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The number of active oil and natural gas rigs in the United States rose for the third straight week to 1,986 for the week ending May 18, 2012, climbing 0.6% from last week’s 1,974. The rig count is also up 8.5% 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 also increased 2.5% to 123 this week from 120 last week, breaking 14 straight weeks of declines. The rig count is down 14.0% 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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Companhia Siderurgica Nacional (CSN) reported adjusted EBITDA of R$1.113B, some 15.4% short of the Street’s R$1.316B and was 24% below 4Q’s R$1.463B. The company mainly attributed weaker results to a combination of a 16.5% drop in iron ore volumes due to excessive rainfall in Brazil as well as 9.3% decline in iron ore prices, but said that steel results declined as well due to a less favorable product mix and higher costs.
Guidance was limited during the call, with CSN providing qualitative comments only. The company was bullish about the prospects in the Brazilian market, saying that costs are declining due to lower iron ore and coal prices and imports are likely to fall from 2m tonnes in 2011 to 1m tonnes this year which should increase domestic market share. The company said that for hot-rolled coils domestic prices are actually at a slight discount to imports, while the domestic price premium is “slightly positive” for cold-rolled and 5-7% for hot-dipped galvanized sheet. Management said that given the combination of these factors, it will try to raise prices by 5-10% by the end of June.
The positive commentary was contrary to what Klockner had said about the Brazilian market just a few days before during their conference call.
Our full report is available to subscribers only and provides further thoughts on CSN’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 – ArcelorMittal Termitau plans to resume normal operations by the end of the month following a fire on May 15th that led to the idling of the hot coil rolling and galvanizing lines as well as reduced production at the CRC mill.
Steel Market Production Increases – Chinese producer Xugang has announced that it plans to construct new facilities with a total production capacity of 10 million tonnes per year in a move intended to shift its focus to the production of specialty steels.
Steel Market Production Cuts – Nippon Steel is extending its reduction in output of H-beams and sheet pile at its Kimitsu works till at least the end of June from early June, citing high inventories.
Sources: Steel Business Briefing, American Metal Market, SteelOrbis
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ThyssenKrupp (TKA) reported MarQ adjusted EBIT of €134m, below the Street’s €171.6m, but a 61% improvement sequentially and 69% above the year-ago quarter. Increased profits in the Components Technology and Marine Systems businesses offset lower earnings in the Elevator and Plant Technology units, while the steel business saw increased volume but severe price pressure.
Guidance for fiscal 2012 was for EBIT to be in the mid-three-digit-euro range, which would represent a modest improvement in 2H (JunQ and SepQ) compared with 1H (DecQ and MarQ). Earnings in the Steel Europe business should approximate those of 1H, while the Steel Americas unit will see continuing price pressure, the company said.
In the US, management said operations at the Alabama rolling mill continue to improve, with volumes increasing 25% to 777,000 tonnes in 1Q from 622,000 tonnes in 4Q; sales were 154% higher than year-ago levels. However, Thyssen said they have had to offer discounts to enter markets and had excess inventory that was sold at higher-than-originally expected discounts.
Our full report is available to subscribers only and provides further thoughts on Thyssen’s MarQ conference call, as well as our views on the potential sale of Thyssen’s plants in the US and Brazil, our opinion of 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 steadily declined all week, settling at $131.30 on Friday, May 18, 2012, down some 4.6% from last Friday to the lowest level since December 19, 2011. Iron ore has now posted five straight weekly declines and is now down some 12.1% from the recent peak on April 13.
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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Steel Market Production Increases – UAE producer Al Ghurair Iron & Steel plans to commission its new 200,000-400,000 tonnes per year hot-dip galvanizing line by the end of 2013.
Steel Market Production Cuts – South Korean producer Dongkuk plans to shut down its 1 million tonne per year No. 1 plate mill at Pohang on June 10th due to overcapacity in the domestic market.
Steel Market Production Cuts – ArcelorMittal plans to stop production at 2.2 million tonne per year blast furnace B at its Gijon plant in Spain for 40-45 days in July for relining.
Sources: Steel Business Briefing, SteelOrbis
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The American Institute of Architects’ (AIA) ABI Index – a leading economic indicator of non-residential construction activity 9-12 months into the future – dropped to below 50 in April, meaning that the number of architects reporting “declining billings” outpaced the number reporting “rising billings” for the first time in six months. The dramatic deterioration in the index is disappointing.
While ABI economists pointed to the impact of warmer weather in the 1Q, we’d disagree because architects’ billings lead construction by 9-12 months – as the AIA says itself every month – so that the likelihood is that a real deterioration in business conditions drove the change.
Our full report is available to subscribers and provides further thoughts on the April ABI Index as well as the impact on steel equities.
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Our Advance/Decliner Index stopped a four week slide, but remained weak, rising from 27% to 31% (any reading below 50 meansmore price cuts were reported than increases).
The nominal increase was driven by our Ex-China Index rising from 35% to 38% as AK Steel and JFE Steel announced price hikes in the US and Japan, partially offset by weaker steel pricing in the MENA region and East Asia.
Our China Index remained at zero for the second straight week, the first time this has happened since last October, as record Chinese steel production combined with declining spot iron ore prices are hurting pricing sentiment and keeping buyers on the sidelines. Chinese steelmakers have continued to reduce steel prices this week, despite Beijing’s reduction of the reserve requirement ratio for banks over the weekend.
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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