Citing decreasing demand, U.S. Steel Corp. (NYSE:X) announced it'll be shutting down its Hamilton Works facility in Canada.
Clueless Canadian politicians entered the fray, saying things like the government should “stand up for steelworkers by acting to protect their jobs.” NDP Leader Andrea Horwath said, “I’m calling on the McGuinty government to play hardball and take the lead in derailing U.S. Steel’s plan to close down in Hamilton.”
The truth is it's really nothing but a response to shrinking demand for the product produced in Hamilton.
Steel analyst Chuck Bradford noted, “Hamilton produces slabs. There are just no customers for slabs at the moment. I would say this move is 90 percent market driven and 10 percent about the negotiations.”
The socialist unions, who seemingly can't grasp markets and economic conditions, continue to battle giving up outrageous perks which the business can't support any longer. Doesn't the sovereign debt crisis in Europe and the term austerity have any meaning to them?
Unions continue to think and operate like they're living a hundred years ago, rather in the 21st century.
Negotiations referred to by Bradford are between US Steel and a little over 1000 steelworkers who refuse to give up some vacation, pension indexing, and other things they're being asked to reduce.
US Steel spokesman Trevor Harris said, “We continue to review and analyze market conditions and the impact they’ve had on customer orders. We can’t speculate on when market conditions will improve enough to necessitate restarting the facility.”
Most of those familiar with the Hamilton operations say the shutdown will last for at least six months.
Showing posts with label Steel Demand. Show all posts
Showing posts with label Steel Demand. Show all posts
Monday, October 4, 2010
Wednesday, September 8, 2010
US Steel (NYSE:X), AK Steel, (NYSE:AKS), Cliffs (NYSE:CLF) Nucor (NYSE:NUE) Rise on Pricing, Infrastructure
US Steel (NYSE:X), AK Steel Holding Corporation (NYSE:AKS), Cliffs Natural Resources Inc (NYSE:CLF) and Nucor (NYSE:NUE) are all up today on news from Arcelor Mittal (NYSE:MT) they're going to raise prices, and the possibility of getting more business from an infrastructure initiative from the White House.
Another factor was the announced shuttering of steel plants in China for a couple of weeks in order to deal with the glut of steel in the market at this time. That could give more pricing power to the steel companies.
Finally, the PMI report from China showed they were growing at a better rate than thought, and that suggests better commodity demand, including steel.
China has hinted of moving their infrastructure projects to rural areas instead of urban areas, as the property markets in urban areas are in danger of a bubble.
The one element that has proven legs in all of this is pricing power, which most steel companies will probably engage in in response to Arcelor Mittal. The rest is highly speculative and unproven, although a possibility.
Another factor was the announced shuttering of steel plants in China for a couple of weeks in order to deal with the glut of steel in the market at this time. That could give more pricing power to the steel companies.
Finally, the PMI report from China showed they were growing at a better rate than thought, and that suggests better commodity demand, including steel.
China has hinted of moving their infrastructure projects to rural areas instead of urban areas, as the property markets in urban areas are in danger of a bubble.
The one element that has proven legs in all of this is pricing power, which most steel companies will probably engage in in response to Arcelor Mittal. The rest is highly speculative and unproven, although a possibility.
Monday, August 30, 2010
U.S. Steel (NYSE:X), AK Steel (NYSE:AKS), Nucor, (NYSE:NUE) - All Under Pressure
The steel industry is under pressure as a surplus of steel and slowing Chinese demand puts pressure on companies like U.S. Steel (NYSE:X), AK Steel (NYSE:AKS) and Nucor (NYSE:NUE).
Credit Suisse (NYSE:CS) recently said that U.S. Steel and AK Steel are particularly vulnerable to a fall in prices.
On the China part of the issue, much depends on how they continue to go forward with the cooling off of the real estate market in urban areas. At this time about growth is about 3 percent lower than before, and that definitely cuts into steel demand.
Another bit of news that has yet to be confirmed on China is they may now direct stimulus efforts to the rural areas of the country which could make up for a lot of the slowdown in urban areas. If that's the case, it could change the dynamics, although it would take time to ramp up.
On the other hand, if steel production in China start to increase again, that could offer support, although it wouldn't be anything that would push prices up dramatically, even in the best case scenario.
Even with the expected increase of steel prices in September of up to $30 a ton (probably), in the fourth quarter expectations are scrap prices will come under pressure and drop. That is based on the belief scrap steel supply will increase during that period.
The recent increase in scrap prices should also push more steel into scrap yards, which will of course bring more supply than needed, driving steel prices back down.
This could create a domino effect in other steel products and cut into margins and earnings.
Ak Steel has been cutting capacity in a low steel demand market, and U.S. Steel has a high debt load which cuts back on their flexibility and has made it extremely difficult to be profitable, as the last six quarters have shown.
On the other hand Nucor and Steel Dynamics (Nasdaq:STLD) have been able to turn a profit in slow times, and are positioned strongly to be able to at least be profitable whatever way the market turns, which should be down in the short term.
Credit Suisse (NYSE:CS) recently said that U.S. Steel and AK Steel are particularly vulnerable to a fall in prices.
On the China part of the issue, much depends on how they continue to go forward with the cooling off of the real estate market in urban areas. At this time about growth is about 3 percent lower than before, and that definitely cuts into steel demand.
Another bit of news that has yet to be confirmed on China is they may now direct stimulus efforts to the rural areas of the country which could make up for a lot of the slowdown in urban areas. If that's the case, it could change the dynamics, although it would take time to ramp up.
On the other hand, if steel production in China start to increase again, that could offer support, although it wouldn't be anything that would push prices up dramatically, even in the best case scenario.
Even with the expected increase of steel prices in September of up to $30 a ton (probably), in the fourth quarter expectations are scrap prices will come under pressure and drop. That is based on the belief scrap steel supply will increase during that period.
The recent increase in scrap prices should also push more steel into scrap yards, which will of course bring more supply than needed, driving steel prices back down.
This could create a domino effect in other steel products and cut into margins and earnings.
Ak Steel has been cutting capacity in a low steel demand market, and U.S. Steel has a high debt load which cuts back on their flexibility and has made it extremely difficult to be profitable, as the last six quarters have shown.
On the other hand Nucor and Steel Dynamics (Nasdaq:STLD) have been able to turn a profit in slow times, and are positioned strongly to be able to at least be profitable whatever way the market turns, which should be down in the short term.
Wednesday, July 28, 2010
ArcelorMittal (NYSE:MT) Misses Revenue, Lowers Guidance
Strong revenue wasn't enough for ArcelorMittal (NYSE:MT) to impress investors and traders, as they were able to generate $21.65 billion in revenue for the second quarter, a 43 percent gain, also beating analysts' estimates by close to $2 billion. They are getting punished though for missing on revenue, even though earnings outperformed.
Earnings per share were $1.13, on $1.7 billion in net profits, 43 cents above estimates.
Guidance was the most concerning for shareholders, as the third quarter looks weak for earnings, based largely on a slowing Chinese economy.
Chief Executive Officer Lakshmi Mittal said in this in a statement, “Although the third quarter will be impacted by a combination of seasonal factors and the effects of the economic slowdown in China, underlying demand continues to show improvement. The challenge for the second half of the year will be to pass on the full extent of cost increases to our customers.”
Mittal added that profits could plunge by up to 30 percent in the third quarter from this quarter.
Other factors include the rising costs of iron ore at the same time demand is slowing. That should eventually push down iron ore prices, but that hasn't caught up with lower demand yet.
Earnings per share were $1.13, on $1.7 billion in net profits, 43 cents above estimates.
Guidance was the most concerning for shareholders, as the third quarter looks weak for earnings, based largely on a slowing Chinese economy.
Chief Executive Officer Lakshmi Mittal said in this in a statement, “Although the third quarter will be impacted by a combination of seasonal factors and the effects of the economic slowdown in China, underlying demand continues to show improvement. The challenge for the second half of the year will be to pass on the full extent of cost increases to our customers.”
Mittal added that profits could plunge by up to 30 percent in the third quarter from this quarter.
Other factors include the rising costs of iron ore at the same time demand is slowing. That should eventually push down iron ore prices, but that hasn't caught up with lower demand yet.
Tuesday, June 15, 2010
US Steel (NYSE:X), Arcelor Mittal (NYSE:MT), Nucor (NYSE:NUE) Coming Under Pressure?
The announcement by Nucor (NYSE:NUE) today that was lowering its earnings guidance today didn't seem to have much impact on the steel industry, as companies like US Steel (NYSE:X), Arcelor Mittal (NYSE:MT) and Nucor (NYSE:NUE) were all up on the day.
But news that steel production is outpacing demand over the last month or so has put downward pressure on margins, and ultimately profits.
Nucor in particular said their decrease in demand came from residential and non-residential segments, driving down the earnings the company had originally projected.
Other countries like India has stated similar things in that the supply is higher than demand now, and their steel companies have had to sell at lower prices to move product.
This could put pressure on others like Arcelor Mittal and US Steel, along with most steel companies until the situation is mitigated.
Specialty steelmakers could do better depending on what their products are.
But news that steel production is outpacing demand over the last month or so has put downward pressure on margins, and ultimately profits.
Nucor in particular said their decrease in demand came from residential and non-residential segments, driving down the earnings the company had originally projected.
Other countries like India has stated similar things in that the supply is higher than demand now, and their steel companies have had to sell at lower prices to move product.
This could put pressure on others like Arcelor Mittal and US Steel, along with most steel companies until the situation is mitigated.
Specialty steelmakers could do better depending on what their products are.
Saturday, June 5, 2010
US Steel (NYSE:X), AK Steel (NYSE:AKS), Nucor (NYSE:NUE), Arcelor Mittal (NYSE:MT) Crushed Last Week
Steel stocks took a beating all week, as US Steel (NYSE:X), AK Steel (NYSE:AKS), Nucor (NYSE:NUE) and Arcelor Mittal (NYSE:MT) stock charts all looked like you were going down a mountain. One exception was Gerdau S.A. (NYSE:GGB), which while losing share price during the week, wasn't as pronounced as the others.
All of this is based on the economic sovereign debt crisis in Europe, as well as the belt tightening of China, which will result in lowered demand for steel, and is also lowering the price of iron ore.
US Steel is particularly exposed to Europe, which could cause them problems in the long run, as that's a challenge that isn't going to go away any time soon.
US Steel finished the week at $41.99, down Friday by $3.29, or 7.27 percent.
The week for AK Steel ended at $13.34 a share, down on Friday by $1.14, or 7.87 percent.
Nucor ended the last five trading days at $40.93, dropping on Friday by $1.61, or 3.78 percent.
For Arcelor Mittal, they came in at $27.50 for the end of the week, plunging on Friday by $1.63, or 5.60 percent.
Gerdau S.A. finished the trading week at $13.01, down $0.64 on the day, or 4.69 percent.
With this precipitous weekly drop in steel stocks, there is sure to be a rebound based on that and nothing else, the reason why some say they like the stocks now.
That's primarily based on current valuations and not related to fundamentals and the macro-economic realities they're facing.
Long-term the steel industry and companies heavily exposed to it should struggle, especially those with heavy exposure to Europe, which is guaranteed to be a slow economy for some time to come, if not poised to go back into a recession, if they're not already there.
China's different only in the clarity isn't there yet as to how the austerity measures they're taking will impact the steel and other industries.
While China will no doubt continue to grow, it won't be at the 12 percent or higher rates it has been in the recent past. More than likely it'll start to come down to a more reasonable 7 to 8 percent rate in the near term.
With the U.S. economy about level at this time, and the combination of Europe and China, it'll have a dramatic impact on the commodity sector in general, and steel industry specifically.
All of this is based on the economic sovereign debt crisis in Europe, as well as the belt tightening of China, which will result in lowered demand for steel, and is also lowering the price of iron ore.
US Steel is particularly exposed to Europe, which could cause them problems in the long run, as that's a challenge that isn't going to go away any time soon.
US Steel finished the week at $41.99, down Friday by $3.29, or 7.27 percent.
The week for AK Steel ended at $13.34 a share, down on Friday by $1.14, or 7.87 percent.
Nucor ended the last five trading days at $40.93, dropping on Friday by $1.61, or 3.78 percent.
For Arcelor Mittal, they came in at $27.50 for the end of the week, plunging on Friday by $1.63, or 5.60 percent.
Gerdau S.A. finished the trading week at $13.01, down $0.64 on the day, or 4.69 percent.
With this precipitous weekly drop in steel stocks, there is sure to be a rebound based on that and nothing else, the reason why some say they like the stocks now.
That's primarily based on current valuations and not related to fundamentals and the macro-economic realities they're facing.
Long-term the steel industry and companies heavily exposed to it should struggle, especially those with heavy exposure to Europe, which is guaranteed to be a slow economy for some time to come, if not poised to go back into a recession, if they're not already there.
China's different only in the clarity isn't there yet as to how the austerity measures they're taking will impact the steel and other industries.
While China will no doubt continue to grow, it won't be at the 12 percent or higher rates it has been in the recent past. More than likely it'll start to come down to a more reasonable 7 to 8 percent rate in the near term.
With the U.S. economy about level at this time, and the combination of Europe and China, it'll have a dramatic impact on the commodity sector in general, and steel industry specifically.
Friday, June 4, 2010
AK Steel's (NYSE:AKS) Conflicting Outlook
AK Steel's (NYSE:AKS) is a good study in the broader markets, as there are conflicting views about the company based on two ways looking at the company.
There is the company itself, which pundit Jim Cramer has said is a "terrible company," while on the other side there are those looking at the macro-economic picture, which is also conflicted.
The reason for the macro-economic conflict comes from those who believe we're in a recovery and those that don't.
For those analysts who upgraded AK Steel recently, it was based upon their belief we're in the midst of a recovery, and the overall steel industry, including AK would benefit.
On the other side of the macro picture are those who are viewing the economic challenges in Europe and China which they believe will have a detrimental impact on steel demand in the near and probably long-term future.
To me there's no doubt the latter picture from the macro-economic outlook is the right one, as there is no way I can see for someone to say we're in a recovery. It doesn't line up with the data.
So if you take that away, which I believe we must, then you must look at AK Steel, or any other company for that matter, as an entity in and of itself. From that perspective there's a lot they need to do before being considered a top-level steel producer.
There is the company itself, which pundit Jim Cramer has said is a "terrible company," while on the other side there are those looking at the macro-economic picture, which is also conflicted.
The reason for the macro-economic conflict comes from those who believe we're in a recovery and those that don't.
For those analysts who upgraded AK Steel recently, it was based upon their belief we're in the midst of a recovery, and the overall steel industry, including AK would benefit.
On the other side of the macro picture are those who are viewing the economic challenges in Europe and China which they believe will have a detrimental impact on steel demand in the near and probably long-term future.
To me there's no doubt the latter picture from the macro-economic outlook is the right one, as there is no way I can see for someone to say we're in a recovery. It doesn't line up with the data.
So if you take that away, which I believe we must, then you must look at AK Steel, or any other company for that matter, as an entity in and of itself. From that perspective there's a lot they need to do before being considered a top-level steel producer.
Thursday, May 13, 2010
BHP Billiton (NYSE:BHP), Rio Tinto (NYSE:RTP), Vale (NYSE:VALE) and Iron Ore Demand from China
As China implements measures to cool off its economy, iron ore producers like BHP Billiton (NYSE:BHP), Rio Tinto (NYSE:RTP) and Vale (NYSE:VALE) are starting to get concerned on how it will impact the demand for iron ore from them.
Many raw materials companies have the same concerns, as many have been counting on increasing demand from China to help them through these slow economic times.
Just last month iron ore prices stood at two-year highs of $184.80 a ton, and now has dropped to $169.5 a ton in that short time.
The major element going forward is whether or not decreasing supply from India because of the monsoon season will offset the lower demand in the market.
Consequently, depending on which you believe to be the case, iron ore prices have been projected to drop as low as $150 a ton or rise to over $200 a ton by the summer.
Many raw materials companies have the same concerns, as many have been counting on increasing demand from China to help them through these slow economic times.
Just last month iron ore prices stood at two-year highs of $184.80 a ton, and now has dropped to $169.5 a ton in that short time.
The major element going forward is whether or not decreasing supply from India because of the monsoon season will offset the lower demand in the market.
Consequently, depending on which you believe to be the case, iron ore prices have been projected to drop as low as $150 a ton or rise to over $200 a ton by the summer.
Wednesday, April 28, 2010
Vale SA (NYSE:VALE), BHP Billiton (ASX:BHP) and Rio Tinto (ASX:RIO) Pressing China on Iron Ore Prices
Vale SA (NYSE:VALE) (SAO:VALE5), BHP Billiton (ASX:BHP)(NYSE:BHP) and Rio Tinto (ASX:RIO) (NYSE:RTP) have reportedly threatened China that they will cut off iron ore supplies if the steelmakers in the country don't accept the price demands they're offering, according to the China Iron & Steel Association.
The major three iron ore producers in the world have sought price increases from between 90 percent to 100 percent, as demand for iron ore grows around the world, with China being the largest consumer of iron ore.
All of this started when the mining companies broke with the past practice of selling iron ore on annual contracts and negotiated a 90 percent increase in price with mills in Japan.
In a counter move, China has said they have begun an investigation to see if the three large iron ore producers are monopolizing supplies.
Apparently China has about two months of iron ore stockpiled as of the latter part of March, which means the pressure ramping up with only about a month left at this time.
Demand for steel is estimated to grow by over 10 percent in 2010, which has resulted in a growing demand for iron ore in competing countries and businesses.
The major three iron ore producers in the world have sought price increases from between 90 percent to 100 percent, as demand for iron ore grows around the world, with China being the largest consumer of iron ore.
All of this started when the mining companies broke with the past practice of selling iron ore on annual contracts and negotiated a 90 percent increase in price with mills in Japan.
In a counter move, China has said they have begun an investigation to see if the three large iron ore producers are monopolizing supplies.
Apparently China has about two months of iron ore stockpiled as of the latter part of March, which means the pressure ramping up with only about a month left at this time.
Demand for steel is estimated to grow by over 10 percent in 2010, which has resulted in a growing demand for iron ore in competing countries and businesses.
Friday, April 23, 2010
Nucor (NYSE:NUE) CEO Concerned with Steel Overcapacity
The CEO of Nucor (NYSE:NUE), Dan DiMicco, said recently he has concerns over Severstal, US Steel (NYSE:X) and ArcelorMittal (AMS:MT) (NYSE:MT), as they restart blast furnances in the US which will add approximately 8 million short tons of capacity to the market.
DiMicco stated, “We have serious concerns that capacity being brought back will get ahead of the demand in the marketplace because the economy isn’t really growing, we are not creating jobs. We are not seeing a lot of commercial construction, nonresidential construction, so it’s a concern. And it should be a concern for everybody. And anybody that says it’s not an issue is kidding themselves or trying to kid you.”
The result of all this, if it happens, will be the drop in steel prices which would put pressure on earnings of steel companies.
DiMicco stated, “We have serious concerns that capacity being brought back will get ahead of the demand in the marketplace because the economy isn’t really growing, we are not creating jobs. We are not seeing a lot of commercial construction, nonresidential construction, so it’s a concern. And it should be a concern for everybody. And anybody that says it’s not an issue is kidding themselves or trying to kid you.”
The result of all this, if it happens, will be the drop in steel prices which would put pressure on earnings of steel companies.
Tuesday, March 30, 2010
Teck Resources (TSE:TCK.B) Surges on Steel Demand
Teck Resources looks good on steel demand
Demand for steel continues to explode from China and emerging markets, driving up the prices of iron ore and coking coal, while companies like Teck Resources (TSE:TCK.B), which provide the raw materials needed for steel production, go up with the prices.
Add to that an estimated increase in production in steel industries residing in G7 countries, and you have a huge market about to explode for some time to come.
Iron ore and coking coal are key ingredients in the production of steel, the reason they're moving up in price along with the demand for steel.
Consequently, companies like Tech Resources are able to command top prices for their raw materials as countries and companies battle to be sure they get what they need for production.
Tech Resources will increase contract prices for its top-grade coking coal from $128 a ton to $200 a ton for the quarter beginning in April and ending in June. When you consider they make a nice profit at the $128 level, you can see how good it should be going forward, barring any unforeseen geopolitical problems or slowing down in the economies of the countries generating the demand.
Demand for steel continues to explode from China and emerging markets, driving up the prices of iron ore and coking coal, while companies like Teck Resources (TSE:TCK.B), which provide the raw materials needed for steel production, go up with the prices.
Add to that an estimated increase in production in steel industries residing in G7 countries, and you have a huge market about to explode for some time to come.
Iron ore and coking coal are key ingredients in the production of steel, the reason they're moving up in price along with the demand for steel.
Consequently, companies like Tech Resources are able to command top prices for their raw materials as countries and companies battle to be sure they get what they need for production.
Tech Resources will increase contract prices for its top-grade coking coal from $128 a ton to $200 a ton for the quarter beginning in April and ending in June. When you consider they make a nice profit at the $128 level, you can see how good it should be going forward, barring any unforeseen geopolitical problems or slowing down in the economies of the countries generating the demand.
Subscribe to:
Posts (Atom)