Tuesday, May 27, 2008
Oil's cargo cushion
reportonbusiness.com
The soaring cost of fuel is whittling away at the cheap-labour advantage enjoyed by Asian exporters, giving Canadian firms a welcome edge in their fight to win back business from Asian competitors.
Two bank economists argue in a report released Tuesday that because of higher fuel costs, shipping a standard 40-foot container from Shanghai to the east coast of North America now costs $8,000 (U.S.), up from $3,000 in 2000 when oil was just $20 a barrel.
That higher cost is passed on to North American consumers, making goods from China and other Asian places more costly compared to the offerings of domestic North American producers.
Some Canadian manufacturers are already noticing the effect.
[...]
Jeffrey Rubin and Benjamin Tal of CIBC World Markets Inc. say higher oil prices are reversing the world-is-flat effect, in which lower trade barriers and new technologies like the Internet made it cheaper to move goods and services from developing Asia to the markets of the rich world.
“In a world of triple-digit oil prices, distance costs money,” they write. “And while trade liberalization and technology may have flattened the world, rising transport prices will once again make it rounder.”
Mr. Rubin and Mr. Tal say the steel sector is a prime example of the world-is-round effect.
Chinese steel exports to the United States are falling by more than 20 per cent year over year. China's costs have risen because Chinese producers have to bring in their iron ore from faraway places such as Australia and Brazil, then ship the finished steel to the United States. As a result, U.S. steel producers actually have an advantage over Chinese rivals.
[...]
“This is an environment in which shipping from the Pacific Rim may not make sense any more,” Mr. Tal said in an interview.
“If you're thinking, ‘maybe we should bring in a container from China,' you should think again.”
The soaring cost of fuel is whittling away at the cheap-labour advantage enjoyed by Asian exporters, giving Canadian firms a welcome edge in their fight to win back business from Asian competitors.
Two bank economists argue in a report released Tuesday that because of higher fuel costs, shipping a standard 40-foot container from Shanghai to the east coast of North America now costs $8,000 (U.S.), up from $3,000 in 2000 when oil was just $20 a barrel.
That higher cost is passed on to North American consumers, making goods from China and other Asian places more costly compared to the offerings of domestic North American producers.
Some Canadian manufacturers are already noticing the effect.
[...]
Jeffrey Rubin and Benjamin Tal of CIBC World Markets Inc. say higher oil prices are reversing the world-is-flat effect, in which lower trade barriers and new technologies like the Internet made it cheaper to move goods and services from developing Asia to the markets of the rich world.
“In a world of triple-digit oil prices, distance costs money,” they write. “And while trade liberalization and technology may have flattened the world, rising transport prices will once again make it rounder.”
Mr. Rubin and Mr. Tal say the steel sector is a prime example of the world-is-round effect.
Chinese steel exports to the United States are falling by more than 20 per cent year over year. China's costs have risen because Chinese producers have to bring in their iron ore from faraway places such as Australia and Brazil, then ship the finished steel to the United States. As a result, U.S. steel producers actually have an advantage over Chinese rivals.
[...]
“This is an environment in which shipping from the Pacific Rim may not make sense any more,” Mr. Tal said in an interview.
“If you're thinking, ‘maybe we should bring in a container from China,' you should think again.”
Labels: china, manufacturing, steel
Sunday, May 25, 2008
The Super Soldier
This is like science fiction - it's a battle suit of armour that could amplify a soldiers strength and endurance by up to 20 times.
The Buffalo News
Rex Jameson bikes and swims regularly, and plays tennis and skis when time allows. But the 5-foot-11-inch, 180- pound software engineer is lucky if he presses 200 pounds –that is, until he steps into an “exoskeleton” of aluminum and electronics that multiplies his strength and endurance as many as 20 times. With the outfit’s claw-like metal hand extensions, he gripped a weight set’s bar at a recent demonstration and knocked off hundreds of repetitions. Once, he did 500.
“Everyone gets bored much more quickly than I get tired,” Jameson said. Jameson –who works for robotics firm Sarcos Inc. in Salt Lake City, which is under contract with the U. S. Army –is helping assess the 150-pound suit’s viability for the soldiers of tomorrow. The suit works by sensing every movement the wearer makes and almost instantly amplifying it.
The Army believes soldiers may someday wear the suits in combat, but it’s focusing for now on applications such as loading cargo or repairing heavy equipment. Sarcos is developing the technology under a two-year contract worth up to $10 million, and the Army plans initial field tests next year.
Before the technology can become practical, the developers must overcome cost barriers and extend the suit’s battery life. Jameson was tethered to power cords during his demonstration because the current battery lasts just 30 minutes.
The Buffalo News
Rex Jameson bikes and swims regularly, and plays tennis and skis when time allows. But the 5-foot-11-inch, 180- pound software engineer is lucky if he presses 200 pounds –that is, until he steps into an “exoskeleton” of aluminum and electronics that multiplies his strength and endurance as many as 20 times. With the outfit’s claw-like metal hand extensions, he gripped a weight set’s bar at a recent demonstration and knocked off hundreds of repetitions. Once, he did 500.
“Everyone gets bored much more quickly than I get tired,” Jameson said. Jameson –who works for robotics firm Sarcos Inc. in Salt Lake City, which is under contract with the U. S. Army –is helping assess the 150-pound suit’s viability for the soldiers of tomorrow. The suit works by sensing every movement the wearer makes and almost instantly amplifying it.
The Army believes soldiers may someday wear the suits in combat, but it’s focusing for now on applications such as loading cargo or repairing heavy equipment. Sarcos is developing the technology under a two-year contract worth up to $10 million, and the Army plans initial field tests next year.
Before the technology can become practical, the developers must overcome cost barriers and extend the suit’s battery life. Jameson was tethered to power cords during his demonstration because the current battery lasts just 30 minutes.
Severstal announces agreement to acquire WCI Steel
More consolidation in the steel industry
Press & Guide
OAO Severstal, one of the world's leading metals and mining companies, announced May 16 that it has reached a binding agreement to purchase WCI Steel, a market leader in the production of value-added steel products based in Warren, Ohio.
According to the terms of the agreement, Severstal will acquire all outstanding equity of WCI for a total cash consideration of $140 million, implying an enterprise value of $327 million based on outstanding net debt as of April 30.
WCI's board has recommended the transaction to its shareholders. Shareholders representing a majority of WCI's diluted shares outstanding have irrevocably consented to the transaction. The acquisition has the full support of the United Steel Workers (USW).
WCI's total annual steel-making capacity of 1.22 million metric tons is focused on high-quality, custom flat-rolled steel for use in demanding applications. Together with Severstal's current U.S. operations in Dearborn, Columbus, Mississippi and the recently acquired Sparrows Point in Baltimore, Md., WCI will grow Severstal's North American leadership in the high-quality, flat-rolled steel segment for the automotive, appliance, furniture, construction and energy markets.
The complementary nature of WCI's manufacturing facility and product offering to Severstal's existing U.S. assets creates potential synergies that together with strong steel industry fundamentals leave WCI poised to add value across Severstal's U.S. platform.
"This acquisition is aligned with Severstal's disciplined approach to growing our U.S. business while creating shareholder value," said Gregory Mason, CEO of Severstal International and COO of OAO Severstal.
Press & Guide
OAO Severstal, one of the world's leading metals and mining companies, announced May 16 that it has reached a binding agreement to purchase WCI Steel, a market leader in the production of value-added steel products based in Warren, Ohio.
According to the terms of the agreement, Severstal will acquire all outstanding equity of WCI for a total cash consideration of $140 million, implying an enterprise value of $327 million based on outstanding net debt as of April 30.
WCI's board has recommended the transaction to its shareholders. Shareholders representing a majority of WCI's diluted shares outstanding have irrevocably consented to the transaction. The acquisition has the full support of the United Steel Workers (USW).
WCI's total annual steel-making capacity of 1.22 million metric tons is focused on high-quality, custom flat-rolled steel for use in demanding applications. Together with Severstal's current U.S. operations in Dearborn, Columbus, Mississippi and the recently acquired Sparrows Point in Baltimore, Md., WCI will grow Severstal's North American leadership in the high-quality, flat-rolled steel segment for the automotive, appliance, furniture, construction and energy markets.
The complementary nature of WCI's manufacturing facility and product offering to Severstal's existing U.S. assets creates potential synergies that together with strong steel industry fundamentals leave WCI poised to add value across Severstal's U.S. platform.
"This acquisition is aligned with Severstal's disciplined approach to growing our U.S. business while creating shareholder value," said Gregory Mason, CEO of Severstal International and COO of OAO Severstal.
Labels: steel
Friday, May 23, 2008
Steel costs add to auto woes
Detroit Free Press
Yet another challenge has emerged for the automotive industry: Rapidly rising steel prices.
The price of hot rolled steel has increased from just over $500 a ton in November to $1,080 per ton Thursday.
Prices are soaring because of increasing global demand, a lack of increase in the supply of raw materials used to make the metal, as well as increased energy and transportation costs.
John Hoffecker, managing director of AlixPartners LLC, said Thursday that the cost of steel is rippling through the automotive industry and will likely result in higher vehicle prices because the expense is too large for the industry to absorb by cutting costs and using different materials.
"It's going to hit suppliers, it is going to hit manufacturers, and my view now is it is going to start hitting consumers," Hoffecker said.
At the same time, Ford has now said they will not return to profitability, due in part to steel price increases.
Bloomberg.com
Ford Motor Co. abandoned a target of returning to profit next year because of rising costs for steel and gasoline, a month after Chief Executive Officer Alan Mulally said the second-largest U.S. automaker expected to meet its goal.
Yet another challenge has emerged for the automotive industry: Rapidly rising steel prices.
The price of hot rolled steel has increased from just over $500 a ton in November to $1,080 per ton Thursday.
Prices are soaring because of increasing global demand, a lack of increase in the supply of raw materials used to make the metal, as well as increased energy and transportation costs.
John Hoffecker, managing director of AlixPartners LLC, said Thursday that the cost of steel is rippling through the automotive industry and will likely result in higher vehicle prices because the expense is too large for the industry to absorb by cutting costs and using different materials.
"It's going to hit suppliers, it is going to hit manufacturers, and my view now is it is going to start hitting consumers," Hoffecker said.
At the same time, Ford has now said they will not return to profitability, due in part to steel price increases.
Bloomberg.com
Ford Motor Co. abandoned a target of returning to profit next year because of rising costs for steel and gasoline, a month after Chief Executive Officer Alan Mulally said the second-largest U.S. automaker expected to meet its goal.
Monday, May 19, 2008
Can Steel Stocks Continue to Climb?
This is from a share-holders prospective, but it's interesting none-the-less.
Seeking Alpha
We often hear a lot of discussion, and rightly so, about the prices of crude oil and the agricultural commodities. Their moves over the last year have, in some cases, been parabolic. Their effect on produced gasoline and food prices are also well documented. Less talked about, but increasingly visible and important, is steel.
Steel prices are continuing to rise, with the alloy's average composite weighted price for all carbon-steel products around $1,000 per metric ton [...]
While the charts certainly look nice, you have to wonder how long companies can continue to increase prices - not only in response to demand, which could decrease, but also with regard to raw material cost, which have been rising. Will costs get so high that demand destruction will occur? Will raw material cost increase faster than companies can increase product prices, thereby reducing profit margins?
Both customers and companies are beginning to take action, but in some cases they are at the mercy of the markets. In Turkey, a number of construction companies are going on strike, protesting price increases. In India, transportation and housing projects have been put on hold. Other countries are limiting the amount of steel that can leave the country as exports, while at the same time freezing prices and reducing tariffs to increase imports. Even oil companies are beginning to worry that they cannot build or obtain the equipment they need to extract the oil that is in such high demand.
Seeking Alpha
We often hear a lot of discussion, and rightly so, about the prices of crude oil and the agricultural commodities. Their moves over the last year have, in some cases, been parabolic. Their effect on produced gasoline and food prices are also well documented. Less talked about, but increasingly visible and important, is steel.
Steel prices are continuing to rise, with the alloy's average composite weighted price for all carbon-steel products around $1,000 per metric ton [...]
While the charts certainly look nice, you have to wonder how long companies can continue to increase prices - not only in response to demand, which could decrease, but also with regard to raw material cost, which have been rising. Will costs get so high that demand destruction will occur? Will raw material cost increase faster than companies can increase product prices, thereby reducing profit margins?
Both customers and companies are beginning to take action, but in some cases they are at the mercy of the markets. In Turkey, a number of construction companies are going on strike, protesting price increases. In India, transportation and housing projects have been put on hold. Other countries are limiting the amount of steel that can leave the country as exports, while at the same time freezing prices and reducing tariffs to increase imports. Even oil companies are beginning to worry that they cannot build or obtain the equipment they need to extract the oil that is in such high demand.
Labels: manufacturing, steel
End to Axle Strike Erases Some Doubts at GM
WSJ.com
Several General Motors Corp. plants are set to ramp up production this week after key supplier American Axle & Manufacturing Holdings Inc. and the United Auto Workers reached a tentative agreement ending an 11-week strike.
The strike had all but crippled GM's ability to produce large pickup trucks and sport-utility vehicles, which generate hefty margins for the auto maker, and slammed its North American profit in the first quarter
It's also good news for parts suppliers going into those pickup trucks.
Several General Motors Corp. plants are set to ramp up production this week after key supplier American Axle & Manufacturing Holdings Inc. and the United Auto Workers reached a tentative agreement ending an 11-week strike.
The strike had all but crippled GM's ability to produce large pickup trucks and sport-utility vehicles, which generate hefty margins for the auto maker, and slammed its North American profit in the first quarter
It's also good news for parts suppliers going into those pickup trucks.
Labels: auto
Saturday, May 17, 2008
China quake seen cutting metals output, lifting zinc prices
Now here's an aspect of the China quake scenario I'll bet you hadn't considered ...
Heightened concerns that China's devastating earthquake will curtail the country's massive metals output helped aluminum, zinc and other base metals extend a two-day rally Friday.
[...]
China is the world's largest producer of zinc, aluminum and lead.
Only a sliver of the country's base metals mining and production takes place in Sichuan province, the epicenter of Monday's 7.9-magnitude earthquake, which Chinese authorities now estimate has claimed more than 21,500 lives. But the two nearby provinces also jolted by the quake -- Shaanxi and Gansu -- have mines and smelters as well.
Bloomberg wrote:
Zinc rose in London, heading for the biggest weekly gain since February, as the biggest earthquake in nearly six decades in China hit output in the world's biggest producer. Aluminum also climbed.
China's 7.9-magnitude earthquake is affecting as much as 350,000 tons of zinc smelting capacity in Sichuan and neighboring provinces, according to Beijing Antaike Information Development Co. The tremor that took place May 12 also affected transportation and power supplies.
At the same time, other analysts are saying that China will temporarily stop buying some metals, because they are distracted by bigger domestic issues at the moment.
However, logic would indicate that, if there is rebuilding to be done afterwards, they will need more, not fewer, resources.
Heightened concerns that China's devastating earthquake will curtail the country's massive metals output helped aluminum, zinc and other base metals extend a two-day rally Friday.
[...]
China is the world's largest producer of zinc, aluminum and lead.
Only a sliver of the country's base metals mining and production takes place in Sichuan province, the epicenter of Monday's 7.9-magnitude earthquake, which Chinese authorities now estimate has claimed more than 21,500 lives. But the two nearby provinces also jolted by the quake -- Shaanxi and Gansu -- have mines and smelters as well.
Bloomberg wrote:
Zinc rose in London, heading for the biggest weekly gain since February, as the biggest earthquake in nearly six decades in China hit output in the world's biggest producer. Aluminum also climbed.
China's 7.9-magnitude earthquake is affecting as much as 350,000 tons of zinc smelting capacity in Sichuan and neighboring provinces, according to Beijing Antaike Information Development Co. The tremor that took place May 12 also affected transportation and power supplies.
At the same time, other analysts are saying that China will temporarily stop buying some metals, because they are distracted by bigger domestic issues at the moment.
However, logic would indicate that, if there is rebuilding to be done afterwards, they will need more, not fewer, resources.
Labels: aluminum, china, lead, zinc
Wednesday, May 07, 2008
RECORD HIKE FOR US STEEL PRICES
MEPS
US transaction prices are going through the roof with gains over the last four weeks as high as $US145 per tonne for some products and more substantial hikes planned by the mills for June deliveries. Domestic values have now caught up with average world prices. Although real demand is no more than satisfactory as the economy weakens, supply is being allocated by the local mills. The availability of imports is virtually nil, due to the weak US dollar, high ocean freight rates and soaring prices in other regions. OEM's complain that expected delivery times are not being met. Inventories at the service centres are described as 'low to medium'. They are unlikely to be rebuilt in the short term as buyers are unwilling to speculate when steel is so expensive.
In Canada, domestic order intake is strong. Producers need to offset the large increases in raw materials, such as iron ore and scrap. Consequently transaction values continue to advance, despite alarm amongst customers. Current imports and permits for the future remain low.
US transaction prices are going through the roof with gains over the last four weeks as high as $US145 per tonne for some products and more substantial hikes planned by the mills for June deliveries. Domestic values have now caught up with average world prices. Although real demand is no more than satisfactory as the economy weakens, supply is being allocated by the local mills. The availability of imports is virtually nil, due to the weak US dollar, high ocean freight rates and soaring prices in other regions. OEM's complain that expected delivery times are not being met. Inventories at the service centres are described as 'low to medium'. They are unlikely to be rebuilt in the short term as buyers are unwilling to speculate when steel is so expensive.
In Canada, domestic order intake is strong. Producers need to offset the large increases in raw materials, such as iron ore and scrap. Consequently transaction values continue to advance, despite alarm amongst customers. Current imports and permits for the future remain low.
Labels: steel
ASIAN AVERAGE CARBON STEEL PRICES - LATEST FORECASTS FROM MEPS
MEPS
All MEPS flat products forecasts have been revised upwards as a result of the staggering 200 percent price rise in coking coal contracts. Scrap figures also rocketed during April. Growing imports for most products will not be sufficient to relieve the tight supply situation in the market in the short term. Consequently, transaction values are expected to climb until the middle of the year.
All MEPS flat products forecasts have been revised upwards as a result of the staggering 200 percent price rise in coking coal contracts. Scrap figures also rocketed during April. Growing imports for most products will not be sufficient to relieve the tight supply situation in the market in the short term. Consequently, transaction values are expected to climb until the middle of the year.
Labels: steel
