ArcelorMittal

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Two significant developments on the steel front took place last week that will ensure that India continued on its chalked-out path of global dominance in steel production.

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Jindal Steel and Power Limited (JSPL) launched its 6 million ton per annum (MTPA) integrated steel plant at Angul in the Odisha province. The plant, one of the biggest in India, was dedicated to the nation on May 27, 2017. Naveen Patnaik, the chief minister of Odisha, said the plant would lead to an addition of 20% of steel to India’s ultimate goal of steel manufacturing capacity of 300 MTPA by 2030.

For JSPL, this was a major milestone, too. According to Chairman Naveen Jindal, the 6 MTPA steel plant at Angul was a major landmark in defining the future growth trajectory of JSPL. The latter is part of US $18 billion diversified O.P. Jindal Group.

Spread over 3,500 acres, JSPL’s integrated steel plant at Angul will provide direct employment opportunities to over 30,000 people and indirect employment to over 100,000 individuals.

JSPL’s capacity addition would further enhance the cost efficiencies of steelmaking — a continuous focus area of JSPL’s business philosophy, adding to its overall plan of debt reduction, said some of its top honchos.

In another development on the steel front, ArcelorMittal, the world’s largest steel producer, said it has agreed to make concessions to Steel Authority of India Ltd (SAIL) to jumpstart a delayed US $897 million automotive joint venture.

ArcelorMittal and SAIL, according to a report by news agency Reuters, had agreed to a proposal to export a fifth of the auto-grade steel they aimed to make as part of the joint venture.

Incidentally, the proposal was one of several made by Indian government think tank NITI Aayog, which is mediating talks on commercial terms for the delayed venture.

At present, a bulk of the high-grade steel used by India’s vehicle industry was imported from countries such as Japan. With this new joint venture all set to take off, reliance on such imported steel would fall drastically, experts say.

The Reuters report quoted a company spokesperson as saying that in the interest of the strategic partnership, some concession from ArcelorMittal on technology had been extended.

Experts believe if the deal does come to fruition, it would help SAIL compete with local rivals, such as JSW Steel and Tata Steel, which have foreign partnerships to make steel for the car industry.

Much to the delight of not only its executives and employees but both the global steel sector and even stock markets, the Luxembourg-based steel giant ArcelorMittal has posted its first annual profit in more than five years, registering the biggest jump in earnings in the same period.

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The world’s largest steelmaker by output swung from a $7.9 billion net loss in 2015 to a net profit of $1.8 billion last year. Read more

Brazilian flat steel producers have notified distributors they are raising prices of hot- and cold-rolled steel between 8 and 10% this month, a steel market source and an analyst told Reuters on Wednesday.

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Cia Siderúrgica Nacional SA, Usinas Siderúrgicas de Minas Gerais SA and the Brazilian unit of ArcelorMittal SA will keep zinc-coated steel prices unchanged, the source said. The price hikes are effective Jan. 1, Jan. 5 and Jan. 10, respectively, the source added.

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The world’s largest oil trader, Vitol, has clinched a deal with the National Iranian Oil Co. (NIOC) to loan it an equivalent of $1 billion in euros guaranteed by future exports of refined products, four sources familiar with the matter told Reuters.

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The pre-finance deal is the first such major contract signed between Iran and a trading house since sanctions were lifted in early 2016.

The Environmental Protection Agency‘s Clean Power Plan took another hit this week and ArcelorMittal, the world’s largest steel company, beat expectations with its Q2 filing.

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ArcelorMittal Beats Q2 Forecasts

ArcelorMittal, the world’s largest producer of steel, on Friday reported a better-than-expected core profit for the second quarter but kept its outlook for the full year unchanged. Core profit almost doubled in the second quarter compared to the same period last year to $1.77 billion, well above the $1.574 billion expected in Reuters poll of eight analysts.

The Department of Commerce issued final anti-dumping and subsidy orders on Thursday, affirming and adding on to initial tariffs on cold-rolled steel flat products from Brazil, India, Korea, Russia, and the U.K. The duties are already in effect and will remain so for five years to counteract dumping and government subsidization.

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Commerce determined that imports of cold-rolled steel from Brazil, India, Korea, Russia, and the U.K. have been sold in the U.S. at dumping margins of 14.43% to 35.43%, 7.60%, 6.32% to 34.33%, 1.04% to 13.36%, and 5.40% to 25.56%, respectively. Commerce also determined that imports of cold-rolled steel from Brazil, India, Korea, and Russia have received countervailable subsidies of 11.09% to 11.31%, 10%, 3.91% to 58.36%, and 0.62% to 6.95%, respectively.

Some producers in Brazil were hit with 46.5% total duties while some producers in the U.K. will only receive 6.02% tariffs, which will continue to be collected by Customs and Border Protection upon import into the U.S. One producer in the Republic of Korea was hit with 64.62% total duties on cold-rolled imports.

Brazil Investigation

Brazil’s Usiminas Siderurgicas de Minas Gerais did not respond to all of Commerce’s requests for information and, therefore, Commerce calculated a final dumping margin based on adverse facts available of 35.43% and levied 11.09% countervailing duties on the company for a total penalty of 46.52% tariffs.

Korea Investigation

In the Korea anti-dumping investigation, Commerce found that dumping had occurred by mandatory respondents POSCO/Daewoo International Corporation and Hyundai Steel Corporation at dumping margins of 6.32% and 34.33%, respectively. Commerce calculated a final dumping margin of 20.33% for all other producers/exporters in Korea.

What’s interesting about this investigation is that while Commerce calculated a final subsidy rate of 3.91% for Hyundai Steel, the second mandatory respondent, POSCO, was unable to confirm certain key elements of its response when the Commerce team conducted verification at its headquarters in Korea. Therefore, Commerce calculated a subsidy rate based on adverse facts available of a whopping 58.3% meaning that POSCO gets a total anti-dumping/countervailing duties tariff of 64.62%. Commerce calculated a final subsidy rate of 3.91% for all other producers/exporters in Korea.

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The successful petitioners for these investigations were AK Steel Corporation, ArcelorMittal USA, Nucor Corporation, Steel Dynamics, Inc., and United States Steel Corporation.

If the European steel industry wasn’t beset with problems of poor profitability and overcapacity before Brexit, it now has a sharply increased element of uncertainty to add into the mix.

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Steel mills across Europe have been criticized for not addressing overcapacity since the financial crisis but if you think closing steel mills in the U.S. is a problem, with states lobbying mills to maintain operations, it is nothing compared to the 28 nation states of the European Union, for whom the continued existence of a national steel industry — each country generally has only one or two champions — is a matter of political survival for many governments.

This steel plant at Port Talbot in South Wales, U.K., could close if Tata Steel can't find a buyer. Even as steel prices increased last week. Source: Adobe Stock/Petert2

Port Talbot in South Wales, U.K., could close if Tata Steel can’t strike a deal and Brexit could make it harder to get one done. Source: Adobe Stock/Petert2

So, for transnational steel producers to moot the possible rationalization of a mill in one country is to invite howls of protest and a political storm. Plus, governments sometimes offer financial support, although, technically, that is against E.U. rules, but ways are often found.

Steel Deals Now in Peril

Tata Steel’s proposed closure or sale of it’s U.K. operations has stuttered along this year with long products being successfully sold to various parties and the major blast furnaces and flat-rolled operations at Port Talbot, South Wales, being circled by a couple of bidders. Read more

One of the world’s biggest steel makers, ArcelorMittal, is at a crossroads. Created by the takeover of Western European steelmaker Arcelor by Indian-owned multinational Mittal Steel in 2006, the Luxembourg-headquartered business has been facing tough times since recently, much of it because of external factors such as collapsing economies, but some of the pain is certainly of its own making.

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ArcelorMittal is at a turning point. It initiated a series of steps which management hopes will turn a corner and help it survive this period of global instability, especially in the  steel sector.

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Cheap imports are hurting ArcelorMittal as much as any steelmaker as almost all of the markets the steel giant operates in are suffering price falls due to the imports.

Shareholders met in Luxembourg and by an overwhelming majority, passed a stock issuance for a capital increase of $3 billion.

Stock Sold to Pay Down Debt

The fundraising is part of an overall plan unveiled in February 4 by ArcelorMittal. For now, though, it has too much debt on its records. At the end of 2015, ArcelorMittal’s total debt was $19.8 billion. The debt rate had reached 57% by December 31, compared to 35% a year ago.

Except for India and China, global steel purchasing — on the national level — is down in the last few years. Cheap Chinese imports are hurting the markets that ArcelorMittal competes in as much as any. If a further market deterioration was to take place, ArcelorMittal would be looking at a bleak future, hence the rush to raise funds and retire debts, some analysts.

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The narrative flow in the automotive industry has been firmly behind aluminum in the quest for lower weight and better fuel consumption, but steelmakers were never going to stand idly by and see one of their most lucrative markets rapidly eroded even though the speed of the change has caught some of them by surprise.

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Brian Aranha, Vice President of Global Automotive at ArcelorMittal is quoted in Automotiveworld saying Ford’s decision to switch a large chunk of the F-150 to aluminum “…was a bad surprise for us, we just didn’t see it coming.”

factory manufacturing

Aluminum might be making inroads, but steelmakers are going to fight to keep their automotive customers. Source: Adobe Stock/AnastasiiaUsoltceva.

Well, whether they saw it coming or not, they are reacting now. Steelmakers the world over are pouring millions into research and development to carve out a role for steel in the car designs of the future.

The Aluminum Challenge

They have much to fear, in an executive summary to a report by Ducker Worldwide last year called DriveAluminum highlight is made to the rapid gains made by the light metal.

Source Ducker Worldwide

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Although the F-150 leads the class with 1,080 lbs. of aluminum, the pickup truck segment has embraced weight reduction more than any other. The average content will be 548.9 lbs per vehicle almost the same as E segment sedans at 549.9 lbs. and SUVs close behind at 410.3 lbs.

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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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