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There were two very meaningful results this month in the ISM Steel Survey.

1. Imports to Decline. Buyers plan to use less foreign steel, with only 10% indicating plans to increase dependence on imports, down from 25% in December, which was the highest since 2006. Foreign prices are becoming less competitive – with only 23% of buyers now see foreign prices “below” or “well below” domestic, as compared to 42% saying “below” in January, and 8% saying “well below.” Similarly foreign offerings are disappearing, with NO buyers reporting foreign mills as “very aggressive,” down from a full 33% in January (an all-time high going back to mid-2003).

All of this is consistent with watching foreign prices rise at a faster clip than domestic in the past 6 weeks, which supports our view that imports should be declining.

2. New Manufacturing Facility Plans Hit a Peak. A whopping 54% of all respondents indicate plans to build new manufacturing facilities, an all-time high (going back to mid-2003) breaching the recent peak of 46% in August, 2011 – the pre-recession peak though was 46% in March, 2005. To quote the sage – “reports of the death of manufacturing” have been truly exaggerated.

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The number of active oil and natural gas rigs in the United States fell 0.8% to 1,973 for the week ending March 9, 2012. However, the rig count is up 15.0% from the year-ago level and is just 2.6% off the 2011 high of 2,026 for the week ending November 4, 2011.

The highest weekly rig count in the United States since 1940 was recorded on December 28, 1981, at 4,530; the lowest was recorded on April 23, 1999, at 488.

The number of rigs in Canada this week decreased 3.8% to 655 from 681 last week, marking the fifth straight decline – totaling 7.7% over that period – although the count was still 4.3% higher than last year.

The highest rig count for Canada was 727 on February 3, 2006; the lowest was 29, recorded on April 24, 1992.

Source: Baker Hughes Inc.

Steel Market Production Cuts – China’s daily crude steel output dropped 1.2% in the final ten days of February to 1.679 mt, according to the latest estimate from the China Iron & Steel Association.

Steel Market Production Cuts – Posco is currently overhauling its equipment at its Guangyang No.2 hot rolling plant that resulted in a sharp drop in exports in 1Q compared to last quarter.

Steel Market Production Cuts – ArcelorMittal Espana will lay off around 200 out of 784 long products workers at Gijon in northern Spain, in response to falling demand.

Steel Market Production Cuts – The Slovak unit of US Steel plans to cut 1,655 jobs by 2015.

Steel Market Production Increases – Global Pipe Company, Saudi Arabia’s newest pipe mill with a line pipe capacity of 200,000 tonnes/year, is scheduled for commissioning in August, with commercial production expected to begin the following month.

Steel Market Production Increases – ArcelorMittal completed revamping its No.2 blast furnace at its Temirtau mill in Kazakhstan last year, which will be relit in April.

Steel Market Production Increases – Specialty tube maker Webco Industries is still on-track to have its new Oklahoma mill up and running by the end of June.

Sources: Steel Business Briefing, American Metal Market, Mysteel, Bloomberg News

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Industrial Services of America (IDSA) reported a 4Q net loss of $(0.26)/share, well below the Street’s $(0.04) loss as volatility in demand for stainless produced “short-term negative results,” according to the company, further adding that the business environment in the scrap sector was “challenging.”

Guidance was for improved profitability in the company’s recycling business however, due to continued investment in people and processes.  Despite volatile demand in 2011, management said the long-term outlook for the stainless business is strong.

Our full report is available to subscribers only and provides further thoughts on IDSA’s 4Q earnings report and conference call as well as the implication for the stock and other equities.

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According to just-published data from American Metal Market (AMM), March prices for shredded scrap (obsolete) remained unchanged at $440/ton, while #1 busheling (prime) scrap fell $12/ton (or 2.5%) to $463/ton.

The decline was the second straight drop for prime scrap, and prices are now some $57/ton (or 11.0%) down from January, although still some 3% above the recent trough last November.  Shredded scrap prices have held up better and are down $30/ton (or 6.4%) from January.

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Steel Market Production Cuts – Gerdau Special Steel North America is taking a five-day scheduled outage this week at its Monroe, Mich., plant in order to complete some structural steel and crane upgrades necessary to support the $130m expansion projects that the company is undergoing.

Steel Market Production Cuts – ArcelorMittal España has pushed back the restart of its Sestao electric arc furnace (EAF) in Bilbao, Spain, for a third time and the EAF will remain offline until at least the second quarter of this year.

Steel Market Production Cuts – AK Steel experienced minor delays in operations at two of its facilities – Rockport Works in Indiana and Ashland Works in Kentucky – due to a series of fatal tornadoes and severe storms.

Steel Market Production Increases – Korea’s Posco expects to commission its new 750,000 tpy hot-dip galvanizing line at its Pohang works by end-March with a production target of 340,000 tonnes estimated for this year.

Steel Market Production Increases – Tata Bluescope Steel has officially opened its coated steel facility with a production capacity of 250,000 tonnes of metallic coating per year in Jharkhand state, India.

Steel Market Production Increases – Moldova Steel Works (MMZ) is preparing to restart its 120-tonne EAF today amid the recent improvement in steel prices and the resumption of scrap supplies and the company aims to make 45,000 tonnes/month of finished products in March and 75,000 t/m in April.

Steel Market Production Increases – Iran-based Pasargad Steel will commission its newly built melt shop in the next two or three months, the first of three phases in the Pasargad Steel Complex in Kovar with a nominal billet capacity of 1.5 mtpy.

Steel Market Production Increases – Gansu province-based Chinese steel producer Lanxin Iron and Steel Company (Lanxin Steel) has commissioned its new high speed wire rod production line with an annual capacity of 1.2 mt.

Steel Market Production Increases – Serbia will restart Zelezara Smederevo, the country’s sole steelworks and top exporter, after restoring supplies of raw material disrupted by extreme weather.

Steel Market Production Increases – Egyptian bar and wire rod producer Beshay Steel is expected to commission the Danieli-supplied rolling mill that will eventually produce 1.3 mtpy of bars and sections in the short-term.

Steel Market Production Increases – Natanz Steel will commission its new 800,000 tpy billet capacity meltshop at its facility in Iran’s Esfahan province in the third quarter of 2012.

Steel Market Production Increases – According to a source close to the Turkish Iron & Steel Producers Association, Turkey’s crude steel production will rise by about 12%-15% to 38-39 mt in 2012 compared with 2011’s output.

Sources: Steel Business Briefing, American Metal Market, Steel Orbis, Bloomberg News

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February import licenses are down 10% from last month to 2.31 million tonnes (mt), according to Steel Import Monitoring and Analysis (SIMA) licensing program.  While there is typically some decline in February imports due to the short month, we’re nevertheless surprised at the magnitude – which adjusted for fewer days would still point to a 4% decline.

Meaningful declines were seen for rebar (down 43%), line pipe (down 38%), beams (down 36%), cut-to-length plate (down 25%), OCTG (down 14%) and semi-finished steel (down 6.0%).  The biggest increase was seen for wire rod, up some 62%.  Total sheet licenses rose a modest 4% although the trend differed across products.  Tonnage of hot-dipped galvanized sheet and coiled plate rose 36% and 29%, partially offset by a 25% drop in cold-rolled sheet licenses.  Hot-rolled sheet licenses were up just 1%.

Our full report is available to subscribers and provides further thoughts on February import licenses as well as our outlook for the coming months and implications for steel equities.

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Our Advance/Decliner Index rose for the third straight week, increasing from 70% last week to a seven-week high of 80% (any reading over 50 means more price increases were recorded than decreases).

Our China Index increased from 53% last week to 90%, the highest since mid-August, while our Ex-China Index rose from 74% to a five-week high of 79%.

Our full report provides further thoughts about global steel pricing trends and our outlook as well as implications for steel equities.

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