MORE EVIDENCE OF MEPS CLAIM THAT CHINA’S STEEL OUTPUT IS UNDERSTATED

In 2011, MEPS reported its belief that the National Bureau of Statistics figures for China’s crude steel production understated the actual output by approximately 6 percent. This fact was subsequently acknowledged by a senior member of the China Iron and Steel Association but no action appears to have been taken in the interim to change the situation.

Recently, Mr Xu Lejiang , Chairman of Baosteel Group, is reported to have stated that China’s crude steel production, in 2013, was 822 million tonnes. This was further reinforced in a recently published article by Mysteel, that an unnamed source had disclosed that up to 70 million tonnes of steelmaking capacity is unreported. By contrast, the latest figure issued by the country’s National Bureau of Statistics is 785 million tonnes.

Mr Xu’s assessment of crude steel output, in 2013, is broadly in line with MEPS latest calculated minimum figure of 815 million tonnes, published in the latest issue of MEPS CHINA STEEL REVIEW. Perhaps the disclosures from the two local steel sector experts will generate action from the authorities responsible for providing production statistics for the steel industry in China.

It is not satisfactory to have doubts about the accuracy of steel production statistics – particularly, for a country as large as China’s with its importance to the global mining sector and steel supply. Moreover, how can the authorities make meaningful decisions about investment, rationalisation, emissions control, privatisation issues etc for an industry in which there is no consensus about the most basic statistic – the level of output?

It is even more surprising when one considers the amount of analysis that takes place, almost on a daily basis, about the industry. Production from a part of the industry is reported three times every month. Percentage changes are analysed to two decimal places and the results reported in the press.

Steel prices are collected and published daily by a number of different organisations. We see futures contracts for steel products and raw materials. All this activity takes place with no concern for the accuracy of the industry’s production data.

Why do the authorities allow this situation to continue? MEPS highlighted the problem three years ago. It has now been confirmed by two steel industry insiders. It is not surprising that the sector was allowed to over-invest in steel manufacturing when the authorities fail to monitor accurately the size of a key matrix – the country’s output.

Source: MEPS China Steel Review – August Edition

India’s Automotive Cold Rolled Steel Sheet Plant Celebrated Its Opening

In January 2011, Nippon Steel and Sumitomo Metal Corporation (NSSMC) (Representative Director and President: Kosei Shindo) and Tata Steel Limited (TSL) (Managing Director: T.V. Narendran) agreed to form Jamshedpur Continuous Annealing & Processing Company Private Limited (JCAPCPL), a joint venture company for manufacture and sale of automotive cold-rolled sheets. Construction of a plant soon followed. In May 2014, JCAPCPL began operation, and on September 1, 2014 held an opening ceremony at the plant site. The ceremony was attended by government officials, customers, and other invited parties.

JCAPCPL can produce high-tensile steel sheet and other high-end cold rolled sheets for automobiles as it utilizes TSL’s excellent steelmaking infrastructure atJamshedpur Works and NSSMC’s state-of-the-art equipment and manufacturing technologies.

The automobile market in India, with its bright prospects for continued growth, is an important market for NSSMC and TSL. Through this joint venture, both companies will strive to respond to Indian automakers’ needs for high-grade high-quality automotive steel sheets.

Source: Nippon Steel & Sumitomo Metal Corporation

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INDIAN STEEL PRICE ROUNDUP FROM MEPS INTERNATIONAL LTD

Negotiated price settlement values, for hot rolled coil, were unchanged in India according to MEPS (International) Ltd. Stockists report that the domestic market is oversupplied. Imports have only exacerbated the situation. Offers from Asian suppliers of commercial grade coil for September shipment stood at US$520/530 per tonne CFR (excluding 7.5 percent import duty and port handling expenses).

In the commodity plate market, buying sentiment has failed to improve. Distributors have reported low trading volumes in the states of Haryana and Maharashtra. Quotations from Asian hot rolled plate suppliers for September shipment stood at US$530/545 per tonne CFR (excluding import duty).

Cold rolled coil purchasing activity remains subdued. Quotations from Asian steel suppliers, for September delivery, stood at US$605/615 per tonne CFR (excluding 7.5 percent import duty and port handling expenses) – up 0.8 percent, month-on-month. Effective transaction values, for galvanised coil, were stable over the period under review.

Monsoon rains have continued to constrain construction activity in the central, northern and southern states. Rashtriya Ispat Nigam Ltd (RINL) elected to maintain its August basis selling figure, for wire rod, at Rs42,230 per tonne (excluding all taxes). Business activity has been slow in the Indian sections market.

Reinforcing bar transaction values edged higher after the country’s Independence Day. Secondary producers based in Central and Western states are operating at less than 50 percent production capacity.

Merchant bar stockists report that there is little appetite for purchasing at present amongst local construction firms. Secondary mill quotations continued to shadow the cost of steelmaking raw materials – particularly, pencil ingots, sponge iron and ferrous scrap.

Source: MEPS Developing Markets Steel Review

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Habas successfully commissions hot strip mill from SMS Siemag

The Turkish steelmaker Habaş has successfully commissioned a hot strip mill supplied by SMS Siemag, Germany,(www.sms-siemag.com) in Aliağa, Turkey. Production of the first coil in July 2014 marked Habaş’ entry into the market of flat products.

The compact hot strip mill is designed for an annual production of 2.5 million tons of hot strip. The strip widths vary between 700 and 2,100 millimeters and the strip gages between 1.2 and 25.4 millimeters. The hot strip mill is designed for the production of a wide range of premium steel grades according to international standards as, for instance, carbon steels and multiphase steels as well as pipe grades up to strength class X80.

The main components of the hot strip mill in the first construction stage are a four-high reversing roughing stand with edger, a mandrelless coilbox, a drum-type crop shear, seven finishing stands with CVC® plus, the laminar cooling section, two downcoilers and a pallet transport system including an inspection line. Mill capacity may be increased at a later stage to 4.5 million tons per year by installation of a second reheating furnace, an additional two-high reversing roughing stand and a third downcoiler.

Plant technology highlights are the strip cooling system and the downcoilers. Strip cooling with reinforced cooling groups allows Habaş to benefit from high cooling rates and differentiated cooling strategies for the manufacture of special grades. The two downcoilers are designed as UNI plus coilers for the winding of high-strength pipe grades up to a strip gage of 25.4 millimeters. The UNI plus coilers are characterized by reinforced mechanical components and an optimized coiling strategy for high-strength, heavy-gage strips.

The supply scope of the X-Pact® automation package included the level-1 and level-2 systems with the process models, level-3 production planning system, technological measuring systems, instrumentation, sensors, industrial camera system and a common HMI for both automation levels. The drive systems with their converters and all motors, main and mill pinion gear units, as well as the drive spindles for the compact hot strip mill at Habaş were also included in SMS Siemag’s supply.

Thanks to the fact that the complete plant technology was supplied by SMS Siemag, Habaş achieved a fast ramp-up of the hot strip mill and good strip quality already in the first weeks of production. One reason for the good results was that the complete X-Pact® automation package had been pre-tested and pre-optimized according to SMS Siemag’s unique Plug & Work concept.

Source: SMS Group

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UNITED STATES HAS BECOME A MAGNET FOR GLOBAL STEEL EXPORTERS

According to MEPS regional steel price trends have diverged over the past twelve months. Selling values in North America have been strong, whereas those in the EU and Asia have come under negative pressure.International Steel Review

In North America, we have witnessed a number of exceptional factors during the last year, including unplanned outages and weather-related disruptions to raw material and steel deliveries. These have resulted in tightened supply and extended delivery lead times. Consequently, local mills have been able to push through a series of domestic price rises.

European and Asian steelmakers have, predominantly, failed to lift selling figures because of falling input costs, subdued demand and increased competition.

As a result, there has been a substantial differential between North American steel prices and those in the rest of the world. Major exporters have taken note of this and attempted to sell their material into the region.

Data from ISSB indicates that US imports of all steels have risen by around 30 percent in the first six months of 2014, on a year-on-year basis. The increase for flat steel products has been more pronounced at approximately 45 percent over the same period.

Many steel buyers in North America have seen the potential to lower their costs and opted to bring a greater portion of their steel from overseas. However, this situation has not gone unnoticed. The US steel mills and their related associations are calling for measures to protect the local industry.

Although overseas material has been very competitively priced, possible protectionist moves by the US government have created a great deal of caution amongst both traders and potential customers regarding forward ordering of material from third countries.

We believe that prices in EU and Asia will reach the bottom in 2014, after three years of declines. A modest rise in demand should help to boost selling figures next year. Economic conditions should improve marginally. However, iron ore costs will remain subdued but other input expenditure could grow.

In contrast, a slight downward price correction is envisaged in North America following a strong 2014. Nevertheless, our prediction is for the discrepancy between North American and global selling values to remain substantial compared with past trends.

Source: MEPS International Steel Review – August Issue

DECLINING EU STEEL PRICES OFFSET BY FALLING MILL INPUT COSTS – MEPS INTERNATIONAL LTD

Steel prices have been under negative pressure so far this year. The MEPS – EU Average Flat Products Composite Steel Price decreased by almost 7 percent in the first half of 2014, compared with the corresponding period in the previous year. However, European Steel Reviewraw material costs have also reduced. The price of iron ore fines (Fe 64%, FOB – Brazil) has fallen by 24 percent and coking coal has declined by 9 percent. The strengthening of the euro against the US dollar has made the reductions even more pronounced.

Customers have been able to secure the majority of, if not all, the mills’ cost savings. However, steelmakers have managed to prevent any further deterioration in their margins. Analysis by MEPS indicates that the conversion margin between raw material costs and flat product steel prices was unchanged in the first half of 2014, on a year-on-year basis.

Steel demand is expected to rise, moderately, in 2014, following decreases in the previous two years. A number of end-user segments are showing better performance. According to ACEA, registrations of passenger cars and commercial vehicles, in the first half of this year, increased by 6.4 and 9.2 percent, respectively. The building sector is gradually improving as financial constraints slowly ease. Better weather conditions helped to boost activity. Data published by Eurostat shows that production in construction grew by 6.5 percent in the first quarter of 2014, year-on-year.

European mills have seen their order intake rise. Figures from worldsteel indicate that steelmakers increased crude steel output by 3.8 percent in the January/June 2014 period, compared with one year earlier. MEPS foresees a slowdown in the rate of growth in the second half – leaving the annual outturn 2.5 to 3 percent higher.

The outlook for flat product prices until the year-end is fairly dull. Steelmakers are expected to push for increases. We believe only modest rises will be achieved, barely covering an anticipated slight rise in the cost of raw materials. However, the conversion margin should hold up, assuming that the mills prevent any further deterioration in their selling figures and input expenditure does not rise significantly. In the latter part of 2013, steel transaction values contracted by more than the reduction in raw material costs, resulting in lower margins in that period.

Modest price growth is envisaged in 2015. The MEPS – EU Average Flat Products Composite Steel Price is forecast to increase by 2.7 percent, compared with the estimated annual average in 2014. Raw material expenditure is also expected to escalate. Significant capacity expansion by global iron ore suppliers should keep prices of fines suppressed but growth is projected for the cost of coking coal and scrap. Consequently, the mills’ conversion margins are expected to be broadly unchanged next year, relative to 2014.

Source: MEPS – European Steel Review