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Steel and Stainless Steel Industries

Stainless Steel and the Ring of Fire – by Rick Millette (Northern Policy Institute – October 1, 2014)

http://northernpolicy.wordpress.com/

It would be hard to find an adult in Northern Ontario who hasn’t heard of the Ring of Fire or doesn’t know what it promises for the North’s future. Most believe that long term prosperity for workers, industry and First Nations people is at their doorstep.

That dream extends beyond the basics. Many northerners suffer a sense of loss with every trainload of raw ore they see heading down the tracks and out of Northern Ontario. There’s a long-held belief that full value is not being retained for those resources.

With the discovery of chromite in the Ring of Fire several years ago, it didn’t take long for the value-added dream to be dreamt again. The North now has all the ingredients in their backyard to make stainless steel, a uniqueness not found anywhere else in the world. How incredulous would it be for Canada to be the only G8 country not to have a stainless steel industry when the chromite, nickel and iron are all in one place?

Although the timeline for the eventual development of the Ring of Fire may be unknown, few would believe that $60-billion of known mineral wealth will stay in the ground for very long.

One way to accelerate that extraction and to start generating wealth on three fronts, would be for our governments to invest in the development of a stainless steel industry.

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U.S. Steel filing throws fate of Hamilton, Ontario assets into question – by Euan Rocha and Allison Martell (Reuters Canada – September 21, 2014)

http://ca.reuters.com/

TORONTO (Reuters) – U.S. Steel Corp’s move to seek creditor protection for its Canadian operations throws into question the fate of the more than a century old steel operations in Hamilton, Ontario.

U.S. Steel acquired the Canadian operations – including the Hamilton assets and the newer Lake Erie facilities in Nanticoke, Ontario – through its acquisition of Stelco Inc in 2007. The Canadian operation was soon bleeding red ink, however, as demand for steel declined following the financial crisis.

Much of the Canadian operation’s value is seen residing in Lake Erie, with years of job cutbacks, environmental liabilities and the weight of a massive retiree base weighing on the worth of the Hamilton assets.

People familiar with the situation told Reuters that U.S. Steel had sought to restructure its Canadian operation this summer, before it sought creditor protection in Canada earlier this week. One plan included the parent company acquiring the Lake Erie facilities but divesting itself the Hamilton assets.

After those plans failed to pan out, some industry watchers think U.S. Steel’s move to seek creditor protection may just be the longer road toward the same end game.

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Posco sees Indonesia as a hot spot – by Joo Kyung-Don (Korea JoongAng Daily – September 18, 2014)

http://koreajoongangdaily.joins.com/

CILEGON, Indonesia — Sweat comes easily and often in Indonesia, where average daytime temperatures reach a humid 33 degrees Celsius (91 degrees Fahrenheit). And the hottest place in the country just might be Krakatau Posco, Southeast Asia’s first integrated steel mill.

“If you look at the history of steel industry, there is no mill on the Equator because it’s not easy to work in hot weather,” says Min Kyung-zoon, president of Krakatau Posco. “We are doing something that is outside the realm of common sense.”

The mill is a joint venture of Korea’s largest steelmaker, Posco, and Indonesia’s state-run steelmaker, Krakatau, in which the Korean company has a 70 percent stake.

It takes about 90 minutes, depending on Jakarta traffic, to drive to the industrial city of Cilegon on the northwest coast of the island of Java. Here, Posco is trying not only to make appositive change in the city, but in all of Indonesia.

For Posco, the success of Krakatau Posco – which has an annual capacity of 1.5 million tons each of slabs and steel plates – is important because it is the company’s first integrated steel mill overseas.

Considering that Posco was established 46 years ago in Pohang, North Gyeongsang, primarily by acquiring foreign technologies and know-how, it also signals the company’s evolving role in the global steel industry.

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Time to stop ‘saving’ U.S. Steel Canada – by Peter Foster (National Post – September 19, 2014)

The National Post is Canada’s second largest national paper.

Five years ago, outside the gates of U.S. Steel Canada’s Nanticoke plant on Lake Erie, unionized workers sported a sign reading “Guantanamo North.” The sign might have been accurate if the company had been trying to lock workers in rather than out, but its main significance lay in indicating the poisonous relations between the United Steelworkers and U.S. Steel, which had taken over the plant as part of its acquisition of Stelco in 2007.

This week the union was again posturing angrily following the announcement that U.S. Steel Canada has filed for bankruptcy protection. Since the end of 2009, it has suffered an aggregate loss of US$2.4-billion. Its liabilities surpass its assets by around US$2 billion. The company also announced this week that expansion plans north of the border were being shelved. The news sent the shares of parent U.S. Steel to a three year high.

Analysts have suggested that the need for protection be laid at the door of poor management, and that may well be a factor. However, at least as important is the Great Recession of 2008-2009. Meanwhile there are other major culprits: principally the Ontario and federal governments, with President Obama’s Buy American policies another major negative factor.

Ontario’s attempt to make Stelco a more desirable purchase by providing a forgivable loan to U.S. Steel, provisional on refurbishing Stelco’s depleted pension fund, has turned out to be a millstone. The fund is at least $800-million underwater, with requirements for the company to kick in further hundreds of millions of dollars in coming years.

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A case of buyer’s remorse? What went wrong at U.S. Steel Canada – by Kristine Owram (National Post – September 18, 2014)

The National Post is Canada’s second largest national paper.

The exuberance that greeted United States Steel Corp.’s purchase of Stelco Inc. in 2007 is a distant memory as the company begins restructuring its Canadian operations under bankruptcy protection.

When the deal was announced seven years ago — shortly after Stelco emerged from its first trip through bankruptcy protection — the tone was as positive as could be. “Our acquisition of Stelco is another example of how we are building value for our stakeholders,” then-U.S. Steel CEO John Surma said when the $1.9-billion deal was announced.

“The fit with U.S. Steel is excellent,” agreed then-Stelco CEO Rodney Mott. “This is an outstanding deal for Stelco’s owners, employees, customers, suppliers and communities.”

But it didn’t turn out that way. Late Tuesday, U.S. Steel Canada Inc. said it had received creditor protection under the Companies’ Creditors Arrangement Act (CCAA), citing an aggregate operating loss of US$2.4-billion since December 2009 and US$1-billion in pension liabilities.

“I am disappointed and sad to see the former Stelco go into CCAA again,” former Stelco CEO Courtney Pratt said in an email. U.S. Steel’s shares rose by more than 10% to a three-year high Wednesday following the announcement, which included a decision not to pursue US$800-million in expansion projects.

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U.S. Steel Canada files for creditor protection – by Greg Keenan (Globe and Mail – September 17, 2014)

The Globe and Mail is Canada’s national newspaper with the second largest broadsheet circulation in the country. It has enormous influence on Canada’s political and business elite.

Toronto — United States Steel Corp. could sell all or part of the assets of U.S. Steel Canada Inc., as it restructures its Canadian unit, which was granted protection from creditors Tuesday under the Companies’ Creditors Arrangement Act.

U.S. Steel Canada, (USSC) consists of the operations of the former Stelco Inc., that U.S. Steel purchased in 2007. The filing culminates almost seven years of turmoil at what was once Canada’s largest steel maker and one of the country’s blue-chip manufacturers. Since the takeover of Stelco, U.S. Steel has locked out employees at operations in Hamilton, Ont., and Nanticoke, Ont., and engaged in a battle with the federal government companies–later settled–over whether the steel giant was breaking promises it made to Ottawa when it bought Stelco.

“The stay of proceedings and related relief sought in this application will provide USSC with the necessary ‘breathing room’ to allow it to carry out a restructuring, including continuing discussions with its key stakeholders,” U.S. Steel Canada said in a court filing, “and to explore restructuring solutions including, potentially, a consensual restructuring of certain material obligations, a sales process to solicit interest in purchasing all or part of USSC’s business, and/or other restructuring processes.”

The company filed for protection after racking up losses before interest, taxes, depreciation and amortization of $1.5-billion between 2008 and 2013, it said in the filing. That period included the recession of 2008-2009, when steel demand shrank dramatically in North America as auto makers slashed production and construction slowed to a trickle.

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A giant of the past [U.S. Steel] resurrected as newest Wall Street hot stock – by Tim Shufelt (Globe and Mail – September 15, 2014)

The Globe and Mail is Canada’s national newspaper with the second largest broadsheet circulation in the country. It has enormous influence on Canada’s political and business elite.

After years of despair that left shareholders reeling, United States Steel Corp. is regaining at least some of its former might.

Once a pillar of the American economy, the company’s long-slumping stock has been one of the hottest large caps over the past three months. That could be just the beginning of a return to form for a stock riding an organizational and industry transformation.

“The potential for transformational change at U.S. Steel is one of the most intriguing stories in the U.S. steel sector at the moment,” Credit Suisse analyst Nathan Littlewood said in a recent note. “The company’s raw material cost advantages as well as privileged steel price environment should position U.S. Steel as one of the most profitable steel makers in the world.”

A century ago, U.S. Steel was known on Wall Street simply as “The Corporation” by virtue of its size alone. More recently, the company benefited from the demand for resources fuelled by China’s rise. The vast quantities of steel required for the building of cities and infrastructure kept prices high through the early 2000s.

The financial crisis snuffed out the global growth needed for a buoyant steel market. And with China consuming half of the world’s steel, a slowdown in Chinese growth over the past couple of years has extended price weakness.

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Half a Loaf? Getting maximum value from the Ring of Fire – by Rick Millette (Northern Policy Institute – August 8, 2014)

http://northernpolicy.wordpress.com/

When I was a youngster, we had a neighbour who kept a jar of coins. When kids would visit, he’d offer the jar and say, “take as many as you like”. If you grabbed too many, your bulging fist wouldn’t make it through the neck of the jar. Lesson learned.

As the development of the Ring of Fire moves ahead, those involved will need to make complicated decisions on how much of the Ring’s wealth to keep in Ontario and how much to let go.

At this point, there are many scenarios of where the North’s chromite might end up. It’s certain that the raw ore will be reduced to concentrate at the mine sites, but after that, it’s a guess. When Cliffs Natural Resources was grabbing the headlines, the plan was to have the concentrate shipped to Sudbury to be turned into ferro chrome at a new smelter they would build in Capreol.

Right now, it’s debatable whether the Ring’s chromite will ever see an Ontario smelter due to provincial electrical costs. Quebec and Manitoba sell their power to industries for less than three cents per kilowatt hour (KWH), while Ontario’s rates are based on a spot market that is often double that.

Other than government intervention, there is nothing that would stop a company from shipping the chromite directly to another province or to another country. At the very least, northerners want the chromite smelted into ferro chrome in the North.

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Essar Steel Algoma staves off third round of bankruptcy protection – by Greg Keenan (Globe and Mail – July 23, 2014)

The Globe and Mail is Canada’s national newspaper with the second largest broadsheet circulation in the country. It has enormous influence on Canada’s political and business elite.

Essar Steel Algoma Inc., considered making its third trip through bankruptcy protection in a quarter-century before reaching a preliminary deal last week with a group of creditors to restructure its debt.

“The company’s current debt obligations of over $1.2-billion and annual interest expense of $113-million are unsustainable,” Algoma’s general counsel, Robert Sandoval, revealed in a court filing that said the steel maker rejected a proposal by one group of creditors that it file for protection under the Companies’ Creditors Arrangement Act (CCAA).

Such a move would have followed court-supervised restructurings in 1991 and 2001, which came before Algoma was bought in 2007 by India-based Essar Global Fund Ltd., in the global steel industry consolidation that led to the purchase of all of Canada’s major steel makers by foreign-based giants.

The court filings said Algoma – once Canada’s third-largest steel maker – plans to reach a final deal with holders of its 9.875 per cent unsecured notes by Sept. 30. The preliminary deal calls for holders of about $385-million worth of debt to receive 32 per cent of the value of their notes in cash and another 55 per cent in new notes.

Instead of using the CCAA to restructure, Algoma has filed a restructuring proposal under the Canada Business Corporations Act (CBCA) and has been granted protection from creditors in the United States under chapter 15 of the U.S. bankruptcy code.

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Editorial: The NDP – for now – by Brian MacLeod (Sudbury Star – June 11, 2014)

The Sudbury Star is the City of Greater Sudbury’s daily newspaper.

“The NDP’s intention to force companies to process more minerals in Ontario is dubious, but
it hasn’t really been tried. The party wants to establish a stainless steel industry in the
province, something advocated by mining analyst Stan Sudol. It would be interesting to watch
them try, rather than allowing so much unprocessed material from the Ring of Fire to leave
the country.” Sudbury Star Editor – Brian MacLeod

Northern Ontario has factored large in both the Liberal and NDP campaigns.

Unfortunately, the Progressive Conservatives have ignored the region. Party Leader Tim Hudak never once ventured north, he skipped the leadership debate in Thunder Bay, and has taken no time to explain his party’s policies to northerners. There is a sense that the party’s policy of eliminating 100,000 civil servants jobs will hit some northern ridings hard – especially Sudbury and Nickel Belt’s health and education sectors. And Hudak has not properly explained what the party would do with the $100 million Northern Ontario Heritage Fund.

The Tories say they would finish four-laning Highway 69 – sometime. That doesn’t cut it.

Hudak’s focus on the deficit is commendable, but the speed at which he wants to eliminate it – one year faster than the other two major parties – is bound to have a significant impact on the North. A Hudak government would suppress Northern priorities to debt reduction.

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Canada needs a steel strategy – by Marty Warren and Leo W. Gerard (National Post – November 5, 2014)

The National Post is Canada’s second largest national paper.

Although steel consumption and imports are on the rise, Canadian steel production and exports have not kept pace since the recession — far from it

Last week, U.S. Steel announced that it will permanently end steel production at its Hamilton plant. Is steelmaking a “smokestack industry” suffering from inevitable decline, or a strategic industry that Canada should seek to defend and develop?

Steel is an indispensable material for every aspect of our traditional economy, including bridges, buildings and cars, but also our growing sustainable economy, from transit vehicles to wind turbines.

Canada needs steel and we have been importing more of it. Last year, our steel imports rose to $12.2-billion — the highest level in Canadian history except for $12.4-billion in 2008, at the height of the commodity boom.

Although steel consumption and imports are on the rise, Canadian steel production and exports have not kept pace since the recession — far from it. We imported $4.6-billion more steel than we exported last year, tying 2006 for the largest steel trade deficit in Canadian history.

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Stainless-Steel Sales Jump as Nickel Costs Spur Stockpile – Maria Kolesnikova (Bloomberg News – May 27, 2014)

http://www.bloomberg.com/

Mining companies aren’t the only ones benefiting from this year’s nickel rally. Stainless-steel makers in Europe, who use the metal, are seeing a surge in sales as customers stock up to avoid higher raw-material surcharges.

Finland’s Outokumpu OYJ (OUT1V) reported a 9.1 percent jump in stainless-steel deliveries from the fourth quarter, orders at Madrid-based Acerinox SA are “the highest in at least three years,” and Germany’s ThyssenKrupp AG, says customers are adding to inventories. The sales jolt is reviving prospects for in an industry mired in losses since the financial crisis.

While nickel accounts for half the cost of stainless steel, mills impose surcharges to cover any increase in the expense. Nickel surged 41 percent this year after Indonesia, the largest supplier to China, banned ore exports to spur investment in domestic smelters. The supply halt is boosting profit for mining companies including Glencore Plc and may help create what Credit Suisse Group AG called a “supercycle” in prices.

“The biggest winners are nickel producers, and the second-biggest are the producers of stainless steel,” said Markus Moll, the founder of Reutte, Austria-based Steel & Metals Market Research GmbH who has studied the industry for three decades. “Usually such a surge in nickel prices triggers a strong speculative buying wave. The biggest loser is the end user, who has to pay higher price for stainless.”

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China’s steel meltdown will ripple around the world – by Carl Mortished (Globe and Mail – March 27, 2014)

The Globe and Mail is Canada’s national newspaper with the second largest broadsheet circulation in the country. It has enormous influence on Canada’s political and business elite.

LONDON — There’s too much mining, and too much iron ore. Overproduction will take the price of steel’s raw material down by almost a third over the next few years, says Australia’s official forecaster. A supply glut could be just part of the problem, because a swathe of Chinese steel makers are burdened with too much debt – and Beijing is not keen on bailouts.

Australia’s iron triumvirate – Rio Tinto Group, BHP Billiton Ltd. and Fortescue Metals Group Ltd. – are ramping up production, and chasing market share at the expense of prices. The frenzied digging means that the country’s exports of ore are expected to rise by almost a fifth to 680 million tonnes this year.

Australia’s Bureau of Resource and Energy Economics is predicting that by 2019, the iron ore price will fall from last year’s average of $126 (U.S.) per tonne to $87.

The price has already declined by a fifth since the beginning of this year, moving close to $100 per tonne, amid concerns that China’s export engine is slowing.

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NEWS RELEASE: Royal Nickel Welcomes Construction of World’s First Processing Plant Capable of Producing Stainless Steel Directly Utilizing Nickel Sulphide Concentrate

Leading Chinese Stainless Steel Producer Tsingshan Expects to Bring Plant into Operation in 2014

Follows Strategic Alliance between Tsingshan and Royal Nickel

TORONTO, March 24, 2014 /CNW/ – Royal Nickel Corporation (TSX: RNX) (“RNC”) is pleased to report that Tsingshan Holding Group (“Tsingshan”), a party with whom RNC entered a strategic alliance in March 2013, is currently constructing the world’s first integrated nickel pig iron (“NPI”) plant to utilize nickel sulphide concentrate as part of the stainless steel production process. The plant is expected to begin operation within this year.

This significant innovation represents the first time that nickel sulphide concentrate will be directly used to create stainless steel. This innovation offers significant potential benefits to the producers of suitable nickel sulphide concentrate feed including lower costs due to simpler processing compared to traditional smelting and refining, and greater flexibility for more potential partners and customers. This plant is also expected to be possibly capable of handling nickel sulphide concentrate anticipated to be produced from RNC’s Dumont Nickel Project (“Dumont”).

Mark Selby, Interim President and CEO, commented, “The Tsingshan plant in China is an industry first and a positive development for projects such as Dumont.

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POSCO to revamp non-steel ops, shun major steel investment – new CEO – by Hyunjoo Jin (Reuters India – March 14, 2014)

http://in.reuters.com/

SEOUL – (Reuters) – POSCO’s (005940.KS) new chief executive said the South Korean steelmaker will restructure non-steel businesses and not make any major investment in increasing steelmaking capacity, in a marked break from the strategy of his predecessor.

Incoming CEO Kwon Oh-joon, a former POSCO chief technology officer, will sell non-core assets and list affiliates after a wave of investment and acquisitions left the world’s fifth-biggest steelmaker with high debt and credit-rating downgrades.

POSCO, once one of the industry’s star performers, posted its third straight year of profit decline last year as it continued to grapple with steel oversupply and reduced customer demand brought about by recent global economic downturn.

“POSCO’s biggest task is to improve its financial structure,” Kwon said at a news briefing after starting a three-year term as chief executive and chairman. “First of all, we have to improve our core competitiveness in steel and generate profit.”

To that end, POSCO will restructure its materials and energy businesses, and focus on lithium, nickel, fuel cells and clean coal, Kwon said.

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