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Iron Ore China steel futures hit all time low

Reuters reported that steel futures in Shanghai sank to an all time low on Tuesday, piling pressure on a global iron ore market reeling from a slump in demand from China, the world dominant consumer.

Losing more than a third of its value since early July, iron ore prices are near their lowest level in three years forcing Australian miner Fortescue Metal Group to slash capital spending and cut hundreds of jobs.

The most traded rebar for January delivery on the Shanghai Futures Exchange hit a session low of CNY 3,298, its weakest since the bourse launched rebar futures in 2009. It stood at CNY 3,304 by the midday break down by 1.4%.

According to data provider Steel Index, benchmark iron ore with 62% iron content .IO62-CNI=SI dipped 30 cents to USD 89.10 a tonne on Monday after Friday's brief rally. Iron ore fell to $88.70 on Thursday its lowest since October 2009.

An iron ore trader based in eastern China Shandong province said "Some people thought iron ore prices had hit the bottom, but I think Friday's rebound was temporary and prices may drop further unless we see big policies to support the economy."

The precipitous decline in Chinese steel prices has had a chilling impact on the iron ore market with iron ore prices falling about 24% in August.

There is still no immediate sign that steel prices will improve, though traders said there was a limit to how much iron ore could decline further.

A Shanghai-based steel trader said "The slump in iron ore prices will slow down as they have almost fallen to the total cost level of most foreign miners, while there is no positive news for the steel market and I can only expect steel prices to stabilise a bit in September and October."

The slump is being felt throughout the iron ore sector, and the larger players are now having to rethink their once bullish expansion plans.

Fortescue Metals Group, Australia third biggest iron ore producer said it would cut jobs, slash its capital spending by a quarter and delay its expansion plans as a result of slowing Chinese demand.

The move follows a decision by mining giant BHP Billiton to shelve a USD 20 billion copper and gold mine expansion in Australia and put all other approvals worldwide on hold.

Source - Reuters
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China boosts rail spending for third time to help revive growth

Bloomberg quoted according to China Railway Group Ltd China boosted plans for spending on railway construction this year to CNY 496 billion as the government seeks to revive flagging economic growth.

Mr Bai Zhongren president of state controlled China Railway Group said spending on new railways will total at least CNY 67 billion a month until the end of the year. The ministry has funding for the new plan which is an increase from CNY 470 billion.

Mr Bai said “This all shows the government’s determination to boost rail development. The government and leaders have stressed many times that the nation should have a scientific and sustainable development of railways.”

The new figure, 7.6% more than last year CNY 461 billion spending is at least the third increase since the start of July when Premier Wen Jiabao said promoting investment growth is key to stabilizing economic expansion that has fallen to the slowest pace in three years. It also marks a renewed focus on building railways after a fatal crash last year prompted safety concerns and a construction slowdown.

Ms Karen Li a Hong Kong based JPMorgan Chase & Co analyst said “The government sees that underlying economic activity is continuing to deteriorate, so they have to do more in terms of investment. Railway investments will be rolled out in a more aggressive way in order to meet the new target.”

She said the ministry of railways is also holding a working group meeting next week which is an unusual time and a sign that funding plans are secure.

Source - Bloomberg
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Crude steel annual output below 1 million tonne to be eliminated - MIIT

The Ministry of Industry and Information Technology of China announced to obsolete steel mills with annual output under one million tonnes.

According to the standards, plain carbon steel mills should own crude steel annual output above one million tonnes and that from special steel mills should have annual output of 300,000 tonnes. Besides, steel mills’ blast furnace should reach 400 cubic meters or else it would be eliminated as well.

In addition, the smoke dust and sulfur dioxide discharge should lower 1.19 kilogram and 1.63 kilogram separately when producing one-tonne crude steel.

Source: www.steelhome.cn/en
China steel information centre and industry database
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ArcelorMittal Liberia signs Collective Bargaining Agreement with Workers' Union

On August 31st 2012, ArcelorMittal Liberia and the United Workers' Union of Liberia signed the company's first Collective Bargaining Agreement, aimed at establishing a formal structure for regulating all aspects of the company and its employees' relationship.

Highlights of this agreement include:
Salary increase to be backdated from April 1st 2012

Enhanced employee benefits, such as an increase in maternity, paternity and annual leaves

Variable bonus to be introduced in January 2013, based on performance including safety

The establishment of a joint health and safety committee

The establishment of a joint ArcelorMittal Liberia management and union committee

Peace obligation binding the management and union to follow requisite procedures to ensure all disputes is resolved internally, at the lowest levels

Mr Lourens Duplessis head of human resources at ArcelorMittal Liberia said that "We were functioning with an interim agreement that did not meet the requirements for providing all the necessary structures, policies and procedures to assist in managing the relationship. The Collective Bargaining Agreement assists greatly in providing the mechanisms conducive to a positive working relationship."

Mr Rajesh Goel CEO of ArcelorMittal Liberia said that "We are very pleased that management and workers have negotiated this agreement after intense negotiations. Arriving at this stage of signing of the CBA took nine long months; however, it is commendable that both sides displayed exemplary patience, maturity, perseverance, mutual respect and understanding to continue the discussion, maintaining an environment of cordiality and camaraderie. My heartiest congratulations and thanks to the workers, management representatives, national general secretary of UWUL and the Labour Ministry. Both sides are now ready to work together to achieve good operating results for the company."

The negotiations between ArcelorMittal’s management and the Worker's Union executives, launched in November 2011, were held in Monrovia, Yekepa, and Buchanan, with an agreement finally reached on August 11th 2012.

Mr Chea Romeo Brookes, head of ArcelorMittal Liberia's Workers' Union, said that "It is a fair deal and should be used as a hallmark for other companies that will be investing in our country."

He singled out the progression of wages as the best part of the deal but emphasized that it must be enforced by the management, employees and the Government of Liberia.

For Liberia, this is the second major CBA signing by an investor, and many see such agreements as major contributors to the general economic growth and wellbeing of the country.

Mr Natty B Davis chairman of the National Investment Commission said that "You are a model for negotiation in the workplace. You are a shining example to all. It takes responsible management and employees to achieve this objective."

Source - ArcelorMittal

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Italian crude steel output down by 8.9pct YoY in July - Federacciai

According to the figures released by the Italian steel producers' association Federacciai, Italian crude steel output decreased by 8.9% YoY in July 2012, totaling 2.402 million tonnes. July is the fourth consecutive month in which a year on year fall in output has been seen.

In addition, the year on year downtrend in crude steel output indicated acceleration in August 2012, increasing by 1.5 percentage as compared to June 2012 and rising by 7.1 percentage points compared to May 2012.

In the first seven months of 2012, total Italian crude steel output amounted to 17.266 million tonnes, down by 0.8% YoY. Despite the year on year decreases in Italian crude steel production starting from April 2012, the year to date output volume has not yet indicated a negative year on year variation in the current year.

Source - Visit www.steelorbis.com for more
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Iran crude steel output climbs 9pct

Tehran Times reported that Iran produced over 6.25 million tonnes of crude steel during the first 5 months of this Iranian year which began on March 20, showing an 8.8% growth YoY.

As per report, some 7.2 million tonnes of steel products were also manufactured in the 5 month period almost equal to the previous year’s total output.

Mr Vajihollah Jafari deputy industry minister of Iran said that the country’s annual crude steel output is projected to reach 55 million tonnes by 2025.

Mr Mehdi Ghazanfari Industry, Mine and Trade Minister of Iran said that Iran will become one of the world’s main steel exporters by March 2016.

Mr Hamidreza Taherizadeh vice chairman of the Association of Iranian Steel Producers said that Iran will be a self-sufficient steel producer in the next three years. Despite global economic sanctions, the country’s steel output increased by 5 million tonnes during the past two years, reaching 17 million tonnes.

Source - Tehran Times.com
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S&P voorziet blijvend lage staalvraag in Europa


AMSTERDAM (Dow Jones)--In navolging van meerdere negatieve rating wijzigingen in de afgelopen negen maanden, waaronder de afwaardering van ArcelorMittal (MT.AE), blijft S&P negatief over de verwachtingen voor de Europese staalsector. Volgens de kredietbeoordelaar behoren aanvullende afwaarderingen tot de mogelijkheden, ondanks kostenbesparingen en verkoop van bezittingen door sommige staalfabrikanten. Als belangrijkste redenen noemt S&P de ongunstige balans tussen vraag en aanbod op de wereldwijde markt, maar vooral de fragiele vraag in Europa. Daar komt bovendien bij dat de groei van de staalmarkt in China ook tot een stilstand is gekomen. De analisten houden in hun analyse ook rekening met een dubbele dip-recessie in Europa, waarop ze de kans op 40% inschatten. Mocht dit scenario zich voltrekken, dan voorzien ze een substantiele verzwakking van de staalvraag, marges en balansen van bedrijven. Omstreeks 10.55 uur noteert het aandeel ArcelorMittal 2,2% hoger op EUR11,67, terwijl roestvaststaalconcern Aperam 5,8% stijgt naar EUR10,03. (LDF)


Dow Jones Nieuwsdienst: +31-20-5715200; amsterdam@dowjones.com
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Steel prices collapse belies all hopes of revival in short term

5 days into September and another 2% decline in steel prices with the SHFE steel futures plunging to an all-time low mounted concerns about a deep rooted rot in the world's top steel consumer .

Economy still aspiring for belated infusion of credit by reducing lending rates fears of snapping gains ground with the patience being stretched too far. Housing sector being the progenitors of demand has the potential to provide mainstay. Residential construction is a key driver of Chinese economic growth and, given its direct and derived use of steel is likely to grow 30% by 2024.

Setting aside the envisaged demand from housing sector the steel mills are finding it hard to overcome production addiction leading to inventory pile up (15 million tonnes). Ironically production cut by big players has been negated by small mills latching on to low raw material price to increase production.

A change of guard at the political helm is in the offing by month end. Market awaits with baited breath for the new setup balm the scars of previous regime. In the meanwhile the Chinese mills are experimenting with new strategic initiatives like indulging in retail sales by cutting the trader stockiest buffer.

The HSBC China manufacturing PMI fell to 47.6, the lowest since March 2009, China's official manufacturing PMI fell for a fourth straight month, dropping to 49.2 in August from 50.1 in July. However inflation has been effectively tackled remaining stay put at 3% in July.

Forestalling investment propositions abroad and indulgence in buying government bonds of the EU countries are some measures to stem the slide in economy and industry. Prudence on part of the PBOC in reducing lending rate is widely expected apart from reduction in export tax of 17%.

National Holiday (1-7th October) might prove to be the turning point partially on speculation about an stimulus package from new regime and market having bottomed out at last before the pre-winter buying sets in.


Source - Strategic Research Institute
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China largest steelmaking province Hebei in depression

It is reported that China largest steelmaking province says the sector has fallen into extreme depression and is unlikely to recover for some time as the country steel mills undergo a long-awaited restructure.

The comments come as iron ore stock piles hit historic highs with Beijing-based analysts predicting that low prices will continue for many months as Chinese steel mills cut production and struggle with industry overcapacity.

The Metallurgy Association of Hebei Province said "The steel industry in Hebei has fallen into extreme depression. Orders to steel factories are dropping sharply and the stock of products keeps increasing with operational pressure on steel factories growing further."

Mr Wang Dayong secretary general of the association said the lower prices and profits would not change in a short time while the environment for China mills to restructure was still developing.

China has steel capacity of about 850 million tonnes, much of it created during the massive government stimulus of 2009-10. But its mills produced only 680 million tonnes of steel last year and are forecast to produce 700 million to 720 million tonnes this year.

But the general economic malaise and the choking off of demand in the real estate sector is starting to bite.

The association said "Though the central government has issued certain stimulus with financial and monetary policies, the slump in demand has not changed."

The association said "Orders for August have dropped 13.3% from the previous month and the steel price has decreased within a large range so more steel mills have put their furnaces into maintenance. Steel factories are reducing their ore stockpiles. The purchase of ores is being reduced, from both domestic producers and abroad."

This slackening in demand has combined with an increased supply of seaborne iron ore from Australia and Brazil.

Source - The Australian
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Tougher rules on iron and steel industry in China

Xinhua reported that China announced a series of new regulations on Monday to fine-tune its iron and steel industry in a bid to make it more energy efficient and environmentally friendly.

The announcement, published by China Ministry of Industry and Information Technology said the new regulations relate to stricter requirements on quality of products, energy consumption, emissions, technology and equipment standards, production scale as well as security and social responsibility for iron and steel companies.

The new regulations rule that iron and steel companies are forbidden to produce a list of obsolete products including hot rolled silicon steel and twisted steel of primary level. Further, powder dust emissions, sulphur dioxide emissions and water consumption for making per ton of steel should not exceed 1.19 kilogram, 1.63 kilogram and 4.1 cubic meters separately.

For equipment capacity requirements, shaft furnaces should be more than 400 cubic meters, converter or electric furnaces should be above 30 tonnes while high alloy steel furnaces should be over 10 tonnes.

As for admittance standards of production scale, a company which produces common steel products should have an annual capacity of no less than one million tonnes in 2010 while a company who produces special steel products should have an annual capacity of 300,000 tonnes or above.

Further, any serious accidents within two years could deprive a company a production qualification, adding that work safety and employees' payments should be guaranteed. The new regulations which is said to be formulated in line with the developments of the country iron and steel industry will be enforced on October 1, 2012. Meanwhile, the old one, which was formulated in June 2010 will be expired.

Source - Xinhua
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Italian government committed to keeping ILVA steel plant open

Reuters reported that the Italian government is committed to keeping open a giant ILVA steel mill in the southern city of Taranto that was threatened with closure due to heavy pollution.

The government said in a statement that closing the plant would cost about EUR 8 billion a year in increased imports, unemployment support, reduced tax revenues and depressed spending in the area

It said “The government and the other institutions, are committed to guaranteeing continued production by taking steps to ensure an improvement in environmental sustainability and protect the health of workers and the public.”

In July prosecutors ordered the partial closure of the plant, which is the biggest of its kind in Europe. Court documents, citing a number of environmental and health reports, said toxic emissions caused hundreds of deaths from respiratory diseases in Taranto and the surrounding region.

Source - Reuters
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ArcelorMittal employees held rally on September 5 2012

ArcelorMittal employees held a rally on September 5th 2012 across the United States to urge the company to come up with a fair and equitable contract.

The demonstration comes just days after the union's pact with the steelmaker expired, but ArcelorMittal and the United Steelworkers decided to continue working under the old contract. More than 1,000 employees and retirees were out in force at an August 27th 2012 practice picket outside the main office at the Indiana Harbor plant in East Chicago plant.

ArcelorMittal idled several furnaces in the run up to the expiration of the contract, but most of them were fired up on September 2nd 2012.

The latest update from the United Steelworkers questioned why ArcelorMittal is dragging its feet on a new contract, while US Steel reached a tentative agreement with the USW on September 2nd 2012.

The USW said the steelworkers still face three significant hurdles to reaching an agreement: funding of the Benefit Trust for retiree health care, current pension terms and pension terms for employees of the former Inland Steel.

The company said it will not comment on specific issues being discussed in negotiations.

The USW said it is in the process of putting together summaries of the tentative agreement with US Steel to members, who will vote by mail. The USW said the process should take three to four weeks.

Source - Post Tribune?

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Lekker bezig, die S&P, (maar niet heus)

Chinese steel companies facing real difficulties - S&P

Global Times quoted ratings agency Standard & Poor said weak margins and overcapacity will erode the profitability of China steel sector this year amid sluggish demand and declining prices.

Ms Suzanne Smith a credit analyst at Standard & Poor said "The overall performance for this year is expected to be much weaker than last year. But the industry is not expected to record a loss for the year.”

She said with Europe recession and the weak US recovery, global companies in the industry are all hurting this year. S&P has also lowered its ratings for Arcelor Mittal, the world largest steel company, and other major steel makers including Nippon Steel and POSCO.

Ms Smith said "The steel industry in China might be worse off than elsewhere because of the overcapacity situation. A number of steel manufacturers have been shut down in Europe, but we have not seen that happen very much in China."

China Business News reported citing data from the China Iron and Steel Association that China 80 largest steel makers suffered a total loss of CNY 1.98 billion in July. The firms made a meager profit of CNY 710 million for the first seven months down by 98.9%YoY.

According to the CISA, the major companies made a combined profit of CNY 87.5 billion in 2011.

According to S&P's report slowing demand and overcapacity is likely to keep steel prices at a low level and could easily depress them further. Demand growth has decelerated due to a slowdown in residential and commercial real estate construction, which accounts for half of steel demand.

S&P said in the report that "While reliable estimates of overcapacity are difficult to obtain, we estimate the level to be about 10% to 25%."

Source - Global Times
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58 steelmakers named on 2012 China top 500 enterprises list

The China Enterprise Confederation and China Entrepreneur Association have issued their list of China's top 500 enterprises for 2012. 58 steelmakers were named on the 2012 China top 500 enterprises list, compared to 55 on the 2011 list.

The aggregate operating revenue of the 58 steelmakers in question in 2011 totaled CNY 4.0175 trillion. Chinese steel giant Baosteel was the highest ranking steel producer on the 2012 China top 500 enterprises list ranked 21st.

The top 10 steelmakers on the list ranked according to earnings in 2011, were Baosteel, Hebei Iron and Steel Group, Shougang, WISCO, Shagang, Angang, Xinxing Cathay International, TISCO, Shandong Steel and Tianjin Pipe. The first seven of these steel producers were also listed among the top 500 world enterprises.

Source - Visit www.steelorbis.com for more
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China approves 25 urban rail projects to boost economy

Xinhua reported that China top economic planning agency has approved 25 urban rail projects that could be worth more than CNY 800 billion.

The National Development and Reform Commission recently announced the approvals of project plans and feasibility reports for the 25 projects in cities including Shijiazhuang, Taiyuan, Lanzhou, Guangzhou and Xiamen, according to the NDRC's website.

The move marks the government latest effort to stabilize economic growth when external demand remains weak as the US economy has been struggling to gain traction and Europe is slipping toward a recession, Mr Xu Changle, professor of regional economics at the East China Normal University.

Official data shows that China economy grew by 7.6%YoY in the second quarter of 2012, its slowest pace in three years.

According to the China Association of Metros an organization under the direct supervision of the NDRC, forty Chinese cities will have subway systems by 2020, bringing the total track length to 7,000 kilometers, 4.3 times the current length.

Source - Xinhua

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ArcelorMittal and USW continue talks - Union

Bloomberg reported that talks between ArcelorMittal and the United Steelworkers are continuing four days after the previous labor contract expired.

Mr Bill Steers, a spokesman for Luxembourg based ArcelorMittal, didn't immediately respond to an e-mailed request for comment.

Source - Bloomberg
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ArcelorMittal to invest EUR 7 million car plates developed in France

ArcelorMittal Florange factory which located in eastern France has begun testing a new galvanizing line.

It is known that the new galvanizing line is mainly designed to coat Usibor, a kind of hardened boron steel used in automobile manufacturing.

In addition, the company has set up a new production line to develop steel products to meet the needs of the vehicle's weight loss.

However, ArcelorMittal did not disclose the capacity of the new production line.

The company spokesman said, ArcelorMittal has invested EUR 7 million in the project till now.

Source - www.yieh.com)
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Taylor Winfield completes advanced seam welding training for ArcelorMittal Vega

At their Innovation Place facility in Youngstown, Taylor Winfield Technologies Inc has recently completed an advanced seam welding training course for Brazilian steel producer ArcelorMittal Vega located in São Francisco do Sul. Taylor Winfield was turned to for technical assistance when the customer faced the need to join automotive grade Advanced High Strength Steels in their production lines.

ArcelorMittal Vega purchased a traditional Narrow Lap seam welder from Taylor Winfield in 2008. Since then, Taylor Winfield has supplied regular on-going service and support to help match their welding techniques with the material being processed in their line.

Mr Robert Matteson, director of technology and product development for Taylor Winfield, said that "Steel grades are constantly changing, and therefore, the welding techniques used must be adapted to the materials being joined. Taylor Winfield, with our state of the art Research and Development Laboratory, has the resources available to weld these new AHSS alloys and train our customer's personnel on proper welding techniques for their process lines. Therefore, we were selected to provide this crucial training."

Source - Taylor Winfield Technologies Inc
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Iron ore continue to build up at Chinese ports

Xinhua News reported that iron ore has continued to build up at 25 major ports as Chinese steel makers posted widespread losses over the seven months to July.

According to the news agency, iron ore inventories waiting at ports increased 1.86 million tonnes to 102.53 million tonnes last week.

Xinhua analysts have blamed the build up on weakening demand for the product.

Xinhua analysts said in the report that "In the short-term, the iron ore market will continue to suffer from oversupplying and the downward trend seems irreversible.”

Source - Xinhua
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Morgan Stanley explains on iron ore price crash

Macro watchers and China observers can't stop talking about the collapse in iron ore prices, as they discuss what it means for the Chinese economy, and miners of industrial metals based in Australia.

Morgan Stanley's Brendan Fitzpatrick has a note on Australian Metals & Mining which simply observes that things are "Getting brutal."

As for why things have gotten so bad, Fitzpatrick offers some straightforward explanations:

Why have spot iron ore and coking coal prices collapsed? In our view, the price weakness in steel making raw materials is a consequence of Chinese steel mills overproducing into an environment of demand weakness. Year to date in 2012, crude steel production has annualized at 717 million tonne vs 683 million tonne in C2011. Despite this, the most recent macroeconomic data clearly illustrate that industrial output in China (a key driver of steel demand) has slowed to levels not seen since mid-2009, and domestic steel prices have sunk to 33-month lows as a result.

Raw materials de-stock has been triggered This steel price weakness has compressed steel cash operating margins among Chinese mills despite sharply falling input costs. Ordinarily, we would expect to see a production response from the steel mills, designed to lower producer, distributor and customer inventories of finished steel. Instead, this intense operating margin pressure has triggered an aggressive raw materials destock as mills maintain output preserve market share and, in the case of the larger steel mills, meet employment obligations.

Purchases being pushed out a ‘buyers strike’ As a result, many contract buyers of iron ore and coking coal have rescheduled deliveries to 4Q12 and 1Q13, with Steel Business Briefing (SBB) reporting that “mills were deferring deliveries of long-term contractual cargoes and buying small lots of portside ore where needed to keep furnaces running.”. At the same time, spot buyers have stepped back from the spot market, forcing traders to scale back purchases and liquidate stocks, intensifying the short-term demand shock.

Source - Business Insider
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