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Ternium S.A. (TX) reported 1Q EBITDA of $372.0m, beating the Street’s forecast of $355.2m, and up 2% from 4Q’s $365.2m due to modest increases in both prices (up 0.2%) and volumes (up 0.4%) and a slight drop in overall costs (down 0.3%).  North American shipments were up 6.2% sequentially.

Guidance for 2Q is for slightly higher operating income on the back of stronger shipments, reflecting a “gradual” economic recovery in the Americas, most notably in North America.  The company is not expecting much movement in pricing or its cost structure in the second quarter, although TX could see a small drop in costs due to lower slab costs at its Mexican operations.

Management went on to say the economic and demand situation in North America is “relatively good,” and the company is expecting some increased demand, most notably in Mexico.

Our full report is available to subscribers only and provides further thoughts on Ternium’s 1Q conference call, as well as our opinion on the stock and the implication for other steel equities.

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Steel Market Production Increases – Brazilian steel producer Usiminas expects its new 2.3 million tonne per year hot strip mill in Cubatão to begin commercial production at some point this quarter.

Steel Market Production Increases – Indonesia’s largest steel manufacturer PT Gunung has ordered a new EAF and ladle furnace from plantmaker SMS Siemag. The combined 1.2 million tonne per year capacity furnaces are scheduled to be commissioned by mid-2013.

Steel Market Production Increases – Four Egyptian steelmakers that have completed, or are on the verge of completing production of new steel mills, are reportedly pressing the government to allow them to connect to the public grid to begin production. The plants have a combined 4 million tonnes per year of billet capacity.

Steel Market Production Increases – Eastern Chinese pipe producer Jiangsu Tianhuai is set to commission a 500,000 tonnes per year seamless pipe mill in May.

Steel Market Production Increases – Chinese steelmaker Yingkou Jiachen will carry out trial production in May at its new long steel facility. The facility has an annual production capacity of 3 million tonnes of wire rod and steel bar.

Steel Market Production Cuts – Evraz North America has temporarily idled its 500,000 tpy rod and bar mill in Pueblo, Colorado following the accidental death of an employee there.

Steel Market Production Cuts – Nippon Steel reportedly halted production of two galvanizing lines at its Kimitsu works at the end of March, that had combined production capacity of 620,000 tonnes per year.

Steel Market Production Cuts – Sumikin Steel & Shapes has temporarily ceased production at its H-beam plant in western Japan following a problem with a heating furnace. The outage which is expected to last until late May could reduce output by 30,000 tonnes.

Sources: Steel Business Briefing, American Metal Market, SteelOrbis

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March preliminary steel imports rose 7.8% from 2.7 million tons (mt) in February to 2.9 mt, the highest since last May at 2.96 mt, which was the post-recession high. The most meaningful increases were for semi-finished steel (up 15.4%), line pipe (up 50.8%), cut-to-length plate (up 43.1%) and OCTG (up 21.6%).

The increase puts year-to-date imports more than 31% above year ago levels. Because preliminary imports are some 10.7% below where March licenses predicted, we suspect there will be an upward revision that lifts final March imports above levels seen last May to a new post-recession high.

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

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Steel Market Production Increases – Workers at Cascade Steel Rolling Mills in McMinnville, OR will return to work this Friday after going on strike beginning April 8. Negotiations regarding a new contract with the union are ongoing.

Steel Market Production Increases – Shaanxi Yanchang Petroleum Group, began construction of a 500,000 tonne per year seamless pipe plant in Ansai County in central China’s Shaanxi province on April 17. The project is scheduled for completion in 2013.

Steel Market Production Cuts – Ukrainian steel producer Donetskstal has postponed the launch of its first EAF. The 1.5 million tonne per year capacity EAF had initially been due for commissioning in May and is now scheduled to launch in October 2012. The producer has just closed four open hearth furnaces ahead of schedule.

Steel Market Production Cuts – Egyptian bar and wire rod producer Beshay Steel has suspended production at its steelworks in Sadat City due to a strike by its workers there. The strike has idled 2 million tonne per year of finished steel capacity.

Steel Market Production Cuts – Taiwan’s China Steel Corp will halt production at its plate mill from late May until early June for 20 days of annual maintenance. The outage will result in 30,000 – 50,000 tonnes of production being lost.

Sources: Steel Business Briefing, American Metal Market

Weekly domestic raw steel production rose 1.4% to 2.003 million tons (mt) for the week ending April 21, 2012, surpassing last week’s previous post-recession high of 1.975 mt, and is up 7.6% compared to the year-ago level.  The lowest production level since the recession began was 800,000 for the week of December 27, 2008.

The capacity utilization rate climbed to 81.1% compared to 79.9% last week and was higher than the year-ago level of 76.1%.  Capacity utilization also set a post-recession high this week.  The lowest capacity utilization rate since the recession began was 33.5% for the week of 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

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Our Advance/Decliner Index fell for the second straight week, dropping from 63% to 46% (meaning more price cuts were reported than increases), the lowest level since early December.

Our China Index declined to a three-month low of 43% from 75% as steel prices in China fell after March Chinese production was reported at near record levels and CISA ’s early April production “flash” was a new all-time high, triggering fears of oversupply.

Our Ex-China Index contributed to the overall decline as well, falling for the third consecutive week to a five-month low of 47% from 58% the week before.  Steel prices weakened in the US, Middle East, Europe, the CIS and India, while less strength was seen in East Asia.

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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Steel Market Production Cuts – Brazilian flats maker ArcelorMittal Tubarão shut down the No. 1 blast furnace at its plant in Espirito Santo state on Friday. The revamping of the 3 million tonnes per year capacity furnace will take 3 months; MT restarted the 1.3m tpy No.2 blast furnace in March in anticipation of the shut down.

Steel Market Production Cuts – Singaporean Steel Maker NatSteel Holdings has ordered the modernization of its finger-shaft electric arc furnace in its Singapore Works. Commissioning of the modernized furnace is planned for March 2013.

Sources: Steel Business Briefing, Steel Orbis

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Metals USA (MUSA) reported 1Q earnings of $0.44/share, matching the Street’s expectations and up 33% from 4Q earnings of $0.33/share and year-ago EPS of $0.33.

Guidance for 2Q was for higher EPS than 1Q “despite a difficult business environment,” due to greater shipping days and rising prices based on lagged index-based contracts. Management expects steel prices to be “range bound” in the 2Q as mills aren’t “interested in raising prices.” Demand for almost all of MUSA’s customer segments has remained solid, management said, although the improvement in non-residential construction activity has been driven by the mild winter and continues near the bottom.

Our full report is available to subscribers only and provides further thoughts on MUSA’s 1Q conference call, as well as our opinion on the stock and the implication for other steel equities.

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