Ferro Alloys

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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MetalCrawler is covering the labor issues beat today and they might affect your metal purchases.

Century Hints at Lockout

Century Aluminum will invoke a lockout of unionized workers at its Hawesville, Ky., smelter starting on May 11 if the union does not approve a final offer on a labor deal, according to a letter posted on Century’s website on Friday.

Pool 4 Tool’s Automotive SRM Summit

United Steelworkers Local 9423 is set to vote on the proposed contract today, according to a post on the union website. If workers go on strike, it would be the first industrial action at a US aluminum smelter in more than a decade.

Train Drivers Strike in Germany

A seven-day strike by German train drivers could cost the German economy €500 million ($556.70 million), Germany’s DIHK Chambers of Commerce said on Monday.

The strike, the eighth in a dispute between the GDL train drivers union and state-owned Deutsche Bahn over work conditions, began today for freight trains and will be extended to passenger trains from Tuesday.

BP Refinery Strike Could Soon End

Workers and management at BP have reached a tentative agreement that would end a months-long strike at the multinational’s refinery in Whiting, Ind.

The United Steel Workers employees must still ratify the contract, and officials expect a vote to occur in the next few days.

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This week, our metals markets fell lower as they were buffeted by seemingly ever-increasing exports of steel, aluminum and other products from China.

Why Manufacturers Need to Ditch Purchase Price Variance

Even though China’s economic growth has been falling, its government still gives producers strong incentives to produce steel and aluminum that eventually ends up exported elsewhere. My colleague Stuart Burns rightfully points out that if Chinese 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.”

Can Debt Fuel Long-Term Growth?

But what’s the eventual result of state support? In China or anywhere else? Can government debt actually lift these economies back into growth mode? Stuart was there again, with an assist from the Daily Telegraph, postulating that sluggish growth and low inflation is the new normal and “advanced economies — and perhaps emerging ones, too — seem to have run out of productivity-enhancing growth and, therefore, need constant infusions of financially destabilizing debt to keep them going.”

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Construction spending falling again was the big news in today’s MetalCrawler report. The race for world’s largest steelmaker by market value heated up, too.

Construction Spending Falls

Outlays for US construction projects fell 0.6% in March to a seasonally adjusted annual rate of $967 billion, the Commerce Department reported Friday.

Why Manufacturers Need to Ditch Purchase Price Variance

Economists polled by MarketWatch expected a drop of 0.5%, compared with an originally reported decrease of 0.1% in February. On Friday, the government revised February’s result to show almost no change. Looking at private outlays in March, spending fell 1.6% for residential projects, and rose 1% for nonresidential projects. For overall public construction projects, spending fell 1.5%.

Baosteel Keeps Growing

Baoshan Iron & Steel Co., spurred by China’s stock-market rally and growing car market, is poised to overtake Japan’s Nippon Steel & Sumitomo Metal Corp. as the world’s largest steelmaker by market value.

Baosteel, supplier of half of China’s automotive steel, had a market capitalization of $23.8 billion to Nippon Steel’s $25 billion on Thursday. The spread on Tuesday was only $52 million. Also tracked in the attached chart is South Korea’s Posco, which wrestled with the Japanese steelmaker for the crown from 2013 until last year.

Shares of Shanghai-based Baosteel more than doubled in local-currency terms since Oct. 30 as the benchmark Shanghai Composite Index rallied 86% Nippon Steel’s stock rose 14% and Posco fell 18% in the same period.

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While India leads the world in Direct-Reduced Iron production, the domestic industry has been facing an uphill production battle for the last four years.

Why Manufacturers Need to Ditch Purchase Price Variance

India’s DRI sector is hoping for help from the government and clarity in the overall steel policy to see it through, what many have dubbed, its most critical phase ever.

Demand DRIs Up

What is worrisome is that the falling demand for steel, especially construction steel globally, could further, negatively impact the sector. Some are quick to note that India’s DRI units need not worry much on this front as the market in India has remained insulated from global trends owing to steadily increasing domestic steel consumption.

Two other risks facing the sector are imported scrap being used by steel companies in India, DRI is an excellent substitute for scrap in electric arc furnaces, and the reliance by medium-sized DRI producers on inferior technology. That means technological limitations stop the producers from exploiting inferior grades of iron ore and coal.

Further, the limited availability of coking coal only motivates steel production in the country through a combination of DRI and blast furnace. What has added to the misery is the recent round of coal auctions held by the federal government.

Unable to Bid in Coal Auction

DRI companies were unable to participate in the auction, and a hitherto discounted source of fuel was lost, pushing the cost of DRI production by an estimated 40%, some have said. The DRI segment has brought this to the government’s attention.

While many steel companies prefer to use DRI instead of scrap, the slowdown in the global steel industry has seen some amount of the steel melting scrap being imported into India because of lower import duties. What makes steel plants happy in such cases, besides the cheap duty, is the fact that the imported scrap percentage works out to be higher, which eventually negates the cost of imported scrap.

To many analysts, the DRI sector in India is poised on the cusp of a turnaround, but only if there is adequate government backing as well as support from domestic steel companies. Even then, it could easily take four years for the industry to come back to an even keel and ramp up production.

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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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Another day at MetalCrawler and another steelmaker reports a loss due to imports. Also, US economic growth ground nearly to a halt in the first quarter and the US International Trade Commission reaffirmed duties on Chinese steel tubes.

U.S. Q1 Results Disappoint

U.S. Steel Corp. reported a loss and lowered its pretax 2015 earnings forecast by around $500 million, citing “massive” imports, particularly from China, low oil prices and excess inventories.

Why Manufacturers Need to Ditch Purchase Price Variance

The results were worse than expected and pushed the Pittsburgh-based steelmaker’s stock down.

Domestic steelmakers are reeling as prices have dropped to their lowest levels since the 2009 financial crisis. The benchmark hot-rolled coil index has declined 26% since the start of the year, to $444 per ton.

U.S. Steel Chief Executive Mario Longhi called market conditions “extremely difficult” as the company, in a statement, blamed imports and oil prices.

Overall steel imports into the US rose 14% to 7.9 million tons during the first two months of 2015, according to Global Trade Information Services. The US imported 397,062 tons of steel from China during that time, up 24% from the same period a year before.

US Economy Barely Grows

The US economy skidded to a near halt in the first three months of the year, battered by harsh weather, plunging exports and sharp cutbacks in oil and gas drilling.

The overall economy grew at a barely discernible annual rate of 0.2% in the January-March quarter, the Commerce Department reported Wednesday. That is the poorest showing in a year and down from 2.2% growth in the fourth quarter.

ITC Affirms Steel Oil Tube Tariffs

The US International Trade Commission (ITC) voted unanimously that US producers were injured by subsidized imports of oil country tubular goods (OCTG) from China. The ITC decision affirms countervailing duties (CVD) of 10-16% established earlier this year by the Commerce Dept. Commerce will now issue a countervailing duty order on the Chinese imports as a result of the ITC’s affirmative determination.

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Yesterday’s post explained how the Short Range Outlook (SRO) report released by the World Steel Association for 2015-2016 predicted steel demand would grow by just about 0.5% to 1.544 million metric tons in 2015.

Pool 4 Tool’s Automotive SRM Summit

The world’s steel sector looks on with hope to India to see it through this downturn. The country’s per capita consumption was still low, at about 60 kg as against the world average of 220 kg. With the government’s Make In India (manufacturing) plan slowly grinding into motion, it is hoped that this will lead to an increase in steel consumption.

The End of Annual Growth for Chinese Steel

So, the China steel story is over, at least for the short-term. The economic deceleration there, following low investment growth since 2008, is expected to adversely impact any steel growth there, and it has so far this year.

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Today in MetalCrawler, losses widened at a major stainless steel manufacturer, an aluminum giant gets a new CEO and two design and construction software companies team up for better workflows for HVAC designers and installers.

AK Steel Loss Widens

AK Steel Holding Corp. said its first-quarter loss widened from a year earlier on a big write-down related to its investment in iron-ore pellet joint venture Magnetation LLC.

Why Manufacturers Need to Ditch Purchase Price Variance

Average selling prices fell 8.9% from a year earlier, while shipments increased 39%, with a boost from an acquisition and strong demand from the automotive sector.

Ohio-based AK Steel in March predicted that shipments of carbon and stainless steel to the automotive market would remain strong because of market demand. However, the company warned that it expected its shipments to decline 14% from the fourth quarter to roughly 1.7 million tons on weakness in the carbon steel spot market, which AK Steel attributed to rising imports.

Martens Leaves Novelis

Novelis Inc., the US’ largest aluminum recycling and rolling company, has announced the departure of Philip Martens as the company’s president and CEO. Replacing Martens as president on an interim basis is Steve Fisher. Novelis says it has begun a search for a permanent CEO.

Martens, a former Ford Motor Co. executive, joined Novelis in 2009. During his tenure with Novelis the company shifted its focus toward servicing the automobile industry.

Vulcan Works With AECOsim for Ductwork

Geo-positioning and construction software manufacturer Trimble recently started supporting new construction modeling workflows with enhanced integration between Bentley Systems‘ AECOsim Building Designer software and Trimble’s Vulcan sheet metal cutting software for the HVAC market. The new workflow integration enables design models to be shared easily, securely and accurately. The move expands the companies’ ongoing collaboration around “Construction Modeling” and enhanced information mobility.

Vulcan is a sheet metal cutting software product for HVAC contractors, design/build firms and duct manufacturers, who rely on the software to increase shop productivity, plan duct design and installation and reduce waste.

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