Data show steel price disparity
Jul 11, 2010 12:47 AM By Jana Marais
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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.
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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
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)
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)
STEEL PRICE
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 Mysteel.com.
“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 Mysteel.com, 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.
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 Mysteel.com.
“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 Mysteel.com, 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.”
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
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.
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.
Thanks for sharing the post. Note those important facts. The best Steel Suppliers in chennai will support us to grow. The quality is the main thing to construct a building. Then also the quality of Steel Dealers in Chennai will satisfy the customer needs.
ReplyDeleteIt is a good article blog. thanks for sharing.
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