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Our Advance/Decliner Index fell for the third consecutive week, dropping from 46% to a five-month low of 30% (meaning more price cuts were reported than increases).

Our China Index declined from 43% to 20% – the lowest since Golden Week – as steelmakers continued to cut domestic long product prices and spot pricing for several other products declined as demand has not picked up as much as anticipated and Chinese production continues at near-record levels.

Our Ex-China Index declined as well, also falling to a five-month low of 33% from 47%.  Steel prices weakened in Europe, MENA, the US, the CIS and South America, while pricing in East Asia remained strong.  A major part of the weakness was due to reduced export prices from China and Turkey in response to weakening domestic prices.

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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Graftech International (GTI)’s adjusted 1Q EBITDA of $40.9m was in line with the Street’s $41.1m and within company guidance of $35-45m.  1Q EBITDA was down 32% yoy from last year’s $60.2m as destocking by steel customers led to substantially reduced volumes.

Guidance for 2Q was for EBITDA to rise to $60-70m – versus the Street’s $61.12m – due to destocking winding down, customers running at modestly higher operating rates and the full impact of electrode price increases of 10-15% (some 20% are on a April to April calendar), partially offset by reduced graphite electrode utilization rates and an annual maintenance outage at Seadrift (needle coke facility) during the quarter.

The company kept full-year 2012 EBITDA guidance unchanged at $250-290m as GTI expects destocking initiatives to be complete by year end which will lead to higher electrode – and thus needle coke – shipments in the second half of the year.

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Steel Market Production Increases – Turkish steelmaker Erdemir has relit the No. 4 unit at its Iskenderun plant, the largest blast furnace in Turkey, after idling it on April 11 for safety reasons. The furnace has a hot metal capacity of 1.8 million tonnes per year.

Steel Market Production Increases – Croatian rebar mini-mill Zeljezara Split has scheduled the restart of its 150,000 tonne per year round bar and rebar rolling mill to between 9-15 May.

Steel Market Production Increases – State steel producer Rashtriya Ispat Nigam Ltd. (RINL) of India recently tapped its first hot metal from the 2.5 million tonne per day No. 3 blast furnace at its Visakhapatnam steelworks.

Steel Market Production Cuts – Abu Dhabi National Company has indefinitely postponed plans to construct a 300,000 tonne per year rebar mill due to weak local consumption.

Sources: Steel Business Briefing

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Bucking the trend for most of the month of April, import licenses for the full month declined 5.3% to 2.78 million tonnes (mt) from March’s 2.95 mt, according to the Steel Import Monitoring and Analysis (SIMA) licensing program.

But the decline is a bit misleading, as semi-finished steel import licenses declined 22.8%, after rising five straight months and doubling levels seen in October 2011. Semi shipments are “lumpy” so a one-month drop is not meaningful. What matters more is that finished steel imports look set to hit another post-recession high, up some 52% from the bottom in December. The uptick in finished steel licenses is being driven by a 32.6% increase in sheet tonnage, the highest level since May 2007, while imports of hot-rolled bars are set to rise some 23.7% to the highest level since October 2008.

Chinese import licenses jumped 42.3% in April to the highest level since March 2009 (just before the OCTG trade case).

Our full report is available to subscribers and provides further thoughts on April import licenses as well as our outlook for the coming months and implications for steel equities.

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Timken (TKR) reported record 1Q earnings from continuing operations of $1.58/share, which adjusted to $1.61/share excluding a one-time expense related to the new labor agreement, well ahead of the Street’s $1.25/share, and sharply higher than 4Q’s adjusted $1.11/share.

Guidance for 2012 was revised up to $5.40-5.70/share (excluding one-time benefits of $0.70/share) from $4.90-5.20/share in late January.  The company revised overall 2012 sales growth to 7-10% from 5-8% in late January, due to upward revisions for the Mobile Industries and Process Industries segments.

The company is seeing strengthening demand from the energy, mining and rail markets as well as the global industrial aftermarket.  TKR is seeing increased sales from recent acquisitions and is seeing the signs of recovery in the company’s aerospace business.

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

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Canam (CAM) reported a 1Q loss of C$(0.03)/share, ahead of the Street’s forecast of a loss of C$(0.07)/share and well ahead of last year’s adjusted loss of C$(0.33)/share.  CAM saw a 38% jump in yoy sales in 1Q driven by increased volumes from their joist and deck business and at FabSouth, which is a structural steel fabricator in the US.

Guidance was limited but management said that 1Q continued to reflect the slow, upward trend in construction that began last fall.  Echoing similar sentiments from industry leader Nucor, CAM is also cautiously optimistic about the prospects for the joist and deck business as well as the multi-residential market.

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

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The World Steel Association (WSA) lowered its 2012 global steel forecast some 3.5% from the previous early 4Q forecast due to a combination of 1.7% weaker actual consumption for 2011, a 4% decline in the Euro-zone consumption forecast and a 4.8% decline in the Chinese consumption forecast.

The WSA identified two main reasons for the forecast cut, citing the negative global impact from the Euro-zone debt crisis and the continuing slowdown in Chinese steel demand.  While WSA expects a recovery in second half demand, the association warned of some downside risk from a worsening of the European problems, the impact of high oil prices or geopolitical tension in oil producing regions and the possibility of a hard landing in China.

The WSA is forecasting steel demand growth in all regions for 2013, with overall growth of 4.5%.

Our full report provides our thoughts on the World Steel Association’s steel consumption forecast for 2012 and 2013 well as the implications for steel equities.

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Tenaris (TS) reported adjusted 1Q EBITDA of $718.2m, modestly higher than the Street’s $708.2m and 1.2% above 4Q’s adjusted $709.6m.  Management attributed the higher EBITDA margin in 1Q to lower raw material costs and plant allocation efficiencies.

Guidance for 2Q was for stable operating margins on higher sales in 2Q (on modestly improved volumes), leading to higher operating income.

Operating margins are expected to remain close to current levels through 2012, management said, with Tenaris’ average selling prices perhaps increasing owing to product mix improvements. The company expects strong year-on-year growth in sales and operating income during the remainder of the year.

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

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After rising a modest $2/ton (0.1%) in March, April OCTG prices fell back a similar $3/ton or 0.1% to $1,913/ton, according to data released by Pipe Logix.

The seeming anomaly of weak pricing in a strong drilling environment is due to a meaningful increase in supply, largely from a 225% jump in imports over the past few years. March quarter OCTG imports rose 30%, lifting import market share to 62% in the 1Q, the highest since 1Q 2009, the quarter before the landmark Chinese trade case was filed. Chinese imports have largely been replaced now with tonnage from Korea, where imports have grown some 167%.

Our full report is available to subscribers and provides further thoughts on OCTG pricing and margins as well as the implications for shares of OCTG producers.

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Steel Market Production Increases – Evraz North America’s rod and bar mill in Pueblo, Colorado resumed operations on Thursday after a fatality on Tuesday. The Pueblo facility has 500,000 tpy capacity and produces, rod, bar, rail and seamless pipe.

Steel Market Production Increases – To support increased SBQ demand from the automotive industry, Brazilian steelmaker Gerdau plans to increase rolling capacity at its Pindamonhangaba mill in São Paulo from 700,000 tonnes per year to 1.2 million tonnes per year by the end of 2012. The producer also plans to increase rolling capacity at its Mogi das Cruzes mill in Sao Paulo from 216,000 tonnes per year to 276,000 by 2012.

Steel Market Production Cuts – Italian steel producer ILVA has temporarily halted production on the electro-zinc line at its Taranto plant. The closure is set to last until mid-May with the company taking advantage of weak demand to carry out maintenance.

Sources: Steel Business Briefing