Sunday, July 11, 2010


Data show steel price disparity
Jul 11, 2010 12:47 AM By Jana Marais
ArcelorMittal's South African clients paid almost 40% more for steel than buyers in China this year, with local, smaller clients bearing the brunt of a controversial iron ore surcharge.
Pricing data shows ArcelorMittal SA's prices for hot rolled coil, an industry benchmark, have also been higher than prices in Russia (18.8%) and Germany (5.2%). Only the US recorded higher prices, with a difference of 1.8%.
Prices in these four markets are weighted equally to determine a benchmark price for ArcelorMittal SA, which has a market share of more than 80% in the local flat steel market. The objective of the basket pricing model is to "provide local manufacturers with a level of competitiveness with their international counterparts", is "fair and equitable" and "has continued to benefit downstream manufacturers", ArcelorMittal said.
However, local prices in the first six months of 2010, which only include ArcelorMittal's controversial iron ore surcharge from May 1, were on average 6.1% higher than the world average, and also exceeded average prices in markets such as Japan, South Korea and Taiwan by as much as 14%.
Since 2004, ArcelorMittal's prices have consistently been higher than the world average, except in 2008 when global prices were skyrocketing, the data shows.
The surcharge adds an estimated 10% to prices. It seems it is mainly ArcelorMittal's smaller local customers that are burdened with the additional cost, as clients on long-term contracts, including the automotive and packaging industries, have been exempt, along with export products and customers.
Smaller downstream manufacturers who spoke on condition of anonymity, said they have been able to pass on the additional costs to "complaining" customers. While ArcelorMittal's direct customers are promised a surcharge refund should the company win its arbitration with Kumba over a cheap iron ore contract, it will be impossible to refund end consumers.
The iron ore contract, which saw ArcelorMittal buying 6.25 million tons a year at cost plus 3%, was cancelled by Kumba in February following the steel giant's failure to convert its old mining order rights in Sishen, as required by law.
"What irks me is that we never saw the benefit of those cheap raw materials before. Imposing the surcharge just confirms that they overcharged us in the past," one downstream manufacturer said.
"We were supposed to get steel at better prices in order to produce goods that can be exported. At these prices, I can still sell to the local hardware store, but it definitely doesn't allow me to produce for the export market and compete with the likes of China," he said.
The Competition Commission is investigating the iron ore surcharge, following a complaint by the Department of Trade and Industry.
"Amsa does not believe its actions have resulted in excessive pricing and will prove this to the commission, if requested," an ArcelorMittal spokesman said

Analyst views on Chinese steel sector consolidation drive
Sunday, 11 Jul, 2010
Reuters reported that China drive to consolidate its fragmented steel sector is set to forge a handful of global giants, turning
up the heat on top producers including Arcelor Mittal and enabling it play hardball with material suppliers such as Rio Tinto.
Mr Chris Park a senior analyst at Moody Corporate Finance Group said "There is no discipline. Steel mills suffer very often
from oversupply, price correction and margin loss too. He added that Chinese mills still lag global peers in product diversity
an issue consolidation will help by allowing them to spend more on product development to pursue big western customers
now served by global giants such as ArcelorMittal, Nippon Steel and POSCO.”
Mr David Ko Head of the iron and steel sector of KPMG China, explaining Beijing's reasons for issuing the new policy
document last month that "The state council is not really satisfied with the speed of the industry consolidation."
Mr Josephine Ho an analyst at Nomura said "A more consolidated industry will lead to higher discipline and if there are
fewer players, it will be easier for them to negotiate."
Explosive expansion in the past few years has made China the top producer in the USD 500 billion global steel industry with
the nation now accounting for about half the world total output after ramping up production to fuel its rapid growth. But that
massive output is spread over some 3,000 steel mills, from state owned giants like Baoshan Iron and Steel to much smaller
private backyard smelters, prompting the government to mount a new push for consolidation.
After a previous consolidation drive largely stalled earlier in the decade, Beijing in June issued a new policy document aimed
at putting more than 60% of domestic capacity in its top 10 mills by 2015 up from 44% in 2009.
Analysts say the new consolidation should benefit market leaders like Baosteel, Angang Steel and Wuhan Iron and Steel as
the restructuring will see the current market leaders driving consolidation, cutting costs and tapping fresh markets.
One area where they could benefit is on iron ore pricing, an area where most of the cards are now controlled by the world top
three suppliers, Brazil Vale and Australia BHP Billiton and Rio Tinto which collectively control two thirds of the USD 88
billion global seaborne iron ore trade.
The new giants could also wield more power in setting global steel prices for the auto and construction sectors and other big
users. Construction alone, much of it for home building, already accounts for about half of China demand.

(Sourced from Reuters)

Chinese steel mills are cutting their output to reduce losses as the country’s steel inventory reached a historic high and domestic steel prices continued to drop for more than ten weeks in a row, the Economic Information Daily reported Friday.
Steel prices on the international market are also plunging, driving iron ore prices lower.
China’s steel industry faces an increasing risk of losing money as inventory stopped dropping in May and rose 74 percent in July year-on-year, to 15.09 million tons, the report said, citing Beijing-based consulting firm
“Steelmakers will try their best to avoid cutting output unless losses are unbearable,” a source with a steel mill told the paper.
The source said steel prices have fallen below what many steelmakers can endure.
Many of the country’s small and medium-sized steel mills have begun to partly shut down; larger ones are focusing on repairs and maintenance instead of production to prevent steel prices from further tumbling, the report said.
Xu Xiangchun, chief analyst at, said losses can be eased to some extent as steelmakers begin to cut output in July and August and raw-material prices drop, and he expected the steel market to reach equilibrium in the fourth quarter of this year, the paper reported.
According to statistics from China’s top economic planner, the National Development and Reform Commission, the average price of the country’s major steel products fell by 8 percent to 4,597 yuan per ton on June 30 from 4,998 yuan on April 21.
Figures from the National Bureau of Statistics showed that the country’s output of crude steel has remained high since early this year, with the monthly output exceeding 50 million tons from January to May. The output in May reached 56.14 million tons, up 20.7 percent from a year ago. June’s output will still be at least 52 million tons, the paper estimated based on mid-June figures from the China Iron and Steel Association.

China tax to benefit Indian steel, stabilise prices
Shubhashish / DNA Thursday, June 24, 2010 4:16 IST

Mumbai: China has removed its export rebate on certain steel products, which effectively discourages exports from the country.
In a move to arrest the low-grade steel production in the country, the government has withdrawn the 9% export rebate given on products such as hot and cold rolled coils in the flat segment, and long steel, which primarily used in the construction sector.
The rebate stands withdrawn with effect from July 15.
Industry experts and analysts believe this is a positive for Indian steelmakers as the price difference between local and imported steel is currently as much as $100 per tonne (approx Rs 4,620).
Imports from China could slow down and prices could stabilise.
Prasad Baji, Faisal Memon and Manan Tolat of Edelweiss Capital, in a report on June 22, said: “Currently, China exports hot rolled coils at $600 per tonne. Withdrawal of the 9% export rebate would mean $54 per tonne lesser profit for Chinese steel exporters, effectively leaving a very thin or possibly no margin.
This would mean reduced level of Chinese steel exports in the second half of the calendar year 2010.”
The analysts said the news is positive for steelmakers such as Tata Steel and JSW Steel.
However, they believe the news is a negative for iron ore miners like Sesa Goa, as most of Sesa Goa’s ore is exported to China.
“The hidden agenda for this move is that this would lead to strong production cuts in China, reducing raw material prices. Ultimately, the strong pricing power of miners will reduce,” the analysts said.
An official from a domestic steel company, on condition of anonymity, told DNA Money, “There has been a huge surge of steel coming from China in the past two months at an average price of $550 per tonne. This has really impacted our sales and prices are under tremendous pressure. Given the high raw material costs, we cannot afford to sell our steel at such low prices.”
Pinakin Parekh and Neha Manpuria of JP Morgan India, in a report dated June 22, said: “While the removal of export rebates is unlikely to result in a complete reduction of exports, we believe the removal of rebates is likely to reduce the import pressure into India from China.”
However, they believe near-term pressure on Indian steel prices will continue and the companies may have to lower prices, as the gap between domestic and imported steel is close to Rs 5,000 per tonne.
Parekh and Manpuria said, “In terms of stock picks, we would continue to highlight Tata Steel for the aggressive investors and SAIL for more defensive investors.”

China Steel Industry is the largest steel producing nation in the whole world. The amount of production is always on an upward slope with every passing year. In the year 2003, the total produced steel output was around two hundred and twenty million tonnes which increased to around two hundred and seventy three tonnes during the fiscal 2004. This increasing trend was maintained during the fiscal year 2005 and the total amount of steel production was hovering around three hundred and fifty million tonnes. A high degree of correlation can be seen between the rate of growth of the Chinese economy and that of the demand for steel in China. Both are growing more or less at a rate around ten percent. The percentage share of steel consumption of China in the whole world is approximately thirty one percent.The main reason for the astronomical growth of China Steel Industry is the constant support and assistance from the Chinese government. The China Steel Industry is basically a fragmented and scattered one even after some of M&A and consolidation has taken place in the Chinese steel market.

Some of the important facts and figures concerning China Steel Industry are :-
• The tremendous growth of the steel industry in China has been possible due to constant back up from Chinese government through huge amount of subsidies.
• The total amount of consumption of the Chinese market is the largest in the whole world, but the market research by various agencies and organizations say that the optimum level of steel consumption has not reached yet.
• Though the domestic supply of steel exceeds that of the domestic demand of China, still it has to import steel from foreign countries. The only reason behind this is that the total amount of quality steel produced is relatively low compared to the total produced steel.
• The steel industry saw a phase of recession from the mid 1970s till the late 1980s. The situation changed from the year 1989 and the main reason for this is the contribution made by China. From the year 1989 till date, the high growth rate in this steel sector was possible due to China Steel Industry which accounted for almost fifty six percent of the total rate of growth.


Steel prices may fall by Rs 1,000/tn in July
Published on: July 10, 2010 at 04:50

NEW DELHI (Commodity Online): India’s domestic steel prices may come down by Rs 1,000 a tonne in July due to sluggish demand mainly from the construction and infrastructure space.

According to steel secretary Atul Chaturvedi, in July, steel prices are likely to fall by Rs 1,000 a tonne mainly due to lack of demand from infrastructure firms amid the monsoon season.

Domestic steel makers are yet to announce any price changes of their products. High cost of raw material, fall in demand and cheaper global rates are putting pressure on domestic steel prices and analysts say the trend could well hit the margins of domestic companies in the current quarter.

The July-September period will see erosion of profitability of steel companies as the gloomy demand scenario would prevent them from hiking rates amid high input cost pressure. He described the second quarter as the weakest link for the industry in the current fiscal.

Steel firms have seen prices coming down by up to Rs 6,000 a tonne to around Rs 27,000-33,000 a tonne in past few months as construction work slowed down ahead of monsoon.

Prices of raw material, coking coal and iron ore, are at present ruling around 50-100 per cent high. Spot iron ore prices are ruling at around USD 100-115 a tonne and coking coal prices at around USD 185 a tonne level.

Anticipating a hit on their bottomline, steel makers like Tata Steel, Essar Steel and JSW Steel are looking at increasing price in some segments in the current month.

Tata Steel, the world’s sixth largest steel producer, hinted at increasing the prices of steel. The company said the rise in the input costs would be passed on to the customers.

Globally, raw material prices have gone up. If producers don’t pass on the price increase, their margins will be affected. We are hoping that we’ll pass on the increase in raw material cost.

Though the demand for steel both in the domestic and international markets is growing, the cheap imports from China, which has overcapacity, continues to be a challenge for Indian firms.

Tata Steel said there are positive trends in the international markets such as the U.S. and Europe. China has overcapacity and we anticipate that the cheap imports will continue. It will have an impact on the domestic market.

Recently, the state-run National Mineral Development Corporation (NMDC) has increased the prices of iron ore by 11 per cent based on the international market trends. The company has indicated that prices would be revised on a quarterly basis

World Steel Industry :
Steel, the recycled material is one of the top products in the manufacturing sector of the world.
The Asian countries have their respective dominance in the production of the steel all over the world. India being one among the fastest growing economies of the world has been considered as one of the potential global steel hub internationally. Over the years, particularly after the adoption of the liberalization policies all over the world, the World steel industry is growing very fast.

Steel Industry is a booming industry in the whole world. The increasing demand for it was mainly generated by the development projects that has been going on along the world, especially the infrastructural works and real estate projects that has been on the boom around the developing countries. Steel Industry was till recently dominated by the United Sates of America but this scenario is changing with a rapid pace with the Indian steel companies on an acquisition spree. In the last one year, the world has seen two big M&A deals to take place :-

• The Mittal Steel, listed in Holland, has acquired the world's largest steel company called Arcelor Steel to become the world's largest producer of Steel named Arcelor-Mittal.

• Tata Steel of India or TISCO (as listed in BSE) has acquired the world's fifth largest steel company, Corus, with the highest ever stock price.

It has been observed that Steel Industry has grown tremendously in the last one and a half decade with a strong financial condition. The increasing needs of steel by the developing countries for its infrastructural projects has pushed the companies in this industry near their operative capacity.

The most significant growth that can be seen in the Steel Industry has been observed during the period 1960 to 1974 when the consumption of steel around the whole world doubled. Between these years, the rate at which the Steel Industry grew has been recorded to be 5.5 %. This roaring market saw a phase of deceleration from the year 1975 which continued till 1982. After this period, the continuous fall slowed down and again started its upward movement from the early 1990s.

Steel Industry is becoming more and more competitive with every passing day. During the period 1960s to late 1980s, the steel market used to be dominated by OECD (Organization for Economic Cooperation and Development) countries. But with the fast emergence of developing countries like China, India and South Korea in this sector has led to slipping market share of OECD countries. The balance of trade line is also tilting towards these countries.

The main demand creators for Steel Industry are Automobile industry, Construction Industry, Infrastructure Industry, Oil and Gas Industry, and Container Industry.

New innovations are also taking place in Steel Industry for cost minimization and at the same time production maximization. Some of the cutting edge technologies that are being implemented in this industry are thin-slab casting, making of steel through the use of electric furnace, vacuum degassing, etc.

The Steel Industry has enough potential to grow at a much accelerated pace in the coming future due to the continuity of the developmental projects around the world. This industry is at present working near its productive capacity which needs to be increased with increasing demand.

World steel industry and Crude Steel Production
The following table gives a clear picture upon the major crude steel producers in the world as of the year 2004.

Country Crude Steel Production (mtpa)
China 272.5
Japan 112.7
United State 98.9
Russia 65.6
South Korea 47.5
F.R.Germany 46.4
Ukraine 38.7
Brazil 32.9
India 32.6
Italy 28.4
In the year 2004, the global steel production has made a record level by crossing the 1000 million tones. Among the top producers in the steel production, China ranked 1 in the world.
Production of steel in the 25 European Union countries was at 16.3 mmt in January 2005. Production in Italy increased by 11.5 per cent in comparison to the same month in 2004. Italy produced 2.5 mmt of crude steel in January 2005. Austria produced 646,000 metric tones.
In Russia it increased by 4.0 per cent to reach at 5.5 mmt in January.
In case of the North America region particularly in it was 1.5 mmt of crude steel in January 2005, up by 8.0 per cent compared to the same month in 2004. Production in the United States was 8.3 mmt.
Brazil had produced 2.6 mmt of crude steel in January 2005. In South America region it was 3.7 mmt for January 2005.

According to rating made by the " World Steel Dynamics", Indian HR Products are categorized in the Tier II category quality of products. Both EU and Japan have ranked the top. USA and South Korea comes as like India.

Saturday, July 10, 2010

Steel World is Welcome Steel Maker, Dealers and Users



 The angry hammer works off his fury on the steel.
 A silver hammer can open an iron gate
 The iron never takes advice from the hammer.
 It is better to be the hammer than the anvil.
 You are either hammer or anvil.
 Between the anvil and the hammer.
 Some people are born hammers, others anvils.
 The same hammer that breaks the glass forges the steel.

Forbes list of the World's Billionaires
Ace Indians Mukesh Ambani and Lakshmi Mittal named among world's top ten billionaires as Mexican mogul Carlo Slim Helu hit Americans Bill Gates and Warren Buffett to turn out to be the most affluent person on earth.
In addition to fourth placed RIL chairman Ambani and fifth positioned steel czar Mittal, four other Indian residents were named among top fifty in 2010 Forbes list of the World's Billionaires released on Wednesday with 49 Indians joining company with the world's 1,011 wealthiest people.

The steel industry is often considered to be an indicator of economic progress, because of the critical role played by steel in infrastructural and overall economic development. Global steel production grew enormously in the 20th century from a mere 28 million tonnes at the beginning of the century to 781 million tonnes at the end. The economic boom in India has caused a massive increase in the demand for steel in recent years. Between 2000 and 2005, world steel demand increased by 6%. Since 2000, several Indian steel firms have risen to prominence.
Steel sector is the leading growth driver for India. Infrastructure development given thrust by government is in the fields of airports, roads, power plants. Per capita consumption of steel in India is around 30kg and the installed steel capacities in India is around 55MTPA. There is huge potential for capacity enhancement by major players and also wide scope for small players. Backward integration could be the safe bet - starting with a rolling mill and moving back with a arc furnace and sponge iron unit.

This brings the focus of the industry to India. Considering a steel consumption of 300 kg per man per year to be a fair level of economic development, India will have to come up to somewhere around 300 million tonnes, if it is to fulfill its ambitions of being a developed country. That of course is a long journey from the present production level of around of around 50 million tonnes but one must consider its past before coming to a conclusion about its potential. India was producing only around a million tonnes of steel at the time of its independence in 1947. By 1991, when the economy was opened up steel production grew to around 14 million tonnes. Thereafter, it doubled in the next 10 years, and then it is doubling again, maybe over a slightly longer span. Steel Production in India expected to reach 124 million tons by 2012 and 275 million tons by 2020 which could make her second largest steel maker.



Chief Executive

NO.3Q.Dhanalakkshmi Nagar, Atthur Road, THURAIYUR-621010,T.N, INDIA-621010; E-mail:;
Mobile : 9443358235/9042432705; Phone:04327-222505