JSW Steel Ltd., India's third- largest producer, is sending the first shipment of steel slabs in 18 months to its U.S. pipe and plate making unit as global demand recovers after the worst slump since World War II.
JSW will ship 40,000 tonnes this month to Texas Works, potentially doubling the plant's operating rate to 40%, Chief Financial Officer Seshagiri Rao said in an interview. The unit makes steel pipes and plates used in the oil and gas industry.
U.S. manufacturing expanded in January at the fastest pace since August 2004, according to the Institute for Supply Management's factory index, boosting steel sales and prompting mills such as U.S. Steel Corp. to restart idled capacity. OAO Severstal, Russia's biggest steelmaker, said in January demand is increasing in North America, especially for steel used in automobiles and pipes.
"Orders have started coming in, although we have a long way to go," Rao said on Mar 3 at JSW's Mumbai headquarters. "We expect demand to recover in the medium term."
JSW, which returned to profit in the third quarter from a loss a year ago, spurred by demand from automobile makers and builders in India, faces lower margins as a likely jump in coal and iron ore prices may push raw material costs up by about US$75 a tonne from April 1, Rao said.
Contract prices of coking coal and iron ore used for steelmaking, are likely to go up as global demand recovers, Rao said. Iron ore contract prices may rise 70% in 2010 as BHP Billiton Ltd., Vale SA and Rio Tinto Group seek to peg costs closer to market rates, Nomura Holdings Inc. said in a March 1 report.
Coking coal prices will double in the next two years, Nomura analysts Paul Cliff and Gavin Wood wrote in the report.
"Steel prices have not recovered as much as the rise in costs," Rao said. "Mills will be cautious in fiscal 2011."
India's coking coal imports are likely to rise about 33% to 40 million tonnes in 2010-11 as steel mills increase capacity utilization to meet higher demand from the automobile and power industries, Rao said.
India's steel consumption in the 10 months ended Jan. 31 rose 8.5% from a year earlier, boosted by demand from power projects, construction companies and makers of cars and appliances. Total consumption climbed to 51 million tonnes in the period, data from the steel ministry showed.
Source: en.sxcoal.com