STEEL RAW MATERIALS MONTHLY
Issue 33 / November 2015
Cost saving gains eroded by falling ore price
Falling iron ore prices over October and
into early November have eaten into the
already thin margins of smaller Australian
iron ore producers and it is mainly the
weak Australian dollar that is providing any
breathing space. Much of the cost saving
gains made over the past 18 months have
been eroded by the descent below $50/dry
mt CFR for 62% Fe fines.
The Australian dollar averaged
US$0.72 cents in the September quarter
and is tipped by analysts and economists
to trade at US$0.70-0.72 cents in the
December quarter. With 62% Fe iron
ore prices averaging $55/dmt in the
September quarter, a near 30% foreign
exchange margin was a lifesaver for smaller
producers. For a long period until 2013,
the Australian dollar had been at or even
above parity with the US dollar, as a result
of the strong prices of iron ore and other
commodities, and the weaker US dollar due
to the Federal Reserve’s QE program.
CONTENTS
National Australia Bank has forecast the
Australian dollar will finish up around US$0.68
cents by the end of next year, which is
roughly the consensus view, but UBS Wealth
Management believes it could be lower at
around US$0.65 cents. These views are
premised on the Fed gradually lifting interest
rates, along with no further rate cuts by the
Reserve Bank of Australia. The RBA kept record
low interest rates unchanged on November 3.
Fortescue Metals Group is working
off expectations of an Australian dollar
of US$0.72 cents in fiscal 2016 (ending
June 30), according to its most recent
operations report, which along with
improved operating costs will give it an
average C1 cost of $15-16/wet mt by midnext year. If this can be achieved the Perthbased miner expects its cash breakeven
price on a Platts 62% Fe basis to be around
$36/dmt CFR by the end of FY2016, down
from around $40/dmt CFR currently.
(continued on page 2)
FORTESCUE C1 COSTS VERSUS REALIZED PRICES
120
C1 cost ($/wmt)
100
Realized price ($/dmt CFR)
80
60
40
20
0
Jan-Mar 2014 Apr-Jun 2014 July-Sep 2014 Oct-Dec 2014 Jan-Mar 2015 Apr-Jun 2015 Jul-Sep 2015
Source: FMG, Platts
KEY PRICE ASSESSMENT MONTHLY AVERAGES, OCTOBER 2015
Platts IODEX Iron ore fines 62% Fe CFR North China
Platts Coking Coal, Premium low-vol FOB Australia Platts Ferrous Scrap HMS CFR Turkey
Unit
$/dmt
$/mt
$/mt
Average
53.25
78.69
178.93
change
-3.88
-1.59
-24.73
% change
-6.79
-1.98
-12.14
TSI Iron Ore Fines 62% Fe Chinese imports (CFR North China port)
TSI Coking Coal, Premium hard, Australian exports (FOB port)
TSI Ferrous Scrap HMS 1&2 80:20, Turkish imports (CFR port)
$/dmt
52.74
-3.61
-6.41
$/mt
79.51
-2.51
-3.06
$/mt
178.55
-27.63
-13.40
www.platts.com
www.twitter.com/PlattsSteel
Iron Ore Market Focus
3
Iron Ore Data
5
Metallurgical Coal Market Focus
6
Metallurgical Coal Data
8
Scrap Market Focus
9
News10
Special Report
15
Turkey ARC Monthly Data
23
24
Global Trade Highlights
Steel Raw Materials Monthly Averages
25
EDITORIAL
BRICs looking less sturdy
Having decided to take a look at the so-called
BRIC (Brazil, Russia, India and China)
economies from a steel demand perspective
in this issue, it was a coincidence that
Goldman Sachs, original coiner of the term,
announced it had shut its BRIC fund, after it
lost close to 90% of its value over the past
five years. Brazil and Russia have been hit by
falling oil prices (not to mention coal and iron
ore and other commodities), while China’s
massive economic growth seems to be finally
running out of steam. India is expected to be
the rising star of the four but its steel and
economic growth trajectory are hard to plot
with any certainty while it still has many ageold problems to solve. China and Brazil built up
steel capacity on the basis that it would easily
be absorbed by ongoing urbanization and
development. Is India – already the world’s
third-largest steel producer – in danger of
making the same mistake?
World Steel Association said last month
that global steel was in a period of low
growth until “other developing regions…
produce another major growth cycle.”
Mexico, Indonesia, Nigeria and Turkey (the
‘MINTs’) are tipped by many to pick up
from the BRICs, but the hyperbole is likely
to be turned down on this occasion.
— Paul Bartholomew
METALS
STEEL RAW MATERIALS MONTHLY
ISSUE 33 / NOVEMBER 2015
Cost saving gains eroded by falling ore price
...from page 1
Fortescue reached its long-held 155
million mt/year capacity target on an
annualized basis in the March 2014 quarter.
In that quarter, the Platts 62% Fe index
averaged $120/dmt, while Fortescue’s C1
costs were $34.88/wmt, and its realized
sales price $107/dmt on a Platts 62% Fe
basis. C1 costs accounted for 33% of the
realized sales price. In the September 2015
quarter (production capacity is now roughly
10 million mt/year higher), its C1 costs were
$16.90/wmt, some 34% of the average sales
price of $50/dmt in the quarter. So while
the company’s C1 costs have roughly halved
over the past 18 months, the proportion
versus the realized sales price has not
ATLAS C1 COSTS VERSUS REALIZED PRICES
100
C1 cost (A$/wmt)
Realized price (A$/dmt CFR)
80
60
40
20
0
shifted as much because iron ore prices
have fallen so hard.
Freight costs have helped margins,
averaging $5.6/mt in the September 2015
quarter compared with $8.8/mt in the March
2014 quarter, while oil and diesel prices have
fallen significantly, along with the Australian
dollar. Fortescue has also benefited from
good demand for its 58% Fe material at a
time when Chinese mills are keeping output
low due to poor market conditions. This has
served to narrow the spread with 62% Fe
prices.
Following a recent analyst tour of
Fortescue’s Pilbara operations, UBS said the
company could reduce its all-in cash costs
to $15/mt, its cash breakeven price “on a
Platts 62% Fe equivalent basis would be
$36/dmt CFR.”
Jan-Mar 2014 Apr-Jun 2014 July-Sep 2014 Oct-Dec 2014 Jan-Mar 2015 Apr-Jun 2015 Jul-Sep 2015
NB: Average used of C1 range and Standard and Value Fines prices in Jan-June 2014
Source: Atlas
FORTESCUE’S OUTPUT, COSTS AND REALIZED PRICE
Output
C1 cost
Realized price
Platts 62% Fe average
(million mt)
($/wmt)
($/dmt CFR)
($/dmt CFR)
Jan-Mar 2014
29.60
34.88107120
Apr-Jun 2014
43.80
34.03
82
103
July-Sep 2014
42.90
32.087190
43.60
28.486374
Oct-Dec 2014
Jan-Mar 2015
35.50
25.904855
Apr-Jun 2015
42.10
22.165260
Jul-Sep 2015
45.10
16.905055
(continued on page 14)
Source: FMG, Platts
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STEEL RAW MATERIALS MONTHLY
Issue 33 / November 2015
ISSN: 2052-3572
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Tougher for juniors
While Fortescue has the scale and ability to
lower costs even further, some of its smaller
rivals are more constrained. Fellow Pilbara
iron ore miner Atlas Iron has tirelessly
taken cost out of the business but almost
foundered back in April when the 62% Fe
iron ore price went below $50/mt CFR.
“We reduced our costs to $61/mt at
Easter (April 3-6) from $85/mt,” David
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STEEL RAW MATERIALS MONTHLY
ISSUE 33 / NOVEMBER 2015
IRON ORE MARKET FOCUS
Prices under pressure as pre-winter restock proves elusive
China’s iron ore imports of 699.45 million
mt over January-September were almost
identical to the year-ago period, China
Customs data shows. July-September quarter
imports of 246.3 million mt were a record,
however, beating the previous record of 242.1
million mt in the same quarter of 2014.
The September quarter is typically a
strong one for Australian iron ore production
and exports, joined this year by record
output from Vale. Unfortunately, all of this
supply has hit at a time of weak demand
in China, due to low crude steel production
and ever decreasing steel prices. Pig iron
production over January-September of
528.3 million mt was down 3.3% on the
same period a year earlier, while crude steel
output of 609 million mt was 2.1% lower.
Port stocks have subsequently climbed
again, putting more downwards pressure on
iron ore prices, which appear to have settled
below the $50/mt CFR level for the time being.
Mysteel data shows port stocks at major
Chinese ports had reached 82.68 million mt
by the end of the first week in November, up
almost 3 million mt from just a week earlier.
Iron ore spot trades were well down in
the month of October (48 compared with 73
in September as observed by Platts), with
fewer cargoes from BHP Billiton, and Vale
selling mainly on a floating price basis.
Platts 62% Fe iron ore fines averaged
$53.25/mt CFR in October, down $6.79/
dry mt from the month before. The Steel
Index’s price for the same material averaged
$52.74/mt CFR in October, $6.41/mt lower
than the September monthly average.
Chinese output drops off
Capacity utilization at larger Chinese iron ore
producers (those with capacity of more than
1 million mt/year) fell to just 51.6% by the
first week of November from around 64%
a fortnight earlier. Again it indicates that a
seaborne spot price of $50/mt CFR is the
pain point for many domestic producers. It
was a similar situation in April this year – the
previous time spot prices went below $50/
mt – when a large chunk of domestic supply
was switched off in favor of imports. But
as soon as prices climb up above $50/mt,
much of this local production is turned back
on again, showing the elasticity and market
responsiveness of Chinese producers.
With little pre-winter restocking taking
place, plentiful supply, and no sign of a
turnaround in steel prices, iron ore prices
could remain at a similar level for the rest
of 2015. This is likely to result in domestic
Chinese capacity utilization of less than 50%
for the rest of the year and into 2016, a period
when local production is typically lower in
any case due to the colder winter months.
As for so-called ‘non-traditional’ iron
SGX - IRON ORE FORWARDS - 62% Fe ($/dmt CFR)
53
01-Oct
30-Oct
48
43
38
Nov-15
May-16
Nov-16
May-17
Nov-17
May-18
Nov-18
Source: SGX, TSI
PLATTS MONTHLY AVERAGE IRON ORE PRICES, OCTOBER 2015 ($/dmt)
IODEX: Iron ore fines 62% Fe CFR North China
63.5/63% Fe CFR North China
65% Fe CFR North China
58% Fe low Al CFR North China
58% Fe CFR North China
52% Fe CFR North China
Per 1% Fe differential (Range 60-63.5% Fe)
Monthly average
53.25
54.50
57.51
48.53
45.78
36.06
0.98
$ change
-3.88
-4.23
-5.02
-3.69
-3.69
-3.67
0.00
% change
-6.79
-7.21
-8.03
-7.07
-7.46
-9.23
0.41
TSI MONTHLY AVERAGE IRON ORE PRICES, OCTOBER 2015 ($/dmt)
62% Fe fines, 3.5% Al, CFR Tianjin port
58% Fe fines, 1.5% Al, CFR Qingdao port
58% Fe fines, 3.5% Al, CFR Tianjin port
62% Fe fines, 2% Al, CFR Qingdao port
63.5/63% Fe fines, 3.5% Al, CFR Qingdao port
65% Fe fines, 1% Al, CFR Qingdao port
Monthly average
52.74
48.89
49.09
53.94
53.74
58.34
$ change
-3.61
-3.62
-3.62
-3.61
-3.61
-3.94
% change
-6.40
-6.90
-6.87
-6.27
-6.29
-6.32
PLATTS 62% & 58% Fe IRON ORE MONTHLY AVERAGES CFR CHINA ($/dmt)
80
62% Fe
58% Fe
70
PLATTS OBSERVED IRON ORE SPOT TRADES
BY VOLUME - JAN-OCT (number of trades)
60
Rio192
BHP104
Vale74
Other245
Total615
50
Source: Platts
Source: Platts
Copyright © 2015 McGraw Hill Financial
3
40
Nov-14 Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15
Jul-15 Aug-15 Sep-15 Oct-15
STEEL RAW MATERIALS MONTHLY
ISSUE 33 / NOVEMBER 2015
IRON ORE MARKET FOCUS
ore supply, it is disappearing quickly, unable
to compete with lower-cost, higher-quality
material from Australia and Brazil. Producing
nations outside of Australia, Brazil, South
Africa and Ukraine now supply less than
10% of China’s iron ore needs. Australia and
Brazil now account for 85% of Chinese iron
ore imports, compared with around 75% in
January-September last year. If the big four
iron ore producing companies, Vale, Rio Tinto,
BHP and Fortescue Metals Group, produce
at a similar level in the final quarter of this
year to the September quarter, they will have
added an extra 75 million-80 million mt this
year compared with CY2014. Softer October
exports from Western Australia’s Port
Hedland of 36.5 million mt, down from 39.4
million mt in September, suggest the final
quarter could be a bit softer out of Australia.
More tons in 2016
Next year could see a similar amount of new
tons, though exports from the new Roy Hill
project in Western Australia could be delayed
until early 2016 and the company may not
export the 20 million mt or so of iron ore
that many analysts have built into their
supply-demand models. Vale has also said
it may trim output expectations slightly in
response to the Samarco disaster. The new
S11D project is around 75% complete and
will likely start making a supply contribution
towards the end of 2016. So next year
could potentially be a bit slower in terms of
additional supply than was thought a few
months ago. Given market conditions and
prices, the major producers may not be in a
hurry to bring on new tons too quickly.
With Chinese demand for iron ore slowing,
any additional supply will put the market
under even more pressure and the major
producers will need to take market share from
each other as the size of the pie will likely get
CHINA’S IRON ORE IMPORT SOURCES
JANUARY-SEPTEMBER 2013-2015
Australia
Brazil
South Africa
Ukraine
Other
Total
2013 20142015
304.2 405.8449.8
111 125.2134.2
32.3
33.3
34.7
12.4 1316.3
141.3122.2 64.4
601.2 699.5699.4
4
and improved ore handling plant utilization at
Newman helped support the stronger output.
The Melbourne-headquartered company
plans to produce 247 million mt in the twelve
months to June 2016.
IRON ORE PORT STOCKS IN CHINA (million mt)
120
Total
100
Australia
Brazil
80
60
40
20
0
Oct-14
Dec-14
Feb-15
Apr-15
Jun-15
Aug-15
Oct-15
Source: Mysteel
PORT HEDLAND IRON ORE EXPORTS (million mt)
40
30
20
10
China
Rest of the world
0
Oct-14
Dec-14
Feb-15
Apr-15
Jun-15
Aug-15
15-Oct
Source: Pilbara Ports Authority
CHINESE MONTHLY IRON ORE IMPORTS (million mt)
100
80
60
40
20
0
Sep-14
Nov-14
Jan-15
Mar-15
May-15
Jul-15
Sep-15
Source: Platts
IRON ORE TRADING BY MAJORS (number of trades)
100
Vale
Rio Tinto
BHP Billiton
Other
80
60
40
20
0
Oct-14
Source: Platts
Source: China Customs, GTIS
Copyright © 2015 McGraw Hill Financial
slightly smaller rather than bigger.
BHP’s July-September quarter iron ore
output of 67 million mt (on a 100% basis) was
up 7% on last year and by 3% on the previous
quarter. The ramp-up of its Jimblebar mine
Dec-14
Feb-15
Apr-15
Jun-15
Aug-15
Oct-15
STEEL RAW MATERIALS MONTHLY
ISSUE 33 / NOVEMBER 2015
IRON ORE DATA
its output was still down on its Brazilian
rival. Rio produced 86.1 million mt in the
September quarter on a 100% basis, while
Vale produced 88.2 million mt for the period.
Fortescue has kept output steady for
around a year at an annualized 165 million mt/
Rio had built up significant stockpiles at
its Pilbara operations as its mines moved
closer to 350 million mt/year production
capacity and was able to push through a
record 91.3 million mt in the September
quarter, which was higher than Vale’s though
BIG 4 - QUARTERLY IRON ORE PRODUCTION (million wmt)
year, indicating it has no wish to bring on extra
supply at a time of weak iron ore prices. The
Perth-based miner produced 45.1 million mt of
iron ore in the September quarter, compared
with 42.1 million mt in the previous quarter.
— Paul Bartholomew
CONTRIBUTION TO CHINA’S IMPORTS (%)
90
100
Australia and Brazil
75
Other
80
60
45
60
30
40
15
Vale
Rio Tinto*
BHP*
Q3 14
Q1 15
20
Fortescue
0
Q1 13
Q3 13
*BHP and Rio 100% basis
Source: Company reports
Q1 14
Q3 15
0
2013
2014
2015
Source: China Customs, GTIS
IRON ORE FREIGHT RATES - KEY ROUTES ($/wmt)
CHINESE CONCENTRATE 66% Fe ($/mt)
25
130
Brazil
West Australia
20
120
15
110
10
100
5
90
0
Oct-14
Dec-14
Feb-15
Apr-15
Jun-15
Aug-15
Oct-15
80
Nov-14
Jan-15
Mar-15
May-15
Jul-15
Source: Platts
Source: Platts
FALLING IRON ORE AND SCRAP PRICES ($/mt)
CHINA IRON ORE SPOT LUMP PREMIUM ($/dmtu)
400
Scrap (left)
90
Iron ore IODEX (right)
300
70
250
60
200
50
0.10
40
0.05
Dec-14
Feb-15
Apr-15
Jun-15
Aug-15
Oct-15
Jan-15
Jan-15
0.30
80
Oct-14
Nov-15
0.35
350
150
Sep-15
0.25
0.20
0.15
Oct-14
Dec-14
Jan-15
Jan-15
Jan-15
Source: Platts
Source: Platts
ATLANTIC BASIN IRON ORE PELLETS ($/mt)
CHINA IRON ORE CAPACITY UTILIZATION
160
100
150
80
140
60
70
130
40
60
20
50
120
110
0
100
Nov-14
Jan-15
Mar-15
May-15
Source: Platts
Copyright © 2015 McGraw Hill Financial
5
Jul-15
Sep-15
Nov-15
(%)
($/mt)
Large
Nov-14
Jan-15
Medium
Mar-15
Small
May-15
62% iron ore prices (right)
Jul-15
Sep-15
*Large: 1 mil mt/year +; Medium: 300k-1 mil mt/year; Small: sub 300k mt/year
Source: MySteel, Platts
90
80
40
Nov-15
STEEL RAW MATERIALS MONTHLY
ISSUE 33 / NOVEMBER 2015
METALLURGICAL COAL MARKET FOCUS
Indian demand for met coal disappoints
India’s consumption of metallurgical coal
and coke will continue to be subdued this
year, with steel demand muzzled by poor
performance of the country’s infrastructure
and construction sectors, according to
market sources. With a looming economic
slowdown in China and languishing steel
prices, observers say that a demand spurt
in Asia’s third largest buyer of metallurgical
coal is unlikely to materialize before 2016.
Crude steel production in India
witnessed a robust first quarter, jumping
8.3% year-on-year, but a modest 0.8%
increase to 45.07 million mt in the AprilSeptember period put a cap on the total gain
this year. As a result, coal and coke import
growth have stalled in recent months.
Despite surging 34.8% y-o-y in the first
five months of 2015, Indian met coal imports
have slipped for three consecutive months,
falling 17.1% to 10.5 million mt in the JuneAugust period, according to data compiled
by Indian ship broker Interocean.
Semi-soft coking coal (SSCC) and
pulverised coal injection (PCI) coal, both
used in steelmaking, will continue to see
imports rise sharply thanks to steelmakers’
ongoing focus on hot metal cost reduction,
sources said. India’s met coke imports have
also declined by more than a third, falling
from 1.7 million mt in the January-July
period from 2.7 million mt a year ago.
“India has largely undershot
expectations of a strong 2015 because steel
output has been hamstrung by an overall
lack of domestic demand,” a marketing
manager from an Australian mining firm
said. “Our volumes to India have been static
this year.”
Finished steel consumption during the
April-September half rose only 4% y-o-y to
39.15 million mt, according to Joint Plant
Committee estimates. This is much lower
than earlier estimates of 6-7% forecast by
analysts. Industry participants surveyed by
Platts estimate that steel demand may not
rise beyond 4-5% this fiscal to 80 million mt.
Prior expectations that significant
growth in Indian met coal would offset
China’s retreat from the seaborne market
Copyright © 2015 McGraw Hill Financial
6
Several Indian buyers told Platts that
they have hardly increased their overall
procurement of met coal and coke due to
chronic uncertainty of steel price directions.
“We are already in the red, but we are not
cutting production because we don’t want
to incur the fixed costs of idling a furnace
or underutilizing facilities,” a west Indian
end-user said. “If raw materials prices
don’t fall, then we might have to shut down
eventually.”
have been overblown, according to one
international trader. While overall Indian
imports advanced 11%, Chinese coking coal
import volumes (excluding PCI) plunged
19% within the same period to 32.4 million
mt. This meant that international trading
firms have shifted the focus to sell more
spot cargoes to Europe and South America,
rather than to India, the trading source said.
PLATTS MONTHLY METALLURGICAL COAL ASSESSMENTS, OCTOBER 2015
Asia-Pacific coking coal ($/mt)
Premium Low Vol
HCC Peak Downs Region
HCC 64 Mid Vol
Low Vol PCI
Low Vol 12 Ash PCI
Semi Soft
Met Coke
FOBCFRCFR Change
AustraliaChina India
AustraliaChina
78.69
85.91
87.92
-1.59
-1.87
79.69
86.91
88.92
-1.59
-1.87
74.77
81.99
84.00
+0.99
+0.71
65.03
72.25
74.26
+0.66
+0.39
63.25
70.47
72.48
+0.04
-0.23
61.35
68.57
70.58
-0.46
-0.73
-
-
136.91
-
-
North China prompt port stock prices
Ex-stock Jingtang
(Yuan/mt, incl VAT)
Premium Low Vol
685.00
HCC 64 Mid Vol
673.00
India
-2.12
-2.12
+0.46
+0.14
-0.48
-0.98
-5.22
CFR Jingtang
equivalent ($/mt)*
84.75
83.19
*ex-stock price, net of VAT and port charges.
Atlantic coking coal ($/mt)
Low Vol HCC
High Vol A
High Vol B
FOB US
East Coast
81.920
83.068
77.955
Change
-4.739
-4.421
-5.715
VM
19%
32%
34%
Ash
8%
7%
8%
S
0.80%
0.85%
0.95%
Detailed methodology and specifications are found here:
http://platts.com/IM.Platts.Content/MethodologyReferences/MethodologySpecs/metcoalmethod.pdf
TSI MONTHLY AVERAGE METALLURGICAL COAL PRICES, OCTOBER 2015 ($/mt)
Premium hard coking coal, FOB Australia
Hard coking coal, FOB Australia
Premium JM25 coking coal, CFR China
Hard JM25 coking coal, CFR China
Monthly $%
averagechangechange
79.51
-2.51
-3.06
73.96
0.31
0.42
85.93
-1.61
-1.84
81.61
1.38
1.72
AUSTRALIA AND US LOW VOL HCC MONTHLY AVERAGES ($/mt)
120
HCC FOB East Coast US
110
HCC FOB Australia
100
90
80
70
Nov-14 Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15
Source: Platts
Jul-15 Aug-15 Sep-15 Oct-15
STEEL RAW MATERIALS MONTHLY
ISSUE 33 / NOVEMBER 2015
METALLURGICAL COAL MARKET FOCUS
October prices dip on soft Chinese demand
TSI’s October monthly averages for Chinese
imports of JM25 PHCC dropped 1.84% m-o-m
to $85.93/mt while second tier JM25 HCC
gained 1.72% m-o-m to $81.61/mt. TSI’s JM 25
Mid-vol Hard Coking Coal (PMV) index fell 0.1%
in October to $83.17/mt CFR Jingtang port.
Platts premium low-vol HCC prices fell
1.6% from the previous month to average
$78.69/mt FOB Australia in October.
Domestic Chinese coal prices were cut by
some Yuan 50/mt in October, leaving seaborne
cargos in a more precarious situation as local
buyers focused on cheaper domestic material.
Coal buyers were lukewarm in October, and
therefore sellers have tended to cross the bid/
offer spreads in the hope of moving tonnages
and cutting further losses. TSI FOB swaps
traded 151,000 mt in October, increasing
volumes for a third straight month.
— Kenneth Woo, Charlotte Rao
ACT ON REAL-TIME COAL MARKET INTELLIGENCE
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PLATTS MONTHLY METALLURGICAL COAL RELATIVITIES TABLE - OCT 30, 2015
CSR
VM
TM
Ash
S
P
Fluidity
Vit %
ad
ar
ad
ad
ad
ddpm
Peak Downs
7420.509.50
10.500.600.03 400 71
Saraji
72 18.50 10.0010.50 0.60 0.03
160 66
Premium Low Vol
71
German Creek
Illawara
Oaky North
Oaky Creek
Goonyella
Goonyella C
Peak Downs North
Standard
Premium
Hail Creek 7019.0010.509.50
7323.2010.009.50
6923.0010.009.50
6724.5010.009.50
6823.4010.008.90
7023.5010.009.90
68
22.80
10.50
9.80
7023.5010.009.50
7025.5010.008.80
69
20.50
10.00
10.00
21.50
9.70
25.50
9.50
9.30
HCC 64 Mid Vol
64
Mavis Downs
Lake Vermont HCC
Carborough Downs
Middlemount Coking
Gregory
6322.0010.008.00
62
21.50
11.00
7.50
5822.5011.008.00
57
19.00
10.00
10.00
5733.00 8.507.30
9.00
0.50
0.045
Spread
vs HCC 64
65
83.00
0.540.06
0.450.06
0.600.07
0.600.07
0.520.03
0.550.04
0.51
0.05
0.450.09
0.600.08
0.30
0.07
180
1200
1500
4000
1100
1200
900
100
200
300
70
53
79
80
62
62
63
54
59
54
82.00
81.50
81.00
81.00
81.50
80.00
79.75
79.75
79.50
79.50
98.80%
98.19%
97.59%
97.59%
98.19%
96.39%
96.08%
100.00%
96.08%100.00%
95.78% 99.69%
95.78%
0.60
1700
55
79.75
96.08%
0.05
500
Sep 30
Spread
CFR China
vs PLV $/mt
84.00 101.20%
83.00 100.00%
0.350.05
75
0.44
0.07
120
50
0.350.04
60 44
0.50
0.04
50
0.650.03 7500 76
100.00%
79.75
79.75
78.75
75.75
75.00
100.00%
100.00%
100.00%
98.75%
94.98%
94.04%
October 30 freight rates. Australia to China: Panamax = $6.45/mt Capesize = $5.65/mt
Notes: ad = air-dried; ar = as received; CSR = coke strength after reaction; ddpm = dial divisions per minute
Platts monthly metallurgical coal assessments and relativities table provides April price assessments for various qualities of coking coal including Platts benchmark grades, premium low-vol and the
mid-vol marker HCC 64 Mid Vol. The price information provided is determined mostly from transactional data and spot market assessments, but also where applicable from theoretical calculations
using value-in-use (VIU).
Platts has developed a normalization tool based on VIU data to track the relative values of several coal qualities. In calculating a theoretical value-in-use, Platts may apply linear penalties and premia
within a certain range for coke strength after reaction (CSR), volatile matter, total moisture, ash and sulphur and non-linear adjustments for phosphorus, maximum fluidity and vitrinite percentage. For
each of the latter, no adjustments are applied within a "normal range," but penalties or premia for these important price determinants are applied when specifications fall outside of the normal range.
However, market observations have a stronger bearing on the relativities than VIU calculations, and theoretical VIU-based relativities are recalibrated by observing spot market data including bids,
offers and trades for specific brands, and by observing the tradable or traded spreads between these brands.
The final assessed value is a combination of the observed market activity, the editorial evaluation of the coal attributes and the results offered by the calculations. Particular market events and specific
circumstances may also have an influence on the market for coking coal or individual grades. Platts observes and monitors all relevant market information for consideration in its assessments.
Since the July 2014 analysis, the table represents relativities at the end of the last working day of each month, rather than an average of relativities through the month.
Since the January 2014 analysis, the table represents relativities on a CFR China basis, rather than theoretical FOB Queensland basis. This is because discoverable relativities are more consistent CFR
China, likely due to the fact that seaborne suppliers compete on a delivered basis. In addition, FOB Australia relativities have been observed to be less consistent, perhaps due to discriminatory pricing
depending on the geographic destination.
Source: Platts
Copyright © 2015 McGraw Hill Financial
7
STEEL RAW MATERIALS MONTHLY
ISSUE 33 / NOVEMBER 2015
METALLURGICAL COAL DATA
AUSTRALIA METALLURGICAL COAL EXPORTS (million mt)
CHINA METALLURGICAL COAL IMPORTS (million mt)
7
15
Australia
Mongolia
Canada
Russia
6
5
10
4
3
5
2
1
India
Japan
China
South Korea
0
0
Jun-14
Jul-14
Aug-14
Sep-14
Oct-14
Nov-14
Jan-15
Mar-15
May-15
Jul-15
Sep-15
Source: ABS, GTIS
Source: China Customs, GTIS
IRON ORE VS COKING COAL PRICES ($/mt)
CHINESE MET COKE EXPORT PRICES, 12.5% ASH ($/mt)
120
190
Prem low vol HCC FOB Australia
IODEX CFR China 62% Fe
180
100
170
80
160
150
60
140
40
Oct-14
Dec-14
Feb-15
Apr-15
Jun-15
Aug-15
Oct-14
130
Oct-14
Dec-14
Feb-15
Apr-15
Jun-15
Aug-15
Oct-15
Source: Platts
Source: Platts
INDIA METALLURGICAL COAL IMPORTS - JANUARY-AUGUST
2013-2015 (million mt)
MONTHLY COAL THROUGHPUT FROM MAJOR QUEENSLAND
PORTS (million mt)
8
35
Australia
Mozambique
Canada
US
New Zealand
Dalrymple Bay
South Africa
Hay Point
Abbott Point
Gladstone
30
6
25
20
4
15
10
2
5
0
0
2013
2014
2015
Copyright © 2015 McGraw Hill Financial
Jan-15
Source: Ports
Source: Platts
8
Mar-15
Jun-15
Aug-15
Oct-15
STEEL RAW MATERIALS MONTHLY
ISSUE 33 / NOVEMBER 2015
SCRAP MARKET FOCUS
Price rebounds after Turkish election
Turkish scrap import prices had weakened
to the point where its steel mills were
turning away from Chinese billet imports
and starting to turn back to scrap. However,
there has been a rebound in scrap import
prices in late October, early November on
stronger sentiment following the Turkish
election of a majority government.
Late October saw a turnaround in the
fortunes of ferrous scrap imports into
Turkey, with price movement for the material
turning positive for the first time in several
months. However, before this turnaround
occurred TSI’s daily index for imports of HMS
#1&2 80:20 scrap hit a fresh record low of
$169/mt on October 20. This represented a
fall of $150/mt (-53%) from the turn of the
year, and highlights the huge impact that
Chinese steel exports have had on global
markets. Scrap chased imported billet prices
lower, while yards carried multiple cargoes
for prompt delivery, meaning mills could
afford to pick and choose.
Meanwhile, the US domestic scrap market
continued to be hampered by poor utilization
rates at mills. The October buy-week settled
at $15-20/long ton lower, while TSI’s US
Midwest shredded index dropped $14/lt
over the November buy-week. Pricing was
strongest in eastern US, buoyed by increased
bulk export trade into Turkey and India.
However, towards the back end of the buyweek mills began to push back a little, and are
eyeing price increases early in the New Year.
Post-election boost in Turkey
The Turkish domestic steel market saw a
sudden increase in demand, and mills were
on the hunt for multiple prompt cargoes,
forcing yards to raise their prices. Along with
domestic rebar prices, international billet
prices also increased, giving scrap prices
a further lift. TSI’s monthly Turkey import
price reached $187/mt by the end of October,
and was pushing close to $200/mt in early
November. Platts monthly average price
for Turkish scrap imports fell $12.14/mt to
$178.93/mt in October.
Participants had mixed views on whether
the uptick in scrap prices seen in November
Copyright © 2015 McGraw Hill Financial
9
was sustainable over the longer-term,
particularly as winter traditionally brings
restricted scrap supply. With global steel
demand remaining subdued and iron ore
again on the slide, one could easily see scrap
prices falling again.
Platts assessment of Turkish premium
heavy melting scrap I/II (80:20) imports
reached $200.50/mt CFR on November 13,
up $3.50/mt on the week before. At least
16 cargoes were booked over the week,
according to trades captured by Platts, while
one steelmaker said more than 1 million mt
of scrap had been booked in the past three
weeks or so.
East Asian market flat
The import market for bulk heavy melting
scrap remained sluggish in East Asia in
the first half of November. Platts assessed
its weekly East Asian bulk HMS 80:20
price at $170-175/mt CFR on November 13,
unchanged from the week before.
In Japan, Tokyo Steel Manufacturing has
retained scrap buying prices since November
3 arrivals after cutting Yen 500/mt ($4/mt)
for its scrap buying prices all works. The
purchase price for H2 at its Utsunomiya
works, northern Kanto was Yen 15,000/mt
($122/mt). Japanese traders were paying Yen
14,000/mt FAS at Tokyo Bay to collect H2 for
export, unchanged from three weeks earlier.
South Korean steelmaker Hyundai Steel
booked Japanese scrap at Yen 13,700/mt FOB
for H2 grade in the week ending November 13,
down by Yen 100/mt from a previous Korean
booking two weeks earlier. As Hyundai’s price
is much lower than Taiwanese and Korean
booking prices, Japanese and Korean trading
sources believed the volume secured by
Hyundai was limited.
— Staff
PLATTS MONTHLY AVERAGE FERROUS SCRAP PRICES, OCTOBER 2015
Unit
HMS FOB Rotterdam
$/mt
$/mt
A3, FOB Black Sea
HMS CFR Turkey
$/mt
Shredded del Midwest US
$/lt
Shredded del dock East Coast
$/lt
HMS del dock East Coast
$/lt
$/mt
HMS FAS US West Coast
Monthly $%
average changechange
159.23
-19.25
-10.79
162.95
-16.53
-9.21
178.93
-24.73
-12.14
182.27
-35.94
-16.47
168.59
-24.67
-12.77
120.34
-23.59
-16.39
130.23
-19.42
-12.97
TSI MONTHLY AVERAGE FERROUS SCRAP PRICES, OCTOBER 2015
Unit
HMS 1&2 80:20, Turkish imports (CFR port)
$/mt
$/mt
Shredded, Turkish imports (CFR port)
Plate and Structural, Turkish imports (CFR port)
$/mt
A3, short sea, Turkish imports (CFR port)
$/mt
Shredded, US domestic (del Midwest mill)
$/lt
HMS 1&2 80:20, Taiwanese imports (CFR port)
$/mt
Shredded, Indian imports (CFR port)
$/mt
Monthly $%
average changechange
178.55
-27.63
-13.40
182.50
-21.00
-10.32
188.25
-22.00
-10.46
160.00
-23.75
-12.93
181.25
-33.75
-15.70
140.25
-21.50
-13.29
193.50
-30.25
-13.52
PLATTS EAST ASIA SCRAP IMPORTS / HMS 80:20 ($/mt CFR)
320
280
240
200
160
Nov-14 Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15
Source: Platts
Jul-15 Aug-15 Sep-15 Oct-15
STEEL RAW MATERIALS MONTHLY
ISSUE 33 / NOVEMBER 2015
NEWS
Little demand pick-up seen in Chinese steel
Platts China Steel Sentiment Index (CSSI)
weakened slightly in November, with steel
market participants expecting fewer new
domestic and export orders in the month ahead.
The headline index for November fell 3.75 points
from October to 31.71 out of a possible 100 points
and was the weakest reading since July. It
was the second consecutive month the CSSI
was below the 50 point threshold, indicating
the market continues to contract.
Price expectations for flat products
improved from last month, rising 21.67 points
to 32.39. But the outlook for prices of long
products dropped 6.25 points in November to
MONTHLY NEWS ROUND-UP
31.25. The outlook for steel exports – a major
outlet for Chinese steel sales over the past
two years – was just 24.02 in November, down
from October’s 28.27 and the weakest reading
since February. Crude steel production was
expected to stay at a similar level to October,
while steel inventories held by traders were
tipped to decrease, the CSSI found.
The index indicated a slow end to a
lackluster year in China’s steel market with
few signs of any pick-up ahead of winter.
Market participants were concerned about
the export outlet being closed off, either
because of a lack of demand from overseas,
CHINA’S STEEL EXPORTS (million mt)
12
2014
10
2015
8
6
4
2
0
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Source: China Customs
CHINA’S CRUDE STEEL PRODUCTION (million mt)
80
2013
2014
2015
60
40
Global iron ore trade stalled after 13
years’ growth: bank
Global iron ore trade is now in “stagnation mode”
after 13 years of steady expansion, with growth
levels plunging significantly this year, investment
bank Macquarie said. “After continuous growth
since 2001, global iron ore trade has very much
stalled in 2015 ... This year we are expecting just
2 million mt of seaborne iron ore trade growth
over 2014 volumes, which is a stark change from
the 120 million mt-plus annual additions seen
over 2013 and 2014,” Macquarie analysts said in
a report. “Looking at year-to-date volumes in
terms of trade, the major deltas are again on the
supply side,” the bank’s analysts said, suggesting
Australian exports look set to exceed 800 million
mt this year — up over 5% on the year and not far
off from double 2010 levels — while Brazil’s exports
have been growing, but at an underwhelming rate.
Iron ore ‘challenging’ as China slows: ANZ
Iron ore fundamentals will remain “challenging” over
the short to medium term, as Chinese industrial
production slows, ANZ believes. ANZ analysts
Mark Pervan and Anurag Soin said, with the latest
Chinese growth figures confirming a “slowing
trajectory” - particularly in the form of weakerthan-expected industrial production - iron ore
fundamentals were likely to follow suit. The analysts
said growing Chinese steel exports indicated mills
in the country were over-producing, adding to the
supply glut. “Strangely, this should keep imported
volumes of iron ore high, particularly with highercost Chinese supply being consolidated,” the
analysts said. “But excess Chinese steel output
means lower steel prices. And with steel mills
running on paper thin margins, lower steel prices
ultimately means lower iron ore prices.”
China, India met coal import demand to
grow long-term: WoodMac
20
0
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Source: WSA, NBS
CHINA DOMESTIC STEEL PRICES - SHANGHAI MARKET (Yuan/mt)
3200
HRC
3000
Rebar
2800
2600
2400
2200
2000
1800
Oct-14
Dec-14
Feb-15
Source: Platts
Copyright © 2015 McGraw Hill Financial
10
Apr-15
Jun-15
Aug-15
Oct-15
Chinese and Indian coking coal demand growth is
still assured, as a recent pullback in the seaborne
market from China may be temporary and Indian
dependency grows in line with its steel industry,
Wood Mackenzie said. China’s domestic met
coal output, which has climbed as steel output
slowed, may not be able to grow further over
the next decade, pushing China to move back
into seaborne imports in a bigger way and buy
more from Mongolia in the future, said Wood
Mackenzie’s director of met coal research, Jim
Truman. “China’s domestic coal production is one
of the larger black boxes,” Truman told the Met
Coke World Summit in Pittsburgh. India’s annual
met coal import demand may grow to 60 million
mt from 40 million mt, with slower PCI injection
than China expected.
STEEL RAW MATERIALS MONTHLY
ISSUE 33 / NOVEMBER 2015
PLATTS CHINA STEEL SENTIMENT INDEX HISTORY (points out of 100)
MONTHLY NEWS ROUND-UP
80
Lump buyers floored by Rio Tinto’s term
contract pricing
60
40
20
0
May-13
Oct-13
Mar-14
Aug-14
Jan-15
Jun-15
Nov-15
Source: Platts
CHINA REBAR AND HRC EXPORTS ($/mt FOB China)
500
HRC
Rebar
450
400
Some contractual buyers of Rio Tinto lump are
grappling with price exposure from the floor
premiums set in their contracts, given the sharp
decline in spot premiums this year. According to
several contract buyers of Rio’s 62% Fe Pilbara
Blend lump, the contractual premium is settled
against the monthly average of weekly Platts
spot lump assessments, adding a value premium
of $0.005/dry metric ton unit. But in the event
the monthly average of Platts lump premium
assessment is lower than the floor premium set
by Rio - which ranges from $0.01/dmtu to $0.06/
dmtu among different buyers - the floor is used as
the settlement instead.
Vale cuts Brazil Carajas ore project cost
by $2 billion
350
300
250
Oct-14
Dec-14
Feb-15
Apr-15
Jun-15
Aug-15
Oct-15
Source: Platts
CHINA PURCHASING MANAGERS’ INDEX
51
Official PMI
Caixin PMI
50
49
48
47
Oct-14
Dec-14
Feb-15
Apr-15
Jun-15
Aug-15
Oct-15
Source: Caixin, NBS
or because low prices will make exports
increasingly uneconomic.
Steel inventory levels have been high but
traders expected stocks to start falling over the
next month, mainly due to some production
cuts at mills rather than to a lift in demand.
The CSSI reflects expectations of market
participants for the month ahead. A CSSI
reading above 50 indicates an increase/
expansion and a reading below 50 indicates
a decrease/contraction. It is based on a
survey of approximately 50-75 China-based
market participants including traders,
stockists and steel producers.
Manufacturing may have bottomed
China’s manufacturing industry showed signs
of stability in October on stronger export
Copyright © 2015 McGraw Hill Financial
11
orders although, similarly to steel, companies
had to trim prices to attract buyers.
Caixin’s manufacturing purchasing
managers’ index improved to 48.3 points in
October from 47.2 in September. While still
below the 50 threshold, it was the strongest
result since June. With the exception of
February, the Caixin (formerly HSBC) PMI has
been under 50 all year.
China’s ‘official’ manufacturing PMI,
published by the National Bureau of Statistics,
was flat in October at 49.8. It was the third
consecutive month this PMI has been under 50.
The official PMI for the steel industry though
slipped again, with October dipping by 1.5 basis
points on month to 42.2 [see other article].
Caixin’s PMI for October found that
export orders rebounded after three weak
Brazilian mining giant Vale again lowered the
estimated cost of its massive S11D Carajas iron
ore project, this time by $2 billion. The new
investment total of $14.4 billion represents a
$5.3 billion drop from Vale’s original cost forecast
of $19.7 billion, and a $2 billion cut from its
latest estimate, in late 2014. The reduction was
determined largely by the depreciation of the real
against the US dollar, since most of the spending
for the project was in the local currency. The total
investment includes mine, processing plant and
logistics (railway and port). By the end of the third
quarter, Vale had already disbursed $8.4 billion
into the project and this is expected to total $9.4
billion by year end. According to Vale, works at
the S11D mine and respective processing plant
was 75% complete, while the rail extension being
built to connect the project to the Carajas Railroad
(EFC) was 72% completed. The project should
come online in the second half of 2016, but the
exact date was to be announced in December at
the New York Stock Exchange.
CHINESE CRUDE STEEL PRODUCTION
2015 (million mt)
Blast furnace output
Total output
62.365.5
Jan-15
Feb-15
56.365.0
Mar-15
60.269.5
Apr-15
59.468.9
May-15
60.969.9
Jun-15
62.368.9
Source: WSA
CHINA MILL ANNOUNCED CLOSURES
AND MAINTENANCE (mt/year)
Mill
Volume impact
Stoppage status
Bayi Iron & Steel 3,000,000
Indefinite
Shougang
80,000 One week from late August
Guofeng I&S
140,000
34 days from August 3
Shagang
200,000 Diverted to export rather
than domestic sales
Source: Platts
STEEL RAW MATERIALS MONTHLY
ISSUE 33 / NOVEMBER 2015
months due to improved demand. Inventory
levels rose for the third consecutive
month, while price discounting eased from
September but “remained sharp overall.”
Manufacturing output fell for the sixth
month in a row in October though the rate of
reduction was the slowest for four months.
“Nearly 16% of panelists noted lower
cost burdens (compared with less than 1%
indicating an increase), with a number of
firms linking the fall to lower raw material
prices, particularly for metals,” Caixin noted.
Caixin chief economist He Fan said
there were signs that “previous stimulating
measures had begun to take effect” but
warned that weak overall demand and lower
bulk commodity prices “remain the biggest
obstacle to economic growth.” Weakening
domestic hot rolled coil prices indicate
any positive impact from an improving
manufacturing sector may take some time
to flow through, and soft domestic demand
for finished goods may continue to weigh on
steel prices.
The NBS PMI, which breaks down the
results by enterprise segment, found that
larger manufacturers had recovered from
an August low of 49.9 to 51 in October, while
small companies reported an 8-month low
of 46.6 in October. The total new order
index rose to 50.3 in October from 50.2 in
September, though production fell to 52.2
from 52.3.
— Paul Bartholomew
NEW BF CAPACITY ADDITIONS IN CHINA - 2013-2015
Company
Region (city)
Capacity mt/year
Shanxi zhongyang Iron & Steel
Shanxi (Lvliang)
1,500,000 Qinyou Special Metal Material Co., Ltd.
Jiangsu (Yangzhou)
1,000,000 Xuzhou Huahong Special Steel
Jiangsu (Xuzhou)
900,000 Minmetals Yingkou Medium Plate Co.,Ltd
Liaoning (Yingkou)
2,000,000 Hunan Valin Lianyuan Iron & Steel
Hunan
2,500,000 Baosteel Group Xinjiang Bayi Iron & Steel
Xinjiang (Baicheng)
1,380,000 Wuhu Xinxing Ductile Iron Pipes Co.,Ltd.
Anhui (Wuhu)
1,000,000 Wuhan Iron & Steel Group Echeng Iron & Steel Co.,Ltd. (Egang)
Hubei (Ezhou)
1,500,000 Guangshui Huaxin Metallurgical
Hubei (Wuhan)
500,000 Xinjiang Kunlun Iron & Steel
Xinjiang
800,000 Tianjin Metallurgy Group Zhasan Youfa Steel
Tianjin
1,200,000 Xinjiang Kunyu Iron & Steel
Xinjiang (Kuian)
500,000 Hebei Xinda Iron & Steel Jilin
1,500,000 Yunnan Anning Yongchang Iron & Steel
Yunnan (Anning)
1,000,000 Anyang Iron & Steel Co.,Ltd.
Henan (Anyang)
4,000,000 Lianfeng Iron & Steel (Zhangjiagang) Co.,Ltd.
Jiangsu (Zhangjiagang)
1,134,000 Xinjiang Kunyu Iron & Steel
Xinjiang (Kuian)
500,000 Sanbao Metallurgical (Fujian) Group
Fujian (Zhangzhou)
500,000 Shandong Qilu Xintong Steel Pipe
Shandong (Liaocheng)
1,000,000 2013 Total
24,414,000
Nanjing Iron & Steel Co.,Ltd.
Jiangsu (Nanjing)
3,600,000 Pangang Group Xichang New Steel Enterprise Co.,Ltd.
Sichuan (Xichang)
1,500,000 Inner Mongolia
5,000,000 Baotou Iron & Steel
Tonghua Iron & Steel Co., Ltd.
Jilin
2,200,000 2014 Total 12,300,000
Qingdao Iron & Steel
Shandong (Qingdao)
4,000,000 Baosteel Group
Guangdong (Zhanjiang)
9,000,000 Anhui (Maanshan)
2,000,000
Maanshan Iron & Steel
Bohai Iron & Steel
Hebei (Tangshan)
2,000,000
Rizhao Iron & Steel
Shandong 8,500,000
CSSI (Total New Orders)
New Domestic Orders
New Export Orders
Steel Production
Steel Prices (flat products)
Stocks held by traders
Nov-15
31.71
32.38
24.02
42.59
32.39
44.3
Source: Platts
traded iron ore derivatives volumes
when compared with September’s level.
220
200
180
160
140
Apr-16
Source: TSI, SGX
Copyright © 2015 McGraw Hill Financial
12
Change from October (points)
-3.75
-3.71
-4.25
0.66
21.67
-26.9
*A figure over 50 indicates expectations of an increase; under 50 indicates a decrease
240
Jan-16
2015
2015
2016
2017
2017
PLATTS CHINA STEEL SENTIMENT INDEX – NOVEMBER 2015*
IMPLIED CHINESE STEELMAKER MARGIN ($/mt CFR)
Oct-15
2014
2014
2014
2014
Source: Platts
SGX iron ore curve below $40/mt for late 2016
Iron ore - China’s week-long holiday
at the start of October put a dent in
Date
2013
2013
2013
2013
2013
2013
2013
2013
2013
2013
2013
2013
2013
2013
2013
2013
2013
2013
2013
Jul-16
Oct-16
Jan-17
However, year-on-year, total off-shore
trade in US$ denominated iron ore
swaps, options and futures of more than
90 million mt cleared against TSI’s 62%
Fe iron ore benchmark on Singapore
Exchange (SGX) and CME Group was
up by nearly 60% on the previous year
(which experienced a similar seasonal dip
in volumes). The forward curve was little
changed over October – most market
participants having already priced in
negative expectations for the coming
year – but there was still some volatility
in the front months, the November
contract trading in a range between
$47-52/dmt. Moving into the start of
STEEL RAW MATERIALS MONTHLY
ISSUE 33 / NOVEMBER 2015
November, the SGX curve slipped slightly
in line with a weakening physical market,
moving below the $40/mt mark from
October 2016 onwards.
Coking coal - A flurry of coking
coal futures trades (1560 lots) were
booked against TSI’s FOB Australia index
during October. CME saw a calendar
trade (2016) too. The SGX share of total
derivative trade has risen from 4.7% in
July to 68.9% in October. The forward
curve remains relatively flat out to 2017,
with a slight contango, but over the
course of October the curve itself shifted
down over $3.00/mt as the market
became considerably more bearish
about its longer term price forecast.
Bid/offer spreads have tightened as
more participants start showing trading
interest in TSI.
ASEAN HRC - The forward curves
for ASEAN have fluctuated in a reduced
range over October as physical market
price volatility abated, compared to
recent history. The index printed at a
new all-time low of $274/mt on the last
day of the month, though Chinese steel
mills seem to be digging their heels in
on offer prices. Nevertheless, buyer
expectations remain low and traders
are offering at more competitive prices.
A stand-off is developing, with physical
trade slowing.
— Staff
ASEAN HRC FORWARD CURVE ($/mt CFR)
350
November
October
330
310
290
270
Oct-15
Jan-16
Apr-16
Copyright © 2015 McGraw Hill Financial
13
Oct-16
Jan-17
Source: TSI, SGX
62% Fe IRON ORE FORWARD CURVE ($/mt CFR)
55
50
45
40
35
Oct-15
Jan-16
Apr-16
Jul-16
Oct-16
Jan-17
Jul-16
Oct-16
Jan-17
Source: TSI, SGX
TSI COKING COAL FORWARD CURVES ($/mt)
87
85
83
CFR
FOB
81
79
77
Oct-15
Jan-16
Apr-16
Source: TSI, SGX
Surging Chinese billet exports usurping scrap
The issue of China’s soaring exports of
carbon steel billets and the impact this trade
is having on the global scrap market loomed
large on both sides of the planet in October.
Delegates at the Bureau of International
Recycling (BIR) conference in Prague blamed
the China billet blitz on the slump in scrap
prices to 11-year lows.
“Frankly, it was billet exports from China
at ever-decreasing prices that were truly
the cause of ever-depressing ferrous scrap
values,” said William Schmiedel, president
of the BIR Ferrous Division and president of
Sims Group Global Trade Corp.
Jul-16
Schmiedel maintained that Chinese
billet producers have circumvented the 25%
export duty on billet and still enjoyed the
13% VAT rebate by declaring the product as
bar or adding elements such as boron.
Effective January 1 this year China
removed export tax rebates on boron-added
hot rolled plate and sheet, wire rod and
bars (the latter include billets classified
for Chinese Customs as ‘square bars’).
However, wily Chinese suppliers switched to
exporting chromium-added billet to define
the material as ‘specialty steel’ and thus
continue enjoying the rebate.
This subterfuge makes the task of
accurately quantifying China’s billet exports
a major challenge, as a recent report by
Japan’s Steel Recycling Research Corp
acknowledged. SSR nevertheless made an
attempt by examining Chinese customs
data for “other alloy steel bars”, arriving at a
total of 15.7 million metric tons for this year’s
January-August period. This would make for
annualized total of 23.55 million mt for 2015.
This, the research firm noted ruefully,
would be not much less than Japan’s
entire EAF-derived crude steel production
projected for this year.
At the Prague conference, BIR Ferrous
Division Board Member Andrey Moiseenko of
STEEL RAW MATERIALS MONTHLY
ISSUE 33 / NOVEMBER 2015
Ukraine’s Ukrmet said that if Chinese billet
exports continue at current volumes there
will be significant changes in the global
ferrous scrap market.
“We should see structural changes in
Turkey,” Moiseenko told Platts. “Some mills will
disappear. If [current billet volumes] continue,
things will change everywhere for scrap.”
For the Japanese scrap traders, their
concerns are nearer to home. The SSR
calculated that during this year’s first
eight months, China’s exports of billets to
South Korea – both disguised and genuine
alloy billets – reached 1.4 million mt, which
annualized would make for shipments of 2.1
million mt for the full year.
South Korea remains Japan’s singlelargest export destination for ferrous scrap,
taking 2.48 million mt between January and
September this year, accounting for 41% of
Japan’s total scrap exports over the period.
Japanese scrap concerns
What worries the Japanese scrap dealers and
traders is that this was nearly 20% down on the
same period last year – a drop they associate
directly with the increasing reliance of Korean
mini-mills on imported Chinese billets.
And it’s not just Japanese scrap that the
Koreans are eschewing. Korean customs
data shows that during the same JanuarySeptember period, the country’s scrap
imports from all sources plunged by 44%
EAST ASIA BILLET IMPORT PRICES ($/mt)
600
550
500
450
400
350
300
250
Feb-13
Jun-13
Oct-13
Feb-14
to 4.5 million mt. Indeed, the US – Korea’s
second-largest supplier after Japan – saw
its liftings halve over the nine months to just
780,000 mt, the Korean data shows.
The concern in Japan is that if the Chinese
mills continue to push their billet into South
Korea at the present rate, Japan’s scrap
exports could fall by 1 million mt/year. At present
scrap prices, that would be the equivalent of
$124 million annually in lost business.
In an internal strategy paper obtained by
Platts from an Asian scrap merchant, there
was speculation over when the flood of
Chinese billet would cease.
“By examining billet exports in terms of
financial, social and political value, we can
first see that no, massive exports will not go
on indefinitely,” the merchant wrote. “The
timing of the end of billet would either be the
beginning of 2016, if China decides to limit
exports for trade diplomacy reasons, or in the
...from page 2
Copyright © 2015 McGraw Hill Financial
14
Oct-14
Feb-15
Jun-15
Oct-15
Source: Platts
Cost saving gains eroded by falling ore price
Flanagan told an investor lunch in Melbourne
in July. “Normally, if you pull $300 million
of costs out of the business that would be
enough to make money, but it wasn’t at
Easter time. The price fell to $46/mt and the
way we were selling iron ore then meant we
were actually getting about A$46/mt ($34/
mt) but it was costing us A$61/mt ($45/mt)
to produce and sell it,” he said.
The C1 cost proportion of the miner’s
average realized price in the September 2015
fell to around 57%, compared with 86% for
the April-June quarter. Despite all the costsaving efforts, the falling iron ore price means
Jun-14
the C1 cost proportion is not much different
to the March 2014 quarter when the Platts
62% Fe price was $120/mt CFR. Atlas has
said previously that the Australian dollar’s
weakness against the US dollar has become
like a natural hedge. The miner is also hedging
“collars, caps and fixed price cargoes” to
better insure itself against lower prices.
Atlas renegotiated terms with its
contractors in April and extracted some
additional margin from royalty payment
deferrals, and from more favorable terms on
some haulage and port arrangements from
the relevant authorities. There may not be
worst case after industry consolidation during
2016-2020. The financial and social costs
would suggest sooner rather than later.”
The merchant estimated Chinese steel
costs equate to $32,000 per worker annually.
Sims Group president Schmiedel estimated
a per capita loss of around $25,000-$30,000
per employee. “It will be cheaper to pension
out these workers than continue to operate
at these loss levels,” he said, adding that
Beijing is aware of this anomaly.
Tom Bird, head of UK-based Mettalis
Recycling agreed that “clearly” there needs
to be change in the approach by China.
“Producing steel at the current rate is
not sustainable in the long term. [Financial
losses are] attracting the attention of
Beijing. There is international pressure, this
can only be a benefit moving forward,” he
told Platts.
— Nicholas Tolomeo, Russ McCulloch
much more scope for cost cutting if prices
go even lower.
Fellow Pilbara junior BC Iron is also
hedging some iron ore volumes and foreign
exchange rates to protect its breakeven price.
It managed to cut A$6/wmt from its costs in
the September quarter to A$52/wmt ($36.6/
wmt) out of a realized price of $47/dmt CFR.
Mount Gibson Iron’s pit wall collapse at
its Koolan Island mine in the Kimberly region
of Western Australia reduced its production
capacity to around 4.5 million-5 million wmt/
year. Its all-in costs of A$52/wmt FOB ($36.6/
wmt) in the September quarter against a
realized sales price of $40/dmt FOB shows
the company’s margins are extremely slim.
— Paul Bartholomew
STEEL RAW MATERIALS MONTHLY
ISSUE 33 / NOVEMBER 2015
SPECIAL REPORT: BATTLING BRICS
China – shift to lower gear as economy transitions
When then Goldman Sachs economist Jim
O’Neill coined the term BRICs in 2001, China
was at the start of a decade of surging
economic growth, with GDP averaging
around 10.5% a year. If not for the global
economic crisis years of 2008 and 2009,
when China’s export markets were severely
affected, it would have been stronger still.
Since 2012, however, the Chinese economy
has slowed markedly, down to levels closer
to 7%, as the tail of Beijing’s 2008-2009 Yuan
4 trillion ($586 billion) stimulus program
started to recede.
Many argue the stimulus package was
responsible for fueling debt at provincial
governments and state-owned enterprises,
resulting in the overcapacity issues –
particularly in steel and housing – that China
is dealing with today.
With China’s economy expanding year
after year, companies both inside and
outside of China believed the good times
would last forever. Chinese steel mills – both
state- and privately-owned – rapidly built up
production capacity to support the country’s
rapid development and urbanization. Iron
ore companies, such as BHP Billiton and
Rio Tinto (along with newcomer Fortescue
Metals Group and a flotilla of ‘junior’ miners)
embarked on huge capacity expansions to
feed steel production that was expected to
surpass 1 billion metric tons/year by next
decade. Indeed, there was never any notion
that China might slow one day; or at least
not by much.
But just as the pace of China’s growth
astonished so many, its slowdown has
also surprised. The country’s fixed-asset
investment fell to a near 15-year low in
August and the much-mooted build-out of
central, not to mention western China, has
been slower than expected and certainly
less steel-intensive than urbanization along
the eastern seaboard.
BRICS STEEL CONSUMPTION
800
(million mt)
-3.3% -3.5%
-2.0%
2014
2015 (f)*
2016 (f)*
% = Year-on-year change
600
400
200
+3.1% +7.3% +7.6%
0
China
*Forecast.
Source: worldsteel
India
-0.7% -10.4% -1.0%
-8.6% -12.8% +0.5%
Russia
Brazil
MANUFACTURING PURCHASING MANAGERS’ INDICES PMI POINTS
54
(index)
52
50
48
46
44
42
India
Russia
China
Feb-15
Brazil
Apr-15
Source: Markit Economics
Copyright © 2015 McGraw Hill Financial
15
Jun-15
Aug-15
Oct-15
In a September report from CLSA,
analysts noted that China’s steel
consumption had decoupled from GDP
growth for the fifth consecutive year in 2015.
This was a “logical” trend for a developing
economy, CLSA argued, as steel was
usually “at the forefront of the economic
development cycle due to the need to build
out capacity.”
In September, Standard & Poor’s
downgraded its GDP outlook for China next
year to 6.3% from 6.6% with 2017 revised
to 6.1% from 6.3%. (In fact, many believe
China’s true GDP is already closer to 6%
than 7%).
Last year, China’s steel consumption
fell 3.4% year-on-year, its first reversal in
three decades. World Steel Association
has forecast China’s steel consumption
will fall 3.5% this year and by a further 2%
in 2016. The country’s steel production in
2015 appears on track to fall 1-2% on last
year. Even BHP has scaled back its outlook
for China’s steel output to 935 million-985
million mt by the middle of next decade from
1 billion mt previously. Rio insists Chinese
output will still creep up by around 1% a year
to reach 1 billion mt by 2030.
The boom years have seen China build
up crude steel production capacity of some
1.1 billion mt/year, of which it is using just
73% currently, Platts estimates.
New steel capacity is slowing, from
around 25 million mt in 2013 to 12.3 million
mt in 2014, with a similar volume coming
on stream this year, largely from Baosteel,
according to data collected by Platts.
Existing production is being trimmed in
response to weak market conditions, but
as yet there have been no major output
cuts or mothballing of facilities, such as
those seen in other parts of the world.
New environmental targets could further
curb steel output in coming years. In
short, like Chinese GDP, steel output and
consumption have peaked and are now on
their way down.
Different hands at the tiller
Very little was said beforehand about the
likely impact of the new administration led
by Xi Jinping and Li Keqiang that replaced
STEEL RAW MATERIALS MONTHLY
ISSUE 33 / NOVEMBER 2015
Hu Jintao and Wen Jiabao in March 2012
– at least not from or about the steel and
resources sectors. It was assumed the pair
would continue the strategies of the former
administration; one which in the words of a
senior Asia-based economist, “threw money
at everything!” But Xi-Li have subsequently
focused on more measured and sustainable
growth, transitioning the economy to one
driven by the wealthier population’s need
for new cars and fridges, rather than more
government investment in infrastructure
and a reliance on exports.
However, the journey is not proving to
be easy. S&P’s Academic Council surmised
in an October meeting that: “There are
significant risks building in the Chinese
economy that could tip the balance toward
a much more implosive scenario, and the
chances that the country’s leaders can carry
out a planned transformation toward a more
services-based economy without suffering a
sharp slowdown are becoming smaller.”
Beijing has started to tackle the
country’s corruption problem, which some
say has contributed to the slowdown.
Deals aren’t getting done as easily as
before. Pollution is another issue high on
Beijing’s agenda, which has a serious social
China’s economic growth prospects getting murkier. Photo: Platts
Copyright © 2015 McGraw Hill Financial
16
CHINA’S STEEL EXPORTS (million mt)
12
2014
10
2015
8
6
4
2
0
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Source: China Customs
CRUDE STEEL PRODUCTION JANUARYSEPTEMBER 20142015
700
(million mt)
-2.1%
2014
600
2015 % = Year-on-year change
500
400
300
200
+3.1%
100
0
China
India
-0.5%
Russia
-1.2%
Brazil
Source: worldsteel
impact. But the sense is that pressure on
companies, including steel mills, to comply
with new environmental regulations is
relaxed at times of slower economic growth.
Provincial governments need to meet their
revenue and tax targets, while maintaining
employment.
The central government’s intervention
in the Shanghai stock exchange crash
earlier this year indicated the shift to a more
market-driven economy may be some time
away. China still dances to its own economic
tune, and is not subject to the same rules
as other countries. It is this that attracts the
ire of steelmakers in the US, EU and other
regions as domestic producers lose market
share to Chinese imports. In contrast,
surprisingly few steel companies or larger
traders in China have failed, despite a lack
of cash and extremely low steel prices over
the past two years, which suggests they
continue to be propped up by provincial
governments, or are just hanging on by their
fingertips.
Haixin Iron & Steel declared bankruptcy
last year. In October, state-owned trader
Sinosteel Corp was rumored to have
defaulted on bank loans worth billions of
yuan, which it later denied. A month later,
Chinese coking coal producer Hidili Industry
International Development Ltd missed a
principal payment on an outstanding US
dollar bond. Many smaller steel and iron
STEEL RAW MATERIALS MONTHLY
ISSUE 33 / NOVEMBER 2015
ore trading companies have closed their
doors. But considering Baosteel’s research
department estimates the 100 top steel
companies in China lost a collective $3.1
billion over January-August this year, it
is remarkable there have been almost no
casualties among larger entities.
Running out of steam
The huge stimulus package in the financial
crisis period was aimed at boosting
domestic growth at a time when the rest of
the globe’s economies were in the doldrums.
But local demand is now back at GFC
levels. Property construction accounts for
around 50% of Chinese steel consumption
but is being weighed down by a massive
oversupply of new apartments – some
40 million or more on some estimates.
Regardless of an improvement in sales –
which is largely occurring in tier 1&2 cities
rather than in smaller cities where the
oversupply is at its worst – working through
the supply backlog will take a long time.
Much of China’s success over the past
decade has been built on productivity
gains as workers moved from rural areas
to factories. But there are fewer available
cheap workers these days, wages have
risen, meaning China is less competitive
than before, and subsequently some
manufacturing – the other key market for
steel demand – is being relocated to other
countries, including even the US.
Manufacturing activity data is the
weakest in six years. Auto production
and sales are patchy, while shipping
manufacturing has also been lackluster in an
oversupplied market.
In Markit’s Business Outlook Survey for
China, released on November 9, it found
the “weakest level of optimism amongst
Chinese companies since data collection
began late-2009.” This was highlighted by a
net balance of just +17% of firms expecting
business activity to rise over the next year,
down from a previous low of +23% in June.
Markit said this was “broadly in line with
that seen across the BRIC nations as a
whole (+18%).”
Relying on offshore markets
To the chagrin of international steel
companies, China has resorted to export
Copyright © 2015 McGraw Hill Financial
17
S&P GDP GROWTH SUMMARY (%)
10
2014
2015
2016
2017
5
0
-5
China
India
Russia
Brazil
Source: S&P
CHINA STEEL MANUFACTURING VS STEEL OUTPUT
80
(million mt)
(points)
51
60
50
40
49
20
48
Steel output (left)
PMI (right)
0
47
Jan-15
Feb-15
Mar-15
Apr-15
May-15
Jun-15
Jul-15
Source: Platts
markets over the past year to offload its
excess steel capacity at a time of extremely
weak domestic demand. Over JanuaryOctober China exported 92 million mt of
steel, compared with a 73.4 million mt over
the same period last year. Relatively weaker
October exports of 9 million mt, down
almost 20% month-on-month, suggest
overseas appetite for Chinese steel could be
starting to wane slightly. But it is too early
to tell if the lower export figure is due to a
plethora of potential dumping investigations
hanging over Chinese steel imports. To date,
China has managed to maintain its overall
export levels by redirecting material away
from countries threatening trade sanctions
into other regions.
Chinese authorities removed an export
tax rebate on certain alloy steel products
at the start of the year in a bid to deter
exports. But they appear to have become
more sanguine about the export level as
the year has proceeded, knowing there
is not the domestic demand to absorb so
much steel.
China’s big plan is to export its
expertise, financial muscle and even
workers under its ‘one belt, one road’
strategy – which can be interpreted as
Beijing’s global ‘soft power’ push, as well as
another way of supporting its state-owned
steel producers, contractors and engineers.
It has been estimated that more than 60
countries could benefit from Beijing’s
largesse, whereby China lends countries
the funds to develop infrastructure largely
fulfilled by Chinese companies. Steel mills
in northern China’s Hebei province have
discussed relocating capacity to emerging
countries, perhaps in support of ‘one belt,
one road.’ But as the UK’s recent “red
carpet treatment” for Xi Jinping indicates,
it is not just emerging nations that want to
deepen relations with China.
While China may no longer be the
shining beacon among the BRICs – many
expect the strong growth to come from
India now – it remains the most important
country in global steel markets. More
clarity around Beijing’s thinking will come
to light when China announces its longawaited ‘Steel Industry Restructuring
Policy’ as part of its 13th 5-year plan that
begins in 2016.
Certainly, the iron ore producers will
hope that China can somehow maintain
its strong steel production, otherwise
prices will come under even more
pressure.
— Paul Bartholomew
STEEL RAW MATERIALS MONTHLY
ISSUE 33 / NOVEMBER 2015
India - optimism turning to frustration
India’s ambition to increase steel production
to 300 million metric tons/year has been
thwarted by slower than expected growth
in consumption. Market pundits dropped
India’s steel consumption estimates to
4-5% from an earlier forecast of 6-7%. The
World Steel Association’s estimate for Indian
demand this year is for a 7.1% year-on-year
rise to 81.5 million mt and a further 7.6%
climb next year to 87.6 million mt.
Industry participants surveyed by Platts
estimate that steel demand may rise 4-5%
this financial year (ending March 31 2016) to
80 million mt. This is reflected in recent data
published by the Joint Plant Committee,
which shows India’s overall finished steel
consumption rose 4.5% y-o-y to 46.2 million
mt during the April-October half.
Meanwhile, India’s overall steel capacity
increased by 46% over the previous five
years to an estimated 110 million mt/year
during the fiscal ended March 2015, from
levels of 75 million mt/year in fiscal year
2009-2010. However, steel consumption,
which rose by a strong 11.9% during FY20102011, has declined since then by 2.4% each
year, according to a report published on
November 5 by Mumbai-based research
agency India Ratings
Further propelling the overcapacity
problem is the new capacity being
completed by companies such as Tata Steel,
Steel Authority of India Limited (Sail) and
JSW Steel, which will result in an additional
12-14 million mt/year becoming operational
in the current fiscal.
Domestic demand stutters
Steel demand declined due to a slump in the
construction, capital goods and automobile
sectors, which are the main consumers
INDIAN IRON ORE IMPORTS-EXPORTS
JANUARY-AUGUST 2013-2015 (million mt)
South Africa
Brazil
Oman
Australia
Total imports
Total exports
Net exports
2013 20142015
456,824
1,275,799 4,022,655
- - 2,292,870
- 41,632 2,129,429
107,540 317,778607,168
1,109,773
2,060,856 9,336,545
9,745,781
8,218,547 2,728,749
8,636,008
6,157,691 -6,607,796
Source: Ministry of Commerce, GTIS
Copyright © 2015 McGraw Hill Financial
18
of steel, the report said. This resulted in
estimated capacity utilization for integrated
steelmakers in India falling to 81% in fiscal
2014-2015 from 88% in the fiscal ending
March 2010.
The national budget delivered in late
February allocated investments of Rupees
140 billion ($2.1 billion) and Rupees 100 billion
for road and railway projects respectively in
the current fiscal. However, the execution
of big ticket infrastructure items, such
as metro rail networks in various cities
and highway widening projects, has been
delayed due to land acquisition, financing
and regulatory approval hurdles.
Similarly, Prime Minister Narendra
Modi’s ‘Make in India’ initiative aims to
transform India into a manufacturing hub
by encouraging investment in the industrial
sector. The initiative aims at increasing the
share of the manufacturing sector in the
country’s GDP from the current 16% to 25% by
2022. However, the rate of growth of industrial
production during fiscal 2014-2015 was only
2.3%, far below the rate of GDP growth.
India’s manufacturing sector
experienced a further slowdown in October,
mirroring the decline in the country’s steel
output. Nikkei India’s purchasing managers
index (PMI) recorded a 22-month low of 50.7
in October, from 51.2 in September.
Steel forms about 2% of GDP and about
16% of the industrial sector. But a recent
study by the National Council of Applied
Economic Research found that current
conditions of India’s steel industry were
“dismal”, with very low profits, low capacity
utilization and dim prospects of new private
investment, either foreign or domestic.
Analysts believe that a proper
implementation of ‘Make in India’, coupled
with aligned infrastructure development,
will boost steel demand growth by 10-12%
during 2018-2019 to 2024-2025, reaching
160-180 million mt by 2024-25.
India’s per capita steel consumption
was 59.4 kgs in 2014, according to the World
Steel Association. This is much lower than
per capital steel consumption of the largest
steel producer China at 510 kgs. India’s is
unlikely to ever reach a similar level.
To stimulate consumer spending, the
INDIA’S OVERALL STEEL IMPORTS
DURING APRIL-SEPTEMBER (mt)
2015
2014Change
y-o-y
China 1,591,460
1,343,850
18%
South Korea 1,516,320
855,050
77%
Japan 1,147,270
654,060
80%
Russia 215,870
84,510
155%
Ukraine 148,810
222,360
-33%
Other countries 1,282,210
1,028,490
25%
Total Steel 5,928,940
4,188,320
42%
Source: Joint Plant Committee
Reserve Bank of India (RBI) dropped the
bank repo rate by a total of 125 basis points
over four rate cuts since January in an
attempt to encourage banks to drop their
lending rates. To date, this has not had the
desired effect, in terms of raising consumer
borrowings.
Meanwhile, a number of steelmakers
invested large sums in capacity additions,
funded by borrowings, which over-stretched
their balance sheets. The net debt of the
top steel producers rated by India Ratings
increased to Rupees 1,626 billion ($24.45
billion) during fiscal 2014-2015 from Rupees
922 billion in fiscal 2010-2011.
In June, the Reserve Bank of India (RBI)
said that five out of the country’s top ten
private steel companies were under severe
financial stress on account of delayed
capacity expansions. India’s central bank
cautioned that the sector warranted a close
watch from lenders due to the high level
of stressed loans among steel companies.
Industry participants say banks are now
reluctant to lend to the steel sector.
Utilization rates low but more capacity
coming on
The nation’s largest steelmaker, Sail, is
at the final stages of completing a near
10 million mt/year expansion at all five of
its integrated steel plants to take overall
capacity to 20 million mt/year. Tata Steel
aims to start operations at a 3 million mt/
year greenfield unit at Kalinganagar, in the
eastern state of Odisha, by December 2016,
which will lift the company’s total capacity
to 14 million mt/year. Similarly, JSW Steel
is in the midst of an ongoing expansion to
increase overall capacity to 18 million mt/
year from the existing 14.3 million mt/year
at all three of its integrated steelworks by
December 2016.
STEEL RAW MATERIALS MONTHLY
ISSUE 33 / NOVEMBER 2015
The financial performance of almost
all Indian steelmakers was affected
during the July-September quarter, with
some declaring losses. For instance,
Sail reported a net loss of Rupees 13.78
billion during the first half of the current
fiscal, which includes a net loss of
Rupees 10.56 billion in July-September.
Similarly, Tata Steel’s Indian operations
reported a drop in profits of about 20%
y-o-y to Rupees 37.71 billion during the
first half of this fiscal.
Steelmakers surveyed by Platts at a
recent Steel & Raw Materials conference
organized by the Federation of Indian
Mineral Industries on November 6-7 in the
southern state of Goa, blamed low-priced
imports for pushing domestic prices further
down, impacting their margins.
Indian steel prices dropped by 20% y-o-y
during April-October. Platts assessed prices
of hot rolled coils 3mm thick and above
dropped to Rupees 27,500-28,500/mt in
October, down from Rupees 34,500-35,500/
mt in October 2014.
To address this, the government raised
import duties in August on foreign steel
by 2.5%, just three months after an initial
increase of 2.5%. These measures took
the duty on flat rolled steel imports like
coils to 12.5% and to 10% on long products
such as reinforcing bars. In September, the
finance ministry imposed an additional 20%
safeguard duty on hot rolled coils above 600
mm width for a period of 200 days.
Despite these measures, India’s appetite
for foreign steel remains unabated, with
imports surging by 42% to 6.68 million mt
during April-October, according to Joint
Plant Committee estimates. Over this period
China remained the top exporting nation to
India with an 18% y-o-y jump to 1.6 million
mt. South Korea and Japan followed closely,
with exports to India shooting up to 77% and
80% respectively.
Many hurdles remain
The National Council of Applied Economic
Research study identifies 11 road blocks
hindering the resurgence of the Indian steel
industry. These are demand deficiency,
decline of trade competiveness and surge
in imports, financial fragility, excessive
taxation, stalemate in land acquisition,
Copyright © 2015 McGraw Hill Financial
19
Sail’s Bokaro steel plant. Photo: Sail
delays in project implementation,
suboptimal system of mineral allocation,
inadequate exploration of mineral wealth,
inadequate availability of skilled manpower,
high cost and low quality logistic facilities
and inadequate progress in meeting the
environmental standards expected of a
modern steel industry.
“Mere tinkering with the present policies
and exhorting greater effort will not achieve
much,” the report said. The study said
authorities needed to realize that there were
deep-seated structural problems in most
manufacturing sub-sectors in India that go
beyond the need to improve the ‘ease of
doing business.’
So India’s role as the great hope for the
world’s steel and raw materials sectors may
take a long time to come to pass, if ever.
Though there is Indian interest in coking coal
projects in Mozambique, Australia is likely
to be the greatest beneficiary of expanded
steel production. India is already the major
customer of Australian coking coal – ahead
of Japan with China now back in third spot
– importing 32.6 million mt over JanuarySeptember this year, up around 10% on the
year before.
Earlier this year, the market became
excited when India started importing
iron ore as seaborne prices were more
attractive than domestic ones and various
bans on captive mines reduced access
to their own mines for steelmakers
such as Tata and JSW. Even Essar Steel,
which inaugurated a 6 million mt/year
pelletizing plant, preferred to import from
countries such as Brazil. But net imports
of 6.6 million mt over January-August
– mainly from South Africa and Brazil
– were not enough to positively impact
seaborne prices. It could serve to dent
the aspirations of state-owned iron ore
producer, National Mineral Development
Corporation, which has had to slash
domestic prices several times – by 50%
y-o-y for fines and by 40% for lump – to
stay competitive with imports. This has
resulted in a likely 48% y-o-y profit fall
in the September quarter, which will not
help NMDC’s plans to grow production to
support India’s steel output expansion.
While there is still optimism about
the Modi government, there is a growing
sense of frustration that improvements
are happening too slowly. India may be
the fastest growing of the BRICs, have the
best GDP and steel consumption outlook
of the four countries, but struggling
steel companies may find it difficult to
reconcile such a rosy prognosis with the
market conditions they are experiencing
on a daily basis.
— Charlotte Rao, Paul Bartholomew
STEEL RAW MATERIALS MONTHLY
ISSUE 33 / NOVEMBER 2015
Brazil - depressed economy undermines Olympics benefits
Many years before Jim O’Neill identified
Brazil as a BRIC nation, French president
Charles de Gaulle described it as a
“country of the future - and always will be.”
Unfortunately, that old saying is ringing
true once more as Brazil’s economy lurches
into depression. Its economy could shrink
by 3.1% in 2015 and by a further 1.2% in
2016, says the Organization for Economic
Co-operation and Development, (OECD).
This would mark the first time since the
1930s that the country would have posted
two consecutive years of negative growth.
Last month the Brazilian government’s
accounts watchdog, Tribunal de Contas da
União, rejected the government’s federal
budget accounts, also for the first time in
80 years, after crushing losses at state-run
oil producer Petrobras amid widespread
corruption scandals, which have discredited
the government and led to the clamor to
impeach President Dilma Rousseff.
Ratings agency Standard & Poor’s, a
Platts sister company, cut Brazil’s credit
rating to junk in September, seven years
after raising it to a prized investment grade.
After putting Brazil’s outlook on a negative
weighting in July, there’s a chance greater
than one in three that S&P could again lower
the country’s rating over the coming year.
The agency cites the risk of fiscal weakness
and potential policy reversal amid a lack of
cohesion in the cabinet and a worsening
growth story.
“Domestic dynamics are driving the
contraction in economic activity more than
the global commodities scenario,” Lisa
Schineller, Standard & Poor’s managing
director, sovereign ratings, said in an
interview. “Brazilian manufacturing is under
pressure, to say the least. Petrobras is
weighing on investments overall as is the
broader political backdrop, with fluid political
dynamics and a corruption investigation
destroying investor confidence.”
Double-digit domestic demand decline
Brazil’s apparent steel consumption has
declined sharply amid the turmoil, falling
14% year-on-year in the first nine months
of 2015 to 16.9 million mt, including
imports, Brazilian Steel Institute (IABr) data
Copyright © 2015 McGraw Hill Financial
20
shows. Crude steel output fell just 1.2%
over the same period to 25.25 million mt,
held up by exports, mainly of semi-finished
and flat steel products. IABr forecasts
crude steel output for the year at 32.75
million mt, 3.4% down on 2014, and well
below installed capacity of 48.8 million
mt. Brazil’s steel sector is experiencing a
crisis worse than in 2008-2009, said IABr
executive president Marco Polo de Mello
Lopes in a recent interview.
Among steel consuming sectors,
durable goods has been hardest hit, with
total vehicle production set to slump 20%
this year, after a 15.3% decline last year,
according to the National Association of
Vehicle Manufacturers, Anfavea. S&P sees
domestic demand for commodity-grade hot
rolled coil falling 15% this year, after a fall
last year, with long products demand down
10% despite a flurry of construction activity
in the run-up to Rio de Janeiro’s hosting of
the 2016 Olympic Games.
Linepipe and oil country tubular goods
demand has been hit by Petrobras’ financial
scandal, which has led to investment and
operational cutbacks: “Brazil will remain in
a very complex situation for a while….we’re
not so optimistic about 2015-2016 because
of the limited operation of Petrobras,” said
Paolo Rocca, CEO of pipemaker Tenaris.
“We’re losing something on Rota 3 in Brazil.”
Cheaper real helps weather storm
Still, the devaluation of the Brazilian real by
over 40% over the last year to recent lows
of more than BRL4 to the US dollar has
given producers a fillip, allowing the more
competitive among them to boost exports,
particularly of semi-finished products, at
the same time putting up a natural barrier
to steel imports, which have become more
expensive in local currency terms. Steel
exports leapt 48.6% year-on-year in the first
nine months, while imports overall slumped
11.9%, IABr said.
“In the first part of the year imports
rose but now they’re contained,” said S&P’s
Brazil-based analysts Diego Ocampo and
Marcus Fernandes. “The biggest threat has
been Turkish steel and Mexican steel, not
from China.”
Indeed, a recent plunge in imports in
many industrial areas has driven down the
nation’s current account deficit: one positive
consequence of the current crisis.
Diversified steel market players, and
those with a larger international presence,
namely Gerdau Group, Cia Siderúrgica
Nacional (CSN) and ArcelorMittal Brazil –
which export significant tonnages to group
operations in other countries - have thus
weathered the storm, the analysts said.
Opening the export valve gives only partial
relief, as international sales margins tend
to be lower than those on domestic sales,
due to oversupply, said Germano Mendes de
Paula, professor of the Economics Institute
at Brazil’s Federal University of Uberlândia.
The only major investment project currently
underway in Brazil’s steel sector - the
Vale-Dongkuk-Posco 3 million mt/year joint
venture Companhia Siderúrgica do Pecém
works - will, at least initially, be entirely
dedicated to slabs exports. CSP’s start-up
has been delayed until Q2 2016 from end2015 due to infrastructure delays, Dongkuk
said November 4.
Market protection mechanisms
Brazil is a relatively protected steel market,
operating import taxes averaging 12-14%
for most third country products from
outside the Mercosur southern cone trade
bloc. Following an import surge in 2010,
domestic producers have also learnt to
keep domestic prices competitive to
discourage imports. For this reason import
penetration has stayed stable over the past
five years at around 15% of the market,
according to Ocampo.
“Longs are more protected than flats,”
the analyst continued, “because the bars
typically used in Brazil are wider than
elsewhere. This also serves as a barrier to
imports, because producers abroad would
need to tweak their production to suit; some
Turkish producers have this capacity.”
CSN, which moved into long products
a year ago, is benefiting from this market
barrier and is also exporting 10% of its long
steel production, Ocampo reports. CSN long
products plant general manager Fernando
Souza Candido explains the company is
using surplus slabs from its integrated Volta
Redonda works in Rio de Janeiro state to
STEEL RAW MATERIALS MONTHLY
ISSUE 33 / NOVEMBER 2015
cut into blooms in its new EAF-based long
products works, due to the slack demand
for flat products. “The Brazilian market is
60% of what it used to be,” said Candido,
stressing the 500,000 mt/year long
products plant may reach full capacity only
in another year.
Concerns persist that Brazilian works
may no longer be competitive on a global
scale: Schineller notes that over the past
decade, while the real was much stronger,
Brazilian industrial exports had declined on a
lack of labor market competitiveness.
Despite the real’s recent depreciation,
hourly wages in dollar terms remain roughly
40% above those in Mexico and China, the
Financial Times cited Credit Suisse as saying in
September. “This is a big deterrent to inward
investment in the country,” the FT said.
“I believe the Brazilian steel industry
isn’t as competitive now as it was 15 or 20
years ago, due mainly to macroeconomic
conditions,” Mendes de Paula said. Still,
its costs, even in recent years when the
real was strong, were always below the
median of the global steel sector, he said.
A study published in 2015 by development
bank BNDES using CRU data puts Brazilian
production costs for crude steel, rebars
and hot rolled coil among the world’s four
most competitive in the context of the
largest players.
Capacity closures
Capacity closures are occurring as low
market prices erode mills’ profitability.
Mendes de Paula notes there have been
more rolling mill closures than furnace
closures, making it easier to rebuild
production once the market recovers. Worst
hit among the major steelmakers is Usinas
Siderúrgicas de Minas Gerais, which focuses
on the hard-hit white goods and car sectors.
Usiminas has turned off three of its five blast
furnaces this year, which may reduce its
crude steel output by more than 900,000 mt
from 2014 levels. Its slabmaking capacity is
9.5 million mt/year, but recent data indicates
it could be working at under half capacity.
The temporary suspension from November
of activities at a blast furnace and meltshop
in Cubatão, where it idled a 1 million mt/year
heavy plate mill late September, and where
it will for the time being no longer produce
slabs is a move to “reposition Usiminas into
a new level of scale and competitiveness
….amid progressive deterioration of the
steel market,” the company’s VP of finances
and investors relations Ronald Seckelmann
said in a statement.
“Usiminas will suffer over the next
two years, because it’s less diversified,”
S&P’s Fernandes said. The power struggle
between major shareholders Nippon Steel
and Ternium for management control
Russia – steel surviving despite recession
Russia is in deep recession. The OECD
expects the economy to contract 4% in
2015 and by a further 0.4% next year in what
may be the nation’s longest recession since
1997. The economy is largely dependent on
oil prices, which remain low and have led
to cutbacks within the sector. Yet Russia’s
steel industry is in the main doing well and
LARGE RUSSIAN STEELMAKERS’ SHARE OF EXPORT SALES (%)
70
60
50
NLMK
Severstal
MMK
40
30
20
10
Q1 2014
Q2 2014
Q3 2014
Source: Companies
Copyright © 2015 McGraw Hill Financial
21
Q4 2014
Q1 2015
Q2 2015
Q3 2015
at the company could meanwhile delay
strategic decisions but isn’t seen having a
direct bearing on day to day operations, the
analyst said.
Votorantim group in October halted an
800,000 mt/year long products mill in Rio
de Janeiro state. Gerdau has concentrated
on its higher value added operations and
niche products, having halted or reduced
operations at six plants since 2014 due
to demand issues. ArcelorMittal Brazil
announced September it is delaying startup of a 1.1 million mt/year longs rolling
mill at João Monlevade, due to “adequate
existing production at a time of economic
downturn and surplus output”. In August,
the company’s Brazil’s longs division, which
has a total production capacity of 3.6 million
mt/year of rolled products, partially halted a
500,000 mt/year rolling mill in Piracicaba.
Brazil’s steelmakers don’t yet glimpse
light at the end of the tunnel, according to
Mendes de Paula, while the S&P analysts
expect another 18 months of pain. “Timing
on a meaningful turnaround is uncertain…
we see modest economic growth of 1% in
2017, but a lack of visibility related to fluid
political dynamics,” said Schineller. This
is expected to bring some steel market
recovery in 2017, after a very challenging
2016.
— Diana Kinch
industrial production, as measured by the
Markit Russia Purchasing Managers’ Index,
rebounded in October after 11 months of
decline.
The ruble’s significant devaluation late
last year - down 42% against the US dollar
- and its subsequent stabilization at what
economists view as a more “realistic” rate,
has helped boost Russian steel exports
close to record level of some 30 million
metric tons/year, enabling production to
continue at strong levels. Exports climbed to
20.8 million mt in January-September, for an
annualized 27.7 million mt, from 19.2 million
mt a year earlier. The ruble’s new value has
enhanced a natural export vocation, backed
by solid port and rail infrastructure, “making
Russia globally much more competitive in
STEEL RAW MATERIALS MONTHLY
ISSUE 33 / NOVEMBER 2015
various segments: manufacturing, steel
and metals,” Evgeny Gavrilenkov, managing
director and chief economist at Russia’s
Sberbank CIB, said in October. The exports
surge has further favored infrastructure
development at ports on the Baltic Sea and
the Black Sea.
Of course the export story is not all
positive. The European Commission is now
actively investigating the need for antidumping duties for products from Russia
and China, including cold rolled coil, amid
lobbying from anxious EU steelmakers and
trade bodies.
Even with the complex trade scenario,
Russia’s steelmakers are likely to adapt,
according to Sberbank. “It’s crisis as usual
in Russia, not a full-scale crisis,” Gavrilenkov
said. “Russia has frequent crises: whenever
oil and gas go down people think we’re in a
crisis. But the system adapts, the Russian
economy has adapted to the new normal.”
Sanctions seen helping cut debt
What’s also happened is that the steam has
been let out of an economy that overheated
in 2011-2013, when high levels of domestic
and international lending, both consumer and
corporate, fueled inflation and interest rates,
pushing the ruble up 50% between 2009
and its crash last year. “Domestic demand
is shrinking now because it was artificially
inflated with people rushing into investments,”
says Gavrilenko. Sanctions, which are seen
not to have affected the steel industry,
have played a beneficial role in limiting the
inflow of new money into the economy and
helping cut $200 billion of foreign debt,
according to the economist. “Russia should
be grateful: sanctions have been very positive
macroprudentially,” he maintains.
RUSSIAN STEEL MARKET BY SEGMENT
Tubes and pipes
(20%)
Construction
and Infrastructure
(67%)
Machinery
(7%)
Metalwork
(4%)
Automotive
(2%)
Source: Metal Expert, NLMK, Moody's
Copyright © 2015 McGraw Hill Financial
22
RUSSIAN STEELMAKERS’ SLAB CASH COSTS WILL REMAIN FAIRLY LOW
ON THE WEAK ROUBLE ($/mt)
450
Severstal
MMK
NLMK
350
250
150
Q1 2013
Q4 2013
Q3 2014
Q2 2015
Source: Company data, Moody’s forecasts
CIS APPARENT STEEL USE (million mt)
60
50
40
30
20
10
0
2011
2012
2013
2014
2015(e)
2016(e)
Source: WSA
Spending has also been tempered by
the low oil prices, which have curbed high
expenditure in hostile drilling environments
in the north of the country. The downsizing
means the economy is now recovering
slowly on a more stable basis, with growth
of more than 2% expected for 2016,
Sberbank calculates, even though both the
International Monetary Fund and the OECD
anticipate a further GDP decline. Statistical
discrepancies are just part of the system,
Gavrilenko explains.
Domestic construction plunge: tubes
brighter
Moody’s Investors Service expects Russia’s
domestic demand for steel to decline
by around 10% in 2015 and remain weak
in 2016, driven primarily by the slump in
construction, the largest steel-using sector,
representing two thirds of aggregate
demand, says analyst Artem Frolov.
According to Russian federal state statistics
service Rosstat, in January-August 2015
construction activity in Russia declined by
8% year-on-year, in comparable prices.
Moody’s expects residential and commercial
construction to continue shrinking in 2016
on weak demand.
In the vehicles sector, Russia’s 2015 new
car sales may contract by up to 45% yearon-year to 1.28 million units, with recovery
starting only in spring 2016, said Autostat,
an automotive sector analyst firm, citing
information from PricewaterhouseCoopers.
“Demand for steel in Russia has been
supported by the tubes and pipes sector which represents around one fifth of total
domestic demand - particularly by large
pipeline projects, including Power of Siberia,
and oil and gas companies’ maintenance
needs,” Frolov said. “However, demand for
pipes from the oil and gas companies could
start declining if oil prices remain at their
lows for long.”
Moody’s notes that many of Russia’s
larger steelmakers have substantially
improved profitability on currency factors.
Together with cost-cutting and the fall in
prices of feedstocks including iron ore and
coking coal, this will lead their cash slab
costs to stabilize at an internationallycompetitive $200-250/mt this year, with
the higher exports helping to offset lower
domestic demand. Slab cash costs of
around $200-$260/mt in H1 2015 are
compared with export prices of around
$305/mt on an FOB basis, Frolov said.
STEEL RAW MATERIALS MONTHLY
ISSUE 33 / NOVEMBER 2015
In January-September, Russia’s
Magnitogorsk Iron and Steel Works (MMK)
quadrupled its net profit from a year earlier
to $546 million, after the ruble devaluation
allowed cost reduction. Its free-cash flow,
or operating income, doubled y-o-y to $940
million, according to the company’s financial
report.
NLMK achieved cost savings of $163
million in January-September 2015.
Output holding up
In terms of volumes, steelmakers are doing
well, maintaining capacity utilization levels
of 82%, compared to less than 80% in the
European Union, according to Ukrainebased information service Metal Expert.
“Nobody’s doing too badly,” said Sberbank
CIB’s commodities strategist Dmitriy
Kolomytsyn. That is, with the possible
exception among the majors of Evraz, which
has greater exposure than others to the
hard-hit domestic construction industry,
compounded by a poor performance by its
US business unit and by its South African
unit entering receivership earlier this year.
Evraz’s crude steel output in the first
nine months of 2015 fell 7.4% on-year
to 10.8 million mt, while finished steel
volumes slumped 12.9% to 6.4 million mt.
However, these results include volumes
from Evraz Vitkovice Steel, disposed
of in April 2014, and of Evraz Highveld
Steel and Vanadium, in business rescue,
which are not consolidated as from April
2015. Indeed, Evraz reported a 3.3%
uptick in consolidated crude steel output
in Q3 from the previous quarter, after
completion of repair works at Russian
mills, with the improvement expected to
continue in Q4.
Overall, crude steel production has this
year remained almost at 2014 levels, dipping
just 0.5% over the first nine months to 53.3
million mt, World Steel Association reports.
Producer Severstal said early November
it was fully booked and working at 100%
capacity at its flagship Cherepovets iron and
steelworks and doesn’t intend to reduce
steel output in the short- to medium-term.
“Regardless of falling markets, we are
still making money,” CEO Vadim Larin told
investors, noting that in January-September
the company boosted its free cash flow
Copyright © 2015 McGraw Hill Financial
23
Usiminas’s Ipatinga steel plant. Photo: Usiminas
by just over half on-year. “So far this year,
Severstal’s financial results have been the
strongest since the glorious first half of
2008,” he added.
Imports, which were never really
significant, have meanwhile plunged to 3.2
million mt in January-September, down from
4.8 million mt in the same 2014 period, partly
due to sanctions imposed by the EU on
some oil tube exports to Russia in 2014. The
ruble depreciation also favored Russian pipe
mills by prompting a 55% y-o-y decline in
Russian pipe imports in H1 2015 and slashing
OCTG imports by 70%. Lower imports also
resulted from an anti-dumping investigation
into OCTG imports from China that Russia,
together with its customs union partners
(Belarus and Kazakhstan) completed in Q3
2015. It subsequently imposed duties of
between 12.23% and 31%.
Market bottoming out
Metalloinvest reported an upturn in
domestic sales of both pig iron and steel in
the first nine months of the year, with the
domestic market becoming its main sales
destination in Q3, thanks to increased orders
from Chelyabinsk Pipe Rolling (ChTPZ) and
Revyakino Steel Rolling Plants. Severstal
said early November that while the Russian
steel market may contract in 2016 by a
further 1-2% on-year, this may effectively be
the bottom. “The adjustment has already
occurred, with this year’s demand falling
by more than 10% from 2014. No significant
improvement can happen in 2016 but the
year should not see any comparable fall
either,” Larin told investors. Russian steel
use is forecast at around 38 million mt next
year, similar to this year’s 38.5 million mt,
down from 43 million mt in 2014.
“Russian steelmakers are reasonably
conservative in their expectations,
recognizing pricing pressure because of
domestic recession and competition in
international markets, particularly from
China,” concludes Moody’s Frolov. “From
a credit standpoint, Russian steelmakers
rated by Moody’s are well positioned to
weather domestic recession and weak
pricing environments in international
markets, as a result of their generally strong
financial metrics, sufficient liquidity for the
next 12-18 months, continuing cost-cutting
measures and competitiveness in export
markets due to the ruble depreciation.”
— Diana Kinch, Katya Bouckley
An amended version of this report appeared
in Platts Metals Insight on November 12
STEEL RAW MATERIALS MONTHLY
ISSUE 33 / NOVEMBER 2015
TURKEY ARC MONTHLY DATA
Scrap weakness in October prior to rebound
The Turkish long steel supply chain last
month remained depressed with scrap
continuing to plunge in October as imports
of steel products from China into the eastern
Mediterranean made traders and producers
even more gloomy.
The Turkey ARC Scrap 30-day index
was at minus 1.79% in October from
3.29% in September, with billet’s falls
reducing the impact on scrap in the
overall mix. This suggested mini-mills
had access to cheaper feedstock and
may be increasing competitiveness, or
operating at an advantage to re-rollers
using imported billets.
The Turkey ARC Billet 30-day index
was at 1.83% in October, weakening
from 2.17% in September. The Turkey
ARC rebar 30-day index remained more
stable and close to equilibrium values
with the other two inputs based on
Turkey ARC analysis, moving to minus
0.24% from 0.45% in September.
The degree over and below zero
marks the commodity’s price deviation
from the 30-day and 60-day average
price relationship for the three-product
group, according to Turkey ARC. The three
commodities saw a fifth month of overall
collective price declines since May’s rise,
based on Platts data.
Scrap fell sharply in early October.
The drop in prices moved the
relationship with iron ore values to a
year-to-date low mid-month at below
2.2:1 scrap to iron ore adjusted for iron
content, down from a peak of over
3.7:1 seen in April. Scrap since August
trended below its average 30-day price
relationship with billet and rebar.
Scrap rebounded in late October
and into November, reducing margins
available to mini-mills, with rebar-toscrap margins at a $144.50/mt as of
November 13, below margins available
earlier last month. Rebar’s margin over
Black Sea billet CFR Turkey basis was
$56/mt on November 13, at relatively
low levels.
— Hector Forster
Copyright © 2015 McGraw Hill Financial
24
TURKEY ARC INDEXES - MONTHLY AVERAGES, 2014 - 2015 (%)
6
4
2
0
-2
-4
-6
Oct-14
Dec-14
Feb-15
Billet 30-day
Rebar 30-day
Apr-15
Jun-15
Aug-15
Oct-15
Scrap 30
Market Indicator
Platts Turkey ARC is a relative strength indicator for rebar FOB, billet CFR and scrap CFR prices. The daily index for each
commodity is the degree the price is over or below the average of the price relationship with the others over the past 30
days, with 0 as equilibrium. Indices for each commodity based on relative price analysis over 60 days are available for
longer term price signals for the commodity or for the wider complex, and potential changes in demand and supply for
the steel industry.
Source: Platts
TURKEY ARC OCTOBER DAILY DATA ANALYSIS (%)
Scrap 30-day
Billet 30-day
Rebar 30-day
Market Indicator
01-Oct-3.08
3.31
-0.40
0.00
02-Oct-2.81
2.28
0.03
-1.02
05-Oct-2.63
3.29
-0.64
-3.05
06-Oct-4.00
3.71
-0.27
-3.56
07-Oct-3.73
3.08
-0.06
-0.52
08-Oct-3.45
2.86
-0.08
0.00
09-Oct-3.29
3.54
-0.57
-3.49
12-Oct-3.02
3.25
-0.55
0.00
13-Oct-2.21
4.12
-1.46
-3.22
14-Oct-2.00
3.80
-1.40
0.00
15-Oct-3.26
4.56
-1.34
-2.29
16-Oct-3.04
4.23
-1.28
0.00
19-Oct-2.82
3.90
-1.22
0.00
20-Oct-2.65
3.09
-0.80
-0.70
21-Oct-3.61
2.57
-0.02
0.28
22-Oct-1.68
0.68
0.33
2.23
23-Oct-1.55
0.58
0.33
0.00
26-Oct0.34
-0.75
0.35
2.86
27-Oct1.24
-2.00
0.77
3.13
28-Oct1.25
-2.02
0.78
0.00
29-Oct2.14
-3.12
1.11
0.64
30-Oct4.47
-4.67
1.05
3.49
Average-1.79
1.83
-0.24
-0.24
STEEL RAW MATERIALS MONTHLY
ISSUE 33 / NOVEMBER 2015
GLOBAL TRADE HIGHLIGHTS
US
Turkish steel mills booked 12.05 million mt of
scrap over January-September, down 18%
on the year before. The fall was in line with
the drop in Turkey’s EAF production over the
period as mills turned to Chinese billet.
China
China exported 9.02 million mt of steel
in October, China Customs data showed,
marking a 20% decline on month after a 16%
month-on-month jump in September. Yearto-date exports of 92 million mt are up 25%.
South Korea
The value of South Korea’s steel exports
plummeted by 30% on year to just $2.14
billion in October, according to the Ministry
of Trade, Industry & Energy. Motie cited
weak demand, lower raw materials prices
and low-priced competition from mainly
Chinese and Russian steelmakers.
USA
CHINA
SOUTH
KOREA
INDIA
BRAZIL
AUSTRALIA
Brazil
Brazilian iron ore exports in October grew
7.5% year-on-year to 34.14 million mt from
31.77 million mt in the year-ago month,
Ministry of Development and Trade data
showed. The value of iron ore sales dropped
to $1.13 billion FOB, 40% below the year-ago
level of $1.89 billion.
Copyright © 2015 McGraw Hill Financial
25
India
Rising demand for carbon steel plates in
India continues to attract plate imports
into the country, with volumes soaring
35% on year during April-September to
536,000 mt, according to new Joint Plant
Committee data.
Australia
Total iron ore exports from Western
Australia’s Port Hedland of 36.5 million mt in
October were down 7% on October’s record
39.4 million mt. Some 30.7 million mt were
shipped to China from the port in October,
Pilbara Ports Authority data showed.
STEEL RAW MATERIALS MONTHLY
ISSUE 33 / NOVEMBER 2015
STEEL RAW MATERIALS MONTHLY AVERAGES
PLATTS RAW MATERIALS REFERENCE PRICES, OCTOBER 2015
Unit
Price
Change
% Chg
Yuan/mt
$/mt
R$/mt
854.00
123.27
465.00
-17.25
-4.36
-32.50
-1.98
-3.42
-6.53
Yuan/mt
$/mt
$/mt
$/mt
546.00
173.88
185.00
230.00
-8.00
-34.25
-25.00
0.00
-1.44
-16.46
-11.90
0.00
Unit
Price
Change
% Chg
$/mt
$/mt
$/mt
160.30
225.88
191.55
-27.09
-8.90
-36.88
-14.46
-3.79
-16.14
$/mt
$/mt
$/mt
$/mt
$/mt
$/mt
$/mt
$/mt
$/mt
124.19
128.33
187.42
178.00
196.00
140.75
140.75
128.33
132.47
-17.39
-13.25
-14.74
-26.38
-34.00
-17.48
-13.32
-19.91
-13.27
-12.28
-9.36
-7.29
-12.91
-14.78
-11.05
-8.65
-13.43
-9.11
$/lt
$/lt
$/lt
R$/mt
191.00
152.00
177.00
433.75
-37.75
-46.13
-34.25
-12.50
-16.50
-23.28
-16.21
-2.80
Coke and coal
Met coke 62% CSR DDP, North China
Met coke 62% CSR, FOB North China
Charcoal – Brazil domestic
Iron
Iron ore concentrate 66% Fe Dry – China domestic
Pig iron – FOB – Black sea export
Pig iron – FOB Ponta da Madeira – Brazil export
HBI – Venezuela export
PLATTS FERROUS SCRAP REFERENCE PRICES, OCTOBER 2015
Scrap, Europe
OA (plate & structural) – UK domestic, delivered
Shredded – delivered – N. Europe domestic, delivered
Shredded – delivered – S. Europe domestic, delivered
Scrap, Asia
H2 – del Okayama – Tokyo Steel purchase price, at works gate
H2 – del Utsunomiya – Tokyo Steel purchase price, at works gate
Heavy – Shanghai – China domestic
HMS 1/2 80:20 CFR – East Asia import
Shredded Scrap CFR India
Shindachi Bara – del Okayama – Tokyo Steel purchase (list) price
Shindachi Bara – del Utsunomiya – Tokyo Steel purchase (list) price
Shredded scrap A (auto) – del Okayama – Tokyo Steel purchase (list) price
Shredded scrap A (auto) – del Utsunomiya – Tokyo Steel purchase (list) price
Scrap, Americas
#1 Busheling – N. America domestic, del, Midwest US
HMS 1/2 – N. America domestic, del Midwest US
Plate & Structural – N. America domestic, del Midwest US
HMS 1/2 – Brazil S.E. domestic
STEEL MILL ECONOMICS: GLOBAL SPREADS MONTHLY AVERAGES
Oct-15
China Flat Steel Spread (CFSS using IODEX)*
169.43 $/mt
China Flat Steel Spread (CFSS using TSI)*
170.17 $/mt
China Long Steel Spread (CLSS using IODEX)
172.36 $/mt
China Long Steel Spread (CLSS using TSI)
173.10 $/mt
China Hot Metal Spread (CHMS using IODEX)*
170.89 $/mt
China Hot Metal Spread (CHMS using TSI)*
171.63 $/mt
China Coking Margin (CCM)**
180.00 RMB/mt
China Billet-Rebar Spread (CBRS)
266.11 RMB/mt
Turkey Scrap-Rebar Spread (TSRS: Platts)
155.43 $/mt
Turkey Scrap-Rebar Spread (TSRS: TSI)
155.82 $/mt
Turkey Scrap-Black Sea Billet Spread (TSBS: Platts)
90.09 $/mt
Turkey Scrap-Black Sea Billet Spread (TSBS: TSI)
90.48 $/mt
US Scrap-HRC Spread (US SHRC)
251.13 $/st
US Scrap-HRC Futures Spread (US SHRCF)
256.36 $/st
US Scrap-Rebar Spread (US SRS)
344.88 $/st
*Weekly, assessed on Mondays. **Weekly, assessed on Fridays.
For spreads calculation and assessment methodology, please go to:
http://platts.com/IM.Platts.Content/MethodologyReferences/MethodologySpecs/steel.pdf
Copyright © 2015 McGraw Hill Financial
26
Change%
on month
change
3.24
1.95
2.76
1.65
-3.87
-2.20
-4.35
-2.45
-0.32
-0.19
-0.79
-0.46
-14.05
-7.24
-6.95
-2.54
-3.81
-2.39
-0.73
-0.47
4.38
5.11
7.45
8.98
0.36
0.14
1.11
0.43
13.99
4.23
SME COMMENT
Platts has introduced a suite of price spreads
called Steel Mill Economics, aimed at assisting
margin modeling and steel industry analysis.
Steel Raw Materials Monthly will carry the spreads
in the table on the left each month, presented
as monthly averages and start to build up
some commentary. The spreads represent the
differences between the prices of downstream
steel products and upstream raw materials that
are needed to produce them. For example, the
spreads allow a comparison of the margins of US
versus Chinese longs producers once the prices of
certain raw materials have been calculated.
STEEL RAW MATERIALS MONTHLY
ISSUE 33 / NOVEMBER 2015
STEEL RAW MATERIALS MONTHLY AVERAGES
METALS MONTHLY AVERAGE, OCTOBER 2015
Monthly $%
Unit
Average changechange
Cobalt
99.8% US Spot cath m
LME Cash
LME 3-Mo
LME 15-Mo
LME Settle
12.830
27609.660
27613.640
28064.090
27661.590
-0.320
-169.890
-165.910
-172.270
-374.770
-2.433
-0.612
-0.597
-0.610
-1.337
¢/lb
¢/lb
¢/lb
¢/lb
¢/lb
¢/lb
¢/lb
¢/lb
¢/lb
104.000
103.000
105.000
208.500
207.000
210.000
225.500
225.000
226.000
-3.300 -3.075
-2.400 -2.277
-4.200 -3.846
0.200 0.096
0.000 0.000
0.400 0.191
0.000 0.000
0.000 0.000
0.000 0.000
¢/lb
¢/lb
¢/lb
$/gt
$/gt
$/gt
88.375
87.500
89.250
840.000
820.000
860.000
$/lb
$/lb
5.865
12.880
-6.125
-6.500
-5.750
-4.000
-4.000
-4.000
-6.481
-6.915
-6.053
-0.474
-0.485
-0.463
Ferromolybdenum
US FeMo mean
EUR FeMo mean
-1.254 -17.615
-1.748 -11.950
Ferrosilicon in-warehouse US
75% Si Mean
75% Si Low
75% Si High
¢/lb
¢/lb
¢/lb
83.500
82.000
85.000
-1.300 -1.533
-2.000 -2.381
-0.600 -0.701
$/lb
7.555
-0.926 -10.919
Ferrovanadium
US Ferrovanadium
Magnesium
US Die Cast Alloy Trans
US Spot West mean
US Dealer Import mean
99.8% FOB China
Die Cast Alloy FOB China
¢/lb
¢/lb
¢/lb
$/mt
$/mt
NY Dealer/Cathode
NY Dealer/Melt
LME Cash
LME 3-Mo
LME Settle
LME Y1
LME Y2
LME Y3
$/lb
$/lb
$/mt
$/mt
$/mt
$/mt
$/mt
$/mt
4.690
4.690
10341.364
10382.386
10344.091
10442.950
10505.680
10515.680
0.140
0.140
445.909
443.863
445.682
442.270
438.180
445.450
Silicomanganese in-warehouse US
65% Mn
¢/lb
41.750
-3.950 -8.643
¢/lb
$/mt
$/mt
114.875
1633.000
1610.000
-4.725 -3.951
-7.000 -0.427
10.000 0.625
$/lt
1005.760
39.760
4.116
$/mt
$/mt
$/mt
$/mt
¢/lb
¢/lb
15838.523
15729.773
15598.409
15848.182
NA
746.111
369.659
539.773
549.545
366.818
NA
15.611
2.390
3.553
3.652
2.369
NA
2.137
$/FL
$/FL
2.010
0.835
$/mt
$/mt
$/mt
$/mt
$/mt
$/mt
$/mt
¢/lb
¢/lb
¢/lb
1727.727
1750.148
1728.045
1782.360
1804.910
1821.230
NA
85.883
85.633
96.656
Silicon
553 Grade Del US Midwest
553 Grade CIF Japan
553 Grade FOB China
190.000
215.000
172.900
2025.000
2305.000
-5.000
0.000
-2.350
-20.000
-20.000
-2.564
0.000
-1.341
-0.978
-0.860
NA FREE MKT 18-8
Tin
LME Cash
LME 3-Mo
LME 15-Mo
LME Settle
MW Composite
MW NY Dealer
Titanium
MW US 70% Ferro
MW US Turning 0.5%
-0.265 -11.648
-0.190 -18.537
Zinc
LME SHG Cash
LME SHG 3-Mo
LME Settle
LME SHG Y1
LME SHG Y2
LME SHG Y3
MW Four Corners
MW NA SHG
MW NA GAL
MW Alloyer NO. 3
9.091
18.262
9.136
17.810
15.090
18.780
NA
0.312
0.312
0.187
Manganese
44% Mn Ore CIF China
37% Mn Ore CIF China
$/dmtu
$/dmtu
2.638
2.448
-0.077 -2.836
-0.107 -4.188
Molybdenum
Dealer Oxide Midpoint/Mean
Dealer Oxide Low
Dealer Oxide High
LME Cash
LME 3-Mo
LME 15-Mo
LME Settle
$/lb
$/lb
$/lb
$/mt
$/mt
$/mt
$/mt
Copyright © 2015 McGraw Hill Financial
3.077
3.077
4.506
4.466
4.503
4.422
4.352
4.423
Stainless scrap
Ferromanganese in-warehouse US
Medium Carbon 85% Mn Mean
Medium Carbon 85% Mn Low
Medium Carbon 85% Mn High
High Carbon 76% Mean
High Carbon 76% Low
High Carbon 76% High
Monthly $%
average changechange
Nickel
$/lb
$/mt
$/mt
$/mt
$/mt
Ferrochrome in-warehouse
65% High Carbon Mean
65% High Carbon Low
65% High Carbon High
Low Carbon .10% Mean
Low Carbon .10% Low
Low Carbon .10% High
Low Carbon .05% Mean
Low Carbon .05% Low
Low Carbon .05% High
Unit
4.744
-0.979 -17.106
4.657
-0.988 -17.502
4.832
-0.968 -16.690
10520.450-2025.010 -16.141
10520.450-2031.830 -16.187
11004.770-2028.640 -15.565
10770.450-2034.100 -15.886
27
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0.529
1.054
0.531
1.009
0.843
1.042
NA
0.365
0.366
0.194