Metalforming companies predict a spike in business conditions during the next three months, according to the latest monthly 2012 Precision Metalforming Association (PMA) Business Conditions Report. The February edition of the report, which samples 138 metalforming companies in the US and Canada, indicates 51% of participants expect metalforming economic activity to improve during the next three months. This figure is up roughly 25% from 41% who held a positive outlook in January.

Meanwhile, 45% of participants predict that metalforming activity will remain unchanged, down roughly 9% from 54% in January, and only 4% predict activity will decline, a 20% drop from 5% the prior month.

Incoming Order Improvement also Expected

Metalforming companies also anticipate a slight improvement in incoming orders during the next three months, with 56% of participants forecasting an increase in orders, (up roughly 10% from 51% in January. In addition, 33% expect no change, down about 17% from 40% last month, although 11% predict a decrease in orders, up about 22% from 9% the prior month.

Average Daily Shipping Levels Rise

Average daily shipping levels rose significantly in February with 45% of participants reporting shipping levels above levels of three months ago, up 50% from 30% in January. There was a slight decrease in the number of participants reporting shipping levels remaining flat from three months ago,dropping dropping about 6% from 48% to 45%, and a dramatic decline in the number  reporting a decrease, which fell about 54%, from 22% in January to 10%.

Layoffs Fall Off

The percentage of metalforming companies with a portion of their workforce on short time or layoff dropped to 7% in February, down about 42% from 12% in January.  This number has not been at this level since December 2006, the last time only 7% of companies reported workers on short time or layoff.

Source: Precision Metalforming Association

REPORT PREVIEW

SSAB reported an adjusted loss of SEK 220m, well short of the Street’s forecast of SEK 338m and 3Q EBIT of SEK 502m.  Management attributed weak 4Q results to continued weakness in Europe, marked by inventory destocking by customers, partly offset by relatively strong performance in the Americas.

Guidance was fairly limited although management said signs of a recovery, including restocking, are apparent in the U.S. and SSAB expects plate prices in North America to increase sequentially, as several plate producers have announced 1Q increases.  Declining steel prices in most parts of the world in 4Q will have a negative impact on the company’s 1Q contract prices and results, while lower iron ore prices renegotiated for 1Q delivery would not benefit SSAB’s results until 2Q.

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Summary – Report Preview

BHP reported underlying EBIT of $15.7B for the six months ended December 31, 2011, up 5.8% from $14.8B recorded in the comparable year-ago period, as revenues rose 9.7% to $37.5B, compared with $31.2B.

The company said that record Western Australia Iron Ore production and stronger bulk commodity and petroleum product prices were the major drivers of the increase in underlying EBIT. Cost pressures continued, as costs reduced underlying EBIT by $1.6 billion during the period, excluding the impact of inflation, exchange rate volatility and non-cash items. Substantial increases in labor and contractor costs accounted for the majority of the increase in cost.

In its outlook, BHP said that Japan and the US, after seeing some uptick in economic activity in the second half of 2011, will see a protracted recovery along with the rest of the developed world, while the disorderly unwinding of European government debt remains one of the key downside risks. In China, the world’s largest importer of iron ore, economic growth rates will moderate, though the long-term outlook remains positive.

Steel Market Production Cuts – Russian coking coal and steel producer Mechel will additionally suspend production at two billet plants, Mechel Targoviste and Ductil Steel Otelu Rosa, on Saturday, February 18^th, after severe snowfall and freezing temperatures halted scrap and other raw materials deliveries to the sites.

Steel Market Production Cuts – The Serbian steel industry is lowering production after the government imposed tough measures to curb power consumption and the harsh weather conditions disrupted main transport routes.

Steel Market Production Cuts – German wire rod producer Trierer Stahlwerke (TSW) stopped production yesterday after the decision was made during a meeting with the board members of the Pampus Group, owner of TSW, on Wednesday.

Steel Market Production Increases – Italy’s Marcegaglia is aiming to double the output at its welded tube plant in Kluczbork to 100,000 tpy in 2012.

Steel Market Production Increases – Gerdau is resuming operations at a meltshop in Colombia that was closed and liquidated in 2009 by its previous owner, Siderurgica del Pacifico (Sidelpa). Furthermore, Gerdau will be adding 80,000 tpy of rolling capacity to its operations located in Tuta and Tocancipa, Colombia.

Steel Market Production Increases – Production at pickling line No.2 with a capacity of 750,000 tpy at Tata’s Llanwern rolling mill in the UK is expected to restart in March.

Steel Market Production Increases – Japanese mini-mill Kyoei Steel is to start producing bar and wire rod in March at the north Vietnamese longs re-roller Tam Dien Rolling Mill (TDR), which has a capacity of 300,000 tpy, and the company also plans a 500,000 tonnes/year meltshop and matching rolling facilities at the works.

Sources: Steel Business Briefing and American Metal Market.

Thomas Jefferson said in 1802:”I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around the banks will deprive the people of all property – until their children wake-up homeless on the continent their fathers conquered.”

In a bit of good news for the steel market, the U.S. unemployment rate slightly declined from 8.5% in December 2011 to 8.3% in January 2012, according to the latest figures from the Bureau of Labor Statistics. Total nonfarm payroll employment increased by 243,000 in January, primarily as a result of 257,000 new jobs in private sector areas such as professional and business services (70,000), leisure and hospitality (44,000), and manufacturing (50,000). The number of new manufacturing jobs added more than doubles the 23,000 added in December. The most recent previous months where manufacturing gained roughly 50,000 or more jobs were January 2011 (49,000) and August 1998 (142,000). Almost 154.4 million people participated in the civilian labor force, up from about 153.9 million in December, and 140.8 million people were employed, up from about 140.6 million in December.

Close to 13M Unemployed

A total of 12.8 million people were classified as unemployed in January, down 2% from about 13.1 million in December. Of these, 5.5 million, or about 43%, were long-term unemployed (27 weeks or more without a job). The remaining 7.3 million either lost a job or completed a temporary job.

Participation Rate Falls Slightly

In January, the civilian non-institutional population age 16 and older measured about 242.3 million, up from about 240.6 million in December. The civilian labor force participation rate fell slightly, however, in January from 64% in December. . Meanwhile, the employment-population ratio held steady at 58.5% and has changed little since September 2011 (58.4%).

Part-Time, Marginal, Discouraged Workers (please compare with December)

There was little month-over-month change in the number of people employed part-time for economic reasons (up 1%, from 8.1 million in December to 8.2 million in January). However, a more substantial increase occurred in the number of people marginally attached to the labor force (up 12%, from 2.5 million to 2.8 million), and discouraged (marginally attached people not currently looking for work, up 16%, from 945,000 to 1.1 million).

Source: Bureau of Labor Statistics