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Strategies & Market Trends : John Pitera's Market Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: Jon Koplik who wrote (7140)	5/21/2005 8:13:43 AM
From: Jon Koplik	Respond to of 33421

WSJ article : scrap steel prices already down over 50% from recent highs ............................................. May 17, 2005 Scrap Business Fights A Nemesis: Snooping By PAUL GLADER Staff Reporter of THE WALL STREET JOURNAL In this country, a lot of steel gets made with two key ingredients: scrap and snooping. Now the industry wants to see if it can cut out the second component by making metals prices more transparent. One of the two main methods for making steel relies on recycling iron-based scrap -- including washing machines, junked cars or even old bridges -- by melting it into new steel. But there isn't a consistent and open system for setting scrap prices, and that has led to headaches and even harassment: Steel and scrap company executives have used helicopters and satellite photography to keep tabs on rivals' scrap and steelyard inventories, while pointing the finger at each other in trade publications. Some executives are also experimenting with alternative materials, hoping to end their reliance on scrap, although some of those plans have slowed. "We've always questioned the accuracy and the timeliness of various types of scrap [prices] in the scrap marketplace," says David Sutherland, chief executive of Ipsco Inc., a Regina, Saskatchewan, steelmaker. Now steel companies are signing onto a new project by Management Science Associates Inc., a Pittsburgh-based data-collection and -analysis firm, that aims to add price transparency to the scrap market. MSA, which has tracked consumer trends for Coca-Cola Co., H.J. Heinz Co., MTV Networks and Levi Strauss & Co., has enlisted a dozen steel companies as members in its Raw Material Data Aggregation Service, or RMDAS. MSA charges member companies a fee to submit purchasing data and, in return, to see if prices they paid were in line with aggregate average prices paid by other steel companies in the program. "Scrap is a free-floating commodity," says Ralph Pinkert, of MSA. "By nature, it's created an adversarial relationship." In the past year, as scrap-steel prices surged to a record high of about $450 a ton, steel companies took to spying on scrap yards to see if supplies were as tight as reported. At a current average scrap steel price of $210 a ton, the 76 million tons of scrap recycled last year could fetch $16 billion. "You're validating information constantly in this business," says Rich Brady, scrap-metal buyer for Fort Wayne, Ind., steelmaker Steel Dynamics Inc. Keith Busse, chief executive of Steel Dynamics, is one such validator. He takes regular trips in a friend's helicopter or a company airplane to check on inventory levels at the scrap yards that supply his company to gauge how much scrap is available and whether prices are fair. "You can't help yourself, when flying by a city, to go check on the scrap supply," he said earlier this year. Mr. Busse has earned the nickname "The Red Baron" for such trips. Scrap and steel company employees sometimes even develop alliances to share aerial and satellite photographs of inventory levels at rivals' mills and yards. And scrap yards gain intelligence on steel-mill supply and production trends by asking their truck drivers who deliver scrap to the mills to report back. Nevertheless, 14 steel companies -- including Steel Dynamics, Nucor Corp. and U.S. Steel Corp. -- hope to minimize the contentiousness and price volatility in scrap buying by joining RMDAS. Together these companies operate 53 plants and account for half of U.S. scrap purchases, or 2.8 million tons a month. If RMDAS proves reliable, steel companies could use the data as the basis for forward purchasing of supply for three months or more, instead of following older practices of buying scrap metal only 30 days in advance. Some think RMDAS could also minimize the importance of large scrap bundle sales from big auto makers. Robin Wiener, executive director of the Institute for Scrap Recycling Industries, says a transparent price index would create a better business climate for her organization's member scrap yards. In the past, many in the industry used scrap prices published by the American Metal Market trade publication or Iron Age as a basis for transactions -- and even data junkie and Federal Reserve Chairman Alan Greenspan is said to watch scrap data. But some major steel companies believe those prices, gathered by telephone surveys, aren't accurate. "We found a survey-based reporting tool isn't as accurate as a transaction-based reporting tool," says Mr. Brady, the scrap-metal buyer for Steel Dynamics. Trade publications, however, suggest that RMDAS is optimistic and can't account for variations among grades of scrap and differences among geographic markets. "We will not change the method that we use," says Martin Abbott, publisher of American Metal Market. "The primary reason for that is the fact that there are many different ways to collect prices. Most of them are imperfect." While welcoming increased transparency, some steel executives want more, including more up-to-date price quotes like those seen in other commodities. MSA executives say they are working on getting their price data being closer to "live" rather than a month old. In commodity trading yesterday: COFFEE: Arabica coffee futures slid on the New York Board of Trade as commodity funds, or large speculators, sold previously bought contracts, while buying from roasters did little to slow the decline, traders said. The July contract settled 5.25 cents lower at $1.1625 a pound after touching a one-month low of $1.16. CRUDE OIL: Prices slipped at the New York Mercantile Exchange, but the market came back from steep losses on the idea that crude may stabilize after recent losses. Still, analysts believe the broader trend is lower. June crude oil fell six cents to $48.61 a barrel, well off the day's low of $47.60. Write to Paul Glader at paul.glader@wsj.com Copyright © 2005 Dow Jones & Company, Inc. All Rights Reserved.

To: Jon Koplik who wrote (7140)	6/30/2005 1:08:04 AM
From: Jon Koplik	Respond to of 33421

WSJ -- Air-Cargo Traffic Fell in May In Sign of Oil-Price Pressure .................... (repeating from my post # 7140) : Yet another item in a long list of signs that the Federal Reserve is dead wrong in their assessment of all those purported inflationary pressures that necessitate raising fed funds. My favorite part was at the end of the article : "can expect a downward trend as the decline in economic activity works its way through the economy." But, of course, the F.O.M.C knows that we are in an inflationary boom ... Jon. ************************************************************ June 30, 2005 Air-Cargo Traffic Fell in May In Sign of Oil-Price Pressure By DANIEL MICHAELS Staff Reporter of THE WALL STREET JOURNAL Air-cargo traffic, a leading indicator of general business activity, shrank in May from a year earlier after slowing in recent months. The data are a sign that high oil prices might be hampering world economic growth, according to the International Air Transport Association, which compiles the figures. About 40% of goods shipped world-wide, measured by value, move by air. This includes high-margin products such as sophisticated industrial equipment, consumer electronics and auto parts, as well as perishable items such as food and fashion. The volume and value of air cargo rose steadily in the past few years as much of the global economy picked up and the pace of business quickened. Cargo aircraft are an increasingly important market segment for plane makers Airbus and Boeing Co., which recently announced plans for new, large cargo jetliners. But the pace of growth in air cargo has dropped substantially since February. In May, the volume of traffic fell 1.6% below the level of May 2004. This was the first clear drop in more than two years. Air-cargo traffic is measured by both the weight of goods and the distance flown. The association believes companies are producing and buying less, and therefore shipping less, because of the general impact of petroleum prices. "The obvious conclusion is that the high price of fuel is starting to affect industries beyond those that are superexposed" to petroleum prices, such as airlines, said Anthony Concil, chief spokesman for the IATA, a global airline trade group in Geneva. Mr. Concil said that while the IATA had expected high oil prices to slow economic activity, the recent slump has surprised IATA economists. It isn't clear whether companies are shifting to other means of transportation. But that also could imply an economic slowdown, because shippers might not be in such a hurry to move their goods to market and can tolerate slower ocean-shipping schedules. Other measures of shipping cargo have been mixed: Rates for ocean-bound cargo containers are still high but aren't rising as quickly, while ocean-shipping rates for bulk commodities moving around the world have come down after major increases. The IATA, which tracks air-cargo traffic and airline-passenger traffic, said the May drop in cargo traffic came as the global volume of passenger traffic continued to rise, climbing 8.8% from May 2004. Airlines world-wide are reporting greater numbers of people flying, although ticket revenue isn't rising at the same pace. Sluggish revenue growth, combined with sharply higher fuel prices, is hurting the profitability of passenger airlines. The IATA predicts the global industry will show a combined loss of $6 billion this year, with much of that coming from a handful of traditional airlines in the U.S. Now, the sharp drop in cargo traffic could signal worse times ahead for passenger airlines, whose fortunes are closely correlated to broader economic growth. IATA Director General Giovanni Bisignani said in a prepared statement that airlines "can expect a downward trend as the decline in economic activity works its way through the economy."** Write to Daniel Michaels at daniel.michaels@wsj.com Copyright © 2005 Dow Jones & Company, Inc. All Rights Reserved.

To: Jon Koplik who wrote (7140)	11/7/2005 10:45:43 AM
From: Jon Koplik	Read Replies (1) \| Respond to of 33421

WSJ piece on steel, mentioning "U.S. prices dropped 50% in the first half of this year" .................................. From below : U.S. prices dropped 50% in the first half of this year in the face of a global glut, coming off historically high levels. Yet another item in a long list of signs that the Federal Reserve is dead wrong ... Jon. ************************************************************* November 7, 2005 Higher U.S. Steel Prices Could Draw Cheap Imports By PAUL GLADER Staff Reporter of THE WALL STREET JOURNAL Steel is becoming significantly more expensive in the U.S. than in the rest of the world and might draw more imports in coming months. The price of hot-rolled coil, the most common steel product, has risen to about $600 a ton in the U.S., compared with about $380 a ton in China. That divergence is expected to attract an influx to the U.S. of low-grade products from China and possibly higher-grade products from other markets in coming months, damping the outlook for some U.S. steel producers. That same influx would be good for American steel consumers because it would moderate U.S. steel prices. Steel is also costlier in Europe than in China, yet the gap is narrower, so that region's steel industry isn't expected to be hit as hard by imports from Asia. China, the world's largest steel producer and consumer, is on pace to make a record 350 million metric tons of steel this year. The country's steel industry continues to oversupply its domestic market for lower-grade steel products, and as China's steelmakers seek to get rid of their excess products, they are driving down prices in neighboring steelmaking countries such as Japan and South Korea. U.S. prices dropped 50% in the first half of this year in the face of a global glut, coming off historically high levels.** Inventories have since declined, and demand has grown in the U.S. and Europe, bringing prices up 20% so far in the second half. Steel imports to the U.S. fell to 17.1 million tons in the first eight months of 2005 from 17.7 million tons in the same period last year. Still, China's exports to the U.S. almost doubled to 1.6 million tons in the first eight months of 2005 from 892,000 tons in that period of 2004. Steel-company executives in the U.S. and Europe are predicting that strong customer demand will bolster steel prices in the fourth quarter and going into 2006. "Inventories are low," said Guy Dollé, chief executive of Luxembourg's Arcelor SA. "Customers and distributors will have to increase inventories to deliver the products the customers want." The Metal Service Center Institute, in Rolling Meadows, Ill., said the steel inventories of its members declined to about a 2.8-month supply, or 12.9 million tons, in September from 3.5 months in July, or 14.3 million tons. Scrap prices also have picked up in recent weeks, giving steelmakers such as Nucor Corp., based in Charlotte, N.C., reason to maintain steel prices. While U.S. steel mills and some Wall Street analysts say they expect buyers to return, others say they believe steel purchasing might slow as winter sets in and cheap imports become available. If that happens, U.S. steel companies may be setting up for another glut in the first or second quarters of 2006, triggering a price slide similar to the 10-month decline from late 2004 through the first half of this year. "You have surging supply and falling demand, and I think there is a real risk that prices will fall dramatically as a result," said Paul Scott, a steel expert at CRU Analysis in London. "Next year, I think, steel prices as a whole will follow a downward trend." Write to Paul Glader at paul.glader@wsj.com Copyright © 2005 Dow Jones & Company, Inc. All Rights Reserved.

To: Jon Koplik who wrote (7140)	4/6/2006 1:12:14 AM
From: Jon Koplik	Read Replies (2) \| Respond to of 33421

WSJ -- World Steel Prices Gain Steam, Fueled by Economic Growth .............................. April 6, 2006 World Steel Prices Gain Steam, Fueled by Economic Growth Rising Output and Imports Should Act as Restraints, But Stockpiling Is a Worry By PAUL GLADER World steel prices are returning to last year's high level, following an end-of-year lull, as steady economic growth fuels strong demand. The upswing could mean higher raw-materials costs for manufacturers. But, industry observers still don't expect steel prices to match heights reached in 2004, in part because of rising steel output and an increasing flow of cheaper imports into the U.S. and elsewhere. Analysts say steel consumers around the world, from auto makers in North America to commercial builders in China, are restocking material and showing increased demand for steel, at least in the short term. The Metals Service Center Institute says U.S. shipments of steel in the first two months of the year were up 3.5% from the same period a year earlier among the institute's members -- distributors that buy huge portions of metal to resell to customers that include aerospace companies and commercial builders. One worry within the steel industry is that buyers, anticipating higher prices, are building stockpiles -- creating a dynamic that sends prices up even faster but ultimately leads to a slump. However, some industry executives say they have learned lessons from past cycles on how to avoid this accordion effect. Prices will fluctuate, said David Hannah, chief executive of Reliance Steel & Aluminum Co. in Los Angeles. "We just don't think they will fluctuate as much as in the past." He said his company isn't building huge inventories before prices run up further, but, rather, it is buying inventory as needed. The average price of hot-rolled coils, a common steel product, is about $570 a ton in the U.S., up 15% from September. "We have seen price increases across all markets," said John Novak, a managing director for industrial products at CIBC World Markets in Toronto. Analysts say nearly all products, including cold-rolled coils, reinforcing bar and stainless steel, are showing slight price increases. Steelmakers already have announced additional price increases that will take effect in coming months. Customers say Charlotte, N.C., steelmaker Nucor Corp. raised the price of hot-rolled coil by $25 a ton this month and a further $10 a ton for May. U.S. Steel Corp., of Pittsburgh, raised prices at its mills in Europe by $33 a ton for June deliveries of hot-rolled, cold-rolled and coated-sheet products, while China's largest steelmaker, Shanghai Baosteel Group Corp., raised prices 17% on hot-rolled coils in late March. AK Steel Holding Corp., of Middletown, Ohio, and Allegheny Technologies Inc., of Pittsburgh, have announced increases in stainless-steel prices of 6% to 9% starting May 1. A few steelmakers are increasing production to meet demand and to benefit from higher prices. U.S. Steel has been bringing its No. 14 blast furnace back on line in Gary, Ind., and Netherlands-based Mittal Steel Co.'s U.S. arm is restarting an idled blast furnace in Cleveland. UBS analyst Timna Tanners estimates prices for hot-rolled coil in 2006 will be $548 a ton on average, up about 9% from earlier predictions of an average price of $504, and compared with $547 last year. Like many analysts, she estimates the prices of steel, as well as steel scrap, will rise in the second quarter but taper off in the third and fourth quarters. This year's price rise is expected to be more manageable than the drastic increase in 2004 that saw steel prices double to nearly $800 per ton of hot-rolled coil. While prices are rising in North America, so, too, are imports. Preliminary data from the U.S. Census Bureau show that imports of finished steel products into the U.S. were up 24% to 5.2 million tons of steel in the first two months of 2006, compared with a year earlier. The greatest increase in imports was in steel wire rod, structural shapes and reinforcing bars, and came largely from China, Turkey and Taiwan. "Domestic mills have been aiming to keep prices consistent through controlling supply and not raising prices enough to invite further imports," Ms. Tanners said in a report. Trade groups are divided on the need for imports. Small manufacturing companies and steel importers say imports should increase, especially on products such as hot-rolled coils to offer more supply options. But domestic producers express concern about growth and source of imports. Write to Paul Glader at paul.glader@wsj.com Copyright © 2006 Dow Jones & Company, Inc. All Rights Reserved.