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Russel Metals (RUS) reported 1Q earnings of C$0.53/share, beating the Street’s $0.51 and 4Q earnings of C$0.46 while matching EPS from a year ago.

Guidance was qualitative and included a decrease in 2Q revenue compared with 1Q because of a seasonal drop in the energy tubular products business. The metals service center and steel distributors divisions should show increases, although yoy growth won’t be as high as in 1Q, the company said. Steel prices are expected to be stable, as in 1Q, with no clear direction going forward.

Russel said the demand outlook is stable, with the US showing more growth than Canada. Imports have been increasing over the past month, however, with Turkish industrial tubing coming in on the East Coast along with Russian plate and Chinese line pipe.

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

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The spot reference price for 62% Fe iron ore cfr North China fell to $144.10 on Friday, May 4, down 0.9% from $145.40 last week, and the third straight weekly decline.  The price is slightly above the recent low of $143.80, recorded on April 26, 2012.

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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Gibraltar Industries (ROCK) reported adjusted EPS of $0.09 in 1Q, below the Street’s $0.18 and $0.11 in the year-ago period.

Guidance for 2012 is for mid-single-digit growth across the company’s market base, which includes a minor exposure to a struggling European region and the weak West Coast residential market. Organic revenue growth is expected to be 4-5% for the company’s core businesses, while incremental revenue from acquisitions is expected to add $30m-$35m to the top line.  The company is expecting full-year 2012 gross margins of 20-20.5%. Gross margins should be around 30% on the incremental organic revenue.

One important point ROCK made during the call was that some states are starting new infrastructure projects, despite the lack of a long-term federal transportation bill, as they can no longer wait due to the condition of their roads, bridges, etc.

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Vale’s 1Q 2012 adjusted EBITDA came in at $4.965B, significantly below the Street’s forecast of $7.519B and 4Q’s 7.396B as abnormal rainfall in Brazil hurt iron ore shipments and costs, iron ore price premiums declined 8.9% from 4Q and the company saw a one-off effect from the significant reduction of one-month lagged quarterly iron ore contracts.

Guidance was for Vale to meet its planned iron ore volumes for the year despite a slow start as March iron ore shipments rebounded sharply; March levels were higher than the combined January/February total.  Vale expects the global iron ore market to remain tight due to strong demand from China as well as no major projects coming online in the near term.

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A.M. Castle (CAS) reported a 1Q loss of $(0.19)/share, which adjusted to a profit of $0.29/share after adjustments, beating the Street’s $0.24/share and well above 4Q’s adjusted $0.05/share.

Guidance was for 2012 sales for the company’s legacy businesses and Tube Supply to each grow 10% from 2011 levels, with consolidated gross margins comparable to 1Q’s 27.3%.  CAS acknowledged that it was more cautious in its outlook than a few months ago, and overall expectations on the high-side have “dampened a bit.”

After starting the year off “quite robustly,” management said that over the past six weeks business has softened, which the company attributed to a build-up of inventories throughout the supply chain in most markets, as CAS has not seen any signs of decreased customer activity.

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SunCoke Energy (SXC) reported 1Q earnings of $0.24/share, which adjusted to $0.33/share excluding one-time items, ahead of the Street’s $0.29/share.  1Q EBITDA came in at $55.8m, which adjusted to $64.1m after non-recurring items, above 4Q’s adjusted $49.6m and $26.6m in the year-ago period. Management attributed the increase from a year ago to the start-up of the Middletown, Ohio coke facility and improvements at Indiana Harbor, offset by an increase in the reject rate for the Jewell coal operations.

Guidance for 2012 was unchanged from the previous quarter with management expecting earnings of $1.30 and $1.65 (assuming a 22% tax rate) and adjusted EBITDA of $250m-$280m. Management forecasts that the EBITDA for domestic coke operations will be $202m-$229m (less ongoing capex), with EBITDA per ton at $55-$60. In 3Q 2011 the guidance excluding Middletown was $50/ton.

The coke business is expected to report a yoy improvement in EBITDA of $95m-110m in 2012, compared with the previous estimate of $74m-$84m. Offsetting the improvements in coke operations are issues in the coal business, most notably increases in cash costs per ton at the Jewell operations. The coal mining business is now expected to contribute just $5m-$15m of the EBITDA improvement this year.

Our full report is available to subscribers only and provides further thoughts on SunCoke’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 – Croatian rebar mini-mill Zeljezara Split plans to produce 4,000 tonnes of billet a month in May during the ramp-up to full capacity at the 150,000 tonne per year facility. The restarted facility is also expected to have a 330,000 tonne per year meltshop come online in the third quarter of this year.

Steel Market Production Increases – Korean steel maker Dongbu Steel is building a new 80,000 tonne per year color-coating line in Thailand with a commissioning set for March 2013.

Steel Market Production Cuts – Labor negotiations at Evraz North America’s Camrose, Alberta pipe mills have failed and all workers were sent home today with a lockout starting on Saturday. The two pipe mills at the facility are capable of producing ERW and DSAW pipe at a rate of 200,000 and 140,000 tonnes per year, respectively.

Sources: Steel Business Briefing, American Metal Market

The number of active oil and natural gas rigs in the United States rose 1.0% to 1,965 for the week ending May 4, 2012, rebounding from last week’s 8-month low of 1,945.  The rig count is also up 7.0% from 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 decreased 2.2% to 131 this week from 134 last week, marking the thirteenth consecutive weekly decline.  The rig count is up 6.5% from the year-ago level however.

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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According to just-published data from American Metal Market (AMM), May prices for shredded scrap (obsolete) remained unchanged at $430/ton, while #1 busheling (prime) scrap fell a modest $3/ton (or 0.7%) to $445/ton.

In late April, steelmakers themselves were expecting to have to pay higher scrap prices, as the market for shredded scrap in particular had been tightening up, and with a reported deal done up $5-10/ton just last week, we had suspected to see a modest uptick for obsolete grades for the month.  However, we have seen a weakening in global steel prices in recent weeks on slowing demand, so that the likely culprit for flat – instead of higher – pricing is the decline in overseas demand for US scrap.

The slight drop in prime scrap pricing is less surprising, as we believe that increased supply from stronger manufacturing activity is in balance with rising domestic steel production levels, which has led to modestly higher scrap demand.

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Steel Market Production Increases – Italian longs producer Leili will keep its 400,000 tonne per year rebar mill in Brescia open after having reached an agreement with regional authorities and unions.

Steel Market Production Cuts – Turkish producer Colakoglu has reduced its HRC capacity utilization to 60% of its annual 4.5 million tonnes capacity due to sluggish demand and a slowdown in sales to the white goods and automotive sector.

Steel Market Production Cuts – Workers at Evraz North America’s Camrose, Alberta pipe mills are facing a Monday morning lockout if labor negotiations remain unresolved. The two pipe mills at the facility are capable of producing ERW and DSAW pipe at a rate of 200,000 and 140,000 tonnes per year, respectively.

Sources: Steel Business Briefing, American Metal Market