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A.M. Castle (CAS) reported a 4Q loss of $(0.52)/share, which adjusted to a profit of $0.05/share excluding acquisition-related charges and losses associated with the mark-to-market adjustment for commodity hedges, below the Street’s $0.12/share.  Sales for the quarter rose 19.8% to $282.2M from $235.6M in 4Q 2010.

During the conference call, guidance was for sales growth of 10-15% across all of the company’s businesses as demand continues to improve in key markets including oil and gas, mining and heavy equipment, and general industrial markets.  We believe guidance was incorrectly interpreted by some as including the impact of Tube Supply, which was later clarified in an 8-K that the 10-15% growth was for legacy businesses “organic growth” as well as the Tube Supply business separately.

Our full report is available to subscribers only and provides further thoughts on Castle’s 4Q earnings report and conference call as well as the implication for the stock and other equities.

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The number of active oil and natural gas rigs in the United States rose 0.4% to 1,989 for the week ending March 2, 2012.  The rig count is up 16.5% from the year-ago level and is just 1.8% off the 2011 high of 2,026 for the week ending November 4, 2011.

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 this week decreased 3% to 681 from 701 last week, marking the fourth straight decline, although the count was still 9% higher than last year.

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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February prices for OCTG trended down an average of 0.5% versus January adjusting for another mix change, according to data provided by Pipe Logix earlier this week, although the reported “average market basket” price of oil country tubular goods (OCTG) rose 2.5% to $1,914/ton.

We continue to believe that a combination of increased domestic capacity and the highest levels of OCTG imports in January for the past three years are creating downward pricing pressure.

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.

For a free trial subscription, please contact us.

Steel Market Production Increases – Citing rising demand, RG Steel LLC plans to restart its dormant No.2 galvanizing line, which will produce heavier-gauge coated products at Sparrows Point starting in early April.

Steel Market Production Increases – Russian miner and steelmaker Mechel has recently launched the universal rolling mill at its principal steelmaking works in Chelyabinsk, which includes a 1 million tpy continuous bloom caster, a 1.2 million tpy ladle furnace, and a two-chamber 650,000 tpy vacuum degasser.

Sources: Steel Business Briefing, American Metal Market

Steel Market Production Cuts – Speculation is mounting that RG Steel LLC will idle tinplate production at its Sparrows Point, Md., facility due to low bookings that resulted from financial instability and concerns among would-be buyers.

Steel Market Production Increases – Turkish integrated producer Isdemir will relight BF No.2 this evening or tomorrow, and BF No.3 that went offline late last week is functioning again.

Steel Market Production Increases – In Libya, Lisco, the state-owned Libyan steel producer, is still not fully operational, but in February the company restarted its No.1 and No.2 rebar rolling mill.

Steel Market Production Increases – China’s Ministry of Industry & Information Technology (MIIT) has predicted that China will produce 730 mt of crude steel in 2012 (an average daily output of around 1.99m t/day), up 6.8% from 2011’s 683 mt.

Steel Market Production Increases – Mexico’s Industrias CH SAB de CV (ICH) expects to bring the first stage of its previously announced $500m billet plant in Mexico’s northeastern state of Tamaulipas on stream in May or June this year, with capacity of 350,000 tpy.

Steel Market Production Increases – ArcelorMittal is to invest an additional €17 million ($22.9 million) in its facility at Florange in eastern France.  The company will also invest in additional maintenance work to ensure that the idled blast furnaces are ready to be restarted in the second half of 2012 in the event of an economic recovery.

Sources: American Metal Market, Steel Business Briefing

Many Manufacturing Indexes Show Slower Growth

The Purchasing Managers Index (PMI) registered 52.4% in February, down 3% from 54.1% in January. However, as a PMI score above 50% indicates growth, the PMI is still expanding, but at a slower rate. Other manufacturing indexes which showed slower growth compared to the prior month include New Orders (54.9%, down almost 5% from 57.6%, Production (55.3%, down about 1% from 55.7%), Employment (53.2%, down 2% from 54.3%), and Backlog of Orders (52%, down 1% from 52.5%).

Prices Lead Manufacturing Indexes with Faster Growth

Several manufacturing indexes showed faster growth in February compared to January, led by Prices (61.5%, up 11% from 55.5%). Exports (59.5%, up 8% from 55.5%) and Imports (54%, up 3% from 52.5%) also grew at a faster rate. Supplier Deliveries moved from contraction to expansion (53.6%, up 9% from 49%).

Inventories Go in Wrong Direction

The two inventory-related manufacturing indexes both displayed poor performance in February. Customer Inventory increased its rate of contraction (46%, down 3% from 47.5%), while Inventories remained flat just below the growth line at 49.5%.

11 of 18 Manufacturing Industries Grow

Of the 18 manufacturing industries, 11 are reporting growth in February, in the following order: Apparel, Leather & Allied Products; Machinery; Primary Metals; Transportation Equipment; Petroleum & Coal Products; Fabricated Metal Products; Paper Products; Computer & Electronic Products; Food, Beverage & Tobacco Products; Miscellaneous Manufacturing; and Chemical Products. The four industries reporting contraction in February are: Furniture & Related Products; Nonmetallic Mineral Products; Plastics & Rubber Products; and Electrical Equipment, Appliances & Components.

Source: Institute for Supply Management

January US construction spending declined 0.1% from December, according to figures from the Department of Commerce. Seasonally adjusted construction spending during January 2012 totaled $827 billion, 0.1% less than the revised December 2011 total of $827.6 billion. However, January’s total was about 7% higher than $772 billion recorded in January 2011.

We’d point out that the seasonally adjusted numbers may present a more rosy picture than reality given the sharp boost construction markets most probably felt due to unseasonably warm weather this winter; in particular highway spending will perk up in warmer winter months, and the data supported that this month.

Overall Private Construction Spending Stays Flat

Private construction spending during January 2012 totaled a seasonally adjusted figure of $538.7 billion, essentially flat with the revised December 2011 estimate of $538.7 billion (taking margin of error into account). Residential construction occurred at a seasonally adjusted annual rate of $253.6 billion in January, about 2% higher than the revised December estimate of $249.2 billion. However, nonresidential construction dipped slightly, to a seasonally adjusted annual rate of $285 billion in January, 1.5% below the revised December figure of $289.5 billion.

Compared to January 2011, private construction spending rose almost 12% from $482.1 billion. Residential construction grew almost 7% from 237.6 billion, and nonresidential construction increased close to 17% from $244.4 billion.

Highway Spending Rises, Overall Public Construction Spending Drops Slightly

In January, the estimated seasonally adjusted annual rate of public construction spending was $288.3 billion, 0.2% less than the revised December number of $289 billion. Educational construction came in at a seasonally adjusted rate of $71.6 billion, roughly 1% less than the revised December estimate of $72.2 billion. Highway construction declined marginally, totaling a seasonally adjusted $83.7 billion in January, compared to $83.9 billion in December.

Compared to January 2011, public construction spending fell 0.5% from $289.9 billion. Educational construction grew 2% from $69.9 billion and highway construction grew 4.5% from $80.1 billion.

Source: Department of Commerce

Steel Market Production Cuts – Italian bar and rod producer Acciaierie Venete has halted crude steel production at its works in Sarezzo due to a fire that broke out on Monday night, and the company expects to restart production in two to three days; Sarezzo has a nameplate capacity of 540,000 tpy of crude steel.

Steel Market Production Increases – SSI will relight its Redcar plant back to life in less than two weeks, as part of its GBP1.6 billion expansion plan.

Steel Market Production Increases – RG Steel LLC started to bring the 4,000 tpd Warren blast furnace back online last Sunday, and the company expects to resume steelmaking later this week.

Sources: Steel Business Briefing, Steel Guru, American Metal Market

The US economy grew at an annual rate of 3% according to today’s revision of Q4 2011 Real U.S. GDP by the Bureau of Economic Analysis (BEA) from the previously reported 2.8%. This uptick was not expected, as a Bloomberg survey of economists had predicted no change from the number initially reported, and in fact some 35% of the economists surveyed had looked for a downward revision. According to the BEA, the upside reflected an upward adjustment to consumer spending for services and a downward adjustment in consumer spending on durable goods.

Current-dollar GDP, the market value of the nation’s output of goods and services, increased 3.9%, or $144.7 billion, during Q4 2011 to a level of $15.3 trillion from about $15.1 trillion in Q3 2011. During Q3 2011, current-dollar GDP increased 4.4%, or $163.3 billion, from about $14.93 trillion.

2011 GDP Increases at Slower Rate than 2010

For the full year 2011, U.S. real GDP increased 1.7% from annual 2010 levels. This was a slower rate of increase than the 3% growth in GDP recorded between 2009 and 2010. BEA data indicates the increase in real GDP in 2011 primarily reflected positive contributions from personal consumption, exports, and nonresidential fixed investment that were partly offset by negative contributions from state and local government spending, private inventory investment, and federal government spending.

Current-dollar GDP increased about 4%, or $567.9 billion, in 2011 to a level of about $15.1 trillion from about 14.53 trillion.  In 2010, current-dollar GDP increased 4.2%, or $587.5 billion from about $13.94 trillion.

The deceleration in real GDP in 2011 primarily reflected downturns in private inventory investment and in federal government spending and a deceleration in exports that were partly offset by a deceleration in imports and an acceleration in nonresidential fixed investment.

Source: Bureau of Economic Analysis, Bloomberg