Platts Sbb Steel Daily 2i5r4n

[STEEL ]

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SBB STEEL MARKETS DAILY

COVERING THE RAW MATERIALS INPUTS TO STEELMAKING Volume 7 / Issue 135 / July 16, 2013

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Rio Tinto could slow Pilbara expansion Melbourne—Rio Tinto could potentially extract additional iron ore capacity from its existing Western Australian mines rather than developing more expensive greenfield projects, which would likely delay planned expansion there to 360 million mt/year. The Anglo-Australian miner said Tuesday work was under way to expand port, rail and power infrastructure in the Pilbara to handle 360 million mt/year, but noted a “number of options for mine capacity growth” were “under evaluation.” Rio’s board has yet to sign off on the additional 70 million mt/year of capacity required to reach 360 million mt/year and is expected to make a decision by the end of this year. Some of the miner’s large shareholders have been putting pressure on Chief Executive Sam Walsh to delay the expansion, given the weaker longerterm outlook for iron ore and slowing Chinese economy. “We’re keeping our options open,” a Rio spokesman said.

The potential for a more phased expansion had been flagged by some analysts, including JP Morgan, who said in a July 10 research note that Rio will likely reach 360 million mt/year in 2019 rather than in 2015 as originally planned. “This suggests the market is overestimating Rio’s iron ore supply over the next five years,” JP Morgan said. The delay would also the views of those analysts who believe the iron ore market will stay stronger for longer, on the basis that new supply will not come online in the expected timeframe. Rio said it remained on track to reach annualized production capacity of 290 million mt/ year in Western Australia in the September quarter, from around 237 million mt/year currently. This is despite heavy rain in the Pilbara in June and a conveyor belt breakage in May that resulted in one of the shiploaders at Cape

(continued on page 2)

Platts raw material assessments, July 16

128.75-129.75

129.25

Change % Chg 0.25

0.19

Please see Platts complete iron price/netbacks table, p.3

Coking coal, low vol ($/mt) FOB Australia CFR China

Iron ore prices firm, views mixed on uptrend duration Singapore—Seaborne iron ore prices continued to rise Tuesday on limited supply of mainstream cargoes and stronger offers. Demand for mainstream material remained good and there was little on offer, leading several participants to believe the uptick would last for a few days as end-s were willing to pay higher prices to restock. “There are mills who would pay high prices for mainstream ore cargoes, as there is a very evident shortage of mainstream material available both in the seaborne and port stock markets,” a source at a state-owned Chinese trading house said. “Sentiment is quite positive and there looks to be more room for improvement to both iron ore and steel prices.”

(continued on page 2)

Today in raw materials

Close/Midpoint IODEX Iron ore fines 62% Fe ($/dmt) CFR North China

Iron ore market

129.50 142.50

129.50 142.50

0.50 0.50

0.39 0.35

Please see full metallurgical coal price/freight table, p.4

Iron ore market Iron ore prices edge up as mills restock, doubts emerge

3

Coking coal market Australian miners make aggressive coal offers into EU

4

Ferrous scrap ($/mt) HMS FOB Rotterdam A3, FOB Black Sea HMS CFR Turkey

334.00-338.00 332.00-338.00 364.00-368.00

336.00 335.00 366.00

0.00 0.00 0.00

0.00 0.00 0.00

Scrap market

390.00-395.00 290.00-300.00 280.00-290.00

392.50 295.00 285.00

0.00 0.00 0.00

0.00 0.00 0.00

Exchanges

Ferrous scrap ($/lt) Shredded del Midwest US Shredded del dock East Coast HMS del dock East Coast

TSI raw material indices, July 16 Iron ore fines 62% Fe

Frequency

Chinese imports (CFR North China port), $/dmt

Daily

129.00

Change % Chg 2.10

1.65

Please see TSI’s complete iron ore price table, p.2

* Latest index July 12

Volume and prices recede in iron ore swaps market

7

7

Ferroalloys market Manganese ore soft, buyers hold back from purchasing

8

Other News

Ferrous scrap HMS 1&2 80:20, Turkish imports (CFR port), $/mt Shredded, US domestic (del Midwest mill)*, $/lt Shredded, Indian imports (CFR port)*, $/mt

Ukraine’s scrap price steady, seen rising in Aug on exports

364.00 384.00 372.00

Daily Weekly (Fri) Weekly (Fri)

0.00 4.00 4.00

0.00 1.05 1.09

Glencore Xstrata to halt Queensland magnetite output

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Marketplace

11

SBB Steel Markets Daily

Rio Tinto could slow Pilbara expansion ... from page 1 Lambert port being “sidelined” for almost three weeks. Rio operates 14 iron ore mines in Western Australia, some 12 of which can contribute to the Pilbara Blend product. Rio produced 66 million mt of iron ore from its global operations in April-June, up 7% on the same period a year earlier and up 8% on the January-March quarter, but shipped just 61.3 million mt due to the Pilbara disruptions. Total production in January-June was 127.2 million mt, up 6% on the first half of 2012, with shipments of 118.6 million mt 4% higher than the same period last year. Rio expects to produce 265 million mt of iron ore in calendar 2013. Meanwhile, Rio produced 1.9 million mt of hard coking coal in April-May, down 5% on the same period in 2012, but up 15% on the previous quarter. It produced 7.1 million mt of semi-soft and thermal coal in the quarter, up 23% on last year and up 17% on January-March. — Paul Bartholomew

Iron ore market ...from page 1

One Singapore-based trader said mills were maintaining high capacity utilization given the recent improvement in steel, thus needed to buy. “Some of my mill customers have been asking the major miners to increase their term allocations of iron ore for the month of August because steel is doing very well,” the trader said. “There are some mills

July 16, 2013

TSI Daily Iron Ore Price Indices TSI daily iron ore indices, July 16 62% Fe fines, 3.5% Al, CFR Tianjin port 58% Fe fines, 3.5% Al, CFR Tianjin port 62% Fe fines, 2% Al, CFR Qingdao port 63.5/63% Fe fines, 3.5% Al, CFR Qingdao port

$/dmt Change % Chg 129.00 2.10 1.65 118.90 1.00 0.85 130.10 2.10 1.64 131.50 2.10 1.62

Low* 86.70 79.30 88.50 88.90

High* 158.90 146.60 160.00 161.70

* Past 12 months

Per 1% Fe differentials, $/dmt Range: 61-64% Fe Range: 56-59% Fe

$/dmt Change 2.25 0.00 3.00 0.00

FOB netback per route / basis TSI 62% Fe, 3.5% Al fines Origin Vessel Type W.Australia Capesize India Supramax Brazil Capesize

FOB ($/dmt) Change % Chg 121.24 2.12 1.78 114.90 2.10 1.86 108.53 2.10 1.97

Rolling Averages, $/dmt 62% Fe fines, 3.5% Al, CFR Tianjin port 58% Fe fines, 3.5% Al, CFR Tianjin port 62% Fe fines, 2% Al, CFR Qingdao port 63.5/63% Fe fines, 3.5% Al, CFR Qingdao port

5-day Monthly 126.36 123.23 116.82 114.29 127.46 124.30 128.86 125.71

Quarterly 123.23 114.29 124.30 125.71

TSI’s indices reflect average daily iron ore spot prices. Full price histories are available to TSI subscribers on its website. Details of TSI’s methodology and product specifications, together with general information about TSI and its full range of steel indices and subscription services, can also be found on its website: www.thesteelindex.com

SBB Steel Markets Daily

Volume 7 / Issue 135 / July 16, 2013 ISSN: 1935-7354

London: Managing Editor Colin Richardson(+44 151 228 1081) Senior Managing Editor, Markets Annalisa Jeffries(+44 207 176 6204) Team Leader, raw materials Hector Forster(+44 207 176 6285) Markets Editors Ciaran Roe(+44 207 176 6346); David Braid(+44 207 176 7611); Jitendra Gill Pittsburgh: Americas Managing Editor Christopher Davis(+1 412 431 0398) Markets Editors Nicholas Tolomeo(+1 412 246 1577); Estelle Tran Singapore: Senior Managing Editor Russ McCulloch(+65 6227 7811)

Managing Editor, raw materials Keith Tan(+65 6530 6557) Team leader, raw materials Julien Hall(+65 6530 6538) Asian markets editors Melvin Yeo(+65 6530 6517); Celestyn Wong(+65-6530-6442); Helena Sheng; Edwin Yeo; Hongmei Li; Anna Low; Anitha Krishnan Managing Editor Paul Bartholomew, Australia(+61 410 400 156) Associate Editorial Director, Metals EMEA Andy Blamey(+44 207 176 6189) Editorial Director, Metals Pricing and Market Engagement Karen McBeth(+1 202 383 2110) Editorial Director Joe Innace(+1 212 904 3484)

Vice President, Editorial Dan Tanz

Platts President Larry Neal

SBB Steel Markets Daily is published daily by Platts, a division of McGraw Hill Financial. ed office Two Penn Plaza, 25th Floor, New York, NY 101212298 Officers of the Corporation: Harold McGraw III, Chairman, President and Chief Executive Officer; Kenneth Vittor, Executive Vice President and General Counsel; Jack F. Callahan Jr., Executive Vice President and Chief Financial Officer; Elizabeth O’Melia, Senior Vice President, Treasury Operations. Prices, indexes, assessments and other price information published herein are based on material collected from actual market participants. Platts makes no warranties, express or implied, as to the accuracy, adequacy or completeness of the data and other information set forth in this publication (‘data’) or as to the merchantability or fitness for a particular use of the data. Platts assumes no liability in connection with any party’s use of the data. Corporate policy prohibits editorial personnel from holding any financial interest in companies they cover and from disclosing information prior to the publication date of an issue.

To reach Platts E-mail:[email protected] North America Tel:800-PLATTS-8 (toll-free) +1-212-904-3070 (direct) Latin America Tel:+54-11-4121-4810 Europe & Middle East Tel:+44-20-7176-6111 Asia Pacific Tel:+65-6530-6430

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SBB Steel Markets Daily

that are ramping up their crude steel production levels because steel demand is doing well, and mills have a need to buy more iron ore for steelmaking.” A Hunan-based steelmaker said there was a “definite need” for Chinese mills to replenish iron ore and many were looking for spot cargoes. However, some believed mill inquiries were beginning to slow given the quick increase in ore prices, which they said had outpaced steel. There needed to be more balance between the steel and iron ore markets, which could lead to a weakening in the latter, they said. Mixed market sentiment was evident in the rebar futures market with the most active January rebar futures contract in Shanghai trading Yuan 16 higher from Monday at Yuan 3,677/mt ($596/mt), while settling Yuan 5/mt lower at Yuan 3,670/mt. The spot price of square billet in Tangshan was down Yuan 10/mt from Monday at Yuan 3,120/mt ex-stock, according to a Shandong-based mill source. — Melvin Yeo and Celestyn Wong

Iron ore prices edge up as mills restock, doubts emerge Singapore—Spot prices of seaborne iron ore edged higher Tuesday as some mills were still seeking material, but there was growing skepticism over whether steel fundamentals ed a continued uptrend. Platts assessed the 62% Fe Iron Ore Index up 25 cents at $129.25/dry mt CFR North China. Many sources noted resilience in buying appetite as Chinese mills were still replenishing stocks after destocking in late May/June when the market view on steel prices was bearish. “You do not see the mills scrambling for cargoes today, but spot supply is limited and you are not able to buy a PB cargo with a price tag of $128/dmt,” said a Shandong-based mill source. However, some mills were heard to be retreating from the spot market because they were not confident current steel prices were able to iron ore. “There are at least three mills who approached me for seaborne iron ore yesterday, but not a single one wanted to buy iron ore from me today,” said a Hebei trader source. “The mills told me that in comparison to steel, ore prices are too expensive, and they are not confident that the price of iron ore will be ed.” Another Jiangsu-based mill source, who also saw demand for iron ore

July 16, 2013

Platts Daily Iron Ore Price Assessments Platts daily iron ore assessments, July 16 IODEX 62% Fe CFR North China 63.5/63% Fe CFR North China 65% Fe CFR North China 58% Fe* CFR North China 52% Fe CFR North China

$/dmt 128.75-129.75 130.00-131.00 136.00-137.00 114.50-115.50 88.00-89.00

Midpoint Change 129.25 0.25 130.50 0.25 136.50 0.25 115.00 0.25 88.50 0.25

% Chg 0.19 0.19 0.18 0.22 0.28

*Al = 4.0% max

Per 1% Fe differential (Range 60-63.5% Fe), $/dmt Range 60-63.5% Fe

$/dmt 2.20

Change 0.00

Platts weekly iron ore lump spot assessment, July 10 Spot lump assessment

$/dmtu 0.1350-0.1450

Midpoint Change 0.1400 NA

FOB netbacks per route / basis IODEX 62% Fe Route Vessel Type Freight rate ($/wmt) Moisture (%) IODEX ($/dmt) Australia Capesize 7.60 8.03 120.99 India West Panamax 12.00 8.11 116.19 India West Handymax 14.00 8.11 114.01 India East Handymax* 15.00 8.00 112.95 Brazil Capesize 20.50 9.00 106.72 South Africa Capesize 13.50 3.00 115.33 * Typical two-port co-loadings from Haldia and Paradip

Freight differentials to major import ports, $/wmt From Qingdao on a Free Out basis To North China: Caofeidian, Tianjin & Xingang To East China: Beilun To South China: Zhanjiang & Fangcheng

0.30 -0.30 -0.80

Rolling monthly average, $/dmt IODEX 62% Fe

123.88

IODEX 62% Fe CFR North China OTC swaps assessment, July 16 switch IODEX 62% $/dmt Change % Chg TSI 62 Aug 13 126.750 -0.500 -0.39 0.500 Sep 13 123.750 -0.500 -0.40 0.500 Oct 13 122.750 -0.750 -0.61 0.500 Q4 2013 121.500 0.000 0.00 0.500 Q1 2014 121.500 0.000 0.00 0.500 Q2 2014 116.500 0.000 0.00 0.500 Calendar 2014 115.500 0.500 0.43 0.500 Detailed methodology and specifications are found here: www.platts.com/IM.Platts.Content/ MethodologyReferences/MethodologySpecs/ironore.pdf

weakening, said a price correction was inevitable as prices needed to come off some dollars before mills would be comfortable to buy. “When the price of iron ore is hovering near $130/dmt level you need more than positive senti-

3

ment to motivate the mills to buy iron ore,” said a Singapore-based trader. “It doesn’t help much when steel prices are not moving up much these days and that explained why buyers are putting on hold their spot purchases.”

Copyright © 2013 McGraw Hill Financial

SBB Steel Markets Daily

There were few spot bids and offers, but most market participants said the repeatable price of 61% Fe Australian Pilbara fines was in the $128-128.50/dmt CFR China range, up from $128/dmt CFR China the day before. Sources said a Newman 90,000 mt cargo was sold on a 62% Fe basis on globalOre, at $128.50/dmt for delivery in August. There were no details on either the buyer or seller of this cargo. Elsewhere, Australian miner BHP Billiton was heard to be inviting bids privately for 63.5% Fe Australian Newman lump Tuesday, according to traders who received the invitation to bid. The 90,000 mt shipment will load over July 26-August 4. Two traders, one based in Shanghai and the other in Hong Kong, said there was healthy demand for lump cargoes now as there was a shortage of domestic pellet cargoes in the market. “We’ve been seeing stronger demand for pellet from mills in the past two weeks and there isn’t much supply available, so this will drive up the buying appetite for lump cargoes,” the trader in Hong Kong said. Lump and pellet cargoes are mutual substitutes, with the latter processed in a plant from concentrate material. — Melvin Yeo and Celestyn Wong with Annalisa Jeffries in London

Coking coal market

Australian miners make aggressive coal offers into EU London—European mills are seeing some offers closer to their expectations from Australian producers following recent low-priced deals from the US into Brazil. One European mill source said he was offered this week a low-volatile blend from Australia at $130/mt for material with 19-21% volatile matter (VM), 100-120 fluidity, reflectance of 1.35, vitrinite at 72.5 and CSR at 58-60. He described the offer as “aggressive” and said costs are currently more important than 3 or 4 CSR points, with mills running at below full capacity. He said the Australian offer was lower than anything he has seen from the US. He had seen one US offer of lowvol coal in the low $130s/mt FOB US, which with freight to Hamburg of around $15-16 would result in around $150/mt delivery into Europe. The offer for Australian low-vol blend at $130/mt was below the deals seen from the US last week for straight run coals at

July 16, 2013

Platts daily metallurgical coal assessments, July 16 Asia-Pacific coking coal ($/mt) FOB CFR CFR Change Australia China India Australia China India HCC Peak Downs Region 131.00 144.00 147.50 +0.50 +0.50 +0.50 Low Vol 129.50 142.50 146.00 +0.50 +0.50 +0.50 HCC 64 Mid Vol 117.00 130.00 133.50 +2.00 +2.00 +2.00 Low Vol PCI 105.50 118.50 122.00 +0.50 +0.50 +0.50 Low Vol 12 Ash PCI 95.50 108.50 112.00 0.00 0.00 0.00 Semi Soft 88.50 101.50 105.00 0.00 0.00 0.00 Met Coke - - 250.00 - - -1.00 North China prompt port stock prices Low Vol* HCC 64 Mid Vol*

Ex-stock Jingtang CFR Jingtang (Yuan/mt, incl VAT) equivalent ($/mt)** 1070.00 143.52 965.00 128.96

*weekly (assessed July 12), 20-day delivery from date. **ex-stock price, net of VAT and port charges.

Atlantic coking coal ($/mt) Low Vol HCC High Vol A High Vol B

FOB US East Coast 132.00 127.00 115.00

Change 0.00 0.00 0.00

VM 19% 32% 34%

Ash 8% 7% 8%

S 0.80% 0.85% 0.95%

Detailed methodology and specifications are found here: http://platts.com/IM.Platts.Content/MethodologyReferences/MethodologySpecs/metcoalmethod.pdf

Dry bulk freight assessments Route Vessel Class Freight rate ($/mt) Moisture (%) Australia-China Panamax 13.00 9.50 Australia-India Panamax 16.50 9.50 USEC-China Panamax 35.00 8.00 USEC-India Panamax 34.00 8.00 USEC-Rotterdam Panamax 12.90 8.00 USEC-Brazil Panamax 15.00 8.00 East Australia: basis Hay Point port. USEC: basis Hampton Roads. See methodology for further details.

HCC assessed specifications Low Vol HCC Peak Downs Region HCC 64 Mid Vol

CSR VM Ash S P 71% 21.5% 9.3% 0.50% 0.045% 74% 20.7% 10.5% 0.60% 0.030% 64% 25.5% 9.0% 0.60% 0.050%

TM Fluidity 9.7% 500 9.5% 400 9.5% 1,700

Penalties & Premia: Differentials ($/mt) Per Per Per Per Per

1% CSR 1% VM (air dried) 1% TM (as received) 1% Ash (air dried) 0.1%S (air dried)

Within Min-Max 60-71% 18-27% 8-11% 7-10.5% 0.3-1%

% of Low Vol FOB Australia assessment price 0.50% 0.50% 1.00% 1.25% 1.00%

Net value ($/mt) 0.65 0.65 1.30 1.62 1.30

The assessed price of HCC Peak Downs® originates with Platts and is based on price information for a range of HCCs with a CSR> 67% normalized to the standard of HCC Peak Downs® (CSR 74%). Peak Downs® is a ed trade mark of BM Alliance Coal Operations Pty Limited “BMA”. This price assessment is not d with or sponsored by BMA in any way. Source: Platts

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Copyright © 2013 McGraw Hill Financial

July 16, 2013

SBB Steel Markets Daily

$131/mt FOB USEC. However, the offer from Australia is for a blended coal, indicating that coking prices are relatively stable in the Atlantic. Platts assessed US low-vol hard coking coal flat at $132/mt FOB USEC Tuesday. US high-vol A remained at $127/mt FOB USEC and high-vol B also remained at $115/mt FOB USEC. However, suppliers were becoming more competitive. One trader said he had July deals all in place, with prices around the levels of $132/mt FOB USEC for lowvol and high-vol B at around $115/mt FOB USEC. He also said he was talking with the Australians and said they had a “very good grasp” of the current market and that he had seen “competitive” offers. Canadian producers also “understood realities” now, despite saying they are close to costs, he said, adding “I don’t think they’re making money, but if they are covering costs they should be happy.” Elsewhere, a source at another European mill said although prices were quite low, it was not enough to bring them back into the spot market. He had room for maybe an extra 50,000-100,000 mt but this was an option within his contract deals. He believed the coking coal market would remain flat this year and was unlikely to fall further. — David Braid

Metallurgical Coke 62% CSR

Spot met coal rangebound as traders take positions

Scrap, Asia*

($/mt)

H2 - del Okayama - Tokyo Steel purchase price, at works gate H2 - del Utsunomiya - Tokyo Steel purchase price, at works gate Heavy - Shanghai - China domestic HMS 1/2 80:20 CFR - East Asia import (WEEKLY) Shindachi Bara - del Okayama Tokyo Steel purchase (list) price Shindachi Bara - del Utsunomiya Tokyo Steel purchase (list) price Shredded scrap A (auto) - del Okayama Tokyo Steel purchase (list) price Shredded scrap A (auto) - del Utsunomiya Tokyo Steel purchase (list) price

Singapore—Spot coking coal prices in Asia were assessed slightly higher Tuesday, though the market was yet to see any sustained upward movement after an extended period of price stability. hard coking coals coals (HCCs) gained 50 cents on the day, to $142.50/mt CFR China and $129.50/mt FOB Australia. Higher offers were heard for prestigious Australian brands with low-volatile matter, typically in the $147-148/mt CFR China range, up from $145-148/mt last week. Perhaps in reaction to these higher offers, price opinions from large Chinese steelmakers were also observed to have risen marginally. Meanwhile, mid-vol HCCs were seen tradeable at a wider-thanusual discount to low-vols, with firm offers heard around $139/mt CFR China for August loadings. The spread was reportedly causing Chinese mills to shun higher-priced low-vol. “Big mills are refusing low-vol because of the high price,” a Beijing trader said. There was some market talk of a spot

$/mt Change % Chg CFR India 250.00 -1.00 -0.40 FOB North China* 231.00 -5.00 -2.12 Yuan/mt DDP North China* 1330.00 0.00 0.00 *weekly

SBB-SMD raw materials reference prices

$/mt Change % Chg

Coke and coal Charcoal - Brazil domestic

222.81

0.00

0.00

126.08 145.01 200.61 382.50 385.00 411.40 275.00

10.14 4.07 -16.45 2.50 -2.50 -8.15 -12.50

8.04 2.89 -8.20 0.65 -0.65 -1.94 -4.55

Iron SGX 62% Fe Iron Ore cash-settled swaps (dry mt) - front month Iron ore concentrate 66% Fe wet - China domestic Atlantic Basin iron ore pellets* FOB Basis (cents/dmtu) Pig iron - FOB - Black sea export Pig iron - FOB Ponta da Madeira - Brazil export Pig iron - Hebei - China domestic HBI - Venezuela export *Reflects estimated monthly price term contract delivery

SBB-SMD ferrous scrap reference prices

Price Change % Chg

Scrap, Europe/Turkey

($/mt)

OA (plate & structural) - UK domestic, delivered Shredded - delivered - N. Europe domestic, delivered Shredded - delivered - S. Europe domestic, delivered

314.38 344.99 339.79

Scrap, Americas

0.00 -4.90 -6.44

0.00 -1.40 -1.86

313.38 323.49 379.18 365.00

-10.11 -5.05 0.00 0.00

-3.13 -1.54 0.00 0.00

333.60

-10.11

-2.94

343.71

-5.05

-1.45

321.47

-10.11

-3.05

331.57

-5.05

-1.50

0.00 0.00 0.00

0.00 0.00 0.00

0.00

0.00

($/lt)

#1 Busheling - N. America domestic, del, Midwest US HMS 1/2 - N. America domestic, del Midwest US Plate & Structural - N. America domestic, del Midwest US

415.00 347.50 377.50

($/mt) HMS 1/2 - Brazil S.E. domestic

210.53

*Monthly unless otherwise noted

deal done in the northeast Asian market for mid-vol HCC last week. It was understood to be a Panamax cargo and its offer price reported earlier was around $127/mt FOB Australia. Meanwhile, second-tier HCC was

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assessed $2/mt higher on the day, reversing a $1.50/mt drop Monday. There was a lack of consensus on this market segment, where recent volatility could be a reflection of the wider tradeable range currently prevailing.

Copyright © 2013 McGraw Hill Financial

SBB Steel Markets Daily

Several traders expressed interest in purchasing typical Rangals with 60-63% coke strength after reaction (CSR) at $115-116/mt FOB Australia, or $125-130/mt CFR China, even for a Panamax-size cargo, contradicting claims from two sell-side sources Monday they would happily sell at $125-127/mt CFR. Most sources described the market as steady, and all agreed there was only very little room for prices to drop further. Meanwhile, three end-s from north China expressed a cautious attitude toward current prices, suggesting any price rebound “cannot last for long and [has] little [leeway].” Highlighting a pick-up in trader activity, out of 15 reported hard coking coal and PCI transactions concluded last week, nine were sold to traders. With regards to domestic coking coal prices, a Tangshan-based coke plant said he thought Chinese miners had “become more determined” in negotiations with mills since steel prices had picked up. On metallurgical coke, several market participants were said to be preparing documents for a coke procurement tender floated by a west Indian mill last week. The tender called for 40,000 mt of blast furnace coke with specifications of 62/60% CSR for August load-

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your Tender Notice in Platts Steel Markets Daily.

July 16, 2013

Steel Mill Economics: Global Spreads, July 16, 2013 China Flat Steel Spread (CFSS using IODEX)* 302.81 China Flat Steel Spread (CFSS using TSI)* 303.21 China Long Steel Spread (CLSS using IODEX) 279.31 China Long Steel Spread (CLSS using TSI) 279.71 China Hot Metal Spread (CHMS using IODEX)* 291.06 China Hot Metal Spread (CHMS using TSI)* 291.46 China Coking Margin (CCM)** 365.00 China Billet-Rebar Spread (CBRS) 320.00 Turkey Scrap-Rebar Spread (TSRS: Platts) 217.00 Turkey Scrap-Rebar Spread (TSRS: TSI) 219.00 Turkey Scrap-Black Sea Billet Spread (TSBS: Platts) 142.00 Turkey Scrap-Black Sea Billet Spread (TSBS: TSI) 144.00 US Scrap-HRC Spread (US SHRC) 294.58 US Scrap-HRC Futures Spread (US SHRCF) 284.58 US Scrap-Rebar Spread (US SRS) 279.58

$/mt $/mt $/mt $/mt $/mt $/mt RMB/mt RMB/mt $/mt $/mt $/mt $/mt $/st $/st $/st

Change -1.77 -4.73 -3.38 -6.34 -2.58 -5.54 0.00 0.00 1.00 1.00 0.00 0.00 0.00 0.00 0.00

% change -0.58 -1.54 -1.20 -2.22 -0.88 -1.86 0.00 0.00 0.46 0.46 0.00 0.00 0.00 0.00 0.00

*Weekly, assessed on Mondays. **Weekly, assessed on Fridays. For spreads calculation and assessment methodology, please go to: http://platts.com/IM.Platts.Content/MethodologyReferences/MethodologySpecs/steel.pdf

News in Brief The direct reduced iron (DRI) plant to be built by Austrian steelmaker Voestalpine in the US will be the world’s largest when it is completed in 2015. Plantmaker Siemens, which Voestalpine has contracted

to build the facility in Texas together with Midrex Technologies, confirmed Tuesday the plant will be “the largest single module of this type worldwide.” The plant has a design capacity of 2 million mt/year of hot briquetted iron (HBI), which will be produced from iron ore pellets using natural gas as the reducing agent. Voestalpine will use half the HBI for its own steelmaking operations and plans to sell the remainder.

Nikopol Ferroalloy Plant (NFP), Ukraine’s biggest ferroalloy smelter, saw June output fall 0.3% month on month to 33,600 mt, producers’ association UkrFa said Tuesday. NFP produced 32,700 mt of silicomanga-

nese and 900 mt of ferromanganese. June’s total output was down 45.1% year on year, UkrFa said. NFP produced 250,300 mt of ferroalloys in the first half of the year, down 20.7%. That was made up of 228,800 mt of silicomanganese, down 12.5%, and 21,500 mt of ferromanganese, down 60.4%. NFP, one of the world’s biggest producers of ferromanganese and silicomanganese, is capable of producing about 1.2 million mt/year of ferroalloy. In 2012 NFP produced 657,800 mt of ferroalloy, down 14.6%.

AIM-listed South Africa-focused miner and developer Ironveld has upgraded the iron ore resource at its Lapon properties in South Africa, it said in a statement. The company is developing a pig iron project on the

northern limb of the Bushveld minerals complex in Limpopo, South Africa, for which these mines will provide the feedstock. According to the statement, the company has doubled its tonnage in the Indicated category to 27.26 million mt at a cut off (minimum grade) of 20% Fe. The ore in the Measured category is now at 1.58 million mt, also at 20% Fe cut-off. Also, the deposit’s main magnetite layer has seen a grade increase from 46.7% to 48% Fe. The total mineral resource now sits at 32 million mt at 20% Fe cut-off and there is “sufficient recoverable iron ore in situ to produce [its previously declared figure of] 1 million mt of pig iron/ year for 25 years,” the company said. The company ed London’s Alternative Investment Market (AIM) in July last year.

In the face of a declining metallurgical coal prices, US miner Alpha Natural Resources announced layoffs at various mining operations in West Virginia as well as the idling of its Pocahontas met coal mine. The +44 20 7176 7638 | [email protected]

mine is operated by White Buck Coal Co. “Generally speaking, met coal is in an oversupply situation right now,” a company spokesperson told Platts. “And prices for the mid-vol spec that Pocahontas produces, have dropped considerably.”

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Copyright © 2013 McGraw Hill Financial

SBB Steel Markets Daily

ing. There was also talk of a coke procurement tender in Brazil for 40-100 mm sized coke with 66/64% CSR for August laycan. The volume requested was 50,000 mt. — Helena Sheng with Julien Hall and Edwin Yeo

Scrap market

Ukraine’s scrap price steady, seen rising in Aug on exports London—Domestic scrap prices in Ukraine remain unchanged Tuesday from two weeks earlier, but several traders said the resumption of exports may result in a Hryvnia 200-250/mt or 10% price increase in August. Scrap continued to sell for Hryvnia 2,050-2,150/mt ($251-263) ex-yard for A3 grade (HMS I/II 80/20). At the same time, port buyers were paying Hryvnia 2,200/mt for A3, merchants in eastern Ukraine said. “As soon as exports resumed this month, it affected scrap flow. It was directed overseas to the detriment of steelworks in close proximity to ports particularly Kryviy Rih, Ilyich and Zaporizhstal,” a merchant said. Deliveries to Ukrainian mills fell from nearly 110,000 mt/week in mid-June to 90,000 mt/week in mid-July, which covers only 80% of the mills’ combined scrap needs. Although mills have sufficient stocks, roughly 270,000 mt in all, their suppliers are running out of stock, meaning shipments to mills can only fall unless the mills raise bids, according to Kiev-based industry analysts UkrPromZovnishEkspertiza. — Katya Bouckley

Exchanges

Volume and prices recede in iron ore swaps market Liverpool—The iron ore swaps market was quieter again Tuesday as a lack of activity in the physical market — and growing concern over the longevity of recent increases — saw prices soften marginally throughout the curve. The Singapore Exchange cleared just 444,000 mt of swaps. July traded at $126.50/dry mt and $126.25/dmt, while August printed down from $126.50/dmt to $126/dmt during Asian trading. September was done at $124.25/

July 16, 2013

Platts steel industry assessments, July 16 Asia

Close/Midpoint

Change

% Chg

Hot-rolled coil FOB Shanghai*

$/mt 505.00-515.00

510.00

7.50

1.49

Reinforcing bar FOB China* * Assessed July 11, 2013

$/mt 500.00-505.00

502.50

5.00

1.01

Eur/mt 415.00-420.00 417.50 0.00 425.00-431.00 428.00 0.00 (Accessible to SBB Briefing subscribers at sbb.com)

0.00 0.00

Europe Hot-rolled coil Ex-works, Ruhr CIF Antwerp DDP NW Europe

$/mt FOB Black Sea 505.00-515.00

510.00

0.00

0.00

Plate Eur/mt Ex-works, Ruhr 495.00-505.00 CIF Antwerp 425.00-435.00

500.00 430.00

0.00 0.00

0.00 0.00

Reinforcing bar Ex-works, NW Eur

Eur/mt 450.00-455.00

452.50

0.50

0.11

$/mt FOB basis Turkey 580.00-586.00

583.00

1.00

0.17

Billet $/mt FOB Black Sea 508.00

508.00

0.00

0.00

$/st 640.00-650.00 580.00-600.00

645.00 590.00

0.00 0.00

0.00 0.00

Plate $/st Ex-works, US SE 680.00-700.00 CIF, Houston 640.00-660.00

690.00 650.00

0.00 0.00

0.00 0.00

Reinforcing bar Ex-works, US SE

$/st 620.00-640.00

630.00

0.00

0.00

CIF, Houston

535.00-540.00

537.50

0.00

0.00

North America Hot-rolled coil Ex-works, Indiana CIF, Houston

Europe and US cold-rolled coil assessments, July 16 Ex-works, Ruhr CIF Antwerp DDP NW Europe

Eur/mt Close/Midpoint Change 515.00-520.00 517.50 0.00 495.00-502.00 498.50 0.00 (Accessible to SBB Briefing subscribers at sbb.com)

% Chg 0.00 0.00

$/mt FOB Black Sea 580.00-590.00

585.00

0.00

0.00

$/st Ex-works, Indiana 740.00-750.00

745.00

0.00

0.00

CIF, Houston

630.00

0.00

0.00

620.00-640.00

dmt, $124/dmt and $123/dmt, while Q4 printed at $120/dmt. The August-September timespread, which had been the focus of much liquidity over the past two days, traded at $2.50/dmt, after trading at $2.503/dmt Monday. Prices were down around 25 cents-

7

$1/dmt across the curve from the previous session. Brokers said liquidity had thinned and one quipped that people should “sell the curve,” given high steel production relative to sales in China. He said iron ore swaps have felt overvalued compared to the physical market for some time.

Copyright © 2013 McGraw Hill Financial

SBB Steel Markets Daily

The Steel Index’s 62% Fe CFR North China reference price rose $2.10/dmt to $129/dmt on the back of limited supply of mainstream material. Platts 62% Fe Iron Ore Index, however, crept up just 25 cents as some sources doubted the longevity of increases given lagging steel fundamentals. European steel and scrap contracts were quiet, but a US hot-rolled coil trade was done for the 2014 calendar year at $610/short ton, at 500 st/month, brokers said. — Colin Richardson

Ferroalloys market

Manganese ore soft, buyers hold back from purchasing London—Manganese ore prices moved down Tuesday, with sources reporting weak buying activity and softer offers from suppliers. Platts assessed its 44% manganese ore price at $5.51/dry mt unit, two cents lower from the previous day. A Chinese trader said Gabon ore was being offered at $5.40/dmtu CIF China and that market sentiment was weak, but he thought manganese ore prices were near the bottom and could not fall further. A trader selling into China said prices had softened over the week and he was hearing Gabon ore being offered below $5.40/dmtu. He said sellers reporting high offer levels in May and June were not able to sell ore without discounting. “Chinese prices are all coming down even though some people are still talking high prices. They cannot sell at these prices,” the trader said. “The Chinese don’t need ore and they are not looking to buy very much.”

A Chinese purchasing source said she had also seen soft prices for manganese ore. However, she was not yet in the market to import. — Jitendra Gill and Clement Kwok

Molybdenum oxide prices stable, pressure remains: trade London—Molybdenum oxide prices took a breather from the losses seen over the past seven days and were unchanged at $9.30-9.40/lb Tuesday. “There’s no change in prices, it seems to be holding a little bit now,” one producer said. He said the market was nervous as people were not expecting prices to fall as quickly as they did from the $10/lb mark seen six days ago. A Europe-based trader said: “Bids are lower today at $9.20/lb but nobody wants to buy anyway. They don’t want to get their finger burnt.” He said prices were under pressure

July 16, 2013

because of poor sentiment and declines would not stop until consumers return to the market. “It can’t stabilize because there are no deals,” he said. A source reported a deal at $9.30/lb CIF Busan. Sources agreed buying signals were not yet seen from China. “We may see resistance if Chinese decide to come in and start to buy and this will help stabilize prices,” a European consumer source said. A second Europe-based trader said the market was lacking activity. “Anyone who wants to put a bid on it now is going to go lower.” — Jitendra Gill

Other News

Glencore Xstrata to halt Queensland magnetite output Melbourne—Glencore Xstrata will stop producing magnetite concentrate at its Ernest Henry Mining operation in

Platts proposes to assess Australia-China Capesize coal freight Platts is seeking on a proposal to enhance its suite of metallurgical coal freight assessments by adding a new daily assessment for spot Capesize cargoes. The assessment would reflect cargoes of 140,000 mt loading 7-45 days forward from the day of assessment, between Hay Point, eastern Australia and Qingdao, north China. The assessment would reflect well approved modern tonnage only, not exceeding 10 years of age. Platts invites about this proposal by July 29, please : [email protected]

Platts clarifies freight netback for metallurgical coal FOB Australia Platts clarifies its procedures for calculating freight netbacks for metallurgical coal assessments on an FOB Australia basis. When deals, bids/offers are observed to be illiquid, inconsistent and non-repeatable, spot price bids/offers or trades in key consumer markets basis CFR China, India, Europe, Japan or South Korea Taiwan may be netted back to FOB Australia. Freight netbacks from China will be calculated using assessed Panamax spot freight rates for dry bulk carriers on the day of assessment, while from other regions, the prevailing vessel size on the given route will be used.

Platts clarifies standard specifications for Asia coal & coke assessments Platts clarifies its standard specifications by adding new quality parameters for several Asian metallurgical coal and coke assessments. Standard vitrinite percentage will be 71% for HCC Peak Downs Region (FOB Australia, CFR India and CFR China), 65% for Low Vol (FOB Australia, CFR India and CFR China), and 55% for HCC 64 Mid Vol (FOB Australia, CFR India and CFR China). Total Moisture (as received) will be 10% for Low Vol PCI (FOB Australia, CFR India and CFR China), and 10% for Low Vol 12 Ash PCI (FOB Australia, CFR India and CFR China). Standard Hardgrove Grindability Index (or HGI) will be 80 for Low Vol 12 Ash PCI (FOB Australia, CFR India and CFR China). Crucible Swelling Number (or CSN) will be 1 for Low Vol 12 Ash PCI (FOB Australia, CFR India and CFR China). Maximum fluidity will be 200 dial divisions per minute (or ddpm) for Semi Soft (FOB Australia, CFR India and CFR China). Standard sulfur (air-dried basis) will be 0.65% for Met Coke (CFR East India, DDP North China and FOB North China).

Platts clarifies loading ports considered for metallurgical coal FOB Australia Platts clarifies the ports considered in its metallurgical coal FOB Australia assessments. These include Dalrymple Bay, Hay Point, Gladstone and Abbot Point; and in New South Wales: Newcastle and Port Kembla. Freight rates for hard coking coal from any of these ports are normalized to Hay Point port for assessment purposes. For PCI and Semi Soft assessments, freight rates from any of these ports are normalized to Dalrymple Bay.

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Copyright © 2013 McGraw Hill Financial

SBB Steel Markets Daily

Queensland, Australia, from mid-August due to weaker iron ore prices and high logistics costs making exports uneconomic, the company said late Monday. The Switzerland-based commodity group said a 30% drop in iron ore prices over the past two years and higher costs for production and transportation have eroded margins, prompting the decision to suspend magnetite output. The magnetite has to be transported some 780 km by rail from Ernest Henry mine, east of Mount Isa, to a port facility at Townsville for export to China. Parts of the magnetite circuit at Ernest Henry will be placed on care and maintenance, with the regrinding circuit reconfigured to produce copper concentrate. Exports of magnetite concentrate started from Ernest Henry in 2011 and production capacity had been ramping up towards an ultimate target of 1.2 million mt/year of magnetite concentrate. An Ernest Henry Mining spokeswoman said the mine produced about 500,000 mt of magnetite concentrate in 2012. “Our magnetite concentrate went predominantly to the Chinese market, with a very small amount for domestic use,” she told Platts. The mine had been earmarked for closure in 2012. But in late 2009, the company decided to invest US$542 million to extend the life of the mine until 2024. This followed a feasibility study into constructing a magnetite processing facility and building full-scale underground mining operations at Ernest Henry. Last month, Glencore-Xstrata said it would cut 450 jobs from its Newlands and Oaky Creek coal mines in Queensland, citing weaker coal prices and the high Australian dollar. — Paul Bartholomew

S&P downgrades NWR on lower coal prices London—Central European coal and coke producer New World Resources (NWR) has been given a lower credit rating by Standard & Poor’s on the back of the negative coal price outlook for 2013-2014 and uncertainty related to NWR’s ability to limit negative cashflow, S&P stated in a press release. According to S&P — like Platts, part of McGraw Hill Financial — the business risk represented by the Amsterdam-based NWR has slipped from “weak” to “vulnerable” (from B to B-) reflecting its high cost profile and need to downscale its operations. At the same time NWR’s liquidity was termed “less than adequate” from “adequate.” The downgrade is also based on the newly adjusted coal price assumptions by S&P for 2013-2014, to $140-150/mt from previous level of $150-160/mt. “This results in NWR

July 16, 2013

Steel headlines Chinese HRC export prices rise, Korean buyers hold off Korean buyers of Chinese hot-rolled coil are holding back on bookings amid a surge in Chinese export prices and persisting weak demand in Korea. Recent export offer prices from major Chinese mills to Korean buyers were at $540-545/mt CFR for SS400B 3mm thick HRC, up $20/mt or more compared with prices late last month, Platts was told Monday. For more steel news, please visit: www.sbb.com „„ Marcegaglia raises sheet, plate prices by around Eur30/mt „„ Keystone raises wire rod prices $15/st for August shipments „„ Shanghai HDG market sees modest price increase „„ Turkish flats prices firm with improving market sentiment „„ Legal battle over UK hot strip mill to be settled in 2014 „„ HRC level at $640-650/st „„ CRC stays at $740-750/st „„ Severstal, USS dissolve Double Eagle galvanizing JV „„ US sheet pricing steady, import concerns linger „„ Southern European HR coil price up; US price rise continues - TSI „„ India’s Sail dispatches first switch rail consignment „„ Taiwan rebar makers lift prices on better demand, scrap rise „„ Northern China’s rebar price still rising on better sentiment „„ Vietnam’s sales of longs for first-half 2013 rise by 1.5% „„ Rebar mini-mill in southwest Russia may start up by August „„ New Russian bar mill aims to start rolling before year-end „„ Nucor: Long product prices unchanged ‘until further notice’ „„ Fullacero sole distributor of Deacero rebar in Chile „„ Ezz Steel raises rebar exports to fund raw materials imports „„ Chinese company to complete new Iranian steelworks „„ Jordanian re-roller seeks investor to help in restructuring „„ Low demand, over-capacity depress OCTG sales for Tianda „„ Seamless pipe prices stable in eastern China „„ US to conduct full sunset reviews of rectangular P&T „„ Saudi pipemaker secures $67 million OCTG supply contract „„ Chinese stainless export prices show signs of stabilizing „„ Turkish stainless coil import prices steady in July „„ Carpenter gets new leader for distribution businesses „„ China’s GDP growth betters target, achieving 7.6% for H1 „„ Special Report: China’s auto output dips again in June „„ China’s crude steel output dips in June, up 4.6% on year „„ Klöckner not expected to break even this year „„ Tata Steel made operating loss of GPB354 million in EU in 2012/13 „„ Mexico’s industrial output flat in May „„ US steel industry capability utilization at 78%: AISI „„ Special Report: Colombia steelworkers to fight outsourcing „„ Brazil’s crude steel production falls 6% on month in June „„ Egypt’s Misr Ataqa approves debt payments for Suez DRI plant „„ Egypt mills operating despite social unrest, but market slow „„ Saudi state spending reduction to hit infrastructure growth „„ Qatar’s $200 billion construction boom to kick off in 2014 generating more negative free cash flow in the second half of 2013 and 2014 than we previously assumed,” S&P explained. The agency also made clear that further downgrading is possible in the coming quarters if coal prices keep softening, and NWR fails to fully meet its cost-cutting targets and sell its 800,000 mt/year coke facility OKK Koksovny in the Ostrava region of the Czech Republic. The miner was in talks with potential buyers, it said earlier this month. NWR was also planning to divest its Czech Paskov mine but recently said the

9

sale was unlikely to materialize and other scenarios were under evaluation including a potential temporary or permanent shutdown of the mine. — Wojtek Laskowski

Equatorial to apply for Congo mining license ‘immediately’ Melbourne—Australia’s Equatorial Resources has completed the scoping study for its Mayoko-Moussondji iron ore

Copyright © 2013 McGraw Hill Financial

SBB Steel Markets Daily

project in the Republic of Congo and plans to apply for a mining license “immediately,” the company said Tuesday. “The scoping study has identified an immediate pathway to a 2 million mt/ year hematite mining operation producing a product transported by the existing railway and port facilities,” Equatorial’s Managing Director John Wellborn said in a statement. The Perth-based company plans to produce a Mayoko fines iron ore of grading 64.1% Fe from the project at a rate of 500,000 mt/year during stage 1, ramping up to 2 million mt/year within 18 months. Initial capex required for first production has been estimated at $114 million with total capital costs to achieve the 2 million mt/year rate estimated at $231 million. Operating cash costs for the mine are expected to average $41/mt FOB Pointe-Noire over the life of the mine, which is expected to be 23 years. Equatorial plans to reduce some of the costs for Mayoko-Moussondji through partnership opportunities in rail and port infrastructure with Exxaro Resources, whose project — Mayoko-Lekoumo — is adjacent to Equatorial’s. Equatorial said Tuesday it expects initial production from its mine to start 15 months from when investment decisions have been satisfied. — Marnie Hobson

Asia

Posco scraps Karnataka plan, some point to ore supply Singapore—South Korea’s Posco has abandoned plans to build a 6 million mt/ year integrated steelworks in the south Indian state of Karnataka and agreed with the state government to stop work on the project, it said Tuesday. In a disclosure to the Korea Stock Exchange, Posco cited delays in gaining approvals to mine along with persisting problems with land acquisitions. It had signed a Memorandum of Understanding with Karnataka in June 2010. “There was not much expectation of success in this project [from the planning

July 16, 2013

stage],” a source from Posco told Platts. “For its own political purposes, the state government had initially intended to lure several steelmakers,” he added. Political uncertainty in the state was also a major reason behind the company’s decision, he added. Meanwhile, Posco has been struggling with a much delayed 8 million mt/year project in eastern India’s Odisha, he noted, adding that there has been some progress with that project though at a slow pace. “Posco’s decision is hardly surprising,” a Mumbai-based analyst said. “Even existing [steel] mills in Karnataka don’t know where they will source iron ore for the next few years or even decades. It just doesn’t make sense to pump in more investments there,” he said. Most other Indian steelmakers have

Australia lump contract price settlements with China mills $/dmtu Q2 2013 0.1350-0.1450 Lump s vary from company to company, depending on when agreements are reached, brands, volumes, and whether they are negotiated as a package with other products like fines. Platts has been reporting on the settlements in the form of news articles, and is publishing them more regularly for easier access by subscribers. The published lump represents what Platts understands most Chinese mills have agreed to. s that are settled under known, special circumstances, would be reported about in news articles, but would be excluded from the published . For further details, see http://www.platts.com/MethodologyAndSpecifications/Metals.

Platts steel assessments currency and unit comparisons, July 16 Prior assessment Eur/mt $/mt $/st $/CWT $/mt $ change Hot-rolled coil Ex-works, Ruhr* FOB Black Sea* CIF Antwerp* Ex-works, Indiana** CIF, US Gulf states, basis Houston**

% change

417.50*** 387.98 428.00*** 540.27 494.20

548.80 510.00*** 562.61 710.98 650.35

497.87 462.67 510.40 645.00*** 590.00***

24.90 23.14 25.53 32.25 29.50

544.38 510.00 558.07 710.98 650.35

4.42 0.00 4.54 0.00 0.00

0.81% 0.00% 0.81% 0.00% 0.00%

517.50*** 445.04 498.50*** 624.04 527.71

680.25 585.00*** 655.28 821.21 694.44

617.13 530.71 594.47 745.00*** 630.00***

30.86 26.54 29.73 37.25 31.50

674.77 585.00 649.99 821.21 694.44

5.48 0.00 5.29 0.00 0.00

0.81% 0.00% 0.81% 0.00% 0.00%

500.00*** 430.00*** 577.97 544.46

657.25 565.24 760.58 716.49

596.26 512.78 690.00*** 650.00***

29.82 25.65 34.50 32.50

651.95 560.68 760.58 716.49

5.30 4.56 0.00 0.00

0.81% 0.81% 0.00% 0.00%

452.50*** 443.51 527.71 450.23

594.81 583.00*** 694.44 592.48

539.61 528.90 630.00*** 537.50***

26.99 26.45 31.50 26.88

589.36 582.00 694.44 592.48

5.45 1.00 0.00 0.00

0.92% 0.17% 0.00% 0.00%

Cold-rolled coil Ex-works, Ruhr* FOB Black Sea* CIF Antwerp* Ex-works, Indiana** CIF, US Gulf states, basis Houston** Plate Ex-works, Ruhr* CIF Antwerp* Ex-works, US Southeast** CIF, US Gulf states, basis Houston** Reinforcing bar Ex-works, Northwest Europe* East Mediterranean, basis Turkey* Ex-works, US Southeast** CIF, US Gulf states, basis Houston**

*LN 16:30 Eur/$ ex rate = 1.3145; **NY 16:30 $/Eur ex rate = 0.7599. ***the primary assessments and have not been converted

10

Copyright © 2013 McGraw Hill Financial

SBB Steel Markets Daily

also put their plans for setting up integrated steelworks in Karnataka on hold until there is more clarity on the iron ore mining scenario in the state. “No investor in their right mind will dream of setting up a steel plant in India now unless they have captive iron ore mines under their belt first,” a Mumbai-based mill official said. — Anitha Krishnan and Hera Oh

Chinese mills conflicted on scrap price development Singapore—Major mills from eastern China expressed caution in changing their scrap purchasing prices at a regular gathering of important consumers in northern China’s Tianjin on Friday, July 12. Heavy scrap over 6mm was assessed by Platts at Yuan 2,320/mt ($377/mt) delivered including VAT on a delivered basis on Friday, stable week on week as market participants held conflicting views on the market. The meeting of 8-10 steelmakers plus other participants was hosted by Tianjin Pipe Group Corporation, China’s third largest consumer of ferrous scrap. The next meeting is due to be held at Zenith Steel in Jiangsu in early August. Baosteel said some mills at the event believed prices should go up in July following prices of finished steel. Platts assessed 18-25mm HRB400 rebar in Shanghai at Yuan 3,415/mt Friday, up from Yuan 3,210/mt on July 1, an increase of Yuan 205/mt during two weeks. However, Baosteel was not sure the increase was sustainable in July and August and other mills also argued that the price increase was temporary. It therefore did not want to increase its scrap buying prices, especially since it had ample and relatively cheap hot metal supply. Baosteel believed scrap prices would be stable in July. As to the long-term, Baosteel believed the price trend would likely depend on government policies in areas such as urbanization or high-speed rail projects. But stimulus on the scale seen in 2009, when Yuan 4 trillion was injected into the economy, was very unlikely, it affirmed. Shagang was also uncertain about the price trend going forward. Meanwhile, Nanjing Iron & Steel Corporation believed scrap prices might be stable or drop slightly. Blast furnaces are expensive to stop and it is easier to keep producing steel from hot metal and reduce scrap use, it noted. One independent Beijing analyst believed scrap prices would increase fol-

July 16, 2013

Marketplace „„ Iron

ore: 63.5% Fe Australian Newman lump — BHP Billiton heard inviting bids privately for 90,000 mt, loading July 26-August 4, according to traders who received the invitation to bid „„ Iron ore: freight — Shanghai-based trader heard Capesize freight from W. Australia to Qingdao fixed at $7.60/wmt „„ Iron ore: freight — Shanghai-based trader indicated Capesize freight from W. Australia to Beilun at $7.30/wmt „„ Iron ore: freight — Shanghai-based trader heard Capesize freight from Brazil to Qingdao fixed at $20.40-20.50/wmt „„ Iron ore: freight — Shanghai-based trader heard Capesize freight from S. Africa to Qingdao fixed at $13.50/wmt „„ Iron ore: freight — Shanghai-based trader heard Capesize freight differential from Qingdao to Beilun at $0.30/wmt „„ Iron ore: spot lump — Hong Kong-based trader estimated tradeable value at IODEX +$0.16/dmtu „„ Met coal, freight: Hong Kong trader estimated Panamax DBCT to Jingtang at $12-13/mt „„ Met coal, HCC: Hong Kong trader would consider buying Jellinbah Lake Vermont at $115-116/mt FOB Australia „„ Met coal, PCI: Hong Kong trader would consider buying Yancoal Yarrabee 12% ash at $110/mt CFR China (This is a sample of trade and market information gathered by Platts editors as they assessed the daily , coking coal, steel, scrap and freight prices. They were first published on Platts Metals Alert earlier in the day as part of the market-testing process with market participants. For more related information about that process and our realtime news and price services, please request a trial to Platts Metals Alert or learn more about the product offering by visiting http —//www.platts.com/Products/metalsalert) lowing the uptick of iron ore and finished steel prices, furthermore, smaller mills have raised their scrap purchasing prices because they could make profits and plan to keep production high. — Bryan Gao

Analysis

Take-or-pay deals ing Australian coal output Liverpool—Only 4 million mt of Australian coal production will close this year, despite 32 million mt currently being produced at negative margins, Wood Mackenzie said in a release Tuesday. “The decision to continue production instead of shutting it down can mainly be attributed to transport and port contracts in Australia, otherwise known as ‘take-orpay’ contracts,” WoodMac said. Take-orpay means miners pay for capacity regardless of the tons they ship. WoodMac said just over 1% of Australia’s coal exports in 2013 (4 million mt) is at risk of closure based on hard coking coal prices of $171/mt and thermal coal prices of $92/mt. “This is not a significant volume of output; however the amount at risk increases significantly under a lower price scenario,” the company said. Platts assessed hard coking coal at $142.50/mt CFR China Tuesday, or $129.50/mt FOB Australia.

11

If average HCC prices fall to $122/mt, however, WoodMac said 13% of Australia’s coal exports in 2013 (45 million mt) will be at risk of closure. At that price 204 million mt of production will be suffering negative margins, the company said. “There have only been two mine closures so far in 2013 compared to seven in 2012,” said Viktor Tanevski, coal cost analyst at Wood Mackenzie. “Despite the low coal price environment and current margin squeeze, take-or-pay contracts are incentivising coal producers to increase rather than reduce production, even if additional production is generating negative cash margins.” The impact of weak met coal prices on margins, at a time of high costs, has forced some companies in Australia to mothball mines or consider asset sales. Earlier this year Anglo American said it would place its Aquila mine in the Bowen Basin on care and maintenance from July 30. It has also been suggested that Rio Tinto would sell 29% of its 80% stake in Coal & Allied, as well as stakes in two thermal coal mines. Last month Sydney-based CLSA analyst Dylan Kelly told Platts Australian miners were struggling to reduce costs “on an operational basis” and were seeing “record cost levels.” “Around half of all open-cut mines in Australia are believed to be selling coal below their production costs,” he said. — Colin Richardson

Copyright © 2013 McGraw Hill Financial