The sharp plunge in iron ore prices has resulted in a shift in steel production from electric arc furnaces (EAFs) and induction furnaces (IFs) to blast furnaces, especially in China. The ramp-up in steel production by non-Chinese region has shifted the focus of steel scrap exporters to destinations such as India, Turkey and south Asian countries.
In many of these countries, the domestic scrap output is found insufficient to meet growing steel scrap demand by EAFs and IFs. Also, unlike China, these countries have recorded significant rise in steel production during the year.
For instance, India’s steel production has risen by 3.3% over the previous year to 75.1 million tonnes during the initial ten-month period of the year. This is at a time when global steel output dropped by almost 2.5%. Also Chinese production slumped by 2.2%. During the first eight months of the current year, India’s scrap imports have jumped higher by 18% to 4.187 mt. The fall in supply from domestic sources is likely to push imports of steel scrap by the country. Incidentally, the scrap consumption by the country is expected to double over the next ten-year period.
The imports of steel scrap by Bangladesh has witnessed dramatic rise in 2015. The imports are likely to grow at the fastest pace in 2016 also. The steel scrap consumption by EAFs and IFs in the country are projected to total around 3 million tonnes, almost five times the consumption levels witnessed in 2015. The favorable import duty structure in the country will boost more imports of scrap into the country.
The scrap imports by Pakistan too has picked up. According to 2014 data, South Korea is the largest importer of steel scrap in Asian region, followed by India. The region had accounted for almost 30% share of the global seaborne steel scrap trade during the year.
Meantime, Turkish steel scrap imports have dropped by almost 18% over the previous year to 12.04 million tonnes during the initial nine-month period of the year. The steel output by the country during this period has declined considerably. However, the new government order that requires all steel finished products made from billets imported from China to be exported within nine months has led to rise in demand for scrap by EAFs.
Source: http://www.metal.com/
Mining-Gear Maker Amends Credit Pacts
Joy Global Inc. is scrambling to shore up its finances as it struggles through a relentless three-year slump in demand that is expected to persist into 2016.
The mining-equipment maker on Wednesday said it had amended credit agreements to avoid the risk of violating covenants with lenders, slashed its dividend to conserve cash and repaid $250 million of senior notes due next year to ease the debt burden. The company also announced a loss of $1.32 billion for its fiscal fourth quarter ended Oct. 30.
“We’ll get through this,” Joy Global Chief Executive Ted Doheny said in an interview, but he acknowledged the company could lose its investment-grade credit rating as the mining slump drags on.
Moody’s Investors Service rates the company’s debt at Baa3, just one notch above junk status. Joy Global’s 5.125% senior notes due in 2021 were trading at 83 cents on the dollar Wednesday morning, down from 112 cents in April. At Wednesday’s price, those notes were yielding 8.9%, comparable to junk bonds.
Joy Global shares rallied, rising 6% to $12.14 on the New York Stock Exchange. Kwame Webb, an analyst at Morningstar Inc., said Joy Global was “taking promising steps” to strengthen its balance sheet and had spare real estate that could be sold. Joy Global officials said the company was operating at only about 35% of capacity.
Since 2012, Joy Global has been battered from all sides. Mining companies continue to cut spending on new equipment and servicing of old machinery as commodity prices remain weak. The steep decline of U.S. coal production reduces demand for Joy’s biggest product category. The weakness of many currencies outside the U.S. reduces the dollar value of Joy Global’s foreign sales.
“The customers just don’t have money,” Mr. Doheny told analysts. In China, some customers aren’t paying their bills, and Joy Global added $19 million to reserves for bad debts there.
For the current fiscal year, the company projected sales of $2.4 billion to $2.6 billion, down from $3.17 billion in the year ended Oct. 30. That would leave sales at less than half the $5.66 billion peak reached in the year ended in October 2012.
Joy Global’s loss for the latest quarter reflects $1.34 billion of write-downs in asset values and compares with profit of $129.7 million, or $1.31 per share, a year earlier. The quarterly dividend dropped to a penny from 20 cents a share. If maintained, that lower rate would save the company $75 million a year.
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The company said it wrote down asset values because of the “prolonged severe downturn of global commodity markets.” The company’s market value has fallen to about $1.2 billion from more than $10 billion in 2011, when the mining market was near its peak.
Joy Global said amendments to its lending agreements would allow net debt to reach as high as 4.5 times earnings before interest, tax, depreciation and amortization in certain quarters, compared with the prior cap of 3 times.
For the current year, Joy Global forecast adjusted earnings of 10 to 50 cents per share, down from $1.95 per share in the year ended in October.
Adjusted earnings for the latest quarter were 43 cents a share, down from $1.29 a year earlier. Revenue dropped 24% to $865.6 million.
Source: http://www.wsj.com/