EOW May 2014

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factors, as mills and traders learn that they can source raw materials easily. This means participants can a ord to sit on the sidelines when they believe prices are too high, which could in turn help to pressure prices. Iron ore stocks have risen signi cantly recently and are some 30-35 million mt higher than they were six months earlier. † Rise of derivatives, no longer the preserve of foreign investment banks. To help mitigate price risk and in some cases simply to have a punt, Chinese mills, traders and investors have increasingly embraced raw materials swaps and futures trading. This was aided by the establishment of new contracts in 2013, when more than 284 million mt of iron ore swaps, options and futures were cleared, with a cumulative value of around US$40 billion. In volume terms, this was 123 per cent higher than in 2012. † Project development remains a challenge. Most smaller iron ore and coal project developers achieved little in 2013 other than to conserve working capital while seeking strategic partners. Investors are cold on the resources sector right now and projects further back in the pipeline may have another di cult year. There is unlikely to be much progress on big-ticket projects such as West African iron ore, as the large miners will focus on controlling costs and doing more with existing operations. † China is serious about pollution. The new leadership in Beijing knows it must tackle pollution and the steel sector is rmly in its sights. Many small mills will be unable to meet new environmental targets and may eventually be forced to close some or all of their operations, which could help reduce steel overcapacity. Already the market is seeing higher-quality raw materials rewarded with stronger premiums, which could increasingly be the case in coming years. (But, Mr Bartholomew also noted: “China has been trying to reform its steel sector for many years, to little real e ect.”) Elsewhere in steel . . . † Steel sheet prices might be nearing bottom, industry sources told American Metal Market (14 th March). Hot rolled and cold rolled sheet prices had slipped in the US since the New Year on increased import activity, a cold-weather cutback in buying, and falling raw material costs, but opportunity for a price increase was seen as arriving with the spring. “Business is good and I’m not hearing anything out there that’s negative,” a Midwest service centre source told AMM . “I’m expecting to see a price increase before 1 st April because mills will want to take advantage of the pent-up demand as well as setting a oor.” † AK Steel (West Chester, Ohio) said it has raised its prices on all stainless steel products, e ective 1 st April, by way of a discount reduction of two percentage points. The producer of at-rolled carbon, stainless and electrical steels hiked its net-price items, including automotive exhaust products, two cents per pound. Current surcharges on the company’s range of stainless steel products remain in e ect. † The inclusion of steel plate made by ArcelorMittal USA in Northwest Indiana in the new $3.9 billion Tappan Zee Bridge in New York State marks a departure from a trend toward the use of steel made in China for major American infrastructure projects. Chinese steel was recently used in the Verrazano-Narrows Bridge, also in New York, and the San Francisco-Oakland Bay Bridge.

The GM response did not directly address the immunity issue. A statement read: “It is true that GM did not assume liability for claims arising from incidents or accidents” occurring prior to July 2009; concluding: “Our principle throughout this process has been to put the customer rst, and that will continue to guide us.” † Mr Spangler noted that the defective ignition switch has not been identi ed as a causative factor in any of the deaths and injuries associated with models in the recall. But he reported that GM arrived at a con dential settlement in at least one lawsuit – instituted over a fatal crash, in 2010, of a 2005 Cobalt – that fell outside the scope of the liability shield. The successful attorney in that case was not entirely satis ed. “Instead of recalling their product, they started paying the claims, which is outrageous,” Lance Cooper, of Marietta, Georgia, told the Free Press . He added that waiving liability protection “would be a good step in the right direction.” Of related interest . . . † Even as lawmakers pressed General Motors over the defective ignition switch, a new review of federal data showed that air bag malfunction was identi ed in crashes involving two models in the February recall, in which 303 people died. The review by Friedman Research (Austin, Texas), a company that analyses vehicle safety data, examined cases in which air bags failed to deploy, but did not try to discover what caused the crashes. The Center for Auto Safety commissioned the study. In a 13 th March letter to the National Highway Tra c Safety Administration, it criticised the agency for not detecting the air bag incidents as well as the ignition switch defects. For good or otherwise, the mainly China-centred trends of last year are seen as in uencing the current scene in steel Paul Bartholomew, who is managing editor-Australia of Platts , reports from Melbourne for the New York-based global provider of information relating to commodity markets. Here, much abbreviated, is his roundup of developments last year that bear most signi cantly on steelmakers today (“Key Steel Themes in 2013 Will Impact Markets This Year,” 14 th February) † China keeps on making more steel. Crude steel production in 2013 rose 7.5 per cent year-on-year to reach around 780 million metric tons in 2013, and the Asian giant is expected to produce close to 810 million mt this year. Even if output starts to plateau, incremental increases on such a large base will continue to drive strong demand for raw materials. † Iron ore prices held up remarkably well, averaging around $132/mt in 2013 and avoiding the dramatic price slumps of the previous two years. Many analysts expect the iron ore feast to induce market indigestion and push prices closer to the $100/mt level. Much depends on where Chinese cost-curve support will settle as imports displace more domestic supply. No one is totally sure if that level is closer to $100/mt or $120/mt. † Abundant supply alters stocking cycles. With the increasing availability of coking coal and iron ore, restocking cycles are becoming less predictable; also less driven by seasonal Steel

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May 2014