Steel Market Production Cuts – ArcelorMittal Poland is running its three active furnaces at various output levels to optimize operations and avoid any idling since the market remains weak – with industry sources reporting that the company’s scrap buying is down and output has fallen.

Steel Market Production Cuts – At least 10 Chinese plate producers reportedly have decided to reduce or stop production altogether this week citing a lack of orders.

Steel Market Production Increases – Chinese producer Bayi Steel, a subsidiary of Baosteel, has announced that it has completed the installation of the main equipment at its new 3 million tpy production base in Baicheng, China.

Steel Market Production Cuts – The government of the city of Ezhou in China’s Hubei Province has announced the elimination of 1 million tpy of crude steel production capacity for this year.

Steel Market Production Cuts – Central Trinidad Steel Limited has announced it is stopping production for at least one month at its 120,000 tpy plant due to excess inventory that it cannot sell.

Steel Market Production Increases – Iranian producer Saba Foolad Zagros plans to commission a 400,000 tpy rebar rolling mill in October.

Sources: Steel Business Briefing, American Metal Market, SteelOrbis, SteelGuru, Central Trinidad Steel Limited Company Webpage

Weekly domestic raw steel production dropped some 0.2% to 1.882 million tons (mt) for the week ending June 16, 2012, falling for the fifth consecutive week from the post-recession high of 2.005 (mt) to the lowest level since December 31, 2011.  Production is still up some 1.3% 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 also declined from 76.3% last week to 76.2% this week, but was slightly higher than the year-ago level of 76.0%.  The lowest capacity utilization rate since the recession began was 33.5% for the week of December 27, 2008; the highest was 81.1% on May 12, 2012.

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

Official HRC lead times for the week ending 6/10 slipped to 2.7 weeks from 3.5 in the previous week. These levels represent the lowest since the start of the year with some sources even quoting lead times at two or even one week for some orders.

Lead times for HDG also moved down to 5.5 from last week’s level of 5.7 weeks – just above the low for the year of 5.5 reached the week ending 5/20 – CRC rose to 6.0 from 5.6 last week.

Sources: The Steel Index, Steel Business Briefing

The number of active oil and natural gas rigs in the United States fell 0.7% to 1,971 for the week ending June 15, 2012, hitting a six-week low.  Despite the decline, the rig count is up 6.0% from the year-ago level of 1,860.

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 increased 7.8% this week, climbing from 230 last week to 248 this week.  Despite the increase, the rig count is down 10.5% from the year-ago level of 277.

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 some 2.7% this week to $135.00 on Friday, June 15, 2012, increasing from last week’s price of $131.40.  The price has increased for six consecutive days and is now at the highest level since June 1.

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

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May MSCI data affirms the view that the current weakness in the domestic steel market is driven off of a surplus of supply rather than a dearth of demand, as domestic distributors sold more steel than any month except one since the start of the recession.

May shipments rose 3.1% from April.  There was strength across almost the entire product spectrum, but particularly in flat-rolled, which rose 4.1%, more than the normal seasonal uptick of 3.5%, and the second highest level of shipments for a month since the start of the recession, reflecting solid demand from automotive in particular.  The weakest point in the survey was plate, where shipments rose a scant 1.1%, against a normal seasonal uptick of 4.5%.

Our full report is available to subscribers and provides further thoughts on May distributor shipments and inventories by product as well as implications for steel equities.

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Steel Market Production Cuts – ArcelorMittal’s 2 million tpy long steel capacity Annaba complex has been forced to stop production at its blast furnace and rolling mills since Tuesday due to demonstrating former employees preventing workforce from entering the plant.

Steel Market Production Increases – Turkish producer Tosyali Holding’s 1.25 million tpy Algerian rebar mill is scheduled for commissioning this September.

Steel Market Production Cuts – Peruvian steelmaker Aceros Aequipa’s new 650,000 tpy rolling mill is scheduled for commissioning in the second quarter of this year.

Sources: Steel Business Briefing, ArcelorMittal corporate website

Steel Market Production Cuts – Gerdau Long Steel North America will be starting a planned maintenance outage today at its 700,000 tpy crude steel capacity meltshop and rolling mill in Beaumont, Texas with production set to resume in the next few days.

Steel Market Production Cuts – ArcelorMittal has reduced output at its plant in Dabrowa Gornicza, Poland to 30% of capacity with output as low as 220,000 tonnes per month according to one source.

Steel Market Production Cuts – Tata Steel Europe plans to rebuild its 2.1 million tpy capacity blast furnace 4 at its Port Talbot steelworks starting in July and taking 125 days to complete.

Steel Market Production Cuts – Italian flat products and pipemaking group Marcegaglia plans to cut flat steel production at its Ravenna, Italy plant in the next few months.

Steel Market Production Increases – Vietnamese Steelmaker Vina Kyoei broke ground on its new meltshop, billet caster and rolling facility in Ba Ria-Vung Tau, Vietnam which will double the mill’s capacity to 900,000 tpy when it is completed around 2013.

Sources: Steel Business Briefing, American Metal Market

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Our Advance/Decliner’s pickup from 4% to 23% last week was short-lived, as the index dropped back down to 18% as our China Index declined from 25% to 10% due to weak Chinese manufacturing data as well as a dip in iron ore prices.  A surprise interest rate cut late last week did not spur an uptick in steel pricing and industry leader Baosteel actually cut sheet prices from 1.8-7.0% on Monday, which will likely further dampen market sentiment this week.

Our Ex-China Index also declined, falling from 23% to 20% as Nucor’s $30/ton price cut for all long products more than offset an announced sheet price hike of €10-20/tonne by ArcelorMittal in Europe.  It was interesting to note that our European sub-index broke the critical 50 level for the first time since early April.

NOTE: Any reading below 50 means more price cuts were reported than increases.

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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