The number of active oil and natural gas rigs in the United States fell 0.8% to 1,968 for the week ending March 23, 2012. The rig count is still up 13.2% from the year-ago level and is just 2.9% 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 fell 31.9% to 352 this week from 517 the week before, marking the seventh straight decline. The drop puts the rig count 17.9% below the year ago period.

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.

The spot reference price for 62% Fe iron ore cfr North China rose to $145.20 on Friday, March 23, 2012, up 0.3% from last Friday’s 16-week high of $144.70.  The price for iron ore rose steadily all week and is now at the highest level since November 22, 2011, when the price was at $146.60.

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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OAO TMK (TMK) reported 4Q adjusted EBITDA of $223m, a 10% improvement sequentially, on flat revenue of $1.60B. The company reported an improved product  mix, marked by a 28% rise in seamless OCTG and premium connection sales, and lower raw material prices.

Guidance for 1Q was for these trends to continue leading to higher EBITDA and EBITDA margins in the quarter compared with 4Q and similar to year-ago results.  The company also had a constructive outlook for full year 2012 due to expectations for improved volumes and a richer product mix.

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

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Steel Market Production Cuts – Sichuan province’s Xichang city is upgrading its power grid and severely affecting HRC production at Panzhihua Iron & Steel’s steelworks as a result, while Chongqing Iron & Steel will lose 20,000t of HRC to a maintenance outage this month.

Steel Market Production Increases – Kardemir Demir Celik, one of Turkey’s biggest rebar producers, is set to complete and commission a third rolling mill by August that will have an initial capacity of 1.2 mtpy.

Steel Market Production Increases – Tokyo Steel’s March production will be 14% higher than last month, reaching 250,000 tons, with the restart of exports.

Sources: Steel Business Briefing, Metal Bulletin, Bloomberg First Word

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The American Institute of Architects’ ABI Index – a leading economic indicator of non-residential construction activity 9-12 months into the future – posted a reading above 50 for the fourth consecutive month in February, coming in at 51.0, slightly above January’s 50.9 (any reading higher than 50 means the number of architects reporting “rising billings” outpaced the number reporting “declining billings”).

The new project inquiry index rose 2.2 points to 63.4, the highest level since July 2007 and the fourth successive reading above 60, the first time this has happened in four and a half years.

Our full report is available to subscribers and provides further thoughts on the February ABI Index as well as the impact on steel equities.

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After increasing four straight weeks to a one year-high of 87% last week, our Advance/Decliner Index fell back to 74% this week (any reading over 50 means that the number of price increases exceeded the number of declines).

Our Ex-China Index declined for the first time in five weeks as some mills – most notably in Turkey – were reducing export offers due to a slowdown in overseas demand.  Our China Index fell to 80% from the 7-month high of 92% reached last week, although pricing continued to improve for most products.

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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Steel Market Production Cuts – ArcelorMittal has proposed to idle its electric arc furnace and continuous caster at Schifflange, Luxembourg, for an indefinite period of time due to continued weakness in the European construction market.

Steel Market Production Increases – According to China Iron and Steel Association’s latest production “flash,” China produced 1.898m tonnes/day of crude steel during the first ten days of March, up 13.1% from 1.679m tpd in the last nine days of February.

Sources: Fox Business, Steel Business Briefing

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With nearly 2/3 of February’s global steel production increase coming from a resurgence in China, output rose 4.2% to 4.110 million tonnes per day (mtpd), in line with the typical seasonal uptick of 4.6%.

Increases included a seasonal 7.8% increase in the EU, as well as pick-ups in the Middle East (up 11.3%), South America (up 6.9%), China (up 5.3%), Asia ex-China (up 2.8%), and North America (up 0.8% with the US up 0.7%).  The most meaningful decline was recorded by Turkey, with production falling 5.1%, while output was down a nominal 0.2% in the CIS.

Our full report is available to subscribers only and provides further thoughts on global steel production and pricing and the implications for steel equities.

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