SAC International Steel, Inc.

MIIT: Chinese mills need to be more self-sufficient in coking coal supplies

As outlined in a statement issued by China's Ministry of Industry and Information Technology (MIIT), in 2009 and 2010 China's imported coking coal volumes increased sharply, reaching 34.4 million mt and 47.27 million mt respectively, and accounting for seven percent and eight percent respectively of total domestic coking coal consumption. Accordingly, China has became a net importer of coking coal from a net exporter of the product.

The MIIT went on to say that in 2011, because of the floods in Australia, the leading international exporter of coking coal, and due to the continuous recovery of the world's iron and steel industry, a situation of insufficient supply and increased demand has developed, with coking coal prices thus continuing to rise. Currently, the spot price of coking coal in the international market has exceeded the historical record of $300/mt; meanwhile, the average price of second grade metallurgical coke in China's domestic market is RMB 2,050/mt, up by RMB 155/mt compared with the price in January.

The MIIT stated that domestic coking coal resources are almost able to meet the needs of China's iron and steel industry, though resources of high-quality coking coal are insufficient. The MIIT concluded by stating that Chinese steel enterprises should focus on increasing their self-sufficiency in coking coal supplies.

Ukraine’s steel pipe output rises 65.6 percent in Jan-Feb

According to preliminary data, in the January-February of the current year Ukraine increased its steel pipe output by 65.6 percent year on year to 348,000 mt.

This increase was due to the significant growth in output of Metinvest's subsidiary Khartsyzsk Pipe Works (KhPW), which in January-February this year produced 101,300 mt of steel pipes - up from 19,230 mt produced in the same period last year.

On the other hand, the pipe producing subsidiaries of Ukraine's Interpipe Corporation (Interpipe) increased their steel pipe output by 22 percent to 139,100 mt as compared to January-February 2010.

Specifically, in the first two months of this year, Interpipe NTRP registered a 34 percent increase in its steel pipe production to 65,100 mt, Interpipe Niko Tube saw its steel pipe output increase by 29 percent to 48,200 mt, while Interpipe NMPP's steel pipe output decreased by seven percent to 25,800 mt, all compared to January-February 2010.

Vietnam Cancels Joint Steel Project Due to Inadequate Funding

Mar. 2 – The Vietnamese government is going to abolish a massive Vietnamese–Malaysian joint steel project in the central province of Ninh Thuan, by revoking its investment license, local officials confirmed on February 24.

The US$9.8 billion joint project between the local shipping company Vinashin and the Malaysian steel giant Lion Group started in November 2008 but made little progress since then. The project with plans to exploit a steel mill with initial capacity of 4.5 million tons, build up power plants, and develop a seaport have not carried out any construction yet – apart from site clearance – over the past two years.

A February 23 statement on the government web site accused investors of not fulfilling “commitments for implementation of the project as stated in the investment license.”

Referring to the statement, Director of Ninh Thuan Planning and Investment Department Pham Dong said the Lion Group, with a 75 percent stake in the project, had difficulty raising sufficient funds, probably because investors are more interested in environment-friendly projects.

Dong added that the local government’s attempt to find a new investor for the project failed as well.

The other partner, Vinashin, is suffering a serious financial crisis. It was reported to have failed in paying back the first US$60 million installment of a US$600 million loan arranged in 2007. Currently, the company is at risk of bankruptcy with its total debt stacking up to over US$4 billion.

Vinashin’s former chairman Pham Thanh Binh was also arrested and accused of violating state economic management regulations. An Agence France Presse report commented that the case will likely impact Vietnam’s global financial reputation negatively.

Severstal Spokesperson Does Not See Steel Demand Being Impacted by Sale

Steel Market Update spoke with a Severstal NA spokesperson this morning regarding the sale of the Wheeling-Pittsburgh, Warren and Sparrows Point steel mills along with other steelmaking and rolling assets. The company's position is the three flat rolled steel mills will not affect demand for hot rolled, cold rolled, galvanized, Galvalume and the tin mill markets.

Severstal informed SMU this morning of their intention to continue to run the plants as they have been for the past few months and the Renco Group, once the deal is closed, can then determine how they will run from there.

Below is the statement we received in a phone call this morning:

"We don't forsee this sale will impact the demand in the market place. As far as supply, until the transaction closes, W, W and SP will continue to operate in the same manner as they have previously. After the transaction closes, you will have to discuss the supply question with the new owner. Our Dearborn and Columbus plants, which will continue to be owned by Severstal North America, will not be affected by the sale.

The Columbus and Dearborn facilities, some of the most modern and advanced in North America, are positioned for long-term successful and profitable operations. Both Dearborn and Columbus have been able to operate at near capacity due to the demand from the markets and customers they serve."

Steel Market Update will be following the sales of the Severstal assets to the Renco Group as well as the new RG Steel once the deal is officially closed. You can follow developments by reading our SMU newsletter which will be published next on Thursday evening. You can register for a free trial below or an annual membership which costs $895 (US) for one year for a single membership.

AK Steel Announces April 2011 Surcharges For Electrical And Stainless Steels

West Chester, OH, March 02, 2011 - AK Steel (NYSE: AKS) has advised its customers that a $400 per ton surcharge will be added to invoices for electrical steel products shipped in April 2011. April 2011 surcharges for the broad range of stainless steel products that AK Steel produces can be found on the company's web site at www.aksteel.com.

AK Steel's surcharges are based on reported prices for raw materials and energy used to manufacture the products, with the February 2011 purchase cost used to determine the
April 2011 surcharges.

Ningbo Steel to implement three environmentally friendly projects

Zhejiang Province-based Chinese steelmaker Ningbo Iron and Steel (Ningbo Steel) has indicated that it plans to carry out three energy-saving and environmentally friendly production projects with a total investment of RMB 2.28 billion ($347 million) before the end of this year. Preparatory work has already commenced.

The three projects in question include the construction of a 430 m2 environmentally friendly sintering machine and sintering gas desulphurization equipment, which is expected to cost RMB 630 million ($95.9 million); construction of a deep slag processing line with an annual capacity of 800,000 mt, a slag grinding line, a blast furnace for briquettes, and a slag micro-powder production line, with a total investment of RMB 600 million ($91.3 million); and, finally, construction of a continuous slab casting and rolling line, with an investment of RMB 1.05 billion ($160 million).

After the programs have been completed, Ningbo Steel will be able to produce 200,000 mt of pickled steel products and 300,000 mt of galvanized steel products per year.

In 2010, Ningbo Steel produced 3.87 million mt of crude steel. The operating revenue achieved by the company for the year was RMB 15.6 billion ($2.37 billion).

Baosteel inks coal contract

BAOSHAN Iron and Steel Co yesterday said it has signed a three-year deal with Rio Tinto for coking coal supplies.

The Australian mining company will supply coking coal, a key raw material used in steel making, to Baosteel, one of China's largest steel mills, from this year.

The Shanghai-based mill didn't release the contract's volume and value but said the agreement makes it the first long-term Chinese buyer of coal from Rio, which supplies its customers with 13.6 million tons of coal a year, taking up a 5.7 percent share of the global market.

Mysteel analyst Liu Bao said it's now cheaper and more convenient for steel makers along the east coast of China to import from Australia, the world's largest coking coal exporter, than from inland coal-producing provinces such as Shanxi because of tight railway capacity.

Global supplies have been hampered as the extensive floods in December and January in the Australian state of Queensland disrupted coking coal production.

Tata Steel raises UK wire rod prices

LONDON, Feb 28 (Reuters) - Tata Steel said it was increasing prices of wire rod produced in the United Kingdom for April deliveries to account for rising raw materials costs and improved demand.

The price rise relates to wire rod produced at its Scunthorpe Rod Mill, the global steelmaker said on Monday.

Prices will rise by a minimum of 125 pounds ($201.50) per tonne, with some grades increasing by as much as 150 pounds per tonne, it said.

Export levy upsets miners

Calcutta : Finance minister Pranab Mukherjee proposed a steep increase in duty on the export of iron ore lumps and fines, meeting the long-standing demand of the steel industry.

Mukherjee raised the duty on fines (iron ore dust) to 20 per cent from the present level of 5 per cent while that on lumps was hiked to 20 per cent from 15 per cent.

Steel industry captains hailed the proposal as a move in the right direction, but iron ore miners predictably dumped it as a step that could potentially kill the iron ore industry hurting both export as well as the domestic steel players. “What you expect me to say? Its like your salary is chopped off by 20 per cent. Of course, everybody will be badly hit. It will make Indian iron ore less competitive in the global market,” P.K. Mukherjee, managing director of Sesa Goa, said.

Sesa, owned by billionaire Anil Agarwal’s Vedanta, is India’s largest iron ore exporter in the private sector.

The country is likely to sell 90 million tonnes of lumps and fines to other countries, especially China during 2010-11, down 23 per cent from 117.37 million tonnes in the previous year, mostly because of the ban on export from Karnataka. Almost 75-80 million tonnes of the export are fines.

The FM, however, also conceded to the demand of the iron ore lobby by reducing the duty on pellet and iron ore nugget to zero from the present level of 15 per cent.

“The hike on export duty on iron ore fines and lumps to 20 per cent ad valorem is most welcome. I am sure that this will lead to greater value addition at home and encourage the domestic steel industry,” Sajjan Jindal, vice-chairman and managing director of India’s largest private sector steel producer JSW Steel, said.

However, Tata Steel MD Hemant Nerurkar rooted for further intervention even as he lauded the move saying exemption of duty on pellets also reduces the scope for greater value addition within the country.

“The value addition at the pelletisation stage is much less compared to finished steel and the aim should be to encourage steel production within the country, which would lead to more jobs, output and value addition within the country,” he said.

A million tonne steel plant requires Rs 4,500 crore to Rs 5,000 crore compared with Rs 750 crore – Rs 1,000 crore for similar size pellet plant.

Koushik Chatterjee, group CFO of Tata Steel, also rooted for infrastructure sector status for the steel industry.

Another view

Mining industry claimed the move would eventually hurt domestic steel players who buy iron ore and fines from the market.

“There is no buyer of Indian iron ore now. If fines are not exported, there will be no lumps production. So the domestic lump prices will go up and steel producer eventually increase steel prices. So, the measure is counter productive,” secretary general of mining association Fimi, said.

Chung Hung Steel to hike its latest prices sharply

After Taiwan's China Steel Corporation released its latest price, Chung Hung Steel, the subsidiary company of CSC, has also made its new price announcement.

The company has surged its HR coil price by TWD 2700 per tonne, CR coil by TWD 2200 to 2400 per tonne and GI price by TWD 3200 per tonne, which are all higher than most expectations by market analysts.

For export prices, CHS has not released its prices. However, it may lift by over USD 100 per tonne. CHS's new HR price will be about TWD 23000 to 24500 per tonne, CR price to be TWD 25500 to 26000 per tonne and CGI price to be TWD 28400 to 28700 per tonne.

Price negotiation of iron ore on halt

Iron ore price negotiations are nearly in a coma, for iron-ore mining company BHP Billiton Ltd. (BHP) has already fixed a high proportion of its iron-ore business for 2011 onwards on a monthly price basis in January, breaking away from the quarterly global contract system, said Luo Bingsheng, former vice secretary general in China Iron &Steel Association (CISA) Wednesday during a meeting in Beijing.

The free on board (FOB) iron ore price offered from BHP to Chinese steel makers increased from $155 per ton to $168 per ton. Though other iron-ore mining giants have not clearly followed BHP's step, their price will inevitably raise, added Luo.

Due to various factors, such as China's great demand of iron ore, India's iron ore export limitation and Australia's disastrous flooding, the iron ore price in 2011 will experience a strong upward shot, and in the second and third quarters, the growth rate may be of 10 percent, said the Shanghai Securities News.

Decreasing the dependence on imports is a way to dodge such surprises, said Luo.

China has an iron ore reserve of 150 million tons due to its investments and cooperations with overseas companies of the field. And the country has also put effort into enlarging its own production capacity.

In two to three years, China's demand and supply of iron ore will be balanced, and then its ability to negotiate on price will resume, said Luo.

China steelmakers to benefit from Yuan appreciation

Dow Jones quoted an executive with one of China largest steelmakers said Yuan appreciation will benefit Chinese steelmakers as the total value of their imports, including iron ore and coking coal is larger than the value of steel exports.

The executive said China steel exports are still small less than 10% of domestic steel output, but China's imports of raw material for steel making are large especially iron ore.

According to data from the China Iron and Steel Association, China imported 618.6 million tonnes of iron ore at an average price of USD 128.38 last year. If the yuan were to appreciate by 5% against the US dollar from average 2010 levels, Chinese steelmakers could save USD 3.97 billion.

However, the executive said global miners including Anglo-Australian Rio Tinto PLC, BHP Billiton Ltd and Brazilian miner Vale SA may raise iron ore prices if the Australian dollar and Brazilian real also appreciate against the US dollar.

Arab revolts may spark severe oil market shortages

Arabian Business quoted Goldman Sachs as saying that oil markets were driven by fears of unrest contagion to other producing nations after Libya and that another disruption could create severe oil shortages and require demand rationing.

Mr Jeffrey Currie said in a research note that "The market cannot accommodate another disruption in our view with the problems in Libya potentially absorbing half of OPEC's spare capacity."

Brent oil surged over 7.5% to its highest since August 2008 on Thursday on concern the bloody unrest that has cut more than a quarter of OPEC member Libya's crude output could spread to other major producers including top exporter Saudi Arabia.

Mr Currie said in his note that this makes the risks now associated with further contagion much higher than they were several days ago, as further disruptions could now create severe shortages in global oil markets that would require substantial demand rationing.

He said that although we still see contagion to the large energy producers in the Gulf as relatively low, the stakes associated with further contagion are now much higher, which creates even further upside risk to our price forecasts.

However, the high level of global inventory could easily accommodate a full outage of Libyan only exports for more than 100 days and OPEC spare capacity could easily absorb the entire loss if needed.

Hot Rolled Coil Futures Prices Up, But Open Interest Declines

This week was another light volume week in which 46 lots (920 tons) of HRC traded on the CME Group Domestic Hot Rolled Coil futures contract.

April 2011 traded at $785, May at $770 and July, August and September trades ranged between $710 and $715.

Open Interest in the CME contract has dropped 12.2% since February 1 -- From 8,923 to 7,947 lots at yesterday's close.

Open interest refers to the total number of futures contracts that have not been settled - no opposite matching position has been contracted. A large open interest indicates more activity and liquidity for the contract.

A decline in Open Interest implies that the futures market is liquidating, and suggests that the prevailing price trend i.e. the current bull market -- is coming to an end.

The drop in the HRC Open Interest could be an early warning of the end to an uptrend in HRC prices.

HRC Settlements: Spot Prices Up $15; 2011 Curve Up $28

The Spot February settlement price on the CME yesterday was $810 which represents a $15 per ton increase from last Wednesday's February spot settlement price of $795.

HRC settlement prices on average for 2011 increased $28 per ton to $751 per ton from last week's $723 average. Futures prices are still well below the spot prices being offered by mills today at between $850 and $900 per ton.

LME Billet Prices Up $29 per ton; Scrap Prices Weaker

The LME Steel Billet cash price settled yesterday at $550 per metric ton which is up $29 from last Wednesday's Official Cash Settlement of $521.

LME Billet 3-Month price range moved up $20 per metric ton this week trading in a range between $540 and $570 all week, and settled yesterday at $570 which is up $29 per metric ton from last Wednesday's Official Settlement of $541.

The LME Billet and scrap prices, which ordinarily move in tandem, de-coupled this week as LME Billet prices rose $29 per ton amidst market chatter that U.S. scrap prices in March are poised to fall $25 per ton. Improved clarity in the Egypt political situation has brought traders back to the billet market in that region. During this upcoming week, we will watch to see if scrap perks up or if billet softens as the two markets are certain to once again converge.

Deal for Teesside steel plant is sealed

Tata Steel has today signed an agreement to sell Teesside Cast Products (TCP) to Thai firm Sahaviriya Steel Industries UK Limited.

The agreement with Thailand’s largest steel producer, in a deal valuing the business at $469 million, brings to an end months of unceratinty for hundreds of Teesside families.

The next step will be the completion of the transaction, which will take place by the end of March.

Karl-Ulrich Köhler, MD & CEO of Tata Steel in Europe, said: “I am very encouraged that after all our efforts we have been able to reach this agreement, which is good news for the highly skilled and dedicated Teesside workforce.

“I commend SSI, the government and the trade unions for their roles in bringing about this agreement, and in particular the people of Teesside for the spirit and fortitude they have shown throughout the last, difficult two years."

EU Average Hot Rolled Coil transaction price soar

The MEPS - EU Average Hot Rolled Coil transaction price soared by almost €100 per tonne in February. Buyers are anticipating further increases in domestic values of flat products in the second quarter as steelmakers make large upward adjustments, in line with higher raw material costs. The EU mills are currently busy because of the restocking exercise that started in December ahead of price rises.

According to the latest research from MEPS, German distributors are experiencing a revival in market demand, amidst well regulated inventories. The mills are pushing for even more increases. These inflated prices could begin to suck in imports later in the year. Although buyers are agreeing higher basis values because they have no real alternative at present, they are only ordering what they need.

Basis figures are continuing to rise in the French market. End-user demand is described as "moderate". There are some third country imports at the docks but quantities have recently dwindled.
All the mills supplying the Italian market are ramping up their basis values. Distributors have been restocking in anticipation of even more expensive steel in the future. However, MEPS notes final consumption is far from robust and, consequently, end-users are reluctant to pay more.

Mill basis numbers are escalating in the UK and resale values are also progressing quite rapidly. The movement is not underpinned by any serious recovery in underlying demand - with the real driver being raw material costs and limited availability from domestic sources.
Having stocked up in the final quarter of 2010, Spanish distributors are now ready to reorder. However, they are only buying just the minimum quantities to keep business ticking over. Current prices do not reflect demand which is stable at a low level.

Steel organization urges ore reserves to fight price manipulation

China Iron and Steel Association disclosed that its latest survey shows evident price manipulation on the iron market. Therefore, it suggests the implementation of a national reserve strategy.

According to the Association, China's iron ore imports account for 75 percent of the world's total iron ore trade through sea shipping. However, the global market of iron ore is monopolized by the top three foreign miners, including Australia's BHP Billiton and Rio Tinto and Brazil's Vale. They have pushed prices up, which has dragged Chinese steelmakers?€? profits down.

Wu Xinchun, vice secretary-general of the Association, pointed out that raw iron output was kept at a low level while iron ore imports have been rising since September last year. In the mean time, prices of rough steel made by China have been pushed higher and higher on the world market, which has buoyed iron ore prices since the end of last year. The price of iron ore is approaching a new record high of 200 U.S. dollars per ton on the spot market.

"The average price of iron ore imports into China stood at about 128 U.S. dollars per ton last year. However, it has risen to some 150 U.S. dollars per ton in the first quarter of this year and currently the price index even has increased to 180 U.S. dollars per ton. That means suppliers are attempting to affect steelmakers' sentiment on the market," said Wu.

He believes it is absolutely necessary to establish a national strategy to build iron ore reserves. That strategy, he thinks, is aimed at achieving the balanced development of the industry, rather than higher yields.

A special government organization should be set up to formalize the policy framework of the national reserve system, Wu insisted.

A report last year by the association and 14 major steelmakers to the State Council about the strategic influence of iron ore supply on the industrial security has received a positive response. As a result, the issue of iron ore supply has been on the agenda as part of the overall national resources strategy.

UK steel production soars at start of 2011

Hopes for an industrial recovery in the UK steel industry will be buoyed today on the announcement that production bounced back in January on increased demand.

Production in the UK soared 35.4 per cent in January to 201,000 tons a week - compared with 148,574 in December, according to UK Steel figures that were to be released this morning.

UK Steel, a division of the manufacturers' organisation EEF, said this was reflected in "sharp increases" across the country's major steel-producing regions "as UK manufacturing continued to respond to increased demand". The British sector is dominated by Corus, owned by Tata of India.

Production in the Yorkshire and Humber area increased by 50 per cent to 89,200 tons a week, and Wales saw an increase of about one-fifth to 101,000. Ian Rodgers, director of UK Steel, said: "The uplift in January output was heartening and is a reflection of the continuing improvement in UK manufacturing output generally."

But he cautioned: "We still have a long way to go to achieve pre-recession levels of steel output, with demand from the construction sector in particular remaining very weak."

The global steel industry was hit hard by the recession but recovered last year as output rose 15 per cent, the biggest full-year increase for more than 50 years, the World Steel Association said in January.

Yet UK output declined 3.7 per cent, the only country with Venezuela to see output fall in 2010. The boom earlier in the last decade was driven by demand in China, although that growth is slowing. Last year, China demand fell behind the rest of the world and the trend is expected to continue in 2011.

Earlier this month, metals giant ArcelorMittal talked up the prospects for a recovery in the global steel industry this year. The group revealed its steel production for 2010 had hit 85 million tons, more than one-fifth higher than the previous year.

Much of the UK's steel output still goes to the car industry and the revival in world trade, with a 20 per cent depreciation in sterling since 2008, has helped to push car exports and production much higher. The industry has also benefited from industrial re-stocking since the end of the recession. Like many basic industries, steel is also highly cyclical.

Local cold rolled coil producers raise prices

PETALING JAYA: Local cold rollers have raised the prices of cold rolled coils (CRC) in view of the general increase in the cost of raw materials and the recent floods in Australia.

Sources said the latest sales were at US$840 to US$850 per tonne this week, up from deals done at US$780 to US$800 in the first week of January.

Cold roll coils are pre-dominantly used in the automobile sector, pipe making and furniture.

Chief Executive Officer of Kinsteel Bhd Datuk Henry Pheng said the increase in CRC prices was in tandem with international prices.

"The recent floods in Queensland, Australia has caused the loss of coal production and hence a shortage in coal supply," said Pheng.

Australia provides for nearly half the world's coal for steel-making. Queensland produces about 80% of Australia's coking coal, contributing 10% to the nation's exports and 2% to gross domestic product.

OSK Research steel analyst Ng Sem Guan said the asking price for CRC was too high, and it was expected to ease.

"At this price, demand is lacklustre because most people are not confident of its sustainability and also because the Chinese New Year period is typically quiet. The second quarter is normally the peak period for the steel industry," said Ng.

Almost two months of torrential rains and the worst floods in Queensland since 1974 had affected 30,000 properties, shut coal mines, cut rail lines and damaged crops.

Coking coal is used primarily in steelmaking. It is more vulnerable to supply disruptions than thermal coal because supply has been extremely tight throughout 2010. Most exporters were already producing at capacity before the Australian floods.

Some analyst are predicting that coking coal prices, which currently trade at over US$300 a tonne to reach US$500 due to the intensification of rain in Australia.

Ng said some of these mines which were disrupted, should resume operations in the next one to two months.

The hype in CRC prices was caused more by speculative traders.

The floods in Australia have also caused Japanese steel mills, which secured more than 50% of their coking coal from Australia last year, to seek other alternatives in North America, Africa and Indonesia.

South Korea seeks government support for proposed SAIL POSCO JV

South Korea today sought Indian government's support for taking off POSCO's proposed joint venture with SAIL to set up a 3 million tonne steel plant at Bokaro in Jharkhand at an estimated cost of INR 15,000 crore.

Mr Park Young June South Korea's deputy minister for trade, energy and resources after a meeting with Indian commerce and industry minister Mr Anand Sharma told reporters that "I asked the minister's support for the project POSCO is implementing in cooperation with SAIL to build an integrated steel mill using advance technology of FINEX.?€

The negotiations for the proposed plant, to be set up at the land adjacent to SAIL's existing 4.5 million tonne per annum plant in Bokaro, have been on since early 2010. However, both the companies POSCO and state run Steel Authority of India have not yet succeeded in striking a joint venture.

While POSCO has been seeking a majority stake in the JV for its FINEX technology, SAIL wanted it to be an equal venture.

According to the initial plan, the plant was proposed to run on POSCO's FINEX technology, which reduces dependence on coking coal and facilitates the use of low grade iron ore and was to be constructed in two phases of 1.5 million tonne per annum each.

Urban trend a lasting boon for Chinese steelmakers

With China's fast urbanization, its steel output won't drop until at least 2030, stimulated by long-term robust demand, industry experts said on Monday.

"China's steel production won't decline over the next 20 to 30 years because urban construction in west China still requires a large amount of steel," said Weng Yuqing, an academician at the Chinese Academy of Engineering and director-general of the Chinese Society for Metals.

The Ministry of Industry and Information Technology said this month that China will produce around 660 million tons of steel in 2011, a 5 percent year-on-year increase.

Last year, China produced 620 tons of steel, 9.3 percent more than the year before.

"Steel producers determine their annual output based on demand from the industry's downstream enterprises, whose business is involved mostly with urban construction, the direct embodiment of a country's industrialization," Lan Jie, a steel industry analyst at Industrial Securities, told China Daily.

Compared with the situation in developed economies like the United States and Europe, China still has potential for growth in steel production.

Its urbanization rate will hit 52 percent in 2015 and grow to 65 percent by 2030, according to the annual report on urban development by the Chinese Academy of Social Sciences.

The urbanization rate had already reached 46.6 percent by the end of last year, with 620 million people living in cities and towns.

Research by the China Commodity Marketplace website shows that the urbanization rate in developed economies is currently 75 percent, compared with 38 percent in developing economies.

The Chinese Society for Metals said the nation's steel production will continue to increase but at a pace that will slow down within the next few years as the urbanization rate reaches a level close to that of developed economies.

Lan said steel manufacturers may have to face the challenge of production surpluses and fluctuating steel prices in the future. Innovative technology is a crucial competitive skill for steel manufacturers that want to maintain rapid development in a stable market.

On Monday, the China Iron &Steel Research Institute Group introduced its third generation of automobile steel, which is four times as strong as the previous generation.

Companies involved in the automotive and the steel industries, including General Motors Corp, Shougang Group and Wuhan Iron &Steel (Group) Corporation, have shown great interest in the technology and have sought to buy new generation auto-steel products, said Cai Rang, general manager of China Iron &Steel Research Institute Group.

China's Anshan Steel to set up joint venture with British Stemcor

China's Anshan Iron & Steel Group Corp. has inked a deal with British Stemcor to set up a joint venture, an official of the Chinese company said Tuesday.

Anshan, the state-owned parent company of Ansteel based in northeast China, and Stemcor will each hold a 50 percent stake in the new company, whose main functions include planning and implementing investment programs of the two collaborators, said Li Dongwei, a vice manager of international business told Xinhua.

However, he refused to reveal the amount of the total investment in the new company, saying both sides were busy preparing for registration in Britain.

The joint venture holding company, to be based in London, is expected to start operation in March and will purchase about two thirds of British USS Ltd., according to Li.

Zhang Xiaoguang, general manager of Anshan who signed the agreement with his counterpart Julian Verden of Stemcor in Brussels last week, said the planned purchase of a stake in British USS Ltd is expected to expand the group's overseas service network and promote its business in the international market.

In late 2007, the Chinese steelmaker formed a joint venture, Ansteel Spain SL, with Stemcor to market steel products in Spain, according to Stemcor's website.

POSCO Plans 2nd Steel Mill in India

Korean steel giant POSCO is making headway in India and has selected a site for its second steel plant in the country in the southern state of Karnataka.

The US$7 billion project is aimed at developing the local iron ore reserves there estimated at some 300 million tons. Industry insiders say POSCO plans to complete a feasibility study for setting up the mill by year's end.

VP Baligar, Karnataka's principal secretary for commerce and industries, was quoted by the Wall Street Journal as saying that the steelmaker has selected the Gadag district for the plant.

He also said the state government will soon begin acquiring the 3,000 acres needed for the project with the goal of completing the acquisition this year. The land is currently used for farming.

POSCO signed a memorandum of understanding with the state government last June to set up the steel mill with an output capacity of 6 million metric tons per year.

The firm says that Karnataka is the country's third largest state for iron ore and has been exporting the mineral in less than lucrative deals. It hopes the mill will change that and become an asset for both sides.

Sumitomo Metals ships five millionth mt of plate to Hyundai Heavy

On February 18, Japanese steelmaker Sumitomo Metal Industries, Ltd (Sumitomo Metals) achieved cumulative total steel plate shipments of five million mt to South Korea-based Hyundai Heavy Industries, Co., Ltd., the world's largest shipbuilder.

According to a Sumitomo Metals release, the company began shipment of steel plates for shipbuilding to the South Korean industry giant in 1972, commencing shipments of high-end steel plates for marine structures in 1984. Sumitomo Metals has since supplied approximately 500,000 mt of high-end steel plates to Hyundai Heavy Industries, included in the total shipments of five million mt to Hyundai Heavy Industries.

Meanwhile, Japan's first RORO ship designed specifically for transportation of steel plates has been launched for service between Sumitomo Metals' Kashima Steel Works and the Ulsan shipyard of Hyundai Heavy. The RORO ship will improve transportation efficiency compared to conventional ships that use cranes to load and unload cargo.

Roll-on/roll-off (RORO) ships are vessels designed to carry wheeled cargo that are driven on and off the ship on their own wheels, similar to ferries which do not use a crane to load and unload cargo.

Mideast steel price under pressure : Rebar prices fell from $700 per tonne to $670/t

The steel market in the Middle East states is under pressure due to Egyptian political unrest. With Turkish and CIS producers now unable to sell to Egypt, they are looking to the rest of the Middle East as an alternative destination, market sources say.

One Dubai based producer says it was forced to lower its ex-works rebar prices from $700 per tonne to $670/t. Other offers into the region are currently said to be in the region of $675-690/t freight-on-board (fob) from Turkish producers, $640-650/t fob from Byelorussia, and $660/t fob Black Sea from ArcelorMittal's Ukrainian plant Kryvyi Ryh.

Spot rebar in Saudi Arabia's Jeddah is now at $640-$650/t, as Black Sea mills seek new markets away from the turmoil, a major Russian producer said. "It is influencing the market," Hamriyah General Director Shukhrat Nishanov told Reuters in an interview.

"If that market was traditionally supplied by our colleagues in Turkey and Ukraine, well, they can't sell there so they are going to the Saudi market and this is disrupting our business."

Metalloinvest's Hamriyah, the only Russian-owned steel plant in the UAE, sold its January rebar production for $700/t, Nishanov said, roughly 8 per cent above the current spot range.

The company, which is also Russia's largest iron miner, opened its steel plant in the UAE last year to tap into the Middle Eastern construction boom. It currently produces 80,000 tonnes of rebar per month, or 1 million tonnes (MT) per year. This can be ramped up slightly to about 1.2MT if demand increases.

Egypt is one of the major buyers in the Middle Eastern and North African steel market, which consumes about 62MT annually, according to Alam Steel senior trader Hadi Hami.

Steel price hike to boost CSC 1HFY11 results

KUCHING: Steel manufacturer CSC Steel Holdings Bhd (CSC) is heading for a more promising first half for financial year 2011 (1HFY11) as steel prices continue to escalate.

OSK Research Sdn Bhd (OSK Research) opined that with this trend of hiking steel prices, CSC might enjoy a time lag advantage from cheaper inventory stocked up previously in its operations.

Besides that, the end of the lunar festive season also suggested that construction and manufacturing activities would start to pick up, gearing up the second quarter as the strongest period for steel demand.

The research firm stated that the group’s fourth quarter for financial year 2010 (4QFY10) returned to the black with a net profit of RM8.6 million after a marginal loss of RM1.6 million in the preceding quarter.

A separate research house, RHB Research Institute Sdn Bhd (RHB Research) attributed the achievement of the positive performance to the absence of a RM10 million inventory write down that was incurred in the previous quarter.

RHB Research also viewed that the rising steel prices would act as a ‘cost push’ in nature and more a case of steel producers passing down raw material cost increases, rather than expansion in margins.

Having said that, steel producers would still be expected to post decent results in 1HFY11 due to the usage of relatively cheaper raw material inventory against higher average selling prices, said RHB Research.

Meanwhile, AmResearch Sdn Bhd (AmResearch) pointed out that CSC announced a much higher dividend payout of 70 per cent, translating to 15 sen per share which would register an impressive 7.4 per cent yield.

AmResearch commented that with the global 4QFY10 hot roll coil (HRC) spot prices trading flat, increased 4Q inventories might indicate stocking up of HRC feedstock by the company.

CSC, under that circumstance, believed that HRC’s February selling
prices would go higher and anticipated this to continue throughout 1HFY11 forecasts.

With orders coming in anticipation of a continued upward trend in the flat steel market, the group’s margins would be spurred to greater heights.

As a conclusion, OSK Research pegged CSC at a target price of RM1.97 per share, RHB Research at RM2.01 per share and AmResearch at RM2.00 per share.

UK steel production soars at start of 2011

Hopes for an industrial recovery in the UK steel industry will be buoyed today on the announcement that production bounced back in January on increased demand.

Production in the UK soared 35.4 per cent in January to 201,000 tons a week – compared with 148,574 in December, according to UK Steel figures that were to be released this morning.

UK Steel, a division of the manufacturers' organisation EEF, said this was reflected in "sharp increases" across the country's major steel-producing regions "as UK manufacturing continued to respond to increased demand". The British sector is dominated by Corus, owned by Tata of India.

Production in the Yorkshire and Humber area increased by 50 per cent to 89,200 tons a week, and Wales saw an increase of about one-fifth to 101,000. Ian Rodgers, director of UK Steel, said: "The uplift in January output was heartening and is a reflection of the continuing improvement in UK manufacturing output generally."

But he cautioned: "We still have a long way to go to achieve pre-recession levels of steel output, with demand from the construction sector in particular remaining very weak."

The global steel industry was hit hard by the recession but recovered last year as output rose 15 per cent, the biggest full-year increase for more than 50 years, the World Steel Association said in January.

Yet UK output declined 3.7 per cent, the only country with Venezuela to see output fall in 2010. The boom earlier in the last decade was driven by demand in China, although that growth is slowing. Last year, China demand fell behind the rest of the world and the trend is expected to continue in 2011.

Earlier this month, metals giant ArcelorMittal talked up the prospects for a recovery in the global steel industry this year. The group revealed its steel production for 2010 had hit 85 million tons, more than one-fifth higher than the previous year.

Much of the UK's steel output still goes to the car industry and the revival in world trade, with a 20 per cent depreciation in sterling since 2008, has helped to push car exports and production much higher. The industry has also benefited from industrial re-stocking since the end of the recession. Like many basic industries, steel is also highly cyclical.

Wuhan has more resources than any other steelmaker worldwide

Now that it has penned deals with two Canadian iron companies, Wuhan Iron and Steel (Group) Corporation (WISCO) has control over billions of tons resources, which makes it the steel manufacturer with the most resources in the world.

WISCO signed a deal with Canadian Adriana Resources Inc. to take a stake in an iron ore project in Lac Otelnuk, Quebec. It is the latest example of a Chinese company buying overseas assets to guarantee iron ore supplies.

In January, WISCO and Adriana signed a binding framework agreement under which Wuhan will pay 120 million Canadian dollars for a 60 percent stake in a joint venture that will develop the Lac Otelnuk project. The deal will give WISCO a 20 percent stake in Adriana through a private placement and the right to nominate a director to Adriana's board.

Lac Otelnuk has reserves of approximately 6 billion tons of medium grade iron ore, but mining costs are low. Also, Adriana has iron ore assets in Brazil and Canada and sees China as its main market.

On Feb. 17, 2011, WISCO agreed with Canada's Century Iron Mines Corp. to jointly develop mining projects as it seeks to cut its reliance on ore purchases from the big three iron producers BHP Billion Ltd., Rio Tinto Group and Vale SA.

Spot prices for iron ore arriving in China's Tianjin port have surged 50 percent in the past year, according to the Steel Index. WISCO wants to be "self-sufficient" in iron ore supplies in three to five years and reduce dependence on overseas suppliers, General Manager Deng Qilin said in a Bloomberg report.

WISCO has now invested in eight iron ore projects spanning the globe in Canada, Brazil, Australia, Liberia and Madagascar. It has secured "billions of tons" of iron ore resources, making it owner of the most mining resources among global mills, according to a company statement.

Wuhan Steel plans to boost steel production capacity from 40 million tons to 60 million metric tons in 2011-2015, company representatives said in July. It made 36.6 million tons last year.

Steel merger aims for survival

Nippon Steel Corp., Japan's biggest steel maker, and Sumitomo Metal Industries Ltd., the nation's third-ranked steel maker, announced Feb. 3 a plan to merge in October 2012. The merger, if it materializes, will bring about the world's No. 2 steel maker after Luxembourg-based ArcelorMittal, which produces about 10 percent of the world's crude steel.

The merger follows two major consolidations in Japan's steel industry — the 1970 merger of Yawata Iron and Steel and Fuji Iron and Steel into Nippon Steel and the 2002 merger of Kawasaki Steel and NKK into JFE Holdings, now Japan's No. 2 steel maker.

The merger plan represents the two firms' attempt to survive in the global steel market where Japanese steel makers' influence has been declining. In terms of global crude steel production, Nippon Steel, once the No. 1, was ranked sixth and JFE ninth in 2009. Nippon Steel and Sumitomo Metal Industries together produce only about 3 percent of global crude steel.

The planned merger will enhance their bargaining power against raw materials producers at a time when iron ore and coking coal prices are rising. Brazil and Australia account for 60 percent of global iron ore exports and three major firms control the world market. Recent coking coal prices are reported to be about 60 percent higher than in the previous year.

It is unrealistic for domestic steel makers to expect demand to expand inside Japan. Nippon and Sumitomo will try to avoid overlapping of investment and decrease production cost. It will be important for them to meet the expanding demand in emerging economies such as China, India, Brazil and Russia, especially demand from the auto industry.

Steel makers from China and South Korea have successfully marketed low-priced, low-to-middle grade steel in Asian markets. Nippon and Sumitomo may consider moving production near such markets. They will have to compete on prices, but they should not forget the importance of developing state-of-the-art products. Such products will be an important weapon in securing a stronghold in crucial markets.

China's steel industry to face tougher times in 2011: MIIT

China's steel companies will come under pressure this year as the government restructures the economy and competition heats up on the global market, said a report released Wednesday by the Ministry of Industry and Information Technology (MIIT).

China produced 626.65 million tonnes of crude steel last year, up 9.3 percent from 2009, The rate of increase was 4.2 percentage points lower than that in 2009, said the report.

However, the ministry forecast steel production this year would rise by only 5 percent to 660 million tonnes, as the government steered the economy to a more sustainable path in the first year of the country's 12th Five-Year Program.

The industry would face greater pressure from requirements to conserve energy and cut emissions, said the report.

China eliminated 44 million tonnes of outdated iron and steel production capacity last year, it said.

Fierce international competition would hurt steel exports, it warned.

The MIIT also predicted iron ore prices would remain high, driving up the costs of steel companies.

"In 2011, the rapid development stage of China's steel industry is coming to an end," said the MIIT.

The ministry urged China's steel companies to step up energy efficiency and emissions reduction efforts.

The Proposal on Formulating the Twelfth Five-Year Program (2011-2015) on National Economic and Social Development, released in October 2010, said the country's major task in the 2011-2015 period was accelerating the transformation of China's economic development pattern.

This required the country to shift its economic structure to a sustainable path that was energy-efficient and environment-friendly.

Mills increase prices for March delivery

TWO major Chinese steel makers raised their main product prices for March delivery to cope with higher raw material costs, after earlier increasing their January and February prices.

Baoshan Iron and Steel Co, China's largest listed mill, said yesterday it would increase prices for hot-rolled coil by 300 yuan (US$45.5) a ton, or up to 6.7 percent, and cold-rolled coil by 260-300 yuan a ton, or up to 4.9 percent.

One day earlier, Wuhan Iron and Steel Co unveiled a rise of around 300 yuan for its main products next month.

Domestic mills have been forced to raise product prices to pass on rising costs of iron ore and coking coal to downstream industries.

The spot price for Indian iron ore was quoted above US$190 per ton including freight to China, a jump of more than 50 percent from July last year, according to industry consultant Custeel.

"Steel makers are now in the late stage of the current price hike cycle," Custeel analysts Hu Yanping and Hu Zhengwu wrote in a note.

Stable raw material prices and downstream demand may help steel prices to rise, albeit at a slower pace, in the coming months, they said.

Iron ore imports reached a record high of 68.97 million tons in January, up 18.8 percent from December and 48 percent from a year earlier, according to the General Administration of Customs.

The imports surged as traders and mills built up stocks on fears of higher ore prices, according to analysts.

ArcelorMittal sees higher volumes & prices offsetting costs

ArcelorMittal expects its steel shipments and selling prices to increase in the first quarter of 2011 versus Q4 2010, "which should combine to offset the higher costs that we will also incur in Q1," the global steelmaker's chief financial officer Aditya Mittal said yesterday. In turn, the company expects its EBITDA to be in the range of $2bn-2.5bn in Q1, compared to $1.9bn in Q4.

Steel shipments should increase in Q1 "as the gradual underlying demand recovery continues and market sentiment improves," the company says. It also expects its capacity utilisation to rise to 75-76% in Q1, up from 69% in Q4. Average steel selling prices "are adjusting to rapid increases in raw material prices," the steelmaker adds.

"Selling prices are recovering, but positive momentum needs to be maintained, as we are facing acute pressure from raw material costs, which continue to be one of our biggest challenges," the company's chief executive, Lakshmi Mittal, cautioned.

ArcelorMittal's EBITDA in Q3, at $2.3bn, was higher than in Q4, so some of the expected growth in EBITDA in Q1 is recovery growth, Aditya Mittal added at the company's annual results meeting in Luxembourg. Weakening demand in Q4 caused some decline in selling prices, and "we could not pass on the full extent of the cost increases," he acknowledged during the meeting, attended by Steel Business Briefing.

ArcelorMittal's crude steel production rose to 90.6m tonnes in 2010 from 71.6m t in 2009, and its steel shipments rose to 85m t from 69.6m t. Its revenue increased to $78bn last year from $61bn in 2009, and its EBITDA went up to $8.5bn from $5.6bn.

Steelmakers raise prices again

Increase in the cost of raw materials now being passed on to customers

China's major steelmakers raised prices for a third straight month as downstream demand became stronger and raw material prices continued to rise.

Baoshan Iron &Steel Co, the nation's largest publicly traded steelmaker, raised prices for hot-rolled products by 300 yuan ($50.85) a ton and cold-rolled prices by between 260 and 300 yuan a ton, backed by strong demand from the automobile and construction industries. Baosteel supplies half of China's automotive steel.

The hike was followed by Wuhan Iron &Steel Co which raised wire bar prices by 200 to 300 yuan a ton on Monday.

The producer price index (PPI), the main gauge of inflation at the wholesale level, rose 6.6 percent in January year-on-year while the consumer price index (CPI), the main gauge of inflation, rose 4.9 percent during the same month, the National Bureau of Statistics announced on Tuesday.

Factory gate prices for the mining sector increased 13.7 percent in January year-on-year, while the factory gate price for the raw materials sector rose 10 percent year-on-year.

China's steel lobby, the China Iron and Steel Association (CISA), said in January that demand from the housing and railway sectors will further drive up steel prices this year.

Passenger car sales rose 12.6 percent in January on an annual basis, despite falling 10 percent in January from the previous month, as cities began imposing curbs on vehicle sales to combat traffic congestion, according to the Shanghai-based China Passenger Car Association.

Rebar futures on the Shanghai Futures Exchange rose as high as 5,157 yuan a ton on Tuesday, close to the record 5,230 yuan reached on Friday.

Steel production rose by 60,000 tons a day in early January compared with a month earlier, according to data from the CISA.

Domestic average steel indexes reached 194.5 on Feb 11, up 1.6 percent from the previous week, and a rise of 27.3 percent from a year ago, propelled by rising raw material costs, according to data from the Lange Steel Information Center.

Indian ore with an iron content of 63.5 percent was being offered at $197 to $199 a ton, including freight costs, on Tuesday, a rise of 12 percent this year.

The price of coking coal also surged after production in the top exporter, Australia, was disrupted by massive floods.

Chinese steel mills and traders bolstered iron ore inventories because they expect prices to rise further.

Iron ore imports surged 18 percent to a record in January, compared with December, according to the General Administration of Customs on Monday.

China Daily

Steel & Tube reports slow reovery

Wellington-based Steel & Tube has reported an unaudited tax paid profit of $8.4 million for the half year to December 31, up $5.2m on the same time the previous year.

Sales were flat at $190.5m with higher volumes offset by lower global steel prices, the company said.

A fully imputed dividend of 6c a share would be paid on March 31 to shareholders on the register at March 11.

Steel & Tube said the economic recovery had been slower than expected.

The September quarter gross domestic product figures were disappointing with both manufacturing and construction declining.

Global steel prices were expected to remain volatile.

"In the immediate future prices are likely to increase as the industry tries to recover escalating raw material costs, compounded recently by the floods in Australia with many coal mines unable to produce.

"This combined with a volatile New Zealand Dollar means domestic steel prices will most likely continue to experience considerable variations."

Steel & Tube expected to see a slow and gradual improvement in activity across most sectors with the exception of commercial construction, which was likely to contract further in the short term.

"Overall we expect the second half of the year results will be similar to those of the first six months."

SE Asian billet import market weaker amid thin trading

The direction of SE Asia’s market for imported billet remains uncertain. "The market weakened last week due to the holidays. Some low-priced offers were heard and are probably position cargoes. But no-one really knows where the market is heading," a regional trader says.

Traders report hearing a few indicative offers late last week: Korean billet at $640/tonne fob and Malaysia material $670/t fob, $10-20/t lower than in late January.

“These price decreases are a consequence of poor billet demand in the past two weeks,” a Manila-based trader says. “There are no signs of improved demand for finished steel,” another tells Steel Business Briefing. Billet prices are falling in tandem with weakened scrap prices, SBB is told.

“Prices are trending downwards,” a buyer in Vietnam says. Offer prices are $10-30/tonne lower than before the holidays. Users prefer domestic billet, currently at around VND 14.5m/t ($700/t), particularly since the Vietnamese dong was recently devalued. Vietnamese importers are indicating bidding interest at $650-655/t cfr, traders tell SBB.

A Russian cargo of 3sp/ps billet is offered at $655/t cfr Indonesia. “It is a distressed cargo, ready to be shipped out now,” a local importer says. Other offers for CIS billet were still at $685-690/t cfr East Asia last week.

Others say billet import prices are stabilising at current levels, since domestic scrap prices in regional markets are holding firm. “Japanese commercial billet is still offered at $700/t cfr Korea,” a Korean trader says. “There’s no reason for billet prices to fall because construction activity will pick up in the second quarter,” says a regional trader. China’s billet and scrap markets are still firm, he adds.

Italian coils mills and buyers in a waiting position

Italian coils mills and buyers are "waiting" to get a better understanding of the market direction, market participants tell Steel Business Briefing.

“Local buyers are not buying because they are waiting to understand the trend. In particular, Riva, the coil price setter in Italy, has not offered material since January because it is still waiting to understand Chinese mills' prices”, a trader says to SBB. “And because local buyers prefer to buy directly from Riva, they are waiting”, he adds.

It is understood that Riva's last offer in January was €610-630/tonne ($823-850/t) ex works for hot rolled coils. Meanwhile Arvedi is active in the market: it is offering around €620/t ex works for its HRC, SBB understands.

It is believed that in Italy cold reduced coils are being offered at a base price of €720/t ex works, while hot dipped galvanized is being offered at €680/t ex works.

Buyers' stock levels are medium high, market participants tell SBB. “The fundamentals for the coils market are good, but at the moment buyers' stocks are at a good level, so that they are not desperate to buy”, a trader tells SBB.

At the moment, no coils sales from Libya to Italy have been reported. “Lisco, the most important steelmaker in Libya, is not working very much with Italy at the moment, but is preferring to sell into the Central and East European market, in particular,” a source says to SBB.

Iran markets remain quiet, demand is low

On the Iran Mercantile Exchange (IME) on 13 February, about 20,000 tonnes of long steel products were traded, which shows that the demand is low, Steel Business Briefing learns from the IME.

Most traders believe that the low demand will last at least up to the end of the current Iranian year (ending March 20). The government policy about import duty is not clear yet, and end-user consumption is not so high, a trader believes.

Insig, the Iranian longs producer, traded its A3 rebar in sizes of 14-25mm for IRR 7,600,000/tonne ($690/t) for 90 days delivery ex-works. Other Iranian private re-roller products were traded for IRR 7,700,000/t ($700/t) for 60 to 90 days ex-works delivery.

In the off-exchange markets in Tehran and other large cities, A3 rebar has seen recent prices ranging from IRR 7,800,000/t ($709/t) to around IRR 8,200,000/t ($745/t) for smaller sizes, which is lower than January prices. Off-exchange markets are quiet too.

Domestic-produced billet is trading at IRR 7,200,000-7,250,000/t ($654-659/t) for different sizes of 5SP billets.

Few new production coil orders from the Iberian peninsula

Coil buyers in Spain and Portugal are currently holding back from ordering new production from mills, Steel Business Briefing learns from local sources. Some lower priced coils are still available at the ports and the prices announced by European mills are considered slightly too optimistic.

While European mills are quoting up to €650-660/tonne ($875-889/t) ex works for April production of hot rolled coils, traders confirm to SBB that some November-December bookings are currently available at the Iberian ports at prices around €590-620/t fca (loaded on truck).

“We expect new cargoes to arrive in February and for few orders for April production to be made,” a trader comments. “This is not to say that prices are set to drop, but European mills may not achieve what they ask. I expect April rollings to be sold at €630-635/t ex works.” Even Egyptian material previously ordered should be delivered, SBB is told.

Uncertainties surrounding prices and the countries’ local economies are also encouraging buyers to purchase material at port. Some clients prefer to buy material in port in order to take immediate delivery and avoid the lead time for new production, SBB understands.

New production of cold reduced coils and hot dip galvanised is quoted at around €720-750/t ex-works base price, while some material from the Far East is still arriving at the ports.

“Portuguese buyers are reluctant to buy the new productions, demand is still poor and prices have increased too rapidly,” a source tells SBB.

US plate price increases succeeding

Moves on US plate have driven prices to upwards of $1,000/short ton and further increases could be on the way as demand picks up.

Spot prices for A36 plate have risen to the $980-1000/short ton range, Steel Business Briefing learns.

The price moves, including $80-100/s.t increases anounced last week, come despite very little demand.

“There is not much demand in general,” said a US-based trader. “No one is buying unless they absolutely need to.”

Once demand eventually increases, another price increase of $20-50/s.t. can be expected, says another trader.

The Steel Index, a unit of SBB, indicates a less drastic increase but still shows a 12-month high for the price of US plate. TSI shows a $39 week-on-week increase on the fob mill price for A36 to $926/s.t.

Furthermore, according to TSI, the price is up $95/s.t. over the last four weeks, an 11.3% increase.

Metal powder producer has best Q4 ever

Metal powder producer Höganäs had its best fourth quarter ever in 2010, buoyed by its performance in emerging markets, according to the Swedish company's annual results seen by Steel Business Briefing.

Sales volumes in India and China reached new record levels in Q4 despite some customers reducing inventories. This offset a slight dip, quarter-on-quarter, in North America and seasonal weakness in Europe. Höganäs’ sales into Asia grew from SEK 514 million ($80m) in Q4 2009 to SEK 613m in the final three months of last year, SBB notes. Group sales rose 18% on the preceding year to SEK 1.6bn, while sales for the year reached SEK 6.6bn.

Over the whole of last year the effect of discontinued car scrappage incentives in Europe was somewhat countered by increased export demand.

“The market is expected to remain strong in Asia and South America, while a gradual recovery, albeit at an uncertain rate, is expected in North America,” the company says in its results. “However, Höganäs judges that underlying demand in Europe will remain weak,” it continues.

In Q4 South Korea’s Sinteron started manufacturing powder-forged connecting rods using Höganäs’ chromium alloyed Astaloy. Sinteron supplies the car industry and Hyundai is a key customer, SBB notes.

China’s HRC output soars in 2010 on capacity boost

The boost in hot rolled coil capacity witnessed in China through 2009~2010 prompted the country’s HR coil and sheet output last year to surge to 144.63m tonnes, according to National Bureau of Statistics data. This was up by a significant 25.93mt or 22% from 2009’s 118.7mt.

Steel Business Briefing notes that, in 2010 alone, a combined 14m tonnes/year of new HRC capacity was brought on stream, and this year a further 6m t/y will be commissioned. Indeed, China’s HRC output will continue climbing this year in any case as those newly-started hot strip mills gradually reach full operation.

Remarkably however, though HRC output is trending upwards, HRC prices have also climbed since early last September – driven both by Chinese inflationary pressure and by increasing raw materials costs.

Among Shanghai dealers for example, Q235 5.5mm HRC prices have reached RMB 4,780/t ($729/t) with 17% VAT, or RMB 4,085/t without VAT, up almost RMB 800/t from last September.

And because HRC supplies to the domestic market this month will be temporarily affected by maintenance stoppages at some mills, prices will likely climb further after traders resume business on 9 February after the Chinese New Year break.

For example, northern China’s Anshan Iron & Steel will lose about 250,000 tonnes of pig iron output this month due to blast furnace maintenance, denting HRC output as a result. Maintenance on one of its hot strip mills this month will lose east China’s Shagang about 300,000 t of HRC output. Angang and Shagang have informed their trading agents that their February HRC deliveries will only be 35% and 28% of contracted volumes respectively.

US takes two China trade disputes to WTO

WASHINGTON (AFP) – The United States said Friday it had taken trade disputes with China over US steel imports and electronic payment services to the World Trade Organization.

The US requested the Geneva-based WTO to establish two panels to settle the disputes, US Trade Representative Ron Kirk said in a statement.

The WTO action marked an escalation in the long-running list of trade disputes between the world's largest economy and its fast-growing Asian rival.

One case addresses China's imposition of antidumping duties and countervailing duties on imports of grain-oriented flat-rolled electrical steel from the United States, the statement said.

The other case challenges China's allegedly discriminatory and restrictive treatment of US suppliers of electronic payment services.

Previous US attempts to resolve the two disputes directly with China had failed, the USTR said.

"We are troubled by the procedures and decision-making employed by China in its trade remedy investigations, which have now led to serious restrictions on exports of American steel," Kirk said.

"We also remain deeply concerned about China's continuing efforts to reserve its domestic payment card market for one state-owned enterprise, to the exclusion of American credit and debit card companies."

Kirk said that in each of those disputes, the "USTR will be pressing to ensure that we obtain the trade benefits provided by the WTO agreement, in particular the American jobs and economic growth at stake as a result of China's actions."

The US accuses China of flouting WTO rules in applying additional duties on imports of the electrical steel, used by the power-generating industry in transformers, reactors, and other large electric machines.

China imposed duties on specific steel imports in April 2009, saying the American steel had been dumped -- sold at less than fair market value -- into its market and was subsidized.

The USTR said that China?s antidumping and subsidy determinations in the case appeared to violate numerous WTO requirements, including initiating the proceedings "without sufficient evidence" and failing to disclose "essential facts" underlying its conclusions.

"We have watched with growing concern China's resort to additional duties on US exports," Kirk said.

"It is important to ensure that China is held to the WTO rules and so prevent any unjustified duties from affecting hundreds of millions of dollars of US steel exports to China," he added.

The two largest US manufacturers of electrical steel are in the struggling "rust belt": AK Steel Corporation, based in Ohio, and Allegheny Ludlum, based in Pennsylvania.

In the second case, the US accused China of creating a "national champion" to monopolize the country's operation of electronic payment transactions, which it estimated was worth several hundred billion dollars in 2010.

While most of the world's top providers of electronic payment services for credit and debit cards are headquartered in the United States, the USTR said, China prohibits foreign suppliers from handling the typical payment card transaction in China.

"China's regulator of electronic payment services, the People's Bank of China, has issued a series of measures -- dating back to 2001 -- that provide a Chinese domestic entity, China UnionPay (CUP), with a monopoly over the handling of domestic currency payment card transactions in China while excluding other potential suppliers," the US trade office said.

Steel prices rise as demand to increase

Reports of an expected 10 percent increase in steel demand in the United States this year sent some steel company stocks higher Thursday, the same day AK Steel announced a price increase.

West Chester-based AK Steel (NYSE: AKS) said it is hiking current spot market base prices for all carbon flat-rolled steel products, effective immediately with new orders. The company, the largest in the Dayton region, said base prices for carbon flat-rolled products will increase by $50 per ton.

This week, Arcelor Mittal (NYSE: MT), the world's largest steelmaker, said it expected a 10 percent increase in the U.S. demand for steel this year, with demand in China and Europe climbing up to 7 percent.

Stock prices got a boost on the news, with Arcelor shares climbing 1.3 percent to $38.09, AK Steel shares increasing 1.2 percent to $15.71, United States Steel Corp. (NYSE: X) jumping 1 percent to $57.83 and Nucor Corp. (NYSE: NUE) climbing half-a-percent to $47.29 per share in trading on Wall Street Thursday.

President Barack Obama reached out to the business community this past week, and has discussed spending $50 billion to improve infrastructure in the country as one of several new initiatives. Any effort to boost construction likely would help drive further demand for steel.

Despite increased demand that has boosted revenue for some steelmakers, profit has lagged. Last month, AK Steel reported a fourth-quarter and full-year 2010 loss, and Arcelor reported a loss this past week.

For the full year, AK Steel's loss grew to $128.9 million, or $1.17 per share, from a loss of $74.6 million, or 68 cents, in 2009. Sales for 2010 were about $6 billion, up from about $4.1 billion in 2009. The company's steel shipments increased to 5.7 million tons compared to 3.9 million tons for the full year of 2009.

California Steel Industries Reports Fourth Quarter and Full Year 2010 Results

FONTANA, Calif., Feb. 10, 2011 /PRNewswire/ -- California Steel Industries, Inc. ("CSI") today reported profitable results for the year ended December 31, 2010, with net sales of $1.08 billion and net income of $25.4 million.

These results compare with net sales of $551.8 million and a net loss of $13.1 million for the year ended December 31, 2009.

The net loss for fourth quarter 2010 is $5.5 million, compared with a net loss of $2.3 million in fourth quarter 2009 and net income in third quarter 2010 of $2.0 million. Net sales for the quarter are $227.9 million, or 48 percent higher than fourth quarter 2009's net sales of $153.6 million, but 27 percent less than third quarter 2010's net sales of $313.9 million.

Shipments in fourth quarter 2010 are 279,641 net tons, 26 percent higher than fourth quarter 2009's shipments of 222,242 net tons and 24 percent lower than third quarter 2010 shipments of 365,608 net tons.

For the year, CSI shipped 1,335,256 net tons, 67 percent higher than 2009's shipments of 800,375 net tons.

The Company recorded $4.6 million in fourth quarter 2010 and $12.9 million in fiscal 2010 for writing down inventory to market value as CSI's inventory values are carried at the lower of cost or market (LCM).

"Fourth quarter 2010 results are normally impacted by the lower shipment levels we experience during this period each year," said Vicente Wright, President & Chief Executive Officer.

"But rather than focus on a quarter whose results are cyclical and thus typically diminished from the rest of the year, I look at the total results for fiscal 2010, and recognize the tremendous survival measures taken by our team and the resulting turnaround from 2009," he continued.

"The results for 2010 not only indicate an improvement to business conditions in the US, but also can be directly attributed to our Company's efforts to position itself to meet future changing conditions," Mr. Wright concluded.

EBITDA (as adjusted) for the quarter is $4.0 million, lower than fourth quarter 2009's adjusted EBITDA of $9.1 million, and also lower than third quarter 2010's adjusted EBITDA of $21.3 million.

For the year, EBITDA (as adjusted) is $88.2 million, 52 percent higher than 2009's adjusted EBITDA of $58.2 million.

The balance under the Company's Revolving Credit Agreement was zero as of December 31, 2010, with availability of $110 million. The Company has a cash balance as of December 31, 2010 of $27.7 million.

Results (in thousands, except for billed net tons) are as follows:

	Three Months Ended		Year Ended
	12/31/10	12/31/09	12/31/10	12/31/09
Billed net tons	279,641	222,242	1,335,256	800,375
Net sales revenue	$227,884	$153,563	$1,076,168	$551,808
Cost of sales	$231,510	$151,380	$1,013,891	$561,120
SG&A	$5,535	$4,662	$19,735	$17,481
Operating (loss) income	$(9,583)	$(2,935)	$41,449	$(27,278)
Interest expense, net	$2,631	$1,958	$9,024	$8,159
(Loss) income before tax	$(11,407)	$(3,496)	$35,332	$(26,945)
Net (loss) income	$(5,540)	$(2,291)	$25,394	$(13,101)
Depreciation	$8,215	$7,910	$31,003	$32,458

Cash Flow Information:

Operating Activities	$51,724	$(17,973)	$21,609	$102,458
Investing Activities	$(5,796)	$(14,662)	$(31,118)	$(46,667)
Financing Activities	$(27,700)	$(2,500)	$(24,443)	$(5,000)

EBITDA, as adjusted	$3,989	$9,072	$88,209	$58,172

A reconciliation between cash flows from operations and EBITDA and EBITDA as adjusted will be included in the Company's Current Report on Form 8-K, together with this press release. As noted in the reconciliation, EBITDA as adjusted is EBITDA adjusted to add back an inventory writedown for lower of cost or market adjustments.

Company Information and Forward Looking Statements

California Steel Industries is the leading producer of flat rolled steel products in the western United States (the 11 states located west of the Rocky Mountains) based on tonnage billed, with a broad range of products, including hot rolled, cold rolled, and galvanized sheet and electric resistant welded pipe. Located in Fontana, California, CSI has slightly less than 900 employees. For more information, please visit our website at www.californiasteel.com.

This press release contains forward-looking statements within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. Actual outcomes and results may differ materially from what is expressed herein. In evaluating any forward-looking statements, please carefully consider factors that could cause actual results to differ materially from the expectations of the company or its management. For a more detailed discussion of these factors, please see the company's most recent filings with the Securities and Exchange Commission. In particular, we direct your attention to our most recent Form 10-K, in particular Item 1 with respect to the general discussion of factors affecting our business, Item 7 with respect to "Management's Discussion and Analysis of Financial Condition and Results of Operations" and Item 7A with respect to "Quantitative and Qualitative Disclosures about Market Risk". The company undertakes no obligation to update the forward-looking statements to reflect subsequent events or circumstances.

SOURCE California Steel Industries, Inc.

Shanghai rebar futures hit record high after holiday

Shanghai steel rebar futures rose to a record Wednesday after traders returned from a week-long Lunar New Year holiday anticipating a pickup in demand.

The price rise comes on the heels of increasing cost of raw materials iron ore and coal and ahead of an expected recovery in steel demand in China - the world's top consumer, despite its interest rates hike Tuesday for the second time in six weeks.

"We're in the time of year when traders build steel inventory, so while real demand is weak at the moment, traders are restocking through it expecting stronger demand in the following month," said Graeme Train, analyst at Macquarie in Shanghai.

"I wouldn't be surprised if steel prices continue rising. Chinese production is still below the run-rate that even more conservative forecasters are predicting for this year and as a result they're probably still under-producing steel so you'll need to incentivise that production by having prices rise."

Crude steel output by China, the world's biggest producer, is forecast to rise 6 percent this year from a record 627 million tons in 2010, according to a Reuters poll of analysts in December. The projected growth rate, however, is slower than the 9.3 percent pace in 2010.

The most active reinforcing bar, or rebar, contract for October delivery on the Shanghai Futures Exchange was up 0.2 percent at 5,136 yuan ($779) a ton by 0302 GMT, after touching an all-time high of 5,150 yuan ($781) earlier.

China's latest quarter percentage point rate hike is unlikely to adversely hurt steel demand, analysts say.

"China's aim is to slow growth and not slow demand in absolute terms. I think everybody has been factoring in slower growth rate this year than last year and some policy is needed to ensure that happens, so I don't think anyone should be surprised by this rate hike," said Macquarie's Train.

Continued restocking by steelmakers should translate to more iron ore purchases, which could drive spot prices of the raw material even higher.

Source: Global Times

Infrastructure spend lifts Indian longs consumption

The overall strength of the Indian economy and the country’s spend on infrastructure and construction helped boost consumption of long steel products to 18.2m tonnes during April-December last year, up 10% from 16.5m t over the same period in 2009.

Industry data prepared by India’s Joint Plant Committee show that total Indian production of alloy and non-alloy finished steel climbed 8% during April-December to 47.3mt.

During the nine months, long products – bars and rods, structural steels, rails and railway products, and large dia pipes – were important drivers of the steel sector, with growth in apparent consumption averaging 9.6% year-on-year.

These four sectors accounted for 60% of India’s apparent steel consumption over the nine months. Apparent consumption of hot coils was up 6% to 10.3mt and that of cold rolled coils by 16% to 5.2mt.

Infrastructure accounts for 27% of India's industrial output, Steel Business Briefing notes. The country intends to double infrastructure spending to the equivalent of $1 trillion in its next five-year plan beginning April 2012.

But despite the strong domestic demand, India is still managing to nudge up its exports. During April-December last year, India’s steel exports surged 17% to 2.5m t, the JPC data show.

Indian apparent steel consumption
Thousand tonnes. Source: Joint Plant Commitee

Apr-Dec '10

Apr-Dec '09

% change

Bars & rods

18,233

16,548

10.2

Structural steel

4,212

3,875

8.7

Rails/rail material

809

756

7.0

Larg dia pipes

1,002

891

12.5

Total app consumpt

44,275

40,997

8.0

Russian domestic scrap prices continue to strengthen

Prices of scrap in the Russian domestic market have increased by more than 10% since December, and are likely to strengthen more in March when Turkey is expected to come back to buying and Russian steel producers will be replenishing stocks for the beginning of the construction season, sources in the country tell Steel Business Briefing.

From the levels of 9,200 - 10,000 roubles/tonne ($315-342/t) CPT for the A3 grade (HMS 1&2 80/20 equivalent) in December, today prices range from 10,500 to 11,700 r/t ($359-400/t), depending on the region, sources say. And there is not much available: "MMK, for instance, had to increase its purchasing prices twice in the last ten days by 400 roubles/tonne ($14/t), to secure tonnages, they add.

Even as exports are limited and "would be below cost levels" for scrap processors, availability is tight, as scrap companies were struggling with procurement in the winter snow. Selling to Russian steelmakers remains more profitable, although once Turkish demand revives in March, scrap companies will have even more leverage to increase their prices. "Nothing points towards softening scrap in Russian in the next quarter," sources say.

Indeed, it is not just the lack of availability amid high demand that is pushing up scrap prices in Russia. Iron ore prices increasing by 30% month-on-month in February have also encouraged scrap processors to keep their prices high. "Steelmakers had to swallow a 30% increase on pellets, from 3,200-3,500 r/t ($109-120/t) in January to 4,200-4,500 r/t ($144-154/t) in February, and fines to 3,700-4,000 r/t ($127-137/t), FCA," one producer says.

Global oil/gas drilling activity still increasing

World oil/gas rotary rig count
Excludes Russia, onshore China, Sudan Source: Baker Hughes

Jan 11

Dec 10

Change

Jan 10

y-o-y