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Our Advance/Decliner Index fell for the second straight week, dropping from 63% to 46% (meaning more price cuts were reported than increases), the lowest level since early December.

Our China Index declined to a three-month low of 43% from 75% as steel prices in China fell after March Chinese production was reported at near record levels and CISA ’s early April production “flash” was a new all-time high, triggering fears of oversupply.

Our Ex-China Index contributed to the overall decline as well, falling for the third consecutive week to a five-month low of 47% from 58% the week before.  Steel prices weakened in the US, Middle East, Europe, the CIS and India, while less strength was seen in East Asia.

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 – Brazilian flats maker ArcelorMittal Tubarão shut down the No. 1 blast furnace at its plant in Espirito Santo state on Friday. The revamping of the 3 million tonnes per year capacity furnace will take 3 months; MT restarted the 1.3m tpy No.2 blast furnace in March in anticipation of the shut down.

Steel Market Production Cuts – Singaporean Steel Maker NatSteel Holdings has ordered the modernization of its finger-shaft electric arc furnace in its Singapore Works. Commissioning of the modernized furnace is planned for March 2013.

Sources: Steel Business Briefing, Steel Orbis

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Metals USA (MUSA) reported 1Q earnings of $0.44/share, matching the Street’s expectations and up 33% from 4Q earnings of $0.33/share and year-ago EPS of $0.33.

Guidance for 2Q was for higher EPS than 1Q “despite a difficult business environment,” due to greater shipping days and rising prices based on lagged index-based contracts. Management expects steel prices to be “range bound” in the 2Q as mills aren’t “interested in raising prices.” Demand for almost all of MUSA’s customer segments has remained solid, management said, although the improvement in non-residential construction activity has been driven by the mild winter and continues near the bottom.

Our full report is available to subscribers only and provides further thoughts on MUSA’s 1Q conference call, as well as our opinion on the stock and the implication for other steel equities.

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The number of active oil and natural gas rigs in the United States increased 1.1% to 1,972 for the week ending April 20, 2012. The rig count is up 9.6% from the year-ago level and is just 2.7% 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 11.0% to 146 this week from 164 the week before, marking the eleventh straight weekly decline. The rig count is 2.1% 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.

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March global steel production rose another 2.3% to a new all-time record of 4.264 million tonnes per day (mtpd), with nearly 2/3 of the uptick due to Chinese output nearing prior all-time records.

The global production recovery has been uneven, with US production still down 12% from pre-recession highs, while Chinese production is actually up 48% over the same time frame. The irony of course, is that in March as Chinese production neared all-time highs, some 8.2% of the Chinese total – 5.03 million tonnes – was exported.

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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The spot reference price for 62% Fe iron ore cfr North China fell to $148.40 on Friday, April 20, 2012, down 0.7% from $149.40 last week, which was the highest level since October 18.  The week-on-week drop was the first since the week ending March 9.

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

Steel Market Production Increases – The Chinese Iron and Steel Association (CISA) reported on Wednesday that crude steel production for the first 10 days of the month averaged 2.03 million tonnes per day, up 7% from the last 11 days of March and a new all-time record.

Steel Market Production Increases –Jiangsu Yulong Steel Pipe, a Chinese welded pipe producer intends to begin production at a new longitudinal submerged arc welded pipe plant at its plant in Huocheng County in early 2013. The new operation will increase production capacity by 120,000 tonnes per year.

Steel Market Production Cuts –Due to declining demand for electro-galvanized products in Europe, ArcelorMittal intends to reduce output at its second line in Dudelange, Luxembourg. The line, along with the already idled number 1 line, has a combined production capacity of 400,000 tonnes per year.

Sources: Steel Business Briefing