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Steady Increase in Steel Output – Analyst Blog

Zacks Market Commentaries — Mon, 07 Dec 2009 14:30:00 +0000

According to the data released by World Steel Association (worldsteel), global crude steel production for the 66 countries reporting to worldsteel improved 13.1% year over year to 112 million tons in October 2009. Following a revision of the September production figures, this is the second month in a row of positive growth rate since September 2008.

Total crude steel production in the 66 reporting countries for the first ten months of 2009 was 982 million ton; a decrease of 13.5% over the same period of 2008. Steel production had reached its highest level in July this year on the back of a moderate rise in demand and the resumption of idle facilities by producers. Total output of 103.9 million tons was an improvement of 4% from 99.8 million tons produced in the last month, but down 11.1% year over year.

Crude Steel production in China, the largest producer and consumer of crude steel was 51.7 million ton in October 2009, up 42.4% from October 2008. Russia’s crude steel production for October 2009 expanded 24.2% to 5.6 million ton. Ukraine produced 2.7 million ton in October 2009, 42.9% higher than the same month last year. Turkey produced 2.3 million ton of crude steel in October 2009, a 25.5% increase from October 2008.

However, steel production in Japan slipped 12.9% year over year to 8.8 million ton in October 2009. South Korea showed a decline of 0.7% from October 2008, producing 4.6 million ton of crude steel in October 2009. In the European Union, Germany’s crude steel production was 3.5 million ton in October 2009, a decrease of 11% from October 2008. Italy produced 2.2 million ton in October 2009, down by 15.8% from October 2008.

The US produced 5.9 million ton of crude steel in October 2009, a decrease of 12.4% compared to the same month last year. Key steel consuming industries such as auto, shipbuilding and construction have been experiencing weak demand in the last quarters, forcing global steel makers to lower production levels.

U.S. Steel Corp. (X) had slashed production by almost 62% during the second quarter of 2009, while Korean steel maker POSCO (PKX) was forced to reduce production for the first time in its history. POSCO curtailed production by about 15% during the period. However, world crude steel capacity utilization has been steadily improving since its lowest point in December 2008. In October 2009, the world total capacity utilization ratio was 76.0%, 17.8 % higher than December 2008.
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Zacks Analyst Blog Highlights: BP plc, ExxonMobil, Chevron, U.S. Steel Corp. and POSCO – Press Releases

Zacks Market Commentaries — Wed, 28 Oct 2009 13:00:02 +0000

For Immediate Release

Chicago, IL – October 28, 2009 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: BP plc (BP), ExxonMobil (XOM), Chevron (CVX), U.S. Steel Corp. (X) and POSCO (PKX).

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Here are highlights from Tuesday’s AnalystBlog:

BP Tops on Better Cost Control

BP plc (BP) reported its third quarter 2009 results of $1.71 per ADS (American Depositary Share), beating the Zacks Consensus Estimate of $1.14 on the back of stronger cost controls and increased upstream volumes. However, in comparison with the year-earlier results, earnings fell approximately 34% on lower oil prices.

BP’s strong performance sets the stage for earnings releases by ExxonMobil (XOM) and Chevron (CVX), which are scheduled to report their results on Thursday and Friday this week, respectively.

BP expects its capex budget to be $20 billion for the year. The company’s attractive dividend (currently yielding around 6%) remains unchanged from the year-ago level. We believe that BP’s dividend is safe with the recent uptrend in oil prices.

Net cash provided by operating activities for the quarter was $8.1 billion compared with $14.9 billion a year ago. Net debt at the end of the quarter was $26.3 billion, representing net debt-to-capitalization ratio of 21% (compared with 17% a year ago).

Steel Output Mounting

Key steel consuming industries such as auto, shipbuilding and construction have been experiencing weak demand in the last quarters, forcing global steel makers to lower production levels. U.S. Steel Corp. (X) had slashed production by almost 62% during the second quarter of 2009, while Korean steel maker POSCO (PKX) was forced to reduce production for the first time in its history. POSCO curtailed production by about 15% during the period.

However, with steel demand picking up in the last couple of months, United States Steel Corp. is restarting its blast furnace at its Hamilton, Ontario, plant after a nine-month shutdown. U.S. Steel had closed the Hamilton blast furnace in Nov 2008. It suspended the remaining operations at Hamilton and the Nanticoke facilities in March 2009 due to a drop in demand. Both the facilities were running at less than half their capacity.

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Steel Output Mounting – Analyst Blog

Zacks Market Commentaries — Tue, 27 Oct 2009 20:57:53 +0000

According to the data released by the World Steel Association (WSA), global steel output increased to 107 million tons in the month of Sep 2009, down marginally (0.6%) from the same month of the previous year. Month-on-month, steel output improved slightly from 106.5 million tons. World crude steel production has continued to show a steady increase since Apr 2009.

Steel production had reached its highest level in July this year on the back of a moderate rise in demand and the resumption of idled facilities by producers. Total output of 103.9 million tons was an improvement of 4% from 99.8 million tons produced in the last month, but down 11.1% year over year.

All major steel producing countries such as China, Japan, Germany, the U.S., Brazil, Turkey, Russia and Ukraine showed peak monthly figures so far this year. Production in the Middle East, where demand was buoyant last year due to booming infrastructure spending, edged up 2% in September. Monthly steel output in Asia increased 15% to over 60 million tons in September. Of this, production in China − the world’s biggest producer and consumer of steel − climbed 28.7% to 39.4 million tons. However, global steel production was down 32.3% in North America in the month of September while production in Europe saw a drop of 23.7%.

Key steel consuming industries such as auto, shipbuilding and construction have been experiencing weak demand in the last quarters, forcing global steel makers to lower production levels. U.S. Steel Corp. (X) had slashed production by almost 62% during the second quarter of 2009, while Korean steel maker POSCO (PKX) was forced to reduce production for the first time in its history. POSCO curtailed production by about 15% during the period.

However, with steel demand picking up in the last couple of months, United States Steel Corp. is restarting its blast furnace at its Hamilton, Ontario, plant after a nine-month shutdown. U.S. Steel had closed the Hamilton blast furnace in Nov 2008. It suspended the remaining operations at Hamilton and the Nanticoke facilities in March 2009 due to a drop in demand. Both the facilities were running at less than half their capacity.

We expect global steel demand to improve in the rest of 2009 with a strong surge from the user industries. China is expected to continue to remain the largest consumer of steel going forward. The World Steel Association is forecasting a 8.6% year over year decline in steel production, better than the previous forecast of a 14.1% decline driven by a strong uptick in Chinese steel demand. With signs of a recovery across the world from the second half of 2009, the association is anticipating global steel demand in 2010 to grow by 9.2% to 1,206 million tons, which is a restoration to the level of 2008.
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Brazil Steelmakers Expect Recovery – Analyst Blog

Zacks Market Commentaries — Thu, 03 Sep 2009 22:51:42 +0000

Earlier this month, Brazilian steelmaker Companhia Siderurgica Nacional, aka CSN (SID), posted disappointing operating results for the second quarter of 2009.

Based on the turmoil in the financial markets, revenues, EBITDA and net income were down 30%, 57% and 68% respectively from the second quarter of 2008. Domestic market sales and volume were down 30% and 28% year over year. Export sales were down 32% year over year, while volume was up 21%. Crude steel production decreased 33% year-over-year.

It seems that the short-term outlook for SID is not very encouraging. However, the company showed some improvement over the previous quarter. Steel product sales volume was up 47%, net revenue was 2% higher than the first quarter of 2009. EBITDA was up 7% and EBITDA margin showed an improvement of 1.1% over the first quarter.

At the end of the second quarter of 2009, CSN began producing and selling cement, whose sales are expected to reach 300,000 tons in 2009. The plant marks SID’s entry into yet another new business that has strong synergies with its existing activities, given that the project’s main advantages lie in its raw materials self-sufficiency and the use of previously existing logistics.

CSN's ADRs have almost doubled since December 2008, which is especially meaningful given that the Dow Jones index rose by just 6% in the same period.

According to the data issued by the World Steel Association last week, global crude steel production dropped more than 10% year-over-year in July but was at its highest level in 2009. Production totaled 103.9 million tons, down 11.1% from July 2008 but up from 99.7 million tons in June 2009.

Although the steel sector scenario remains unpredictable, Brazilian steel makers SID and Gerdau S.A. (GGB) expect a gradual sales recovery in the coming months.
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Steel Output Peaks in July – Analyst Blog

Zacks Market Commentaries — Tue, 01 Sep 2009 17:15:51 +0000

According to data released by the World Steel Association, global steel output reached its highest level in July on the back of moderate rise in demand and resumption of idled facilities by producers. Total output of 103.9 million tons was an improvement of 4% from 99.8 million tons produced in the last month, but down 11.1% year over year.

All major steel producing countries like China, Japan, Germany, the U.S., Brazil, Turkey, Russia and Ukraine showed peak monthly figures so far this year. Production in the Middle East, where demand was buoyant last year due to booming infrastructure spending, edged up by 2.5% in July. Monthly steel output in China, the world’s biggest producer and consumer of steel, climbed 12.6% to 50.7 million tons. Steel production in India also increased, but only by a modest 4.3% to 4.7 million tons during the month.

However, global steel production was down 19.9% to 652.9 million tons for the first 7 months of 2009 compared with the same period a year ago. North America posted a 41.6% fall in year-to-date steel production while Europe saw a drop of 42.1% during the same period. Steel output in Asia was down 6.1%, with Japan posting a production decline of 38.5%.

Key steel consuming industries like auto, shipbuilding and construction experienced weak demand in the last quarter, forcing global steel makers to cut production levels. U.S. Steel Corp. (X) had slashed production by almost 62% during the second quarter, while Korean steel maker POSCO (PKX) cut production by about 15% during the period. The operating environment deteriorated so sharply that POSCO was forced to lower production for the first time in its history in December last year.

Given our expectations for weak steel demand through the rest of 2009, we believe that global steel production will continue to be lower compared to last year. On the other hand, given the declining inventory levels, we believe the rate of deterioration in steel production will moderate in the coming months.

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U. of Michigan Spoils the Party…

Contrarian Profits — Mon, 17 Aug 2009 19:00:52 +0000

pRisk Aversion comes back strong! Risk assets get sold#8230; What games will be played with TIC#8217;s? 40 years since Woodstock! And Now#8230; Today#8217;s Pfennig!/p pGood day#8230; And a Marvelous Monday to you! A great weekend that was filled with watching my little buddy, Alex, play football, hosting a surprise 30th birthday party for my little girl, Dawn, and a sweep of the Padres by the Cardinals! This week gets cut short with me a the helm, as I head to San Francisco on Thursday. Chris will have the conn on the Pfennig Thursday through Monday./p pWell#8230; Who#8217;d a thunk it? Yes, who would have thought that the U. of Michigan Consumer Confidence could turn the markets upside down and spoil the party?#8230;/p

Adding Iron for a Healthy Portfolio

Investment U — Tue, 11 Aug 2009 16:18:25 +0000

Adding Iron for a Healthy Portfolio Tony Daltorio, The Investment U Research Team Hiking along back-trails has a calming effect, is good for your cardiovascular system, and is good for your health in general. It’s serene, with few people around. Hiking along investment back-trails where few Wall Street sales people are around can also [...]

Air Products Slows Way Down – Analyst Blog

Zacks Market Commentaries — Mon, 06 Jul 2009 19:20:27 +0000

Air Products Has Severe Top-Line Slowdown

Sales at Air Products (APD) are down 29% in April and May. This is faster than the 24% drop in April, with May obviously being a much larger negative number. Air Products reported the steepest sales decline in its tonnage gases unit, whose customers include oil refiners that need hydrogen and metal fabricators that need oxygen.

Sales in that unit dropped 41 percent in April and May compared to a year earlier due to lower demand from chemical producers and steel-makers.
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Chinese Steel & Brazilian Iron – Analyst Blog

Zacks Market Commentaries — Wed, 03 Jun 2009 16:04:17 +0000

Negotiations of iron ore prices between Chinese steel makers and the three big mining companies -- Vale (VALE), BHP (BHP) and Rio Tinto (RTP) -- have been going on for months, and up 'til now, no decision has been reached.

Some weeks ago Korean and Japanese steel companies accepted an iron ore price reduction between 33% and 44%. We thought that this was a good indication of what would be accepted by Chinese companies, too.

However, it seems that China wants more.

Yesterday Mr. Luo Bing Cheng, from CISA (Chinese Iron and Steel Association), announced that China wants at least a 40% price reduction for iron ore, well ahead of the 33% minimum accepted by both Korea and Japan. Additionally, market sources have said that an agreement could be reached with China accepting the same price reduction offered to Japan and Korea if the new contract was for just 6 months and not for the usual 12 months.

Prices of iron ore in the spot market continue to trade with around a 45% discount, if compared to the 2008 price agreed between China and the three big producers. Despite last year's negotiations, iron ore producers are selling the product with discounts between 30% and 40%.

Average iron ore volume imported from China reached a monthly average of 47.1 million tons during the first four months 2009, compared to just a 38.3 million tons during the first half of 2008. It seems a huge volume increase for a difficult economic period.

Even stranger is the fact that Chinese internal steel production was flat during the first four months of 2009 from 2008. Chinese companies are taking advantage of the good price to build inventories.

It is important to note that China is the only buyer in this market, as Europe the U.S. and Japan are all into deep recessions.

Usually the second half of the year is a soft period for iron ore demand. Even worse, we do not expect a strong recovery in the developed world in the following months, and Chinese inventories should be loaded. If we add to this entire difficult business environment the idea that China would like to renegotiate prices in six months, we begin to wonder if there is some room for price appreciation of the iron ore in the following quarters.

Apparently, China made its move in order to be sure that prices would stay down for more than just a few months. We find it difficult to justify the more positive view of the market towards iron ore producers in the last few months. We prefer to remain cautious and keep our neutral view on Vale.
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China Performs a Kind of Financial Alchemy

Dan Denning — Tue, 19 May 2009 20:56:18 +0000

pWherever we#8217;re going, are we there yet? Nope! But we#8217;re getting there. That is, America is sleepwalking its way into poverty. China is performing a kind of financial alchemy. And Australia finds itself subject to American-style problems, but benefitting from China#8217;s Grand Economic Strategy./p pBut how about those powerful idealists on U.S. markets? Both the S#38;P 500 and the Dow were up nearly three percent. If you can believe it, they were led by financial stocks and retailers. Bank of America (NYSE:a href="http://www.google.com/finance?q=BAC"BAC/a) finished up 9.9% after Goldman Sachs (NYSE:a href="http://www.google.com/finance?q=GS"GS/a) put it on its #8220;conviction buy#8221; list. Home hardware retailer Lowes was up 8.1% after a survey of U.S. homebuilder confidence surged./p pBy the way, what the hell is a #8220;conviction buy#8221; list?#8230;/p

China Iron Ore Negotiations Tough – Analyst Blog

Zacks Market Commentaries — Thu, 05 Mar 2009 20:30:45 +0000

Iron Ore Price Negotiations with China Far from Over

Today Mr. Zhang Xiaogang, Chairman of Anshan Iron & Steel Group said Chinese steel makers want CVRD (RIO), BHP Billiton Ltd. (BHP) and Rio Tinto Group (RTP) to cut prices of iron ore by between 40 percent and 50 percent this year.

It was announced before that prices for CVRD would be around 10% higher than those of BHP and Rio Tinto, since price adjustment for 2008 for CVRD was around 10% lower. That would mean that iron ore prices for CVRD would be somewhere between 40% and 30% lower than in 2008.

That would be the first iron ore price cut in 7 years as the global recession has been reducing demand of the product worldwide. The iron ore producers have offered to sell the material at spot prices, which are lower than benchmark contracted prices, until new benchmarks for the year are decided, nevertheless the negotiations are far from over.

Today's spot price for iron ore is just 15% lower than 2008 contract prices, thus a 40% or 50% decline seems excessive. It is interesting to remember that just yesterday, prices of metal commodities and mining companies soared on expectation on a new stimulus package in China to be announced in the annual meeting of the Chinese Communist Party.

We believe it is more reasonable to expect a price cut around 30% for BHP and RTP and 20% for RIO, which is already incorporated into prices. We are keeping our Hold recommendation on CVRD.

Read the full analyst report on "RIO"
Read the full analyst report on "BHP"
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The World Bank Goes Nuclear on Commodities

Dan Denning — Wed, 10 Dec 2008 15:52:24 +0000

pSometimes you have to just stand back and admire the extremes a real bubble can produce. What you have now, as Bill explained last night at the Doomer#8217;s Ball, is the last greatest bubble of them all, the bubble in U.S. bonds. It#8217;s reaching staggering levels./p pHow do you measure these things? In yields. This, by the way, is how you#8217;ll know the bubble is popping. When that happens (bond yields rise like a rocket ship) it#8217;s going to unleash financial chaos. But for now, the bubble just keeps on getting bigger and yields on short-term U.S. bonds keep approaching-and even reaching-zero./p p#8220;The Treasury sold $27 billion of three-month bills yesterday at a discount rate of 0.005 percent,#8221; reports Bloomberg. It#8217;s, #8220;the#8230;/p

China and the Baltic Dry Index

Richard Shaw — Sun, 07 Dec 2008 17:13:00 +0000

China stock market and Baltic Dry Index are in current disagreement. China manufactures things and ships them around the world. Much of that transport is done by sea. The Baltic Dry Index is an assessment of the price of moving major raw materials by sea. As global trade increases, the Baltic Dry Index tends to increase. As [...]

Watch out for China steelmakers

Tony Sagami — Thu, 18 Sep 2008 20:32:49 +0000

China is threatening to stop using iron ore from Brazilian miner Vale (NYSE:RIO because of a recent price increase.

China warns that it will tell Chinese iron ore miners to increase production and instruct Chinese steel makers to reduce output.

China needs the iron ore, but the Chinese steelmakers could be the big loser in this shouting match.