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Tuesday, August 20, 2019

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Gulf Countries Finished Steel Demand Forecast (2017-2020)
Middle East Steel Prices

Turkey: Kardemir cuts semi-finished and long steel prices


Middle East Steel News

Turkey: Kardemir cuts semi-finished and long steel prices
Turkey: Kardemir's crude steel output declined by 3.36 pct in H1 2019 YoY
Pakistan: International Steels posts 39 pct YoY drop in half yearly profit
Egypt: Steel exports drop 30 pct YoY in H1 2019
Oman: Unique Contracting awarded contract for mixed-use development project

Global Steel News

China: Iron ore futures extend losses as supply concerns ease; steel futures drop despite Tangshan curbs
China: High grade iron ore demand likely to increase in the wake of strict environmental regulation
India: Economic slowdown may force JSW Steel to cut production
Russia: MMK's steel deliveries to auto industry grew by 23 pct in H1 2019 YoY
Australia: BHP posts largest annual profit in 5 years but trade risks linger


New (Renewed) Steel Companies on MEsteel
Company Country Steel tons handled per year (kt) Brief Description
GULF FERRO ALLOYS COMPANY (SABAYEK) Saudi Arabia 50-100 Ferro Alloys Producer (Silico Manganese & High Carbon Ferro Manganese).

Middle East Steel News

Kardemir cuts semi-finished and long steel prices

New rebar price is at TRY 2521 (USD 449), down by TRY 30 per ton compared to prices announced on 8 August 2019. In USD term, rebar prices decreased by USD 8 per ton.

Wire rod prices for 6-32 mm sizes in SAE 1006 grade are 2,720 (USD 484) per ton as compared to TRY 2,770 per ton in the last published price list. In USD terms, wire rod prices decreased by USD 13 per ton.

Kardemir has also reduced billet prices by TRY 90 per ton. New billet prices for 130 mm section size in S235JR grade is at TRY 2410 (USD 429) and for 150 mm its 2350 (USD 418) per ton.

Karabuk Demir Celik (Kardemir) was established in 1938 as a state-owned company and Turkey's first integrated steel producer. In 1995, the company was privatized. It offers steel products, such as blooms, billets, rebars, profiles along with other steel products.

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Kardemir's crude steel output declined by 3.36 pct in H1 2019 YoY

Turkish steel producer, Kardemir, has announced its operational results for the first six months ended 30 June 2019.

In H1 2019, Kardemir's crude steel output decreased by 3.36 pct YoY to 1.13 mln tons. Company utilized 66.2 pct liquid steel capacity as compared to 68.56 pct in the same period last year. Kardemir's liquid steel capacity is 3.5 mln tons per annum.

Company has also reported TRY 170.159 mln (USD 30.3 mln) profit in the first half of 2019, down significantly by 61 pct YoY due to higher cost. Sales revenue were totalled TRY 3.2 bln, up by 28.51 pct YoY in the given period. Sales quantity increased by 5.5 pct YoY to 1.19 mln tons.

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International Steels posts 39 pct YoY drop in half yearly profit

International Steels' earnings dived 39pct to PKR 2.66 bln (USD 16.7 mln) in the year ended June 30, 2019 on the back of a dip in gross margins.

The company had reported a profit of PKR 4.36 bln in the previous year, according to a company notice sent to the Pakistan Stock Exchange (PSX).

Topline Securities' analyst Hammad Akram was of the view that the significant decline in earnings was mainly due to decrease of 1.4 percentage points in gross margins of the company as the USD gained 31pct against the rupee in FY19. Finance cost surged a massive 139.2pct to PKR 1.29 bln from PKR 539.1 mln in FY18 due to higher interest rates coupled with heavy borrowing.

Net sales improved 15.6pct on a YoY basis to PKR 55.1 bln (USD 345 mln) as the company sold around 140,000-145,000 tons of flat steel products, Akram said.

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Steel exports drop 30 pct YoY in H1 2019

Egypt's iron and steel exports declined by 30 pct during the first half of 2019 as exporters haven't received their dues from the export subsidies programme estimated at EGP 1 bln (USD 60.3 mln), Samir Naaman, official at the export council for building materials.

Naaman, head of the Division of construction materials production, further told a local newspaper that the delay in paying off the arrears of export subsidies has contributed to decreasing the competitiveness of the Egyptian steel in foreign markets.

Egyptian iron and steel exports during H1 of 2019 has declined to register USD 394 mln versus USD 560 mln in the same period of 2018.

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Unique Contracting awarded contract for mixed-use development project

Real estate developer Tasmim has named Unique Contracting as main contractor for its mixed-use development Habitat in Al Khuwair near Muscat International Airport, which is expected to complete by December 2021.

The project is being developed by a joint venture of Omani conglomerate Shanfari Group of Companies and European architecture firm Mandressi, both of which are backers of Tasmim.

Commenting on the contract award, Tasmim's chief executive officer, Alessandro Daverio, said substructure works would commence shortly on the project.

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Global Steel News

Iron ore futures extend losses as supply concerns ease; steel futures drop despite Tangshan curbs

Iron ore futures in China fell for a fourth straight session on Tuesday as supply concerns eased, while stepped-up production curbs in top steelmaking city of Tangshan added more pressure.

The most-traded January 2020 iron ore contract on the Dalian Commodity Exchange ended down 2.2pct at the session's lowest at 609 yuan (USD 86.25) a ton, its weakest finish since June 11.

The most-active September 2019 iron ore contract on the Singapore Exchange was down 0.5pct at USD 86.08 a ton in late trade.

"The iron ore market is currently mainly driven by supply factors, such as the rising export volumes from miners," a Shanghai-based trader said.

Top steel producer China's iron ore imports surged 21pct in July from the month before to their highest level since January, as supplies surged from miners in Australia and Brazil.

Reduced iron ore shipments after a deadly tailings dam collapse in Brazil in January and a cyclone in Australia, and China's ramped-up steel output, lifted spot prices of the raw material to five-year peak in recent months. Prices have pulled back but they remain well above 2018 levels.

"Despite the steel production restrictions in China, I think demand for iron ore, particularly for high-grade materials, is still at a healthy level," the trader said.

Under Tangshan's new anti-pollution measures, steelmaker HBIS Tangsteel is allowed to operate only one sintering plant over a four-day period from Aug. 18. Huaxi Steel and Guoyi Special Steel can operate only two plants each, according to a report.

All other Tangshan mills were asked to slash sintering operations by 50pct, compared with the 20pct-50pct reduction previously imposed for August, the report said.

Benchmark spot 62pct iron ore for delivery to China rose on Monday to USD 92.50 a ton, from Friday's USD 91.50, extending its rebound after slumping to the lowest in more than four months early last week.

China's demand for iron ore pellets and high-quality ore is expected to accelerate in 2020 as a result of Beijing's push to shift dozens of steel mills to coastal regions in its battle to stop smog blanketing industrial cities.

The most-active construction steel rebar contract on the Shanghai Futures Exchange edged down 0.8pct at 3,699 yuan a ton.

Hot-rolled coil dropped 0.5pct to 3,709 yuan a ton.

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High grade iron ore demand likely to increase in the wake of strict environmental regulation

China's demand for iron ore pellets and high-quality ore is expected to accelerate in 2020 as a result of Beijing's push to shift dozens of steel mills to coastal regions in its battle to stop smog blanketing industrial cities.

Relocating plants to the coast, with stricter environmental requirements, means up to 20pct of China's more-than-a-bln-ton annual ore demand will shift from lower- to higher-grade ores within coming years, according to industry sources and a Reuters analysis of official import and production statistics.

Steel executives say the demand shift in the top ore market will mean declining purchases of low-grade supplies and greater demand for pelletised ore of a higher grade - with potentially major implications for ore exporters in Australia.

"Iron ore producers who can sell pellet-feed into China will be better placed than those who don't have such products," said Ian Roper, general manager at a Chinese metals market research company, "with the major Australian (lower-grade) specialist suppliers facing the biggest challenge in the medium to longer term."

Brazil's Vale SA, the world's biggest iron ore miner, is also the top producer of pellets and pellet feed. LKAB in Sweden and Switzerland-based Ferrexpo are the second- and third-largest pellet producers.

Over a four-year campaign against pollution, as well as excess capacity in heavy industry, China has shut 700 small steel mills with 140 mln tons of steel capacity deemed sub-standard, plus 150 mln tons of inefficient capacity at larger firms.

Remaining mills will need to further cut emissions, and those located in the smog-prone eastern rust belt must move to designated steel parks along the coast, where fragile eco-systems mean environmental regulations are strict.

More than 50 Chinese steel companies pledged in 2018 to shut old capacity and build new furnaces with a combined yearly capacity of 60.29 mln tons, according to a Reuters analysis of official industry data. Nearly 25 mln tons of this new capacity is scheduled to come online in 2020.

Another 33 firms will build 47.03 mln tons of new capacity within the next three years.

These new plants will each house bigger, more efficient furnaces with annual capacity of more than 1 mln tons, compared to 550,000-650,000 tons previously.

They will also boast lower emissions but require higher quality ore and more pellets to minimize pollution and optimize output, industry experts said.

"It's much more expensive to fix big furnaces than the smaller ones," said a purchasing manager at a mid-sized mill in Hebei, China's steel hub. "So mills tend to feed them with better raw materials, and adding more pellets will improve air permeability in the furnaces."

Iron ore pellets, typically with 64pct iron content or above, can be shoveled directly into blast furnaces without going through a dirtier process known sintering, where low-grade ore is mixed with other products to create a blast furnace fuel.

"Using pellets in steelmaking consumes only one third of the energy that using sinter ore does," said Li Xishan, assistant general manager at Yangzhou Pacific Special Materials Co, the biggest pellet producer in China, with annual capacity of 6 mln tons.

Emissions of sulfur dioxide and nitrogen oxide will be cut by 47-95pct if mills cut out sintering and switch to pellets, Li said.

Erik Hedborg, senior iron ore analyst at CRU in London, expects Chinese pellet demand to grow more than 40pct by 2023 to roughly 190 mln tons, from 140 mln tons in 2018, and keep rising.

China's current demand for pellets remains well below overseas counterparts, at around 15-16pct of all ore compared with 35pct in Europe.

"We expect China to follow the rest of the world in terms of pellet rates," Hedborg said.

While using pellets effectively shifts part of the dirty production process offshore, they are more expensive than lower-grade ore.

So far this year, pellet-grade ore for import has averaged USD 30 per ton above low-grade 58pct ore, and about USD 12 a ton more than benchmark-grade 62pct ore.

This means any significant increase in pellet purchases may come with a hefty price tag for cash-strapped mills.

Due to those enduring cost concerns, much of the initial increase in pellet demand is expected by industry insiders to be filled by domestic producers, who have a combined output production capacity of 253 mln tons and often undercut international rivals.

But analysts question whether domestic suppliers will be able to keep up with demand, given their own emissions restrictions and limited supplies of pellet feed.

"We expect pellet feeds production in China to fall amid the tightening environmental regulations," said Dr. Ming He, senior manager at Wood Mackenzie in Beijing. "Hence mills will have to buy pellets directly from foreign producers, as the cost of making pellets with imported feeds would be too expensive."

China imported 18.67 mln tons of pellets last year, or 1.8pct of total iron ore imports, with 34pct coming from India, 26pct from Canada and 14pct from Brazil, according to Chinese customs data.

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Economic slowdown may force JSW Steel to cut production

JSW Steel, the leading steelmaker in India, may be forced to cut production in the coming months as economic slowdown has dampened demand from clients in infrastructure and auto sectors.

While the auto sector has seen one of the sharpest drops in sales, government spending in infrastructure projects hasn't reached desired levels.

If this was bad enough, steelmakers are also facing an unusual situation: even as steel prices have gone south, rates of raw materials like iron ore and coking coal remain high. This has kept cost of production elevated, even as margins have come under pressure.

Due to these factors - and unless there is a stimulus from the government - it is unlikely that demand will pick up in the near future, said a senior official from JSW Steel.

"If you look the four sectors that reflect economic activity - capital goods, infrastructure, oil & gas and metals and mining - none of them is talking about investments it is looking difficult for steel companies to make money in such circumstances," JSW Steel's Jt Managing Director & Group CFO Seshagiri Rao, told a local newspaper.

"A production cut could be the answer. If not in this quarter, in the next quarter we could see a big cut in supply, all the variables remaining the same," said Rao.

JSW Steel last cut production in 2011, when a mining ban in Karnataka led to a severe shortage of iron ore, a key raw material in steel making.

In 2008 too, the steel company had closed its blast furnace for about a month as demand from auto and infrastructure sectors slumped.

This time too, conditions have been tough for steelmakers. In the first quarter, JSW Steel saw its profit plummet by a half. Likewise, Tata Steel's net profit tanked 64 pct.

This is the fifth down cycle that Rao is seeing in his 32-year career in the steel sector.

There was one in 1989, followed by the Asian financial crisis in 1997, and the third in 2008. JSW Steel faced a slowdown in 2011 because of the raw material crunch. And now, in 2019, another down cycle is impacting the industry.

But it is an unusual one, says the veteran.

"In almost all the cycles, raw material and steel prices moved in the same direction, even if not in the same proportion. If steel prices fell, iron ore and coking coal rates would also come down. But not this time," says Rao.

So even as steel price corrected to USD 480 a ton, iron ore prices headed north. Similar was the trend in coking coal prices. But there was no supply adjustment, except in Europe. ArcelorMittal had cut production in many of its units in Europe.

But in rest of the steel market, including in India, producers have refrained from cutting production.

While prices of iron ore and coking coal have in the last month corrected, the general belief is that there is room for much more. And that is because the slide in price of steel products has been steeper.

A news report pointed out that since the beginning of the year, price of TMT bars and billets have fallen by up to 21 pct. Industry players have called for a cut in iron ore prices.

"A correction in iron ore is possible," says Rao.

Explaining how the sector has evolved since 2008, Rao underlined that the circumstances have become more volatile.

"And that is because raw material contracts were earlier set, yearly. With the raw material price known, the steel rates would also move in similar range," recounts Rao.

But raw material contracts later became half-yearly, quarterly, monthly and are now indexed. "Funds entered, invested and any small disruption - actual or potential - led to changes in prices. With this financialization, the movement in steel prices has become too volatile," says Rao.

On the other hand, the financialization didn't happen in the steel side. Things remained the same when it came to fixing steel contracts. Even today, clients of JSW Steel prefer fixed price when awarding contracts. Some, like in auto, take into account price trend of the previous six months while deciding on the contract. But others, especially in infrastructure, don't.

"So adjusting to this kind of a situation itself is a challenge", says Rao.

The change has affected the length of a peak or a trough in the sector. "Prior to 2008, the downturn or a peak used to be longer," added the senior executive.

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MMK's steel deliveries to auto industry grew by 23 pct in H1 2019 YoY

Magnitogorsk Iron and Steel Works (MMK) delivered more than 314,000 tons of steel products to the automotive industry in the first half of 2019, exceeding the previous year's figure for the same period by 23pct.

The share of shipments to the automotive industry in the first six months of this year amounted to 7.5pct of MMK's supplies to the domestic market. The first half of this year saw significant increases in the supply of Magnitogorsk metal to such automakers as AVTOVAZ, UAZ and Volkswagen.

MMK supplies cold-rolled and hot-dip galvanised steel to all major Russian companies in the industry, as well as to foreign automakers localising their capacities in Russia. At the same time, MMK's share within the structure of metal consumption in many enterprises of the automotive industry reaches 50-80pct.

An important step in the expansion of MMK's presence in the steel market for the automotive industry was the commissioning in 2011-2012 of the modern cold rolling complex in the sheet rolling shop No. 11, Mill 2000. The launch of the complex allowed MMK to compete closely with foreign manufacturers. The technological features of the complex have made it possible to meet the most stringent requirements for the surface quality of cold-rolled and hot-galvanized steel, to provide high tolerances in thickness, and to produce high-strength IF-HS, HSLA, BH and DP steel that is in demand among automakers and automotive component manufacturers.

In 2018, the supply of MMK steel products to the automotive industry amounted to almost 550,000 tons, which became a record figure for the company. This year, MMK plans to surpass the mark of 600,000 tons of metal products shipped to the automotive industry.

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BHP posts largest annual profit in 5 years but trade risks linger

BHP Group, the world's biggest miner, reported its largest annual profit in five years and posted record full-year dividends, boosted by a dramatic rally in prices for steelmaking ingredient iron ore.

However, the dividend slightly undershot some expectations as BHP kept cash in its coffers in the face of risks to global economic growth such as the Sino-U.S. trade war.

While the trade dispute between Washington and Beijing has dampened global economic growth, it has not yet affected Chinese demand for BHP's commodities such as iron ore, copper and coal in China, said Chief Executive Andrew Mackenzie.

Mackenzie also noted that BHP has become the world's lowest cost iron ore producer, whittling costs down to USD 12.86 per ton with scope to trim them still further, as it reaped a 40 pct jump in realised prices to USD 77.74 from USD 55.62 in the first-half of the 2019 calendar year.

Iron ore prices staged a dramatic rally in the first-half with the Dalian iron benchmark more than doubling, amid the supply shortfall and more Chinese appetite for the steelmaking raw material as it ramped up infrastructure spending to support its economy.

China's iron ore imports surged 21pct in July from the month before to their highest level since January, as supply recovered from miners in Australia and Brazil.

Underlying profit for the 12 months ended June 30 rose to USD 9.12 bln from USD 8.93 bln a year earlier. Underlying profit is a measure of the company's core performance excluding one-time gains and losses.

But the company recorded USD 1 bln in productivity losses for fiscal 2019 on disruptions to production at its copper and iron ore operations.

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Metal Prices 19-Aug-19

Product Cash 3 Mons.
Nickel 16.000 16.000
Tin 16.370 16.375
Zinc 2.237 2.249
Source: LME.co.uk

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