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.

Our full report is available to subscribers only and provides further thoughts on Schnitzer’s full-year 2011 earnings report and conference call as well as the implication for the stock and other equities.

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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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Steel Market Production Increases – US Steel has commissioned a new quench and temper line at its seamless pipe mill in Lorain, Ohio. The new line will have a production capacity of 264,000 tpy.

Steel Market Production Increases – Chinese steelmaker, Xilin Steel has announced that its 1,260 cubic meter blast furnace will be commissioned in early April. The blast furnace has a designed capacity of 1.02 million mt.

Sources: American Metal Market, SteelOrbis

The number of active oil and natural gas rigs in the United States remained unchanged at 1,979 for the week ending April 5, 2012. The rig count is up 11.1% from the year-ago level and is just 2.3% 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 27.0% to 187 this week from 256 the week before, marking the ninth straight decline. The drop puts the rig count 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.

Steel Market Production Increases – Al Tanmiya for Steel Industries is hoping to commission its new long product steelworks in Iraq by July. The new EAF facility will have 300,000 tpy rebar and 450,000 tpy billet capacity.

Steel Market Production Increases – Nova Steel has upgraded its Montreal tube mill with two new standard and structural lines. The smaller of the two mills is expected to come online in late 2012 and the larger is expected to go live in the first quarter of 2013.

Steel Market Production Increases – SSAB’s plate rolling operations at its plant in Oxelösund, Sweden are expected to restart this week after an outage caused by an incident that disrupted power to the plant on March 24^th.

Sources: Steel Business Briefing

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Nucor (NUE) is following ArcelorMittal (MT)’s recent $20/ton sheet price increase effective immediately, according to trade press.  The difference in these two price increases is that Mittal’s original increase was a “firm” $700/ton so that their $20/ton brings the HRC price to $720. Nucor’s pricing move is an increase of $20/ton but Nucor doesn’t publish a “firm” sheet price.

While there will be a great deal of debate on exactly where HRC prices are today, we would point out two things – first, Nucor has rarely, if ever, announced a sheet price increase that has not mainly stuck. Second, same thing with ArcelorMittal.

Our full report provides further thoughts about domestic and global steel prices as well as the implication for steel equities.

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Steel Market Production Cuts – Czech plate and sections producer Evraz Vitkovice Steel shut down its heavy sections mill on March 31 due to a lack of demand for long products. The mill has an annual capacity of 120,000 tpy, representing 10% of Evraz Vitkovice Steel’s total capacity.

Steel Market Production Increases – Workers at Schnitzer Steel subsidiary, Cascade Steel Rolling Mills have returned to work today after a Monday evening walkout that was unauthorized by the United Steelworkers Union. The Cascade Steel Rolling Mills have an annual production capacity of approximately 800,000 tpy.

Sources: Steel Business Briefing, American Metal Markets