“Corus UK Ltd and Sahaviriya Steel Industries Public Company Ltd today signed a Memorandum of Understanding which sets out the scope of a potential transaction whereby SSI would acquire from Corus the Teesside Cast Products (TCP) business in a transaction valued at approximately $500 million,” Tata Steel said in a statement here.

Tata Steel said that the deal, if successfully concluded, is expected to create a significant number of new jobs at the plant in addition to TCP’s existing workforce of over 700 and will provide a considerable boost to the local economy.

“The assets covered by the MoU include the Redcar and South Bank coke ovens, TCP’s power generation facilities and sinter plant, the Redcar Blast Furnace and the Lackenby Steelmaking facilities,” it added.

Corus MD and CEO Kirby Adams said, “We are very pleased to announce this significant progress in our long-held objective to sell the TCP assets to a strategic industry investor.

I wrote about the carbon credits issue back in February.

At the time The closure led to concerns that Corus, owned by Indian billionaire Ratan Tata’s business empire, may seek to trade the carbon credits that were freely allocated to the plant.

Carbon credits can be a “money maker” for multinationals in a way that is totally outside the spirit and purpose of the original agreements and as in this case cost real jobs in an area of the UK that badly needs work.

Shame on Corus.

The latest plans will bring the number of new workers hired by the firm to more than 300 since March, with the Speciality Steels division recruiting trainees for the first time since the recession started.

The new jobs will be in South Yorkshire and were an investment in the future of the business, said Corus.

It is just over a year since Corus made over 1000 redundancies.

By Tim Bowler
Business reporter, BBC World Service

Are the world’s iron ore mining companies putting the world recovery in jeopardy, by forcing up prices?

Iron ore is a key component in the manufacture of steel, and is used in construction and heavy industry everywhere.

It may not have the immediate glamour of a precious metal, like gold, but is nevertheless vital for economic growth.

Steel itself is used in a myriad of everyday products - from household items such as fridges and washing machines, to cars, buses, trains and the steel girders used in most office buildings.

Three big mining companies, Rio Tinto, Vale and BHP Billiton, dominate the global market in iron ore.

According to their customers, the steelmakers, they are putting up the price of iron ore unfairly. It’s a charge the mining companies deny.

Pricing switch

In the past, the mining firms used to fix the price of iron ore once a year. But this year they have switched to three month contracts, and iron ore prices have risen steeply.

The steelmakers argue that higher raw material costs could push up costs for manufacturers and consumers, and thus threaten the global recovery.

 

Read the full article here

Whilst market forces dictate that increasing demand will inevitably lead to increasing prices, competition amongst suppliers helps to negate the most extreme moves. However when there are only three major suppliers in the world they are close to being in a monopoly position and able to exert price increases almost at will.

When it is important to get the global economy moving again the fact that a single sector in an important supply chain can wield such power is a worrying issue.

Whilst conversions between tensile strengths and steel hardness are not exact comparisons a chart showing comparisons can be found here.

EU STEEL COIL PRODUCERS FACE HIGHER INPUT COSTS AS DEMAND COLLAPSES

Market sentiment has been knocked by the recent economic turmoil and sovereign debt issues in the eurozone. Strip mill product prices are fairly flat this month. Domestic producers are still keen to lift basis values significantly for the third quarter. However, most steel consumers and distributors are comfortable with their current inventory levels and are purchasing prudently. Consequently, the market is very quiet and the number of mill bookings is extremely low. The steelmakers may eventually be forced to go below their target selling figures to generate business, at least for the commodity grades. It may be easier to secure increases for the higher specifications. In recent days, the mills appear to be acknowledging the overall weakness in the market. They are said to be considering output cuts during the third quarter.

Read the full report here

Expect cut backs in production as the European steelmakers try to protect price levels

Hot on the heels of the recent announcement by ArcelorMittal of possible steel production cutbacks, Bloomberg are reporting discussion of cuts in China:

Chinese steelmakers are likely to cut production in the third quarter because of “weak” demand from auto and appliance makers, according to the nation’s second- biggest mill.

Slower demand may prompt smaller makers to default on iron ore contracts in the third quarter, Baosteel Group Corp. Chairman Xu Lejiang said today at the Bloomberg

“Many steelmakers will cut production or carry out maintenance in the third quarter,” Xu said. “Steel demand from automotive and home appliance industries has become weak. Iron ore costs will be the highest in the third quarter.”

Mills face a “difficult” second half, Xu said last month as concern increases that measures to curb speculation in the property market will trim demand. Baoshan Iron & Steel Co., Baosteel’s publicly traded unit, cut prices on June 4, the first time in eight months.

“Many Chinese steelmakers are either losing money or close to losing money,” Michelle Applebaum, who runs a steel-research firm in Highland Park, Illinois, wrote in an e-mail today. “The timing on iron ore price increases in the coming months is very poor for many of China’s higher cost smaller steelmakers.”

Read the full report at Bloomberg Business Week.

Steel prices have increased rapidly during 2010 and have only weakened very recently in Asia. Steel prices remain high in Europe and North America. Steel Mills appear to be reacting rapidly to a threat of prices collapsing by taking capacity out of the market to align with lower forecast demand. A proportion of the recent price rises was based on increasing iron ore costs. One of the moves by the iron ore produces was to insist on shorter fixed contracts, presumably to give them scope to increase prices more frequently. If demand is falling it may turn out to be a move they will regret.

ArcelorMittal, said on Thursday it was considering halting up to three European blast furnaces (BFs) in the third quarter to meet lower demand. "In Europe the third quarter is characterised by lower demand due to summer vacation shutdowns.

In order to be prepared ArcelorMittal is technically in a position to reduce its production by stopping up to three BFs in Q3," the company said in an emailed statement.
"No decision if and where and when has been taken," it added.

Cutting capacity to protect prices at a time of low demand is a tactic used regularly by steelmakers.

Excerpt:

In Western Europe, producers are talking up period three prices but firm negotiations are only just starting. Customers believe that some of the numbers being proposed are far too high relative to current demand conditions, in which case, they would not be sustainable. Many buyers purchased sufficient material during the second quarter, ahead of anticipated further hikes. They can now afford to adopt a "wait and see" approach.

The availability of lower price raw materials from traders and suppliers outside of Europe and continuing weak demand is liable to put pressure on the mills. With iron ore and scrap prices weakening, it will be increasingly difficult for steelmakers to justify the continuing demand for increased steel prices.

Read the full MEPS report here.