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Contrary to CISA’s June production estimate showing a nominal monthly drop, official June output came in at 2.01 million tonnes per day (mtpd), up 1.6% from May, to the second highest of all-time, and just 0.6% shy of April’s all-time record.

The uptick in Chinese production in the face of waning steel demand is disconcerting as steelmakers have continued to ship overproduction around the globe, resulting in June net Chinese steel exports rising 5.4% to a two-year high of 4.09 mt.

While Beijing’s multiple stimulus-attempts are good news longer-term for steel in China, in the short term, we believe that stimulus announcements are backfiring, keeping production too high, as steelmakers wait for promised new orders to come in as they continue to lose money.

Our full report is available to subscribers only and provides further thoughts on June Chinese steel production and the implications for steel equities.

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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.

For a free trial subscription, please contact us.

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