New Report Preview

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.

For a free trial subscription, please contact us.

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

New Report Preview

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.

For a free trial subscription, please contact us.

New Report Preview

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.

For a free trial subscription, please contact us.

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

New Report Preview

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.

For a free trial subscription, please contact us.

New Report Preview

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.

For a free trial subscription, please contact us.

New Report Preview

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.

For a free trial subscription, please contact us.