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Our Advance/Decliner Index gained for the second straight week, increasing from 26% to 34% (but still below the key 50 level meaning more price decreases were announced than increases) as domestic steelmakers raised sheet prices and Brazilian steelmakers raised steel prices across-the-board due in part to the weakening real against the dollar.  Pricing strength seen in the MENA region last week proved fleeting, while pricing in East Asia weakened on the heels of continued export price cuts out of China.

Our China Index rose from zero to 11% as just one price increase was recorded during the week despite Beijing announcing the second interest rate cut in less than a month.  Spot prices in China have continued downward so far this week, as we think the marketplace is viewing the rate cut as an indicator of a real downturn in the economy – and a negative this time around – rather than a positive.

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 – Korean steelmaker Dongkuk has begun summer maintenance seven days early at its EAF based Incheon works due to an accident – the outage had previously been scheduled for July 17-27.

Steel Market Production Cuts – Tata steel’s strip unit in the UK has announced that it will take some production pauses at its facilities in Port Talbot and Lainwern, Wales over the summer.

Steel Market Production Increases – Chinese pipemaker Zhengzhou Jinghua Welded pipe plans to commission a new 520,000 tpy production capacity electric resistance welded (ERW) pipe plant by the end of July.

Steel Market Production Cuts – Czech plate and sections producer Evraz Vitkovice will be halting production for almost a month starting July 17^th due to a planned interruption of the hot metal supply from ArcelorMittal Ostrava.

Steel Market Production Cuts – Central Trinidad Limited (Centrin) has extended its 30-day shutdown until August 17 at its 120,000 tpy plant citing an inability to find buyers for its excess inventories after it lowered prices.

Sources: Steel Business Briefing

Steel Market Production Cuts – China’s Ministry of Industry and Information Technology (MIIT) has issued a list with planned annual crude steel production capacity cuts totaling 7.8 million tpy that will affect 22 steelmakers along with the closure of blast furnaces at 27 works for a reduction in total pig iron capacity of 10.4 million tpy. These cuts will be fully implemented by September of this year.

Steel Market Production Cuts – According to the China Iron and Steel Association (CISA), daily steel production in China fell to 1.965 million in the last ten days of June – a decrease of 0.3% from the number reported in the middle ten days and down some 1.7% from the number reported in the first ten days.

Steel Market Production Cuts – Chile’s Compañía Siderúrgica Hauchipato (CAP Acero) plans to reline its No. 2 blast furnace at its Talcahuano longs plant for 90 days during which time it will be running the 1.4 million tpy facility at half capacity.

Steel Market Production Increases – Chinese welded line pipe maker Baoji Petroleum Steel Pipe (BSG) has inaugurated its new 300,000 tpy electric arc welded pipe (ERW) facility in Xi’an city with most of the new production to be oil country tubular goods (OCTG).

Steel Market Production Increases – Chinese steelmaker Kunming Iron and Steel has commissioned two converters at its new facilities in Anning that bring the company’s annual production capacity to 2 million tpy.

Steel Market Production Cuts – Workers at Venezuelan steelmaker Sidetur have been on strike since the end of last week – it is as of yet unclear how this will affect the company’s 1,300 tonnes per day of billet as well as its production of angles, plate and rebar.

Steel Market Production Cuts – Ukrainian steelmaker Alchevsk has announced that it will be reducing production of rolled steel products in July by 15% from June, bringing final production to around 250,000 tonnes in the month.

Sources: Steel Business Briefing, SteelOrbis, MySteel

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We believe long product steelmakers will be announcing immediate base price increases of $20-25/ton, partially offsetting the $45/ton surcharge decline by roughly half, resulting in net transaction prices dropping by $20-25/ton, while we expect commodity plate prices to continue downwards given the continued high level of imports.

As evidenced by Steel Business Briefing’s domestic pricing assessment for sheet rising by 1.7% this week, the $40/ton spot price hike announced last week is starting to take hold as buyers begin to worry about potential labor disruption in the face of strong flat-rolled demand.

Our full report provides further thoughts about domestic and global steel prices as well as the implication for steel equities.

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The price of iron ore rose some 0.8% to $135.10 for the week ending July 6, 2012, from $134.oo last week.  The price of iron ore has been relatively stable for the past two months now, trading in a range of $130-140/tonne.

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

Weekly domestic raw steel production fell by 0.6% to 1.869 million tons (mt) for the week ending July 7, 2012, from last week’s 1.881 mt, but up some 0.9% compared to the year-ago level.  The lowest production level since the recession began was 800,000 tons for the week of December 27, 2008. The highest level since the recession began was 2.005 mt for the week of May 12, 2012.

We would caution readers that only half of the AISI reporting companies release their weekly production in “real time” so the other half of this data is estimated – using prior months’ reported production & operating rate. What this means is that when business is improving or deteriorating, the weekly data has a meaningful lag.

Capacity utilization also fell from 76.1% last week to 75.6% this week, slightly below the year-ago level of 75.8%.  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.

Source: AISI and Steel Market Intelligence

Steel Market Production Cuts – ArcelorMittal has reportedly failed to rule out making more cuts in Europe with the company’s CEO citing severe imbalance in steel supply and demand, although a company spokesman said that no further plans have been announced.

Steel Market Production Increases – Indian steelmaker SAIL plans to complete its plant expansion program at five of its integrated plants by next year – for a 70% increase in crude steel capacity to 23.4 million tonnes per year (mtpy) from the current 13.8 mtpy.

Sources: Steel Business Briefing, FinancialTimes

Steel Market Production Cuts – ArcelorMittal plans to curtail output at its 4.4 million tpy flat product works in Ghent, Belgium by 10-15% in the third quarter of 2012 due to the current economic situation.

Steel Market Production Cuts – Scheduled maintenance outages at major cold rolled mills in China this month will reduce output by a total of 140,000-150,000 tonnes of CRC.

Steel Market Production Cuts – Italian producer Lucchini group has announced it will be idling its Piombino, Italy blast furnace for four straight weeks in August – up from the scheduled one week – due to weak market conditions.

Steel Market Production Cuts – Japanese steelmaker Nippon Steel was forced to bank its  No. 2 blast furnace at its Kimitsu Works after a coke spill and fire on Tuesday – the company planned for the furnace to be restarted on Thursday.

Steel Market Production Increases – Indian steelmaker JSW plans to increase production capacity at its Vijayanagar works by 2 million tpy to 12 million tpy by March 0f 2013.

Steel Market Production Increases – Russian billet producer Frolovo Volga-Fest plans to restart its 270,000 tpy EAF billet plant in the Volgograd region next week – the plant has been closed since late April for maintenance.

Sources: Steel Business Briefing

The number of active oil and natural gas rigs in the United States rose 0.3% to 1,965 for the week ending July 6, 2012, rising from the two-month low of 1,959 last week.  The rig count is 4.1% above the year-ago level.

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 rose again this week by 1.2% to 264 compared with 261 last week and the highest count since March 30, 2012.  Despite the increase, the count is down 20.2% from the year-ago level.

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.

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While Nucor, US Steel and ArcelorMittal now joining the ranks of domestic players adding a $40/ton increase to spot pricing adds credibility to this move, we suspect that recent firming in the domestic order book is fragile; with domestic HRC prices currently at around parity with global pricing levels, the lowest level in 9 months.

We say fragile because while domestic markets will benefit from local mill maintenance, a lower operating rate, and some worries about strike risk at US Steel and ArcelorMittal, the risk of imported material increasing is high.

Our full report provides further thoughts about domestic and global steel prices as well as the implication for steel equities.

For a free trial subscription, please contact us.