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Pipeline Project Costs to Increase Globally by 2022

Rystad Energy analysis revealed that the costs associated with onshore pipeline projects are likely to increase by between 4% and 6% globally by the end of 2022 against current levels, as prices continue to surge for labor, raw materials and transportation. Materials in particular, which account for 30%-40% of the total cost for a pipeline, are expected to become 2%-3% more expensive in the same period and may approach USD 1 million per kilometer in leading pipeline regions such as the US.

A recent increase in steel demand has also led to higher iron ore prices, thus pushing up steel costs. Moving forward, the removal of tax rebates for line pipe in major export hubs like China could result in higher material costs, hence making Chinese exports more expensive. In addition, prices for other pipeline construction materials, such as valves and flanges, have also spiked. The price index for pipeline flanges and valves in the US, for instance, has grown by more than 30% since early 2020.

The anticipated rise in material costs will not be driven by an increase in general steel prices, as they are expected to slide next year, but instead by the present regulatory hurdles and a lull in pipeline development activity. This in turn could hinder operators from locking in long term agreements with steel suppliers as prices take a turn for the better.

Additionally, the stronger than expected demand from other industries, combined with the slow pace of pipeline project sanctioning activity, could push pipeline operators to the back of the queue to secure large orders, thereby forcing them to pay a premium to procure the required quantities.

Construction and installation costs are the largest cost components of a pipeline project, potentially accounting for nearly half the total cost. Compared to other cost elements, which may undergo periods of decline, construction and installation costs have been highly resilient, driven in large part by rising wages, which can account for more than 50% of these costs. For instance, wages for major pipeline construction trades such as welders, construction equipment operators, electricians, plumbers, construction managers and drivers – have not dropped in the US despite a Covid-19 induced downturn and are expected to increase by more than 5% by the end of 2023 compared to current levels.

Based on our Labor Market Trends Dashboard, we expect wages for major pipeline trades to grow at an average of about 8% across major pipeline regions by the end of 2022 against current levels. This means an expected rise of 2% to 3% in construction and installation costs during this period.

The cost pressure exerted by rising wages could further intensify as the US construction industry still lacks more than 200,000 workers, according to the US Department of Labor. This skills shortage is likely to boost wages further, even for entry level trades. Additionally, with the US Congress advancing the Biden Administration’s $1 trillion infrastructure bill, competition for the limited workforce is set to intensify.

While the pipeline industry is actively exploring potential solutions to reduce labor requirements, we note that the bulk of these solutions are concentrated around inspection and maintenance, such as drones and crawlers. But scalable solutions are still largely unavailable for leading construction trades, such as plumbers and equipment operators. Therefore, at least for the near future, the cost pressure of growing wages continues to weigh on operators.

Source - Strategic Research Institute
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SteelFollower
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Na 2 weken met vakantie weer even terug aan beleggersfront. Geheel onverwachts boven 30 gebleven zie ik. Gok nu op 30 rond of lager om in te stappen vandaag want LT oogt goed. Nu even tegenslag agv winstnemingen en situatie Afghanistan.
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EU consumption recovery continues, pandemic risks remain: Eurofer
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EU27 apparent steel consumption rose 0.9% on-year in the first quarter to 36.3 million tonnes, reflecting further recovery from last year’s Covid-19 shock, while domestic EU deliveries rose 1%. Imports from outside the EU meanwhile fell 2.5%, the nineth consecutive quarterly drop, says European steelmakers’ association Eurofer.

The association sees the bloc’s overall end-use output rebounding 9.3% on-year in 2021, with growth slowing to 4.6% in 2022.

EU end-use sector output recovery continued in Q1 despite considerable problems in the global supply chain, particularly for the automotive sector – rising transportation costs, rising fuel costs and shortage of components, Eurofer observes. End-use output growth rebounded 2.6% in Q1, the first quarterly increase since Q3 2019.

“Industry in the EU has recovered the output loss experienced during the pandemic, but activity remains exposed to fragility and risks, due to persisting uncertainty around vaccination plans and the ongoing consequences of the pandemic, which is not yet over,” Eurofer says in its latest quarterly report sent to Kallanish.

Industrial output is likely to continue to grow and to gain further ground over the second half of 2021, provided there are no further shocks. Growth in 2021 and 2022 is seen at 8.6% and 4% respectively.

Real steel consumption however fell 0.6% in Q1, the eighth consecutive quarterly drop. It is expected to recover 7.9% on-year in 2021 after the counter-cyclical destocking process seen throughout 2020 came to an end in Q1.

“Government investment and public expenditure are expected to play a rather robust, countercyclical role and could provide a strong contribution to the growth of domestic demand, although the most visible effects will only be visible from 2022,” Eurofer says of the macroeconomic scenario.

Adam Smith Germany
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Luzhou Xinyang commissions two EAFs
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Sichuan Luzhou Xinyang Vanadium and Titanium Steel officially commissioned two electric arc furnaces last week, Kallanish notes.

The whole steelmaking project contains two 100-tonne EAFs with a combined 2 million tonnes/year of crude steel capacity. The main equipment also includes two 100t ladle furnaces, two continuous casters and four rolling mills. The steelmaker ordered EAFs and rebar mills from Italian supplier Danieli in 2019 (see Kallanish passim).

By reorganising Luzhou Yixin Steel and Luzhou Jiangyang Steel, the firm secured 2.52m t/y of steel capacity quota, of which 520,000 t/y is retained for other projects in future (see Kallanish passim). On 27 July 2021, Sichuan Metallurgical Holding Group (SMHG) was officially inaugurated in Chengdu, integrating eight steel companies. These are Chengdu Metallurgical Test Plant, Sichuan Dugang, Luzhou Xinyang Vanadium and Titanium Steel, Chengdu Changfeng Steel, Sichuan Shengquan Steel, Sichuan Derun Steel, Shehong Chuanzhong Building Materials Co., and Ya'an Anshan Steel.

By Kallanish Team
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Jiangsu steelmakers cut production in August
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Under the impact of Covid-19 and restrictions on crude steel production, steel mills in China's Jiangsu Province announced that they would conduct extensive overhauls in August to reduce production, Kallanish notes.

Market information shows that Zhongxin Steel, Lianxin Huanghai Steel and Zenith Steel will conduct maintenance on blast furnaces from late-July to August. This will reduce about 21,000 tonnes/day of iron output at the steel plants.

In addition, Xuzhou Steel, Binxin Steel, Zenith Steel, Shagang, Yonggang, Nanjing Steel and Jiangsu Hongtai will have various levels of overhauls on their construction steel production lines. Market data implies over 28,000 t/d of construction steel output will be cut during the period.

The reduction also affects the operation of electric arc furnace plants, which are also facing an electricity supply shortage. Yonggang and Jinhong Steel will cut their EAF production in August, reducing over 5,000 t/d of EAF steel output.

By Kallanish Team
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Chinese shipbuilding completions fall back in July
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China's shipbuilding completions in July fell from a high of over 4 million deadweight tonnes in May and June. The July data is still slightly higher than the same period last year however, Kallanish notes.

According to China Association of the National Shipbuilding Industry (CANSI) data, China's shipbuilding completions reached 24.18 million deadweight tonnes in the first seven months of 2021, up by 20.7% year-on-year. However, completions in July declined to 3.26m dwt, down by 19.7% on-month.

This implies that about 8.35mt of steel was consumed by the shipbuilding sector during the first seven months of 2021, including 1.13mt consumed in July only, Kallanish estimates.

New orders in the shipbuilding industry continue to rise, also increasing orders in hand. From January to July this year, orders for new ships were 45.22 million dwt, a year-on-year increase of 223.2%. At the end of July, orders in hand were 89.67 million dwt, an increase of 18.6% year-on-year, and an increase of 26.1% from the end of 2020.

During the reporting period, the global market share of China's shipbuilding industry has increased and it retained its place as teh alrgest shipbuilder. Shipbuilding completions, new orders and orders-in-had accounted for 46.1%, 52.0% and 46.0% of the world's total in deadweight tonnage.

By Kallanish Team
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Xinsteel runs first seven-metre coke battery
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Jianxgi Xinyu Iron & Steel (Xinsteel) successfully put a 7-metre-high coke battery into official production last week. This is the first of its specification in China’s Jiangxi province, Kallanish notes.

Xinsteel ignited the coke battery in early April, but the official operation was almost 40 days later than planned at that time. The whole project included construction of two identical coke batteries with a design capacity of 1.47 million tonnes/year of coke.

After commissioning the two coke batteries and eliminating four existing 4.3m batteries, Xinsteel will maintain its total coke capacity unmoved at 2.63m t/y (see Kallanish notes).

By Kallanish Team
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Taiwan posts highest ever monthly steel export value
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In July this year, Taiwan achieved its highest monthly export value for steel and steel products since in 2001. This was up 21.24% month-on-month and 79.81% year-on-year respectively to $1.97 billion, Kallanish notes from Ministry of Finance data.

The export value in the first seven months of the current year therefore totaled at $11.39 billion, up 39.27% y-o-y.

The import value in July meanwhile stood at $1.51 billion, an increase of 86.48% y-o-y, and approaching the previous record high set in September 2008. This boosted the import value in January-July period to $8.21 billion, compared to $5.38 billion in the corresponding seven months last year.

By Kallanish Team
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Hongtai Steel completes capacity replacement project
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After building two 105-tonne electric arc furnaces (EAFs) in 2019, Jiangsu Hongtai Iron & Steel has finally reorganised and submitted its capacity replacement report, according to the Industry and Information Technology Department of Jiangsu.

The company had previously said four EAFs would be closed to provide capacity quotas, but has reduced this to three, including a 60t EAF and two 80t EAFs which it previously operated, Kallanish notes. As Jiangsu plans to eliminate 25 local steel companies by 2025, Hongtai Steel started its investment and renewed the filing of its paperwork to ensure it can survive and is not one of the companies eliminated.

At present, Hongtai Steel has 1.57 million tonnes/year of crude steel capacity, and 2m t/y of hot rolled longs capacity.

By Kallanish Team
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Rail industry to receive boost from infrastructure bill
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The US railroad industry will receive nearly $1 billion in grants along with $845 million in additional funding for rail improvement projects per year over a five-year period, Kallanish learns.

On behalf of the US rail industry, The Association of American Railroads (AAR) is applauding the US Senate's recent passage of the Infrastructure Investment and Jobs Act which would increase federal infrastructure spending by $550 billion over five years.

"Railroads applaud the Senate and the Biden administration on their leadership and urge the House to follow suit by quickly approving this landmark legislation,” says AAR president Ian Jefferies.

Under the Infrastructure Investment and Jobs Act, Amtrak would receive $66 billion in investment spending with $24 billion towards the Northeast rail corridor, $20 billion for intercity rail projects, and $22 billion in other additional grant funding. According to the White House, this would be the largest investment in Amtrak and passenger rail in the US since its inception over 50 years ago.

“We applaud the Senate and the Biden Administration for their work in advancing this historic investment in passenger rail included in this bill, which will allow Amtrak and states to modernise our country’s aging passenger rail network, including buying new railcars and locomotives, upgrading stations and increasing reliability,” adds Rail Passengers Association ceo Jim Mathews.

Zach Johnson USA
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Steel construction input prices rise by 20% quarterly
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US steel mill construction input prices have risen over 20% in the past quarter, as of July, with steel mill prices remaining up two-fold in an on-year comparison, Kallanish learns from an analysis of the US Bureau of Labor Statistics' (BLS) producer price index by the Associated General Contractors (AGC) of America.

According to the latest BLS data, producer pricing for three of the largest steel construction input categories rose in July from the prior month. In July, prices rose for steel mill products (up 10.8%), fabricated structural metals (up 0.8%), and prefabricated metal buildings (up 8.4%).

In the past quarter, producer prices have risen by 20.5% for steel mill product, 10.3% for fabricated structural metals, and 18.7% for prefabricated metal buildings.

“July was the sixth straight month of double-digit price increases for construction inputs...In addition, lead times to produce or deliver many items keep lengthening. Many reports since the government collected this price data in mid-July show the trend will continue, at a minimum into the autumn and likely beyond, unless tariffs and quotas are removed,” explains AGC chief economist Ken Simonson.

On-year, pricing remains up by 108.6% for steel mill product, 32.5% for fabricated structural metals, and 45.9% for prefabricated metal buildings.

Zach Johnson USA
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Light shaped bar imports dip in June
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US imports of light shaped bars dipped in June to their third highest level this year, Kallanish learns from steel import data collected by the US Department of Commerce.

According to Census data collected through 9 August, imports of light shaped bars to the US totaled 16,784 tonnes in June. Imports for the month were below May's imports totaling 17,412t, as well as below March's imports totaling 18,999t. In June, the leading exporters of light shaped bars to the US were Mexico (8,956t) and Canada (7,307t).

In an on-year comparison, light shaped bar imports were above June 2020's imports totaling 11,683t. At the time, the leading exporters of light shaped bars to the US were Mexico and Canada with 8,298t and 3,018t, respectively.

Zach Johnson USA
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Tenaris announces huge energy tube price hike
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Tenaris has announced a massive price increase for its energy tubular products in the US, which is following the general trend of chasing skelp skyward, Kallanish reports.

Tenaris’ increase of $350/short ton is effective immediately for both oilcountry tubular goods (OCTG) and line pipe - seamless and welded, according to a customer letter.

A Gulf Coast trader says that puts alloy prices at more than $2,000/st and carbon prices at more than $2,100/st. Kallanish held its representative P110 domestic welded casing price Friday at $2,100-2,200/st, ex-works, domestic mill, plain-end.

“Times, they are a-changing,” he says.

A line pipe trader says the market is still very much tied to skelp prices, which remain at all-time highs.

“All the demand is for usage outside the energy sector,” he says. “That won’t decrease for some time. Hot-rolled continues to increase, and so will finished products. Oilpatch demand is still a long way off.”

Dan Hilliard USA
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Iron ore prices stabilise on autumn expectations
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Seaborne iron ore prices inched higher on Friday after falling most of the week. Port stocks have increased slightly but some traders now think the sharp price adjustment of the last two weeks has come to an end.

The Kallanish KORE 62% Fe index recovered $0.69/tonne to $161.32/dry metric tonne cfr Qingdao, but was still $5.21/t lower on-week. The Kallanish KORE 65% Fe index gained $0.62/t to $192/dmt cfr, down $5.11/t on-week. and the KORE 58% Fe index increased $0.21/t to $135.42/dmt cfr, down $2.53/t on-week.

On the Dalian Commodity Exchange January 2022 iron ore settled down CNY 18/t at CNY 831.5/t ($128.39/t), while on the Singapore Exchange September 62% Fe futures settled up $0.12/t at $159.35/t. The same contract for 65% Fe and 58% Fe futures settled up $0.12/t at $186.56/t, and down $0.98/t at $132.70/t respectively. In Tangshan, billet prices dropped CNY 20/t to CNY 5,090/t.

Iron ore port stocks inched higher last week despite a recovery in shipments out of ports. Across 35 ports stocks rose 200,000t to 118.65 million tonnes, according to a count by SMM. Deliveries into port stocks in northern China increased rapidly as disruptions to port activities eased.

Traders had been assessing whether or not iron ore prices needed to fall further. Steel prices have stabilised however, and mills expect prices to improve in the autumn when demand is due to see a seasonal recovery. As this period is rapidly approaching some traders believe iron ore prices have now found a floor.

Tomas Gutierrez UK
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German rebar inches up, wire mesh extends lead
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The relatively generous surge of rebar prices during the second quarter in Germany and adjacent markets has slowed down, but not yet stopped completely.

At the beginning of the summer holidays in many regions in June, peak base price offers from German mills were heard to have reached €650/tonne ($766/t). Meanwhile, the average asked by mills has moved up by another €10/t, Kallanish is told by several distributors. Rebar in coils will be between €680-700/t, they say.

Wire mesh has risen more notably, with now more than twice the price gap of €100/t that is characteristic for “normal” times. In May, that gap was already wider than €150/t, and is now easily more than €200/t. Base prices here are now between €870-880/t, even for large buyers like purchasing cooperatives.

Going forward, some buyers believe that a peak has been reached, but that assessment has been disappointed several times earlier. According to one buyer, “the upwards drive has flattened, and prices are moving sideways.” But he adds that he does not see any dip, either, “because the availability isn’t given – mills cannot keep up with demand.”

This is especially true for the summer time with maintenance breaks at most mills. A manager at a big stockholder group says that the coming weeks will see shortage continue. Choosing his wording carefully, he says that prices could even become “more solid”.

Christian Koehl Germany
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Ukrainian scrap exports continue to rise
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Exports of ferrous scrap from Ukraine continue to increase despite the €58/tonne ($68.3/t) export duty, which will remain for another five years until September 2026.

The first seven months of the year saw Ukraine’s ferrous scrap exports rising 20 times on-year to 334,589t, exceeding 2020's total exports tenfold, Kallanish learns from the data published by the Ukrainian national custom service. July exports of 103,000t were 22% up on-month and the highest volume exported in the last three years.

The ongoing increase is supported by unusually high scrap prices in Ukraine's major scrap export outlet - Turkey, and Europe, and the lag in the rise of Ukraine's domestic scrap prices. Although Turkish scrap prices have corrected from the early summer highs of around $500/t cfr Turkey for HMS 1/2 80:20, they are still over $100/t higher than Ukrainian domestic indications, giving sellers an opportunity to absorb the export duty and still sell at a profit.

Meanwhile, after a short-lived drop in scrap deliveries to Ukrainian mills in May, the supply has recovered in June, with six-month volume also up on-year, according to the Ukrainian association of secondary metals, UAVtormet. Ukrainian steelmakers received 1.65 million tonnes of ferrous scrap in January-June, up by 26.3% on-year.

According to preliminary national output data compiled by Ukrmetallurgprom, Ukrainian steelmakers continued to ramp up output in January-July. Crude steel output rose by 7.4% on-year to 12.7mt, pig iron - by 7.7% on-year to 12.65mt, and products - by 6.6% on-year to 11.4mt.

Katya Ourakova UK
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Indian automotive output soars amid global semiconductor shortage
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Indian automotive output soared 22% on-year to 2,099,035 units in July against 1,715,514 units produced a year earlier, reports the Society of Indian Automobile Manufacturers (SIAM). The output includes passenger vehicles, commercial vehicles, three-wheelers, two-wheelers, and quadricycles.

Production increased 106% on-year to 6,545,619 units during April-July 2021 against 3,173,169 units last year, Kallanish notes.

“The wholesale dispatches of passenger vehicles in the domestic market were up 44.6% in July 2021 amid a challenging and uncertain business environment,” says SIAM.

Passenger vehicle sales surged 45% to 264,442 units in July against 182,779 units last year. Three and two-wheelers sales clocked at 17,888 units and 1,253,937, respectively.

“Indian Automobile Industry continues to face heavy headwinds in the form of global semiconductor shortage and steep rise in commodity prices,” says SIAM’s director-general Rajesh Menon. “On the one hand, the Industry is managing such supply chain challenges while ensuring the safety of its people. And on the other hand, also keeping a close eye on the onset of the third wave in India and across the world.”

Passenger vehicle export grew 53% on-year to 52,319 units in July and two-wheeler export grew more than double to 377,000 units.

“Amidst such challenging and uncertain business environment, the industry is trying to maximise production and sales. However, sales for the period of April to July 2021 for the passenger vehicle segment are still lower than the level of 2016-17. The two-wheeler segment is also lower than the level of 2010-11 and the three-wheeler segment has been pushed back by many years,” Menon adds.

Sayed Aameer India
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German scrap prices decline, Turkey lowers purchases
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German scrap prices started to decline in the first week of August due to the traditional summer holidays this month in Europe and lower purchases from Turkey, according to German scrap market participants. Additionally, sources expect that flooding in some parts of the country and a new railway strike may negatively impact the supply chain.

Prices in southern Germany, as well as in the north and west, decreased €20-40/tonne ($23-47/t) this month, a local buyer tells Kallanish.

The nationwide average price has decreased this month by €30/t, with, for example, old thick scrap sort 3 down from €480/t ($565) to €440/t in August’s negotiations. The price for new scrap sort 2/8 meanwhile has reached €450-460/t in Germany.

The price for E40 shredded scrap reached €465/t in August.

In Austria, some scrap prices increased by €20/t depending on the sort, others declined by €25/t this month. Thus, old thick scrap sort 3 decreased to €455/t, but new scrap sort 2/8 hit €510/t.

The main reason is low supply from Europe. However Turkish purchases of German scrap continued to decline in August.

“New scrap is still in short supply and demand is high, but most German mills have their stocks full due to the summer holidays,” says another German market participant. “The limited supply of new scrap is additionally burdened by persistent semiconductor shortages, which have led to production halts in the automotive industry.”

The severe floods in western Germany caused great damage and hit logistics, but this combined with the holidays for now do not impact severely the supply chain in Germany and Austria, sources observe.

Most sources expect German scrap prices to continue to decline in August, if the low purchase from Turkey continues.

Svetoslav Abrossimov Bulgaria
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Stelco to buy back, cancel 13% of shares
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Canadian steelmaker Stelco plans to repurchase and cancel more than 11 million of its common shares, Kallanish learns from a company statement.

The approximately 11.4m shares - 13% of the total issued - will be purchased from LG Bedrock Holdings at a per-share price of CAD 34.93 ($27.89), or a total of about CAD 398m. The shares will then be canceled, concentrating value in the remaining shares.

Stelco notes that the transaction will also serve to diversify its shareholder base.

"This is an exceptional opportunity to take full advantage of the strength we have built in our business over the past four years," says ceo Alan Kestenbaum. "Our commitment to and focus on maintaining a strong balance sheet combined with our ability to capitalise on our strategic investments, the strong steel market and our strong and strengthening cash flow generation has positioned us to take advantage of opportunities such as this one as we begin to allocate our capital in a manner that is highly accretive to all of our shareholders.”

Dan Hilliard USA
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Chinese HRC remains stable on weak demand
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Despite fluctuations in sentiment due to Tangshan’s plan to limit steel production during Beijing Winter Olympics and Paralympics, Chinese hot rolled coil prices finally ended the week level with both production and demand weak, Kallanish notes. Export markets meanwhile remained silent as Chinese prices are not competitive.

In Shanghai on Friday afternoon, 5.5x1,500mm Q235 HRC was traded at around CNY 5,820-5,840/tonne ($898-901/t), down CNY 30/t from the previous Friday. On the Shanghai Futures Exchange, October 2021 HRC futures closed CNY 12/t lower than Thursday and CNY 7/t lower than the previous Friday at CNY 5,765/t.

Stimulated by the rally in futures prices in the middle of last week, spot traders tried to push up offers, however, low demand made them turn back without success. Demand is still fettered by the summer slowdown, and no recovery is expected before the end of August.

Steel production has continued to decline as more regions are following the central government’s goal of capping output this year. China Iron & Steel Association (CISA) data shows daily steel production at its members was down 2.97% from late July to 2.04 million tonnes in early August.

Export offers for Chinese HRC were unattractive, as they have been for weeks, because they more expensive than other offers to Southeast Asian markets, and there remains uncertainty over export taxes. Some Chinese steel mills meanwhile even tried to lift offers to South America, one of the few markets which ahs bought Chinese HRC recently, but with limited success.

“Steel mills are lying down and waiting for changes,” a source comments. 1 September is now the focus for rumours that an export tax may be implemented. Talk of the 15 or 28 August are dismissed by traders, who note that these dates are not working days and do not come ahead of any particular deadlines.

Kallanish assessed 2mm SAE1006 HRC unmoved for the third consecutive week at $930-940/t fob China on 13 August.

By Kallanish Team
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Vertraagd 18 apr 2024 17:35
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