It is reported that China’s crude steel output has retreated slightly in April 2008 to 44.68 million tonnes from the previous month’s record volume, constrained by tight supplies of coke and other key inputs. Crude steel output in April 2008, while down a marginal 0.4% MoM from March’s all time high of 44.87 million tonnes, was up by 10% YoY.

Mr Henry Liu analyst at Macquarie said that “It seems that the steel mills were not able to ease bottlenecks in raw materials sourcing. I think they were willing to produce more with the high prices, but they might have faced problems purchasing more materials such as coke. That is not a good indicator, because the second quarter is seen as a peak production season and it is believed that some steel mills have been moving their production ahead of schedule before the Beijing Olympics.”

Mr Liu further added that steel products, especially bar, rod and section steel used for construction, will be badly needed in Sichuan Province, where buildings and infrastructure such as roads and bridges were seriously damaged by the magnitude 7.9 earthquake. Steel prices have been soaring in China due to rising raw material and labor costs as well as brisk demand, especially for products used in construction as the country spends heavily on fixed asset investments.

Standard & Poor’s Ratings Services said today that the Indian rupee (INR) 20 billion debt raised recently by India’s Tata Steel Ltd. (BB/Stable/–) in the domestic bond market, by itself, does not place any pressure on the ratings on the company. As clarified by Tata Steel, the proceeds from the bond issue are entirely for refinancing existing borrowings, including debt raised at the Corus Group PLC level. Nonetheless, medium-term pressure persists in relation to the incremental debt required for funding the company’s ambitious expansion plans in India and potentially softening demand conditions in Europe and North America, which may result in overall weakening profitability and cash flows

The earthquake in China has sent base metal prices soaring, and stocks like Hindalco and Nalco have seen huge gains.

Metals have gained 3-5 % this week after the earthquake in China. Zinc has gained 7% and also seen support from African mine strike. Tin is trading at record highs above USD 25,000/tonne, as supplies have declined to three-year lows. Power shortages have supported aluminium prices.

China was rocked by one of the worst earthquakes in three decades. The quake hit China’s South West Sichuan province. Sichuan is a source of 10% of China’s lead, 5.5% of zinc and 4.1% of aluminium supply. The zinc output in Sichuan province is likely to take a hit as smelting units of 4-5 lakh tonne have been halted. Coal reserve levels are alarmingly low in Chinese power plants. There is a fear that lower supplies from major producers in China and Indonesia will lead to market tightness.

Hindustan Zinc Limited stock is up 18% in two days; zinc prices are up nearly 6.5%. It has has underperformed other base metals in recent past. Most analysts expect small surplus for zinc in CY08-10. They expect small surplus for lead in CY08. The triggers for this space are rupee depreciation and price surge.

Hindalco stock was also buzzing. Analysts expect aluminium market to be in deficit in 2008. They expect bigger deficits in 2009 and 2010. Aluminium prices are expected to average USD2/lb in 2009 and rise further in 2010. The major trigger in this space would be rupee depreciation and price surge.

Sterlite is up 7% in two days. Its aluminium business has contributed 17% of revenues in FY08. Its consolidated numbers includes zinc from HZL. A major trigger for the company would be the rupee depreciation and price surge.

Nalco抯 aluminium business has seen 59% of revenues in FY08. The major triggers are rupee depreciation and price surge. Analysts have increased long-term price contract rate to 13.5%

By David Helwig
SooToday.com
Wednesday, May 14, 2008

Algoma Steel has reported a loss of $25.3 million for the for the three months ended March 31.

That compares to a profit of $23.1 million for the same period last year.

The red ink was largely attributable to foreign exchange losses as well as interest expenses related to the company’s acquisition last year by Essar Steel Holdings Ltd.

First-quarter sales were up - $502.3 million this year, as compared to as compared to $480.2 million last year.

“The higher sales in the first quarter of 2008 were due to higher shipment totals and product mix changes, offset by the effects of the stronger Canadian dollar,” the company said.

The steelmaker shipped 683,100 tons in the recently-ended quarter, up six percent over the same period last year.

Labour cost per hour was down two percent. At the end of March, approximately 3,400 employees worked at Algoma Steel.

The company’s energy costs have been rising sharply, up 25 percent in the first quarter, compared to the same period last year.

However, this was largely due to increased production.

“The average unit cost of natural gas increased one percent compared to the first quarter of 2007,” the company said in a statement.

Natural gas accounts for roughly 63 percent of Algoma Steel’s energy costs.

Consumption and cost of purchased electricity remained virtually unchanged from last year.

The company expects continued sales growth in the coming year with recently announced steel price increases and the expected start-up of #6 blast furnace.

Manufacturing costs will depend on current negotiations with Algoma Steel’s primary iron ore supplier.

Coal costs per ton, together with rail and vessel freight costs, are expected to rise.

“Employment levels are not expected to change significantly from calendar 2007 levels,” the company said.

The company issued the following news release today.

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Algoma Steel significantly improves performance in first quarter 2008

Algoma Steel Inc. announced today in a call with their lenders significant performance improvements for the first quarter of 2008, as compared to the first quarter of 2007.

Shipments increased by 6.2 percent, sales increased by 4.6 percent and EBITDA, a meaningful indicator of the Company’s profitability, was $71.4 million, an increase of $17.6 million from the same period last year and $22.5 million over the previous quarter.

Algoma further reported a net loss of $25.3 million, essentially attributable to a $26.2 million non-cash foreign exchange loss on U.S. dollar denominated debt that must be reported for accounting purposes.

Armando Plastino, Chief Operating Officer said today, “We remain optimistic about Algoma’s overall financial performance throughout the course of this year. We expect that the increased volumes will be sustainable over the long term and the Company’s demonstrated performance improvements of this quarter will continue.”

A member of the Essar Group, Algoma Steel Inc. is based in Sault Ste. Marie, Ontario.

As a fully integrated steel producer, Algoma’s revenues are derived primarily from the manufacture and sale of rolled steel products including hot and cold rolled sheet and plate.