ArcelorMittal

Could world markets finally see a respite from Chinese steel imports? Molycorp, Inc. vowed in court papers that it won’t completely shut down its Mountain Pass, Calif., facility.

Chinese Steel Prices Collapse

A collapse in Chinese prices last month is set to push already stretched Chinese steel mills even further into the red, curtailing production and exports, according to billionaire steel mogul Lakshmi Mittal, CEO of ArcelorMittal, the world’s largest steel producer.

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Chinese prices for the benchmark product, hot-rolled coil, already at rock bottom, fell a further 10% last month.

We have been hearing a lot that the Chinese government wants to reduce capacity,” Mittal, chief executive officer of ArcelorMittal, the world’s biggest steel producer, told investors on July 31. “This should really accelerate the process of closing down the capacity.”

Molycorp Won’t Shut Down Mountain Pass

In a bankruptcy-court filing, Molycorp, Inc., said it is weighing a number of options for its Mountain Pass, Calif. operation, which has consistently lost money. From 40 to 200 of the 400 jobs at the facility could be saved, depending on how much of the Mountain Pass facility Molycorp decides to keep running while it addresses a $1.7 billion pile of debt, according to court papers filed Wednesday.

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Six steelmakers with major US operations filed a trade complaint Wednesday seeking punitive tariffs for alleged unfair pricing of imported steel from China, India, Italy, South Korea and Taiwan.

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The suit, which concerns corrosion-resistant steel used in automobile and construction industries, is the first salvo in the campaign this year by the beleaguered US steel industry to protect itself against a record flood of imports.

The steelmakers are U.S. Steel Corp. , Nucor Corp., Steel Dynamics Inc., ArcelorMittal USA, AK Steel Corp. and California Steel Industries. All are based in the US except multinational ArcelorMittal, the world’s biggest steelmaker, which is based in Luxembourg and London but owns big mills in Indiana and elsewhere in the country.

Prices have been sluggish—down about 25% since the start of the year—despite strong demand in the US. That has forced the companies, which make most of their steel near auto factories in the Midwest and South, to lay off thousands of workers and idle plants around the country.

They blame imports, particularly from China. The US International Trade Commission must decide within 45 days whether the business of US producers was sufficiently “injured” to merit duties. The Department of Commerce will issue a preliminary ruling by the end of 2015. Final rulings by both agencies are expected by mid-2016. The steel companies are expected to argue before the USITC that foreign companies benefit from subsidies from their governments and from currencies that have been intentionally depreciated relative to the dollar.

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It was barely two years ago that major steel multinationals, ArcelorMittal and the South Korean giant POSCO had announced they were pulling their multibillion dollar project investments out of India. Some of these had been pending for a decade or so for such varied reasons as lack of land and government permissions.

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Now, ArcelorMittal is back, like that famous line from Arnold Swarznegger in “The Terminator.” Different time, different government, fresh hope.

ArcelorMittal Signs MoU with SAIL

A few days ago, billionaire Lakshmi Mittal-led ArcelorMittal announced the signing of a memorandum of understanding with the Indian public sector giant Steel Authority of India Ltd. (SAIL) for an automotive steel plant. Obviously, ArcelorMittal is betting on an expected spurt in steel demand in India. Who can blame the conglomerate? Now that China has spun out of investors’ trajectory, steel companies, domestic as well as multinationals, can only look with hope at the until-now dormant Indian steel sector. It’s a case of damned if you do, damned if you don’t.

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Today in metals, two steel majors joined forces in India and predictions differed for the US economic recovery.

ArcelorMittal and SAIL Team Up for Auto Plant

ArcelorMittal, and the Steel Authority of India Limited (SAIL), India’s leading steel company, signed a memorandum of understanding to set up an automotive steel manufacturing facility under a joint venture arrangement in India.

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The MoU was signed in London Lakshmi Mittal, Chairman and CEO of ArcelorMittal, and C.S. Verma, Chairman of SAIL. Rakesh Singh, Secretary to the Government of India, Ministry of Steel and Aditya Mittal, ArcelorMittal CFO and CEO ArcelorMittal Europe, were also present.

The MoU is the first step of a process to establish a JV between the two companies. The proposed JV will construct a state-of-the-art cold rolling mill and other downstream finishing facilities in India that will offer technologically advanced steel products to India’s growing automotive sector.

MarketWatch: US Recovery Murky

It’s a mystery if the US economy will fire back up and grow at a significant rate this summer.

Not long ago, economists thought US growth could reach nearly 4% in the second quarter after a tepid 0.2% gain in the first three months of the year, a period marked by unusually harsh weather. That would be a carbon copy of the feast-or-famine growth pattern that occurred in 2014.

Many are so sure after an uneven batch of economic reports midway through the second quarter. A poll of analysts compiled by MarketWatch predicts the US will expand at a 3.2% annual rate from April through June — and some have chopped their forecasts to below 3%.

A cluster of fresh reports this week probably won’t give much inkling.

Orders for durable goods such as TVs and trucks that are meant to last a long time are expected to fall again in April. Business spending and investment have softened considerably since last fall.

Sales of new homes nationwide, meanwhile, might creep higher in April, but closings are still historically weak.

Another domestic steel plant closing has been blamed on cheap imports and a major steelmaker in India took a big write-down for similar reasons.

ArcelorMittal Shut Down

ArcelorMittal is permanently closing its money-losing Georgetown, S.C., mill, delivering a blow to the local economy, the Charleston Post and Courier reported.

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The company said the shutdown will be completed by Sept. 30 and 226 workers there will lose their jobs.
Luxembourg-based ArcelorMittal blamed “challenging market conditions facing the USA business,” which uses electric arc furnaces to make wire rod used in the automotive and construction industries.
In the press release announcing the closure, ArcelorMittal also said the mill “has been severely impacted by waves of unfairly traded steel imports from China and other countries.”
ArcelorMittal previously shut down the Georgetown operation in 2009. It reopened in early 2011 after negotiating pay cuts and other cost-saving measures with employees.
“Despite our joint efforts and a highly productive workforce, the facility has incurred significant losses since the restart due to high input costs and imports,” P.S. Venkat, CEO of ArcelorMittal Long Carbon North America, told the Post and Courier.

Tata Steel Has Long Product Woes, Too

Tata Steel Ltd. slumped in Mumbai after India’s largest producer of the alloy wrote off its long-products business in the UK.

The shares fell as much as 3.1% to 355.10 rupees and traded at 359 rupees as of 9:37 a.m. local time, Bloomberg reported. The stock has declined 10 percent this year, compared with a 0.7% drop in the benchmark S&P BSE Sensitive Index.

The Mumbai-based company expects to take a non-cash impairment of 50 billion rupees ($787 million) for the quarter ended March 31, according to a statement Thursday. That would completely write off the value of the UK long-products business, which Tata Steel is trying to sell to Geneva-based Klesch Group.

ArcelorMittal has received a reprieve in its court fight over patent infringement for lightweight steel and Novelis reported a first quarter drop in profits.

ArcelorMittal Patent Infringement Actions Revived

A lightweight steel patent at the center of three separate infringement lawsuits filed by ArcelorMittal, the world’s largest steel company, against competitors AK Steel Corp. and two others should not have been canceled outright, a US appeals court said this week.

In a partial victory for Luxembourg-based ArcelorMittal and its attorney Constantine Trela of Sidley Austin, the US Court of Appeals for the Federal Circuit revived two claims of the company’s reissued patent, although it affirmed Delaware US District Judge Sue Robinson’s ruling invalidating the rest.

Novelis Reports a Profit Drop

Novelis, Inc., the world’s largest recycler of aluminum, reported a nearly 50% drop in its net profit at $29 million compared to $54 million in the corresponding quarter of previous financial year.

Its earnings before interest, taxes, depreciation, and amortization (EBITDA) or gross profit was $222 million compared to $250 million in the previous financial year.

Analysts say lower volumes led to lower operating profit for the company. Europe accounted for 75% of the decline in its operating profit, analysts say.

More first quarter results today in MetalCrawler and, as with other steel companies, ArcelorMittal‘s are not good.

ArcelorMittal Loss Widens

ArcelorMittal, the world’s biggest steelmaker, based in Luxembourg, said last week that its first-quarter net loss widened to $728 million from $205 million a year earlier. Revenue fell 13% to $17.12 billion.

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Sales declined 8.6% sequentially due to lower steel selling prices, seasonally lower market-priced iron ore shipments and lower iron ore prices, partly offset by increased steel shipments. Total steel shipments for the quarter were 21.6 million metric tons compared with 21 million metric tons in the year-ago quarter.

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Saudi Arabian Mining Co. (Ma’aden) said a massive smelter run jointly with Alcoa, Inc. will produce above its initial capacity target this year.

The Ma’aden smelter started commercial operations last year after facing problems during the start-up phase.

Ma’aden, the Gulf’s largest miner, is currently exporting around 70 to 80% of the smelter’s production, Thomas Walpole, senior vice president, Aluminium, Ma’aden said at a conference in Dubai.

The smelter had an initial annual capacity of 740,000 metric tons per year, but this year it is expected to achieve a slightly higher production of 760,000 mt, Walpole said.

In today’s MetalCrawler update, the jobless rate fell again even as the world’s largest steelmaker, ArcelorMittal, said it might idle more US plants.

Jobless Rate Falls

The US economy added a solid 230,000 jobs in April, according to government data released Friday morning by the Bureau of Labor Statistics, a sign that the labor market is regaining its footing after taking a slide earlier this year.

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The unemployment rate fell to 5.4%, a seven-year low.

The latest numbers offer encouragement that the recent economic slowdown marks a temporary blip rather than a sign of deeper problems. Both the jobs growth in April, as well as the tick down in the unemployment rate, were almost exactly in line with market expectations.

ArcelorMittal May Close US Plants

ArcelorMittal SA said it might follow U.S. Steel Corp. in idling more American plants as it struggles to cope with a global steel glut, weak iron-ore prices and a surge of imports into the US.

The world’s biggest steelmaker, based in Luxembourg, said Thursday that its first-quarter net loss widened to $728 million from $205 million a year earlier. Revenue fell 13% to $17.12 billion.

The company plans to cut costs in its iron-ore mining business and reduce operations in the US., Chief Executive Lakshmi Mittal told the Wall Street Journal in an interview. “We are contemplating all actions” to remain competitive, he said. “Including idling some [plants].”

The US is ArcelorMittal’s No. 2 market, after Europe.

It may be the world’s largest steel producer, but Lakshmi Mittal-led ArcelorMittal saw a decline in its businesses in India in 2014 for two main reasons: weak demand and cheap imports.

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The firm’s recently released annual report said ArcelorMittal and its subsidiaries rang in sales of $225 million from India. Once upon a time, in fact in 2010, ArcelorMittal’s Indian operations had netted $873 million, so that will give readers some perspective of the depth to which sales have plummeted.

It would not be an exaggeration to state that almost all of India’s major steel companies have stories similar to that of ArcelorMittal. Even the government-owned Steel Authority of India Ltd. (SAIL), which had posted a net profit for the October-December quarter 8.6% higher than the same period last year, had a similar lament.

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ArcelorMittal, Inc., as reported by The Economic Times, suffered weak Indian domestic demand for steel as the rupee depreciated by more than 30% since 2010, which also made imports difficult. ArcelorMittal had to pay more import duties to get ore into its CEO’s native country (7.5%) as opposed to imports from Free Trade Agreement (FTA) countries, who paid just 0.8%, adding to the company’s financial burden.

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In February this year, Standard & Poors downgraded the company’s credit rating on lower than-expected profit though it maintained a stable outlook, saying ArcelorMittal would generate at least neutral cash flow and avoid meaningful debt increases over the next two years.

Weak Demand, Rising Imports

Most of India’s steel majors, such as ArcelorMittal, have, in recent times, been left trying to cope with weak demand and rising imports from China, Japan and South Korea.

Steel Authority of India Ltd.’s C.S. Verma, for example, has gone on record saying he is optimistic about a recovery in domestic demand in India, though that, to some extent, could be offset by a continued slump in export markets. Along with a few others, he feels steel prices, having plunged to a historic low, will only recover going forward.

A report released by Dun & Bradstreet earlier this week, reported  sentiments generally in tune with the sentiments of executives such as Verma. While the outlook for mining and metals industry remained volatile globally, in India, though, the formation of a stable government had “reaffirmed corporate and consumer sentiment significantly,” the report said.

The latest Sector Outlook for Metals in India 2015 report by the agency said demand was likely to improve as fiscal policy was better geared toward an investment-led growth strategy. The government policy shift could provide an overall metal sector could benefit.

Government Help

India’s Modi government and the local governments are trying their best to improve the local situation. Indian Steel and Mines Minister Narendra Singh Tomar announced that the government had planned to set up four steel plants in the provinces of Jharkhand, Karnataka, Odisha and Chhattisgarh.

Of the four, the one in Chhattisgarh is touted as the most important. SAIL and the National Mineral Development Corporation plan to create an ultra-mega steel plant there. It’s a multibillion-dollar greenfield project that, when complete, will have a 3 million metric-ton-per-year capacity. It is planned that both the company and the Chhattisgarh government will sign agreements for the project when Prime Minister Narendra Modi visits Chhattisgarh on May 9.

The author, Sohrab Darabshaw, contributes an Indian perspective on industrial metals markets to MetalMiner.