Mittal suffers loss after furnace fails

Conditions in struggling South African steel industry worsen over the past quarter

Friday, November04, 2011

ArcelorMittal SA reported a R460m headline loss for the third quarter ended September, following the failure of the blast furnace system at its Newcastle works in KwaZulu-Natal, and a sharp rise in input costs.

This compares with headline earnings of R473m for the previous quarter, and R68m for the same period last year.

The group also said yesterday that operating conditions in the steel industry had deteriorated sharply over the past quarter, with the weaker trend in SA’s economy having a big effect on major steel consumers. Strike s in the sector in July hit deliveries, with customers forced to delay orders.

"It has been a difficult and challenging quarter," CEO Nonkululeko Nyembezi-Heita said yesterday. "The Newcastle incident resulted in a substantial loss of production with a concomitant effect on our quarterly results."

She said to ease the effect on customers, 240000 tons of steel was secured in SA and globally, from ArcelorMittal Group mills, and dispatched from mid-October. This still left the market short, with a knock-on effect in the mainstay building and construction sector.

Most of ArcelorMittal SA’s key drivers exhibited stable to negative trends, with raw material prices rising further, and electricity costs soaring 25%. But the firm said strong growth was experienced in Kenya and Zambia, with increased activity in the construction and mining sectors.

"Management (said) at the half-year results that the third quarter would be tough, but the Newcastle furnace issues resulted in a much poorer result," Rubin Renecke, equity analyst at Kagiso Asset Management, said yesterday. "Globally, steel demand remains sluggish ... (but) the weaker rand against the dollar should be positive for local steel pricing going forward."

Year on year, revenue in the quarter rose 5% to R7,6bn, following an 11% increase in average net realised prices, but was considerably down from R8,8bn in the preceding June quarter. Overall steel sales were flat at 1,1-million tons, with long steel products falling by 10%, while flat steel products rose 4%.

Revenue from ArcelorMittal SA’s coke and chemicals division declined 38%, following a 40% decline in commercial coke sales and an 11% drop in average net realised prices. Sales were also hampered by weaker seasonal demand from the ferro-alloy industry due to high winter electricity tariffs, and the poor state of the stainless steel industry.

Liquid steel production fell 17% to 1,2-million tons in the quarter, mainly as a result of the structural failure at Newcastle.

(sourced BusinessDay)

Tata Steel's raw material costs to go up to USD 7 bn in FY'11

10 Mar,2011, 02.22PM IST,PTI
NEW DELHI: Tata Steel Group today said its expenses on key raw materials are likely to go up by USD 1 billion in the current fiscal to USD 7 billion due to a rise in input costs.

"We expect a USD 1 billion rise on raw material expenses to USD 7 billion this fiscal on account of floods in Australia and increased activity from China," Tata Steel Group Director (Procurement) Kees Gerretse said on the sidelines of an event here.

The costs on inputs would further escalate by around 15 per cent next fiscal over 2010-11 levels, he added, attributing the rise to higher iron ore and coking coal prices, which went past USD 300 a tonne as a result of a global scarcity in the wake of floods in Australia's Queensland.

Steel prices, as a result, will go up next fiscal as the manufacturers of the alloy are unlikely to absorb the escalated input costs on the back of increased demand for the alloy, he added.

Queensland contributes over 60 per cent of coal exports from Australia, world's largest supplier of coking coal.

As a whole, Tata Steel Group, with a total steel-making capacity of 28.1 million tonnes per annum (mtpa), buys around 17 million tonnes coking coal and up to 27 million tonnes of iron ore a year.

While Tata Steel India has captive iron ore sources, the European operation has none of the key raw materials to feed the plants. Its entire requirement is met through imports. The company had earlier said it would ensure 50 per cent of the key inputs requirement for its European subsidiary by 2015.

Tata Steel has already acquired stake in two coal mines in Mozambique and one in Australia. It has also stakes in an iron ore mine in Ivory Coast and two in Canada.

Gerretse said coal production from Mozambique blocks would peak at 2 mtpa in next two years. Iron ore from the mines in Canada would start coming in from 2014.

The group, he said, was looking at opportunities for acquiring greenfield coal and iron ore assets, but for the time being, its focus would be on the existing mines.

"The price of coking coal will start normalising from August onwards. Iron ore price is also likely to remain stable after the second quarter," he said.

Nippon aims to up H-beam price even as stocks up

Thu Mar 10, 2011 6:01am GMT

TOKYO, March 10 (Reuters) - Nippon Steel Corp (5401.T: Quote), the world's No.4 steelmaker, said it aims to secure another price hike on its H-beam steel to pass on surging input costs, even though sluggish sales pushed inventories higher in February.

Domestic inventories of its H-beam steel used in construction rose 8.9 percent to 174,600 tonnes at the end of February from the month before, a company official said.

"Shipments were slow in February due in part to the market's seasonal weakness, but with demand from small office and other building projects increasing, we plan to implement another price hike as soon as possible," he said.

Nippon Steel boosted the price of H-beams in February to above 80,000 yen per tonne for a third consecutive price increase, sources told Reuters.

Rival Tokyo Steel Manufacturing Co (5423.T: Quote) said last month it would raise prices of all its products in March to cover rising input costs. (Reporting by Yuko Inoue, sourced :Thomson Reuters)

Nippon says Y20,000 price hike needed after April

(Update1- Nippon Steel sees input costs up by Y15,000/tonne)

* Nippon says Y20,000 price hike needed after April

* Says price increase necessary due to higher input costs

TOKYO Feb 28 (Reuters) - Nippon Steel Corp expects major input costs to rise by more than 15,000 yen ($183.50) per tonne after April, a company official said on Monday.

Due to the rise in input costs, Nippon Steel estimates that a price hike of about 20,000 yen per tonne is necessary for its steel products in general, Kozo Uchida, a senior Nippon Steel executive, told reporters.

That may be equivalent to a nearly 25 percent price hike, given Nippon Steel's average product price of about 82,000 yen planned for the year to March 31.

Its smaller rival JFE Steel last week told primary distributors that it would raise prices steel sheets by 20,000 yen per tonne, signalling to volume contract users such as Toyota Motor Corp the level of price hike it seeks.

Big steelmakers usually push through a price hike among its primary dealers first before starting tough pricing talks with volume users, who buy on contracts, like car and electronics makers and shipbuilders. (Reporting by Yuko Inoue; Editing by Chris Gallagher,sourced:Thomson Reuters)