The number of active oil and natural gas rigs in the United States fell 0.2% to 1,983 for the week ending May 25, 2012, after reaching an eleven-week high of 1,986 last week.  The rig count is also up 7.4% from the year-ago level of 1,847.

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 jumped 28.5% to 158 this week, up significantly from 123 last week.  Despite the jump, the rig count is still down 11.7% from the year-ago level of 179.

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 declined for the sixth consecutive week, falling to $130.50 on Friday, May 25, 2012, down some 0.6% from the week before and down 12.7% from mid-April.  The price dropped to a six-month low of $129.90 on Wednesday, May 23, before ticking slightly higher the past two days.

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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After the market close last night, Sims Metal Management released meaningfully disappointing guidance for the June 2012 year, saying that earnings – after adjustments – will be “materially less than” consensus.

Problems impacting results include trading illiquidity and softness in deep sea markets, weak pricing, the potential for gains/losses on derivative contracts and currency markets and global economic weakness.

Sims is the second public scrap company with a significant export business to provide weaker-than-expected results in the past week, as Schnitzer guided likewise to a 25-50% decline in operating income due to similar factors.

Our full report is available to subscribers only and provides further thoughts on Sims’ earnings guidance as well as the implication for the stock and other equities.

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Steel Market Production Increases – Indian iron miner NMDC has signed a contract with a consortium led by Siemens to construct a 3 million tpy steel plant in eastern India.

Steel Market Production Increases – Croatian rebar mini-mill Adria Steel began testing of its rolling mill yesterday with expected production of 4,000 tonnes per month in the initial phase. The mill also intends to restart its modernized 330,000 tpy capacity EAF in September.

Steel Market Production Cuts – Chinese producer Jinan Steel plans to make upgrades to its rebar line from May 23-25 with output expected to be reduced by 12,000 tonnes.

Sources: Steel Business Briefing, SteelGuru

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According to press reports, RG Steel is set to idle ALL of its facilities and start laying employees off in June; not only at the 3.4m tpy Sparrows Point, Maryland facility, but also at the Warren, Martins Ferry, and Yorkville, Ohio facilities due to “an immediate, and unexpected liquidity crisis.”

The combined real impact of shutdowns at both Sparrows Point and 1.4m tpy Warren will be slightly more than 5% of the sheet market, while the Martins Ferry and Yorkville facilities are finishing only.

Our full report provides our thoughts on the impact on the domestic sheet market as well as the implications for steel equities.

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Steel Market Production Increases – Chinese high-speed steel and die steel producer Tiangong International commissioned a new 80,000 tpy wire rod and bar rolling mill on May 18th.

Steel Market Production Increases – Polish steelmaking group Alchemia has restarted the 145,000 tpy EAF at its seamless pipe plant Huta Batory in Chorzow, southern Poland after a one month stoppage due to a strike that began on April 2^nd.

Steel Market Production Increases – Chinese steelmaker Tianjin Metallurgy No. 1 Steel Group has commissioned the first stage of its 1m tpy welded pipe project in Tianjin, China, with initial capacity of 550,000 tpy.

Sources: Steel Business Briefing, SteelOrbis

Steel Market Production Increases – RG Steel has restarted operations at its 3 million tpy Sparrows Point, Maryland blast furnace which was temporarily shut down again over the weekend.

Steel Market Production Increases – Turkish producer Icdas is set to boost capacity by 1 million tonnes per year at its Biga works in the Marmara region of Turkey when its new billet meltshop comes online in early June.

Steel Market Production Cuts – Italian steel group Arvedi and Brazilian producer Metalfer have postponed the start of the 360,000 tonne per year initial phase of their joint-venture tube mill in São Paulo state, Brazil.

Steel Market Production Cuts – ArcelorMittal’s expansion project aimed at doubling billet and wire rod capacity to 2.4 and 2.3 million tonnes per year at the Monlevade unit in south-eastern Brazil has been suspended indefinitely due to a lack of domestic demand and a poor outlook globally.

Steel Market Production Cuts – Turkish producer Yolbulan Bastug has placed plans to install a new 700,000 tonnes per year capacity rebar and wire rod mill on hold due to a slowdown in local longs trade and certain export markets.

Sources: Steel Business Briefing, American Metal Market

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As global pricing weakened still further, largely on the back of new record production from China combined with weak economic growth globally, our Advance/Decliner Index plummeted from 31% to 16%, the lowest level since early November (any reading below 50 means more price cuts were reported than increases).

Pricing deterioration in the US, MENA, Europe and the CIS drove our Ex-China Index falling to a six-and-a-half month low of 19% from 38% last week.

Our China Index remained at zero for the third consecutive week – just the fourth time in history this has ever occurred – as steel prices remained under pressure despite Beijing’s reserve requirement rate cut and supportive pro-growth verbiage.  The Chinese steel market remained spooked by a combination of a mid-May flash production report showing yet another record production month in the offing, as well as a 5% plunge in spot iron ore prices which are being equally driven by weakened steel demand.

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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