Archive for July 2015

Three Years Ago This Coal Mine Was Worth $624 Million. // Now just $1 dollar

From Bloomberg, Jul 31, 2015

The destructive force of a collapse in world coal prices has been underscored by the sale of a mine valued at A$860 million ($631 million) three years ago for just a dollar. Brazilian miner Vale SA and Japan’s Sumitomo Corp. sold the Isaac Plains coking-coal mine in Australia to Stanmore Coal Ltd., the Brisbane-based company said Thursday in a statement. Sumitomo bought a half stake for A$430 million in 2012.

A slump in the price of coking coal, used to make steel, to a decade low is forcing mines to close across the world and bankrupting some producers.

Alpha Natural Resources Inc., the biggest U.S. producer, plans to file for bankruptcy protection in Virginia as soon as Monday, said three people with direct knowledge of the matter. It was valued at $7.3 billion in 2008.

To read the entire article, go to http://bloom.bg/1fOuf97

Blue Skies in Beijing! All because Steel Mills Face Curbs as city prepares for a Parade

From Bloomberg, Jul 30, 2015

 

A Chinese paramilitary policeman stands guard at Tiananmen Square under crimson clouds at sunset in Beijing, China. Photographer: Feng Li/Getty Images

Beijing airport under clear skies

Steel output in China will be disrupted next month and September as mills around Beijing are ordered to curb production to ensure clean air and blue skies for a parade to mark World War II and sports event, hurting iron ore demand.

Look for more falling ore and met coal and scrap prices to follow as a result.

Steel output in China will be disrupted next month and September as mills around Beijing are ordered to curb production to ensure clean air and blue skies. Why? All for a parade to mark World War II and sports event. Impact Example As much as 6 million metric tons may be cut, more than was lost last year when similar curbs were used for a global summit…  says Xu Xiangchun, chief analyst at Mysteel Research. He was citing talks with policy makers and mills. The government plans measures to ensure the air quality, according to an official at the Beijing Municipal Environmental Protection Bureau.

IN THE LONG TERM

Over a longer period, the capital’s air pollution may drive the government more quickly towards far less polluting steel manufacturing processes.  Look for a shift towards more scrap charged oxygen plants and mini mills to substitute fro fully integrated ore and met coal steel plants.  This shift will affect railway traffic volumes both in China and in far away raw materials nations like Mongolia and South Africa.

To read the entire news report, go to http://bloom.bg/1IO3gHX

CSX, Georgia Ports Authority MOU to open new inland port

PORT OF SAVANNAH INLAND OPTION FOR CONTAINERS… AND AUTOS

Is such a short haul intermodal Port of Savannah inland corridor possible? Or just a boutique market?

355 miles? Really?

Being promoted as a MOU. That’s not a legal contract. So how real is this? And can it be profitable given the short distance? Or will it need to be subsidized? Too little info at this time to tell.

New Release highlights:

CSX Transportation and the Georgia Ports Authority (GPA) signed a MOU agreement yesterday to establish an inland port in northwest Georgia.

CUSTOMER? NOT PRESENT.

The Georgia Governor and officials from the ports authority, CSX and Murray County signed the memorandum of agreement.  It sets up the Appalachian Regional Port in Chatsworth, Ga. From there, It might use trucks or rail to service a hinterland market of Alabama, Tennessee and parts of Kentucky.

It is to be operated by the GPA. This new inland terminal/transfer/storage port facility will be located on 42 acres in Murray County. The site is next to U.S. Highway 411 and provides access to Interstate 75.

But the facility may not become operational until 2018.

Port officials estimate the CSX route will reduce Atlanta’s truck traffic by 40,000 moves annually. That is about 150 containers a day. The calculated highway mileage is about 355 truck miles.

Normal economics see rail intermodal profitable competition ranges versus trucking at longer 600 plus mile distances. In theory this might work with by using on near dockside lower drayage cost within the Savannah port.

What do you think? A good investment? Or too risky for my pension funds?

http://www.progressiverailroading.com/intermodal/news/CSX-Georgia-Ports-Authority-sign-pact-to-open-new-inland-port–45233

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Selected observations from others

The port of Charleston inland terminal at Greer SC is quite different than this Savannah opinion. For one thing it is between Greenville and Spartanburg and down the road from the BMW plant which is a very big deal up there so the terminal was a natural for truck drays from the port and vice versa. The rail angle is to connect the port drays to the Crescent Corridor including base load traffic into and out of the region.

One person recently observed that with reasonable wait times the dray men are making 2 turns per day, very good economics for them.

Some of these short inland operations can work.

Trouble in Steel Town as World’s Mills Face Glut, Sinking Prices

From Bloomberg, Jul 29, 2015

There’s trouble in steel town. Global finished steel prices are in retreat as China’s mills put more products on the boat for export.

The average U.S. price of hot-rolled coil, used in everything from buildings to automobiles, dropped by 33% to $456 a ton in the second quarter, according to The Steel Index.

In China, steel rebar sank to the lowest level since 2003 this month.

Scrap prices are also falling.

To read the entire article, go to http://bloom.bg/1Sf0Ypz

A few data points:

“Chinese steel is flowing into the North Asian markets,” Naoto Umehara, executive vice president of Kobe Steel Ltd., told reporters in Tokyo. “That’s pushing down hot-rolled coil, a typical example of general commercial steel products, and that’s also pushing down the overall market prices. In that sense, the damage is big.”

South Korea’s Posco, the world’s fifth-largest producer, reported a slump in profit earlier this month and announced plans to cut staff and refocus on its main business. Its stock traded this week at the lowest in a decade.

U.S. Steel said that the net loss widened to $1.79 a share in the second quarter compared with 12 cents a year earlier. Its steel SALES fell to $2.9 billion from $4.4 billion. Stock in U.S. Steel is 36% lower over the past 12 months.

DUMPING?

Steel exports from China surged 28 percent to 52.4 million tons in the first half, according to customs data. Overseas sales from China have risen to extraordinary levels, according to Credit Suisse Group AG.

All of this are more signs of a reduction in the value of scrap steel and proposed new mine and rail projects around the world.

What happens when asset sales slow down? As buyers are few.

From Bloomberg, Jul 28, 2015

Big oil companies are trying to spin off assets to generate cash and rebalance their Balance Sheets.

South Africa’s government wants to sell off assets to generate funding for its troubled monopoly power company

What happens when buyers are in no rush to do a deal?

More about this can be found on Bloomberg as oil giant BP Plc’s second-quarter profit were reported this morning and it missed analyst estimates. Part of its strategy is to sell off assets. Finding buyers at the right price seems to be difficult! That could mess up a lot of strategic plans.

To read the entire article, go to http://bloom.bg/1IqsaLB

Mid year 2015 report on railway frieght car orders in the US —

The North American freight rail-car market remains robust according to Economic Planning Associates Inc.’s (EPA)   Their Railcar Overview report of 2015 1Q report points out that the market DEMAND for all types of covered hoppers continues to increase, along with a very strong market for intermodal stack container rail wagon types.

EPA as of mid year still projects total year 2015 deliveries of 88,000 cars and platforms in 2015,…   …and assemblies of 78,500 units in 2016.

AT THE SAME TIME….    …new car orders are slowing.   The primarily slowing is from lower tank-car orders.   Rail-car orders of all types totaled 15,952 units in 1Q, down from 37,431 in the fourth-quarter 2014 and 24,050 in first-quarter of 2014,

For more information, log onto Progressive Railroading.   http://www.progressiverailroading.com/mechanical/article/Rail-car-and-locomotive-statistics-Fleet-Stats-2015   Jim

South Africa steel industry critical financial condition in collapsing global market

South Africa

With commercial assertions of possible steel finished product dumping, (as Chinese steel production at home exceeds the domestic market demand by customers), another South African steel company faces a financial crisis.

Too many assets on the Balance Sheet.

Too many employees given the business decline these past two years.

South Africa’s 2nd largest steelmaker Evraz Highveld Steel and Vanadium confirmed that it had temporarily ceased steel production at its steelworks. The company cited “working capital constraints and reduced domestic demand…” It also cited a “significant” increase in steel imports from China.

From raw resources like iron ore and met coal to scrap metal to charge steel furnaces, the global picture of the FOREST is that we can see a lot if the TREES “burning”.

LOCAL JOB IMPACT

Evraz Highveld Steel and Vanadium has issued a proposed restructuring notice in terms of South African laws Section that could see the country’s second-largest steelmaker potentially cutting half of its workforce.

RESPONSE

The local labor organization are demanding discussion to how to fix the global market locally. Their leadership appears to be in self denial. Transnet’s grand 7 year market development plan now approaching year four of execution also appears to be unadjusted to these global market shifts and local South African customer changing logistics service demand of the rail and ports future services.

Sooner or later, Transnet will have to adjust. If not, it may over invest in unproductive added assets. What do you think?

For more news coverage, I encourage you to log onto the following links http://www.engineeringnews.co.za/article/evraz-highveld-moves-to-cut-half-its-workforce-2015-07-21/rep_id:3182 And http://www.engineeringnews.co.za/article/cash-hungry-steelmaker-evraz-highveld-halts-operations-2015-07-20

Anglo may cut one third of its jobs as steel industry market demand drops prices

What has taken senior iron ore – steel industry leadership so long to adjust their strategic plans? What are rail and port companies that provide logistics services to Anglo doing to resize their transport service assets?

From Reuters sources http://www.iol.co.za/business/companies/anglo-to-shed-50-000-jobs-1.1890299#.VbJDREr3arV

Headline reads: Anglo to shed 50 000 jobs (over the long term) July 24 2015

Reporter is Silvia Antonioli

Anglo American, the fifth-biggest diversified global mining group by stock market capitalization, announced on Friday that it will move towards the elimination of as much as one-third of its work force. This appears to be a belated recognition of the strategic lower market steel demands and the consequences on iron ore prices in the face of an over supply of resources like iron ore.

It also admits it “might put up more assets for sale”…

It’s Board appears to finally reacting after the accelerating slump in metals prices that seen its stock shares decline to a 13-year low.”

MIGHT GET WORSE

The company posted a steep fall in first-half profit after a rout in prices of metals from platinum to iron ore. The company said “the next six months could be even worse.” “Quite frankly we didn’t expect the commodity price rout to be so dramatic… … CEO Mark Cutifani said during a presentation to market analysts. In the short term, management says it “would cut about 6 000 of its almost 13 000 office-based and other non-production job roles globally”…

If market conditions soured further the company would consider putting up for sale more of its underperforming assets than currently planned, Cutifani said.

Anglo employs 151,000 staff worldwide. I

N ITS PR NEWS RELEASES the company puts a best “spin” on the current financial results as it is about half way through its three year strategic change previously announced to investors. The economic interpretation from the analysts meeting is that they are going to have to move much faster in making changes and/or make bigger changes

REPORTED RESULTS:

Anglo American Interim Results for 2015 include the following cited on the Internet. “Improved operational performance and accelerated cost and capex reductions to mitigate price weakness” says the company in its financial reporting. Group underlying EBIT of $1.9 billion, a 36% decrease due to sharply weaker commodity prices ($1.9 billion underlying EBIT impact), Partially offset by weaker producer country currencies and cost reductions ($0.6 billion underlying EBIT benefit), Commodity price-driven impairments of $3.5 billion after tax, including $2.9 billion at Minas-Rio

FUTURE LOOKING PROJECTIONS include: $1.5 billion of operating and indirect cost reductions and productivity gains targeted in H2 2015 and 2016 (operating costs $800 million, productivity gains $400 million, indirect costs $300 million) Additional company capital expenditure reductions of up to $1.0 billion by end 2016 $1.6 billion of “disposal proceeds” delivered in July 2015

Another bad sign for the South African steel industry and future rail related traffic as AMSA reports

The South African Steel Industry is hit hard by he global slowdown in the market DEMAND for steel.

Reports today from multiple sources say for example that South Africa’s largest steel producer ArcelorMittal South Africa (AMSA) is giving notice that it is weighing the partial or full closure of its Vereeniging Works, in southern Gauteng. The Vereeniging mill is perhaps South Africa’s oldest steel plant — going back to 1911 as the Union Steel Corporation of South Africa.

Some market sources suggest that ArcelorMittal may soon make a trading statement indicating that the company might report a large loss per share in the half year to June 30. One source, Mining Weekly, has its reporters suggesting that it could be as much as “1,400% worse than the 2c/share loss incurred during the corresponding period last year.” Other South African steel companies like Highveld Steel and Vanadium are also reporting depressed commercial results.

This marks a continuing pattern of global declining prospects for ore, met coal, and scrap plus lower future business revenues for the railroads and ports that handle the steel related inputs and outputs.

Are the transporters changing their strategic plans or hoping their customers’ business patterns will suddenly change?

Go here for more reported details: http://m.miningweekly.com/article/poor-citizen-amsa-promises-to-mend-ways-as-it-seeks-support-to-save-vereeniging-and-company-2015-07-23

Do the Most Optimistic People Live in Africa?

Maybe.

That according to a Pew Report Picked up on by Bloomberg on July 23rd. For example, “growth in Ethiopia has beaten every other sub-Saharan country over the past decade.” —

One report says that “when it comes to optimism about the domestic economy, the French have nothing on Ethiopians”. Is that true or false?

As another example, Nigeria tops the Pew Research Center charts, with 92 percent of respondents seeing their economy improving in the next 12 months That contrasts with only a net 5 percent who said it would stay the same or worsen.

Residents in Burkina Faso and Ethiopia were similarly upbeat, with more than 80% of people in each country projecting economic progress.

To read the entire report, contact Pew Research Center for their survey. To read the entire, go to Bloomberg news.