Rio's Oct-Dec iron ore prices to fall 13% to $127/t fob

Rio Tinto’s head of iron ore, Sam Walsh, said iron ore prices for October-December are likely to fall by at least 13% from the current quarter to around $127/tonne fob.

With freight rates between Australia and China around $12/t currently, this would put the contract price for the fourth quarter at some $138-139/t cfr. This corresponds to the $138/t cfr China predicted by Steel Business Briefing last week, based on average spot prices for June-August published by The Steel Index. This would mark a $20/t drop from July-September prices.

Walsh was speaking at the opening of Rio’s new US$1.5bn Brockman 4 mine in Western Australia on Thursday, and added that such a price would represent a more “sustainable” level after consecutive quarterly price increases. Some reports indicate that the new contract price has already been agreed between Rio and its major customers.

As discussed in detail in the August issue of SBB's Raw Materials Xtra, Rio bases its quarterly contracts on average iron ore index prices adjusted for freight and moisture content to produce a US cents/dry metric tonne unit fob price.

Walsh said Brockman 4 will initially produce 22m t/y, and could double output as the miner ramps up its Pilbara capacity to 330m t/y. Rio is also investing half of US$1.6bn to develop the Hope Downs 4 project with joint venture partner Hancock Prospecting. Hope Downs is set to produce around 15m t/y of iron ore by 2013.

Billet buyers stay on sidelines of SE Asian import market

The billet import market in Southeast Asia is quiet this week because importers are generally adopting a wait-and-see approach. Offer prices are relatively unchanged from last week at around $590-620/tonne cfr, depending on origin.

Suppliers of Russian material are giving quotes at around $590-600/t cfr Philippines and for Taiwanese material, at $595-600/t cfr SE Asia. The Malaysian and Thai mills are quoting $600-605/t fob ($620-630/t cfr SE Asia) for their billet. 

Regional importers are giving bids at around $580/t cfr SE Asia. Bookings were made at $580-585/t cfr in the region one-two weeks ago. Some trading sources say that buyers may be able to bring down the price of certain offers. "Scrap prices are falling. If buyers can give a firm bid, suppliers may be willing to discuss," a Taiwanese trader says.

“Buyers would rather wait for the Middle East and European markets to return,” a regional trader tells Steel Business Briefing. “There is demand here but buyers are afraid that finished steel demand may not pick up,” he adds. The Islamic fasting month will be over next week and the Europeans will be resuming work after their summer holidays. 

“The market is not moving. It will be clearer in two weeks’ time,” another trader says. He tells SBB that he has cautioned his buyers that increased seasonal construction activity (in many parts of the region) in the fourth quarter will lift billet buying and prices in the coming weeks.

Global markets uncertain, as large economies waver - WSR

While scrap and iron ore spot prices weakened a little last week, a number of producer list prices are rising. It would appear that, with steel demand and sentiment not as strong as many expected at the end of August (going into September), spot raw material prices declined. Consumption in China remains quite uncertain and that has impacted spot iron ore in particular. 

Nevertheless the June-August average TSI 62% Fe spot reference price was down by just over 12%. Thus the Vale and Rio Tinto Q4 contract prices are expected to fall by something similar, depending on freight costs.

With fears of a double-dip recession continuing, the US economy too may not as firm as some traders and analysts had anticipated a few months ago. Scrap surcharged flat and long product prices may rise in the coming weeks, as may some strip producer prices. Inventories are low, but there are doubts on how long the producers, can hold them in a soft market. 

Similarly in Europe, there are concerns about announced producer price increases. With raw material costs having risen year-on-year, some rebar prices have been lifted by €20-30/t, and ArcelorMittal is looking for €50-70/t more for sections from September. In addition, a s most analysts now believe the EU economy, led by Germany, is stronger than that of the USA, producers are likely to be encouraged to lift coil prices by up €30-50/t in Q4. ThyssenKrupp, Salzgitter and Voestalpine are all said to be running at good capacity utilisation rates, reflecting firm automotive demand.

In Asia, producers too are keen to hike prices, but increases so far seem small, and traders report not much improvement in demand. Though Chinese exports to Europe were strong in July, tighter margins are likely to mean a renewed focus on nearer markets, including India. Q4 is traditionally the strongest season in the region.

This analysis of global markets has been adapted from Steel Business Briefing's World Steel Review of 1 September.

Majority of companies expect steady demand: The Steel Index

A growing number of companies expect steel demand to remain stable in the next three months, according to the latest market survey results from The Steel Index, released this week. Expectations of higher prices slipped down among US companies, but rose in Europe. 

53% of companies globally foresee stable demand, up from 45% last week, and 30% expect higher demand, down from 38% (see table). 52% of US respondents expect steady demand, up from 41% last week, while 24% forecast higher demand, down from 41%. Expectations of unchanged demand in Europe rose to 58% of companies from 51%. 

52% of North American companies expect higher prices in the next three months, down from 68%, with 24% foreseeing stable prices and an almost unchanged 24% expecting lower prices. The number of European companies expecting higher prices rose to 44% from 31%, while 19% foresee stable prices and 37% expect lower levels. 49% of companies globally foresee higher prices in the next three months, down from 51% last week. 31% expect lower prices, down from 34%.

14% of respondents globally reported higher steel inventories, up from 11%, and 53% had stable stock levels compared to the previous week. 18% of US respondents had higher stocks than in the previous week, up from 14%, while 36% had stable inventories, down from 52%. 12% of European companies had higher inventories than the previous week, and 59% reported stable stock levels. 

More information about The Steel Index - which is majority-owned bySteel Business Briefing - is available on its websitewww.thesteelindex.com .

Brazil announces a new 11.5bn t iron ore deposit

Brazil's Mato Grosso state government has announced the discovery of a 11.5bn-tonne iron ore reserve in Mirassol D'Oeste city, with average grading quality of 41% Fe. After one year of drilling work, these deposits are expected to be larger than the Carajás iron ore region, in the northern Pará state.

According to government's officials, "The mining rights are owned by mining company Global Mining Exploration (GME4), and after a reserve confirmation process and feasibility studies, these rights might be put on sale." Steel Business Briefing understands, however, that logistics might be an issue for the development of the assets.

"This (proven reserves) would be amongst the largest iron ore discoveries of the past years, being compared to proven reserves of Vale's Carajás at 7.1m tonnes. However, we still need to wait for further details of the potential operations, mainly funding/logistics," says Barclays Capital analyst Leonardo Corrêa.

SBB notes that Vale and MMX also operate iron ore plants in the Corumbá region, a neighbor state of Mato Grosso do Sul. Both operations are known for high-grade ore - mainly lump - but they operate at low rates due to logistical problems draining their output. Currently, production in the region is transported via barges down the Paraguay river to Argentina's ports, which could be used by the Mato Grosso project as well, SBB figures.

SBB Special Report: US longs market waiting for price hikes

US market players are already anticipating mills will soon announce scrap-driven price increases for most long products later this month,Steel Business Briefing learns from market sources.

A benchmark shredded scrap price could increase as much as $40/long ton, with many sources expecting prices on beams, rebar, merchant bar and wire rod to increase by at least part of that amount, if not all.

“Most likely, prices will increase by the scrap amount unless it is very large (scrap price) increase,” said one beam source. He added that a recent $25/short ton price hike for September is sticking, 
“because imports are few and domestic mills don’t appear to be beating each other up.” 

Wide flange beams selling for around $750/s.t, fob mill.

A rebar source told SBB he expects prices will go up $20-30/s.t if scrap is up $40-50/l.t when the benchmark price is published next week.

“The problem is that the (rebar) market is still soft and winter is coming,” he added. “I do not know what the scrap number will look like in October through December. That will make everyone cautious, unless it is going to keep going up - and I think that is doubtful.”

A mill source disagreed, saying he believes a $30-40/l.t scrap increase will move long product prices up by the full amount.

A wire rod market source said, “I will be surprised if the mills wait until Labor Day (Monday) to announce a price increase. They may wait until the 10th of the month to make it official . . . I know the scrap industry well enough not to make predictions,” he added.

Indian coil producers lift prices on stronger markets

Indian mills have hiked their base prices for flat products by about Rs 1,000/tonne ($21.4/t) for September in line with the strengthening of international prices and in view of what they see as “recovery signals” in the domestic market.

JSW Steel, which lifted its base prices by 3-4% over August levels, is now offering 2mm commercial grade hot rolled coils for Rs 33,000/t and 1mm D grade cold rolled coils for about Rs 37,500-38,000/t ex-works, Steel Business Briefing learns from the company.

State-owned Steel Authority of India Ltd has reduced the discount offered on flat products by Rs 1,000/t. Tata Steel is also contemplating a “modest price hike – of about 4% – in view of the improved market sentiments,” a senior company official tells SBB.

Further easing the pressure on mills is the decreasing HRC inventory levels, primarily those of imports from China. Import stocks in Mumbai alone fell to 300,000-400,000t in late August from about 500,000-600,000t in mid-July. Including the mills’ own stocks, the total HRC inventory available in the domestic market stood at about 600,000-700,000t late last month. 

“Mills had come under severe pressure to maintain their profitability as prices slumped in the past few months, but there was no respite from high input costs,” a Mumbai-based trader tells SBB. “Now that international price levels seem to be firming up, Indian mills are following suit.”

Domestic producers expect market sentiments to remain positive in the coming months and hope to see further price increases in October.

Korean steelmakers riding car sales boom

Korean producers of automotive sheet are enjoying buoyant business thanks to continued growth in the country’s automotive sector. Hyundai Hysco, affiliated with Korean auto giant Hyundai Motor Group, says its production lines are running at full capacity and squeezing additional output will be impossible.

“Our auto sheet output has been almost full since the beginning of this year,” a Hysco spokesman says. “This means our company has almost no room to lift capacity utilization further – even if output or sales of vehicles from automakers significantly improves,” he tells Steel Business Briefing.

Hysco has a capacity of 3.8m tonnes/year for cold rolled and other coated products, with auto sheet output accounting for about 2m t/y.

The re-roller was commenting on the release of data Wednesday that showed domestic and export sales of Korea’s top five carmakers surged 29% last month from August 2009, to reach 512,500 vehicles. Home market sales climbed 20% year-on-year to 109,800 units, with overseas shipments jumping 32% to 402,700.

Driving up the total was the country’s largest maker, Hyundai Motor, whose total sales last month reached 288,300 units, within which exports accounted for 239,000 units, up 20% y-o-y. 

Its affiliate Kia Motors Corp – the country's second largest automaker – enjoyed even stronger export sales growth last month, posting a sizzling 56% climb to 112,000 units. Its domestic sales climbed 53% to 38,620.

Korean plate stocks plunge 23% in July

Stock levels of the seven major flat steel products held by Korean distributors in July remained almost unchanged from a month earlier. The flats inventory total in July dipped by only 1.1% or by 12,000 tonnes to 1.04m t from June’s 1.05m t.

But the changes in stock volumes varied considerably by product. That of heavy plate declined fastest among the flat product stocks, falling by 23% month-on-month or by 34,000 t in July to 117,000 t. Improving demand from Korean shipbuilders fuelled active sales from local distributors, the Korea Iron & Steel Association (Kosa) notes. 

Efforts by Korean steelmakers to secure certification for ship plate produced on their new facilities will result in more ship plate deliveries from mills to distributors and shipbuilders, Steel Business Briefing learns from industry sources, but what effect this might have on stocks is unclear.

Though data on flat product stocks for August will not be available for several weeks, Kosa predicts that Korean steelmakers’ deliveries to local distributors of flat products – those of heavy plate and hot rolled coil in particular – will see some decline again.

The dip will reflect the drop in steel supply from maintenance shutdowns carried out by Posco and Hyundai Steel during July and August and, in some cases, into this month. The No.1 and 3 plate mills at Posco’s Pohang works are under repair during 23 August-3 September. Hyundai undertook maintenance on the hot strip mills in Dangjin from 30 July-23 August, Kosa adds.

China’s Sinosteel plans to invest in silicon steel mill

Sinosteel Group is planning to build a non-grain oriented silicon steel mill in Hunan province’s Shaoyang City. It will target local downstream industries, such as white goods and transformer manufacturing.

This electrical steel mill is designed to have a capacity of 160,000 tonnes/year. The construction work for the project will take about 14 months. However, as this project is still in the initial planning stage, it is currently unknown when construction will start.

According to an announcement issued by the Shaoyang city government, Sinosteel will invest RMB 500m ($74m) in the project, and design work on the mill’s equipment has already been started. 

After the mill’s commissioning, Sinosteel will become a competitor of Valin Group and ArcelorMittal, who are also jointly building a silicon steel mill in Hunan province’s Loudi city, as Steel Business Briefing reported. This joint venture will have a 200,000 t/y mill producing NGO silicon sheet and a 100,000 t/y facility for GO silicon. It is expected to be commissioned late next year.

Taiwanese rebar prices weaken on falling scrap prices

Reflecting falling scrap prices, major Taiwanese rebar maker Feng Hsin Iron & Steel readjusted its pricing strategy for this week on 2 September by trimming off TWD 300/tonne ($9/t) on its rebar prices, marking an end to a month of price increases.

On 30 August Feng Hsin increased its rebar prices for this week by TWD 300/t, which was said to be a delayed reaction to last week’s rebar market, as Steel Business Briefing reported.

After the price reduction, Feng Hsin’s list price for medium-sized SD280 rebar is now TWD 19,300/t ($603/t). However, some Taiwanese market sources believe the new prices are still not attractive to Taiwanese buyers as the demand for rebar remains very sluggish.

A senior official with another Taiwanese rebar maker Wei Chih Steel Industrial Co says the domestic rebar market is so weak, that the mill has already stopped offering domestic list prices, and instead, has shifted its focus to the export market.

He says their rebar export offer prices are currently around $640/t fob, which is unacceptable in the weak domestic market. This month, more than half of Wei Chih’s rebar production will be headed overseas, the official adds.

China's Antai installing heavy beam mill

Shanxi Antai Group, a steelworks in northern China’s Shanxi province, has started to install the facilities for its 1.2 tonnes/year H-beam mill,Steel Business Briefing learns from the company. The company expects to commission the new mill early next year. 

The line, with its main equipment supplied by Germany’s SMS Meer, can produce H-beams with a flange depth of 200-1,000mm. A company source told SBB that the ability to make large-sized beams means Antai can avoid fierce competition in light beam markets, caused by the massive domestic capacity for small-sized beams. 

Competition for small-sized beams is strong Hebei province, just east of Shanxi, as it is home to dozens of makers of the product. 

SBB understands the world financial crisis delayed the start of the mill’s construction, which began around 2007. The company also saw increasing demand for traditional construction steel generated by stimulus package and decided to complete construction on a proposed wire rod mill first. 

The wire rod mill, with a capacity of about 800,000 t/y, was put into operation last year, and was the company’s first rolling mill. 

Antai's crude steel capacity is currently about 2.4m t/y.

China’s welded pipe prices rise

China’s domestic welded pipe prices rose slightly this week, as a response to the rally in upstream narrow strip prices. Steel Business Briefing learns that prices are unlikely to fall supported by higher prices for the raw material.

In Shanghai, traders were offering 114x3.75mm electric resistance welded (ERW) pipes (Q235 grade) from Hebei province at around RMB 4,550-4,600/tonne ($668-676/t) with 17% VAT on 2 September. Some traders raised their prices slightly earlier this week by about RMB 30-50/t ($4-7/t) from the previous week, while other traders kept their prices unchanged. 

As September and October are part of the traditional peak season for steel transactions, traders have better attitudes towards the market now. 

SBB learns narrow strip makers in Hebei raised their ex-works prices by RMB 40/t on 2 September, after a price hike of RMB 30/t on 30 August. This took new prices to about RMB 4,240/t (depending on width). 

Although demand hasn’t improved, narrow strip mills are tentatively raising their prices in light of the market sentiment that the central government’s order for mills to control their energy consumption will lead to lower steel output and boost steel prices. 

As a result, ex-works prices for 114x3.75mm ERW pipes from mills in Hebei’s Tangshan city were at around RMB 4,350/t ($639/t) on 2 September, up about RMB 50/t from the previous week. Mills say transactions have improved and most are keeping a positive outlook.

Buyers bargain down Asian stainless prices

Asian stainless prices retreated this week as buyers continue to bargain down prices. Transacted prices of East Asian-origin grade 304 stainless cold rolled sheets for delivery in one-to-two months are heard at $3,000-3,100/tonne cfr China this week, down from $3,100-3,150/t cfr China a week ago.

New September offers from Taiwan rose to $3,150-3,200/t this week, from $3,100-3,200/t a week ago. This follows the decision to Taiwan’s largest stainless producer Yieh United Steel Corp (Yusco) to increase its austenitic stainless prices by $60-80/t for September. 

But traders say customers are so far unenthusiastic about the higher offer prices. “Customers want better prices and will negotiate prices down to $3,050-3,100/t,” a Taipei source tells Steel Business Briefing.

Meanwhile, Japanese sellers are keeping offer prices at $3,300-3,400/t, traders say. “The Japanese mills do not want to drop prices because their export costs are high. They would rather sell to the domestic market,” says a south China trader. Traders say they have not received new offers from Korea this week. Korean offers at around $3,200/t last week.

Generally stable prices in the Chinese domestic spot market relative to the higher import prices are discouraging buyers from procuring imported materials, industry observers say. “It is around $100/t more expensive for downstream users to use imported materials (as compared to domestic coils) as raw materials. Those who can make do with local coils will just buy local,” adds the second trader.

Three-month nickel prices finished at $21,105/10/t on 1 September, up around $1,000/t from a week ago.

NSSC lifts austenitic CRC, plate prices for September

Nippon Steel & Sumikin Stainless (NSSC) has decided to lift domestic prices of its austenitic cold rolled coils for September shipment and plates for September contracts/November shipments by ¥10,000/tonne ($119/t) to reflect higher nickel prices, the company announced Thursday.

Explaining its decision, NSSC said that average LME nickel prices in August increased by 86 US cents/lb from July to $9.71/lb. Thus, the Japanese mill’s new price of austenitic CRC below 2mm becomes ¥350,000/t ($4,157/t), with an alloy surcharge of ¥60,000/t ($713/t) and base price unchanged at ¥290,000/t ($3,444/t).

Last month, the company had cut its ferritic CRC prices by ¥5,000/t for August shipments to reflect lower ferro-chrome prices for the current quarter. Thus NSSC’s ferritic CRC below 2mm for September shipment remains at ¥260,000/t, with the alloy surcharge of ¥15,000/t and the base price of ¥245,000/t.

NSSC says Japan’s stainless sheet market is witnessing slow deliveries for ‘miseuri’ or spot contracts, but that contracts for ‘himotsuki’ or long-term business are stable – a condition it expects will be maintained for the foreseeable future.

It also notes that stainless flat rolled imports have been increasing from January and that tonnages will continue to be closely monitored. 

Japan’s total stainless imports during January-July surged 58% year-on-year to 94,300 tonnes, with stainless CR accounting for 39,592 t and stainless HR 35,419t, Steel Business Briefing learns from the Japan Iron & Steel Federation (JISF). 

The jump partly reflected low volumes last year, the JISF says, but imports also rose because of the stronger Japanese yen and these may continue increasing while the yen is high, it says.

Ikeuchi Seiko to start producing bright bars in China

Japanese special steel maker Ikeuchi Seiko is to build a plant in China with trader Sumitomo Corp to supply bright steel bars to auto parts makers in southern China for use in suspensions, shafts and other components.

Ikeuchi-Summit Precision Processing, to be owned 60% by Ikeuchi and 40% by Sumitomo, will be established in October to manage the facility. The plant will be built in Foshan, Guangdong, and boast a capacity of 18,000 tonnes/year of 6-24mm dia bright bars. Operations will start from October 2011. 

“Initially we’ll be supplying Japanese auto transplants in southern China but later we’ll target American and European makers too,” a Ikeuchi spokesman tells Steel Business Briefing. Nissan Motor – through its local venture Dongfeng-Nissan – plus Honda Motor and Toyota Motor are producing over 2m units annually in southern China and output will continue expanding.

Supplying these three firms are some 154 auto parts makers in and around Foshan, SBB notes. 

Initially, wire rod feeds will be supplied from Japan but with Chinese automakers trying to increase local procurement, in the future the venture may tap Chinese special steel makers.

This venture will be Ikeuchi’s first abroad, but already the firm is considering an expansion to produce CHQ wire products.

Ikeuchi is producing bright bars, CHQ wires and peeled products at its Yokosuka plant near Tokyo. Parts makers for Nissan are its largest customers, and thanks to stronger demand from the auto sector generally, shipments are averaging 8,000 tonnes/month or about 90-95% of peak. 

Daido Steel, Kobe Steel and Sumitomo Metals (Kokura) are Ikeuchi’s key wire rod suppliers.

Korean re-rollers lift prices of austenitic CRC for Sept

Korean stainless re-rollers Hyundai Steel and BNG Steel, have lifted their domestic prices of austenitic cold rolled coil for September deliveries. This follows the price hike of KRW 200,000/tonne ($167/t) for stainless hot rolled coil that Posco announced late last month.

Prices of grade 304 CRC (2mm) from Hyundai will rise by KRW 212,000/t ($178/t) to KRW 3.989m/t ($3,357/t), and those from BNG by KRW 246,000/t ($206/t) to KRW 4.618m/t ($3,887/t). The prices for grade 430 CRC from both re-rollers remain at KRW 2.415m/t and KRW 2.875m/t respectively.

Local distributors of stainless CRC plan to pass on higher prices to their customers from next week but they doubt their buyers will accept. 

This is because a lack of domestic demand, plus fewer working days this month. As Korea’s Chuseok (harvest moon festival) holidays are scheduled for 21-23 September, this will impact the operations of many steel makers and other related companies.

Stainless CRC output in July from Posco and Korea's other re-rollers reached 101,000 t, a decrease of 1.3% month-on-month, but a rise of 19.1% year-on-year. Domestic CRC sales reached 64,500 t, up 4.3% m-o-m and up 14.2% y-o-y, according to Korea Iron & Steel Association data released in late August.

Taiwan stainless prices remain flat for September

As a response to falling nickel prices, Taiwan’s two largest stainless steelmakers, Yieh United Steel Corp (Yusco) and Tang Eng Iron Works, have kept most of their 300-series domestic prices unchanged. Their new list prices cover the first half of September.

Yusco is keeping the domestic prices of its grade 304 and 430 hot and cold rolled products unchanged from their late August levels. Prices of grade 316L HR/CR products will increase by TWD 2,000/t ($63/t), however. Yusco also announced that it will raise its export prices for its 300-series products by $60-80/t, and by $30-50/t for its 400-series products.

As a result, Yusco’s domestic-delivered list price for grade 304 HRC 2B 2mm is TWD 111,000/t ($3,474/t), while for grade 304 CRC 2B 2mm the price is TWD 115,000/t. Export and 430 prices are unavailable. 

An official with Yusco says the company’s decision to leave most prices unchanged reflects the drop in nickel prices in the second half of August. 

Meanwhile, Tang Eng’s domestic list price for grade 304 HRC 2B 2mm is TWD 108,000/t, while the price for 304 CRC 2B 2mm is TWD 112,000/t, according to a 31 August release from the company. It raised its export prices of 300-series products by $140/t. The new prices are unavailable, however. 

A Tang Eng official says the increase in export prices is due to the rise in nickel prices throughout August as it adjusts its exports prices less frequently. Tang Eng is still keeping its production at 80% of capacity,Steel Business Briefing is told.

Coking coal spot prices boosted by strong Q4 contract deal

The higher than anticipated settlement price for fourth quarter hard coking coal contracts has given the spot coal market a boost, lifting ex-Australia offer prices to around $200-205/tonne fob this week.

Spot prices were around $185/t fob towards the end of August but have improved on the strong October-December settlement of $209/t achieved by BHP Billiton-Mitsubishi Alliance (BMA), with transactions of $195/t fob being heard.

Demand for coking coal is rebounding in China as mills lift steel production, though coke producers are generally not buying. Steel Business Briefing hears that BMA has been selling material into China at a $20/t premium to prevailing contract prices this quarter.

In India, however, demand remains weak. Some mills with long-term coking coal contracts have been unable to use the material and are selling the coal in the market. Xstrata is offering spot at close to the new benchmark but is finding few takers.

Freight prices between Queensland and India are around $25/t while freight to China is under $20/t currently, traders say.

In their talks with BMA, Japanese mills had reportedly asked for $190/t for October-December contracts but SBB hears it was even lower at $170/t. A trader based in Singapore says BMA’s near-monopoly position in the market and “longevity” puts the company in a very powerful negotiating and marketing position.

“The number of [spot] offers at benchmark tells me the benchmark is a little higher than it should've been; but BMA can say ‘if you want long-term coal then you have to pay a premium',” the trader tells SBB.

Impasse continues in Chinese FeCr import market

The deadlock in China’s ferro-chrome import spot market continued this week with buyers and sellers failing to agree on prices. Offer prices from India remain at around 100 US cents/lb cfr China but buyers in China are only willing to buy at below this level.

Prices of India-origin FeCr (6-8% C, 58-60% Cr) were at 96-98 cents/lb cfr China in mid-August, but no deals could be confirmed this and last week due to the standoff between buyers and sellers. 

Traders say buyers are adopting a wait-and-see approach and holding back on purchases due to uncertainties in the stainless steel market. Chrome ore prices have also started falling, according to a north China-based trader. “I don’t know if this may later cause FeCr prices to fall, but overall demand for FeCr is not very good,” she tells Steel Business Briefing.

Meanwhile, Chinese domestic spot prices are also heard lower at RMB 8,400-8,600/tonne (equivalent to 94-96 US cents/lb), which further discouraged buyers from procuring higher priced imported materials.

Orissa orders mine closures on environmental grounds

The state government of Orissa in eastern India has ordered the closure of several iron ore and manganese mines in the state – including those of Tata Steel and state-owned Orissa Mining Corporation – on environmental grounds, Steel Business Briefing learns from market sources familiar with the development.

As many as 19 mines are believed to have been affected by this order, which was issued earlier this week, SBB is told. Tata Steel officials were unavailable for comment, however, and Orissa government officials could not be reached owing to a public holiday.

Market watchers believe that the move reflects the flak the Orissa state government is facing from the central government over violations of environmental guidelines in approving mining leases and land acquisition for large-scale industrial projects. 

Earlier this month, India’s environment ministry directed Orissa to halt land acquisition for Posco’s proposed 12m tonnes/year greenfield steelworks in the state as it said this violated the country’s forest rights law. In July, the Orissa high court overturned the state government’s approval of a prospecting licence for Posco for iron ore deposits at Kandahar, again on environmental grounds. 

“In view of all these developments, there is a lot of pressure on the Orissa state government now,” a local source tells SBB. “Also, the central government seems to be seriously addressing issues such as violations of environmental norms and the local communities’ opposition to industrial projects,” he muses.

Chinese domestic coking coal prices see slight rebound

Chinese domestic hard coking coal prices are seeing a slight recovery due to increased demand from the country’s coke industry. However, the market is still a little chaotic, Steel Business Briefing learns from the market.

Hard coking coal prices in northern China’s Shanxi province rose to around RMB 1,500/tonne ($220/t) including 17% VAT, up by RMB 50/t ($7/t) compared with RMB 1,450-1,500/t on 17 August.

When connected by SBB, many traders say prices have increased due to the tight supply, as well as recovering demand from coke plants.

A trader based in Shanxi’s Hejin city tells SBB that coking coal supplies are short as many coal mines in Shanxi have been closed down as part of the consolidation of the province’s coal industry, so its production capacity is limited.

But another trader says there is sufficient supply, and the prices are rising just because the demand is rebounding. “Coke plants have used up their coking coke inventory,” he says. “They have to buy, so prices are climbing.”

Producers dispute this claim, however. A manager of coal processor based in Jinzhong city in Shanxi tells SBB he hasn’t seen any improvement in market condition in his area, and his plant is still maintaining its production cuts.

Burwill to open second iron ore concentrating plant in China

Hong Kong-based steel trader Burwill Holdings announced on 1 September that its second iron ore processing plant will be completed by October this year in China’s Shandong province, Steel Business Briefinglearns from the company.

The new plant is a part of Burwill's Laiyang Taixin magnetite project. It will produce around 700,000 tonnes/year of concentrate with 65% Fe content, according to an official with the company.

The Laiyang Taixin magnetite project, also located in Shandong, is a group of five iron ore mines with combined proven reserves of 643.3m t. The average grades of iron ore from these mines ranges from 16.72% to 19.73%. 

Laiwu Steel Group, Jigang Group, Weifang Steel Group and Qingdao Iron & Steel Group are also all located in Shandong province and could be potential customers of Burwill’s processing plant. 

“Shandong’s steel mills are currently relying on imported iron ore as well as ore from other provinces of China, so the location advantage of these mines offsets the disadvantage of the low concentrate in the ore, which make them worth developing,” the Burwill official says.

Burwill completed construction on its No.1 processing plant early this year. It has a production capacity of 200,000 t/y of concentrate.

Sail adds sinter plant for Bhilai steelworks expansion

Indian steelmaking group Sail is to install a new iron ore sintering plant at its Bhilai steelworks in the central state of Chhattisgarh. The unit is part of an expansion programme to raise production capacity at Bhilai to 7m tonnes/year of crude steel from 4m t/y currently.

Finland-based plant supplier Outotec tells Steel Business Briefing it will supply the sinter plant with a production capacity of 3.7m t/y.

Bhilai is installing a new blast furnace of 2.8m t/y, as SBB recently reported, and a new oxygen converter shop is due to start up next year.

Pakistan scrap imports revived in July on lower prices

Pakistan’s scrap imports showed some revival in July after the prices weakened by around $15/tonne for the importers. But the imports were still slow compared to last year, Steel Business Briefing learns from the market sources.

According to data released by the Pakistan federal bureau of statistics (PFBS), Pakistan imported 127,090 tonnes of ferrous scrap in July which is 28% less than the same month of last year but 28% higher than the 99,618t imported in June.

July imports were worth $43.2m, or almost $339.6/t which is $14.5/t less than June’s $354/t, SBB understands from PFBS data.

Market sources say that the imports will not recover before the country’s internal problems are solved, and the last quarter of the year is expected to be slow too.

Speculation growing over Posco Q4 steel prices

The date for Posco’s formal tabling of its October-December domestic prices may be weeks away but already rumours are circulating about the integrated mill’s new pricing strategy. 

Speculation over what Posco might decide has intensified after the conclusion earlier this week of October-December hard coking coal prices between BHP Billiton-Mitsubishi Alliance (BMA) and the Japanese integrated mills. 

The coming quarter’s coal price was settled at $209/tonne fob, a decrease of $16/t from $225/t in the July-September quarter – as Steel Business Briefing reported – and though Posco would not confirm whether it followed, market insiders note that Posco raw mats settlement prices are normally in line with those agreed by the Japanese.

Some industry sources are now musing that with Q4 prices of other raw materials likely to decline, Posco’s input costs may fall by about KRW 40-50,000/t ($33-42/t) and lead the mill to pass its savings on through its finished product prices. 

But others believe Posco may not be so generous because while the concluded BMA-Japan mill coal price represented a decline from Q3 levels, the Japanese had in fact targeted a price closer to $190/t fob. 

Besides, Posco had insisted when tabling its current quarter steel sales prices that it was absorbing some higher input costs including those of raw materials. The company lifted Q3 domestic finished product prices by only KRW 50-55,000/t when it claimed it really needed rises of KRW 110-120,000/t to offset higher costs.

A Posco source tells SBB that no specific details are available yet about its Q4 prices. These are slated to be announced by 20 September.

China's fixed asset investment to slow down in H2

China’s fixed asset investment will slow down in the rest of this year, the State Information Center (SIC), a central government-backed think tank says in a recent report.

According to the report, the growth rate of fixed asset investment saw a decreasing trend in the second quarter of this year and may continue to drop for the rest of this year. However, since investor confidence is picking up and the financial environment still has a large amount of liquidity, it is not likely that investment will fall very substantially. 

It is expected that the nationwide investment in fixed assets will reach RMB 27.38 trillion ($4 trillion) in 2010, up 22% year-on-year. Among which, urban fixed asset investment will be RMB 23.7 trillion, up 22% y-o-y and real estate investment, both affordable and commercial housing, will be RMB 4.6 trillion, up 27% y-o-y.

A source with SIC tells Steel Business Briefing that Beijing is not likely to give much support to high energy-consuming industries including steel industry for the next few years, and the growth of steel industry may slow down during the remainder of this year. However, since China’s affordable housing sector is growing strongly, it will also drive the development of related steel industry.

According to Ministry of Industry and Information Technology (MIIT) data, during the period of January-July, investment in steel industry increased 2% y-o-y, while that of H1 increased 9% y-o-y. This is mainly due to Beijing’s order for mills to control their energy consumption and eliminate outdated production capacity, the SIC source tells SBB.

Italian coil producers seek higher prices

Italian domestic coils prices have risen by €20/tonne since the end of August driven by higher raw material costs and expectations of new buying after the summer holidays, market participants tell Steel Business Briefing.

Current base prices for hot rolled coils and cold rolled coils are €530/t and €610-630/t respectively, while hot-dip galvanized is said to be €610-640/t.

SBB understands that producers Riva and Arvedi have both raised prices by €20-30/t. “They have increased prices as input costs are up and, as long as they don't push prices up too much, these higher levels may stick”, a trader tells SBB.

ArcelorMittal has increased officially its coils prices by at least €30/t targeting a price of €630/t, as SBB reported yesterday. Arvedi and Riva have not taken an official position.

Italian coil prices are considered to be competitive compared with North European prices, with galvanized prices €20-30/t lower than in other South European countries.

“Italian prices are competitive and the price increment will hold. Italian mills are not facing much Chinese and Indian competition as their CIF (Marghera) base prices for cold rolled coils are €30-€40/t more expensive than the Italian producers”, a trader comments.

Turkish strip prices squeezed by competition

Turkish flat steel producers say they cannot increase their prices despite the raw material price hikes, because of the competition from local and foreign suppliers. Some big producers visited by Steel Business Briefingsay competition in the country makes them work with very little profit margins, in order to keep their market share.

Hot rolled coil prices have increased by $10-40/tonne in the last month, for both local and import prices. But, re-rollers and coil coaters cannot reflect this cost rise in their prices. They also need to compete with low-priced import offers, SBB is told. Asked about the 9-15% import duty on flats imported to Turkey, producers say most Turkish importers use the advantage of inward processing regime duty discount, so high import duty is not a solution.

Demand for flat steel is sluggish for the time being in the country, but an increase is expected in mid-September, after the Ramadan Eid. However, Turkish producers believe steel prices will not increase much in the last quarter of 2010 as the market is cautious.

Evraz’s European arm sees sales outlook steady

Russian steelmaker Evraz's European arm predicts a steadier outlook for plate sales in the second half of this year, Steel Business Briefing learns from the company during its half-year results conference call.

“Third quarter sales will be lower due to seasonal factors,” cautions Pavel Tatyanin, Evraz vice president for international business, “but fourth quarter volumes and prices should recover as long as iron ore and scrap prices do not increase sharply,” he continues.

The company reported that the European steel industry continues to face challenges with domestic demand weak and driven mainly by public projects. Nonetheless the company's Italian division, Palini e Bertoli, is operating at close to full capacity, while its Czech plant, Evraz Vitkovice, operates at 85% of its capacity.

As reported previously by SBB, Vitkovice temporarily closed its steelmaking operations from July 2010 after failing to reach an agreement with its neighbour ArcelorMittal Ostrava over the price it pays for hot metal. “The shutdown had no material economic impact on Evraz’s production volumes and costs, and the closure will continue until the dispute with ArcelorMittal is resolved”, Tatyanin tells SBB.

Evraz's European arm's consolidated revenue for the first six months of 2010 increased by 9.9% to $630m from $507m in the same period of last year.

Turkish rebar exporters see offers increasing for next week

Turkish rebar producers report that they are likely to push their offer price for exports slightly higher for next week, with the expectation that there will be bookings for the post-Ramadan period. Market sources quote $615-620/tonne fob offers are likely to come, increasing from current offers of $600-610/t fob.

Especially the increase in Egyptian local rebar prices is expected to boost export bookings in Turkey. A producer tells Steel Business Briefing that the rest of the year is likely to be stronger, because of the firm scrap prices throughout the summer. Due to seasonal reasons especially, scrap prices are likely to increase further, which is likely to have an effect on rebar prices.

Market sources also expect US bookings to be slightly stronger towards the end of the year, which can strengthen the Turkish rebar prices in 2011, SBB was told.

Rebar maker Badische puts the brakes on production

German rebar and wire rod maker Badische Stahlwerke (BSW) has temporarily stopped production, and has returned to short-time working, the company’s management tells Steel Business Briefing.

Short-time working schemes were implemented by German steelmakers for many months during the global economic crisis, but largely expired by the middle of this year. More than 800 workers are affected by the new scheme at BSW, which halted its meltshop and rolling facilities on 1 September.

The decision to suspend production was made because of higher scrap and power costs, which it is difficult to pass on to the customers, SBB understands. Scrap prices in Germany rebounded in August and could rise again this month. Also, facing sluggish local demand for rebar, BSW has built up inventories, which it is now using to supply its customers.

SBB hears from sources close to the company that the stoppage is initially planned for two weeks, but could last for four.

Turkey's Izdemir increases profit despite fall in sales

Turkish long steel producer Izmir Demir Celik reported TL 12m ($7.94m) in profit in the first half of 2010, more than double the profit of TL 5m ($3.3/t) for last year’s first six months, despite a fall in sales tonnages.

Billet production decreased by 5.49% to 516,475 tonnes from 546,502t, and rolled production fell by 20.7% to 311,839t from 393,305t. Meltshop capacity utilisation rate came down by 4.5% and rolling mill capacity utilisation by 18% to 69.3%, Steel Business Briefing learns from the company.

Izdemir sold 73,319t of billet and 467,637t of finished products, and some 273,479t of total sales were exported. Finished product exports of the company for 2009 first half were 340,000t.

The company states that a recovery is likely to follow the end of Ramadan, when activity increases in markets such as the Gulf, Middle East and North Africa.

Italy's Lucefin to inaugurate new bright bar plant

Italian producer and distributor Lucefin Group will inaugurate a new warehouse on 4 September, allowing it to expand its distribution capabilities for bright bar products, Steel Business Briefing learns form the company. 

The 7,000 square metre site in Orbassano, Turin, will be fitted with automatic equipment including sawing machines. “We have invested €8m in this establishment. Because as core business we are more in the middle of the chain between steel producers and end users we think that is better invest in machines that can tailor the final products for our clients", Alberto Berlinghieri, Lucefin director, tells SBB. 

The new warehouse will be close to a new logistic centre that the company is building, which is due to start up in 2011-12. 

Lucefin is also expanding in stainless steel through its recently-established Trafitec company based in San Colombano al Lambro. By October 2010 Trafitec will be producing cold finished bars with diameters of 3-30mm, and squares and hexagons of 8-60 mm. 

Lucefin through its Trafilix comany in 2010 invested also €1.5m in the installation of a cold mill to re-roll wire rod of up to 30mm diameter into flats and squares.

The company’s outlook for 2010 is positive. "In 2009 we posted a net income of €4.9m compared with €15m registered in 2008 and revenue nearly halved to €121m from €224m; but in the first eight months of this year we have already registered a + 57% in sales,” Berlinghieri concludes.

Schmolz+Bickenbach returns to profit in January-June

Swiss-German special steels producer Schmolz+Bickenbach moved back into the black in the first half of 2010, and expects a positive market trend to continue this year, Steel Business Briefing learns.

Its markets have taken “a turn to towards normality”, and order backlogs have now returned to levels that make corresponding adjustments to capacity use necessary to avoid supply delays, the company writes.

After the upswing starting in the automobile and automobile components supply industry, demand is now also taking off in other sectors, including machinery and equipment construction, hydraulics, energy technology and aviation, it says.

In H2 2010, shipments should thus clearly increase and achieve adequate price levels again, it adds. 

The maker of stainless, tool and engineering steel long products has increased its personnel, particularly using temporary workers, to avoid impending supply shortages. Last year’s decision to retain the permanent workforce as far as possible has paid off, it notes.

Higher sales volumes contributed to an increase in group revenues in H1 2010 to €1.48bn, from €1.05bn in the same period in 2009. Earnings before interest, taxation, depreciation and amortisation (EBITDA) were €102m, following negative EBITDA of €115m last year. Last year’s net loss of €149.0m turned into a profit of €4.4m.

S+B notes that its Swiss subsidiaries are burdened by the development of the exchange rate between the euro and Swiss franc, whereas its other European plants benefit from the weakness of the euro, because they, as well as their customers, become internationally more competitive as a result.

TK Nirosta bundles three German service centres into one

ThyssenKrupp Nirosta is streamlining its stainless steel service centre operations in Germany into one company, it tells Steel Business Briefing. TK Nirosta operates three national service centres, Nirosta Service Center NSC based in Wilnsdorf near Siegen, EBOR Edelstahl in Sachsenheim near Stuttgart, and SMB Chromstahl in Langenhagen near Hannover. 

With the start of ThyssenKrupp AG’s new business year on 1 October, the three centres will all figure under the name of the parent ThyssenKrupp Nirosta. “With this step we can make it clearer to our customers that the service centres are extended workbenches of our production plants,” says Karsten Lork, head of sales at the company.

SBB understands the reorganization will reduce costs in the administrative area, but not involve workforce reductions. As for the benefits for the customers, Lork says they will be increasingly involved “in the development work and product services of ThyssenKrupp Nirosta”.

European carbon prices: ‘underlying trend is up’

European Union Allowances (EUAs) closed at €15.2/tonne on 31 August on the London-based European Climate Exchange (ECX). This was almost level from last week’s €15.3/t but up over €1/t from the end of July.

Recent price rises came largely from speculators as utility companies are still out of the market, Matteo Mazzoni of Italian economic institute Nomisma Energia tells Steel Business Briefing. Nothing is expected to affect the market significantly before the end of September, he adds.

However, Emmanuel Fages of carbon market analysts Orbeo tells SBB the underlying trend is up. Though prices have levelled off in the last week, prices are still higher than a month ago and could continue to rise. EUAs could touch €17/t before the end of Q3, he suggests.

EUAs can be used to account for greenhouse gas emissions equivalent to one tonne of carbon dioxide under the European Emissions Trading System (ETS). By the end of phase II (2008-2012) of the ETS, a number of new facilities will have joined the scheme. European states have set aside EUAs in a New Entrants Reserve (NER) to cover the emissions of these plants.

A new report by Orbeo suggests that European states will have a net surplus of 88m EUAs which will end up on the European markets. However, this is less than many analysts expected, Fages tells SBB. If the number of new entrants increases significantly as a result of the recovering economy, a net deficit of 61m EUAs could be seen.

Polish distributor sees seasonal dip in Q4, but better 2011

Steel prices in Poland should remain stable this quarter, Polish steel processor and distributor Konsorcjum Stali (KS) says. They “underwent a correction and stabilised” at the beginning of June, after growth of up to 40% in March and April that steel purchasers “were unable to accept”.

Q4, though, is expected to bring some price decreases linked to the seasonal lull in activity in construction. “In this period steel purchasers also traditionally restrict their buying and stock levels in anticipation of weaker demand,” KS president Robert Wojdyna comments.

In the longer view, however, the market outlook is promising, says KS, citing the forecast by European steelmakers’ federation Eurofer of 15% growth in apparent steel consumption in Poland both this year and next. “The climate in the market, compared to a much weaker 2009, has changed radically,” Wojdyna says. “Prices have firmly bounced back from their bottom and, although demand is still not as strong as in 2008, it is certainly better than last year,” he adds.

Konsorcjum Stali increased its revenues by 40% year-on-year in the first half of 2010 to PLN 475.6m (€119.9m), and more than doubled its gross profit to PLN 41.3m (€10.4m). “The economic situation was definitely better than last year,” explains Wojdyna. “In addition we were able to replenish our stocks with cheap steel prior to the [price] hikes, which bore fruit with very good results in our trading operations,” he adds.

It operated its reinforcing steel processing plants, as well as its steel structures plants, at full capacity utilisation in the second quarter of 2010,Steel Business Briefing learns from the company.

UK construction sector continues to slow down

Growth in the UK construction sector slowed down for the third consecutive month in August, after the high recorded in May, Steel Business Briefing learns from the monthly report of the Chartered Institute for Purchasing & Supply (CIPS) and Markit Economics.

The Markit/CIPS Index (PMI) for August reached 52,1, a decrease of 2 points m-o-m and heading toward the number 50, which in the index represents the mark of no change, SBB notes.

“Those who are looking for signs of a slowdown will find plenty to worry about in this month’s construction PMI. The most disturbing is the marked slowdown in the residential sector as this is where much of the recent sector growth has come from,” David Noble, CEO of CIPS, explains.

Meanwhile the sentiment for future work intakes has risen during the same month among constructors, despite concerns over public spending cuts, according to the report.

Ukraine’s Makeyevka increases rolling capacity

Ukraine’s Makeyevka Steel Plant, part of Metinvest, has further upgraded its 390mm long products rolling mill, leading to an expansion in its capacity to up to 770,000 tonnes/year from 720,000t/y, Steel Business Briefing learns from Metinvest.

It has replaced ordinary cast iron rolls with hard alloy (tungsten carbide) coated rolls. This increases the volume of steel that can be rolled before changing the rolls to 3,300-3,500t from 450-500t, making it possible to reduce considerably the number of scheduled stoppages at the mill. The hard alloy rolls also minimise the porosity of the finished product, improving its quality.

The mill is capable of rolling 8-40mm reinforcing bar in carbon and alloy steel grades, as well as round, hexagonal and square bars, angles and channels. At the turn of the year, it also introduced 4-strand slit-rolling technology, supplied by CVS of Turkey, increasing productivity. Makeyevka is further preparing to introduce a bar dimension control system, supplied by Danieli of Italy.

The 390mm mill was commissioned in July 2009, replacing two old 350mm rolling mills with a combined capacity of 600,000t/y. It represented an investment of over 600m hryvnia ($76m), and by the end of 2010 almost another 23m hryvnia will have been invested in the mill since its start-up. The current upgrades at the mill mark the completion of Makeyevka’s 2008-2010 rolling development programme.

Russia’s MMK restarts blast furnace after repairs

The No 6 blast furnace at Russia’s Magnitogorsk Iron & Steel Works (MMK) has been restarted, after undergoing substantial maintenance. It was stopped at the end of May for the repairs, which lasted three months.

The furnace has a working volume of 1,370 cubic metres, and first came into operation at the end of the wartime year of 1943. In 2007, it was equipped with a bell-less top charging mechanism supplied by Luxembourg company Paul Wurth, as previously reported by Steel Business Briefing.

Evraz fully utilises Russian capacities, mulls longs mill

Moscow-headquartered Evraz says it fully utilised its Russian steelmaking capacities in the first half of the year and “significantly” increased utilisation of its international capacities. The group raised its crude steel production by 22% year-on-year to 8.3m tonnes overall in January-June.

Groupwide sales of steel products went up by 13% to 7.7mt, driven by increases in long products for construction, up by 35% to 2.48mt, and flats, up by 47% to 1.31mt, while sales of semis fell by 16% to 2.26mt.

Notably, Evraz sold 0.6mt more steel in the Russian market in H1 this year compared to last. Russian demand was fuelled by growth in private sector construction as well as state-financed infrastructure projects, including for the APEC summit in Vladivostok in 2012 and Winter Olympics in Sochi in 2014.

Eyeing stronger demand for rebar, Evraz is pursuing plans to build a new rolling mill in the CIS region to process its surplus billet. It is considering sites in Russia’s southern federal district and Irkutsk region and the Kostanay region in northern Kazakhstan, group chief executive Alexander Frolov told Steel Business Briefing in a conference call.

Real demand for finished steel products in the CIS rose to around 80% of peak pre-crisis levels in January-June, Evraz says.

In the rest of 2010, the company will focus on operational improvements. It is reconstructing its Russian rail mills to develop production of higher value added products, including 100-metre high-speed rails, and is adding pulverised coal injection technology to blast furnaces at its Nizhny Tagil (NTMK) and West Siberian (ZapSib) steelworks.

Sheet mills in 'poker game' with US buyers

The $40/short ton price hikes announced this week by US sheet mills are already being met with resistance. However, some believe the latest round won't be the end of the line, Steel Business Briefing hears.

One southern source says the mills are likely to announce another increase within the next several weeks, boosting hotrolled coil list prices from their current range of roughly $600-620/s.t to nearly $675/s.t.

"From their perspective, now's the time to be aggressive," he says.

He cautions, though, that mills can't push through another round without expecting push back from the market.

"We can have sympathy for them on their costs (rising), but their customers have to make money, too," he says. "It's a two-way street."

A midwestern US buyer likened the current scenario to "a poker game where all the mills have is a pair of twos and are waiting for everyone else to fold as the specter of drastically higher scrap prices is said to be just about to enter the game."

One eastern stockist, however, says he doesn't think the $40/s.t increases are "all that crazy."

"I think it's about right," he says. "They were selling at below cost, so hopefully they're selling above cost now so they can make some money. It's in none of our best interests if they're selling below cost."

SNA should sell assets 'at any price,' Russian analyst says

An analyst with Russian financial services firm, Uralsib, is urging Severstal North America to sell several of its US steelmaking assets "at any price."

Dmitry Smolin, in an investors note seen by Steel Business Briefing, says SNA's Warren, Wheeling and Sparrows Point sheet facilities are a drag on Russian parent company OAO Severstal's earnings.

The comments come ahead of Severstal's second quarter financial results, expected September 6. Uralsib predicts Severstal is "likely to show the most impressive quarter-on-quarter performance among Russian steel names, driven by solid improvements in Russia and the expected turnaround in its US operations."

Smolin says revenue should be up 29% q-o-q to $4.1bn. "We expect EBITDA to increase almost 83% q-o-q to $902m," he says. "We expect net income of $184m, versus a net loss in Q1."

Smolin believes profitability will be "only temporary," though, and Severstal could record an EBITDA loss in the US in Q3.

"We would welcome a sale of the US mills by Severstal in the most expedient way, at any price," he says. "Of particular interest during the conference call will be the H2 outlook, US steel market trends and progress of the US asset sale."

An SNA spokeswoman declined comment on the rumored sale. A source familiar with the company's operations told SBB this week SNA CEO Sergei Kuznetsov is prepared to scrap a divestiture of the assets if it's not in SNA's best interests "and come up with a strategy to make them work."

US sheet, plate import licenses fall back in August

US sheet imports likely declined in August after posting strong numbers in July.

Licenses to import hotrolled coil into the US dropped 34% from July’s total of 212,800 tonnes to 140,150 t in August. The recent license count – not a final number but generally a good indicator of actual imports during the month – was also a 20% decline from the monthly average of 174,240 t of HRC imports in the first half of the year.

Hot-dipped galv sheet licenses of 100,080 t in August were a 13% drop from the 115,400 t of imports in July. August’s license count was also a 13% drop from the H1 monthly average, Steel Business Briefing notes.

After hitting a H1 monthly average of 65,830 t - and totaling 68,000 t of imports in July - licenses to import coldrolled sheet fell back to 52,750 t in August.

Licenses to import plate also declined, according to the import data from the US Department of Commerce.

Coiled plate import license applications were 63,140 t in August – a 21% drop from July’s imports of 79,670 t and an 18% drop from the H1 monthly average of 77,310 t.

Cut plate import licenses fell more dramatically, as August licenses were 30,675 t compared to 64,120 t in July and the H1 monthly average of 52,975 t.

Licenses to import bar into US jump in August

US imports of hotrolled bar and reinforcing bar look to have risen significantly in August based on a count of import license applications.

Licenses to import HR bar jumped to nearly 90,100 tonnes in August – a 15% rise from July’s imports of 78,050 t and a 21% rise from the monthly average of 74,540 t in the first half of the year, Steel Business Briefingcalculates from import data from the US Department of Commerce.

HR bar import licenses were highest for Canadian material with 34,440 t counted, followed by Japan with 14,300 t and the UK with 11,665 t.

Rebar imports look to have risen more substantially, with licenses totaling over 69,820 t in August. This is a 59% rise from July’s imports of 44,000 t and a 78% rise from the H1 monthly average of 39,130 t.

Licenses to import rebar from Mexico and Turkey jumped significantly in August, with Mexico’s 34,770 t of licenses a 71% rise from July and Turkey’s 33,860 t of licenses a 220% rise from July.

Evraz enjoys strong pipe and plate demand in North America

Growing shale gas exploration in the US has contributed to the consumption of pipe in the North American region, and helped to enhance capacity utilisation at North American plants affiliated to Russia’s Evraz Group, Steel Business Briefing learns.

The utilisation of rolling capacities at the Colorado and Portland mills has achieved pre-recession levels, while the Claymont site has exceeded pre-recession rates by 15%, according to Pavel Tatyanin, vice-president for international business at Evraz. 

But a dull market for large diameter pipe remains the soft spot in the group’s North American business. “We had to halt our LDP mill in Oregon, and the need to re-start it will probably not occur for the good part of the next year,” Tatyanin comments.

However, Evraz expects demand for tubular products to persist in H2 2010 and also foresees stronger demand for rails. Its rail sales in North America are likely to achieve pre-recession levels by the end of the third quarter in response to resumed investment in the renewal of the rail infrastructure.

The group’s plate sales in North America have already fully recovered on the growing number of orders prompted by resumed projects in bridge engineering and the power industry (wind power plants predominantly).

Regarding anticipated price moves, Evraz refers any possible changes to the behaviour of iron ore and scrap prices. “Our pricing policy reflects principle raw materials price trends,” says Tatyanin.

Lakeside breaks ground on Alabama tube mill

Canadian tube producer Lakeside Steel has broken ground on its flagship $40m US mill in Thomasville, Alabama.

The company, headquartered in Welland, Ontario, broke ground Wednesday, according to a company release. Construction is expected to be complete by April 2011.

The mill will become operational by October 31, 2011, and is expected to produce oil well casing in the 4.5-9.625 inches outside diameter range as well as line pipe in the 4.5-10.75 inches OD range. 

It will add 192,000 short tons to Lakeside’s existing 250,000 s.t capacity,Steel Business Briefing.

“We’re very pleased with how things are progressing,” said Lakeside president Ron Bedard. “Our market is still relatively strong and our customers are committed to doing what’s necessary to load that mill once it comes up.”

Indian stainless bar shipments to US get 0% AD duties

Two stainless bar companies from India have received de minimisantidumping duties after a US Department of Commerce administrative review.

In the final results of the review covering the one-year period ended January 31, 2009, the DOC determined a 0.42% de minimis AD margin for India’s Venus Wire and a 0% margin for Ambica Steels.

Duties on US imports of stainless bar from these two companies will not be collected for the period of review and the new margins will be used going forward, Steel Business Briefing understands.

Ambica had previously been subject to a 22.63% duty, while Venus had the same 0% margin previously. Duties on imports from other Indian companies are currently 0-21%.

NAS releases October stainless surcharges

North American Stainless has released October stainless coil surcharges in line with a previous announcement by AK Steel.

The type 304 coil surcharge will rise 8.5% to about $1.02/pound. The type 316 surcharges will rise 9.63% to about $1.48/lb, while the type 430 surcharge will remain flat at $0.27/lb, Steel Business Briefing notes.

Mexico's Autlán acquires stake in power generating company

Mexican manganese and ferroalloy producer Minera Autlán has acquired a 49% stake in local power generator Compañia de Energia Mexicana (CEM), aiming at increasing its energy self-sufficiency, Steel Business Briefing learns from Autlán. The transaction is pegged at US$21m.

CEM is currently constructing a 30MW hydropower plant, which is scheduled to be commissioned by the second half of 2011. The company will supply 25% of Autlán’s overall energy needs, when this plant becomes functional.

Also, CEM will grant discounts on energy tariffs for Autlán through a long-term supply contract, reducing its costs and improving profit margins. The ferroalloy producer also says it plans to be 75% energy self-sufficient in the near-term through other projects, SBB notes.

Argentina's stainless imports up from Brazil, Uruguay down

Shipments from Brazil's ArcelorMittal Inox to the Argentinean and Uruguayan markets have been mixed so far this year, Steel Business Briefing learns from the latest data reported by Mercosur customs.

The company dispatched 9,801 tonnes of stainless hotrolled and coldrolled sheet to the Argentinean service center MT Majdalani from January to July, against 4,783 t during the same period last year.

Meanwhile, stainless shipments from Brazil to tube maker Cínter in Uruguay dropped 22% during the January-July period year-on-year, from 4,933 t to 3,844 t.

SBB notes that the two markets have experienced different scenarios in stainless processing activity. Argentina has seen a solid recovery, while Uruguay is still experiencing an economic slowdown.

MT Majdalani and Cínter are both controlled by ArcelorMittal and source most of their stainless CRC from ArcelorMittal's Brazilian operations.

Brazil's ore exports on the rise; average price hits record

Amid strong demand and higher prices, Brazilian iron ore exports surged again in August, Steel Business Briefing learns from the country's Industry, Development and Trade Ministry (MDIC).

According to the statistics, last month's iron ore exports totaled 29.83m tonnes, a 16.6% increase over the 25.57m t dispatched during July. In an annual comparison, August figures increased about 28%, from 23.29m t.

"The US$119.8/tonne average price for iron ore during August is a monthly record," says Brazil's trade association (AEB) VP José Augusto de Castro. He also emphasizes that based on the new pricing mechanism created by Vale, prices might remain stable in September, decreasing in the fourth quarter as previously announced by the miner. 

In terms of values, August iron ore exports totaled US$3.57bn, against US$2.83bn in July and US$1.04bn in August 2009, SBB notes.

Caterpillar announces a new plant in Brazil on strong market

US heavy agricultural and construction equipment manufacturer Caterpillar Inc has finally announced the location of its new plant in Brazil, which aims to capitalize on the growing Latin American market, Steel Business Briefing learns from the company. 

Caterpillar has acquired an existing industrial facility in Campo Largo city, in the southern state of Paraná. The plant, due to be operational by 2011, will be able to manufacture backhoe loaders and small wheel loaders, which are currently being produced at its Piracicaba works, São Paulo state.

The company also announced expansion plans for its capacity at Piracicaba, but didn’t disclose further details. The projects will require some US$180m total over the next two years, SBB notes.

According to the manufacturer, these new investments have been stimulated by improved demand from both infrastructure and mining industries in Brazil.

Egypt’s Ezz leaves HRC price unchanged for September

Egypt’s biggest steel producer Ezz Steel has not changed its hot rolled coil price for September. Steel Business Briefing is informed that its HRC is sold at EGP 3,750/tonne ($653/t), excluding 10% sales tax, the same as August.

Egyptian traders believe the reason for no change despite the increase of production cost is that the company wants to keep its market share against low priced imports. Ezz Steel’s subsidiary EFS (Ezz Flat Steel) restarted production in March this year, after being shut down since November 2008. So, Egyptian traders also believe that the company is trying to make sure to maintain a certain market share.

HRC from Ukraine is offered in Egypt at $600-620/t cfr and Russian HRC is offered at $630-650/t cfr. Demand for flat rolled steel is low in Egypt but is expected to increase after Ramadan Eid, mid-September.

Acerinox's South African stainless mill may face strike

Acerinox’s majority owned South African stainless steel mill, Columbus Stainless, is likely to face a strike after being issued with a strike notice this week by the National Union of Metalworkers of South Africa (NUMSA) over a wage dispute. 

The local Solidarity union is also in dispute with the company over wages, though a source there says it is unlikely to strike.

Acerinox’s spokesman in Spain tells Steel Business Briefing: “We have a five-year wage agreement signed with NUMSA, with salaries linked to inflation, plus other benefits, it appears the dispute is partly a result of macro-economic conditions in South Africa”. 

Acerinox says contingency plans are in place so that customers will not be affected: “In the event that the strike lasts a long time, we will supply stainless steel from our other plants around the world.”

SBB understands Columbus’s capacity is 1m tonnes/year, and that it produced 646,000t in 2009, and 253,000t in the first half of 2010. 

Acerinox says up to 80% of output is exported, around half each to Asia and Europe. The majority of HRC goes to Asia, where Acerinox has a cold rolling mill, and CRC to Europe. The remaining 20% is sold as CRC in the South African market.

New Omani pipe mill receives first project order

Gulf International Pipe Industry (GIPI), the first 24 inch diameter ERW pipe manufacturer in the Middle East/North Africa region, has been awarded the first project order to supply 5,000 tonnes of X52 sour grade ERW pipes for Daleel Petroleum, the Omani oil producing company, Steel Business Briefing learns.

GIPI tells SBB that the pipes to be supplied will be 18 meters in length each and this will the very first such pipe length to be supplied locally in the Gulf region.

GIPI, in Sohar, Oman, inaugurated its mill in March and is producing high pressure pipe and casing with 8-24 inch diameter and 1 inch wall thickness. Production capacity is 250,000 tonnes/year.

The company’s shareholders are Oman Investment Corp 30%, Golden Dunes Investment 30%, Gulf Investment Corp (GIC) 20%, Posco 15% and Arkan Group 5%.

LME billet price getting stronger as holidays end

The price of steel billet traded on the London Metal Exchange remains strong as buyers return to market after the summer break and in preparation for the end of Ramadan next week, Steel Business Briefinglearns from trading sources.

Prices are now around $470-485/tonne (cash) and $490-505/t (3 months), and have remained around these levels for the past week or so as we have moved closer to the end of the holiday periods.

“The price is looking stronger now; it did soften during Ramadan, but now buyers are filling inventories again,” a trader says.

The physical market has also picked up, which has helped LME prices along, another trader says. The CIS export billet price has risen by about $60/t since the start of August. “We’ve returned to business now and the market is looking stronger,” he adds.

The traders expect the price to remain steady over the coming weeks and may even strengthen further going forward. “There are no expected blips on the horizon as the market has returned from holidays quite strong,” a trader adds.