Steel Market Production Cuts – AK Steel has idled their 2 million tpy capacity blast furnace at Ashland Kentucky mill for an undisclosed period of time as part of a planned maintenance outage at the mill which produces carbon and ultra-low carbon semis along with galvanized and galvannealed steels.

Steel Market Production Cuts – Taiwanese steelmaker Chung Hung has idled production at one of their subsidiary’s 1.2 million typ cold rolling mill citing a dismal cold-rolled product market in Taiwan.

Steel Market Production Increases – Venezuelan longs producer Sidetur has resumed billet shipments after a 10-day stoppage due to a strike.

Sources: Steel Business Briefing

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Domestic steelmakers are cutting transaction prices for bars and beams by $20/ton and $30/ton effective immediately – partially offsetting the $45/ton surcharge decline with $25/ton and $15/ton base price increases.  The pricing moves are largely in line with our expectation that mills would “split the difference” of plunging scrap surcharges with end-users by offsetting surcharge cuts with base price increases due to firming markets as a surge of imported bar earlier in the year has retreated.

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After posting two straight weekly increases, our Advance/Decliner Index fell to a three-week low driven by weakness in the CIS, East Asia andBrazil, which reduced our Ex-China Index to a three-week low as well. Our China Index remained dismal and unchanged as pricing sentiment soured further following Bao’s price cuts last week.

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June MSCI shipments fell 4.4%, twice the normal seasonal decline, as most types of steel registered weaker shipping performance than seasonally normal and total inventories fell a scant 0.8%.  Most disappointing was the 5.5% decline in flat-rolled (FR) shipments; coupled with a nominal 1.2% decline in FR inventories, adjusted MOS rose from 2.2 to 2.3, as compared to our hoped-for drop.

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Weekly domestic raw steel production for the week ending July 14, 2012, fell for the second straight week coming in at 1.843 million tons (mt) down 1.4% from last week’s 1.869 mt and down some 1.9% year-on-year.

We would caution readers that only half of the AISI reporting companies release their weekly production in “real time” so the other half of this data is estimated – using prior months’ reported production & operating rate. What this means is that when the operating rate is declning as it is right now, the weekly data is actually understating the decline.

Capacity utilization also fell from 75.6% last week to 75.0% this week, the lowest since last December and slightly below the year-ago level of 76.8%.

The lowest production level since the recession began was 800,000 tons for the week of December 27, 2008. The highest level since the recession began was 2.005 mt for the week of May 12, 2012. The lowest capacity utilization rate since the recession began was 33.5% for the week of December 27, 2008; the highest was 81.1% on May 12, 2012.

Source: AISI and Steel Market Intelligence

Steel Market Production Cuts – Gerdau Long Steel North America is planning a 10-day outage beginning at the end of July at its 800,000 tpy crude steel capacity Sayreville NJ plant which has a 600,000 tpy rolling capacity of rebar, angles, flats, squares and handrails.

Steel Market Production Cuts – ArcelorMittal told reporters today that it is reviewing its European flat carbon operations due to poor economic conditions – with trading sources commenting that they could easily shut down three more blast furnaces inEurope.

Steel Market Production Cuts – Last Friday, ArcelorMittal began idling its 1 million tpy crude steel capacity hot strip mill inOstrava,Czech Republicwith an unspecified restart date that will depend on market demand. Before the outage the mill had been running at 30% capacity.

Steel Market Production Cuts – Some steelmakers inEuropehave reportedly been considering extending their summer stoppages by a few extra days or a week according to a source at European steel association, Eurofer.

Steel Market Production Cuts – Workers at Evraz’s South African subsidiary Highveld Steel have begun striking against potential retrenchments amidst the company being in the process of stopping production at the 1 million tpy crude steel capacity Witbank Plant.

Steel Market Production Cuts – Belarusian steelmaker BMZ has suspended production of its new 600,000 tpy HRC rolling mill.

Steel Market Production Increases – European steelmaker Vorskla Steel hopes to restart its Danish mill, VorsklaDenmark, by March of 2013 when it completes its capacity expansion on the meltshop which will lift total capacity to 800,000 tpy from 500,000.

Sources: Steel Business Briefing, American Metal Market, SteelOrbis, The Citizen

The spot reference price for 62% Fe iron ore cfr North China fell some 1.7% to $132.80 for the week ending July 13, 2012, from $135.1o last week. The price of iron ore has been relatively stable for the past two months now, trading in a range of $130-140/tonne.

For the first quarter of 2012, the iron ore price averaged $140.37, and for 2Q, $142.63; this compares to an average of $178.22 for 1H 2011 and $167.59 for full-year 2011. 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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June steel distributor inventory/shipment data will be released at 8am on Tuesday morning, and we expect to see a decline in overall inventories and relatively strong MSCI shipments as two opposing forces come to bear – worries about falling steel prices will likely keep inventories lean, and reasonably healthy end-user demand should keep shipments up.

Our full report is available to subscribers and provides further thoughts regarding our outlook for June distributor shipments and inventory data as well as implications for steel prices and equities.

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