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OAO TMK (TMK) reported 4Q adjusted EBITDA of $223m, a 10% improvement sequentially, on flat revenue of $1.60B. The company reported an improved product  mix, marked by a 28% rise in seamless OCTG and premium connection sales, and lower raw material prices.

Guidance for 1Q was for these trends to continue leading to higher EBITDA and EBITDA margins in the quarter compared with 4Q and similar to year-ago results.  The company also had a constructive outlook for full year 2012 due to expectations for improved volumes and a richer product mix.

Our full report is available to subscribers only and provides further thoughts on TMK’s 4Q earnings report and conference call as well as the implication for the stock and other equities.

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Steel Market Production Cuts – Sichuan province’s Xichang city is upgrading its power grid and severely affecting HRC production at Panzhihua Iron & Steel’s steelworks as a result, while Chongqing Iron & Steel will lose 20,000t of HRC to a maintenance outage this month.

Steel Market Production Increases – Kardemir Demir Celik, one of Turkey’s biggest rebar producers, is set to complete and commission a third rolling mill by August that will have an initial capacity of 1.2 mtpy.

Steel Market Production Increases – Tokyo Steel’s March production will be 14% higher than last month, reaching 250,000 tons, with the restart of exports.

Sources: Steel Business Briefing, Metal Bulletin, Bloomberg First Word

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The American Institute of Architects’ ABI Index – a leading economic indicator of non-residential construction activity 9-12 months into the future – posted a reading above 50 for the fourth consecutive month in February, coming in at 51.0, slightly above January’s 50.9 (any reading higher than 50 means the number of architects reporting “rising billings” outpaced the number reporting “declining billings”).

The new project inquiry index rose 2.2 points to 63.4, the highest level since July 2007 and the fourth successive reading above 60, the first time this has happened in four and a half years.

Our full report is available to subscribers and provides further thoughts on the February ABI Index as well as the impact on steel equities.

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After increasing four straight weeks to a one year-high of 87% last week, our Advance/Decliner Index fell back to 74% this week (any reading over 50 means that the number of price increases exceeded the number of declines).

Our Ex-China Index declined for the first time in five weeks as some mills – most notably in Turkey – were reducing export offers due to a slowdown in overseas demand.  Our China Index fell to 80% from the 7-month high of 92% reached last week, although pricing continued to improve for most products.

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 – ArcelorMittal has proposed to idle its electric arc furnace and continuous caster at Schifflange, Luxembourg, for an indefinite period of time due to continued weakness in the European construction market.

Steel Market Production Increases – According to China Iron and Steel Association’s latest production “flash,” China produced 1.898m tonnes/day of crude steel during the first ten days of March, up 13.1% from 1.679m tpd in the last nine days of February.

Sources: Fox Business, Steel Business Briefing

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With nearly 2/3 of February’s global steel production increase coming from a resurgence in China, output rose 4.2% to 4.110 million tonnes per day (mtpd), in line with the typical seasonal uptick of 4.6%.

Increases included a seasonal 7.8% increase in the EU, as well as pick-ups in the Middle East (up 11.3%), South America (up 6.9%), China (up 5.3%), Asia ex-China (up 2.8%), and North America (up 0.8% with the US up 0.7%).  The most meaningful decline was recorded by Turkey, with production falling 5.1%, while output was down a nominal 0.2% in the CIS.

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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Metalico (MEA) swung to a 4Q loss of $(0.06)/share after posting a profit of $0.11/share in 3Q, missing the Street’s estimate of a $(0.01) loss as “sluggish” pricing hit metal margins.  The company built inventories ahead of the start-up of a new shredder which impacted margins/volume in 4Q as well.

Guidance through the first six months of the year is for ferrous scrap prices to remain stable, trading in a narrow range, while the company forecast both domestic and export demand to stay “firm.” Improving energy and automotive markets coupled with a slow US economic recovery should continue to drive demand for steel, and the company’s scrap shipments are expected to trend substantially higher in 2012 as Metalico’s Buffalo shredder, which started recently, gradually ramps up to full capacity of 12,000-15,000 tons per month (tpm).

Our full report is available to subscribers only and provides further thoughts on Metalico’s 4Q earnings report and conference call as well as the implication for the stock and other equities.

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February MSCI shipments declined 2.0%, only nominally worse than the typical sideways sequential move we see, while inventory tons rose 1.9%, leading to months’ supply (MOS) rising nominally from 2.3 to 2.4.

The third consecutive monthly increase in inventories lifted tonnage to another post-recession high, while February shipments were still the second highest since September 2008 despite the modest sequential decrease.  Average daily shipments were 9.2% higher year-over-year, with all steel products posting gains.

Our full report is available to subscribers and provides further thoughts on February distributor shipments and inventories by product as well as implications for steel equities.

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