· pdf filevietnam mulls new import tariff on alloy steel after fraud warning ... page10 ......

According to the World Steel Association (worldsteel), the steel industry has reached the end of a major growth cycle which was based on the rapid development in China. It accord-ingly forecasted that global steel demand will decline by 1.7% to 1.513 billion tonnes in 2015, down from 1.54 million tonnes in 2014. In its latest short-range outlook report, worldsteel, however, projected that global steel demand will rebound slightly by 0.7% to 1.523 billion tonnes in 2016.

China’s steel demand is expected to contract by 3.5% this year to 685.9 million tonnes, follow-ing a 3.3% year-on-year decline to 710.8 million tonnes in 2014. For 2016, worldsteel expects China’s steel demand to continue to retreat, by some 2%, to 672.2 million tonnes.

For the other major steel consuming econo-mies, steel demand in the USA is also expected to drop by 3.5 % to 103.8 million tonnes in 2015 before picking up by 1.3% to 105.2 million tonnes in 2016. The EU-28, on the other hand, is forecast to see modest steel demand growth of 1.3% this year to 149.8 million tonnes, and further increase by 2.2% to 153.1 million tonnes in 2016.

As for the other countries in Asia, Japan’s steel consumption is forecast to see a rather signifi-cant drop of 5.4% this year to 64 million tonnes before rebounding with a growth rate of 3% in 2016 to 66 million tonnes. In contrast, India is performing better than expected with its steel demand forecasted to rise by 7.3% to 81.5 million tonnes this year and by another 7.6% in 2016 to 87.6 million tonnes.

Message from the Secretary General

At the same session, an expert from Wood Mackenzie will examine the “Future Direction of China’s Steel Exports” while a representa-tive from Platts will present “Steel Raw Material Outlook and Trends”. Mr. Le Phuoc Vu, Chairman of Hoa Sen Group of Vietnam, will also share with us his views on “Increasing Cooperation in Developing of Steel Industry among ASEAN”.

Another highlight of the Forum is the special focus on the construction sector which will feature three (3) dedicated sessions on the sector i.e. Construction Management & Sustainability; Smart Systems for Steel Construction; and Steel Material & Innovative Product Developments.

There is still time to register and participate in this interesting and informative event of the Institute. TAN AH YONG

For ASEAN-5 (Indonesia, Malaysia, Philippines, Thailand and Vietnam), worldsteel expects the grouping’s steel demand to continue to see moderate growth rates of 3.5% and 3.4% in 2015 and 2016 respectively.

The low growth environment for the steel industry has led to a situation where the industry is now undergoing a painful restruc-turing with prices and demand of steel products both at record lows. The major contributing factor is of course the slow down in steel consumption in China compounded by the country’s chronic excess steel produc-tion capacity.

According to the China Iron and Steel Associa-tion (CISA), China’s apparent consumption of crude steel fell 5.8% year-on-year in the first nine months of 2015 while data released by the National Bureau of Statistics showed only a 2% drop in the country’s crude steel output over the same period. This supply-demand imbalance has led to a continual decline in steel prices. As a consequence, CISA reported that medium and large-sized steelmakers in China posted total losses of US$ 4.4 billion in the first nine months of this year.

The fallout from China steelmakers’ struggles is also hurting other steelmakers across the globe. As steel mills in China seek new channels to absorb their excess output, China’s steel exports rocketed and reached 83.11 million tonnes in the first nine months of 2015, up 27% year-on-year. At this rate, China’s steel exports will certainly breach 100 million tonnes this year, an all time high.

The huge outflow of steel products from China at record low prices is disrupting steel markets across the world leading to heightened trade tensions. Many steel mills, including those from ASEAN, are struggling to keep their businesses afloat.

How are the steelmakers in ASEAN coping with the challenges? I will try to assess the situation when I present an “Update on ASEAN Steel Industry Development Scenario” in the session on “Steel Market Developments” at the upcoming 2015 ASEAN Iron and Steel Sustain ability Forum which will be held in Kuala Lumpur, Malaysia on 30 November to 2 December 2015.

Publisher: SEAISI Editor: Pichsini Tepa-Apirak Contributing Editor: Josephine Fong Printer: Yeohprinco Sdn. Bhd.Email: [email protected] Tel: 603 55191102 Fax: 603 55191159 Website: www.seaisi.org

UPCOMING EVENTUPCOMING EVENT

SEAISISouth East Asia Iron and Steel Institute ISSN 0166-9645

Newsletter October 2015

NEWS HIGHLIGHTSNEWS HIGHLIGHTS

Australia clears three countries in rebar anti-dumping probe ... page 3

Malaysia’s Lion in talks with Asian buyer of strip mill unit ... page 6

VSA wants 27 steel projects cancelled ... page 9

Vietnam mulls new import tariff on alloy steel after fraud warning ... page10

Intra – ASEAN Steel Trade ... page15

2016 SEAISI Conference and Exhibition 30 May 2016 to 2 June 2016JW Marriott Hanoi, Vietnam

2 SEAISI Newsletter, October 2015

ContentsMessage from Secretary General ....................................................... 1

Australia’s BlueScope Steel cuts 500 jobs in cost-cutting plan .......2

Australia extends deadline for AD probe on Chinese rebar imports 2

Australia clears three countries in rebar anti-dumping probe ........ 3

Chinese steel flood heaps pressure on Arrium, BlueScope .............. 3

BlueScope boosts exposure to global steel ....................................... 4

Indonesia’s auto sales, output continue to decline in September .. 5

Japan industry body cuts FY crude steel output forecast on

slowing exports ................................................................................... 5

Posco aims 10 million mt autosheet sale by 2018 ........................... 5

Korea’s steel imports continuing to fall ............................................ 6

Malaysia’s Lion in talks with Asian buyer of strip mill unit ............... 6

Malaysian bourse ticks off Kinsteel, Perwaja over breach of

listing rules ......................................................................................... 6

Big catching up needed for Phl steel industry ................................... 7

Taiwan’s CSC rolls over domestic steel prices for December ........... 8

UK slab plant liquidation brings down Thai parent company ........... 8

Vietnam’s CSVC monitoring imports of China CRC, HDG .................... 9

VSA wants 27 steel projects cancelled .............................................. 9

Hoa Phat signs iron ore deal with Anglo American to feed new bf ... 9

Viet Nam Steel Association accuses China of trade fraud .............. 10

Vietnam mulls new import tariff on alloy steel after fraud

warning ............................................................................................. 10

NLMK crude production and sales up on exports in Jan-Sep .......... 11

Brazil’s iron ore exports up 8% in September .................................. 11

Brazil’s steel sheet imports tumbled nearly 70% in September .... 11

Steel consumption declines 5.2 % in September ............................ 11

Steel imports by India slow in September on import tax increase . 12

India records steel demand growth in difficult external

environment ..................................................................................... 12

China’s impact on the global steel market ...................................... 13

China crude steel output falls in Sept y/y as demand slows .......... 13

European crisis will bend but not break Tata Steel ......................... 14

Promote steel consumption while building infrastructure ............ 14

Intra – ASEAN steel trade .................................................................. 15

2015 ASEAN Iron and Steel Sustainability Forum ............................. 16

A U S T R A L I A

Australia’s BlueScope Steel cuts 500 jobs in cost-cutting plan

Australia’s BlueScope Steel Ltd said it will cut 500 jobs at a steelmaking plant near Sydney as part of a union-backed plan to keepthe facility open in the face of plummeting commodity prices.

In a statement, BlueScope said the Australian Workers Union(AWU) agreed to cut 300 manufacturing jobs and 200 supportjobs to save A$200 million ($144 million) at the Port Kemblasteelworks, one the biggest employers in Australia’s 10th-largestcity Wollongong.

For months, BlueScope, the AWU and the country’s industrialrelations tribunal have been negotiating a way to keep the facilityoperating as a Chinese construction slowdown hammers theprices of steel and steel-making ingredient iron ore, two keyexports for Australia.

“We still have a lot of work to do in the coming weeks, as steelprices remain under pressure from the global steel glut,” BlueScopeChief Executive Officer Paul O’Malley said in the statement.

The Port Kembla steelworks currently employs about 3,500people. The remaining workers at the site also agreed to a three-year wage freeze, O’Malley said.

The AWU said steel workers had accepted “real pain and sacrifice”to keep the industry viable and demanded the government ofNew South Wales state introduce a policy of buying only locally-made steel.

Shares of BlueScope, spun off from mining giant BHP Billiton Ltdin 2002, rose 1.8 percent while the broader market was up 0.9percent in early trading.

Reuters, October 8, 2015

Australia extends deadline for AD probe on Chinese rebar imports

The Australian Anti-Dumping Commission has been granted moretime to complete its investigation into alleged dumping of rebarexported to the country from China.

It now has until February 6, 2016 to issue a statement of essentialfacts (SEF) on the probe, the commission said on ThursdayOctober 15.

The initiation notice had advised that the SEF – which will set outthe facts on which the commission proposes to base itsrecommendations to the parliamentary secretary of Australia’sMinistry of Industry, Innovation & Science – would be placed onpublic record by October 19.

The commission said it requires “additional time to thoroughlyassess market situation and material injury claims, to completeexporter verifications, accurately calculate dumping marginsand draft the SEF” for its request for a further extension to thedeadline.

Interested parties will be invited to make submissions to thecommission in response to the SEF within 20 days of itspublication, it said.

SEAISI Newsletter, October 2015 3

The commission will present its recommendation to theparliamentary secretary in a report by March 22, 2016, it added.

The investigation, which covers the period from July 1, 2014 toJune 30, 2015 was launched on July 1, followed an applicationlodged by OneSteel Manufacturing, a manufacturer of rebar inAustralia.

The company claimed that Chinese rebar was being sold inAustralia at prices much lower than locally manufactured steeland was harming domestic manufacturers.

Steel First, October 15, 2015

Australia clears three countries in rebar anti-dumping probe

Australia’s Anti-Dumping Commission has terminated part of itsinvestigation into alleged dumping of rebar exported to thecountry from South Korea, Malaysia, Singapore, Spain, Taiwan,Thailand and Turkey.

The commission concluded that there has been no dumping fromMalaysia’s Ann Joo Steel, Thailand’s Millcon Steel or Turkey’sHabas.

In the case of Taiwan’s Power Steel, although the goods exportedfrom the company to Australia were dumped, the dumping marginwas negligible, at less than 2%, according to a statement releasedby the commission on Tuesday October 20.

In relation to the goods exported from Malaysia, Thailand andTurkey, the volumes of dumped goods were found to be negligible,and therefore it must terminate the investigation insofar as itrelates to those three countries, the commission said.

The probe covered the period from July 1, 2013, to June 30, 2014,and was instigated by OneSteel Manufacturing, a producer ofrebar in Australia.

The company claimed that the imports had been exported toAustralia at prices lower than their normal value and that thedumping had caused material injury to the Australian industry.

The commission provided its final recommendations and reportin relation to the investigation to the parliamentary secretary ofAustralia’s Ministry for Industry, Innovation and Science onOctober 19.


Chinese steel flood heaps pressure on Arrium, BlueScope

The chief executive of Arrium Steel, Steve Hamer, says steelindustry conditions are the worst he has seen and that the federalgovernment is failing to protect the local industry from dumpedsteel.

Mr Hamer, who has worked in the steel industry his entire career,said Australian steel is “under enormous pressure”.

“We are seeing unprecedented margin compression. It isunsustainable… we’ve had some tough times and this is as toughas we’ve ever seen it,” he said on the sidelines of a Citi conferencein Sydney.

Globally a huge excess of steelmaking capacity and slowingdemand from China, which produces half the world’s steel, hasresulted in a glut of supply, tanking steel prices.

“The whole world is talking about the problem of Chinese exportsand the impact it is having on margins,” Mr Hamer said.

Steel dumping – the selling of steel in a foreign market at a lowerprice than the domestic market price – is a hot issue in the steelindustry and China is often singled out as the key culprit.

The British conservative government came under fire this weekfor rolling out the welcome mat to Chinese president Xi Jinping,while at the same time refusing to provide state aid to local steelmakers in the face of an unprecedented wave of cheap Chineseimports.

In Britain, Tata Steel has announced 1200 job losses, SSI hasgone into liquidation with 2000 job losses expected, and Caparohas gone into partial administration with reports of as many as1800 redundancies.

Anti-dumping claimsArrium has anti-dumping claims either in force or underinvestigation for around 65 per cent of its production. It hasoutstanding claims against Chinese rod and rebar products.

Mr Hamer said Australia’s anti-dumping measures are “still notfast enough or robust enough”.

Arrium, formerly known as OneSteel, makes steel from its blastfurnace at Whyalla and its electric arc furnaces in Sydney andMelbourne. The company has capacity to produce 2.6 milliontonnes of steel a year.

Mr Hamer said he believes Australia’s blast furnaces – at Whyallain South Australia and at Port Kembla in NSW – have a future. Buthe said the company has to consider all options in the currentenvironment.

“We need to look at our business model all the time includingimports, blast furnace, electric arc furnaces, do we mothball orrun our production down, all those sorts of questions,” Mr Hamersaid.

“That [mothballing Whyalla and importing raw steel] is a liveand active question in our business.”

Chinese exportsChinese steel exports have doubled to more than 100 milliontonnes a year between 2010 and 2015. Chinese steel exports hita record monthly high of 11.25 million tonnes in September, up32 per cent on September 2014.

Losses in China’s steel industry totalled $US3.9 billion in thefirst eight months of 2015.

A recent survey of 163 Chinese steel mills by MySteel found that90.2 per cent of China’s steel mills are operating in deficitconditions.


Xu Lejiang, the chairman of China’s second-biggest mill ShanghaiBaosteel Group, said this week that China may need to cut itsproduction by 20 per cent.

Arrium said three weeks ago that it will cut jobs and overhauloperating practices at the Whyalla steelworks to save $100million, on top of $20 million in savings already being pursuedin the steel business.

Australia’s other listed steel maker, BlueScope Steel, is set tomake a decision on the future of the Port Kembla steelworks nextmonth.

BlueScope has said it must secure $200 million in cost savingsor it will shut the nation’s biggest steelworks at the cost of 4500jobs.

Unprecedented actionUnprecedented concessions from BlueScope workers earlier thismonth, including wage freezes and 500 job cuts, may not beenough to save the plant.

A final decision on Port Kembla is expected to be announcedeither before or during BlueScope’s annual meeting on November19.

Christopher Pyne, the new federal minister for industry, scienceand innovation, has called a meeting of state and federalpoliticians and other stakeholders for October 26 to discussPort Kembla and the steel industry.

“The Australian government is committed to an efficient andeffective anti-dumping system,” a spokesman from Mr Pyne’soffice said.

“We intend to stay engaged with stakeholders, including the NSWgovernment, on a constructive approach for BlueScope’s futureand a strategy for long-term economic development in theIllawarra region”.

BlueScope has asked the NSW government to grant the companyaround $30 million of relief from payroll tax and other impoststo help keep Port Kembla open.

“We have been in very constructive negotiations with thecompany and support their efforts to keep steel makingoperations open in Port Kembla,” a spokesman from NSW PremierMike Baird’s office said.

Sydney Morning Herald, October 23, 2015

BlueScope boosts exposure to global steel

BlueScope Steel has boosted its exposure to the global steel-market, pledging to keep the -historic Port Kembla steelworksrunning after unions voted to -accept 500 job losses, and makingthe surprise move to spend $US720 million ($990m) to take full-ownership of its Ohio steel plant, the most profitable in NorthAmerica.

The beleaguered Port Kembla’s survival had been flagged earlierthis month after managing director Paul O’Malley said the unionvote had effectively saved 4500 regional jobs and that talks with

the state government to secure the last remaining concessionsto ensure $200m of annual savings were well advanced.

But few were expecting the Melbourne-based steelmaker tolaunch a debt-fuelled $US720m acquisition to beef up its steelinterests, even if it is buying out Cargill, its 50-50 partner in theNorth Star electric arc furnace steel mill, which uses scrap steelrather than iron ore and coking coal.

The announcements, along with a $50m boost in first-halfearnings before interest and tax guidance to about $180m, sentthe shares up 43c, or 11 per cent, to a six-week high of $4.50.“The decision to continue steelmaking, -together with the moveto full ownership of North Star, delivers on our strategy, which isto deliver cost-competitive steel supply within a sustainablebusiness model,” Mr O’Malley said yesterday. “North Star is themost profitable steel mill in North America; it’s cost-competitive,it’s a high quality asset and its employees are incrediblyproductive.”

The North Star plant, in Delta, Ohio, sits in the middle of a big USscrap steel production region, has a profit margin of 16.6 percent (double the US industry average) and has paid BlueScope$1.1 billion of cash dividends in the past 10 years. The acquisitionwas made after Cargill struck a deal to sell out to an unnamedthird party and BlueScope exercised its pre-emptive rights totake the stake. North Star is what BlueScope hopes Port Kemblacan be after the Australian Workers Unions agreed to a raft ofchanges, including a three-year wage freeze, the ability to makeworkplace restructures quickly and incentive outcomes linkedto business performance.

“North Star is probably 15 years ahead of Port Kembla in termsof alignment (between workers and the company) but what we’veseen in the last eight weeks is you can make progress very veryquickly,” Mr O’Malley said.

The board has decided to keep Port Kembla open, subject toratification of enterprise agreements, after the NSW governmentagreed yesterday to defer $60m of payroll tax payments over thenext three years. With the $40m of benefits from the union voteand $100m of changes the company plans with its new-foundworker flexibility, this provides the $200m of cost savingsBlueScope in August said would be needed to keep Port Kemblaopen and avoid 5000 -regional job losses.

“The earnings upgrade today demonstrates that we are both aheadof schedule, and delivering costs more quickly than expected,”Mr O’Malley said. “We have to get more than those $200m ofcosts out and I -believe we will.”

The earnings upgrade was due to cost savings, currency andimprovement in domestic demand.

The company’s biggest shareholder, Perpetual Investments, lastweek told investors that any Port Kembla solution would probablynot be for the long term because Australian mills wouldeventually be unable to compete with the flood of exports comingout of China.

However, Mr O’Malley said he expected the steel cycle toeventually turn, noting that 90 per cent of China’s steel capacity


was unprofitable at current -prices and that while this couldcontinue for a long time, it was unlikely to do so forever.

“We are in a cyclical business and at some point we expect thecycle to turn back in our favour,” Mr O’Malley said. “We have toassume -prices are going to be low for a long time and the onlyway we are going to be around is to be cost competitive.”

Mr O’Malley said it was -unclear whether the pick-up inAustralian steel demand, led by the residential market, wasindicative of an improving -market or to do with restocking.

Standard & Poor’s said the North Star acquisition would notaffect BlueScope’s BB rating, even though it was debt funded. “Inour opinion, the current rating can accommodate higher debtlevels, particularly given North Star’s relatively strong and stablecash flow generation.”

The Australian, October 27, 2015

Indonesia’s auto sales, output continue to decline in September

Indonesia’s domestic automotive sales totalled 93,038 units inSeptember, down 9.3% from the 102,572 units sold a year earlier.

This marks a 13th consecutive month of decline, according tothe latest data from the country’s automotive industry associationGaikindo.

Automobile sales are a key indicator of consumption inIndonesia, whose economy is growing at its slowest since 2009amid a slump in commodities prices.

Last month’s numbers brought the country’s domestic auto salesfor the first nine months of this year to 764,683 units, down 18%from the corresponding period last year.

Indonesia’s auto output also fell last month, totalling 102,968vehicles, a 10.5% drop from the 115,026 units produced a yearearlier.

The country produced a total of 843,354 units in January-September this year, down 15% from the corresponding period oflast year.


Japan industry body cuts FY crude steel output forecast on slowingexports

Japan’s steel industry body on Friday lowered its forecast for thecountry’s crude steel output in the fiscal year to March 2016 by1 million tonnes to 106 million tonnes, citing slow exportdemand.

“The biggest risk factor is slowing growth in the Chinese economy,”Koji Kakigi, chairman of the Japan Iron and Steel Federation,told a news conference.

I N D O N E S I A

J A P A N

“We had projected about 107 million tonnes in crude steel outputfor this fiscal year, but it now looks that it would fall short byabout 1 million tonnes due to slower export,” he said.

The revised forecast marks a 3.5 percent drop from the country’sactual crude steel output of 109.85 million tonnes in the fiscalyear ended March 2015.

Japan’s crude steel output fell 7.3 percent in September from ayear earlier to 8.57 million tonnes, marking a 13th straightmonthly drop and a six-year low for the month, as weak demandand high inventories forced steelmakers to cut output.

Production has been on a downtrend due to slack sales of carsand houses after a tax hike in April 2014, which caused a rise instockpiles of steel products, and slumping steel prices in Asiathat eat into export margins of Japanese steelmakers.

Asked when steel output would recover, Kakigi said it dependson export circumstances.

“We expect a certain amount of domestic demand going forward,but the problem is export,” he said.

Kakigi, president of JFE Holdings’ unit JFE Steel, said output wasunlikely to go up in the current quarter.

Whether or not production rises would depend on for how longthe current prices hold and how much steel China exports, hesaid.

“Many Chinese steelmakers are exporting steel products at aloss,” he said.

“The bigger losses they make, the harder it gets for them to keepon doing like this.”

Shanghai steel futures fell to an all-time low earlier this weekafter data showed China’s economy grew at its slowest pacesince 2009 in the third quarter, underlining demand pressure inthe top consumer of the alloy.

China also makes nearly half the world’s 1.6 billion tonnes ofsteel. With its once stellar growth slowing, the country is expectedto export a record 100 million tonnes of steel to world marketsthis year to help address its spare steelmaking capacity -estimated at a hefty 300 million tonnes.


Posco aims 10 million mt autosheet sale by 2018

Posco aims to expand its sales of autosheet to 10 million metrictons annually by 2018, an increase of some 1.7 million mtcompared with last year’s sales of 8.3 million mt.

The South Korean steelmaker revealed its plans on October 8 atits signing of an memorandum of understanding regardingautosheet supply with Renault Samsung Motors. Under the deal,the steelmaker will provide autosheet to the carmaker’s plant inBusan and the two will cooperate to develop high-strengthautosheet and other new technology, Posco said in statement.

K O R E A


Posco did not reveal further details such as tonnage andcommencement of deliveries, but an industry source said theshipments will start from next month. Posco said exterior panelson new model Renault Samsung sedans and SUVs will use thesteelmaker’s materials to help reduce vehicle weight.

Renault Samsung Motors produced 150,108 units during January-September, up 59% on year, according to Korea AutomobileManufacturers Association. In September alone, it made 15,397units, up 5% on year.

Industry sources estimated Posco’s autosheet output accountsfor around 20% of total production, but sales of the sheet generatehalf of the firm’s operating profits.

Over the past few years Posco has been losing its domestic marketshare in autosheet to Hyundai Steel, especially in sales toHyundai Motor Group including Kia Motors. The steelmaker istrying to offset this decline through increased exports by securingbusiness with foreign carmakers, an analyst in Seoul said.

In July, Posco was chosen as German carmaker VolkswagenGroup’s outstanding partner for its flat carbon steel products,as reported.

Korea’s exports of cold rolled coil including both carbon steeland specialty steel to Germany surged by 80% on year duringJanuary-August, Korea Iron and Steel Association data shows,albeit from a low base to 4,500 metric tons.

Platts, October 12, 2015

Korea’s steel imports continuing to fall

Korea’s steel imports are on a rapid decline, mainly due to theongoing recession in the domestic shipbuilding industry.

According to the Korea Iron & Steel Association, the importsdecreased by 9.9 percent and 10.7 percent from a year ago and amonth ago in Sept., to 1.774 million tons, respectively. Thecumulative total for the first three quarters of this year decreased2.8 percent from a year earlier to 165.52 million tons, too. Sincethe beginning of this year, the imports have continued to declineyear-on-year except in March, July, and Aug.

By item, those of hot-rolled steel, thick plates, and zinc-coatedsteel sheets showed a significant decline in particular. Theimports of hot-rolled steel from China and Japan fell 2.0 percentand 13.8 percent year-on-year, dragging down total imports by8.6 percent to 507,000 tons. When it comes to thick plates, whichare closely related to the shipbuilding industry, imports recordeda 48.7 percent year-on-year decrease to 171,000 tons.

In the meantime, Clarksons Research recently announced thatKorean shipbuilders won orders worth US$2.162 billion for 33ships having a combined capacity of 1,070,729 CGTs last month,ranking third in the world behind Chinese and Japanesecompanies.

Business Korea, October 20, 2015

Malaysia’s Lion in talks with Asian buyer of strip mill unit

Malaysia’s Lion Corp is in discussions with “a party fromNortheast Asia” to consider investing in its subsidiary MegasteelSdn Bhd, the company announced in a stock exchange filing. Thiswas part of Lion Corp’s “regularization plan “which involvedMegasteel, its subsidiary which produces hot rolled and coldrolled coils in Banting, Selangor.

“The regularization plan would include the securing of potentialinvestor(s) to strengthen the operational and financial positionof Megasteel and the petition for the implementation of effectivetrade defense mechanism by the government,” the filing said.

Megasteel was the petitioner in a safeguard probe against HRCimports initiated on September 11, as Platts reported. The targetedproducts are HRC 600mm or more wide and 1.2-22mm thick,classified under HS Codes heading 7208 and 7225.

Lion has been granted an extension to January 31, 2016 to submitits regularization plan to the authorities, according to an October5 filing to Bursa Malaysia. It had made an application to BursaSecurities for an extension of time to next March 31. SJ Securitiesmade these announcements on behalf of Lion. An official with SJdeclined further comment when contacted on Tuesday.

Last month Lion said Megasteel was unable to meet payment forthe banker’s acceptance which fell due last September 23 inrespect of a working capital facility. As at that day, the totalamount outstanding for the loans, bonds, debts, loan stocks andthe banker’s acceptance amounted to approximately RM 3.02billion ($690 million).

Megasteel was unable to meet payments for loan facilities dueon September 30 and this resulted in a default by Megasteel,Lion said. The facilities comprised syndicated term loan facilitieswith interests due for Malaysian and US dollar-denominatedterm loans.


Malaysian bourse ticks off Kinsteel, Perwaja over breach of listingrules

Bursa Malaysia Securities has publicly reprimanded Kinsteeland its 30.5%-owned subsidiary Perwaja Holdings for breachingmain market listing requirements.

The two companies’ respective financial reports for the 18-monthperiod ended June 30, 2014, released on August 29, 2014, werein contravention of paragraph 9.16(1)(a) of the Bursa MalaysiaSecurities Main Market Listing Requirements, according to twoseparate statements issued by Bursa Malaysia on Friday October23.

The requirement states that a listed issuer must ensure that eachannouncement made is factual, clear, unambiguous, accurate,succinct and contains sufficient information to enable investorsto make informed investment decisions.

M A L A Y S I A


While Bursa Malaysia Securities did not single out any ofKinsteel’s directors as being responsible for the breach by thecompany, the bourse said it wished to highlight and remind themthat it was their duty to maintain appropriate standards ofresponsibility and accountability in ensuring compliance of themain listing requirements.

Kinsteel has the responsibility to ensure that its consolidatedfinancial statements were prepared to give a true and fair viewof the state of affairs of the group and there was no justificationfor its failure to do so particularly where nearly the entire boardof directors of Perwaja were directors of Kinsteel, Bursa Malaysiasaid.

“They were or should be aware of the audit issues highlighted bythe external auditors, including the request for an independentvaluation report,” it added.

According to Bursa Malaysia, there was a difference of 125million ringgit ($29 million) between Kinsteel’s unaudited lossafter tax and minority interest (announced on August 29, 2014)and the audited version (announced on November 7, 2014), whichrepresented a variance of 29.7%.

In Perwaja’s case, the difference of 296 million ringgit ($69million) between the unaudited loss after tax and minorityinterest (announced on August 29, 2014) and the audited version(announced on November 7, 2014) represented a variance of32%.

The main adjustment was in respect of an impairment of plantand machinery amounting to 233.6 million ringgit ($55 million),where, despite requests by the external auditors since May 28,2014, Perwaja had failed to undertake an impairment assessmentincluding taking reasonable steps to appoint and expedite thecompletion of the independent valuation report for impairmentassessment prior to the submission of the June 2014 report.

“The explanation that the adjustment was made upon receipt ofthe valuation letter dated November 6, 2014 was not acceptable,”Bursa Malaysia said.

Perwaja Holdings owns Perwaja Steel, a 1.3-million-tpy mill thatstopped operations in August 2013 when its dry gas and electricitysupplies were cut off, while debt-laden Kinsteel is trying to turnits business around.

Both Kinsteel’s and Perwaja’s shares closed unchanged at 12.5sen ($0.03) on Friday.


Big catching up needed for Phl steel industry

Positive news for the nation’s struggling iron and steel industryturned up this week: Seven domestic banks have pooled a P4.4-billion syndicated loan to finance the construction in Plaridel,Bulacan of a modern reinforcing-steel-bar rolling mill, with anannual capacity of 1.2 million metric tons.

The loan package is billed as a “maiden peso syndicated offering”and the “largest peso-denominated syndicated term loan facilityto date (for) a steel mill in the Philippines.” Definitely this is awelcome development: medium-size Philippine banks poolingresources to fund the expansion of an important downstreamsegment of a key industry that government has neglected tonurture for decades.

Kudos to the Philippine National Bank, China Banking Corp.,Philippine Veterans Bank, Robinsons Bank Corp., United CoconutPlanters Bank, Bank of Makati, and China Bank Savings. Also toPNB Capital and Investment Corp., the sole issue manager whicharranged the loan jointly with China Bank.

Similarly SteelAsia Manufacturing Corp. deserves praise forforging the peso loan for its wholly owned subsidiary, Del PilarSteel Inc., which will operate the Plaridel mill. Said to be thelargest and most modern reinforcing steel bar producer in thecountry, SteelAsia has strategically set up rolling mills in Cebu,Davao, and Cagayan de Oro. It’s planning another one in SouthernTagalog. The Plaridel mill will expand the firm’s annualproduction from 2.1 million metric tons to 3.3 million metrictons by 2017.

Yet this additional capacity will supply but a small portion ofthe country’s fast-growing consumption of steel products – placedat 6 million metric tons in 2012 and projected to more thantreble to 20 million metric tons by 2030. That’s a lot of catchingup in domestic steel production.

Ironically, according to the Philippine Iron and Steel Institute,about 60 percent of our steel product consumption in the lastfive years was imported from China, Russia and Japan. Worsestill, the Philippines has been importing 80 percent of the requiredslabs and billets: the crude-steel main inputs for the rolling millsto manufacture long and flat steel products.

It’s small comfort that four other Southeast Asian countries arealso net importers (about 2/3 of their consumption) of iron andsteel products. They are Indonesia, Malaysia, Thailand andVietnam. But according to data provided by the Southeast AsiaIron & Steel Institute, these four countries are well ahead of thePhilippines in moving toward the integration of their iron-and-steel-making (or ISM) capacities, including the production ofslabs and billets.

In fact the PISI (an affiliate of the SEASI) acknowledges that thePhilippines has zero ISM capacity compared with the fourSoutheast Asian neighbors. Their ISM capacities (in millionmetric tons) and degrees of self-sufficiency are: Malaysia, 5.1(57percent); Indonesia, 5.8 (46 percent); Thailand, 6 (37 percent);and Vietnam, 9.1(81 percent).

It did not use to be this way for the Philippines. In 1968 thegovernment, through public bidding, awarded the establishmentof the Iligan Integrated Steel Mills Inc. to the Fernando Jacintofamily, which 10 years earlier had set up the Jacinto Steel Corp.(manufacturer, until now, of galvanized iron sheets).

The IISMI was the first integrated steel mill to be built in SoutheastAsia. It began partial operations with initial success and muchpromise. But then it suffered from various problems – not theleast of them the intervention of Marcos’ martial law dictatorship.

P H I L I P P I N E S


It’s not possible to review in this space what happened in detail.The Marcos regime took the firm away from the Jacintos, renamedit National Steel Corp. Over the subsequent years, the mill wassold to Malaysian and then Indian investors who both failed torun it efficiently and profitably.

Five years ago the Indian investors shut down the mill and thefirm, then named Global Steel. The government did nothing. Theshutdown deprived the country of its sole producer of hot-rolledcoils and plates (semi-processed inputs) and its dominantproducer of cold-rolled steel (finished product). The closure ofthe upstream sector for making flat-steel products leftdownstream local mills with capacity only for long-steelproduction.

The cutoff in flat-steel output – with no new investments comingin because the production cost is about just as much as inimporting flat steel – plus the deficit in production of other steelproducts led to dependence on importation.

To resolve this problem of deepening import dependence and tosteer the iron and steel industry toward the necessary integration,the PISI urges the following steps:

• Revive the Presidential Iron and Steel Committee to pursue theintegration project.

• Government to provide incentives for local iron and steel firmsto merge and consolidate their facilities in order to achieveeconomies of scale and ensure the utilization of idle capacities;

• Government, through the National Development Corp., toacquire and operate the dormant flat-steel capacity of the Iliganmill;

• The NDC to start feasibility studies on the ISM project,particularly by looking at the prospect of utilizing the Philippines’rich iron ore resources using the appropriate steel-makingtechnology; and determining the required amount of investments;

• In drawing up the most feasible means to realize the integratedsteel mill project, involve the joint and coordinated efforts of theNDC, Department of Trade and Industry, the Board of Investments,the Department of Environment and Natural Resources, and theDepartment of Energy.

Asean economic integration by the end of 2015 – in just a fewmonths! – will mean more intense competition ahead. Failing toact decisively can worsen the country’s steel-import dependencefrom 80 percent to 100 percent, industry players warn. Is anybodylistening?

The Philippine Star, October 19, 2015

Taiwan’s CSC rolls over domestic steel prices for December

China Steel Corp (CSC), Taiwan’s biggest steelmaker, said on FridayOctober 23 that it would keep all its domestic wholesale pricesunchanged for December deliveries.

The move to keep the prices at the same level as those for October-November deliveries followed consecutive cuts made sinceOctober last year.

“We decided to maintain December domestic prices as steelprices are expected to gradually warm up,” the Taiwanesesteelmaker, which does not disclose the exact prices for its steelproducts, said.

The World Steel Assn has forecast global steel demand to fall1.7% in 2015 before edging upwards by 0.7% next year, CSC noted.This, along with production cuts by major mills due to mountinglosses, will relieve the market of some oversupply pressure, itsaid.

CSC’s domestic price announcements are made in alternatingperiods of one month and two months in the following order:January-February, March, April-May, June, and so on.


UK slab plant liquidation brings down Thai parent company

Sahaviriya Steel Industries’ (SSI) application for “businessrehabilitation” has been accepted by the Central BankruptcyCourt, the company announced in a filing with the Stock Exchangeof Thailand. Preliminary hearing of its application is scheduledto take place on 21 December, it said.

SSI decided to enter business rehabilitation after the three majorcreditors – Siam Commercial Bank, Krung ThaiBank and TISCOBank – demanded that SSI meet the financial obligations of SSIUK, as its guarantor. SSI UK went into liquidation last week afteridling its Teesside slab plant, as Platts reported. The loanobligations between SSI and the creditors amount to THB 23.9billion ($657.4 million), which it is unable to repay as itsliabilities exceed its assets.

The company’s board decided on business rehabilitation for itsdebt restructuring to enable the company to carry on normaloperation of its hot rolled coil business, “including to maintainbusiness value and competitiveness”, “as well as to minimizethe impact upon the employees, customers and trading partners,”it said.

“The major creditors will continue to support the company byproviding financial support in the form of working capital asthey deem appropriate, in order to enhance the company’sliquidity for its operation, whereby a financial advisor will beappointed to monitor the company’s cash,” it said. SSI and themajor creditors will work together towards instilling confidencewith SSI’s trading partners too.

SSI had to file for bankruptcy “otherwise it cannot renegotiatethe terms with the banks for the Teesside debt,” a Bangkok tradersaid Tuesday. By doing so, the banks will support SSI and provideit with working capital, said the trader who added that SSI wasstill operating its HRC business.


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Vietnam’s CSVC monitoring imports of China CRC, HDG

China Steel Sumikin Vietnam Joint Stock Co (CSVC), operator of a1.2 million metric tons/year cold rolling mill in Vung Tau insouthern Vietnam, is closely watching imports of flat steelproducts from China for the impact these might have on its ownbusiness. “We have been feeling great pressure from cheaperChinese imports into Vietnam since the beginning of 2015, andwe’ve been obliged to match the prices to secure customers,” acompany official said Wednesday.

So CSVC has begun collecting import data for China-origin pickledand oiled coil, cold rolled coil and hot-dip galvanized todetermine whether it might have grounds for pursuing anantidumping claim, he added. CSVC produces electrical steel coilsas well. The official admitted, though, that filing a case againstChinese imports may be hard as CSVC is a relative newcomer toVietnam’s steel industry having operated for only just over oneyear.

China Steel Corp, Taiwan’s largest steel mill, holds a 56% stakein CSVC and has been supplying the venture with hot rolled coilfeedstock from its Kaohsiung works in southern Taiwan. In thefuture, CSVC will be sourcing HRC feeds from Formosa Ha TinhSteel in central-northern Vietnam’s Ha Tinh province, after thelatter commences trial production at its 3.5 million mt/year hotstrip mill expected this month.

During January-April Vietnam was the largest recipient of China-origin steel imports among the six ASEAN countries, figures fromthe South East Asia Iron & Steel Institute showed. Vietnam took2.7 million mt of the total 9.4 million mt steel that China shippedto the region over the period. No breakdown by product wasavailable.

An official from Formosa Ha Tinh Steel, however, showed littleconcern about the challenge from China-origin HRC, explainingthat his mill had already signed “a number of pre-salesagreements with our customers”, implying that its HRC businesswas secure for now.


VSA wants 27 steel projects cancelled

The Vietnam Steel Association (VSA) has proposed relevantministries and agencies scrap a total of 27 steel projects whichare deemed as inefficient and harmful to the environment.

Eleven of these projects have not got off the ground and theremaining 16 are either infeasible or unable to meet technologyrequirements so as to ward off unnecessary competition stokedby a domestic oversupply.

VSA vice chairman Do Duy Thai told the Daily over the weekendthat the annual construction steel capacity in Vietnam totals 11million tons while consumption is a little more than five milliontons. Therefore, it is necessary to do away with those projectsusing out-of-date technologies and not economically viable.

“It is okay if steel supply surpasses demand by a maximum of30% but supply is two times higher than demand on the domesticmarket. Other countries allow steel supply to be 20-30% higherthan demand,” Thai said.

According to VSA, up to 28 out of 42 projects registered forimplementation in the 2013-2025 period cannot meet allrequirements set in the zoning plan for the steel industry andinvestment licensing.

Rampant investments in steel projects have triggered fiercecompetition in the industry in recent years, as supplies of steelingots, construction steel, cold-rolled steel sheets, steel pipes,galvanized steel and color-coated steel products are 1.5-2 timeshigher than needed.

Local demand for construction steel this year is estimated at sixmillion tons but the combined capacity of steel mills nationwidecould amount to 11 million tons.

Speaking to the Daily recently, VSA former chairman Pham ChiCuong said oversupply resulted from the fact that many provincesrushed to issue investment certificates for steel projects withoutfollowing the zoning plan for the steel sector in previous years.

Cuong said VSA used to call for relevant ministries and localauthorities to tighten controls on new steel projects to avoid anoversupply and inefficient investment in the sector.

Oversupply-triggered competition has forced many firms withweak financial positions and out-of-date technologies towithdraw from steel projects as their products have not beenable to compete, according to VSA.

A number of producers have reported losses and closed theirmills, especially in the north, and only big companies able toinvest in advanced technologies and turn out quality productsfor domestic consumption and export can survive.

Last year, VSA wrote to the Ministry of Industry and Trade askingfor a review of steel projects.

VietNamNet Bridge, October 15, 2015

Hoa Phat signs iron ore deal with Anglo American to feed new bf

Vietnam’s steelmaker Hoa Phat Group has closed a deal to buyiron ore from Anglo American, as it draw closer to commissioningits new blast furnace mill.

The new furnace will raise its crude steel production capacity by750,000 tpy.

Privately owned Hoa Phat, one of the biggest steel producers inthe Southeast Asian nation, will import 300,000 tonnes of 63.5%Fe iron ore from Anglo’s subsidiary Kumba Iron Ore’s Sishenmine in South Africa, it said in its website on Wednesday October14.

The purchase will be made in the first six months of 2016.

“From the first quarter of 2016 onwards, Hoa Phat’s steelmakingcomplex will reach nearly 1.8 million tpy of capacity, so the need

V I E T N A M


for high Fe-content iron ore [will become] bigger,” the steelmakersaid.

At the moment, Hoa Phat can produce almost 1 million tpy ofcrude steel at its integrated works in Kinh Mon district in the HaiDuong province, which consists mainly of two blast furnacesand steelmaking units.

The new No3 blast furnace and its billet caster have alreadybeen going through hot tests, a source close to the company toldSteel First on Friday October 16.

Hoa Phat has also a small electric arc furnace facility in HungYen province, just outside of Hanoi, in northern Vietnam.

Its total crude steel production capacity will reach nearly 2million tpy once its new blast furnace is commissioned.

The steelmaker manufactures mainly long steel for theconstruction industry.

In the first nine months of 2015, it sold over 1 million tonnes offinished steel products, which represents 85% of its plannedshipments of 1.2 million tonnes for the whole year.


Viet Nam Steel Association accuses China of trade fraud

The Viet Nam Steel Association has accused China of committingtrade fraud in exporting steel ingots to Viet Nam, causing lossesof millions of US dollars to the State budget.

In a document sent to the ministries of industry and trade, finance,and science and technology last week, the association said thatcheap steel ingots from China were flooding the domestic marketand that several exporters cheated to enjoy tax rate gaps.

“This is not the first time that cheap steel ingots from China haveflooded the domestic market, burdening local producers.Exporters are taking advantages of tax policies to commit fraud,”the association said.

During August and September, the association said parts of steelingots from China were added with chrome to be turned intoalloy to enjoy zero tax rate, instead of the tax rate of 9 per centimposed on steel ingots for construction.

The association cited customs statistics showing that import ofsteel ingots containing chrome reached 3,000 tonnes in Augustand dramatically increased to 62,000 tonnes in September,anticipating a continued rise in the remaining months of theyear if no action was taken.

The two-month import alone worth US$21 million steel ingotscontaining chrome would cause a loss of $1.9 million to theState budget, the association estimated.

The entry of cheap imported steel ingots into the domestic marketwas burdening local production which was now running at only60 per cent of 11-million-tonne design capacity. If the situationwas not improved, local producers would face further difficulty,

amid a Chinese economy slowdown forcing the country to expandexports as the domestic demand fell.

The association proposed the management of imported steelingots containing chrome to be tightened. If the steel ingots wereused to produce construction steel, the tax rate of 9 per centmust be imposed, said the association.

Nguyen Van Sua, the association’s vice chairman, said steel alloyscontaining less than 0.3 per cent of chrome could be used asnormal steel ingots. The use of trade defence instruments shouldbe considered to prevent trade frauds and unhealthy competition.

Customs statistics showed that as of mid-September, Viet Namimported 1.1 million tonnes of steel ingots, nearly tripling thevolume of the same period last year, 75 per cent of which camefrom China.

Vietnam News, October 19, 2015

Vietnam mulls new import tariff on alloy steel after fraud warning

The Ministry of Finance is considering changing a tax regulationfollowing concerns that the rule has been abused by Chineseexporters to ship a large amount of steel to Vietnam withoutpaying duties.

Currently imported steel with at least 0.3 percent of chromecontent will be exempt from tarriffs, but the ministry wants tointroduce a 10 percent tax.

The proposal is now awaiting feedback from the Ministry ofIndustry and Trade, the Ministry of Planning and Investment,and other relevant agencies.

It came after the Vietnam Steel Association voiced concerns overstrong increases in Chinese-imported alloy steel billets recently.

Chinese exporters claim their products contain 0.3-0.4 percentchrome content, thus getting import duty exemption underVietnam’s existing laws, the association said.

But the very small chrome content does not add any value to thesteel billets, meaning they cannot be used for making high-qualityproducts, it said, recommending them being taxed at 9 percent,which is the rate for non-alloy steel used for constructionpurposes.

Since local products cannot compete with cheap imports, manyVietnamese manufacturers have had to scale down theirproduction, according to the association.

Vietnam imported 62,000 metric tons of steel last month, onlyslightly lower than the combined figure for July and August, itsaid.

It estimated that the government lost $1.89 million in taxes inthe past two months due to the dubious nature of the Chinesesteel.

More than 1.13 million tons of steel billets, mostly from China,were imported in the first nine months, almost triple the volumeimported in the same period last year.

Thanh Nien Daily, October 27, 2015


NLMK crude production and sales up on exports in Jan-Sep

Crude steel production and sales at Russia’s NLMK moved upslightly during the first nine months of the year, mainly thanks tothe increase in exports registered, Platts learns from thecompany.

Crude steel production was up 2% y-o-y to 12 million mt duringJanuary-September. According to the company the increase wasmainly thanks to the “efforts at boosting steelmaking equipmentproductivity at the Lipetsk site and higher utilization rates atNLMK Kaluga, offsetting the decrease in output at NSMMZ andNLMK Indiana due to major repairs in Q1 2015”.

Overall in Q3 capacity utilization at the company’s furnacesstood at 93%, 1% down q-o-q and 3% down y-o-y.

Sales of various products from the different NLMK companieswere up 7% y-o-y during the first nine months of the year, on theback of a 17% y-o-y increase in exports. Overall the companysold 12 million mt of products, of which 7.37 million mt (61% ofthe total) were exported. At the same time sales to the Russianmarket fell 5% y-o-y and accounted for 39% of total sales.

The weakening of the construction sector in Russia impacted thecompany’s sales of long products. Overall sales of long productswere down 8% y-o-y in the Jan-Sep period, to 1.8 million mt,partially offset by the increase in exports of long products (93%y-o-y), to 260,000mt.

The main increase in terms of volume increase was registered inpig iron: the company sold almost 0.5 million mt of the productduring the first nine months of the year, up from the 108,000 mtin the same period last year.


Brazil’s iron ore exports up 8% in September

Brazil’s iron ore exports increased by 7.6% year-on-year inSeptember, according to figures released by the country’s foreigntrade ministry, MDIC, on Thursday October 1.

Shipments totalled 35.6 million tonnes in September, comparedwith 33.07 million tonnes in the corresponding month a yearearlier.

Last month’s tonnage was the largest monthly total so far in2015 and the highest level since December 2014’s export level of35.8 million tonnes.

But iron ore export revenues declined by 43.2% in September onan annual basis to $1.26 billion, due to falling iron ore prices inthe international market.

The average iron ore fob price for the Brazilian steelmaking rawmaterial was $35.50 per tonne last month compared with $67.30per tonne in September 2014, MDIC data showed.

On a monthly comparison, September’s iron ore export volumesrose 31.1% from August’s level of 27.12 million tonnes, whileexport revenues increased by 29.7% over the same period from$971,300.

The average fob iron ore price was $35.80 per tonne in August.Steel First, October 2, 2015

Brazil’s steel sheet imports tumbled nearly 70% in September

The latest trade statistics released by Brazil’s foreign tradeministry indicates that the country’s steel sheet products fellsharply during the month of September this year. The importstotaled 35,214 mt during the month, down by 68.98% whenmatched with the imports of 113,536 mt during September lastyear.

The country’s hot rolled coil (HRC) imports totaled 4,769 mt,falling significantly by 73.7% year-on-year. The HRC imports byBrazil had totaled 18,137 mt during September last year. Thevalue of HRC imports totaled $2.34 million FOB during Septemberthis year.

Brazil imported 22,046 mt of cold rolled coils (CRC) during Sep’15, down by 60.5% when matched with the imports of 55,802 mtduring same month a year before. The value of CRC imports totaled$11.43 million during the month.

The hot-dipped galvanized (HDG) steel imports by Brazil droppedconsiderably by 77.2% to 13,164 mt, falling from 57,716 mt ayear before. The value of HDG imports totaled $8.32 million.The cumulative steel sheet imports by Brazil during the nine-month period from January to September this year totaled508,971 mt. The imports dropped by almost one-third whenmatched with the imports of 764,988 mt during the correspondingnine-month period in 2014. The value of imports dropped from$719.21 million FOB a year before to $487.32 million FOB duringJan-Sep ’15.

Scrap Monster, October 19, 2015

Steel consumption declines 5.2 % in September

India’s steel consumption declined by more than five per cent inSeptember to 6.2 million tonnes compared with the earlier month,a development that indicates a weakness in the businesssentiment.

Moreover, the production of the metal too went south by 1.3 percent last month to 7.34 million tonnes compared with August2015, latest data by the Steel Ministry’s Joint Plant Committee(JPC) showed.

“Domestic steel consumption in September 2015 (6.2 milliontonnes) declined by 5.2 per cent compared to August 2015 andincreased by 5 per cent compared to September 2014,” JPC said.

However, in the first half of the fiscal, the consumption of totalfinished steel grew by 4.1 per cent to 39.14 million tonnescompared with April-September 2014-15, it added.

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According to experts, although the demand in the first half showsoptimism, there is a huge dip in demand when the consumptionin August is analysed in comparison to July 2015.

Also there is a fall in demand in April-September as againstApril-August.

As per the JPC, finished steel consumption grew by 4.6 per cent inApril -August 2015 at 33.025 million tonnes compared with theyear-ago period. In August, the demand grew by 4.8 per cent to6.63 million tonnes compared with July and increased by 0.8 percent compared to August 2014.

Another factor worth analysing is that global as well as domesticeconomic activity, particularly in infrastructure and housing,has not shown very “optimistic signs”, they said.

“In India, the government has come out with tenders and clearindications of spending on several infra and housing projects,but there is still time for them to start keeping in mind that theywill go through tendering process, etc. Real estate is a still longway from revival,” a top official from a major steel producersaid.

According to the JPC, crude steel production compared to August2015 declined by 1.3 per cent in September to 7.33 million tonnes.Against September 2014, it fell by 0.5 per cent.

However in April-September 2015-16 crude steel production was45.135 million tonnes, a growth of one per cent compared tosame period of last year.

Integrated steel producers (SAIL, RINL, TSL, Essar, JSWL and JSPL)together produced 23.67 million tonnes in April-September 2015,a growth of 3.3 per cent over the year-ago period. Others produced21.47 million tonnes, which was a decline of 1.5 per cent duringthe same period.

The Hindu, October 8, 2015

Steel imports by India slow in September on import tax increase

Steel shipments into India, Asia’s third-biggest economy, grew ata slower pace for a second month in September after the nationincreased the import tax on some products fearing an influx ofcheaper goods from China.

Inbound purchases rose 1.7 percent to 850,000 metric tons lastmonth from a year earlier, slowing from 17 percent growth inAugust and a 69 percent increase in July, according to initialdata from steel ministry’s joint plant committee Thursday. Importsgrew 41 percent to 5.4 million tons during the six months throughSeptember, the data showed.

The global steel industry is struggling with huge exports fromChina as excess supply spills onto world markets. China’s exportsin August were close to January’s record and 25 percent morethan a year earlier, customs data show, forcing countries toimpose protectionist measures. India raised the import tax onsome products in August and imposed a 20 percent temporarysafeguard duty in September on fears of an influx of cheaperproducts from China after it devalued the yuan to boost exports.

Output in India dropped 0.8 percent during September to 7.28million tons, while consumption climbed 5 percent to 6.2 milliontons, the steel ministry’s data showed. The country’s steel industrymay not meet the target of having annual capacity of 300 milliontons by 2025 as envisaged by the government’s Steel Policy 2012,the National Council of Applied Economic Research said on Oct.6.

The current condition of the industry is “dismal with very lowprofits, low capacity utilization, and dim prospects of new privateinvestments, either foreign or domestic,” the New-Delhi basedcouncil said. The sector is constrained by supply-side factorssuch as the availability of land or minerals or environmentalclearances, inadequate demand and macro-economic factors, itsaid.

Bloomberg, October 9, 2015

India records steel demand growth in difficult externalenvironment

Deceleration in China’s economic growth as President Xi Jinpingshifts focus from investment to consumption-led growth to avoidany hard landing for the world’s second largest economy hasmeant the cycle of capacity, production and demand for the worldsteel industry has come to an end.

This was unavoidable since China, for nearly two decades, grewsteel capacity at such a frenetic pace that it has nearly half theshare of global production. The profile of the world steel industryhas become such that if China sneezes, producers in other regionswill invariably catch cold. A lethal combination of overcapacityand demand fall, both mostly occurring in China, has been largelyresponsible for a 40 per cent fall in steel prices this year. Marginsremain under pressure despite big falls in prices of iron ore andmetallurgical coal, its two most important ingredients. Investorshave lost interest in shares of producing companies.

ArcelorMittal is down half from its 52-week high of $13.315.Here, Tata Steel shares have suffered value erosion of the sameorder. This is in spite of 2.9 million tonnes (mt) new capacity atits Jamshedpur plant being fully ramped up, continuous productmix enrichment and the steel ministry’s Joint Plant Committeereporting the country’s demand in the first half of 2015-16growing 4.1 per cent to 39.14 mt on a year-on-year basis.

Local companies have to do with low prices caused primarily byweakness in the global market and our imports rising 41.4 percent to 5.4 mt in the first half of 2015-16, compared with thesame period of 2014-15. Whatever their pains, in the World SteelAssociation (WSA)’s ‘short range outlook for 2015 and 2016’,India emerges as one of the few bright spots, where “steeldemand... is expected to maintain growth momentum despiteadverse external environment”.

India, according to WSA, is one of the few countries to remain a“resilient” economy in the face of a “global slowdown” becauseof its commitment to “reforms”. Indian steel demand in 2015 isto rise to 81.5 mt from 75.9 mt in 2014. WSA says its use willfurther improve by 7.6 per cent to 87.6 mt next year. Hopefully,the three-year high of 6.4 per cent rise in industrial growth inAugust, supported by good showing in manufacturing, miningand electricity, will be sustained to generate good demand forsteel in the months ahead.


There is a damper, however, in the form of India’s exports shrinkingfor 10 straight months by September. Engineering goodsshipments contracted 22.8 per cent reflecting the strained globaldemand. For the same reason, Chinese exports fell 3.7 per cent inSeptember compared with a year earlier. A major point of concernfor the industry here is that large volumes of the new steelcapacity are getting commissioned when producers are not ableto earn any surplus by selling items at current prices. In India’sprevious round of major capacity expansion after the governmentthrew open the sector to the private sector, Ispat Industries, sincetaken over by JSW Steel in a rescue operation, and some othersfound themselves on the mat by a bad market. That is not aforgotten experience. Bank loans to steel groups becoming non-performing assets will be unavoidable if prices do not improve.For that, the economy needs robust public spending, clearancesof infrastructure and other big projects, and moderation in steelimports.

A WSA official says the world steel industry’s low growth willlast till “other regions of sufficient size and strength” deliver“another major growth cycle”. Such hopes largely rest on India.Hasn’t Prime Minister Narendra Modi given a call to grow Indiain the next two decades at a pace that matches China’s in its bestdays? As has been the Chinese experience, steel demand growthhere will remain strong in case the economy advances by eightto nine per cent a year.

WSA says China’s steel demand will be down 3.5 per cent to685.9 mt this year, on the back of demand contraction of 3.3 percent to 710.8 mt in 2014. In 2016, too, the country will suffer ademand setback of two per cent to 672.2 mt. Fall in local steeluse will leave China with huge exportable surplus. That’s a pointof concern for India.

Business Standard, October 20, 2015

China’s impact on the global steel market

Given the fact that the global steel price is at its lowest level inmore than a decade, it is no surprise that much of the UK’sproduction is becoming economically unviable.

Due to the economic slowdown in China their demand for steelhas waned; down 4% last year and likely to be 5-6% lower thisyear, according to Richard White at the International SteelStatistics Bureau.

This translates to a huge glut of Chinese steel which is no longerrequired domestically; prompting Chinese steel exports to doublein 2014.

In that year alone, its exports increased by more than the entireannual steel production of Mexico and Canada combined.

This means that China is now exporting 100 million tonnes ofsteel per year at prices which are below the Chinese cost ofproduction, let alone the costs associated with UK steelproduction.The majority of Chinese steel-makers are currently loss-making,with very few mills refusing to cut production and even fewerconsidering shut down.

In a scenario very similar to the one being played out in thecrude oil market, steel-makers are playing a loss-making waitinggame - hoping that prices reverse before they are forced out ofthe game altogether.

Analysts believe that only a sharp reduction in capacity willallow the markets to stabilise.

Until either Chinese capacity is reduced or a resurgence inChinese economic growth is realised, prices will continue toslide.

The price of slab steel has dropped by 40% from around £318 atonne to under £191 in the past year.

These lower prices - twinned with a rebound in economic activityin the UK - have pushed up demand for Chinese steel.

Imports are up 23% year-on-year in the first 7 months of 2015and up 129% compared to this period in 2013.

But it is not only the cut price imports which are hampering theUK’s steel industry.

The strengthening pound means that steel from our eurozonecompetitors is 12% cheaper than it was early last year.

Furthermore, business energy costs and rates are alsosignificantly higher in the UK, which also damages the UK’s steelcompetiitveness.

Figures from the Department of Energy and Climate Changeindicate that electricity prices in the UK were 82% higher thanthe EU average for extra-large consumers in the first half of thisyear. This disparity has doubled in just two years.

Earlier this year, SSI UK’s boss, Cornelius Louwrens, claimed thatRedcar would be fully profitable by 2016.

Unfortunately this prediction could not have been further fromreality.

Whether we will even have a steel industry by the end of 2016 isnow of worrying concern, not least for the 30,000 people it stillemploys.

Sky News, October 16, 2015

China crude steel output falls in Sept y/y as demand slows

China’s crude steel output fell 3 percent in September from ayear ago to 66.12 million tonnes, government data showed onMonday, as persistent weakness in demand in the world’s topproducer forced steekmakers to curb output.

Output in the first nine months of 2015 was down 2.1 percent at608.94 million tonnes, compared with the same period of lastyear, data from the National Bureau of Statistics showed.With steel prices at their lowest in nearly three decades, steelmills, including big state-owned firms, are expected to cut outputfurther in the fourth quarter.

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“China’s steel output has already fallen a lot this year, while weexpect more output cuts ahead and some will not be able tosurvive from cash shortage and heavy losses,” said Qiu Yuecheng,analyst at the steel trading platform Xiben New Line E-Commercein Shanghai.

China’s economic growth eased to 6.9 percent in the third quarterfrom a year earlier, beating expectations but still the slowestsince the global financial crisis, putting pressure onpolicymakers to roll out more support measures.

The average daily steel output was 2.204 million tonnes inSeptember, up 2.3 percent from August, according to Reuters’calculation based on the data, driven by a modest seasonal pick-up in demand.

China’s apparent consumption of crude steel peaked last yearand dropped 5.5 percent to 477 million tonnes for the first eightmonths, outpacing a 3.5 percent fall in output, the China Iron &Steel Association said in a report on Oct.10.

Meanwhile, steel mills have boosted sales abroad to offsetshrinking orders in the domestic market, with Septembershipment hitting an-all time high of 11.25 million tonnes.


European crisis will bend but not break Tata Steel

Industry woes will bend but not break Tata Steel. The Indianproducer has a mountain of debt. Its European business is rackingup massive losses as cheap imports flood in from China. Yet atimely refinancing and support from its parent means Tata Steelcan avoid the fate of weaker rivals.

All steelmakers are facing hard times. China is exporting recordamounts of the alloy at below-cost prices when global demandis weak. The pressure has pushed the UK’s second-biggest steelproducer, owned by Thailand’s Sahaviriya Steel Industries, intoliquidation.

Tata Steel’s domestic business is in reasonable shape but it ishaunted by the expensive acquisition of Anglo-Dutch producerCorus in 2007, which made it Britain’s biggest steelmaker. Europeaccounted for 57 percent of the group’s production in the year toMarch but brought in less than one third of the EBITDA per tonnethat the group earned in India.

Around two thirds of Tata Steel’s net debt, which stood at $9.2billion at the end of March, is attached to the European business,where liabilities now exceed the value of the division’s assets.Efforts to sell the ailing long products unit, which accounts for20 percent of its European headcount, have so far failed.

Yet Tata Steel has some important advantages over its Thai rival.The Indian group refinanced most of its debt with less restrictivefinancial covenants in October last year, before escalatingworries about China’s dumping and economic slowdown pushedup borrowing costs. Just 23 percent of the group’s debt is due forrepayment in the next two years, down from 56 percent beforethe refinancing, according to Investec.

A strong parent also helps. When the steelmaker last monthraised funds by offloading part of its stake in Tata Motors for$384 million, holding company Tata Sons -which owns 30 percentof the steel unit -bought half the shares. With more than 30publicly-listed companies ranging from autos to consultancyservices, the group is unlikely to allow one of its affiliates todefault.

If the slump persists, Tata Steel will be forced to make toughdecisions about the future of its European business. But for now,it has some breathing room.


Promote steel consumption while building infrastructure

The average share of the construction sector in global steelconsumption at around 50-55% implies that irrespective of thestage of growth of the economy, revival of steel demand criticallyhinges on development and expansion of this sector. World SteelDynamics, an information service provider, estimates put thesteel intensity of investment in construction nearly 7 times higherthan that in other important sectors like machinery andequipment, automobile, household appliances and packaging.

Last year the construction sector grew at a negative growth of 2.5% in China which drove down steel consumption -3.3 %. In India,the sector rose by only 4.1% in 2014, impacting a slow growth of2.2% in total steel consumption. To push up the economic growth,all the advanced steel-producing countries have called for a bigboost in investment in infrastructure building and up gradationof existing facilities in urban infrastructure, rail and roadnetwork and also constructing a few residential complexes. Thiswould not only enhance steel consumption but also contributeto higher utilisation in indigenous capacity.

It is also well known that steel intensity in project and non-residential construction is significantly higher than that in realestates. Steel-cement ratio in project construction exceeds thesame in individual houses particularly in mass housing projectsup to 3 to 4 floors. For higher floors, of course, more use of steeladds to a number of advantages like faster construction,availability of extra floor space by replacing concrete slabs withlight gauge high-performance steel, castellated beams etc. Forhigh-rise buildings, the requirement of steel is more to constructadditional roofing space in each floor, the basement, the coveredparking and multi-level parking and other subsidiaryconstructions in the additional spaces. In advanced countriesthe paucity of space requires houses and compendiums in thecities to be multi storied and more steel-intensive. In India, themass housing projects and affordable housing projects fundedprimarily from the government sources may not provide muchspace for higher steel application except for reinforcement steelused for concrete. In the smart city concept, the emphasis ismore on digital advancement, improvement in public services,eco friendly environment, safety and security for the citizens,good roads, adequate electricity and water supply.

Each smart city can be planned with an elegant looking entrygate made out of high grade pre-painted steel or stainless steelto project a shining image. At busy road connections the smallspan steel-concrete composite Road over Bridges (ROB) may beplanned for safe movement of the senior citizens, women and

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children. A good number of kiosks (for multiple uses), dustbin,public conveniences, meeting places and community halls in thelocality made with innovative steel design would provide elegantand environment-friendly construction. As steel structures areof permanent nature and require little maintenance and there isan inherent tendency to use locally available cheap materialsand then indulge in annual maintenance activities at the cost ofthe exchequer, the consideration of Life Cycle Cost advantages ofsteel-based construction must be inculcated at the planning stageitself for the smart cities. This aspect should be addressed onpriority if steel is to play a stellar role in the housing and cityplanning activities of the Government.

It is, therefore, necessary to distinguish between investmentearmarked for residential construction and investment made ininfrastructure building and make suitable changes in themethodology of demand estimation while correlatingconstruction sector growth with growth in steel demand. It isreiterated that steel use for construction sector as a whole in thecountry has gone up appreciably in the past one-and-half decadethanks to wider awareness about steel, acceptability and spreadof steel- based designs, new user-friendly Codes and Standards(IS 1786, IS 15962, IS 11384), development of light-weight, high-performance steel. Despite all these developments, a good dealof challenges needs to be addressed for higher use of steel inconstruction sector in India.

Financial Express, October 20, 2015

Intra – ASEAN steel trade

ASEAN steel demand increased repidly by an average rate of 9.6%from 2009 to 2014. Apparent steel demand registered 65.9 milliontonnes in 2014. Around 60% of total steel supply was from import.Major sources of import were China, Japan, South Korea andTaiwan. Meanwhile, intra-ASEAN steel trade recorded a share ofonly 3.7% in 2014. Share of intra-ASEAN trade, in fact, hasdecreased gradually from 12.5% in 2011, to 7.4% in 2012 and4.7% in 2013. In the first four months of 2015, the share of intra-ASEAN steel trade was only 2.4% of total import.

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ASEAN steel import vs intra-ASEAN import - tonnes

Intra-ASEAN trade of section registered 342,000 tonnes in 2014,representing a share of 14% of total section import in the region.Major source of supply within ASEAN was Thailand. However,import volume from Thailand reduced significantly, by 37% y-o-y, in the first four months of 2015.

Intra-ASAN trade of bar was not significant, at 97,000 tonnes,representing a share of 2% of total bar import in the region in2014. Major source of supply within the region was Singaporeand the volume increased significantly by 50% y-o-y in the firstfour months of 2015.

Import of wire rod within ASEAN registered a share of 1.6% oftotal wire rod import, at 95,000 tonnes in 2014. Malaysia andSingapore were the major sources of import within ASEAN.However, import from Malaysia contracted substantially, by 50%in the first four months of 2015 while import from Singaporerose by three folds in the same period.

Import of hot rolled plate within ASEAN registered 228,000 tonnesin 2014, accounting for a share of 55% of total HRP import intothe region. Major sources in ASEAN were Indonesia andSingapore. However, import volume declined significantly in thefirst four months of 2015.

Hot rolled coil import in ASEAN registered a significant volumeof 14.5 million tonnes in 2014. Major sources were Japan, China,Korea and Taiwan. Intra-ASEAN trade, on the other hand, wasminimum, at 130,000 tonnes in 2014. Major sources of supplywere Indonesia and Singapore. Intra-ASEAN trade for HRC declinedby half in the first four months of 2015.

Intra-ASEAN trade for cold rolled coil registered 428,000 tonnesin 2014, representing a share of 8% of total CRC import in theregion. Major source of import within the region was Vietnam(half of the intra-ASEAN trade).

Import of coated steel sheet within ASEAN registered 810,000tonnes, representing a share of 11% of total coated steel sheetimport in the region. Major source of the import in the regionwas Vietnam (80% of total intra-ASEAN trade for coated sheet).Import from Vietnam rose significantly, by 28% to 272,000 tonnesin the first four months of 2015.

SEAISI, October 2015

Please register me for the

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DDeecceemmbbeerr 22001155 Hotel Istana, Kuala Lumpur City Centre, Malaysia 22 00 11 55 AA SS EE AA NN

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