Steel Market Production Increases –Libyan Iron & Steel Co intends to start production of coils this month at its hot strip mill pending final approval to restart by Gecol, the Libyan General Electric Company.

Steel Market Production Cuts –ArcelorMittal has reported that it intends to temporarily idle one of the two blast furnaces at its plant in Gijon, Northern Spain, in August for maintenance. The plant produces slabs, billets and blooms for re-rolling into long products.

Steel Market Production Cuts – The Polish steelmaking group, Alchemia is closing the meltshop at its seamless pipe plant Huta Batory in Chorzow, Southern Poland, following a strike by workers at the meltshop on April 2. The meltshop had a production capacity of 145,000 tpy.

Source: Steel Business Briefing

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Our Advance/Decliner Index continued to show stability, rising modestly from 71% last week to 74%; our Index has now traded in a tight band of 71-74% over the last four weeks (any reading over 50 means that the number of price increases exceeded the number of declines).

The small uptick was driven by our China Index rising from 55% to 75% as prices for most types of steel products trended higher on the back of a stronger-than-expected PMI reading.  Our Ex-China Index was relatively stable, falling from 76% from 73% as pricing in East Asia, the CIS and Europe showed less strength. An uptick in the US sub-index partially offset this slight softening, with both Nucor and Severstal following ArcelorMittal’s second sheet price increase last week.

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 Increases – U.S. Steel Corp. plans to run 15 turns on its No. 3 galvanizing line at Hamilton Ohio. The line was originally planned to run 10 turns but increased to 15 because of increased demand for thin gauge material.

Sources: American Metal Market

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Reflecting general trends in trade in the Chinese economy, March Chinese steel net exports surged 74.6% to 3.72 million tonnes (mt), the highest level since June 2010, on a combination of a 48.4% jump in steel exports and a nominal 4.0% increase in imports.

While the March uptick in exports was actually in line with the normal seasonal pickup, the magnitude of the rise in imports was far less than normal, so the size of the increase in net exports was a surprise.

Although the increase in net exports is helping the Chinese market, it increases the risk of Chinese exports depressing global markets.

Our full report is available to subscribers only and provides further thoughts on China’s steel trade balance and the implication for steel equities.

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Steel Market Production Increases – Saudi Steel producer, SABIC has said that its steel production capacity will grow by 50% to 6 million tonnes per year when it completes its new plant in Jubail in the second half of this year.

Steel Market Production Increases – Iraq’s sole rebar producer, Erbil Steel, plans on expanding its rolling mill capacity from to 240,000 tpy to 360,000 tpy by early next year.

Steel Market Production Increases – Kuwaiti Pipe Industries & Oil Services Company plans to more than double its capacity with a new longitudinal submerged arc welded pipe mill set for commissioning in early 2013. The new mill will have 288,000 tpy capacity.

Steel Market Production Increases –Guangzhoe JFE Steel Sheet has formally commissioned a 400,000 tpy hot-dip galvanizing line at its south China plant, doubling the company’s hot-dip capacity to 800,ooo tpy.

Steel Market Production Increases – Bahraini Steelmaker, SULB has secured funding for its 1.5 million tpy capacity DRI plant, 970,000 tpy melt shop and 600,000 tpy heavy sections mill. SULB expects commissioning of the melt shop to begin in September while the DRI plant should come online in January 2013.

Steel Market Production Increases – Chinese steelmaker, Hebei Iron and Steel Group started work on its new welded pipe project in Caofeidian New Area. The project will have 600,000 tpy of electric resistance welded capacity and 500,000 tpy spiral welded pipe.

Steel Market Production Cuts – Moldavian Metallurgical Works in Moldava plans to reduce production of rolled steel to 25,ooo tonnes per month from 54,231 in March due to problems with scrap supplies.

Steel Market Production Cuts – Cascade Steel Rolling Mills suspended production at its McMinnville, Ore. facility due to workers launching a strike there this Sunday.

Steel Market Production Cuts – Two small fires temporarily interrupted steel production at RG Steel’s plant in Warren Ohio. Production was expected to resume by this afternoon.

Sources: American Metal Market, Steel Business Briefing,  SteelOrbis, Bloomberg, SteelGuru

Weekly domestic raw steel production grew 3.1% to 1.958 million tons (mt) for the week ending April 7, 2012, up 7.7% versus the year-ago level and just shy of the post-recession high of 1.959 mt seen on March 10, 2012.  The lowest production since the recession began was 0.8 mt on December 27, 2008.

The capacity utilization rate also rose, coming in at 79.2%, compared to 76.9% last week and was higher than the year-ago level of 74.3%.  Capacity utilization was slightly below the post-recession high of 79.3% recorded on March 10, 2012.   The lowest capacity utilization rate since the recession began was 33.5% on December 27, 2008.

Note: AISI weekly production data only includes real-time input from 50% of producing members; the remainder of the data is a guesstimate based on each company’s prior-month production and therefore the weekly AISI data lags when there are production cuts or increases going on.

Source: AISI and Steel Market Intelligence

The spot reference price for 62% Fe iron ore cfr North China remained at $147.60 on Thursday, April 5, 2012, from last Friday.  This price is just below the recent high of $147.70 reached on March 29.

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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Schnitzer Steel Industries (SCHN) reported FebQ EPS of $0.35, at the top end of mid-March company guidance of $0.28-0.35/share, and ahead of the Street’s $0.33/share.

The company made the unusual step of not providing typical guidance for pricing, volumes and margins and instead said they would guide in the second half of May. Qualitative guidance was that recycling operating income/ton is trending higher than in FebQ on small but steady improvements in scrap pricing and supply is characterized as “steady.”  The auto parts business is also seeing an uptick, with parts sales up and improved margins over FebQ; $2m of unusual legal fees will not impact the segment moving forward. Prices and utilization in the steel manufacturing business are flat thus far in the current quarter.

The company boosted its quarterly dividend nearly 11-fold to $0.1875/share from $0.0175/share, lifting SCHN’s dividend yield to 1.9% from 0.2%, but emphasized that it will continue to grow through acquisitions.

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Fresh April prices for shredded scrap (obsolete) declined $10/ton (or 2.3%) to $430/ton, while #1 busheling (prime) scrap fell another $15/ton (or 3.2%) to $448/ton, according to American Metal Market.

The $10/ton drop for shredded was at the high of our expectations, while the $15/ton decline for prime scrap was greater than forecast.

We believe that obsolete scrap flows have been much more liquid early this year when compared to the historical norm because of warmer weather which continued to pressure prices despite strong overseas demand from Turkey.

We believe the larger-than-expected drop for prime is a function of increased supply as strengthening manufacturing activity – most notably automotive – is leading to more prime scrap generation and we suspect that prime scrap and pig iron imports ordered earlier in the year are adding further to the enlarged scrap reservoir.

Our full report provides our scrap and steel price outlook as well as the implications for steel equities.

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