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Tenaris (TS) reported adjusted 1Q EBITDA of $718.2m, modestly higher than the Street’s $708.2m and 1.2% above 4Q’s adjusted $709.6m.  Management attributed the higher EBITDA margin in 1Q to lower raw material costs and plant allocation efficiencies.

Guidance for 2Q was for stable operating margins on higher sales in 2Q (on modestly improved volumes), leading to higher operating income.

Operating margins are expected to remain close to current levels through 2012, management said, with Tenaris’ average selling prices perhaps increasing owing to product mix improvements. The company expects strong year-on-year growth in sales and operating income during the remainder of the year.

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

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After rising a modest $2/ton (0.1%) in March, April OCTG prices fell back a similar $3/ton or 0.1% to $1,913/ton, according to data released by Pipe Logix.

The seeming anomaly of weak pricing in a strong drilling environment is due to a meaningful increase in supply, largely from a 225% jump in imports over the past few years. March quarter OCTG imports rose 30%, lifting import market share to 62% in the 1Q, the highest since 1Q 2009, the quarter before the landmark Chinese trade case was filed. Chinese imports have largely been replaced now with tonnage from Korea, where imports have grown some 167%.

Our full report is available to subscribers and provides further thoughts on OCTG pricing and margins as well as the implications for shares of OCTG producers.

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Steel Market Production Increases – Evraz North America’s rod and bar mill in Pueblo, Colorado resumed operations on Thursday after a fatality on Tuesday. The Pueblo facility has 500,000 tpy capacity and produces, rod, bar, rail and seamless pipe.

Steel Market Production Increases – To support increased SBQ demand from the automotive industry, Brazilian steelmaker Gerdau plans to increase rolling capacity at its Pindamonhangaba mill in São Paulo from 700,000 tonnes per year to 1.2 million tonnes per year by the end of 2012. The producer also plans to increase rolling capacity at its Mogi das Cruzes mill in Sao Paulo from 216,000 tonnes per year to 276,000 by 2012.

Steel Market Production Cuts – Italian steel producer ILVA has temporarily halted production on the electro-zinc line at its Taranto plant. The closure is set to last until mid-May with the company taking advantage of weak demand to carry out maintenance.

Sources: Steel Business Briefing

Steel Market Production Increases – Chinese steelmaker Daan Special Steel is building a new 2 million tonne per year plant in Xinjian, China. The 800,000 tonne per year first phase of the project is scheduled to begin production in November of this year.

Steel Market Production Increases – Chinese steelmaker Jigang Group expects commissioning on phase 1 of its 300,000 tonne per year steel section and pipe project by May 10.

Steel Market Production Increases – Feida Group’s new EAF melting unit, the largest in China with a capacity of 1.8 million tonnes per year, was recently tested.

Steel Market Production Increases – According to the China Iron & Steel Association (CISA), China’s daily crude steel output during the second 10 days of the month was estimated at 2.005 million tonnes per day, down 1.26% from the first ten days.

Steel Market Production Cuts – ThyssenKrupp Steel has postponed plans to relight its number 9 blast furnace located in Duisburg Germany in June citing a lack of demand. The 1.7 million tonne per year capacity furnace was idled in January for a reline.

Sources: Steel Business Briefing, SteelOrbis

The number of active oil and natural gas rigs in the United States fell 1.4% to 1,945 for the week ending April 27, 2012, the lowest count since August 5, 2011.  Despite the fall, the rig count is still up 7.0% from the year-ago level.

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 decreased 8.2% this week to 134 from 146 last week, marking the twelfth consecutive drop.  The rig count was one rig higher than last year however.

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 fell to $145.40 on Friday, April 27, 2012, down 2.0% from $148.40 last week.  The price of iron ore had posted continuous declines from the recent peak of $149.40 on April 13 through Thursday when the price fell to $143.80 – the lowest since March 23, 2012 – before rebounding slightly today.

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 – ArcelorMittal’s new 600,000 tonne per year seamless pipe mill in the Saudi Arabian city of Jubail is slated to begin testing late this summer with production planned to start at the beginning of 2013.

Steel Market Production Increases – Russian billet producer Volga-Fest has suspended production at its 270,000 tonne per year EAF-based mini- mill due to transformer issues. The mill primarily exports to the Middle East.