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Dear Readers,


If Feb 09 automobile production figures are of some indication, one can imply that not only auto but also steel industry is on recovery track. Is this logic correct? Are we on recovery track?

I would beg to differ from the above logic. First of all, the increase in Feb auto production can be attributed to ‘year end heat’ phenomenon and it may not sustain after the financial year end on 31st March. Secondly, one sector in isolation can not flourish when rest of the economy is going down. This seems against the principles of economics. Having said all this, I would still say that even a slightest increase in steel consumption is a welcome sign and would certainly help to boost the mood of the industry. Further, inflation is going down in many countries. Though this is a good sign up to certain extent, when it is near zero, there is a great danger of deflation. Indian inflation rate has gone below 1 % and this is surely a great worry for the policy makers. Many analysts even view general elections as a great economy booster but I am unable to form any opinion on this.

If one takes the world view, the situation still looks bleak, especially in the western world. The bailout packages are not enough for the economy to recover and move forward. Many steel mills are virtually closed and remaining are operating on minimal capacity utilization. The situation in Asian region is somewhat better. In gulf region, though the demand has shrunk considerably, the industry is still moving forward and mills are working, may be with reduced production. India is also in the same boat and is expected to do better after the financial year ends in March. China and SE Asian region is also witnessing a slump but it seems the situation has not gone out of control. This region is also expecting recovery in the second half of current year. More or less I feel that Asian region will be in a comparatively stable position by this year end.

 Recession is a great teacher. It teaches you to cut the extra cost, increase efficiency, be more innovative, explore new markets and products and what not. Now, the whole world is undergoing reorientation in terms of its approach, business strategies, work culture and I am sure it will soon become smart enough to beat the recession.

 D.A.Chandekar
Editor & CEO

 

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SAIL expansion and modernisation on track   

State-run Steel Authority of India's (SAIL) expansion and modernization programme is well on track, despite of weak demand and falling prices of steel globally.
“Our modenization and expansion is on track as we believe this is the right time to get prepared for the better time and I think the sector will revive by 2010-11," SAIL director commercial Shoeb Ahmed said. He added that the company would add 10 million tons (mt) by 2010-11. SAIL would be pouring Rs 54,000 crore in the expansion programme to gear up its production capacity to 26.2 mt from the current level 15 mt.
Ahmed said, "Global steel production in 2008 was down 1.2 percent to 1,327 mt but in December, steel production was down 23.4 percent to 84.4 mt, against of 105 mt as projected. Major producers even cut production by 30 to 40 percent."
Domestic steel production by 2010-11 could reach 80 to 85 mt, from around 60 mt, as demand from the domestic market would continue to grow with the economy growing at 6 percent next year.

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JSW Steel to negotiate lower coking coal price

To ease out input cost pressure, JSW Steel is looking for a 66 percent lower rate for coking coal from global suppliers at $ 100 per ton.
""Long-term coking coal contracts are under negotiations. We are expecting (the deal at) close to $ 100 a ton, which is 66 percent lower than the present contracted rates," said JSW Steel Vice-Chairman and MD Sajjan Jindal. The company has already negotiated a 43 percent cheaper rate for coking coal to be procured from Rio Tinto for the January-March quarter at $175 a ton, against the contracted price of $305 a ton.
Jindal said long-term coking coal contracts for the next fiscal would ease input cost pressures, which partially ate into its margins as it reported a net loss of Rs 127.50 crore for the third quarter of 2008-09.
Selling at $96 a ton last year, coking coal prices had touched $300 a ton under long-term contracts in the international market. Coking coal is a vital raw material in steelmaking. After touching their peak during the first-half of 2008, commodity prices - including that of coking coal - fell over 60 percent in the spot market due to the global economic crisis.
However, bound under long-term contracts, companies like SAIL and JSW Steel failed to reap the benefits of the price correction.

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Tata Steel's consolidated net profit dips 44%  

India's leading steel maker Tata Steel announced a 44 percent fall in its net profit to Rs 732.21 crore on a consolidation basis for the quarter ended December 2008, owing to high raw material costs, inventory build-up and a foreign exchange loss of Rs 200 crore.
However, the company's net sales rose 4.05 percent to Rs 33,191 crore as steel prices were higher in the third quarter to the corresponding period last year. Tata Steel had cut production at its Anglo-Dutch subsidiary Corus which also affected the revenue growth, while low demand for steel from its main consumers- automotive and construction sectors- has led to an inventory build-up worth Rs 2,352 crore. Low demand and the subsequent fall in prices have also affected Tata Steel's India business, where the company posted a fall of 3.5 percent. "These are unprecedented times but still, we managed to register profits because of our geographical spread, product mix, synergies with international operations and also with ownership of raw materials. In the future, we are looking at lower raw material contract prices as the company is renegotiating with the suppliers," said B Muthuraman, managing director, Tata Steel. Philippe Varin, chief executive of Corus, said, "Until June 2009, Corus will continue its production cut that began with the shutdown of three blast furnaces in Europe. The move is due to the continuing lower demand in the international market. Corus has sold off its aluminium as well as teesside cast businesses as part of cost cutting."
Tata Steel has repaid $500 million (Rs 2,500 crore) debt raised for the Corus acquisition in 2007. "The company has no repayment till December 2009. In 2010-11, we have to repay $798 million and $1.3 billion in 2011-12," said Koushik Chatterjee, group chief financial officer, Tata Steel.
Even as the steel major re-prioritised its capital expenditure for new projects in view of the global economic slowdown, it said the expansion of its Jamshedpur unit is on track. "The 3-million ton expansion plan at Jamshedpur is on track and will be completed by 2010," Muthuraman said.
Tata Steel has undertaken brownfield expansion to enhance its production capacity to 10.5 million tons from the present 6.8 million tons.
In the April- December period, Tata Steel has registered a 45.3 percent rise in net profit at Rs 11,469 crore, while net sales for the consolidated entity rose 26.63 percent to Rs 1,20,914 crore.

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Indian steel long term fundamentals are intact - Ernst & Young  

Predicting the outlook for Indian steel industry in 2009, Ernst & Young said that the industry is squeezed but remains strong.
The firm further stated that though the world steel scenario is grim, India has the potential to grow at double digit rates and should target a production of 125 million ton in the medium term. Drawing a parallel with China, it goes on to say that during the 1998-03 period, when the finished global steel production grew at a compounded annual growth rate of 1.6 percent, the Chinese finished steel consumption doubled at a CAGR of 18 percent. The key drivers of Chinese steel demand were massive infrastructure development and high level of urbanization, escalating demand from housing, automobile and white goods sectors.
Navin Vohra Partner & national Leader, metals and mining practice for Earnest & Young said," The current Indian scenario is very similar to that of China in 1998 and we expect significant investments here towards large scale public infrastructure, urbanisation, auto and white goods. Further, in the long term, capacity in the commodity industry has to move to low cost centers and India is well placed with abundant high quality iron ore, qualified manpower and competitive capital costs due to low land and construction costs."
According to the report, while the near to medium term future of the global steel industry is challenging, the outlook for India is also encouraging because unlike the last bear phase during 1993-94 to 2001-02 when the domestic sector was reeling under a supply overhang the supply demand scenario is more balanced this time.
The report added that the near term outlook for the industry is challenging as the growth in key end user industries such as construction, automobiles and manufacturing has taken a backseat. The downturn has also led to a decline in the prices for raw materials such as iron ore and coking coal, albeit at a lower rate than the dip in steel prices. Further, prices are expected to decline in 2009 as consumption levels are projected to continue plummeting.
As steel manufacturers have undertaken production cuts, this is likely to result in a surplus of iron ore and resulting weakening of ore prices. It is expected that the domestic steel companies will try to drive hard bargains for iron ore, though the consolidated nature of the raw material industry ensures that generally it is the input suppliers who have better bargaining power than the steel manufacturers, thereby impacting operating margins. Similarly, the coking coal market is also expected to turn into a surplus on account of the production cuts in the industry.
Ernst & Young said “The companies with captive mines will be in a better position to combat the downturn. The key strategies which companies can adopt in this scenario is to focus on value added products, rationalize cost structure through better manpower planning, logistics and raw material sourcing. The companies with a focus on the domestic market are likely to be more favorably placed, given the relatively stronger demand from the local users.”
The report estimates M&A activity to rebound when the credit crunch eases and the economy picks up as domestic players will require iron ore and coking coal reserves for enhancing their raw material security. Further, there is a relatively high fragmentation in the industry in India and therefore a need to attain economies of scale and improve bargaining power with raw material producers. Increasing geographical spread to enter high-value steel markets is another imperative.

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Steel scenario unlikely to improve significantly

Steelmakers are likely to reduce prices by about Rs 600 per ton, following the 2 percent cut in excise duties. However, that's unlikely to result in a spurt in orders from the real estate or automobile players, though players in the infrastructure space may be willing to buy more.
Until there is a full-fledged revival in demand, companies will have to survive with low realisations- prices have gone down 30 to 40 percent since August and now range between Rs 32,000 and Rs 36,000 per ton. Only because of this reason, JSW Steel (standalone) to report losses before tax of Rs 139 crore in the December 2008 quarter. This figure does not include foreign exchange losses. Of course, the company also sold a smaller amount of steel--it had actually scaled down production by 20 percent and therefore revenues remained flat. Others too netted lower realisations as a result of which sales at Tata Steel, for instance, contracted 3.5 percent while SAIL's revenues were down 6 percent. High raw materials continued to pressure operating profit margins (opm) at JSW Steel--the opm was down about 1,400 basis points to 15.3 percent. Tata Steel's margins also came off about 1,200 basis points, though they were far higher, at 30 percent.
Analysts are also forecasting a fall in profits in the following year. However, since JSW Steel is not as exposed to the overseas markets as Tata Steel is, a revival in demand at home could mean better operational profits in 2009-10. Nevertheless the company could continue to incur foreign exchange losses and that could hurt the bottom line.

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Steel prices to remain weak, output to grow by 6.5% in '09-10

Steel prices would remain weak domestically in 2009 but production of alloys would increase by 6.5 percent during the period, said Centre for Monitoring Indian Economy (CMIE).
"With a sharp reduction in input prices expected in the renewed contracts of domestic companies and global steel prices remaining subdued, we expect domestic steel prices to remain weak in 2009-10," CMIE said in its latest review. The average prices of hot rolled coil declined by as much as 11.3 percent during January from the month ago levels due to de-stocking by steel companies.
Distress sales also impacted the prices of cold rolled coils and galvanised steels, which fell by 3.6 per cent and 9.1 per cent respectively. TMT bar prices also reported a 3.5 per cent decline. "The downward trend will continue with average steel prices expected to fall by another 3-4 per cent till March 2009," CMIE said. It, however, expected growth in steel output to pick up by 6.5 per cent in 2009-10 driven by a healthy demand from long steel products used in construction.
"The Government's emphasis on infrastructure spending in order to stimulate economic growth would keep demand for long products healthy," CMIE said .

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Ennore Coke seeks lower coking coal prices

Ennore Coke Ltd, a domestic manufacturer of metallurgical coke, is in talks with its global coking coal suppliers- Rio Tinto and BHO Billiton- to fix an annual long -term contract at $140 to $150 per ton.
"At present, we are buying coking coal from our global suppliers at around $160 per ton. We are looking for a lower purchase price for coking coal as spot prices if the raw materials in the international market have declined this year and steelmakers are also pressing for lower prices," said Ennore Coke president and chief executive officer Ganesan Natarajan. The company was seeking for long-term coking coal contracts as its requirement for the raw material- which currently available at about 7,20,000 tons per annum (tpa)- is set to go up significantly in the next two years. The company would have a coking coal requirement of 1.3 million tpa for its proposed 1-mtpa plant at Dhamara port in Orissa, which is scheduled to be operational by the end of 2010. It is also scaling up the capacity of its coke plant at Haldia from 1.5 lakh tons to 3 lakh tpa.
Ennore Coke's plans to negotiate coking coal prices come close on the heels of a similar move by the domestic steelmakers whose bottomline was significantly hit by higher coking coal prices in 2008.
The average price of coking coal in the international market jumped from $96 a ton in 2007 to around $300 per ton in 2008. Recent sales of coking coal in China were in the range of $130 to $150 per ton. Macquarie Group - a global provider of banking, financial and advisory services - has forecasted a benchmark price of coking coal at $110 per ton for 2009.
Meanwhile, the steelmakers, both domestic as well as overseas, are also negotiating with Ennore Coke for lower prices of metallurgical coke. Ennore Coke is supplying foundry coke to the steel units at $420 per ton and steelmakers are negotiating for a price of around $300 per ton, according to Natarajan.
Ennore Coke exports nearly 45 percent of its total coke production to countries like the US, Saudi Arabia and Iran. It aims to raise its export share to 60 to 70 percent in the next few years.

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GMDC may buy stake in 14 projects

Gujarat Mineral development Corporation (GMDC) is planning to buy stakes in various projects slated in Gujarat. The company is eying 26 percent stake each in 14 different projects to be established by leading companies.
The mining major signed memorandum of understanding with 14 companies during the Vibrant Gujarat Investors' Summit-2009. "GMDC is looking at taking 26 percent stake in each of these projects. The company will get stake in the project for supplying raw material to these projects and no cash fund will be infused by the company in the 14 ventures," said a senior government official.
Raw materials such as bauxite, silica sand, fluorspar and limestone will be supplied by GMDC, which has inked agreements with various corporate for projects involving an investment of Rs 8,733 crore.
The projects in which GMDC is eying stakes include integrated coke oven plants by Mumbai-based Hindustan-Dorr Oliver Ltd, Saurashtra Fuels (P) Ltd, Rachna Global LDA of Mozambique, BLA Coke Pvt Ltd and Sunflag Iron & Steel Co Ltd. These companies will invest Rs 1,500 crore each for their respective coke oven plants.
GMDC is also considering stakes in coal washery projects. Adani Enterprise Ltd and Aryan Coal Benefication intend to infuse Rs 60 crore each for setting up coal washeries in Gujarat. GMDC will supply raw material for the projects.

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CIL targets 6 mt imports next fiscal

The country's largest coal producer Coal India Ltd (CIL) has set a target to import 6 million tons (mt) of coal in the next financial year.
However, much will depend on how much the power ministry would require and also on certain firm commitments from power utilities during the year.
Discussions are on ministerial level to draft estimates on the amount of additional coal that would be required by power utilities and the price of coal imports, if any, by CIL.
The coal supplier did not import any coal in the current year. "CIL was asked to import by the power ministry to meet the shortage faced by power utilities, but we did not get any commitment from either power utilities or the power ministry. It is not possible to keep imported coal and not use it," an official said. Even at reduced rates, prices of imported coal are much higher than domestic prices. Imported coal costs at about $80-90 per ton, whereas landed cost of domestic coal is almost half--at around $ 40 per ton. Sources said the Power Ministry was to import 20 million tons coal, but did not do so, leading to a shortage in coal stocks. CIL has put a target to produce 405 million tons for this year, an increase of 25.5 million tons over last year. In the period April-January, CIL's production growth of 7.1 percent has been the highest-ever. The absolute production during this period was 360.45 million tons.

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Slow demand hurts Sesa Goa

Sesa Goa, the country leading iron ore manufacturer, is seeing a considerable slowdown in its revenues due to weak demand from steel companies. For the first half of 2008-09, the company's revenues grew by 138 percent, but in December 2008 quarter, it managed to grow by just 12 percent to Rs 1,360 crore. This is despite a 37.4 per cent y-o-y growth in volumes as realisations came off by 17 per cent on a y-o-y basis.
The demand for iron ore, the main input for making steel, has been declining globally and most of players are facing pressure on revenues front. Major iron ore producers such as Vale and Rio Tinto had already slashed production by 10 percent during November and December 2008, and said that they are watching market closely for developments. Sesa Goa sells close to half of its iron ore on spot prices and the rest on contracts and with annual contracts coming in for re-negotiation this year, all players including Rio Tinto and Vale may have to settle for lower prices.
Sesa Goa's realisations in the December 2008 quarter halved to Rs 2,296 per ton from Rs 4,666 per ton in the September 2008 quarter. China is the biggest consumer of iron ore and smaller Chinese steel mills are important customers of Indian exporters, but these mills cut production in the second half of 2008 due to the economic crisis.
The Chinese government has announced a stimulus package of $585 billion to increase spending on housing and railroads which could help revive steel demand in the country though there is no impact yet. Chinese iron ore imports were up one per cent y-o-y in December 2008 to 34.53 million ton, but analysts say that's because of older agreements and does not mark a revival as yet. Higher transportation costs resulted in the operating profit margins falling sharply by 2,100 basis points y-o-y to 41.2 per cent in the December quarter.
Higher other income helped cushion the drop in net profit to just 7.3 per cent at Rs 471 crore, which includes a foreign exchange loss of Rs 65 crore during the December 2008 quarter.

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Iron ore exports improve for Goa

The improvement is steel production in the last two months has amended Goa's iron ore export industry, which was badly hit due to global recession between September and December.
Goa Mineral Ore Exporters' Association president Shivanand Salgaoncar said, "When the recession hit us, the scene was bad but in the last two months or so, the situation has improved and there could be a marginal drop in terms of volume. It is the decline in international prices of the long-term contracts that is worrying us."
He also pointed out that Chinese market was a spot market; it was Japan and Korea- traditional buyers of Goan ore- which were still under the spell of recession. Goan iron ore mining could continue for another 20 years, taking 50 Fe as the cutoff base and over 80 percent of the ore was low grade. "Goa's iron ore grade is 58 percent and below. Thanks to the Chinese market, the ore of still lower grade has value and is exported. The threshold value according to the Indian Bureau of Mines is 55 Fe but for us, iron ore with value of 52 Fe is a viable opportunity," said Salgaoncar.
Riding on a last quarter pick-up of iron ore volumes by Chinese steel companies, Goan iron ore exporters are confident that they would end the current financial year marginally below last year's ore exports but continue to be upset over the low contract prices in the international market.
Salgaoncar said the recessionary trend - which continues to dog Japanese steel mills, traditional importers of Goan ore through long-term contracts - was troubling Goan exporters. In the worst scenario, imports by Japan and Korea could be down nearly 50 percent of the usual intake. Gross iron ore exports from Goa touched 40 million tons (mt) last year, including 33 mt of Goan origin ore. The current year could end with figures of 38 mt and 30 mt, respectively.
Explaining the economics of low grade ore, he said some of the Chinese steel mills had been taking Goan low grade ore and using it to blend it with high grade ore procured from Brazil. Considering the grip of world recession on some of these mills, the annual 8 to 10 mt intake could be down by at least 2 to 3 mt, according to Salgaoncar.
"What really worries us is the unpredictability of the world iron ore trade at this juncture. We cannot be sure of what can happen in the next couple of months; it is a month-to-month kind of fluctuating situation," Salgaoncar added.

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Welspun Gujarat shuts down plate mill temporarily

Welson Gujarat Stahl Rohren Ltd (WGSRL) has shutdown its plate mill at Anjar for 45 days to implement the 1.5 million ton Stackel coil mill which is a part of the backward integration improve the company's internal flexibility to produce in-house high gratde coils.
Moreover, the company has also commissioned its state-of-art pipe mill at Little Rock in Arkansas, US. The $150 million facility can produce 300,000 tons of HSAW pipes from 24 to 60 inches as outer diameter; 6 mm to 25 mm as wall thickness. It also has coating and double jointing capabilities which were commissioned earlier.

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GMR Energy buys Indonesian coal miner

GMR Energy has acquired Barasentosa Lestari PT, an Indonesian coal mining company, for $80 million.
The move is expected to strengthen backend integration for its future power projects as GMR aims to achieve fuel security for its power projects in India. GMR has paid $40 million for the Indonesian company while the balance will be paid in multiple tranches over the next two years. The company has raised 80 percent debt and 20 percent through equity to fund the first tranche of $40 million towards the acquisition.
GMR group chief finance Officer A. Subbarao said, "We have been working on this transaction for six months. This deal will help us fast-track power projects. If you have the right project, you can always raise money."
The Indonesian company, which holds a mining licence under the coal contract of work issued by the government of Indonesia, has reserves amounting to 100 million tons (mt) in south Sumatra. The licence provides 30-year mining authorisation over two separate coal blocks. The company has already begun identifying locations for setting up thermal plants.
"We are looking at the west coast of India, which offers better evacuation facilities and higher demand for power," said Subbarao. Typically, a 1,000-MW plant will consume 5 mt of coal per year and the Indonesian reserves will easily service GMR's power project plans over the next decade or so. The company will use bulk of the reserves for captive consumption. The company is looking at erecting power plants to coincide with the date of operation of the coal mine.

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Tata Metaliks identifies land in Karnataka for steel project

Tata Metaliks, which plans to establish an integrated steel plant in Karnataka, has identified land for the project.
"We had appointed (consultancy firm) Mecon to find a suitable place for us in Karnataka. It has identified the Bellary-Hospet iron belt," said Harsh K. Jha, managing director of Tata Metaliks, a subsidiary of Tata Steel.
"Ten days ago, the Karnataka government gave its consent for 900 acres. We haven't yet chalked out investment plans for the steel plant," Jha added.
"We are planning an integrated steel facility that will consist of ductile iron pipe plant and a pig iron plant and may also have a billet plant," he said.
The company has also applied for a licence to mine iron ore in the region for the proposed steel project.
Earlier, Tata Metaliks had asked for land from the West Bengal government in 2004-05 for constructing a 500,000-tonne per annum billet plant and had even made an advance payment of Rs. 9.5 crore. "We wanted 500 acres adjacent to the Tata Metaliks plant in Kharagpur. But we didn't hear anything from them," Jha said, adding that a few days ago, the company had communicated to the state government that it was no longer interested in constructing the plant in West Bengal. "They asked us to reconsider our decision," Jha said, adding: "There is no end-point to this bargaining." Tata Metaliks Kubota Pipes is a joint venture between Tata Metaliks (51 percent), Kubota Corp of Japan (44 percent) and Metal One Corp, also of Japan, (5 percent) and has been set up with an investment of Rs.185 crore. The company is also looking at starting work for the second phase of the plant to take up the capacity to 250 million tons annually from the present 110 million tons.

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Egyptian steel makers cut prices to counter cheaper imports   

Egyptian steel companies slashed their prices by EGP 300-550 per ton in the wake of weak demand and continuous threat of Turkish and Ukrainian imports.
According to a report, a leading steelmaker Al Ezz Steel cut their ex factory price to EGP 3,050 per ton from EGP 3,400 per ton. Following the action, Beshay Steel cut their ex factory price to EGP 3,000 per ton from EGP 3,500 per ton. “Imports into Egypt are still a threat to Egyptian producers. Ezz wants to counter the threat posed by the price differential. He has no choice but to lower prices. We are having a reactive response rather than a proactive one.” an analyst at investment bank Beltone Financial said.
All this has cut into local producers' profits, inspiring some anger. Two factories are now considering halting production in order to pressure the state to put tariffs on Turkish steel imports, said the report.
But the analyst thinks it is unlikely that the government will impose any new tariffs. He said that “You have to have a very strong dumping case. Dumping by definition is when you sell in the export market for a lower price than in your local market.

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Gulf may see 35% drop in steel demand        

The slowdown in the Gulf's construction industry due the current global recession could decline steel demand by as much as 35 percent.
The Dubai Multi Commodities Centre estimated that steel consumption in the region could drop to 9 million tons this year down from about 14 million tons in 2008. John Short ED for steel at DMCC said that "It's obvious to most that demand will come off with announced slowdowns less on site consumption occurring per active project, stoppages of active projects and less building project starts."
In the region, the construction industry is the biggest consumer of steel and most of the projects either have been delayed or even cancelled. According to a research report, USD 582 billion worth projects in the UAE are now on hold. But this is not indicative of the entire region as countries Abu Dhabi are continuing to see growth.
Short said that the construction industry accounted for more than 80% of Gulf steel demand. Steel rebar prices are now below USD 500 a ton, down from the peak of around USD 1200 a ton seen in the Q4 of 2008.

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Turkish rebars makers target Egyptian markets        

Due to falling demand from tradition Middle East Region, Turkish rebar manufacturers have turned to Egyptian markets for their products. Currently, Turkish rebars are being sold at USD 450 per ton to USD 460 per ton.
According to the industry, the prices may drop further. Ezz Steel has its Rebar pricing settled at USD 606 per tonnes which is considerably greater than that of Turkish origin. Ezz shall have to reduce its prices in order to make them more competitive or loose market share.

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Saudi Arabian scrap market in slump and prices stable        

Demand for steel scrap products from Saudi Arabia dropped into slump with declining transactions, but the prices had not many changes within a month.
Transactions of domestic steel scrap seems more optimistic than that of imported products. It is learned that price of HMS1&2 80:20 steel scrap was at SAR 600 per ton equal to USD 160 per ton and the price in western part was at SAR 500 per ton to SAR 550 per ton.
Purchasers from Saudi Arabia held that they have no plans to import steel scrap yet. The current import is just to relax the contemporary inventory shortage. As scrap export is forbidden in Saudi Arabia, the import prices are hard to confirm.

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Egyptian steel producers demand duties on rebar import   

Egyptian iron and steel producing companies have reduced, for the second time, the rebars prices as from March 2009. Ezz Steel has announced cutting their prices down to EGP 3050 per tons ex-works. This price is lower by EGP 350 than the level of prices of February, which amounted to EGP 3400 per tons. The other producers in Egypt reduced their prices at approximate levels.
This reduction is in response to the decline of the inputs of the iron and steel industry worldwide, according to Ezz Steel, but it also occurs as a result of the impact of the growing competition in the domestic market the intensity of which has increased by the low prices of the steel imported from a number of the exporting countries to the Egyptian market headed by Turkey whose rebars prices to the Egyptian market reached EGP 2900 per ton.
The Turkish exports to the Egyptian market account for about 35 percent of the total Turkish exports to the countries of the Middle East and North Africa during January 2009. The local producers are afraid of the possibility that the continuation of exports in this way would cause a real injury to the local mills due to their inability to match the low prices of the imported products.
The increasing imports of rebars and their low prices led the local producers to demand taking protective measures against the imported steel. President of the Metallic Industries Association in Egypt submitted an official memorandum two days ago to the Ministry of Industry and Trade asking them to impose preventive duties on the imported steel.

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Harsco inks 10 year pact with Emirates Steel    

Worldwide industrial services company Harsco Corporation announced that its Harsco Metals group is expanding into the United Arab Emirates under a new 10 year contract valued in excess of USD 35 million over its term.
The contract with Abu Dhabi based Emirates Steel LLC installs Harsco as the principal onsite service partner to a new electric arc furnace steel plant entering production with capacity for up to 400,000 tons of steel billets and 250,000 tons of gas based DRI production per year.
The release said that “Harsco was invited to take on responsibilities for a broad range of high value onsite material handling and environmental services, having worked successfully with the mill's management team at other steelmaking operations.”
The mill is a subsidiary of Al Nasser Industrial Enterprises ANIE, one of the leading manufacturing companies in the United Arab Emirates. Harsco expects to begin work within the next 1-2 months.

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Suez Steel closing billet mill   

Suez Steel has announced that closure of its billet producing mill since the first week of March 2009 because of the losses incurred by the company.
According to the sources, the drop in imported billet prices from CIS and the fall of the Turkish rebars prices in the Egyptian market are cited as the reason. The company's management sent a memorandum to the Egyptian Ministry of Industry and Trade informing it of putting the mill out of production.
Suez Steel was established in the Industrial Zone in Suez Governorate in 1997 and started with production in 2000. Its production capacity is 600 thousand tonnes of steel billets, using scrap and iron pellets produced by direct reduction. Egyptian National Steel Company bought the government's share in Suez Steel amounting to 82% for EGP 1.1 billion in September 2006.

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Toyota and Suzuki may set up manufacturing centers in Aden           

The Japanese Toyota and Suzuki Motor Companies have showed keenness to set up centers for their manufactures in Aden Free Zone for exporting them to African and other neighboring countries.
Dr Abdul Jalil al-Shuaibi deputy head of Free Zones General Authority, head of AFZ said that the two Japanese companies have informed him their desire to set up these centers as he met with them in sideline of his participation in an investment promotion forum held last week in Japan.
Al Shuaibi pointed out that AFZ and the Investment General Authority have reviewed in the forum the available investment opportunities and investment Projects in Yemen as well as facilities which would be provided to investors.

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Malaysia's Perwaja Steel delays projects

Malaysian steel maker Perwaja Steel has postponed expansion plans and is running at half its capacity as the current recession hit the country, a top company official.
Managing Director Pheng Yin Huah said that the company has no plans to restructure its borrowings or tap shareholders to raise fresh capital.
"Global steel prices will remain highly volatile this year. It would be good enough if we can just break even this year," Pheng said.
The price of steel billets, a semi-finished form of long steel mainly used in construction, has declined nearly one fifth over the past two months to below $350 per ton.
"The goal is not to make money, but to make sure we can sail through the crisis by carefully planning our purchasing and other cost saving measures," he said. Malaysia's largest steel maker made a profit of $24 million for fiscal year 2008 ending December 31, the first year of its listing, on revenue of 2.3 billion ringgit.
Perwaja has delayed two projects worth about $163 million to build a new electric arc furnace and a new blast furnace given the uncertain economic environment, said Pheng. "Everyone in the industry is taking a defensive stance now, this is not a period to be offensive," said Pheng. Inventory turnover has also slowed from the usual three-month period after it set aside nearly 350 million ringgit in the second half of 2008 for inventory impairment as global steel prices collapsed, Pheng said. Perwaja, which employs 3,000 people, is running at half of its capacity now due to slumping demand as Malaysia, the third-most export dependent country in Asia after Singapore and Hong Kong, heads for its steepest slowdown since the Asian financial crisis. Pheng said Perwaja and Kinsteel, another listed steel company that he controls, do not have refinancing problems.
Gearing ratios of the two companies, ranging between 0.6 times to 1.2 times were well within the 1.75 times limit that banks imposed on the steel industry, he said. "The group is financially stable. We don't see the need to restructure our debts or make cash call because we still have enough cash," said the executive.

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Japanese heavy plate import down by 26.6% MoM   

Japan imported 8,801 tons of heavy plate in January 2009, down 26.6 percent MoM, at an average price JPY 100,750 ton CIF.
Korea ranked the first largest exporter to Japan at 3,714 tons, up by 31.5 percent YoY, China ranked the second at 2,729 tons, down by 24.3 percent YoY and Taiwan ranked the third at 2,340 tons, up by 68.5 percent YoY.
In addition, Japan exported 264,299 tons of heavy plate in January 2009, down by 24.5 percent MoM.

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S Korea plans to spend 50 bln won to stockpile steel scrap 

South Korea plans to spend 50 billion won ($33.5 million) to stockpile around 150,000 tonnes of steel scrap for the first time, as it seeks to stabilise prices, the trade ministry said. The government and steel mills agree that adding steel scrap to state reserves would help stabilise prices, which tend to fluctuate sharply depending on seasonal demand. Steel scrap is a feedstock used mainly by mini mills to produce construction steel, while blast furnace operators use iron ore and coking coal to produce high-quality crude steel which can be processed into auto sheets, electronics goods and ship plates. South Korea plans to fund its purchase from a supplementary budget worth around 30 trillion won ($20.2 billion) due to be introduced this month to prop up the slowing economy. A purchase of 150,000 tonnes will be very small compared to the nearly 30 million tonnes of scrap South Korea consumes each year but would be enough to feed a mini mill for about one month. Scrap prices fell 6 percent to 17,810 yen ($182.3) a tonne in March from 19,066 yen in February, ending a steady rise since December after prices halved to 11,036 yen in November, when the global financial crisis slowed economic growth, data from the Japan Ferrous Raw Materials Association showed. Domestic scrap prices, however, remained firm as dealers refuse to release their stockpiles, betting prices would rise as the government plans to boost infrastructure spending to revive the economy. In South Korea prices are quoted at around 350,000 won ($235.1) a tonne, after jumping to nearly 700,000 won when steel prices peaked at record highs early last year and then skidding to around 100,000 won late last year, traders said.

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Posco hires banks for investor talks    

Posco, Asia's third-largest steelmaker, hired five banks to arrange meetings with investors that may lead to a bond sale for working capital. These banks are Citigroup Inc., Deutsche Bank AG, Goldman Sachs Group Inc., HSBC Holdings Plc and Merrill Lynch & Co. A bond sale will follow “subject to market conditions,” the note sent to investors said. Posco has a strong credit profile, but is operating in the commodity sector and its product prices are falling due to the global economic slowdown, so it would be difficult to gauge how successful this transaction will be. Pohang, South Korea-based Posco slashed production in December for the first time in its 40-year history, joining moves by ArcelorMittal and Nippon Steel Corp., the world's biggest steelmakers, as the global recession cooled demand. The company may cut production by 6 percent this year should the demand slump continue until June, Chief Executive Officer Chung Joon Yang said recently. While Posco is considering bond sales at home and overseas it hasn't yet made firm plans, spokesman Choi Doo Jin said. The steelmaker is understood to sell as much as $700 million of bonds. Posco's $300 million in 5.875 percent bonds maturing 2016 were quoted at 631 basis points above U.S. Treasuries recently. Posco had a net profit of 721 billion won ($485 million) in the fourth quarter ended Dec. 31, compared with 713 billion won a year earlier.

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S Korean HR and plate import prices on downward trend    

The import prices of HRC and plate in South Korea keeps declining recently. Now, export quotation for HRC by Chinese second tier mills goes at USD 520 per ton FOB, down by USD 30 to USD 50 per ton from early February. CSC also offers USD 520 per ton FOB, while the other mills only provide USD 500 to USD 510 per ton.
As for plate producers, both Chinese second tier plants and Amur Steel in Russia quote USD 570 per ton CFR for their plates. Nevertheless, there is still little transactions despite the price drop dating back to the depreciation of KRW versus US dollars. In that case, it is difficult to forecast the price trend in the future, at the mean time, steel demand remains to be weak and the stock is still piling up.
Industry insiders said that "Traders dare not to import although with the price decrease for the uncertain exchange rate and price trend as it will take more than two months from order placing to cargo warehousing."
Steel industry insiders consider it is hard to enlarge steel import before the ending of the price negotiation for raw material.

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Philippines to imports steel from Japan with zero tariff    

Philippines is expected to allow 175,000 tonnes steel imports from Japan with zero tariff.
Philippine Board of Investments said that government would allow 175,000 tons of hot rolled, cold rolled and tinplate products from Japan with zero importing tax in 2009 according to the Economic Partnership Agreement to be signed between the two countries recently.
Philippines' current import tax on HR and CR products stays at 7 percent and about 90 percent domestic consumption of cold rolled sheets relies on import.
There's only one supplier of cold rolled sheet in the country called Global Steel Philippines Inc, whose capacity is far under the domestic demand.

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China to produce 460mt steel in 2009

China, the world's largest steel producer and consumer, will produce 460 million tons (mt) steel in 2009, down by 8 percent from last year. This is against an output of 500 in 2008, of which more than 10 percent was exported.
According to a draft plan, China will also export only 8 percent of this. SBB reported that the final plan would probably include the 500 mt per annum (mtpa) production limit from 2011. The country is expected to slash an additional 72 mtpa of outdated iron capacity and 25 mtpa of steel capacity by 2011. Blast furnaces of under 400 cubic metres and converters of under 30 tons capacity will be shut down.
The government will support consolidation and maintain the current 10 to 25 percent export taxes on low-value products such as pig iron, ferro alloys, semis, ingot and wire rods and rebars. However, VAT rebates on exports of high-value products are expected to increase.

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Jinan Steel posts 60% drop in 2008 net profit    

Jinan Iron and Steel Company, China's largest shipbuilding plate manufacturer in the eastern Shandong Province, registered a fall of 60.13 percent in its 2008 net profit. Meanwhile, the company's net profit stood at more than $114.1 million in 2008, down 60.13 percent from a year earlier.
The company blamed the financial crisis for the drop in its profit, saying the downturn had resulted in drastic contraction in both domestic and overseas demand for steel in 2008.
Slacking demand led to an increase in stockpiling and thus steel prices plunged, which eroded the company's profit. The whole steel industry suffered from shrinking demand and steel prices dive last year. According to the country's iron and steel association, the aggregate net profit of 71 medium-sized and large steel producers fell 43 percent to 84.6 billion yuan in 2008 as weak demand drove down prices. And 15 steel producers recorded full-year losses totaling 8.5 billion yuan.
The statement of Jinan Steel said the prospect for 2009 was not optimistic in face of the sagging world economy and uncertainties about the raw material prices. Luo Bingsheng, executive deputy director of the country's iron and steel association, said in late February that recovery for China's steel market was not yet in sight as declining exports and excessive production capacity continued to haunt the industry.

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China mills demand 2007 iron ore prices      

Shougang Iron and Steel, China's sixth-largest steel maker, said Chinese steel mills would only accept global iron ore prices close to the 2007 level, which would give both miners and steel firms reasonable profit margins.
Global miners and Chinese steel mills are in talks to set term iron ore prices. "I think, first of all, we can only go to discuss precise prices on the basis of the 2007 price level," Shougang Group Chairman Zhu Jimin said. That implies a 50 percent cut, since last year prices from top ore suppliers BHP Billiton, Rio Tinto and Vale almost doubled. "The price should give miners some profit room for their sustainable development, and it should also be in a range the steel mills can bear. A price that hurts the interest of one side will lead to disorder in the industry," he added.
China's steel sector, the world's biggest, has been hit hard by the global slowdown because demand for ships, cars and building work has fallen sharply. Beijing is encouraging the fragmented sector to coalesce into a few regional champions, with upgraded plants in coastal regions where they have better access to overseas markets.
Although it has not offered direct aid to steel mills, it is offering indirect help through a 4 trillion yuan ($585 billion) stimulus package. And it is also urging companies to invest abroad while commodity and asset prices are low.
It bought about 40 percent of Australian miner Mount Gibson Iron Ore Ltd in December through two of its Hong Kong-listed subsidiaries-Shougang Concord International Enterprises Co Ltd and APAC Resources Ltd.
Zhu said his firm had no plans to buy more of Mount Gibson, but it does plan to invest $700 million to $1 billion in its Peruvian iron ore mining project, Shougang Hierro Peru.
Under the stimulus plan, Shougang recently won a contract to supply 310,000 tons of steel, part of a 500,000-tonne deal for oil and gas pipeline construction, Zhu said. Steel firms will also benefit from China's plans to expand its railway system and machinery industry, Zhu said.
Shougang, which produced almost 12.2 million tons of crude steel last year, will soon launch operations at its Caofeidian joint venture plant, a state-of-the-art mill on the coast of northern Hebei province near Beijing. The mill is 49 percent owned by Tangshan Iron & Steel.
Caofeidian will start running in April at half capacity, 4.85 million tons a year, and will reach its full capacity of 9.7 million tons of high quality steel by the end of 2010, Zhu said. Shougang is also in takeover talks with Shanxi-based Changzhi Iron & Steel and Guigang Special Steel, Zhu said, adding the company was in the due diligence stage. Changzhi Iron & Steel has an annual capacity of 4 million tons and Guigang Special Steel has less than 1 million tons.
Commenting on the steel price trend, Zhu said a real price rebound would not happen until the second half of the year, when he expected more of the government's stimulus policies to take effect and the global economy to start looking up. An uptick in steel prices and exports at the start of this year cheered the gloomy commodity markets, with some traders seeing the chance of a return of Chinese demand thanks to the economic stimulus package.

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Wugang slashes April prices for strip       

Wuhan Iron & Steel (WUgang) will slash its hot rolled coil (HRC) ex-work prices for April by RMB 50 to 200 per ton ($7-29 per ton).
The company is also planning to slash its cold rolled coil and hot-dip galvinised prices by RMB 300 per ton, said a report. Now, Wugang's Q235 5.5mm HRC price will be RMB 3,791 per ton ($558 per ton), its Q195 1.0mm CRC price will be RMB 4,575 per ton and its 1.0mm HDG price will stand at RMB 4,906 per ton, all including VAT.
The announcement comes days after Baosteel decreased its April ex-works prices. These cuts bode well for the market in the short term, according to traders. However, some traders also pointed out that Wugang's April prices would remain higher than current market prices, in spite of the lowering.

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Chinese mills may cut output

China Iron & Steel Association held a meeting with the heads of China's top 20 steel majors to discuss controlling capacity utilization and upgrading output cut scale in response to the deep steel price falls since the Lunar New Year holiday.
The authority unveiled that Chinese steel market, which had shown sign of looking up, collapsed again since Feb and beaten most steel mills' expectations. The authority added that "Participants are mainly discussing the current market conditions and the future trend, for any pre-judges can help save losses." Officials of the China's steel industry body said current steel prices are still determined by market fundamentals, and it will be difficult for it to put forward the idea of joint production cutback. According to the report, most steel mills are in same dire condition at the moment, and they should control output in tandem with self conditions. A host of medium-and-small scaled steel mills have again idled their furnaces in light of the deep steel price corrections since February.
Zhang Xiaogang, president of Angang Group told the newspaper during the annual parliament session that "The price fall came as no surprise due to the severe excess capacity.” Zhang added that "The pressure will be tougher in future since capacity for some big projects have yet to be fully released. Angang idles two of its furnaces at the moment and its Caifeidian new plant, which had previously planned to start operation in March will certainly be postponed..

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Maanshan signs 0.2 mt deals with 9 auto makers      

Maanshan Iron & Steel Co Ltd bagged 9 deals, equal to over 0.2 million tons of steel products, which totally out values CNY 1 billion, from 9 auto and auto parts makers like Chery, JAC Motors and Changhe Auto.
As per report, the big deals were signed on February 25th in the auto steel supply and demand meeting jointly held by five financial branches of Anhui Province. The meeting convoked nearly one hundred car-related enterprises in the province; calling for a priority given to Maanshan Steel made products.
As the largest industrial enterprise in Anhui, Maanshan Steel is thought as the first one who is able to top CNY 100 billion of sales revenue. Thus, local Govs places a highlight on the steel maker's sales performance. It's learned that there is about 0.9 million tons steel demands in local auto industry.

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U.S. Steel to cut production in Serbia 

U.S. Steel Corp. may cut production and working hours at a smeltering operation in Serbia as it's continues steps to cut costs in the wake of the global financial crisis.
The Pittsburgh-based steelmaker will complete a shutdown of its smelter in the city of Smederevo by April, and will keep the facility shuttered until 2010, said a report.
U.S. Steel's Serbian unit already has cut the work for a week at the plant from 40 to 32 hours, the report said. It did not say how many workers the plant employs.
Spokeswoman Erin DiPIetro was not available for comment.
The company already has announced a number of cost-cutting steps both in the U.S. and abroad in recent months, including on Feb. 27 a plan to idle three of the 12 coke oven batteries at its Clairton Works. The company did not disclose how many of the plant's 1,254 workers would be impacted.

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ArcelorMittal idling Cleveland plant    

A decline market for steel has forced ArcelorMittal, the world's largest steel producer, to suspend operations at its Cleveland site in May, cutting off 950 employees for indefinite time.
About 250 employees will remain at the plant for maintenance of the mill and finishing plant in the city's Flats area, said a company spokesperson. The site employed about 1,440 members of United Steelworkers of America.
Local 979 President Mark Granakis says he expected some job cuts but had not expected them to be so severe. The company says workers will return to work “as soon as it is warranted by market conditions.

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Severstal steel output 2008 dips 7% in Russia    

Severstal reported a near 50 percent cut in crude steel production in Russia in the fourth quarter to 1.7 million tons, compared to the third quarter.
Saleable rolled products production in that country has fallen 41 percent quarters-on-quarters to 1.4 mt while sealable semi-finished products dropped 20 percent around 200,000 tons, said the SBB report.
As a result, Severstal's Russian crude steel production for the complete year declined 7 percent from 2007, at 11.1 mt. Rolled products output in Russia stood at 87 mt last year. Long products came down the most, 11 percent year-on-year to 1.8 mt. Severstal's saleable output of iron ore pellets was 7 percent lower in 2008, at 9.3 mt, compared to 2007. However, saleable production of iron ore concentrate rose 1 percent in 2008 to 4.7 mt.

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JP Morgan lowers ArcelorMittal earnings   

ArcelorMittal, the world's biggest steelmaker, will report earnings at least 10 percent less than previously forecast for 2009 and 2010 as the outlook for profit at European producers worsens, JPMorgan Securities Ltd. said. JPMorgan cut its estimate for earnings before interest, tax, depreciation and amortization this year to $8.5 billion, from $9.7 billion previously, Jeffrey Largey, an analyst in London, wrote in a note recently. The bank reduced its 2010 prediction to $12 billion, from $13.4 billion, and its price estimate for the company's stock by 9 percent. “Investors should remain cautious on the European steel sector as the probability of meaningful earnings recovery in 2009 appears to be diminishing,” the report said. Global crude steel output fell 24 percent in January from a year earlier, the World Steel Association said February 20. The price of European hot-rolled coil, a benchmark steel product used in cars and construction, has declined 54 percent to 375 euros a metric ton since reaching a high of 815 euros a ton on June 18, 2008. Luxembourg-based ArcelorMittal posted an unexpected fourth- quarter loss of $2.63 billion on February 11 after one-off charges of $4.4 billion including writedowns on inventories and raw- material contracts. It has lowered output more than 30 percent and may cut as many as 9,000 jobs, or 3 percent of its staff.

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Global steel demand down 20% 

Global demand for steel is down around 20 percent at the moment, but with destocking nearing an end, the industry is likely to see some signs of recovery by the end of the year, a top industry official said. Stocks are very low and destocking is coming to an end, he added. By the end of this year, some steel companies will say 2010 is looking much better than. Steel demand and prices have collapsed since mid-2008 after consumption from the major steel-consuming sectors such as automotive and construction came down sharply, forcing producers across the globe to slash output sharply. Christmas said the capacity usage across the sector was around 50 to 60 percent currently, with global production down 24 percent in January. Production will be off 20 percent in the first half. According to a study global crude steel production is expected to fall by 9 percent to 1.210 billion tonnes this year, which will be the first drop in output since 1998. The industry is eagerly awaiting, Chinese industry to come back for resumption in steel demand. China is the world's top steel producer with its some 500 million tonnes of annual output, which grew by 2.6 percent while the global output was down by 1.2 percent. But recovery in Western Europe is likely to take some more time, but sentiment is rather upbeat about the outlook for the United States.

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Belgian steel maker's profit up 

Belgian steel cord and wire manufacturer Bekaert reported a rise in 2008 profit boosted by growth in emerging markets, raised its dividend, but remained vague on the prospects for this year. Bekaert, whose products are used to reinforce tyres and concrete, said that recurring earnings before interest and tax (REBIT) rose 58 percent to 294.2 million euros ($375.9 million), above the average forecast of 279 million euros in a Reuters poll of five analysts. Net profit increased by 18.7 percent to 191.8 million euros. Analysts had expected a net profit of 197 million euros. Last month, Bekaert reported consolidated sales of 2.66 billion euros for 2008, up 22.6 percent from 2007. The group also said it managed to pass on raw material price increases and saw a particularly strong first half of the year. Bekaert said at the time that short-term visibility on market developments was extremely limited, but that it did not expect the current activity slowdown to last across the group's different markets. Analysts fear the group faces a tough 2009, given the state of the auto sector. The company said it would propose paying a dividend of 2.80 euros per share, compared with a gross dividend of 2.76 euros for 2007.

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Outokumpu doesn't expect stainless steel recovery yet

Outokumpu Oyj, the world's fourth- biggest stainless-steel maker, said it doesn't expect a recovery in demand yet. Steel demand in U.S., Europe and Japan has dropped as the global recession crimped demand from automakers and builders, forcing Outokumpu and rivals to cut output. Chinese demand may have started to recover amid increased government spending, Shanxi Taigang Stainless Steel Co. said. Most stainless steel makers have cut production already. Whether or not more would be needed will depend on demand, a company executive said. The Espoo, Finland-based company last month reported a fourth-quarter loss and had also said the stainless-steel market will remain 'very weak' in the current quarter. China is spending 4 trillion yuan ($585 billion) on a stimulus package, which will include building infrastructure, to help it reach an economic growth target of 8 percent this year. Taigang, the country's largest stainless steelmaker, yesterday said demand for its products is recovering.

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