Daily Steel News - 26 Feb 2009

China’s 2009 steel consumption to increase by 40 million tons

According to a study analysis by the China Iron and Steel Association (CISA), the governmental “4 trillion stimulus package” and “top ten industries revitalization scheme” will push steel consumption of 2009 up to 430 million tons, increased by 40 million tons.It will focus on 4 industries – equipment manufacturing industry, shipbuilding industry, auto industry and petro-chemical industry. And the steel consumption of year 2010 and 2011 will also increase further benefited from the favorable policies.

European demand for steel drops by 40%
UK steel industry is now suffering the severe recession, which has not been seen in 30 years and steel output has plummeted to an unprecedented level since 1980.With the global economic crisis, steel demand from automobile and construction industries has plunged, forcing the worldwide mills to cut the output and jobs.According to the statistics, UK crude steel output fell to less 700,000 tons, down by 45 percent. And European steel demand has fallen by 40 percent, all the way down since 2008. Corus, the second largest steel corporation in Europe and ArcelorMittal NL-MT, the world’s largest steel company, both have cut the jobs and output in response to the recession.

Daily Steel News - 25 Feb 2009

Tokyo Steel cuts scrap buying prices twice in two days
Tokyo Steel Manufacturing is cutting its scrap buying prices again, this time by ¥1,000/tonne ($10/t) for all grades at all works effective from 26 February arrivals. The reduction is the mini mill's second this week after it clipped prices by ¥1,000-2,000/t from 24 February. After Tokyo Steel's earlier reduction, other mini mills followed and pared their prices by the same margin. "But scrap export prices also fell by ¥1,000/t to around ¥20,000/t fob for H2, so Tokyo Steel again decided to cut its prices," a scrap trader tells Steel Business Briefing, pointing out that with its reduced output Tokyo Steel doesn't need much scrap. After the reduction, Tokyo Steel's H2 prices at its Okayama and Kyushu works become ¥19,000/t $196.3/t) and those at Takamatsu and Utsunomiya become ¥18,000/t and ¥20,000/t respectively. Average scrap buying prices by Japanese mini mills peaked at ¥19,177/t ($198/t) in the first week of February after 26/02/09 9/18 bottoming at ¥9,588/t last November, SBB learns from the Japan ferrous raw materials association.

Japanese scrap price falling
Japanese scrap price keeps on falling and may decrease further because China and Taiwan have refrained from buying scrap. It is reported that Korean Hyundai purchased H2 scrap from Japan last week, at ￥22,000/ton. Besides, Hyundai won’t purchase more for the time being, but they will consecutively request to reduce the purchasing price. Japanese high level scrap price won’t slide in line with dropping H2 scrap price. Hyundai’s latest purchasing price for new scrap was ￥25,000/ton, and that of P&S scrap was ￥24,000/ton.

Tokyo Steel cuts H2 scrap purchase price
Japan’s Tokyo Steel is cutting their H2 scrap purchase price by ￥1,000～2,000/ton to the level of ￥19,000～21,000/ton, first adjustment over the past three weeks.Consequently, if calculated on base price of ￥20,000/ton and plus sea freight, Japan’s offer on H2 scrap to Taiwan stays at US$240/ton.

China to adjust import, export tax policy in March
China will launch new policies on steel industry in March, which involves more flexible export duty to ensure 15 percent of total steel output for export market. This plan indicates that Chinese steel export may decline by 50 percent in 2009 and steel makers are facing the hardest time in recent years. China will take further actions to expand domestic steel consumption especially in construction steels, which is occupying 50 percent of total steel consumption locally. China will keep current tax level for steels with low grade and profit margin while will impose more attractive tax on highly profitable steels. However, import tax on some steels may be increased by the government in order to protect internal steelmakers.

China's overcapacity may be 200m t/y this year - Eurofer
China has no global cost advantage in steel making, yet could have a crude overcapacity of 100-200m tonnes/year this year, according to a new study on the country's industry prepared by Eurofer, the European steel makers' association. The study is primarily designed to alert the European Commission and EU governments to China's insidious influence in the global steel market, Ian Rodgers of UK Steel told Steel Business Briefing at its launch in Brussels.
The growth of China's industry over the last 5-10 years was not market-driven, said Markus Taube of Germany's Think!Desk Consulting, and author of the Eurofer study. Rather it was steered by a "cartel" involving top steel managers and governmental and industry bodies (such as the National Development & Reform Commission and China Iron & Steel Association).
The result has primarily benefited the top 20 or so mills. Many of the smaller enterprises, described as "renegades" by Taube, are outside this "China Steel Inc" state-business relationship. They often align themselves with local stakeholders, and defy central government policies, he added. These various alliances, often backed up by subsidies and other financial benefits detailed by the company in the report, have supported the industry's expansion. Pre-crisis, Taube estimates overcapacity at more than 100m t/y; this year, including an estimated 10% decline in output, it could reach 200m t/y. Consequently China's exports to Europe have increased significantly in the last few years. Taube says this reflects the domestic market distortions, which have depressed costs and unfairly strengthened the mills' international competitiveness.

Perwaja & Southern Steel record losses

24-02-2009:
Perwaja slips into the red in 4Q, RM90m net profit for FY08
Fong Min Hun http://www.theedgedaily.com/cms/content.jsp?id=com.tms.cms.article.Article_a641f14d-cb73c03a-1a8402c0-a6a45244#
KUALA LUMPUR: Perwaja Holdings Bhd slipped into the red with a net loss of RM212.82 million in its fourth quarter ended Dec 31, 2008 after registering a strong set of results in the previous three quarters.
It attributed the loss to lower selling prices and sales volume and a writedown to net realisable value in inventories amounting to RM225.8 million.
Revenue plunged 77.4%, or RM756.7 million, from RM978 million in the previous quarter due to the international steel market slump and weakening global economy.
Due to the strong previous quarters, Perwaja, which was listed last August, stayed in the black for the full year with a net profit of RM90.15 million, while revenue surged 38% to a record RM2.33 billion in FY08 from RM1.69 billion in FY07.
The group made provisions totalling RM346.1 million for the impairment of inventory value in the second half of 2008. Excluding the provisions made, the group would have posted a 168% rise in full-year net profit to RM436.2 million for FY08 from RM162.6 million in FY07.
“2008 was a roller-coaster year not just for Perwaja, but for the industry as a whole,” Perwaja managing director Tan Sri Pheng Yin Huah said in a statement.
“We achieved a strong set of results in the first half of 2008, driven by a sharp spike in steel price and robust demand both from the domestic and regional markets. Unfortunately, the downswing in the second half of the year was just as sharp, and this had reduced our overall performance.”
Perwaja expressed “cautious optimism” for FY09 owing to the government’s stimulus spending and signs of improvement in the market.

Friday February 20, 2009
Southern Steel records loss
Southern Steel Bhd posted a RM300mil loss in the last quarter ended Dec 31, as the steep drop in steel prices eroded the value of its inventories.
Its revenue was RM489mil versus RM689mil registered in the same quarter a year earlier.
The huge losses in the last quarter dragged down the group’s full year (FY08) earnings to RM105mil from RM192mil previously.
“The lower profit was due to poor market conditions in the second half of the year and the dimunition in value of inventories,” Southern Steel said in a filing with Bursa Malaysia.
“The board does not expect a quick recovery and expects this new financial year to be challenging,” it added.
The company said the steel sector was probably the worst affected in terms of the drop in demand and prices, as the financial crisis dragged the world into a recession.