Exports

The US steel industry is suffering because a barrage of imports has reached a record 34% of market share, steel executives said today at the American Iron and Steel Institute‘s press briefing in Chicago.

Nucor Corp. CEO John Ferriola said 4 million people whose livelihoods depend on the steel industry are at risk, but also that enforcing existing trade and anti-dumping laws consistently would make a wealth of difference for today’s producers.

Pool 4 Tool’s Automotive SRM Summit

“The first step is enforcing existing law as written,” he said. “Legally and consistently enforcing the laws on the books would help immensely… The American worker is still the most efficient worker in the world. We have relatively inexpensive energy, we have the raw material available, we have the best market in the world. When you look at those natural advantages, it makes no sense we should be operating at 60-70% capacity while the rest of the world is overproducing.”

Chinese Dumping

“While many nations continue to engage in unfair trade practices, China is of particular concern,” Baske said. “Last year, China exported 101 million metric tons. A surge of 60% over the previous year and that increase continued at record levels in the first quarter of this year. Some estimates are as high as 468 million mt. Steel demand in China declined last year and is expected to decline this year, too, according to the World Steel Association. China also manipulates its currency to give its products an unfair advantage.”

Baske also noted the business decisions US steelmakers have had to make due to declining prices due to the import surge and they are still in a difficult position due to what the glut has done to prices on the London Metal Exchange.

“On Sept. 3, almost eight months ago, hot-rolled ran $676 a ton. Now it’s $440 a ton,” he said. “In any industry, a 35% to 36% price reduction in that period of time would put pressure on the business. Fair trade will correct it.”

WTO Relief

The executives also noted that while bringing anti-dumping cases with the US International Trade Commission and the World Trade Organization has been somewhat successful, the process has not always worked in the favor of US producers. Even cases that were won, such as last year’s rebar case against Turkey, have not had high enough tariffs to discourage dumping. Gibson said the standard in a safeguard case is higher than in a trade case and the AISI, and the industry as a whole, continue to evaluate all options under the law.

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Although stainless steel demand is expected to grow moderately this year, service centers are flush with inventory which is putting pressure on US mills.

Why Manufacturers Need to Ditch Purchase Price Variance

Combined with successive months of declines in nickel prices, service centers are only purchasing what is absolutely necessary. Both domestic mills and Asian mills have robust North American inventories, a stark contrast from a year ago when lead times went beyond the standard 6-8 weeks, causing service centers to seek alternative sources.

Technical Issues Hurting Mills

Another exacerbating factor in last year’s supply was Outokumpu’s technical issues with its cold-rolling mills and a lack of alternative domestic supply led service centers to seek other sources. With lead times extended, the domestic mills were able to pass through several base price increases in 2014.

With higher US base prices and the strength of the US dollar, Asian imports did not subside. Asian producers need other markets for their surplus material as Chinese demand is weak and both Europe and India have taken anti-dumping actions against China.

End market demand is strong for automotive,​ residential​ appliance and food service/food processing equipment. The only market that appears to be suffering is energy which is due to the low price of oil. Stainless demand is decent according to many sources and stainless base prices will remain under pressure.

Inventory Backlog

The North American market​ ​is ​saturated with inventory​ ​so​ lowering the base price will not spur on demand. Until service centers reduce their inventory backlogs and nickel prices start to improve, service centers will not buy, regardless of price. Service centers need to focus on getting their inventories in check before they resume anything resembling regular buying patterns. ​​Unfortunately, the mills are under pressure to book capacity which oftentimes leads to acts of desperation.

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When domestic markets weaken, most producers turn to export markets to sell excess capacity, but you don’t just break into export markets overnight. It’s not that easy. Sort of like one does not simply walk into Mordor.

Why Manufacturers Need to Ditch Purchase Price Variance

The tried and trusted short-term approach is to sell cheap, making it hard for buyers to refuse the low-priced product being offered.

Sell Low, Buy Even Lower

If those mills are supported by plunging raw material costs and extensive local state support gifting them a break-even price around the lowest in the world, then the intent to simply “dump” metal into export markets has few barriers.

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Why Manufacturers Need to Ditch Purchase Price Variance

High costs and lower demand are just two of the problems plaguing India’s DRI sector. DRI is used by the steel industry in flat as well as long steel product segments, and is also used in infrastructure projects.

Low Steel Demand Hits DRI Producers, Too

According to figures put out by the World Steel Association, in the first quarter of 2015, India, with over 4,500 tons of DRI, headed the list of 14 nations that accounted for 87 % of the world’s total DRI production. The Sponge Iron Manufacturers Association has estimated India to have an installed capacity of 37 million metric tons, although it’s difficult to arrive at an accurate figure due to a general lack of proper research.

EAF and Induction Resources

India’s DRI industry has nurtured secondary steel producers who largely use electric arc or induction furnaces to make their steel, for which DRI comes as handy substitute for scrap.

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Today’s MetalCrawler brings you all the steel news fit to digitally print.

How Big Chinese Mills are Making Money

Plunging iron ore prices are providing a lifeline to some of China’s biggest steel mills and are raising the prospect of a rising tide of exports and increased friction with the European Union, US, India and other export destinations.

Pool 4 Tool’s Automotive SRM Summit

Even as China’s domestic steel demand shrinks and the industry battles chronic overcapacity, lower iron ore prices have helped many large mills post better earnings in 2014 than a year earlier, supported by record exports. Reuters reports that the latest batch of Chinese steel earnings shows just three of 18 big Chinese mills to report so far suffered losses in 2014, down from five the year before. Six of the 13 profit-making mills in 2013 increased profits last year.

Big Chinese mills are able to ship in cheaper seaborne ore direct to their coastal steelmaking operations, selling to customers nearby or shipping steel overseas.

Steel Dynamics Misses

Steel Dynamics Inc. recently reported first-quarter net earnings of $30.8 million or $0.13 per share compared with $38.6 million or $0.17 per share last year.

Excluding items, adjusted earnings for the quarter were $0.17 per share . Revenues for the quarter were $2.05 billion compared with $1.83 billion in the prior year. Analysts polled by Thomson Reuters estimated earnings of $0.15 per share on revenues of $2.15 billion for the quarter.

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MetalCrawler brings you warning of more domestic steel producer layoffs and China released new rare earth quotas.

More Layoffs Coming

U.S. Steel Corp. could slash 1,400 jobs as it continues to grapple with a difficult market.

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The Pittsburgh-based company notified workers last week, mostly at plants in Texas and Arkansas, that they could be out of a job as early as June 17, U.S. Steel spokeswoman Sarah Cassella said Monday.

The potential cuts include 579 employees in Lone Star Tubular Operations; 166 in Offshore Operations Houston; 255 at Wheeling Machine Pine Bluff in Arkansas; and 404 managers throughout its tubular operations.

China Sets Rare Earth Quotas

China’s Ministry of Industry & Information Technology recently released rare earth production quotas for 2015.

Rare earth oxide (REO) mining quotas were set at 52,500 metric tons while smelting and separating limits came in at 50,050 mt.

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Maybe because of Alcoa Inc.’s involvement in the Maadan smelter in Saudi Arabia, recent attention on the Middle East has centered on that production facility, but significant as its 750,000 metric tons is, it will be but part of a much larger regional capacity that has built up in recent years.

Free Webinar: MetalMiner’s View For Q2 and Q3, Learn How to Plan Your Purchases Through September

A report from the fourth edition of Aluminium Middle East 2015 states that last year the Gulf region produced 4.83 million metric tons of primary aluminum compared to the 53.06 mmt produced globally. Of that, the United Arab Emirates (UAE) produced 2.3 mmt making it globally the fourth-largest producer accounting for more than 50% of the region’s production.

United Aluminum Emirates

85% of the metal is exported around the world although tax breaks, local metal supply and a buoyant construction infrastructure market have encouraged fast rising local consumption. Consumption for downstream application is growing at 8.4% per year compared to a global average of 3.5% supposedly making the Middle East the fastest growing aluminum market in the world according to the report.

The Gulf has six smelters: Alba, Dubal, Emal, Qatalum, Sohar and EGA, in addition to a growing alumina refining capacity. Although the UAE is nearing production capacity — it produced 2.3 mmt of it’s 2.4 mmt theoretical capacity last year — the management are tight lipped about further expansion plans.

Expansion Beyond Current Capacity

Emirate Global Aluminium’s vice chairman is also CEO of Dubai Electricity and Water Authority, underlining the close interdependency of aluminum smelters to electricity costs and water supply. Although the UAE earns some $3.9 billion in export revenues from aluminum production, it comes at a price in the consumption of vast amounts of natural gas and fresh water.

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MetalCrawler has a case of the Mondays as steel prices in China are being cut even more to try to spur sales.

China Steel Cuts Prices Deeply

China Steel Corp. announced Friday a deeper-than-expected price cut of 7.4% on average for its products to be shipped to local customers in June, as sluggish demand is adding pressure on the profits of China’s biggest steelmaker this quarter.

NHTSA Approves of F-150 Crash Compatibility

The National Highway Traffic Safety Administration gave its top rating to the aluminum-bodied 2015 F-150 Super Crew, granting it five stars for both the frontal and side impact tests and four stars for the rollover rating.

Free Webinar: MetalMiner’s Q2 and Q3 2015 Forecasts

The previous model, with a steel body, got an overall rating of four stars, and only three stars for the frontal crash. Safety ratings have not yet been released by the other US group that conducts crash-testing, the Insurance Institute for Highway Safety (IIHS), whose tests are generally regarded as even more stringent than NHTSA’s.

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The big news in metals this week was China’s economy growing at the slowest rate since 2009. If our bearish markets are to turn around this year, it would appear they’re going to have to do it without help from the world’s second-largest economy.

Free Webinar: MetalMiner’s Q2 and Q3 2015 Forecasts

But that’s not all that we learned from China this week. In many ways, China doesn’t really look like an economy growing at even 7%, with exports plunging in March, power generation dropping 3.7%, and a host of other indicators pointing to sluggish growth. This is bad because the most of the demand for our metals is based on China at least maintaining 7.5% economic growth. In today’s world economy, if you’re not growing, you’re dying.

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Today in MetalCrawler; the Chinese economy continues to disappoint, gold breaks a key support level and nobody agrees about when copper prices might recover.

Chinese Economy May Be Stimulus-Proof

In many ways China doesn’t really look like an economy growing at even 7%, with exports plunging in March, power generation dropping 3.7%, the biggest fall since 2008, and a host of other indicators pointing to sluggish growth.

Free Webinar: MetalMiner’s Q2 and Q3 2015 Forecasts

Reuters Clyde Russell writes that increased economic stimulus spending by Beijing may not be able to do much to help the Chinese economy this year.

Gold Falls

Gold slid below $1,200 an ounce on Thursday as the dollar pared losses after upbeat US factory data and demand for physical metal stayed weak, though uncertainty over the timing of a Federal Reserve rate increase underpinned prices.

The dollar index, strength in which tends to weigh on gold, recovered from lows against a basket of currencies after a survey showed factory activity in the mid-Atlantic region accelerated in April.

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