The steel industry doesn’t have much to cheer about these days. Some recent news items tell the tale:
- Essar Steel Algoma, a Canadian flat steel producer, filed for creditor protection for the second time in 18 months.
- Ferrous scrap prices fell again this month, erasing any hope that an end to the five-month swoon in the key steelmaking raw material would boost finished steel prices by extension. Scrap prices have declined about 40% since June and are roughly half the price they were at the beginning of the year.
- In the UK, the steel downturn has reached crisis levels resulting in the closure of SSI’s Teesside slab mill, the announcement by Tata Steel that it will close plate mills in Scotland and Scunthorpe and the announcement that 16 Caparo group companies, including steel strip and tube makers, appointed administrators after suffering financial problems. The administrators have announced more than 450 job losses. To make matters worse, Caparo CEO Angad Paul was found dead Sunday after apparently falling from his eighth floor residence in central London.
- Roughly all the steel mills in the Western Hemisphere have joined together to protest China’s assumption of market economy status when it gains membership to the World Trade Organization late next year because the designation will make it harder for them to battle the dumped Chinese steel they feel certain will proliferate. The coalition of steelmakers in North and South America and Europe noted that the OECD Steel Committee has indicated there is almost 700 million metric tons of excess steel capacity globally, with China holding the lion’s share with about 380 million mt, a total that could grow. “This situation, together with a declining steel consumption, has resulted in record levels of steel exports from China to the rest of the world in 2014 — and which are on track to exceed 100 million metric tons this year,” the coalition stated.
- US raw steel production capability utilization has come in below 70% in each of the last few weeks, signaling the likelihood of more red ink for American integrated mills in the current quarter.
- A study commissioned by North American mills revealed that granting market economy status to China next year would cause the value of NAFTA steel industry output to shrink by $31.5 billion and NAFTA economic welfare to decrease by $42.5 billion – $68.5 billion and cause job losses of 400,000-600,000 workers in the US and near-term job losses in Canada of up to 60,000.
- Prices for US hot-rolled coils — a bellwether steel product — have fallen to their lowest levels since May 2009 — down by about 40% from a year ago — and are in danger of falling to price levels not seen since January 2004.
- Labor issues at two major US integrated steelmakers, US Steel and ArcelorMittal, remain unresolved more than two months after the September 1 expiration of their contracts with the United Steelworkers union.
- US Steel, which lost $173 million in the third quarter and $509 million so far this year, asked its outside sheet processors for an immediate 15% reduction in their fees to help USS reach its cost-cutting goals. Tata Steel’s European long products division is in dialogue with its suppliers to cut costs by 10% with further reductions possible. Both US Steel and Tata have already closed or are closing some of their operations.
- Global steel giant ArcelorMittal lost $700 million in Q3 alone and expects “unsustainably low” Chinese steel export prices to continue in 2016.
- On the bright side, US minimills Nucor and Steel Dynamics reported Q3 net profits of $227 million and $61 million, respectively — but that may only make it more difficult for US mills to prove injury in critical unfair trade cases against sheet imports.
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