GLOBAL STEEL PRICES EXPECTED TO PEAK BEFORE THE YEAR END

Many metal stampers, especially smaller ones, are unable to pass steel price increases on to their customers, or only at certain, negotiated times. Therefore, highly volatile steel markets really hurt their bottom line. The fact that steel is still expected to rise for the rest of this year is bad news for the little guys. If in fact, there is a peak coming soon, that’s good news in the middle term, and perhaps some people will be able to set prices there at the peak and ride the down side a bit to improve profitability. But such market timing is hard for stampers, since market speculation isn’t really their forté

MEPS

Transaction figures are expected to continue climbing in September due to higher raw material costs. However, we predict that the latest increases will signal the peak of the current cycle in western countries as reduced consumption negatively affects demand on the mills. Low construction activity is expected to result in continued cautious buying by service centres. They also fear being left with overpriced material when values begin to fall.
The weakening economies in the EU and North America will, almost certainly, result in reduced demand in the near term from the manufacturing and building industries. Credit constraints are also expected to limit purchases, particularly from smaller customers. Consequently, selling figures are forecast to soften towards the end of the year.

Cost hikes cut into iron and steel company profits

This hardly seems like much of a surprise. It’s hard to consider absorbing a 70% increase in iron ore cost and not having it hurt you.

chinadaily.com.cn
Costs for China’s large and medium-size iron and steel manufacturers rose by more than 250 billion yuan ($36.5 billion), or 57.57 percent, in the first half, according to the China Iron and Steel Association (CISA).
The cost hike was due to the soaring prices of materials and fuel, said the CISA, noting the country’s iron and steel companies were facing tremendous pressure this year.
The soaring costs resulted in profit falls, with the half-year rate of return on sales for large and medium-size iron and steel suppliers at 7.61 percent, 0.95 percentage points lower than the same period last year.

U. S. Steel seeks cause of belching blast furnace

St. Catharines Standard
U. S. Steel Canada is apologetic about its blast furnace belching smoke and coke dust into the air over Hamilton four times in little more than a month.
Spokesman Trevor Harris says the multinational steelmaker that took over Stelco last fall is calling on in-house experts around the world to help local staff and the Ontario Environment Ministry determine what went wrong and how to stop it happening.
‘One of the great benefits of being U. S. Steel Canada (instead of stand-alone Stelco) is that we now have access to expertise from literally around the world to try to rectify the problem.’

Bikers escort WTC steel to new memorial

USATODAY.com
The roar of 1,000 motorcycles accompanied a steel beam from the World Trade Center on Saturday as it traveled to Pennsylvania, where it will be part of a memorial to those who died there in the Sept. 11 terrorist attacks.
Hundreds of current and retired New York City firefighters left Brooklyn’s Floyd Bennett Field at about 7 a.m. to escort the girder on the 311-mile ride to Shanksville, Pennsylvania.

The members of the New York City Fire Riders joined a larger group that included bikers from as far away as Georgia. The beam rode on a flatbed truck.

Steel Price Is Latest Setback for European Pipeline

This isn’t directly related to stamping, but here is yet another project hit by the high price of steel.

Nabucco, the European Union’s natural gas pipeline project, intended to reduce the bloc’s dependence on Russian natural gas, has been dealt another setback — and this one could hit European consumers in the wallet.

Rising Iron Ore Prices for China will effect Steel Prices

One of the issues bubbling while I wasn’t blogging was the iron ore price increase that Chinese steelmakers had to accept recently. There are many articles about it, many opinions, all contradictory (of course).

Let’s start here:
China’s steel mills shrug off iron ore rise. An amazing feat, if true. I don’t know too many industries that can shrug off an 85% increase in a major input cost.

Big steelmakers in China on Tuesday shrugged off the impact of Monday’s record rise in iron ore prices, but the higher prices could increase cost pressures on smaller mills and hasten consolidation in the industry.

The average 85 per cent price increase agreed with Rio Tinto, the Anglo-Australian miner, was within the range of expectations, analysts said. Chinese mills had been expecting a price rise of at least 65 per cent[…]

“They [large and medium-sized steelmakers] can still maintain a long-term pricing system with the Australian miners,” and avoid higher-priced spot market purchases, Ms Wang said.

But analysts said thousands of smaller Chinese mills could be affected if the pricing agreement leads to higher spot prices, hastening consolidation in the steel industry. Smaller mills buy iron ore on the spot market and are unable to lock in prices by annual contract.

If this leads to consolidation of the chinese steel industry, this should lead to higher prices for chinese goods made of steel. The article says a 3% rise in output prices should cover it.

The consolidation effect was predicted already as far back as February, in the China Daily. Iron ore price rise could force China steel rationalization

China imports almost half of the world’s seaborne iron ore, making it the largest iron ore consumer in the world, but it has become a price-taker for this basic input for steel — perhaps because it waited too long to negotiate with major suppliers.

I also blogged on it at the time.

At the end of June, chinastakes.com wrote Iron Ore Price Hike to Swallow Chinese Steel Producers’ Profit

Apart from the iron ore price hike, the coking coal price rise will also lift the production cost of domestic steel producers. […] With steel companies facing increasingly high production cost, profits are expected to slide in the near future.

Apart from the iron ore price hike, the price of coal and coking coal, as well as transportation costs are also increasing. In December of 2007, the average production cost of steel and pig iron in large and medium-sized steel companies increased by 31.05% over the same period in 2006.

The production cost increase of steel companies, a large part of it a result of the rise in iron ore and coking coal prices, will have a profound influence on the shipbuilding industry, the construction machinery industry, and the household appliances industry.

None of those are directly customers for small and medium sized stamping outfits, but each of those industries utilize loads of smaller stamped metal parts. Where the major manufacturing goes, so goes the little guys.

At the end of June, Mineweb.com said that Chinese dependence on iron ore imports has been growing, and was likely to rise in future.

while China was the world’s biggest producer of iron ore at 520mt in 2006, representing almost a third of global production, much of this material is very low grade.

China will become more dependent on imported iron ore in future, despite the fact that its own production of iron ore has been increasing rapidly since the start of the century. Monthly imports have been growing at a much faster pace and are now almost double its own production.

Today, several sources, including Steel on the Net announced that Sinosteel succeeded in its bid to gain control of Australian iron ore miner Midwest. Stock exchange documents show it now has a majority stake in the target company. http://en.ce.cn/Business/Enterprise/200807/12/t20080712_16135812.shtml

See also: Forbes Sinosteel buys controlling stake in Aussie miner

Defying odds, U.S. steel industry making comeback

It’s been a while since I’ve blogged anything. It’s a combination of several factors. Blogger’s software has been giving me grief of late, I’ve been very busy in my home life, I was on vacation, etc. So there are going to be a bunch of catchup articles, things that are actually a month or two old, but only now am I getting to the backlog of articles and publishing them.

So how fitting the first one is about the rebirth of north american steel. Of course, here at Stampingoutaliving, some of the things mentioned in the article have the opposite value for us. For instance, lack of competition and lack of lower cost imports is great if you’re a steel company, not so much if you’re in a steel-consuming company.

The San Diego Union-Tribune

The U.S. steel industry is enjoying a new era of prosperity less than a decade after crippling production costs and lower-priced imports helped trigger a huge wave of bankruptcies that some thought would leave it permanently tarnished.

Buoyed by sharply reduced employee costs, soaring global demand, dramatic consolidation that has tamped down cutthroat competition and a weakened dollar that has made imports less attractive, steel prices have tripled in the past five years. For the first time in decades, companies operating in the United States have added capacity and workers.

German steel maker ThyssenKrupp is building a $4 billion plant […]. Nucor has applied for permits to build a $2 billion plant […]. The Russian giant Severstal recently purchased the Sparrows Point steel plant outside Baltimore […]

“There hasn’t been this much building in 25 to 30 years,” said Michael D. Locker, president of Locker Associates, a steel consulting firm.

Metals tumble on rising LME stocks

Yahoo! Malaysia News

Industrial metals lead, zinc and tin fell sharply on Thursday, hit by waning demand and rising stockpiles in warehouses.

While zinc is certainly down from recent highs (as much as $2 in December/January 06/7) to “only” a buck now, it was 50 cents 5 years ago. So we still have some adjusting to do to get back to historical levels.

The other metals are the same story. Copper was $4 recently, now it’s “only” $3.67. But 5 years ago, less than a buck.

A year ago nickel touched $25 briefly. It’s currently $10, but was $5 5 years ago.

Defying odds, U.S. steel industry making comeback

The San Diego Union-Tribune

The U.S. steel industry is enjoying a new era of prosperity less than a decade after crippling production costs and lower-priced imports helped trigger a huge wave of bankruptcies that some thought would leave it permanently tarnished.

Buoyed by sharply reduced employee costs, soaring global demand, dramatic consolidation that has tamped down cutthroat competition and a weakened dollar that has made imports less attractive, steel prices have tripled in the past five years. For the first time in decades, companies operating in the United States have added capacity and workers.