ArcelorMittal

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.

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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.

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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.

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

ArcelorMittal Loss Widens

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.

More Middle East Aluminum

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.

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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.

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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.

In its Q2 results statement, the company said the turnover was impacted due to “challenging market conditions” and high imports, among other reasons.

Rough SAILing

SAIL chairman C.S. Verma told the media here that the only way his company had circumvented these challenges was by bringing in initiatives to reduce energy consumption and optimize raw material utilization, as well as adopt state-of-the-art technologies.

It looks like these measures were not enough to save SAIL from Fitch Ratings. Fitch recently lowered the outlook for SAIL’s long-term foreign currency issuer default rating to negative. The crux of the matter lay in its commentary, where Fitch said continued weak steel demand growth in India, high steel imports or a further softening in global steel prices could derail SAIL’s efforts to modernize.

Same Story at Tata Steel

Another Indian steel behemoth, Tata Steel Ltd.’s Indian steel operations had a rough quarter again for almost the same reasons — sluggish demand, cheaper imports and higher raw material costs on account of mining stoppages. In the December quarter, Tata Steel’s consolidated sales declined over the preceding quarter by 6.1% on the back of a 3.1% decline in steel volume and weak steel price realizations. The only redeeming factor here was Tata’s European operations which turned in a substantial jump in profitability.

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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.

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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.

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“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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Today in MetalCrawler, Sherritt International gets another executive, Alcoa is now in the efficient automotive production business and the EU is imposing tariffs on Chinese Steel.

Sherritt Hires ArcelorMittal Canada Exec.

Sherritt International Corp. has named ArcelorMittal Mining Canada President and CEO Steve Wood as its new COO effective from April 27.

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Wood will oversee Sherritt’s operations in Canada, Cuba and Madagascar, including the environmental, health and safety, sustainability, technology, engineering and marketing functions.

Alcoa Gets a Gov’t Loan For Efficient Vehicles

The US Department of Energy has offered a conditional commitment to lend Alcoa Inc. $259 million to expand automotive aluminum sheet production capacity at the supplier’s Tennessee factory, reviving a long-dormant loan program to support the development of energy-efficient vehicles.

The funds will finance most of the costs of a $275 million expansion project already under way at the plant, where Alcoa is converting capacity previously used for making aluminum cans to produce high-strength aluminum for automakers. The project began in 2013 and is expected to add 200 permanent jobs after its mid-2015 completion, plus an additional 400 jobs during peak construction, the company and the DOE said.

EU Imposes Anti-Dumping Duties on Chinese Steel

The European Union will impose anti-dumping duties from Thursday on imports of cold-rolled flat stainless steel from China and Taiwan, according to a notice on Wednesday in the EU’s Official Journal.

The EU will apply tariffs of up to 25.2% for sheet, coil and strip imports from China and up to 12 percent for Taiwanese product, following a complaint lodged in May 2014 by the European steel producers association, Eurofer.

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Steel producer ArcelorMittal‘s Polish arm said on Wednesday it might reduce coal supplies from Polish miner JSW to limit the risk of delivery disruptions if workers’ protests at JSW recur.

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Coal production has stopped at JSW as a result of a miners’ strike, which started on Jan.28, hitting ArcelorMittal, one of its biggest customers, which ceased to receive a significant chunk of supplies.

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