill’s representative here recently announcing an increase which takes the price to nearly €750/t,” says a manager at one regional fabricator. He is buying large volumes on a long-standing basis from a mill where merchant bar is a non-core product. Until now, prices from this supply source have been lower than those quoted by Italian or Spanish producers, the manager adds.

Similarly, eastern European suppliers, so far considered cheaper, are currently seen charging the same as or more than western European mills. “They are above €700/t and western mills are definitely cheaper,” one western European importer tells Steel Business Briefing, citing €640/t as a domestic price.

However, “they should be pretty much on a par,” a manager at a large regional trading group counters. “Some buyers make a fuss that they got a 120-tonne load at less than €650/t, but those are untypical exceptions,” he says.

Pricing these days defies economic laws and is subject to the daily mood of the sellers and buyers, he maintains. “The two sides do not come to terms because prices are so crazy,” he adds.

Egyptian mill to install new wire rod processing line

Italian plant maker DEM Wire Rolling Technology has just commissioned a new wire rod processing line for a mill in Egypt, the company tells Steel Business Briefing.

From wire rod coils weighing up to 2 tonnes the line can produce wire rod, in coils, with a weight of up to 1t, bars from 2,500-6,000mm in length, special flats up to 12x6mm and square profiles up to 7x7mm.

It consists of a wire rod uncoiling system, shot blasting machine, fully automated coiler and a wire cut-to-length shear and bar collecting bench. The line also consists of rolls, two driven and two idle, which can move vertically and horizontally to make the flat wire and special profiles.

DEM cannot say which mill it is sending the equipment to, only that the plant is in Egypt. Flat wire rolling lines can produce wire for use in a variety of sectors, including automotive, power generation and distribution, oil and chemical, machinery and mining and civil construction.

Pipemaker EEW expands fabrication capabilities in Rostock

Erndtebrücker Eisenwerke (EEW) has announced another investment at its subsidiary in Rostock on the German Baltic Sea coast, the company tells Steel Business Briefing.

The works in Rostock, EEW-SPC (Special Pipe Construction), was set up in 2008, at a cost of €60m, for the production of large and heavy pipes and components for the offshore oil, gas and wind power industries. It is an established supplier for numerous wind parks in the North Sea, and currently has an annual capacity of 85,000 tonnes.

The company is spending €7.5m to add a new hall to provide another 5,000m2 of production space. The hall will be used for the fabrication of conical sections as well as increasing the present capacity for the circumferential welds needed for the prefabrication of longer lengths, the company says. 

The project will also include upgrading of the works’ port facilities, with additional halls there, and 20,000m2 of paved dockside. 

According to the local press, some 50 new jobs are expected to be created.

Academic suggests 800,000 t/y stainless capacity for Turkey

Turkey could support a stainless steel production capacity of 800,000 tonnes/year which would be enough to feed the local and neighbouring market demand. The idea was put forward by Mustafa Kelami Sesen, academic member of Istanbul Technical University’s department of metallurgical and materials engineering, at last week’s Turkey mining, metals and minerals summit conference, attended by Steel Business Briefing.

Sesen says that Turkey has strong steelmaking experience as well as reserves of chrome needed to produce stainless. The country has also a geographical advantage: the closest stainless steel producers in the west are in Italy and India in the east. There are many potential markets in Middle East and Turkic republics.

He suggests that the stainless steel production should be 80% cold rolled flat products, 10% hot rolled long products and 10% hot rolled plates to match demand with optimum production capacity. Sesen also advises the Iskenderun region to locate the mills in order to be close to the ports and the ferro-chrome factories.

High energy costs would be one difficulty to be faced by any stainless steel project, Sesen said. Turkey has no stainless steel production at present.

EU engineering steel scrap surcharges rise again

More European engineering steel producers have raised their scrap surcharges for deliveries of hot rolled bars in February compared to January, Steel Business Briefing learns.

In Germany, Lech-Stahlwerke, Saarstahl and Deutsche Edelstahwerke have all lifted their surcharges by €35/tonne to the level of €297/t already announced by Georgsmarienhütte. France’s Ascometal has raised its surcharge by €60/t to €331/t and Italy’s Acciaierie Bertoli Safau (ABS) by €33/t to €307/t.

Tata Steel Europe has also raised its engineering steel scrap surcharge by £38/t to £240/t (€278/t). Sweden’s Ovako added SEK 611/to its surcharge, bringing it to SEK 2,739/t (€309/t), as previously reported by SBB.

Germany’s BGH Edelstahl and Spain’s Gerdau Sidenor had not published their February surcharges by SBB’s press deadline.

German scrap prices rose by some €40-60/t in January compared to December, according to German scrap association BDSV, but prices in southern Europe have already recently softened by €20-30/t, suggesting scrap surcharges may start diverging a little.

India poised to return to UK scrap market, say sellers

UK container exports of shredded scrap have been very quiet since late December, but now some believe buying from India could be about to pick up. It is possible – after prices into Turkey eased slightly – that UK prices will fall more in line with Indian expectations, says a UK market source.

After failing to secure business earlier this month, top-end offers to India have softened by $10-20/tonne: They now need to fall just that little bit further for deals to be concluded, a UK trader believes.

UK exporters pegged shredded in containers at around £270-280/t ex-yard, depending on location and deal. This, say some, equates to around $475-485/t cfr Nhava Sheva. HMS 1&2 is said to be roughly £15/t lower.

But, at $480/t to India, “there is no profit for the trader”, adds one UK source. So, while Indian bids for shredded containers are around $480-485/t cfr, UK offers are at $500-505/t, he feels. Views on freight rates from UK to India ranged from $30/t to $45/t, however.

“The Indian market is significantly behind [developments elsewhere]. They need to raise their bids,” another UK scrap trader agrees. “We can get £20/t more selling fob to Turkey,” he says. 

Steel Business Briefing heard of just one UK cargo moving to Turkey last week. But, compared to Indian expectations, this Turkish deal was reported at $505/t cfr for 20,000t of shredded [see related article].

Czech miner gets higher coal and coke prices for Q1

Czech coal mining group New World Resources (NWR) has secured a 7% increase in its coking coal prices for deliveries in the first quarter of 2011. Its overall production of coking and thermal coal in full-year 2011 could be similar to last year, but it expects its coke production to fall a little.

The company’s average quarterly contract price for coking coal in Q1 is €165/tonne ($225/t) ex-works, up 7% on Q4. Quarterly priced volumes delivered in Q1 are mostly semi-soft coking coal. The company’s average coke price for Q1, meanwhile, inched up by 1% q-o-q to €339/t ($462/t) ex-works.

“As the sales volumes priced for the first quarter of 2011 started being negotiated at the end of 2010, the impact of the recent international price spike was limited,” NWR notes in a release sent to Steel Business Briefing.

The company forecasts production levels of 11m tonnes of coking and thermal coal combined and 800,000t of coke in 2011. However, it could produce an additional 400,000t of coal “subject to market developments and underground production conditions.” It also forecasts 2011 sales volumes to total around 10.3mt of coal, half of which will be coking coal, and 720,000t of coke. 

In 2010, NWR produced 11.4mt of coking and thermal coal combined and 1mt of coke. However, the proportion of coking coal in the sales mix last year was lower than anticipated. The company expects to expand coking coal volumes towards the end of this year, and envisages a “rebalancing of the product mix towards coking coal in 2012.”

UK scrap sellers undecided over market direction

Weak export demand for British scrap and slightly lower Turkish deals do not mean a more sustained price fall is imminent, say UK scrap sellers. Despite a general lack of export buying, supply remains tight, they tellSteel Business Briefing.

“Compared to a month ago, you could say [scrap] prices are a bit higher, a bit lower. They’re bobbing about,” notes a trader. “The same is true looking forward. Up or down, things are not clear cut,” another adds. “Sterling is a bit stronger against the dollar, and that’s not helping,” says one. Freight rates are another uncertainty.

Last week’s latest UK sale to Turkey was reportedly $505/t cfr for shredded. Excluding this, “the Turks are still digging their heels in, and haven’t bought anything since the peak of $525/t”, a source notes.

Shredded containers to India are being talked around $475-495/t, according to most. This compares with previous deals after Christmas, which were rumoured to have been $519/t and $525/t. “Pakistan is about the same [as India],” adds a trader. Indonesia is around $495/t, says another. Taiwan and Korea are understood to be buying out of the US west coast.

One bright spot, however, is short-sea ships, where buyers “are paying very fancy numbers, way above containers”: These prices did exceed £300/t fob for shredded, but are still £290-plus fob to the European mainland, a source notes.

Meanwhile, a bullish trader notes offers of shredded containers to Bangladesh of $520-550/t cfr Chittagong. But, sentiment is similar to that in India, meaning these offers have not being taken up, he adds. This compares with peak levels mid-January of $550-560/t, he claims.

UK steelmakers escape spike in energy costs

British steel producers have not seen any significant increase in energy costs despite the rise in the crude oil price in recent weeks. Jeremy Nicholson, director of the Energy Intensive Users Group, which includes steel companies, tells Steel Business Briefing: “the current highs in oil price have had very little effect on gas prices for UK steelmakers.”

“Although continental gas supplies are indexed to oil, the UK gas price remains competitive,” he explains. “This is not so much a result of gas prices lagging oil by three to six months, but rather that the UK enjoys a strong international supply from exporters such as Qatar and, recently, a lot of diverted gas from the US market”.

“This has resulted in steelmakers getting a good deal despite the recent cold weather resulting in the highest ever demand for gas recorded in the UK.” He adds: “a convergence with the higher continental prices is still on the horizon but is a few years off yet; barring any unforeseen events, these competitive prices can be expected to continue”.

But for electricity, there have been moderate-to-significant price increases for steelmakers and other industrial users. Nicholson says: “Although the wholesale industrial prices are higher than those seen in France and Germany, they are not likely to increase much until around 2014-15, when major closures of coal-fired power stations are scheduled”. 

Germany could veto GHG benchmarks

The German government could veto the European Commission’s proposed benchmarks for the steel industry's greenhouse gas emissions, the German steelmakers’ federation, WV Stahl, tells Steel Business Briefing. The federation is calling for such a veto.

The benchmarks will determine the number of free European Union Allowances (EUAs) granted to steelmakers in phase III (2013-2020) of the Emissions Trading System (ETS). 

WV Stahl argues that the benchmarks are set too low and that Eurofer’s proposed benchmarks would be more acceptable. There isn’t a steelmaker in the world which can achieve such low carbon emissions, it says. 

EU member states unanimously approved the benchmarks on 15 December after Germany changed its position to vote in favour, as previously reported. However, a rift within the government could lead Germany to change its position again, WV Stahl says.

While the Berlin Environment Ministry supports the benchmarks, the Ministry of the Economy is opposed to them, SBB understands. If German Chancellor, Angela Merkel, intervenes and comes out against the proposals they would then be rejected, and the European Commission would have to propose a new set of benchmarks.

However, the likelihood of this happening is uncertain and any intervention would have to come fast. Once the European Parliament approves the benchmarks it would be too late: the vote is expected to take place in one or two months' time.

The CO2 benchmarks are to be discussed at SBB Green Steel Strategies conference in Brussels on 5-6 April.

Sweden’s 2011 output to near pre-crisis levels, Jernkontoret

The Swedish steel industry expects to continue to rebound strongly in early 2011, Steel Business Briefing learns from the steel producers' association, Jernkontoret. 

“We hope production will be even better in 2011 than 2010. It should get closer to 2008 levels”, a senior spokesperson for the organisation tells SBB.

Swedish mills produced 4.8m tonnes of crude steel in 2010, a 73% rise year-on-year, equating to 85% of pre-crisis output in 2008. Finished product deliveries increased 41%, to 3.8mt.

Last year the value of Swedish steel exports increased 37% on 2009, to around SEK 51bn ($7.8bn). Finished product exports topped 3.5mt. Demand has been governed primarily by the energy sector, automotive, mining and processing industries and heavy transport, reported Bo-Erik Pers, ceo of Jernkontoret.

Salzgitter freight train involved in fatal crash

The freight train that collided with a passenger train in Hordorf in the German state of Saxony-Anhalt on Saturday night was carrying lime from Salzgitter’s Peiner Träger sections plant. The train belongs to Verkehrsbetriebe Peine-Salzgitter (VPS), a transport subsidiary of the steelmaker.

At least ten people died and over 30 others were injured as a result of the head-on collision, which happened at speed, according to local press reports. “We are aghast about about the terrible train accident,” Salzgitter says in a statement sent to Steel Business Briefing. “Our sympathies are with the victims of this tragic accident and their relatives,” it adds.

The police and the public prosecutor’s office are investigating the causes of the accident, Salzgitter says, and it does not want to prejudge the outcome of the investigation. The causes were still unclear as SBB went to press.

Marcegaglia starts two new stainless tube lines in Russia

Italian based re-roller Marcegaglia has commissioned two new automatic lines for the production of electro-welded stainless steel tubes at its Russian Vladimir-based subsidiary, Marcegaglia Ru, the company confirms to Steel Business Briefing.

The two new lines will produce electro-welded stainless steel tubes of 70mm diameter for the chemical, pharmaceutical and food industries. 

Between 2009 and last year, Marcegaglia comissioned three other stainless steel tube lines, one slitter and one flattening machine at its Russian subsidiary. 

The total capacity is 50,000 t/y for the tubes and 50,000 t/y for coils and plate. The company estimates the plant's total production for 2011 will be 16,000t. Marcegaglia has invested €50 million ($68m) in its plant in Russia, €20m of which has been invested in equipment.

2018 World Cup to require up to 3mt of steel: Evraz

Russian steelmaker Evraz estimates that Russia hosting the football World Cup in 2018 will generate demand for 2.5m-3m tonnes of steel products for the construction of 13 stadia, a number of hotels, highways and bridges.

It hopes to benefit from this demand, and also notes that it ships 8% of its domestic sales volumes to construction projects for the Winter Olympics in Sochi in 2014.

However, most domestic steelmakers do not gain much from Olympics spending, according to Moscow-based analysts of bank Morgan Stanley. Olympics construction projects in the Sochi region will absorb roughly 700,000t of steel in all, equivalent to under 3% of Russia’s annual steel consumption, the analysts estimate.

Steel consumption in Russia is driven by the construction sector, which was hard hit in 2009, when developers suspended projects and the government cut spending by 38%. This year, though, the country’s infrastructure spending will reach $169bn and exceed $180bn in 2012 to match pre-crisis levels, according to Morgan Stanley.

The construction sector is forecast to absorb 17.6mt of steel in 2011, up 5% year-on-year, and equivalent to just over half the expected total steel consumption in Russia in 2011, the analysts say. Residential housing and commercial construction may consume 15.5mt of steel, given that each square metre of building requires an average of 60kg of rebar, 60kg of other longs, including channels, angles, beams and wire rod, and 100kg of flat steel.

Road infrastructure is also forecast to absorb roughly 600,000t of steel this year for the construction and repair of 3,000km of roads and 28km of bridges, Steel Business Briefing learns from Morgan Stanley.

Russia’s MMK aims to produce 12mt of steel this year

Russia’s Magnitogorsk Iron Steel Works (MMK) increased its production of steel products by 17% to 10.25m tonnes in 2010, accounting for 17% of national production, it says in a statement sent to Steel Business Briefing. It increased its crude steel output by 19% to 11.42mt.

The company has been steadily increasing its sales to the domestic market in recent years and continued this trend last year, increasing domestic sales by 44% to 7.04mt compared to 4.90mt in 2009. Its export sales, consequently, fell by 17% to 3.2mt, it adds.

The increase in domestic versus export sales was facilitated by MMK’s strategy to supply import-substituting and high added value products – a trend which it is set to continue this year. Optimistic about continued growth in steel consumption in Russia, MMK is planning to further increase its production of steel products to 12mt this year, it says.

The share of high added value products in the total production of the MMK group reached a record high of 42% in the last quarter of 2010, while the average share for the year was 38%, up from 31% in 2009. MMK’s wide plate mill 5,000 is producing at full capacity, and produced 943,000t of heavy plate last year, with Russian pipe producers such as ChelPipe being its main customers.

US longs imports show gains, especially wire rod

Imports of long products into the US showed year-on-year improvements in 2010, but while most major product imports remained below 2008 levels, wire rod imports were actually higher.

Total US imports of wire rod were 1.18m tonnes last year – 73% higher than 2009 and 8% higher than 2008, Steel Business Briefing calculates from US government import data. Approximately 35% of 2010 imports came from Canada and the next two highest suppliers were Turkey and Brazil.

Imports of hotrolled bar, at 924,830 t, were 56% higher in 2010 than 2009, but 30% below 2008 imports. Nearly half came from Canada last year, 16% from Japan, and 11% from the United Kingdom.

Drawn wire imports were up 29% year-on-year to 531,500 t last year and down just from 2008 levels. The top three suppliers were Canada, Mexico and China, SBB observes.

Rebar imports of 468,350 t were 23% higher than 2009 but 47% lower than 2008. More than half of the imports came from Mexico, 34% came from Turkey and the Dominican Republic supplied 6% of the 2010 total.

Heavy structural steel imports were 39% higher than 2009 at 467,700 t last year, but were 28% lower than 2008. Luxembourg was the top supplier at 20% of 2010 imports, followed by Korea and Mexico with 15% and 13%, respectively. 

Evraz making Canadian OCTG upgrades

Evraz Inc NA announced it is making major capital investments at two of its Alberta, Canada oil country tubular goods pipe-making facilities.

The company, which declined to disclose the amount of the investments, said the most significant expenditure is the installation of a premium threading production line at the Evraz Red Deer, Alberta pipe mill to meet growing demand from the SAGD (steam-assisted gravity drainage) market and other premium connection applications.

Evraz NA is also installing new tooling in Red Deer, enabling the company to finish large diameter casing. Installation will begin immediately and be fully implemented before year-end, Steel Business Briefing understands.

Additionally, Evraz NA announced plans to expand heat-treating and inspection capability at its Calgary, Alberta pipe mill to meet growing demand for larger casing sizes for the SAGD market and other applications. The Calgary projects will be completed and commissioned later this year, Evraz said.

"The improvements are designed to position Evraz for further growth in energy tubular product markets by meeting the increased demand for these complex products," said Rob Simon, executive VP of tubular products for Evraz NA.

North American rig count continues upward trend

The North American rig count, tracked by petroleum industry consulting firm Barker Hughes, continued its upward trend last week as both US and Canadian counts posted week-on-week increases.

The overall US count – including both oil and gas rigs – rose by 19 from the week prior to 1,732. The count is 415 higher than a year ago, Steel Business Briefing notes.

Noticeable in the Baker Hughes data, Pennsylvania added 10 rigs w-o-w to total 108, while Louisiana, the US state with the second highest count at 174, added five. Texas lost one net rig but maintains the most rigs with 740.

In Canada, 16 new net rigs were added, pushing the count up to 637, or 106 higher than the same time last year.

NAS plans $30m expansion at Kentucky plant

North American Stainless plans to expand its Ghent, Kentucky, plant with a $30m investment, Steel Business Briefing learns from Kentucky governor Steve Beshear’s office.

NAS plans to invest $10m for increased peeled bar production, adding 35,000 square feet to its long products facility, and $20m for additional equipment upgrades at the Ghent facility.

Construction will begin in the next few months and is expected to be completed by the second quarter of next year.

This is the company’s ninth expansion since it began operations in 1990. In the last three years alone, NAS has increased production capacity by 40% with other upgrades and additions to its melt shop and coldrolling capabilities. Currently, the Ghent facility has two electric arc furnaces with a total annual capacity of about 1.6m short tons.

NAS is a member of Spain's Acerinox Group, SBB notes. A NAS spokeswoman did not return SBB's request for further comment.

US scrap prices could be declining

The US scrap market is seen as possibly slipping downward, sources tellSteel Business Briefing

"The market is going down $25 to $35/long ton. It did go up very fast and we see this as temporary correction and after the holiday (Chinese New Year, February 2-8) anything can happen," predicted one West Coast exporter. "Also, a lot of scrap was sold in the last two weeks and we have to see what the domestic market will do."

A Mid-Atlantic states scrap dealer told SBB a "shredder called today saying they will drop February 1st $20/long ton. Have not heard from the others. I think cut grades may be down $10/l.t."

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

As SBB reported last week, Turkish steel mills have returned to the international scrap market, taking advantage of lower deep sea offer prices. Offer prices from the US stand almost $25/t lower compared to the first week of January, according to Turkish reports.

$8.5bn Alpha-Massey merger to create met coal giant

Two US coal companies, Alpha Natural Resources and Massey Energy, have agreed to an $8.5bn merger that will create a global leader in metallurgical coal, according to Alpha.

The merged company will have a total reserve base of about 5bn short tons at more than 110 mines with one of the world's largest, highest-quality met coal reserve bases, Alpha states.

After an Alpha purchase of Massey shares, Alpha and Massey shareholders will own approximately 54% and 46% of the combined company, respectively, Steel Business Briefing has learned.

"Together we will be America's largest supplier of metallurgical coal for the world's steel industry," said Alpha CEO Kevin Crutchfield.

Annual savings of at least $150m are expected within two years from merger synergies.

US seen getting more aggressive at WTO

The US is making more aggressive and better use of trade remedies available to it at the World Trade Organization, according to one trade attorney for domestic steelmakers.

For example, the US, EU and Mexico are challenging Chinese restrictions on certain raw material exports such as coke, zinc and refractory bauxite. The Asian nation uses tools such as export duties, export quotas and restrictive bidding practices, said Tim Brightbill, a partner at the Washington, DC law firm Wiley Rein.

An interim report is due next month from the WTO and a final report is due April 1 on the issue, Brightbill said, speaking at the 2011 Steel Manufacturers Association directors meeting in Florida. Steel Business Briefing was in attendance.

The outcome of this case "could have a major impact" on international trade in steelmaking raw materials, Brightbill believes. 

A finding against China would open the door to cases against other nations that restrict scrap exports, he added. 

If the US wins its case, it can retaliate by placing tariffs on Chinese goods. 

Brightbill also cited a second case as evidence of America's more assertive stance at the WTO - a recent case brought by the United Steelworkers union against Chinese subsidies for green technologies.

Top SMA priority: schooling lawmakers on steel issues

Dealing with the new members of Congress and educating them about steel and manufacturing issues is the top concern for the Steel Manufacturers Association in 2011, said SMA president Tom Danjczek.

“We have many new members of Congress who just don’t know anything about steel,” Danjczek said at the US minimill group's annual meeting last week in Florida, attended by Steel Business Briefing. These members need to be educated about currency issues, regulation, energy independence and infrastructure, he said.

After last year’s US midterm elections, 94 new Representatives and 13 new Senators took office at the beginning of the year, the largest number of new members in several decades.

Neil Messick, VP of government relations for ArcelorMittal, also said dealing with so many first-time legislators will be a challenge. “People aren’t thinking about our issue unless we make them think about it,” he said.

At last week’s meeting, SMA members also discussed “nuts and bolts” issues like environmental regulatory issues and normal association business, Danjczek said.

The SMA is the primary trade association for scrap-based electric arc furnace steel makers and rerollers. It consists of 34 North American companies.

Timken sees big steel sales boost in 2011

Specialty steel and bearings maker Timken expects its steel group sales to increase 20-25% in 2011 on improved demand across all market sectors, as well as surcharges.

The Canton, Ohio-based company says it expects the global economy "to grow modestly in 2011 following 2010's recovery." It projects overall 2011 sales to increase about 10-15% from 2010, Steel Business Briefing learns.

The comments came as Timken reported $275m in net income for 2010 on sales of $4.1bn. That compares to a $134m loss on revenue of $3.1bn in 2009. For Q4 2010, earnings totaled $90m on sales of nearly $1.1bn, improved from a $20.2m loss on revenue of $775m during the same quarter last year.

Timken said light-vehicle demand provided an early boost in sales and remained strong throughout 2010. In H2, accelerated demand in the heavy-truck, off-highway, energy and industrial distribution sectors further increased sales growth.

Timken's steel group, an SBQ bar and tube producer, posted 2010 sales of $1.4bn - an increase of 90% over 2009 sales of $714.9m. Raw material surcharge increases totaled about $250m from a year ago. The group recorded Q4 sales of $380m, up 119% from the prior year's Q4 sales of $173.5m.

Brazil's flats market running on destocking

In December last year, Brazil's flats distribution chain saw shipments fall 11.5% compared to November, while inventories declined only 1% to 1.2m tonnes. Also, the Brazilian steel distributors Institute Inda was expecting purchases from mills to drop by 10-13% due to seasonality, which did not materialize, as purchases were surprisingly positive.

According to a Credit Suisse report reviewed by Steel Business Briefing, a destocking process should take several months, but following Inda's expectations, shipments to end-users may increase by 15% in January, reducing inventories levels to 3.6 months of sales - still high, but closer to normalized levels of 2.8-3 months.

"This means we should see steel mill orders running below real steel demand for a while," concludes the report. "This, coupled with increasing raw material cost pressure, should continue to pressure first half earnings for flat steel producers, especially Usiminas," concludes the report.

Chile HRC prices flat, may rise by March

January is a notoriously quiet month for the Chilean steel market and, as anticipated, flats prices are unchanged from December values. However, February or March could bring about some price hikes, Steel Business Briefing learns.

Hotrolled coil transaction prices are being held at the levels seen in December, US$740-800/t fob. A February price hike has been rumored to be around $60/t. However, some sources believe this to be excessive and that higher prices are more likely to be accepted come March. 

“As expected, there has been no movement in pricing during the first month of the year. And, while February is also quiet, there are rumors of some hikes in time for March, when the market is expected to kick-start and buying will resume among those who want to replenish their stocks," one service center executive tells SBB.

Government wants cheap iron ore deal between Kumba and ICT

The dispute between Kumba Iron Ore and South Africa’s Department of Mineral Resources (DMR) intensified last week after DMR director general Sandile Nogxina said in court papers that Kumba must talk to Imperial Crown Trading (ICT) about a cheap iron ore deal.

The DMR is still yet to officially grant ICT the contested 21.4% mining rights to Kumba’s Sishen mine, to which it holds prospecting rights. However, it has rejected Kumba’s application for the mining rights, which Kumba is appealing against.

Nogxina said that an arrangement similar to the one ArcelorMittal SA and Kumba had – when AMSA held the 21.4% rights and got 6.25m tonnes/year at cost plus 3% - needs to be sought in a bid to help government plans to keep domestic steel prices low.

Kumba is “pretty much back where they started a year ago,” an analyst tells Steel Business Briefing. “ICT are the only real benefiters in this situation because they’ll make money regardless of what happens,” he adds.

AMSA is currently undertaking due diligence for its $110m offer to buy ICT. The deal is also based on the condition that ICT retains its 21.4% disputed stake in Sishen and, by implication, its access to low-priced ore.

“Kumba is in a difficult position as they’d need to sell iron ore domestically if they don’t sell it to AMSA. They can export some, but they don’t have the rail infrastructure to export all of it,” the analyst says. “It’s difficult to know the outcome of this dispute.”

High steel margins to continue into Q2: Macquarie

Steel producers have been able to widen their profit margins by pushing through price rises ahead of the increase in their raw material costs, according to a new report by Macquarie Research sent to Steel Business Briefing. In times when raw material supply is constrained, as at present, the industry cannot produce as much steel as users are demanding: “the world is short of steel, and steelmakers can take advantage”.

Steelmakers’ pricing power has enabled them to increase their margins “over and above input cost inflation,” the report says. With the coking coal shortage continuing, a surge in Chinese steel production will likely lead to further price rises in the next few months.

Those mills that buy raw materials on a quarterly contract are benefiting from lower prices versus spot. Steelmakers will see “further substantial raw material contract rises” in Q2, but the strong demand conditions will “allow steelmakers to minimise margin erosion,” so that, even if down on Q1, margins will still be above Q4 2010 levels.

However, the steel shortage is not likely to last long, the analysts say. When raw material supplies return to normal and Chinese steel production growth slows down, “the spectre of overcapacity” is likely to return. As conditions deteriorate towards mid-year, steelmakers are likely to be using high-priced (Q2) raw materials at a time when steel prices are falling – weighing on their margins, and illustrating again the inefficiency of the retrospective system of raw material pricing.

Turkish, Indian scrap import prices ease back off highs: TSI

Turkish and Indian scrap reference prices released by The Steel Index (TSI) last Friday both fell slightly after hitting peak prices recently. However, both reference prices are around 5% higher than four weeks earlier.

The Turkish import price for HMS1&2 80:20 dropped $8/t last week to $496/tonne CFR Turkish port, as those buyers in the deep-sea market booked European material which was cheaper than US-origin offers. This is $21/t above the level published four weeks previously. 

The Indian containerised shredded scrap import price was almost unchanged at $482/tonne CFR Nhava Sheva port, a dip of 0.2% since a week earlier, as buyers rejected the higher American offers. 

The next scrap reference price to be launched by TSI will be for US domestic shredded obsolete scrap. This is currently undergoing the validation phase, during which TSI collects data and calculates the reference price unofficially. TSI advised, for the week ending January 28, that US domestic scrap price also decreased slightly to $474/long ton, which is $14/lt higher than four weeks ago. 

TSI is majority-owned by Steel Business Briefing and specialises in compiling steel, iron ore and scrap reference prices by collecting and averaging actual transaction data. 

Further details of the methodology and specifications for the steel, iron ore and scrap grades covered can be found on the websitewww.thesteelindex.com. Companies wishing to subscribe to TSI's full set of reference prices or to apply to submit steel, iron ore or scrap price data can do so on the website.