Steel Market Production Cuts – The Nucor Yamato beam mill has a scheduled shutdown on March 25^th.

Steel Market Production Cuts – According to the Japan Iron and Steel Federation, Japan will see decreased production this year from weak demand in the shipbuilding sector and destocking, causing production to potentially shrink by 2 percent to around 104 million tons, assuming flat exports.

Steel Market Production Cuts – Max Aicher North America Inc. (MANA) has moved back a restart of its bar mill in Hamilton, Ontario to late in the second quarter.

Steel Market Production Increases – U.S .Steel plans to restart its No.3 galvanizing line at Hamilton Works in early May.

Steel Market Production Increases – RG Steel has completed the restart of its No. 2 galvanizing line a month earlier than expected, with operations anticipated to resume very soon.

Steel Market Production Increases – SSAB Americas is conducting hot trials on its new 200,000 tpy quenching line at its Mobile, AL works and expects commercial production to start very soon.

Steel Market Production Increases – Syria’s Saifi Group plans to complete commissioning of its 300,000 tpy bar and section rolling mill, Steelco, next month, with plans to start production in June.

Steel Market Production Increases – UAE rebar mill Hamriyah Steel could restart production in April following a 5-month stoppage caused by unfavorable pricing in the UAE and the surrounding region.

Steel Market Production Increases – Turkish billet producer Cansan Metallurgy plans to start rebar production within three months at its Southern Payas EAF billet plant. The plant has a capacity of 1 million tpy.

Sources: Steel Business Briefing, Reuters, SteelOrbis, American Metal Market

We attended The Steel Index’s Scrap Seminar in Chicago last week and heard a variety of views on the current scrap market and the overwhelming changes in the market for this once-quiet commodity.

One over-riding theme was scrap’s strategic importance to the U.S. steel industry and increasingly to the world’s steel industry.

A question as to whether or not the United States is doing enough to protect scrap supply was raised by Rich Brady, Executive VP of Omnisource. According to Mr. Brady, “There is a global tug of war for scrap materials.” He went on to outline how 20 countries have ferrous scrap export restrictions, and despite scrap being one of the top 5 commodities exported from the United States, our nation has no similar restrictions on exports.

This issue of increasing exports of U.S. scrap was pointed to as a driver of scrap price increases and volatility by the Institute of Scrap Recycling Industries’ Chief Economist and Director of Commodities, Joe Pickard, who pointed out that the increase in scrap volatility coincides with increasing exports to foreign markets.

The general consensus at the seminar was for scrap demand to continue to grow moving forward, particularly as China adds more EAF-based production to improve the regions’ air quality.

At The Steel Index’s Scrap Seminar in Chicago last week the theme of steelmakers backwards integrating into the once sleepy and primarily family-owned business of scrapyards was a frequent topic.

According to Rich Brady, Executive VP of the Ferrous Commercial Group at Omnisource, in the past there was a worry among EAF steel producers that foreign companies were going to enter the U.S. scrap market and begin exporting.

This perception drove many of them to protect their supply through acquisitions.

With roughly 30% of domestic scrap being exported, according to Joe Pickard, Chief Economist and Director of Commodities at ISRI, we can see why domestic steelmakers were concerned about scrap availability during times of strong domestic steel demand and production levels.

Exacerbating this is that there are 20 nations around the world that restrict scrap export.

Mr. Brady went on to say that producers are likely to continue to make acquisitions, though not at the same rate given the lofty valuations that many scrapyards are commanding today.

At the same time, the problems that many steelmakers face in finding stable prices for scrap were laid out by Republic Steel’s Director of Supply Chain Management, Michael B. Humphrey II, who outlined Republic’s difficulties in obtaining the high quality scrap they need to produce SBQ.

According to Mr. Humphrey, Republic is looking to acquire a scrapyard to help ensure a stable supply of scrap for its operations.

The number of active oil and natural gas rigs in the United States fell 0.8% to 1,968 for the week ending March 23, 2012. The rig count is still up 13.2% from the year-ago level and is just 2.9% 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 fell 31.9% to 352 this week from 517 the week before, marking the seventh straight decline. The drop puts the rig count 17.9% below the year ago period.

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.

The spot reference price for 62% Fe iron ore cfr North China rose to $145.20 on Friday, March 23, 2012, up 0.3% from last Friday’s 16-week high of $144.70.  The price for iron ore rose steadily all week and is now at the highest level since November 22, 2011, when the price was at $146.60.

The post-recession low was $59.10 on March 27, 2009, while the high was $190.19 on February 17, 2011.

Source: The Steel Index

New Report Preview

OAO TMK (TMK) reported 4Q adjusted EBITDA of $223m, a 10% improvement sequentially, on flat revenue of $1.60B. The company reported an improved product  mix, marked by a 28% rise in seamless OCTG and premium connection sales, and lower raw material prices.

Guidance for 1Q was for these trends to continue leading to higher EBITDA and EBITDA margins in the quarter compared with 4Q and similar to year-ago results.  The company also had a constructive outlook for full year 2012 due to expectations for improved volumes and a richer product mix.

Our full report is available to subscribers only and provides further thoughts on TMK’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.

Steel Market Production Cuts – Sichuan province’s Xichang city is upgrading its power grid and severely affecting HRC production at Panzhihua Iron & Steel’s steelworks as a result, while Chongqing Iron & Steel will lose 20,000t of HRC to a maintenance outage this month.

Steel Market Production Increases – Kardemir Demir Celik, one of Turkey’s biggest rebar producers, is set to complete and commission a third rolling mill by August that will have an initial capacity of 1.2 mtpy.

Steel Market Production Increases – Tokyo Steel’s March production will be 14% higher than last month, reaching 250,000 tons, with the restart of exports.

Sources: Steel Business Briefing, Metal Bulletin, Bloomberg First Word

New Report Preview

The American Institute of Architects’ ABI Index – a leading economic indicator of non-residential construction activity 9-12 months into the future – posted a reading above 50 for the fourth consecutive month in February, coming in at 51.0, slightly above January’s 50.9 (any reading higher than 50 means the number of architects reporting “rising billings” outpaced the number reporting “declining billings”).

The new project inquiry index rose 2.2 points to 63.4, the highest level since July 2007 and the fourth successive reading above 60, the first time this has happened in four and a half years.

Our full report is available to subscribers and provides further thoughts on the February ABI Index as well as the impact on steel equities.

For a free trial subscription, please contact us.