Steel News from YK-8.1

China’s steel PMI jumps to 54.8% in July, indicating positive H2 start

China / Flat Products, Long products

China’s Steel PMI significantly rose in July, indicating good performance of the industry. Supply-demand balance led

to positive market sentiments among market insiders at the beginning of H2 this year. Besides, supply limitations and

strong consumption are likely to support the market for the rest of the year.

Index jumped by 3.2 percent points (p.p.) over the month reaching 54.8% in July, being the fifth consecutive month

above the 50% line, according to the latest report published by China Steel Logistics Professional Committee (CSLPC).

It means that industry developed even in faster pace than in June.

Changzhou to limit steel production by year end

China / Flat Products, Long products

The government of the Changzhou city in the Jiangsu province prepared a draft plan for the production curbs in heavy

industries. Steel mills may have to reduce output till the end of the year by up to 50%.

All the steel plants in the city will have to cut utilization rates no later than August 3, but the time when restriction will

be finished is not clear yet, neither are other details, which will be published later. “It is not sure when the output curbs

will last…probably until the end of this year,” Reuters reported citing Yu Le, official at Changzhou Environmental Bureau.

Operations at sintering machines, shaft and blast furnaces will be reduced by 10‑50%, according suggestions of

market insiders. “Maybe even converters will be restricted this time, which were not in Tangshan,” a representative of

major Jiangsu-based steelmaker told Metal Expert. The daily affect of the new initiative is evaluated at 30,000‑70,000 t,

according to different media sources in China.

The biggest steel producer in Changzhou city is Zenith Steel Group, which has around 10 million tpy of steel capacity,

while most other steel companies in the area are re-rolling mills. Total crude steel output in Changzhou was 12.96 million

t in 2017.

Iron ore spikes on restrictions in Changzhou

China / Iron Ore

Iron ore price kept surging on ascending steel market as one more city of China announced production cuts.

Australian iron ore fines 62% Fe climbed by $1/t to $67/t CFR following a rise in steel futures and physical prices caused

by new production cuts, this time in Changzhou city, Jiangsu province. According to insiders, operations at steel mills

in the city will be reduced by 50%, though it is still unclear which equipment exactly will be affected, neither how long

the restrictions will last. “The period has not been determined yet. Impact should be several ten thousand tonnes of

steel per day,” a Shanghai-based trader told Metal Expert.

However, a lack of details did not prevent steel quotations from another round of increase, especially given unusually

robust demand for construction steel and, as a result, reducing steelmakers’ and traders’ inventories. Tangshan billet

gained RMB 20/t ($2.9/t) over the day, while October rebar on the Shanghai Futures Exchange rose by RMB 41/t ($6/t).

Numerous output restrictions announced in July in China, mainly in Tangshan city, coupled with better than expected

demand in the local market, caused a spectacular hike of the steel price this month which is usually a slack season

for finished products market. Tangshan billet spiked by RMB 220/t ($32/t) during the period.

It supported iron ore tags despite falling demand, with the average price being $63.8/t CFR in July. Previously, Barclays

predicted the raw material to average $58/t CFR in Q3.

Krakatau Steel improves H1 2018 operational results

South East Asia / Flat Products, Long products

Krakatau Steel’s posted better operational results in H1 2018 owing to improving demand for steel products in Indonesia

and significant increase of steel sales volumes. The year of 2018 will be better for the company, as local steel demand

is expected to increase further amid higher governmental expenditures for infrastructure development.

The steelmaker managed to increase operating profit by 110.19% to $9.34 million in H1 on growing sales revenues. In

particular, better demand for steel in Indonesia resulted in higher total sales, 24.4% up to 1.05 million t year-on-year

over the period under review. The biggest sales increase was recorded in the HRC segment, by 47% to 576,652 t. The

situation in the CRC market was also favourable: sales increased by 9.7% to 288,608 t. Besides, the producer also

managed to increase sales of longs by 4.3% to 141,824 t. The higher sales along with stronger price situation in the

global steel market resulted in increase of revenue by 34.75% to $854.27 million.

The outlook for the next half of the year is very optimistic amid governmental investments in the infrastructure sector.

Besides, Krakatau Steel officially announced its plans to increase its sales revenue by 30% in 2018, reaching $1.87 billion,

as Metal Expert reported earlier. The forecast is based on the producer’s policy to increase production capacity this

year. Besides, Krakatau Steel relies on continuous uptrend in the market providing additional support to steel producer.

Indonesia’s producers worried about steel import growth

South East Asia / Flat Products, Long products

Steel manufacturers in Indonesia are worried about a stable growth of steel import in the country. In particular, they

are asking the government to review rules of steel products import implemented just at the beginning of the year.

The Indonesian government approved new import regulations in Q1, which were expected to support local steel producers

by accelerating raw material deliveries and allowed inspecting imported products after entering the country

instead of technical supervision by the Ministry of Industry on the boarder, Metal Expert learnt. Nevertheless, total import

of steel products kept increasing. It totalled almost 2 million t in Q1 of 2018, according to Metal Expert information.

Steel manufacturers in Indonesia asked the government to review import regulations and filed complaints but have

not got any response. “With the amendment to these provisions, it will directly affect the national steel industry which

will become increasingly losers and even go bankrupt due to the absence of control and supervision of imported steel

products”, Krakatau Steel Commissioner Roy Maningkat said. In particular, not only upstream steel producers were

damaged, but also downstream makers.

Notably, in 2017 only Indonesia and Philippines increased steel import in ASEAN region. Overseas supplies reached

7.07 million t in Indonesia, showing a 2.8% growth year-on-year, while production rose by 19.6% y-o-y to 7.86 million t,

according to the SEAISI.

India seeks foreign investments for auto steel development

India / Flat Products

Steel consumption in India will grow in the short term amid developing automotive sector. As a result, India invites

Japanese and South Korean companies to invest in high-grade auto steel plants to satisfy growing demand from the

auto manufacturers.

The Indian government is encouraging Japanese and South Korean steelmakers to step up their investments in projects

in India to produce high-grade automotive steel. The country imports the high-tensile steel from Japan and South

Korea. Meanwhile, the demand for the auto steel is rising in the country and local production cannot satisfy it fully.

“Japanese companies can come through joint ventures or independently because India is becoming an auto manufacturing

hub so the requirement of auto grade steel is going to go up,” steel secretary Aruna Sharma told Reuters in

an interview. Steel Authority of India (SAIL) and ArcelorMittal entered a memorandum of understanding to jointly set

up an automotive grade steel plant in 2015. Nevertheless, the project has been on hold since then as the parties have

failed to reach a final agreement. JSW Group, on the contrary, has already built a 2.3 million tpy of auto-grade steel

mill jointly with Japan’s JFE Holdings.

The Indian automotive sector showed significant improvement in Q1 of this financial year (April 2018 – March 2019). In

April – June, India produced 8.06 million units of vehicles, posting a year-on-year growth of 16.55%, as Metal Expert

reported. Moreover, automakers are going to increase further vehicle production. In particular, Hyundai Motor India is

going to ramp up production capacity of 700,000 units per year by 50,000 units per year by 2019, according to press

release of the company.

Mukand Group expands capacity to cover demand for auto grade steel in India

India / Special Steels, Long products

Indian steel makers keep increasing production capacities to meet rising demand for steel products in the country.

Mukand Group is planning brownfield and greenfield expansions to cover special steel needs from the automotive

and machinery sectors.

Mukand Group is going to invest INR 7.5 billion ($109.3 million) in steel capacity expansion. In particular, INR 6 billion

($87.4 million) will be used for the construction of a new mill in Hospet city, Karnataka, by Mukand Sumi Special

Steel which is a JV with Japanese Sumitomo Corporation. Еhe producer has already got the land for setting up and

commissioning of a rolling mill. Besides, the company will fund INR 1.5 billion ($21.8 million) to resolve problems with

the existing equipment, Metal Expert learnt. “This will create an additional 400,000 tpy capacity by 2020,” Mukand

Co-chairman Rajesh V Shah said. Company’s current capacity is estimated at 600,000 tpy of special and stainless steel.

Mukand Group is producing special steel grades which are used, particularly, for vehicles and machines production

and in the auto components industry. The company is going to reach 90% utilization rate this financial year, while in

FY 2018 it was 75‑80%, according to Rajesh V Shah.

In brief: Glencore increases coking coal production in H1

Australia / Coal

Glencore, one of the largest mining companies in the world, increased Australian coking production by 26% to 3.4 million t

year-on-year in H1 2018, according to the report of the company. The increase is explained by stronger performance

of Oaky Creek and Newlands mines. It was enough to offset the absence of Tahmoor mine (2 million tpy) which was

acquired by Liberty in April this year. Production of Australian semi-soft coal, meanwhile, totalled 1.6 million t, down

27% y-o-y. Glencore produces semi-soft and coking coal from fifteen mines, five of which are located in Queensland.

The manufacturer may face delays in coal shipments from Queensland to the seaborn market due to the rail maintenance

of Aurizon later this year.

Steel imports down in Iran, may almost stop

Middle East / Flat Products

Import of steel products to Iran continues to decrease mainly due to the unprecedented rial devaluation making

purchases from abroad unacceptable. Besides, after the US President announced the decision to impose sanctions

against Iran, most companies preferred to temporarily stop cooperation with the Islamic Republic. As a result, in case

US blockade takes place, imports may even stop.

Iran’s ESCO to deliver second lot of rails locally

Middle East / Long products

Iran’s Esfahan Steel Company (ESCO), being a sole domestic rail producer, has sorted out some production and

quality issues and has managed to reach the steady output pace. As a result, the supplier is ready to deliver the second

batch of products to Islamic Republic of Iran Railways (IRIR) and to overall fully cover domestic rails requirement.

ESCO is ready to deliver the second consignment of the U33 or 46E2 rails (1,000 t) in the frames of the contract with

IRIR for 40,000 t supply. Notably the first 1,500 t lot was delivered in the second half of June 2018. “Rail production

speed has reached a favourable pace and [in terms of quality] 98% of the recent batch met the highest standards in

the preliminary inspection,” a source in the company told local media. One of the main problems of the ESCO and

IRIR agreement was the rejection of the mill’s quality. “We invited an international French observation company, so

the quality standards were approved,” another source told Metal Expert.

Having sorted out quality issues, ESCO is now ready to satisfy the local demand fully. “The IRIR can fully rely on domestic

supply of rails,” the company’s managing director Mansour Yazdizadeh told local media. Such development will

support the local economy, which targets self-sufficiency in a number of industries. In addition, steady domestic rails

supply will minimize the necessity of the importation, which is becoming more and more risky, taking into account rial

rate free fall, Metal Expert estimates.

KSA’a Hadeed strengthens financial position in H1 2018

Middle East / Flat Products, Long products

Hadeed Saudi Iron & Steel Company (SABIC), the major steel producer in Saudi Arabia, managed to improve its financial

performance in H1 2018 as some revival registered in Q1 continued during the next reported period. Stronger

pricing and operating results supported the company.

In January-June 2018, Hadeed ramped up sales revenue by 55.8% to SAR 6.1 billion ($1.6 billion; $1 = SAR 3.75)

year-on-year, according to the official statement. Such a rapid growth is attributed to stronger selling prices in the

steel market in a y-o-y comparison both for longs and flats, Metal Expert estimates. Moreover, despite the accident

happened in the steelmaking unit at the beginning of the year, Hadeed increased steel output by 1% to 2.545 million t

during H1, according to the worldsteel data. Improvements in production figures are attributed to the gradual revival

of the local market and partially to export sales.

Rather positive operating performance resulted in higher steel business profitability. Hadeed posted net income attributed

to equity holders (including eliminations and adjustments, which are applied to the total group results) at the

level of SAR 163.3 million ($43.5 million) versus the loss of SAR 517.2 million ($137.9 million) in H1 2017, the corporate

report said.

Notably, that Yousuf Al Benyan, SABIC’s CEO, pointed out during the press-conference dedicated to financial results

that the first half of 2018 was “very positive” for the group in general and the company expects the second half of the

year to be “equally positive.”

Egypt ramps up gas output at Zohr ahead of schedule

North Africa / DRI & HBI

Egypt continues to scale up production at one of its key gas field, Zohr. The managing company has reviewed production

plans, targeting to reach figures ahead of the preliminary schedule. If so, Egypt will come closer to its goal to

become a net exporter of LNG again and provide local steelmakers with sufficient gas supplies.

Italy’s Eni announced it started production at the third and fourth liquefied natural gas processing lines at Zohr gas field

during Q2, which allowed for reaching significantly higher production volumes (1.6 billion cu feet per day), according to

the official statement. Moreover, the company is expected to accelerate output to 2 billion cu feet in September owing to

the commissioning of the fifth facility, while earlier this figure was planned for the end of the year, Metal Expert learnt.

It is worth mentioning that with Zohr, offshore field total gas production in Egypt is expected to hit 6.5‑6.75 billion cu

feet per day by the end‑2018, according to Tarek El-Molla, Minister of Petroleum and Mineral Resources. At the same

time, the county’s consumption is about 6 billion cu feet. Commercial and industrial sectors, including the steel segment,

will benefit from sufficient gas supply taking into account that a big portion of mills is using a DRI technology.

According to worldsteel data, Egypt’s DRI production increased by 18% to almost 2.8 million t year-on-year in H1 2018.

Oman start studies on $40 billion smart city project in Duqm

Middle East / Long products

Oman is making progress with the development of the Duqm Special Economic Zone (SEZ). It is starting the study

part of the first smart city investment in this area under the preliminary phase of the project. The actual realization of

the project works is expected to support steel demand in the country, but in a longer run.

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