Issue 179 (2192), Wednesday, September 19, 2018

Editorial

• IREPAS: New rules set by US start chain reaction in world long steel market...... 3

• Outlook bleak for EAF in ASEAN as induction furnace capacity increases..... 4

Latest contracts............................................................................................. 6

MENA

• European scrap strengthens in Turkey............................................................. 8

• Turkish mills adjust domestic rebar prices in line with lira fall.......................... 8

• Amendments in new currency rules in Turkey puzzle steel sector even more...... 9

• SMS Group to leave Iran, pre-sanctions contracts in jeopardy........................ 9

• Oil-for-goods trade to be emergency exit for EU-Iran cooperation................. 10

• Qatar to invest over $16 billion in infrastructure and real estate..................... 10

Asia

• Local scrap price increase gathers momentum in Japan................................11

• Import iron ore prices unchanged as purchases absent in China...................11

• Vietnam’s Hoa Phat Group posts 7% growth of steel output

in January-August........................................................................................... 12

• Tokyo Steel keeps domestic prices for October............................................. 12

• India asks for investments from Japan, South Korea to build new steel mill....... 13

• South Korea’s Daehan Steel to modernize rolling mill.................................... 13

CIS

• Russia to cut slab exports by 12% in September........................................... 14

• Ukrzaliznytsia to raise tariffs in 2019.............................................................. 14

• In brief: EVRAZ ZSMK to reduce semis exports due to repairs..................... 14

Europe

• German scrap keeps sliding in September..................................................... 15

• Outokumpu sees EU stainless steel market dominated by imports due

to US tariffs..................................................................................................... 15

• Unions concerned about AST future............................................................... 16

• Gestamp expands in UK................................................................................. 17

Americas

• US to impose new tariffs on Chinese imports worth $200 billion................... 18

• Steel Dynamics completes purchase of Kentucky-based manufacturer

of SBQ and MBQ............................................................................................ 18

• SDI expects higher earnings this quarter....................................................... 19

• US mills restarted after Florence.................................................................... 19

• Bolivia’s ESM to start integrated mill construction by end‑2018..................... 20

 Editorial
IREPAS: New rules set by US start chain reaction in world long steel market

Although the autumn’s international meeting of long steel business representatives was planned as an anniversary
event back in May, the segment has changed dramatically by the time it took place in Turkey, providing topics for hot
debates. The main trigger behind the changes was the US and its new trade policy, according to participants.

Increasing trade protection measures have been discussed actively in all countries and steel segments this year,
so it’s only natural it has become the top issue at the IREPAS autumn meeting in Istanbul on September 16‑18. The
delegates agreed that the US has set new rules in the global market by starting investigations under Section 232 and
thus causing noticeable trade flow redistribution. “An intention to protect the domestic market is understandable, but
counterproductive, because the country will face bigger consequences than just cutting off the supply of certain goods,”
a delegate noted. A good example is the case of Canada, the country that basically invented antidumping and intro-
duced it to the global practice, but now is struggling to stop the surge of imports from Turkey, which lost the US market.

Another important topic was Turkey and the outlook for its exports and economy development. Amid the current finan-
cial and economic problems in the country, local steelmakers see rather unfavourable situation in terms of structural
steel consumption, as a number of projects in Turkey have been delayed or frozen due to the lack of liquidity in the
construction sector. “Of course, some projects are proceeding, but most companies are under big pressure from the
unstable lira. Some small ones are already on the verge of bankruptcy,” a conference participant told Metal Expert.
Long-term outlook is not very optimistic either, since no new projects have been announced.

The lira crisis is also a serious challenge for Turkey along with the new currency regulations. “It is impossible to do
business and plan something these days due to the swinging currency. There is no stable exchange rate and it’s even
a bigger problem than lira weakening,” a participant said. “It is harder to make payments and loans in this troubled
economy, since many banks are not interested in crediting Turkish companies because of numerous risks,” another
source said.

Turkish steel suppliers are becoming very active in exporting, to their traditional sales markets, as well as new ones,
in the current conditions. “The US market is now closed, but we will look for new outlets. We have made it many times
already. The market is moving and when some buyer breaks off, there is always another one,” a Turkish supplier ex-
plained. While earlier Turkey was more focused on finished steel sales, just about the only acceptable way for mills to
maintain profitability these days may be billet exports. Southeast Asia is considered one of major outlets for rebar and
semis, given the absence of China and the problems of Iranian suppliers who are facing new US sanctions. Despite
quite fair quotas in the EU, Turkish exporters are cautious about the European market at this point, as its further de-
velopments are lacking clarity and the market is unable to absorb much bigger volumes anyway. In addition, Turkey
plans to focus on its old outlets, particularly Yemen, which has been buying more rebar lately.

Turkey & Middle East Steel

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 Editorial

Despite many challenges in the global long steel market, some optimism is coming from economic forecasts in a
number of countries and regions. In particular, even little economic growth in the GCC, Spain and Turkey can provide
long steel suppliers with regular orders.

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Outlook bleak for EAF in ASEAN as induction furnace capacity increases

The number of induction furnaces in Southeast Asia has been growing since last year. Local steel producers, being
already in a difficult situation, do not see any chances for expanding or even restarting existing EAFs in the region.
This trend will not stick for the long term, but most market participants believe it will support billet imports to ASEAN
in the coming 2‑3 years.

When Chinese authorities ordered local producers to shut down all induction furnaces (IF), making substandard steel,
with a total capacity of up to 120 million tpy, some Southeast Asian companies decided to install some IFs. The move
was explained by low production cost of steel produced in an IF and relatively low installation costs contrary to an EAF,
which needs additional related equipment. Capital costs for EAF installation are 25% higher than for IF. However, it
fact, they are even bigger as usually a capacity of an IF is 50,000‑100,000 tpy maximum, while that of an EAF starts
from 200,000 tpy. As a result, the rebar competition in most Southeast Asian countries became even worse than ear-
lier. “Basically, most EAF producers are not running their furnaces, only induction furnace-based mills are working.
Induction furnaces are causing problems because they are selling lower quality finished products at a lower price,”
Octo Julius, director of Indonesia re-roller Putra Baja Deli, told Metal Expert.

The main reason behind this is cheaper steel production in IFs compared to EAFs, even taking into account higher
energy consumption of the former. First of all, an IF does not need to use graphite electrodes, which are in a great
demand for the second year in a row. The most recent price for UHP 600 electrodes from China was heard still at about
$10,000‑12,000/t FOB, even after a visible decline earlier this year, according to Metal Expert data. “Induction furnace
has higher productivity because it saves a lot of impurities inside. That’s why such furnaces have cheaper production
costs, but produce lower-grade steel. It is because induction furnaces are not designed to produce carbon steel [they
are for foundries],” Octo Julius said. An EAF generates about 8% of the melt rate as slag, while for IF it is 1% or lower.

Though there are a number of advantages of using an EAF, such as ability to turn on and off the equipment, use of
different scrap grades (a part of HBI is also possible) and, of course, a quality control, lower production cost became
the most important factor for the majority of Southeast Asian countries. Indonesia has one of the biggest induction
furnace capacity in the region. “Their capacity is the same as the players’ whose EAFs are shut down. Maybe it’s
even more. This problem is not small. I can say that induction furnaces have more than 3 million tpy of capacity in
Indonesia. There are at least 30 mills and its number will grow as new players are going to enter the market,” Octo
Julius told Metal Expert in an interview. This issue is quite big for Thailand as well, as the installed capacity of IF is
about 2.8 million tpy there, while the real production “is estimated to be more than 1 million tpy,” a representative of
the Iron and Steel institute of Thailand said. A total IF capacity in Malaysia is 530,000 tpy, according to the Malaysia
Steel Institute. In the Philippines, this figure reaches 400,000 tpy.

Vietnam is the only country where EAF producers have chances to increase production, though they are also facing
challenges. The share of IFs in the total capacity is less than 10%. “Total billet production by IF in Vietnam in 2017 was
about 800,000 t, while total crude steel output in the country reached 11.5 million t,” Chu Duc Khai, Vice Chairman and
General Secretary of the Vietnam Steel Association, told Metal Expert. EAFs account for more than 50% of total steel
production in Vietnam, having more opportunities for the growth. Moreover, consumption of long products, driven by

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 Editorial

construction, is developing faster than in other countries. Therefore, Vietnamese producers have to use their chances
to produce own steel as there is an antidumping duty on billets (currently 19.3%). The competition in the local rebar
market in Vietnam is not so strong as in other ASEAN countries for end users prefer higher quality products, while
IF-based producers may even export billet, when they cannot find a customer for their rebar in the local market.

Though local authorities are not encouraging producers to expand IF capacities, they neither have ways to forbid this
at the moment. “Currently, Vietnam has no plans to close the induction furnace because the capacity of the electric
furnace is not meeting the local demand fully, so the induction furnace has still a positive contribution,” Nguyen Van
Sua, deputy chairman of the Vietnam Steel Association, said in an interview earlier this year. Other countries are in
the same situation. Most market participants do not see bright prospects for IF steel production in ASEAN for the long
term due to quality control problem and negative effect on the environment, which may lead to the similar situation as
in China. But it is different for the short term.

While mills with induction furnaces will operate in ASEAN and will have good chances for expanding, other long steel
producers will have only two ways to deal with strong competition. The first is to build a BOF-based complex to produce
low-cost steel but it will demand huge investments. The second way is to diversify the production portfolio, adding
equipment for making wire rod or sections. These products cannot be produced from IF-steel so the competition will
remain mostly in the rebar segment.

As a result, billet imports have good potential for staying high and growing in line with longs demand in the region. The
CIS semis suppliers, exporters from the Middle East and intra-ASEAN BOF-based mills will benefit the most “I don’t
think the Malaysian local market can consume all 3.5 million tpy of steel from newcomer Alliance Steel. And also we
need to remember about Formosa Ha Tinh. As both those companies use blast furnaces I think there is a good chance
for intra-ASEAN trading development,” Octo Julius said.

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 Latest contracts
Contracts for steel products and raw materials
Commodity/specifications Origin/supplier Consumer Volume, t Price & delivery terms Details
Flat products
HRC KSA UAE 3,000 $610‑615/t CPT October-November shipment
Scrap
HMS 1&2 (80:20) Netherlands Turkey 26,000 $317/t CFR -
Bonus Netherlands Turkey 4,000 $327/t CFR -

Daily price assessments for steel products and raw materials Methodology

Currency, September Daily Metal Expert publishes the

Commodity Country
delivery term 18, 2018 change following types of prices:
Iron ore, 62% Fe China $/t, CFR ex-Australia 68.5 0
Coking coal Australia $/t, FOB 206 0
Ferrous scrap, HMS 1&2 (80:20) Turkey $/t, CFR ex-USA 319 0
offer price – an offer from a
Ferrous scrap, shredded Turkey $/t, CFR ex-USA 324 0 supplier but a deal has not
Ferrous scrap, HMS 2 Japan JPY/t, FOB 36,250 0 been signed at this level as
Square billet, 150 mm China $/t, FOB n/a -
of the time of publication;
RMB/t, EXW Tangshan,
Square billet, 150 mm China 4,010 +10
incl. 17% VAT
Square billet, 125‑150 mm Ukraine $/t, FOB 475 0 contract price – a transac-
Square billet, 125‑150 mm Turkey $/t, CFR 495 0
tion price confirmed on both
Rebar, 12 mm Turkey $/t, EXW, еxcl. 18% VAT 521 –3
Rebar, 8‑32 mm Turkey $/t, FOB 515 0
seller’s and buyer’s side;
Rebar, 12, 32 mm Germany EUR/t, CPT 565 0
Rebar, 16 mm USA $/t, EXW TW, excl. taxes 860 0 price assessment – Metal
Wire rod, 6.5 mm China $/t, FOB 589 0 Expert’s estimate of a fair
HRC, 3‑12 mm China $/t, FOB 580 0
price level for a possible
EUR/t, EXW, еxcl. 19%
HRC, base Germany 575 0
VAT transaction in current mar-
HRC, 2‑8 mm USA $/t, EXW, excl. taxes 970 0
ket conditions.

Weekly price assessments for steel products and raw materials

Commodity Country Currency, delivery term September 14, 2018 W-o-w
Square billet, 130‑150 mm Iran $/t, FOB South ports 465 0
Square billet, 130‑150 mm UAE $/t, CFR ex-Iran 488 +3
Square billet, 130‑150 mm Thailand $/t, CFR ex-Iran 503 0

Major steel and raw materials futures in China

Product Name of futures exchange Month of delivery Currency September 18, 2018 Daily change
Rebar, 16‑25 mm Shanghai Futures Exchange January RMB/t 4,166 +66
Rebar, 16‑25 mm Shanghai Futures Exchange January $/t 605.25 +9.55
HRC, 3.5‑9.75 mm Shanghai Futures Exchange January RMB/t 4,021 +52
HRC, 3.5‑9.75 mm Shanghai Futures Exchange January $/t 584.2 +7.6
Iron ore, 62% Fe Dalian Commodity Exchange January RMB/t 506.5 +6.5
Iron ore, 62% Fe Dalian Commodity Exchange January $/t 73.6 +0.96
Coking coal Dalian Commodity Exchange January RMB/t 1,298 +6
Coking coal Dalian Commodity Exchange January $/t 188.56 +0.86
Note: RMB 1 = 6.8831

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 Latest contracts

Weekly indicative freight rates, $/t

Cargo Lot, t Country Loading port Country Discharging port September 14, 2018
Square billet 20,000 Iran southern ports – Bandar United Arab Dubai, Abu Dhabi 19
Abbas, Imam Khomeini Emirates
Square billet 20,000 Iran southern ports – Bandar Oman Sohar 20
Abbas, Imam Khomeini
Square billet 15,000 Iran southern ports – Bandar Egypt El-Adabiya 19
Abbas, Imam Khomeini
Square billet 15,000 Iran southern ports – Bandar Egypt Damietta 23
Abbas, Imam Khomeini
Square billet 50,000 Iran southern ports – Bandar Southeast Asia Bangkok, Jakarta 25
Abbas, Imam Khomeini
Square billet 10,000 China northern ports Southeast Asia Manila, Jakarta 18
Square billet 10,000‑15,000 Ukraine Odessa Egypt Alexandria, Damietta 22
Square billet 10,000‑15,000 Ukraine Odessa Turkey Marmara Sea ports and Izmir 18
Square billet 10,000‑15,000 Russia Novorossiysk Egypt Alexandria, Damietta 25

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 MENA
European scrap strengthens in Turkey
Turkey / Scrap
Negotiations between Turkish steel producers and scrap suppliers, which became even more intensive during the past
several days especially in the frame of IREPAS conference, resulted in a new contract. Moreover, despite challenging
steel sales a local mill accepted higher prices for European material.

An Iskenderun-based integrated mill agreed supply of 26,000 t of HMS 1&2 (80:20) and 4,000 t of bonus at $317/t
CFR and $327/t CFR respectively with scrap collector from the Netherlands, Metal Expert learnt. It is worth mention-
ing that the deal was signed with the price increase, as in the previous booking from Europe HMS 1&2 (80:20) was
estimated at $313.5/t CFR.

The quotes of US scrap to Turkey remain stable as no new deals were heard. The price assessment for HMS 1&2
(80:20) from the US East Coast is set at $319/t CFR Turkey.

Some new contracts are expected as local producers have not covered their requirements yet. “Turkish mills need
minimum 10 cargoes for October shipment, up to 15 cargoes,” a trader told Metal Expert. Currently, bids vary from
$317/t CFR to $322/t CFR for premium quality HMS 1&2 (80:20). Suppliers target $325‑330/t CFR.

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Turkish mills adjust domestic rebar prices in line with lira fall
Turkey / Long products
Continued lira weakening resulted in domestic rebar price correction in Turkey for the second day in a row.

ICDAS increased its prices by TRY 60/t just for one day aiming to offset currency fluctuation. Currently, the producer’s
rebar is available at $520/t (TRY 3,930/t) EXW Biga and $525/t (TRY 3,970/t) CFR Marmara, Metal Expert learnt. De-
spite the move, the US dollar-denominated prices lost around $3/t day-on-day amid rather rapid pace of lira weakening.

Izmir Demir Celik is offering 12‑32 mm rebar at $516/t (TRY 3,900/t) EXW, by TRY 60/t higher than on Monday.

Buying activity in Turkey’s rebar segment remains slack. Despite stronger lira, in the US dollars the general price range
came down to $516‑525/t EXW (TRY 3,900‑3,970/t)

Prices in lira include 18% VAT, offers in US dollar do not. Currency rate $1 = TRY 6.4031.

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 MENA

Amendments in new currency rules in Turkey puzzle steel sector even more
Turkey / Flat Products, Long products
Ankara made some amendments in the recently introduced regulations to do trading in the local market only in lira.
Although the market players have received the chance to be exempted from the common rules, in general they are
puzzled by the situation amid lack of clarity.

The updated version of the document divided market players on Turkey’s residents and non-residents, stipulating that
if both sides of the contract are residents the deal should be determined in Turkish lira with no pre-conditions. At the
same time, the official explanations of the mechanism leave some room for exemptions both for current and new con-
tracts, but with no clear criteria, as Metal Expert understands. Input costs and liabilities in foreign currency are among
possible field for liberalization, which will be evaluated.

Rather uncertain situation with implementation of new rules has put local steel producers into an tricky situation. As a
result, they prefer to wait and see further developments. “The government just has adjusted the regulations, but they
are not still clear. If you are doing business in USD as importer, may you be exempted? No clarity,” a market source
told Metal Expert.

It is worth mentioning that on September 12, 2018, the president of Turkey signed a new directive aimed to support
the national currency, which requires that the value of goods and services being sold locally should be lira-nominated.

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SMS Group to leave Iran, pre-sanctions contracts in jeopardy

Middle East / DRI & HBI, Steel Semis
After Italy’s Danieli in May had expressed concerns regarding the US sanctions renewal against Iran, another global
equipment supplier, German SMS Group faced difficulties in cooperation with the Islamic Republic. The company is
likely to leave the Iranian market putting in jeopardy projects agreed prior to the blockade.

SMS Group plans to stop dealing with Iran like some other big European companies which announced the same
decisions earlier in order to avoid sanctions. “SMS Group, with EUR 2.89 billion in revenue in 2017, will stop doing
business in Iran,” Richard Grenell, the current United States Ambassador to Germany, twittered.

Despite the recent announcement, there are no clear details on the projects currently underway or previously agreed.
“Up to this moment, we have not received any direct instructions from the head office on how to operate. Now we
are waiting for them. But in any case, we have not been very active recently and we are waiting to see what is going
to happen,” a representative of the Iranian office of SMS told Metal Expert. No comments from the head office were
received by the time of the publication of this article. “People in the head office are working hard to understand what
approach is correct. Definitely, we should receive instructions with enforcement,” the source added.

In any case, the US blockade threatened expansion projects performed by SMS Group in Iran. In particular, a $400 mil-
lion agreement signed with Mobarakeh Steel Company in March 2017 to provide additional capacity of 3.5 million tpy,
with a potential to rise to 5 million tpy, is likely to be challenged. The contract was only signed with no physical progress
as the financial side was not finalized even during the more liberal period for Iran, Metal Expert learnt.

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 MENA

Oil-for-goods trade to be emergency exit for EU-Iran cooperation

Middle East / Steel Semis, Flat Products
The EU continues to search for the ways to maintain trade ties with Iran amid US sanctions. Several European countries
plan to create a special financial institution to ease transactions. Iranian steel producers and their European partners
may benefit from such cooperation, sources believe.

Germany, France and the United Kingdom agreed to set up a special financial company that will help to continue
trading with Iran in different commodities, first of all, the oil, which is crucial for the EU economy. “If Iran exports oil to
the EU customer, Iran will not get money but will have them on the credit account of this financial institute in Europe.
It is in a sense a barter trade,” a steel market analyst and trader Keyvan Jafari Tehrani told Metal Expert.

It is worth mentioning that this mechanism was widely used by Iran and India in bilateral trade during the previous
sanctions. As a result, Iran’s steel market players believe that it will be an emergency exit for further EU-Iran cooperation
and not only with the above-mentioned countries. “It will be beneficial for Europe in general,” an industry source noted.

First of all, it may be an option to secure equipment supply, which is beneficial both for Iranian mills and European
machinery segment. “If Iran buys some spare parts in Germany or Italy, it will be able to use this system,” a market
player said. In addition, this mechanism may provide a channel for the global trade. “There are a lot of trading com-
panies in the EU, which buy our steel for other markets, so for sure they may arrange contracts with Iranian mills. So,
we are waiting for the results in practice,” an Iranian billet producer told Metal Expert.

In particular, Italy is expected to get access to the financial institution as well, being a traditional partner of Iran in
the steel sector. During the previous Persian year (March 21, 2017 – March 20, 2018), the Islamic Republic sold over
465,000 t of semis and flats to Italy, according to Iranian Steel Producers’ Association.

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Qatar to invest over $16 billion in infrastructure and real estate

Middle East / Long products
Qatar, though being cut out of the GCC, acts in line with the other states in terms of investment policy. Favourable
situation in the global gas market, resulting in high country’s revenues, also helps Qatar to allocate sizeable funds for
infrastructure and real estate developments.

Doha have recently announced plans to invest almost QAR 60 billion ($16.1 billion; $1 = QAR 3.65) within the next four
years, targeting to develop infrastructure and real estate segment. In addition, Qatar strongly relies to fund country’s
touristic and leisure sector growth. In particular, the country plans to attract 5.6 million of visitors by 2023 with non-GCC
ones accounting to 69% of the total figure. According to the Qatar National Tourism Sector Strategy 2030 the mentioned
goals will require $34 billion of investment, part of it will be covered by the private sector, Metal Expert understands.

While conducting confident investment policy, Qatar is moving in line with the GCC, although has broken ties with
most members since summer 2017. KSA and the UAE, being the largest projects markets in the region, are planning
to invest $1.1 trillion and $350 billion, respectively until around 2038, as Metal Expert reported previously. Projects
realization within the coming years in Qatar will provide sustainable support to local producer Qatar Steel as well as
to other building material suppliers in the country.

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 Asia
Local scrap price increase gathers momentum in Japan
Far East / Scrap
The largest EAF steel producer in Japan – Tokyo Steel – announced today the third increase of local scrap purchas-
ing price since the beginning of last week. As a result, even slow buying activity in the export market will not lead to
a significant price decrease of Japanese scrap in the near future. Moreover, suppliers may even try to increase tags
for foreign customers.

The steel giant Tokyo Steel announced a JPY 500‑1,000/t ($4.5‑9/t) increase in HMS 2 material purchase price at all
plants, effective from September 19. If to take into account the hike, which company made on weekends, prices for
such assets as Okayama and Takamatsu have added JPY 1,500/t ($13.4/t) since late last week. From September 19,
purchasing prices for all plants will reach JPY 37,500/t ($335/t), except for Takamatsu, where it will be JPY 37,000/t
($331/t). The exchange rate is $1 = JPY 111.8.

After such increase most market participant doubt that Japanese scrap suppliers will be ready to provide discounts for
foreign customers. Japanese HMS 2 was offered still at JPY 35,500‑36,500/t ($317‑326/t) FOB, while bids from South
Korea were coming at the lower end of the range. Far Eastern importers may prefer to buy scrap from other sources,
like Russia or the US in the future, Metal Expert learnt.

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Import iron ore prices unchanged as purchases absent in China

China / Iron Ore
Trading activity in the Chinese market for imported iron ore remained sluggish on Tuesday, but futures rose on news
about retaliation of US tariffs claimed on Monday.

Australian iron ore fines 62% Fe remained at $68.5/t CFR, as it was the second day of no deals in a row. “Most importers
are in wait and see mode now, as market trend is not clear yet, while nobody knows what will be the restrictions for
heating season” a major Chinese trader told Metal Expert. Some lots of iron ore were booked in ports by steel mills,
but quotes were stable there too.

However, both steel and raw materials futures moved up on Tuesday after commerce ministry claimed China would
retaliate to the latest 10% tariffs against Chinese $200 billion products, claimed by US president on Monday. Iron ore
quotes increased by RMB 6.5/t ($1/t) over day in Dalian Commodity Exchange, while rebar futures in Shanghai added
RMB 66/t ($10/t) over the same period.

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 Asia

In longer term, Chinese steel market insiders have not very optimistic predictions. “It seems Trump aims to erode
China’s economy. Nobody knows what will be in the near future. Yuan may follow Turkish lira very soon,” a major state-
owned trader told Metal Expert.

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Vietnam’s Hoa Phat Group posts 7% growth of steel output in January-August

South East Asia / Long products, Tubes & Pipes
Hoa Phat Group (HPG) raised steel output in January-August 2018, posting the highest growth of 18% in the central
region. The manufacturer will try to keep increasing output in the coming months as the local demand recovers. Be-
sides, the company aims to boost export.

Vietnam’s HPG increased construction steel output by 7% to 1.47 million t year-on-year in January-August. The per-
formance growth is supported by demand recovery from local construction after rains and storms in previous months
along with the upgrading BF No 2 in Hai Duong which now has increased production by about 18,000 tpm compared
to the beginning of the year, Metal Expert learnt from company monthly report.

Strong demand from overseas markets, namely Australia, Cambodia, USA, Malaysia and Canada supports the solid
improvement in HPG’s performance. In particular, in January-August, the company exported 119,000 t of construction
steel, up by 3% y-o-y mainly of high quality wire rod.

Besides, HPG is on the way to implementing its new steel project in the Dung Quat Economic Zone. In particular,
according to the company report, until the end of the year, the company will bring in operation the first steel rolling
line (600,000 tpy) and plans to start trial production in the first BF at the complex by December this year, Metal Expert
learnt from the mill’s representative.

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Tokyo Steel keeps domestic prices for October

Far East / Flat Products, Long products
The biggest EAF-based steel manufacturer in Japan Tokyo Steel maintained prices for steel products for the domestic
market for eight consecutive months.

Tokyo Steel kept prices for October delivery for all kinds of steel products, according to the company release. The last
increase posted by the producer was in February, Metal Expert learnt. The prices for HRC is JPY 74,000/t ($660.9/t),
that for heavy plates JPY 81,000/t ($723.5/t). Meanwhile, rebar and H-beam will be offered at JPY 69,000/t ($616.3/t)
and JPY 89,000/t ($795/t), respectively, the company stated.

Tokyo Steel kept prices unchanged to make sure that the surge announced earlier this year is fully accepted by the
market. Besides, market participants hesitated to raise prices as “works at end-users of steel have been delayed due to
a shortage of fabricator capacity,” according to Tokyo Steel Managing Director Kiyoshi Imamura. However, the producer
is going to increase prices further in the short term amid strong demand, especially from automotive, machinery and
construction sectors, aiming to cover rising costs, electrodes and electricity particularly.

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 Asia

India asks for investments from Japan, South Korea to build new steel mill
India / Flat Products, Long products
India initiated construction of a new steel plant in cooperation with Japanese and South Korean investors. The gov-
ernment aims to raise domestic steel production and reduce import in India.

The Indian government proposed Japanese and South Korean investors to set up a new steel mill in cooperation with
domestic steel manufacturer Rashtriya Ispat Nigam (RINL). The projected plant has a capacity of 5 million tpy and is
expected to produce value-added steel for automotive and other industries, Metal Expert learnt. Total investments are
estimated at INR 300 billion ($4.1 billion), according to the local media.

If the project is approved, the Indian government will guarantee iron ore supply for steel production at the plant. Besides,
land owned by RINL will be allocated for the new assets. Notably, last year steel giant POSCO cancelled the greenfield
steel plant project in India due to problems with land rent from the Indian government, as Metal Expert reported earlier.
Launch of the new facility will support the Made in India program by substitution of import with locally made products.

Demand in India remains stable and is expected to grow further, particularly, from the automotive sector. Production
of vehicles increased by 14.5% to 13.7 million units year-on-year in April-August, as Metal Expert reported earlier.

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South Korea’s Daehan Steel to modernize rolling mill

Far East / Long products
Daehan Steel placed an order for modernization of bar mill at one of its steel works to expand the production mix and
reduce production costs.

South Korea’s steel manufacturer Daehan Steel (Daehan) placed an order with SMS Group for bar mill modernization
in Sinpyeong works, Busan area, according to the equipment supplier press release on September 17. The moderniza-
tion project involves the replacement of the existing quenching line, installation of two dividing shears and HSD (High
Speed Delivery) line. Once the modernization is completed, Daehan will be able to increase the production range.
With the new equipment the manufacturer will produce rebar in diameter from 13 up to 32 mm. The modernization
will also help Daehan “to reduce the ferroalloys content in the billets, which will result in a substantial cost reduction”,
said SMS in press release.

During the first half of 2018 Singpyeong plant worked with the lowest capacities utilization in comparison with other
Daehan’s units. Thus, the capacity utilization rate for billet production at the works was 34% and rebar production
capacity utilization was 58% during the period. At the same time, the billet production and rebar production capacity
utilization rate at Noksan works was 109% and 92% respectively, according to the company interim report released
on August 14.

As for now Singpyeong works is capable of producing 600,000 tpy of billets and 600,000 tpy of rebar.

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13 World Steel News, September 19, 2018 www.metalexpert.com © 2018 Metal Expert, +38 056 239 88 50
 CIS
Russia to cut slab exports by 12% in September
CIS / Slabs
Russian slab suppliers will reduce exports due to BF repairs and slack demand.

September slab export is estimated at around 662,000 t (including intra-holding shipments hereinafter), down by 12%
from August levels. The biggest decrease is expected from EVRAZ mills. Shipments from EVRAZ ZSMK will decrease
by 50% to 29,000 t, from EVRAZ NTMK by 46% to 62,000 t, because of BF revamps. Severstal will cut slab exports to
16,000 t, focusing on finished flat products. NLMK, however, will be able to keep its shipments close to the last month’s
numbers at some 555,000 t, by Metal Expert’s estimate.

Russian producers exported 6.3 million t of slabs in January-August 2018, which is 5% more than in eight months of 2017.

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Ukrzaliznytsia to raise tariffs in 2019

CIS / Flat Products, Long products, Iron Ore
Ukrzaliznytsia plans another increase of tariffs in 2019, referring to a higher industrial production price index. The rise
will depend on the results of tariff class unification, though.

The tariffs will go up by at least 12%, which is in line with this year’s consumer price index growth. “Higher transpor-
tation costs will always have a direct connection to other industrial product price growth, because they are included in
our input costs,” said Andrey Ryazantsev, financial and economic director at Ukrzaliznytsia, cited by Interfax Ukraine.

The railway operator, however, has not filed a request to the Ukrainian government, expecting a decision on tariff class
unification that implies tariff reduction and averaging, Metal Expert learnt. “If we’re able to adjust our tariffs this year,
next year’s rise will be about in line with product price index or consumer price index. Otherwise the tariff increase will
be twice as big in 2019,” Andrey Ryazantsev said.

At the same time, Ukrainian producers are extremely negative about the rise in tariffs, pointing out that transportation is
still complicated and the tariffs are constantly increasing anyway, driven by “hidden developments”. “In autumn 2017, the
tariffs went up by 15% and the railcar component liberalization added another 20% to them. So the increase for miners
and steelmakers already reached 35% in less than 9 months,” said Alexander Kalenkov, president of Ukrmetallurgprom.

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In brief: EVRAZ ZSMK to reduce semis exports due to repairs

CIS / Steel Semis
EVRAZ ZSMK will considerably reduce semis exports due to the ongoing repairs at the BF shop, which started in
mid-August and will take about six more weeks to complete. Slab exports will go down to 29,000 t, losing 50% from
August numbers, while square billet shipments will slump to 30,000 t versus 179,000 t, Metal Expert learnt. As before,
the entire output will be sold to Southeast Asia. In January-August 2018, the mill exported 1.2 million t of square billet
(up 22% year-on-year) and 955,000 t of slabs (up 18%).

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14 World Steel News, September 19, 2018 www.metalexpert.com © 2018 Metal Expert, +38 056 239 88 50
 Europe
German scrap keeps sliding in September
Western Europe / Scrap
Scrap prices in Germany keep sliding in September amid unstable international market. Insiders believe that in Oc-
tober prices will stabilise

The demand for scrap from the local mills remains very strong in September. Scrap collection in Germany started to
improve in all parts of the country as the summer holidays are over. “Demand is high, scrap should be enough around
but with a decrease of higher than EUR 10/t, the smaller dealers are unwilling to sell their scarp,” a source familiar with
the situation commented. However, domestic prices for September delivery fell again by approximately EUR 5‑15/t,
depending on the grade and the mill, mostly driven by the continuous uncertainty in the Turkish scrap market, Metal
Expert learnt.

Italian and Western European buyers also managed to reduce Germany: steel scrap prices in September, EUR/t
scrap purchase prices from German suppliers by EUR 15/t in Segment/product Price M-o-m
September. Insiders report that large German scrap exporter Domestic market, DDP
sold 30,000 t of HMS 1&2 (80:20) at $350/t CFR to Vietnam HMS 1&2 80:20 (E3) 270‑280 –10
at the beginning of the month, Metal Expert learnt. Shredded (E40) 270‑285 –10/-5
P&S, new arising (E8) 275‑290 –5
Market participants do not expect further price decrease in Export to Italy, CPT

the near term and believe that scrap prices will stabilise in HMS 1&2 80:20 (E3) 270‑280 –15/-5

October. However, the development of the Turkish market will Shredded (E40) 280‑285 –15/-10
P&S, new arising (E8) 285 –15
remain the main indicator of the price direction.

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Outokumpu sees EU stainless steel market dominated by imports due to US tariffs

North Europe / Stainless Steel
Outokumpu sees stainless steel import still prevailing in the EU market after the US Section 232 tariffs imposition.

Lower stainless steel prices in Europe, where import volumes rose as a result of the US measures, impacted the com-
pany’s financial results, Metal Expert learnt. Outokumpu underlined that imports are still prevalent in the EU market
and the local producers will feel the benefits of the EU measures only by the end of the year “as import quotas would
by then be full,” according to Reuters. Stainless steel imports to the EU in March-July 2018 added 14%, coming to
777,000 t y-o-y, according to Eurofer. Market participants attribute an increase to trade diversion, resulting from the US

15 World Steel News, September 19, 2018 www.metalexpert.com © 2018 Metal Expert, +38 056 239 88 50
 Europe

protectionism. Outokumpu expects the price pressure to persist in Europe in Q3, but it will be partly offset by higher
base prices in the US supported by steel import tariffs.

It is worth noticing that Outokumpu’s earnings decreased by 32% in Q2 due to higher US costs and price pressure in
Europe, as Metal Expert earlier reported.

Outokumpu also expects the US would satisfy very few steel tariff exemption requests, according to the local media.
As a results, prices for stainless steel will resume their upward trend in the USA in the near term.

U.S. Commerce Department received over 30,000 requests for tariff exclusions for products and grades which are not
being produced in the US by end-August, but only 1,780 of them were satisfied, Metal Expert learnt.

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Unions concerned about AST future

South Europe / Stainless Steel
Unions are concerned about Acciai Speciali Terni (AST) prospects as its current owner Thyssenkrupp does not con-
sider the asset strategic anymore.

A meeting was held today at the ministry of economic development to discuss the AST future. Unions met Thyssenk-
rupp’s representatives on behalf of Acciai Speciali Terni (AST) in the presence of Italian officials. During the discussion,
the German group confirmed that AST is not a strategic asset for it. Nevertheless, Thyssenkrupp did not declare its
willingness to sell the asset immediately, Metal Expert learnt.

Unions fear that Thyssenkrupp’s announcement will negatively affect AST’s “industrial prospects” given tight competition
is the stainless steel market. “This is why we have urged both Thyssenkrupp and the government to solve the issue
of the industrial plan that expires at the end of the year, including investments and commercial campaign, as well as
the delicate environmental aspects that impact the plant and the region,” unions say.

The meeting was called following the news of ongoing business transformation of Thyssenkrupp as the reformation
of the German industrial giant is gaining pace after its former CEO Dr. Heinrich Hiesinger stepped down in July, Metal
Expert reported.

AST is one of the global leaders in production and distribution of stainless steel flat products. In addition, it is capable
of producing hot-rolled titanium sheets, coils and tubes for industrial use, Metal Expert learnt.

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16 World Steel News, September 19, 2018 www.metalexpert.com © 2018 Metal Expert, +38 056 239 88 50
 Europe

Gestamp expands in UK
Western Europe / Flat Products
International stamping company Gestamp opened a new site in West Midlands, UK.

Gestamp invested GBP 50 million in its new facility in West Midlands to “upgrade the company’s industrial capabilities
in the region,” according to the statement. The new plant has “state of art” stamping equipment and will also include
the capacities of nearly located Gestamp Cannock’s facilities, thus safeguarding 800 jobs. The company does not
exclude the possibility of new investments, Metal Expert learnt. “We will continue to help our customers and provide
them with the latest technologies such as hot and aluminium stamping. We are already supporting them with the chal-
lenges that they face with electrical vehicles by providing lighter and safer solutions,” Francisco J. Riberas, Gestamp
Executive Chairman, said.

The new facility will use the completely innovative technology of hot stamping, Metal Expert understands. The com-
pany’s products are designed for leading automotive manufacturers, including

JLR, Nissan-Renault, Volvo, Ford, BMW, Toyota and Honda. “This new plant is more efficient and competitive, it is a
customer focused factory with opportunity for further growth with both existing and new clients,” Francisco J. Riberas
added.

Gestamp UK owns 7 production plants in the country. Since 2012, Gestamp has invested more than GBP 200 million
in the UK plants. The company specializes in the design, development and manufacture of highly engineered metal
components for the automotive industry.

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17 World Steel News, September 19, 2018 www.metalexpert.com © 2018 Metal Expert, +38 056 239 88 50
 Americas
US to impose new tariffs on Chinese imports worth $200 billion
USA / Tubes & Pipes, Long products
Relationship between Washington and Beijing keep worsening. The imposition of new tariffs on $200 billion worth of
Chinese goods, announced by the White House Monday, escalates the trade war between the world’s two largest
economies as China has already threatened to retaliate against new duties.

On September 17, the Office of the United States Trade Representative (USTR) released a list of approximately $200 bil-
lion worth of Chinese imports that will be subject to additional tariffs, as part of the United States’ continuing response
to China’s theft of American intellectual property and forced transfer of American technology, according to the official
statement. The list contains 5,745 full or partial lines of the original 6,031 tariff lines that were on a proposed list of
Chinese imports announced on July 10, 2018. Specifically, according to it, aluminum and steel items including alloy and
non-alloy steel products will be subject to a 10% tariff starting September 24. Moreover, the tariff rate will increase to
25% on January 1, 2019. “If China takes retaliatory action against our farmers or other industries, we will immediately
pursue phase three, which is tariffs on approximately $267 billion of additional imports,” the White House stressed.

It is worth noting that Washington already imposed a 25% duty on $50 billion of Chinese goods over what it alleges
are unfair trade practices. With the new tariffs, about a half of the US imports of Chinese goods are covered by punitive
trade measures.

Beijing’s feedback was not long in coming. On Tuesday, China said there was “no choice” but to retaliate against the
new US tariffs. “To protect its legitimate rights and interests and order in international free trade, China is left with no
choice but to retaliate simultaneously,” China’s Commerce Ministry said in a statement. They added that they will “adopt
countermeasures,” but did not provide details on exactly what action it would take, Metal Expert learnt.

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Steel Dynamics completes purchase of Kentucky-based manufacturer of SBQ and MBQ

USA / Long products
Steel Dynamics Inc. (SDI), a leading steel producer in the US, keeps expanding presence in special bar quality (SBQ)
and merchant bar quality (MBQ) markets. The company finalized the acquisition of Kentucky Electric Steel (KES), a
wholly-owned subsidiary of Specialty Steel Works Incorporated, located in Ashland, Kentucky.

Under the agreement, SDI acquired substantially all of the assets of KES for $5 million, according to the company’s
official statement. The acquired assets comprise a rolling mill with an annual capacity of 250,000 st (226,796 t). It is
worth noting that the operations were closed earlier this year by the prior owner, and Steel Dynamics plans to reopen
the rolling mill in November 2018. The facility will be operated as part of Steel Dynamics’ Steel of West Virginia (SWVA)
operations, Metal Expert learnt.

The acquisition will provide product diversification for SWVA through the addition of flats and specialty alloy bars, ac-
cording to the company. “We believe that the complementary product offerings will provide value to our customers. We
currently anticipate that roughly 100,000 to 150,000 st (90,718‑136,007 t) of billets will be shipped each year from our
long products steel mills to be further processed at Ashland, providing additional value-added capability and higher
through-cycle utilization for our steel mills,” Glenn Pushis, Senior Vice President, Long Products Steel Group, said.

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18 World Steel News, September 19, 2018 www.metalexpert.com © 2018 Metal Expert, +38 056 239 88 50
 Americas

SDI expects higher earnings this quarter

USA / Flat Products, Long products, Scrap
Steel Dynamics, Inc. (SDI), one of the major steel producers and metals recyclers in the US, anticipates a higher Q3
profitability compared to Q2, mainly owing to improvement in steel operations performance.

The steelmaker foresees Q3 2018 profitability from the company’s steel operations to continue improving in comparison
with Q2 2018 “based on strong underlying demand and meaningful metal spread expansion.” Specifically, average
quarterly steel product pricing is expected to increase more than average scrap costs across the steel platform, re-
sulting in increased profitability for both the sheet and long product steel operations. “Based on strong steel demand
fundamentals and customer optimism, the company believes steel consumption and market dynamics will remain
strong,” SDI said in the official statement.

Profitability for the company’s steel fabrication business is expected to remain steady compared to the previous report-
ing period. Although average sales prices and shipments are expected to improve sequentially, higher average steel
input costs will offset these positive demand fundamentals in Q3, the company said. Besides, SDI mentioned that it
continued to experience strong steel fabrication order activity, and increasing order backlogs.

However, earnings from metals recycling operations, represented by SDI’s scrap subsidiary OmniSource, are expected
to decrease versus Q2 due to recycled non-ferrous shipments and a price decline. At the same time, recycled ferrous
volumes and metal spreads are expected to remain steady for Q3 2018 based on stable domestic steel utilization,
Metal Expert learnt.

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US mills restarted after Florence

USA / Flat Products, Long products
US steelmakers with operations in South and North Carolina restarted operations after Hurricane Florence made
landfall Friday.

On September 17, Nucor resumed normal operations at all Nucor plants in North and South Carolina after taking sev-
eral of its facilities in the region offline last week due to the storm. As it was reported earlier, the company suspended
operations at several facilities on 12 September, including halting production at its Berkeley, South Carolina, sheet mill
and Hertford, North Carolina, plate mill. “Our facilities did not sustain major damage from the storm. The suspension
of operations is not expected to impact customer orders”, a company spokesperson told Metal Expert.

Liberty Steel which also suspended operations at its 750,000 stpy (about 680,000 tpy) wire rod mill in Georgetown,
South Carolina, last week, is resuming operations. “Liberty Steel Georgetown remained safe during hurricane Florence
and associated flooding and there was no major damage to the plant. We are onsite this week to start the operation
safely and to allow our employees to return from the flood affected areas,” the company said.

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19 World Steel News, September 19, 2018 www.metalexpert.com © 2018 Metal Expert, +38 056 239 88 50
 Americas

Bolivia’s ESM to start integrated mill construction by end‑2018

South America / Long products
Bolivia still hopes to build Empresa Siderurgica del Mutun (ESM), the country’s first integrated steel mill specializing
in long products, in Puerto Suarez, German Busch Province of Santa Cruz Department.

Liang Yu, the ambassador of China in Bolivia, announced this week that the construction of the Mutun steel plant in
Santa Cruz will begin before the end of the year, so the processes to expedite the first disbursement of the loan that
will finance the project are streamlined, Metal Expert learnt from the local media. China will provide $396.1 million
for the project; and the state of Bolivia $69.9 million. Jesus Lara, executive president of ESM, said in August that the
investment to launch the Mutun steel project will be increased to $546 million. A supreme decree is being negotiated
to make it possible an additional injection of $80 million.

As Metal Expert reported before, the plant will be constructed by China’s Sinosteel Equipment and Engineering Co.
The project includes the design, construction, commissioning and operation of fully integrated production cycle from
iron ore extraction (650,000 tpy) to finished steel manufacturing. The steel works will be equipped with a pellet plant,
a 250,000 tpy DRI plant, a steel meltshop and a longs-rolling mill to produce 150,000 tpy of construction steel. The
company plans to export some 86,000 tpy of its output, mainly to Brazil. Besides, the second and third stages are
considered to increase the plant’s rolling capacity.

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20 World Steel News, September 19, 2018 www.metalexpert.com © 2018 Metal Expert, +38 056 239 88 50
World Steel News

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