Steel News from YK-8.7

Shandong province to improve air quality reducing steel capacity by 2020

China / Flat Products, Long products

The authorities of the Shandong province released a three-year plan to reduce emissions in order to clean the air by

cutting iron, steel and coal production capacities. Moreover, plants in the province will need to switch to cleaner energy

and to rail transportation of commodities.

On August 3, Shandong’s Environmental Protection Bureau released a new plan for tackling air pollution before 2020.

In particular, ironmaking capacities must be cut by 600,000 tpy, steelmaking capacities – by 3.55 million t. Coal capacities

will be reduced from 156 million tpy to 140 million tpy, according to the document.

By 2020, the local government also intends to switch from coal to cleaner energy sources. The government will increase

supply of natural gas and liquefied natural gas (LNG) from other provinces. Thus, by 2020 the natural gas supply volumes

will reach 15.8 billion cu m. The proportion of LNG consumption will go up to 8% by 2020.

The province is also going to switch from truck to rail transportation by 2020. All coal from the provincial ports of Qingdao,

Yantai and Rizhao should be transported by rail or waterways by the end of this year, while iron ore, coke and

other commodities will completely switch to rails by 2020.

News about steel capacity cuts in Shandong led to another futures hike in China. Rebar on the Dallian Commodity

Exchange added RMB 37/t ($5/t), iron ore – RMB 18/t ($2.6/t) and coking coal – RMB 28.5/t ($4/t), Metal Expert learnt.

Finished steel production in the province reached 92.1 million t and crude steel 71.4 million t in 2017, Metal Expert learnt.

Iron ore almost $70/t on new capacity cuts

China / Iron Ore

Iron ore jumped Monday as China continues with its efforts to improve the environment situation by cutting production.

Australian iron ore fines 62% Fe soared by $2.5/t to $69.5/t CFR over one day, following a RMB 18/t ($2.6/t) leap in

September contracts on the Dalian Commodity Exchange which, in turn, was supported by rising steel futures. Prices

at ports surged as well, insiders say.

The Environmental Protection Bureau of China’s eastern Shandong province said on Friday it would shut pig iron and

crude steel production equipment, reducing capacity by 0.6 million t and 3.55 million t, respectively, by the end of 2018.

Besides, coal making capacities would be reduced by 16 million t to 140 million t by 2020.

“Steelmakers in the north have already reduced output significantly, and extension of the cuts to other areas gave

the suppliers a solid reason for further price increase,” a Chinese trader told Metal Expert. Due to the previously

announced production curbs in the country, the stock level of five major steel products at mills dropped by 2.6% last

week, Mysteel data shows.

October rebar on the Shanghai Futures Exchange kept improving, gaining RMB 37/t ($5.4/t) since Friday, while Tangshan

billet remained unchanged at the highest mark since December 2017.

Although tighter restrictions pushed the raw material consumption down, it yet spurred producers’ interest in high-grade

Brazilian ore, with two deals being registered on trading platforms during the day.

Vietnam’s steel exports at new high in July

South East Asia / Flat Products, Long products

Vietnamese steel producers continued to increase sales to the overseas markets in January-July 2018. At the same

time, the import volumes keep falling due to tightening of trade measures in the country.

In January-July, Vietnam maintained export activity, selling 3.3 million t of steel products in the foreign markets, showing

a 34.6% increase year-on-year. In particular, export sales in July rose by 50% compared with July 2017, coming to

450,000 t, according to the General Statistics Office of Vietnam. The main destination for Vietnam is ASEAN region,

as Metal Expert reported earlier.

Meanwhile, Vietnam’s steel imports continue to decline. In January-July, imports reached 8.1 million t, 9.5% down

y-o-y, according to General Statistics Office. Imports in July, however, accounted for 1.25 million t, showing a 3.4%

month-on-month growth, Metal Expert learnt.

Market participants remain optimistic about the export performance which is likely to increase in the short term.

Anyang Iron and Steel boosts profit in H1 on higher demand for home appliances

China / Flat Products, Long products

Henan-based Anyang Iron and Steel improved financial results in H1 owing to strong operating results, better demand

and higher prices.

Anyang Iron and Steel, which produced 10.6 million t of crude steel in 2017, managed to significantly raise a net profit

in the January-June period. It surged from RMB 27.8 million ($4 million) to RMB 1.02 billion (around $149 million), Metal

Expert learnt. Revenue added 36.8% during the corresponding period.

The manufacturer managed to increase financial results amid strong demand in the country, from local white goods

producers specifically. In March this year, the company completed the construction of the cold-rolling line project with

a designed capacity of 700,000 tpy, which became one of the largest annealing and processing lines in China for

home appliances and construction materials. The company started to benefit from increasing consumption in the white

goods segment. In January-June 2018, sales of household appliances and AV equipment added 10.6% year-on-year

in China, according to the data of NBS.

Besides, steel mills located in Henan province have a chance to avoid production restrictions in the following heating

season (over November 2018 – March 2019) in case they upgrade the manufacturing facilities by October 2018 to

meet the ultra-low emission standards, as Metal Expert reported earlier.

JSW Steel orders 8 million tpy pellet plant to cover future needs

India / Iron Ore

One of the largest steel producers in India, JSW Steel, ordered a 8 million tpy pellet plant, aiming to increase pellets

use at the existing steelmaking assets and to guarantee raw material supply as the company is going to expand crude

steel capacity by 6 million tpy in coming few years.

The new pellet plant will be located at Vijaynagar Works in Toranagallu, Karnataka state. The project completion is

expected in H2 2019, according to representative of the equipment supplier Finland’s Metso. The increase of pellets

use, partly replacing sinter, will help the company improve productivity, quality of the finished steel products and to

lower emissions. Moreover, the installation of the new equipment is highly important as JSW Steel has ambitious plans

for crude steel expansion.

Crude steel capacity at Vijayanagar Works will be increased by 1 million t to 13 million tpy by March 2020, as Metal

Expert reported earlier. In particular, the company has already started repair and upgrade of its BF No.3 to improve

hot metal availability. At the same time, till the end of 2019, a 5 million tpy BOF-shop at Dolvi plant in Maharashtra will

be installed.

JSW Steel has plans to ensure iron ore feed to new pelletizing equipment as it has five mines in Karnataka with a total

capacity of about 5 million tpy, which will start operation till 2020. The company wanted to buy another eight mines in

the state but the auction was delayed.

SAIL improves steel production profit in Q1 of FY 2019

India / Flat Products, Long products

The state-run Steel Authority of India (SAIL) improved its financial performance in the first three months of the current

financial year (April-June) on higher prices and production.

Two scrap suppliers provide discounts to Turkey

Turkey / Scrap

Turkish mills achieved lower prices for ferrous scrap in two deals for American and European material late last week.

Upon negotiations in the Turkish scrap market, a Marmara-based company purchased 35,000 t of HMS 1&2 (80:20)

from the USA at $328/t CFR, Metal Expert learnt. The price decreased by $7/t.

An Izmir-based producer bought 20,000 t of HMS 1&2 (80:20) at $322.5/t CFR and 10,000 t of bonus scrap at $332.5/t

CFR from the Netherlands. The cargo is due to be delivered by September 30. The price for European HMS 1&2

(80:20) dropped by $5/t.

Although it was also heard that a large scrap collector from the UK sold a cargo to Turkey, most market participants

believe it is an unsubstantiated rumor.

One more contract was discussed in Turkey for only 7,000 t of scrap. An Izmir-based steelmaker purchased HMS 1&2

(80:20) at $322/t CFR and bonus material at $333/t CFR from France (Marseille area), Metal Expert learnt.

Iran limits DRI exports to benefit local steel production

Middle East / DRI & HBI

Iran decided to limit DRI exports to the benefit of local steel production, which has been suffering from lack of raw material

supply. However, the outcome remains rather unclear as the situation is aggravated by the challenging financial

issues in the country as well as by the uncertainty related to US sanctions.

Exports of DRI under 7203.10.00 and 7203.90.00 codes from Iran is allowed only by manufacturers who have corresponding

permission from the Ministry of Industry, Mining and Trade. The decision was approved by the ministry and

comes into force on August, 6, Metal Expert learnt. According to the new rule, the producers have to offer the metallized

products on the Iranian Mercantile Exchange first. In case there is no buyer, the material can be offered to foreign customers

afterwards. “Firstly, they implemented this rule in order to overcome a shortage of DRI in the domestic market

caused by some shutdowns at Iranian mills,” market analyst and trader Keyvan Jafari Tehrani told Metal Expert. In

addition, the measure is aimed at limiting traders in playing on currency rates, Metal Expert understands. It is worth

mentioning that US sanctions would not have critically affected Iran’s DRI exports, as the flows were mainly directed

to the countries with strong ties with Iran – to India and Oman in particular.

DRI exports limitation is expected to benefit local steelmakers as the domestic supply increase may soften the prices

for raw material, giving more space for margins. “Obviously it will have an effect on the steel industry because the

local price has been much higher than in the international market,” the industrial source mentioned. However, some

sources are cautious in their forecasts as a number of reasons may offset the benefits. “Everything will depend on the

international price and the US dollar rate,” one of the Iranian steel producers mentioned.

Iran’s DRI output increased by 25% year-on-year to 6.5 million t in Q1 of the current Persian year (March 21 – June

21, 2018); exports dropped by 21% to 178,000 t over the same period. Last year Iran already used some limitations

for DRI exports to meet local requirements, as Metal Expert reported earlier.

New rules in currency market may ease pressure on Iran’s steel exporters

Middle East / Steel Semis

Aiming to increase the inflow of hard currency, Iran’s government introduced the new rules for operations in the local

market, which may ease pressure on the steel industry as well. However, at present most market players are waiting

for a final approval of the new regulations and details in order to evaluate further prospects.

Under the new rules, the Central Bank of Iran (CBI) plans to set the new exchange rate for trade in different kinds

of goods, which will be based on the supply-demand ratio. “No specific rate has been announced yet but it is being

discussed at $1 = IRR 80,000‑85,000,” a market source told Metal Expert. The official CBI rate, which is currently

$1 = IRR 44,120, will be applicable only to imports of essential goods, such as food and medicine. At the same time,

other categories, including steel producers, which previously were forced to sell most of the export revenue at the

official rate, will be free from these obligations now, market sources say.

As a result, the pressure on steel exporters may ease in case the US sanctions do not close completely the ways for

international trade. “The profits of exporters of both steel and petrochemical plants will increase significantly because

they will be able to exchange dollars with the new and higher rate, but the sanctions make the situation more complicated,”

an industrial source told Metal Expert. Some other sources prefer to wait and see or are offering more pessimistic

forecasts. “We will get final details soon but as of today we do not know what is going to happen. We even do not

know exactly the currency rate and cannot calculate export revenues. We are like in the darkroom,” a steel producer

mentioned. It is expected that in a few days all market players will get ample instructions and clearer understanding

of the new policy.

Turkish white goods market gives less support to steel consumption

Turkey / Flat Products

Unfavourable economic situation in Turkey together with less buyer confidence amid local currency volatility led to

the weakening of the country’s white goods market in H1 2018. Despite the fact, such developments did not influence

domestic flat steel consumption so far. However, the situation is worrying in terms of mid-term prospects.

Bahrain’s construction set to grow further to benefit of steel producers

Middle East / Long products

Bahrain’s infrastructure projects provided major support to the country’s objective to offset the drop of the oil sector

over the past few years. Rising construction sector and more sustainable steel industry is another effect of the government’s

strategy to divert economy. Moreover, the trend is set to continue.

The construction sector of Bahrain grew by 6.7% year-on-year in Q1 2018, according to local authorities, owing to

increased spending on infrastructure and higher capital inflows for industrial developments. Sector’s expansion made

a sizeable contribution to the country’s healthier economy, having helped to assist to offset the 14.7% contraction in

the oil industry. Moreover, the construction industry is foreseen to be among the main drivers for Bahrain’s economic

upturn in the short and medium term as new injections are planned, Metal Expert understands. In particular, according

to the report of National Bank of Kuwait (NBK), Bahrain is going to fulfil project in transport, utilities and housing at a

total cost of $8 billion.

In addition, local construction and steel sectors are expected to benefit from the planned hydrocarbons industry developments.

In particular, Bahrain in April announced the discovery of large oil and gas reserves, which will require additional

infrastructure for the development till the output begins around 2023, Metal Expert understand. Another project is the

$5 billion expansion of Bahrain Petroleum Company, which is as well foreseen to create some construction demand.

As a result, local but as well regional steel industry is expected to benefit from the infrastructure development in the

coming years. Although Bahrain is one of the smallest GCC markets in terms of steel consumption – only around

20,000 tpm, as Metal Expert learnt, the gradual rise of construction activities provides solid ground for domestic producers.

Several Egyptian suppliers decrease domestic rebar prices

North Africa / Long products

Despite weak demand in the domestic longs market, Egypt’s key producers decided to roll over prices for local consumers.

However, some smaller suppliers revised theirs downwards in order to stimulate buying and stay competitive

on lower-priced imports.

Mitsui supports Hawsons project development to secure high-grade ore off-take

Australia / Iron Ore

Japan’s trading company Mitsui & Co. will take part in bankable feasibility study (BFS) of Australia’s Hawsons Iron

Project (Hawsons), which is to produce the world’s highest-grade iron products once put into operation.

The trading house will invest AUD 5.4 million ($3.99 million) under the agreement announced on August 6 with Australia’s

Carpentaria Resources (CAP), Hawsons’ major shareholder (68.69%). The amount is “equivalent to 20% of the

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