Steel Market Production Cuts – Malaysian mills have cut their rebar production by 25-40% of running capacity in response to poor demand at home.

Steel Market Production Cuts – Utah-based SME Steel has begun layoffs and will completely halt operations at its Pocatello steel plant by March 31st, 2012 due to lost contracts.

Steel Market Production Cuts – Steel giant ArcelorMittal Brazil may not resume its US$1.2bn expansion work at longs unit Monlevade this year that would increase capacity to 2.4 mtpy of crude steel from the current 1.2 mtpy.  The steelmaker has also delayed two other longs expansion projects – the US$300m expansion of the Espírito Santo-based Cariacia rebar and sections plant and the Juiz de Fora longs plant in Minas Gerais – that would more than double its output to 2.2 mtpy, due to challenging market conditions.

Steel Market Production Increases – Slovakian mini rebar mill Slovakia Steel Mills (SSM) will launch full production after the company completes tests at its wire rod mill by the second quarter of 2012.

Steel Market Production Increases – Korea’s leading special steel bar producer, SeAH Besteel, is installing a new continuous casting machine of 700,000 tpy for billet that is scheduled to start this October at its main works in Gunsan, southwest of Seoul.

Sources: American Metal Market, Steel Guru, Steel Business Briefing

Weekly domestic raw steel production increased 0.9% to 1.947 million tons (mt) for the week ending March 3, 2012, which is a post-recession high and 6.6% higher than the year-ago level. The lowest production since the recession began was 0.8 mt on December 27, 2008.

The capacity utilization rate also hit a post-recession high, coming in at 78.8% compared to 78.1% last week and 74.7% a year ago. The lowest capacity utilization rate since the recession began was 33.5% on December 27, 2008.

Note: AISI weekly production data only includes real-time input from 50% of producing members; the remainder of the data is a guesstimate based on each company’s prior-month production and therefore the weekly AISI data lags when there are production cuts or increases going on.

Source: AISI and Steel Market Intelligence

New Report Preview

A.M. Castle (CAS) reported a 4Q loss of $(0.52)/share, which adjusted to a profit of $0.05/share excluding acquisition-related charges and losses associated with the mark-to-market adjustment for commodity hedges, below the Street’s $0.12/share.  Sales for the quarter rose 19.8% to $282.2M from $235.6M in 4Q 2010.

During the conference call, guidance was for sales growth of 10-15% across all of the company’s businesses as demand continues to improve in key markets including oil and gas, mining and heavy equipment, and general industrial markets.  We believe guidance was incorrectly interpreted by some as including the impact of Tube Supply, which was later clarified in an 8-K that the 10-15% growth was for legacy businesses “organic growth” as well as the Tube Supply business separately.

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

For a free trial subscription, please contact us.

The number of active oil and natural gas rigs in the United States rose 0.4% to 1,989 for the week ending March 2, 2012.  The rig count is up 16.5% from the year-ago level and is just 1.8% 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% to 681 from 701 last week, marking the fourth straight decline, although the count was still 9% 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.

New Report Preview

February prices for OCTG trended down an average of 0.5% versus January adjusting for another mix change, according to data provided by Pipe Logix earlier this week, although the reported “average market basket” price of oil country tubular goods (OCTG) rose 2.5% to $1,914/ton.

We continue to believe that a combination of increased domestic capacity and the highest levels of OCTG imports in January for the past three years are creating downward pricing pressure.

Our full report is available to subscribers and provides further thoughts on OCTG pricing and margins as well as the implications for shares of OCTG producers.

For a free trial subscription, please contact us.

Steel Market Production Increases – Citing rising demand, RG Steel LLC plans to restart its dormant No.2 galvanizing line, which will produce heavier-gauge coated products at Sparrows Point starting in early April.

Steel Market Production Increases – Russian miner and steelmaker Mechel has recently launched the universal rolling mill at its principal steelmaking works in Chelyabinsk, which includes a 1 million tpy continuous bloom caster, a 1.2 million tpy ladle furnace, and a two-chamber 650,000 tpy vacuum degasser.

Sources: Steel Business Briefing, American Metal Market

Steel Market Production Cuts – Speculation is mounting that RG Steel LLC will idle tinplate production at its Sparrows Point, Md., facility due to low bookings that resulted from financial instability and concerns among would-be buyers.

Steel Market Production Increases – Turkish integrated producer Isdemir will relight BF No.2 this evening or tomorrow, and BF No.3 that went offline late last week is functioning again.

Steel Market Production Increases – In Libya, Lisco, the state-owned Libyan steel producer, is still not fully operational, but in February the company restarted its No.1 and No.2 rebar rolling mill.

Steel Market Production Increases – China’s Ministry of Industry & Information Technology (MIIT) has predicted that China will produce 730 mt of crude steel in 2012 (an average daily output of around 1.99m t/day), up 6.8% from 2011’s 683 mt.

Steel Market Production Increases – Mexico’s Industrias CH SAB de CV (ICH) expects to bring the first stage of its previously announced $500m billet plant in Mexico’s northeastern state of Tamaulipas on stream in May or June this year, with capacity of 350,000 tpy.

Steel Market Production Increases – ArcelorMittal is to invest an additional €17 million ($22.9 million) in its facility at Florange in eastern France.  The company will also invest in additional maintenance work to ensure that the idled blast furnaces are ready to be restarted in the second half of 2012 in the event of an economic recovery.

Sources: American Metal Market, Steel Business Briefing

Many Manufacturing Indexes Show Slower Growth

The Purchasing Managers Index (PMI) registered 52.4% in February, down 3% from 54.1% in January. However, as a PMI score above 50% indicates growth, the PMI is still expanding, but at a slower rate. Other manufacturing indexes which showed slower growth compared to the prior month include New Orders (54.9%, down almost 5% from 57.6%, Production (55.3%, down about 1% from 55.7%), Employment (53.2%, down 2% from 54.3%), and Backlog of Orders (52%, down 1% from 52.5%).

Prices Lead Manufacturing Indexes with Faster Growth

Several manufacturing indexes showed faster growth in February compared to January, led by Prices (61.5%, up 11% from 55.5%). Exports (59.5%, up 8% from 55.5%) and Imports (54%, up 3% from 52.5%) also grew at a faster rate. Supplier Deliveries moved from contraction to expansion (53.6%, up 9% from 49%).

Inventories Go in Wrong Direction

The two inventory-related manufacturing indexes both displayed poor performance in February. Customer Inventory increased its rate of contraction (46%, down 3% from 47.5%), while Inventories remained flat just below the growth line at 49.5%.

11 of 18 Manufacturing Industries Grow

Of the 18 manufacturing industries, 11 are reporting growth in February, in the following order: Apparel, Leather & Allied Products; Machinery; Primary Metals; Transportation Equipment; Petroleum & Coal Products; Fabricated Metal Products; Paper Products; Computer & Electronic Products; Food, Beverage & Tobacco Products; Miscellaneous Manufacturing; and Chemical Products. The four industries reporting contraction in February are: Furniture & Related Products; Nonmetallic Mineral Products; Plastics & Rubber Products; and Electrical Equipment, Appliances & Components.

Source: Institute for Supply Management