China’s top steel city curbs heavy industry output for five days on smog alert

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China’s top steelmaking city, Tangshan, has ordered steel mills to shut sintering plants and asked that coke and cement factories curb output for five days due to forecasts of heavy smog over the weekend, two sources familiar with the plan said on Friday.

The measures came into force at noon on Friday and will last until noon on July 18, the sources said. They declined to be identified as they are not authorized to speak to the media.

The Tangshan government could not be reached for comment.

Sintering plants, where iron ore is heated into a mass as a precursor to making hot metal, along with coke and cement factories, have been major targets this year in Beijing’s push to curb pollution.

Source: REUTERS

Chinese steel exports recommence year-on-year growth

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Chinese steel export levels exceeded expectations in June, recording their first year-on-year increase since July 2016. That still left exports over the first half of 2018 down heavily from 2017 however, Kallanish notes.

In June China exported 6.94 million tonnes of finished steel, 2% more than in June 2017 and the highest level since July 2017, according to the General Administration of Customs. That left Chinese exports over January-June down -13.2% y-o-y at 35.43mt.

June exports were also up 0.9% month-on-month. Increasing steel prices and falling domestic inventory levels had suggested June could see a slight decline in volumes, and that is now expected to be seen in the July data.

Volumes are likely to drop at least through July-August, with a possible up-tick in September-October. A dip in prices two weeks ago gave exporters some short lived opportunities to book volumes to spot customers in Southeast Asia. Those opportunities appeared to be closing up again over the last week however.

Firm steel prices in the second half are likely to have a negative impact on export volumes. Over the second half of the year monthly export volumes are expected to average around 5.5m tonnes/month, leaving total exports for the year at around 65-70mt.

China also imported 1.04mt of steel, down -8.3% m-o-m and -8% y-o-y. Over the first half Chinese steel imports were down -1.9% at 6.67mt.

Source: KALLANISH

China sets record daily steel output for third month in a row

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China’s steel mills churned out record amounts of the construction material in June as producers rushed to cash in on hefty margins, even as a trade spat between Beijing and Washington intensified.

China, which accounts for half the world’s capacity, produced 80.2 million tonnes of crude steel last month, National Bureau of Statistics data showed on Friday. That’s just shy of the 81.6 million tonnes the United States produced in the whole of 2017, according to World Steel Association data.

June output was below May’s record 81.13 million tonnes, but June has one less day, setting a new daily average production record for a third month in a row at 2.67 million tonnes, according to Reuters’ calculations.

“Steel mills were dashing to reap as much of the bumper profits as they could despite environmental checks,” said Richard Lu, analyst at CRU in Beijing.

The data may further inflame a bitter Sino-U.S. trade row. The United States and Europe have accused China of exporting its surplus metal cheap, hurting international rivals.

China’s steel exports rose last month to 6.94 million tonnes, their highest since July 2017, even after Washington imposed import duties to protect U.S. industries.

The production increase also comes as China has shuttered some mills to help curb choking pollution and ramped up environmental inspections, suggesting that newer mills have ramped up operations to cash in on fat margins.

China’s steel output in the first half rose 6 percent to 451.2 million tonnes.

BUMPER MARGINS

Steel prices have soared over the past year due to firm demand and on concerns about tightening supplies of metal, used in construction and automotives, as Beijing seeks to close inefficient mills and clamps down on smoke-stack industries to clean the nation’s skies.

Lu estimated that mills were earning a profit margin of about 800 yuan ($119.50) per tonne of steel, while analysts at Huatai Futures put profit margins for mills in northern China at over 1,000 yuan a tonne, one of the highest on record.

Monthly utilisation rates at mills reached 71.6 percent in June, the highest since October before winter production curbs had taken effect, according to Reuters calculation based on data from Mysteel consultancy.

Analysts say it’s not clear if China will continue its record-setting run.

Some particularly smoggy cities and provinces are also implementing ad hoc measures to beat bouts of pollution. Last week, top steelmaking city Tangshan ordered mills to cut production for 6 weeks over summer.

“Steel output may not necessarily go down even though stricter restrictions are on the way,” said Lu. “Steel mills in Xuzhou city could reopen soon, which will to some extent offset the production curbs in Tangshan.”

Producers are also racing to make as much metal as possible before a new round of production curbs are imposed in November ahead of China’s winter, when pollution is at its worst.

Last winter, government forced mills and heavy industry in 28 of the most polluted northern cities to shut up to half of their capacity between November and March. More are expected to adopt similar curbs this winter.

Source: REUTERS

India’s JSW Steel revamps acquisition strategy after recent setbacks: executive

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India’s JSW Steel is looking to acquire smaller steel plants in India and overseas that produce specialized products, a top executive said on Tuesday, as it tweaks its acquisition strategy after missing out on some recent deals.

JSW Steel, India’s biggest steelmaker in terms of domestic capacity, failed to outbid rival Tata Steel (TISC.NS) in March for bankrupt steelmaker Bhushan Steel. The company also lost out to UK-based steel manufacturer Liberty House for Bhushan Power following a bankruptcy resolution process for both companies in April.

Earlier this year, JSW was beaten out by ArcelorMittal SA (MT.AS), the world’s largest steelmaker, for Italian steel major Ilva SpA.

After the recent setbacks, JSW Steel is now looking to focus on buying more niche, lower capacity plants which do not require huge investments to turn around, said Seshagiri Rao, joint managing director and the group financial head of JSW Steel.

“In the next round, our strategic thinking is to now focus on special product units that generally have a capacity of about a million tonnes,” said Rao, referring to an upcoming round of auctions under India’s new bankruptcy law, during which a second wave of steel assets will be up for grabs.

India’s steel demand has been growing at over 8 percent for the last few months. The growth is being led by higher motorcycle and automobile sales and government-sponsored infrastructure projects.

Rao said that JSW Steel is scouting for opportunities in the specialized steel segment that are dedicated to meeting specific customer demands. He did not name the prospective targets.

INTERNATIONAL PLANS

JSW has steelmaking capacity of 18 million tonnes per year, around 13 percent of India’s installed capacity. It is investing 268 billion rupees ($3.9 billion) over the next three years to expand to 24 million tonnes.

By 20230, JSW plans to increase its capacity to 40 million tonnes in India and 10 million tonnes overseas.

Buoyed by its two recent acquisitions of relatively smaller steel plants in the United States and Italy, the company is now looking for similar-sized plants elsewhere in Europe.

“There are five or six mainly downstream projects that we’re evaluating,” said Rao, adding the strategy would be similar to its acquisition plans in India.

In March, JSW bought Acero Junction Holdings for $80.85 million in the United States and Italy’s Aferpi for 55 million euros in May.

Together, along with its plate and pipe mill in the U.S., it now has a total overseas capacity of 4 million tonnes per year.

“I think both the acquisitions we’ve announced fit well with our strategy,” Rao said.

Source: REUTERS

Domestic steel prices plummet on rise in imports and softening global rates

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Indian steel prices, which climbed in lockstep with a rebounding economy, have made an about-turn as output bound for overseas returns home amid the threat of an escalating global trade war.

Monsoon rains that affect construction locally have also kept demand restrained Steel prices of long products, such as TMT bars, billets and ingots, have dropped around Rs 4,000-4,500 per tonne in the last 15 days and could fall further through August and September, said industry insiders. While demand for flat products is stable, experts say that producers are facing pressure to lower prices.

“The ability of Indian steel producers to export has greatly reduced due to the international trade wars, resulting in rising shipments into India. This has negatively impacted domestic steel prices,” said Ranjan Dhar, chief marketing officer at Essar Steel.

Dhar wants India to also increase tariff barriers, in line with other consuming countries.

According to SteelMint, prices of TMT stood at Rs40,200 per tonne in Mumbai as on June 15. This has fallen to a low of Rs37,000 per tonne on July 11. Prices of billets also fell from a high of Rs 36,800 a tonne in mid-June to Rs 32,000 on July 11.

To be sure, with the monsoons setting in, prices of long products used in construction are bound to trend lower. However, while every year the fall is about Rs1,000-1,500 per tonne, this year prices have dropped by almost three times.

A senior industry executive who did not wish to be named said: “Unfortunately in India, the TMT market has not matured like in Japan and China. This makes consumers buy a whole lot of it when the prices show signs of moving up and then sit on a stockpile, forcing the prices to crash.” However, data from the Joint Plant Committee on imports of non-flat products (bars, rods) throw up another notable observation. Such imports have more than doubled in May, both since May last year and April this year.

The jump assumes significance since the US imposed tariffs on steel imports in March and the European Commission launched its safeguard investigation into steel imports. To be sure, local consumption of steel has shown a growth of 8.5% in May over last year.

“The fallcould be attributed to seasonality, even though the quantum is unusual,” said Goutam Chakraborty, metals analyst at Emkay Securities. “Inventory clearing could be another reason,” he said. In the international markets, steel has declined, weighed down by softening prices of iron ore and coking coal. Iron ore prices hit a 7-month low last week.

Source: THE ECONOMIC TIMES

U.S. steel tariff may impact India indirectly: Minister

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Union Steel Minister Chaudhary Birender Singh on Friday said the 25% tariff imposed by the U.S. on steel import can ‘indirectly’ affect the domestic sector.

U.S. President Donald Trump has imposed a 25% import tariff on steel and 10% on aluminium.

Mr. Singh had earlier said the U.S.’ levy of heavy tariffs on imported steel and aluminium would not have any major impact on steel production in India as steel export to U.S. was only 3.3% of total exports.

However, speaking at a conference here, he said: “The U.S. decision to impose 25% tariff on steel imports will have negligible direct impact [on India’s export] as India’s share of U.S. steel imports is very small as compared to other countries but there might be an indirect impact.” He added, “Countries which are exporting to the U.S. will be forced to look at other major steel consuming markets like India to sell their surplus [produce] and [can] slightly distort our domestic market considerably due to dumping,” he said.

‘85 MT may target India’

N.A. Ansari, CEO Steel Business, Jindal Steel and Power Ltd., who also attended the conference on steel and trade, said: “In the global steel business about 300 MT [million tonnes] is… traded between the countries… and due to this U.S. tariff move, at least some 85 MT of steel might find its way to India.

“We need to be very careful at this point.”

Source: PTI

Strong U.S. retail sales lift second-quarter GDP estimates

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U.S. retail sales rose solidly in June as households boosted purchases of automobiles and a range of other goods, cementing expectations for robust economic growth in the second quarter. Signs of a strengthening economy, together with a tightening labor market and firming inflation, likely will keep the Federal Reserve on track to continue raising interest […]

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US: Economy to continue to grow at a healthy pace – Nomura

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Analysts at Nomura expect the US economy to continue to grow significantly above potential in 2018 and 2019, supported by stimulative fiscal policy, before growth decelerates towards potential over 2019 and into 2020.
Key Quotes
“Job gains remain well above the long-term sustainable pace and will likely continue to put downward pressure on the unemployment rate through 2019 before tighter monetary policy and financial conditions eventually slow employment growth. However, we expect slow productivity growth to persist, held down, in part, by structural declines in underlying business dynamism, limiting wage growth.”
“Inflation: Transitory factors that that held down inflation in 2017 have largely abated. For 2018-20, we expect core inflation to pick up gradually as labor markets tighten and the economy moves towards potential. Core PCE inflation may pick up slightly faster than core CPI as healthcare service inflation could accelerate while rent inflation gradually slows. With upside risk to healthcare prices as well as expected further labor market tightening, we expect core PCE inflation to reach 2.4% in Q4 2020.”
“Policy: Facing strong momentum in aggregate demand, tightening labor markets, and inflation at the 2% symmetric target, we expect the Fed to hike two more times in 2018 and two times in 2019 before taking a pause through 2020. With our neutral rate estimate between 2-2.25%, we believe monetary policy will remain in a slightly restrictive stance for some time, tightening financial conditions. We think the roll-off of the balance sheet will continue to exert upward pressure on long-term interest rates, as will the large increase in the federal budget deficit.”
“Risks: Financial conditions remain accommodative but recent market activity, and history, suggest they can turn quickly. In our view, protectionist US trade policy remains a key risk as US-China tariffs take effect and the US moves forward with an investigation into imports of autos and auto parts. In addition, waning fiscal stimulus in 2019, with the possibility of a fiscal cliff in 2020, could create market angst.”
Source: FXSTREET

China’s carbon emissions likely to decline: research

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China’s industrial upgrading and energy structure transformation are the main reasons for its declining carbon emissions, and the declining trend is likely to continue, according to recent research.

Led by Tsinghua University, the research was co-conducted by experts from China, Britain, and the United States. The research draws on data from China Emission Accounts and Datasets, which gathers international experts on China’s emission accounting methods and applications.

Researchers quantitatively evaluated the drivers of the peak and decline of China’s carbon emissions between 2007 and 2016.

The research found that China’s carbon emissions increased between 2000 and 2013, while carbon emissions declined year after year from 2013 to 2016.

The research showed that the increased infrastructure investment during 2007 and 2013 led to a rapid increase in carbon emissions. After 2013, China’s investment in infrastructure slowed down. At the same time, industrial upgrading and declining coal consumption led to a decline in carbon emissions.

The research concluded that the decline of China’s carbon emissions is likely to be sustained if the industrial upgrading and energy system transitions continue.

The research provides a scientific basis for the government to formulate emission reduction policies and accelerate the carbon emission reduction process.

The research was published in the journal Nature Geoscience.

Source: XINHUA

China says its second-quarter GDP growth was 6.7%, meeting expectations

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China posted second-quarter GDP growth of 6.7 percent from a year ago, slightly lower than 6.8 percent in the first quarter of 2018 as Beijing has been cracking down on risky credit amid escalating trade tensions with the U.S.

The official reading was in line with expectations from analysts polled by Reuters.

The headline figure was no surprise as any impact from current U.S.-China trade scuffles will only factor in the second half of the year, said Fraser Howie, an independent analyst.

There may be a bumpy ride ahead as China’s economy is not impervious to external threats, he added.

“China’s economy can be knocked, and when it comes to trade, it influences a lot of sectors, a lot of jobs associated with it. Net export sheds are a small percent of GDP but your brain is only 3 percent of your body mass [and] losing 3 percent can be very important to you,” Howie told CNBC’s “Street Signs.”

It’s a delicate balancing act.

Trade tensions between China and the U.S. have weighed on sentiment, particularly as the property market is slowing in first-tier cities such as Beijing and Shanghai, said Hao Zhou, senior emerging market economist for Asia at Commerzbank.

“I think it’s a little bit tricky at this moment. On the one hand, China commits to financial deleveraging. On the other hand, China sees growth moderation and growth slowdown is a risk for the economy as well,” Zhou said on “The Rundown.”

Fixed asset investment growth for the first half of 2018 was a record low at 6.0 percent from a year ago, while industrial output for June matched the the slowest growth rate in over two years at 6.0 percent, according to Reuters’ records.

The situation poses a policy dilemma as the China needs to implement relatively tight monetary policy to force financial deleveraging. However, it also needs easier monetary conditions to support growth.

The People’s Bank of China has already cut banks’ reserve requirements three times this year.

As the risks from the U.S.-China trade war will be a drag on overall growth in the next few years if China’s trade surplus against the U.S. narrows substantially, Beijing is likely to continue easing monetary policy going forward, Zhou said. That is particularly since domestic consumption will slow on escalating trade tensions.

Although Beijing’s official GDP figures are closely watched as an indicator of the health of the world’s second-largest economy, many outside experts have long expressed skepticism about the veracity of China’s reports.

Source: CNBC