Category: Iron and Steel Industry

A first meeting of Arrium’s creditors is being held today, with the iron and steel business’s administrator saying the future hinges on the Whyalla’s steelworks.

Mark Mentha of insolvency firm KordaMentha said most of the company, which owes around $4 billion, is in good shape, but was exposed to the survival of Whyalla. Arrium, which entered voluntary administration this month, has said it was undertaking studies on the effects of mothballing the loss-making plant.

Turning the steel factory around was vital to both Arrium and the community, Mentha told the ABC.

“It’s the front end of the business where we dig the ore out of the ground and feed that into the mill starts the whole steel process,” he told AM.

“In Whyalla, in particular, many of the businesses in that town are in some way connected to the steel works. So it’s a business that is very much interwoven into the fabric of that community and the state of South Australia.

The creditors meeting is being held in Sydney and streamed to workers in SA.

Meanwhile, the Australian Workers Union has called on the federal government to consider co-investment in the steel facility, with modernising to supply the upcoming offshore patrol vessels a “golden opportunity” for Arrium.

“In the case that Australian steelmaking operations, like the Whyalla steelworks, would require an upgrade to manufacture the grade of steel required, the Government should look to enter into a co-investment arrangement,” AWU national secretary Scott McDine told The Advertiser.

Steel and iron ore business Arrium announced this morning that it has appointed Grant Thornton as administrators.

“After considering the available alternatives, in the current circumstances it has become clear to the board of Arrium that it has, unfortunately, been left with no option than to place the relevant companies into voluntary administration in order to protect the interests of stakeholders,” it said in a statement to the ASX.

The ABC reports that Arrium owes its bankers $2.8 billion, trade creditors $1 billion and employees $500 million in entitlements.

Arrium, which split from BHP Billiton in 2000 as OneSteel, employs 7,000 in Australia, and over 1,000 at its Whyalla steelworks.

The fate of the steelworks has been in question for some time. Arrium announced in February that it was considering putting the plant and the company’s iron ore operations in care and maintenance.

Speculation about the company’s future intensified earlier this week when Arrium’s lending syndicate rejected a recapitalisation plan from vulture fund GSO Capital. This would’ve seen lenders lose 50 cents in the dollar.

It borrowed heavily to expand, buying up iron ore mines near the ore market’s peak

The management has been blamed for the company’s situation, including by industry minister Christopher Pyne.

“If there is anybody that needs to look at themselves, it’s the Arrium management, not the banks,” Business Spectator reports him as saying.

“Arrium has a $2bn debt. That is a problem for Arrium, incurred by Arrium management. It is no fault of the workers of Whyalla and it’s no fault of the state or commonwealth governments.”

The closure of Arrium’s loss-making Whyalla steelworks would have a greater impact on its community than the closure of Holden’s Elizabeth factory next year would, according to Professor John Spoehr.

The academic from Flinders University’s Business School told the ABC that the federal and state governments should formulate an assistance package for the company. 1,100 are employed at the steelworks and a tenth of the workforce in Whyalla – population 22,000 – work at Arrium.

“It’s important that we explore every possible option for keeping the plant in operation in the years to come,” Professor Spoehr told the ABC.

An estimated 4,000 jobs would be at risk due to the factory’s mothballing, which is being examined by the company. Studies on this are due to finish in April, as announced when the company released its half-year profit results last month. A steelworks shutdown would see many in the community relocate.

“It would have a devastating impact on the local economy, because it’s such a significant employer, and in some ways it would have a more detrimental impact than the closure of Holden is going to have in Adelaide, because it represents a much larger proportion of total employers in the area,” said Professor Spoehr.

Global steel output fell last year, the first time this has happened since 2009, according to figures from the World Steel Association released this week.

The report from the WSA states production was down in every region besides Oceania.

The USA’s production was down 10.5 per cent to 78.9 million tonnes, Japan down 5 per cent to 105 million tonnes, and the EU down 1.8 per cent to 166.2 million tonnes.

A standout was India, which managed to up its production 2.6 per cent to 89.6 million tonnes.

Reuters notes that world leader China, which accounts for nearly half of global output of crude steel, cut its annual output for the first time in three decades. This fell 2.3 per cent to 803.8 million million tonnes.

“Many mills including (in) China are pulling production offline in an attempt to support prices — and it is working,” Chris Houlden, research manager at consultancy CRU, told Reuters.

“However, any reversal of production cutbacks in response to price rises will again place steel producers’ margins under extreme pressure.”

In April last year, a leading Australian economist (and former ambassador to China) Ross Garnaut tipped China’s steelmaking output to fall 25 per cent to 2030, reaching around 600 million tonnes.

To see the crude steel output data for 2015 from the WSA, click here.

The owners of the Whyalla Steelworks in South Australia have announced that they will be cutting cost in the aim to save $100 million as they try and improve the viability of the steelworks.

The cuts will affect areas such as, souring and procurement, labour and overheads, site rationalisations, corporate cost and production conversion costs.

Arrium, the owner of the Whyalla Steelworks in South Australia, has announced it has started a two year of cost cutting aiming to save $100 million to improve the viability of steelworks.

Overcapacity of steel meant it needed to improve its cost base to maintain the competitiveness of the Whyalla Steelworks.

Arrium is yet to comment on the number of jobs that will be lost as a result of the cost cutting, saying that they will consult employees, unions, suppliers and the Government.

BHP Billiton’s simplification process continues, with the miner set to shed over 100 jobs from its head office in Melbourne.

BHP said the cuts would occur over the coming years, and will include moving the company’s treasury division to London.

Staff reductions at Melbourne mean BHP’s Singapore office will employee more people.

Under rules handed down in 2001 when BHP merged with Billiton, the company must keep its HQ in Melbourne, and the CEO and CFO and required to spend the majority of their time there.

“The company is in full compliance with its FIRB commitments,” a spokesman said

BHP said it would continue to consult with tis employees about the changes.

BHP has placed a renewed and aggressive emphasis on productivity and efficiency gains across its entire portfolio in an effort to simplify mining operations.

Last year the miner cut a number of jobs in iron ore, coal and nickel in a bid to bring down costs and focus on productivity.

The United States manufacturing sector appears to have slowed to only slight rate of growth, according to the Federal Reserve’s figures.
The Wall Street Journal reports that overall industrial production – around three quarters of which is made up by manufacturing – grew by 0.2 per cent in January.
This was not enough to offset a decline of 0.3 per cent in December.
Reuters noted that the overall 0.2 per cent increase in industrials – including manufacturing, utilities and mining – was “entirely” due to an uptick in utilities.
The results “underscore what we have seen in the past couple of months from the ISM factory index: the manufacturing sector is cooling off after an extraordinarily robust 2014,” offered chief economist for Amherst Pierpont Securities Stephen Stanley in a note to clients.
Capacity utilisation was steady for January at 79.4 per cent, just below the historical average for the years 1972 to 2014.
The result follows similar indications from the ISM survey released at the beginning of the month, which registered the slowest manufacturing performance in a year, influenced by the decline in commodity prices.

A Konecranes SMARTON overhead crane has been deployed by Australian company Commonwealth Steel at their Indonesian facility in Cilegon to lift safely, efficiently and reliably. The SMARTON is Konecranes’ most advanced overhead crane, incorporating smart features for better safety and efficiency.
Commonwealth Steel is jointly owned by OneSteel and Arrium. OneSteel is Australia’s premier manufacturer of steel long products and also a leading metals distribution company in Australia and New Zealand. Arrium is the largest supplier of grinding media in the world.
Commonwealth Steel Indonesia is the first company in Indonesia and one of the first in South East Asia to install the latest Konecranes SMARTON crane with TRUCONNECT remote monitoring and reporting. Additionally, the SMARTON crane at Commonwealth Steel Indonesia features sway control and target positioning to make lifting even safer and more efficient.
The 15t SMARTON crane with the addition of a magnetic lifter is used for the loading and unloading of steel balls manufactured by Commonwealth Steel Indonesia for crushing applications. The crane is complemented by a 10/2.5t double girder CXT crane, which is used for lifting equipment and maintenance.
Commonwealth Steel Indonesia Construction Manager Mr Lukman Renta explained that safety, price and maintenance were key considerations when selecting the crane. Smart features were added to save time and money. The TRUCONNECT function additionally allows the company to optimise their maintenance schedule.
Commonwealth Steel Indonesia and Konecranes have been working together for just over one year at their new facility in Cilegon, where safety is highly prioritised.
According to Mr Lukman, the crane has excellent safety features and the maintenance crew is very fast to respond with certified technicians who comply with all safety standards and procedures. Konecranes’ SMARTON overhead cranes maximise safety and minimise downtime. The robust crane is also compact in size enabling new industrial spaces to be smaller than before, reducing construction costs and heating expenses.
Key features and benefits of Konecranes CXT cranes include individual hoist capacities up to 80 tons; complementary CXT wire rope hoists; assurance of industry benchmarked safety and ergonomics; easy and effective load handling; optimum dimensions for space-saving solutions with ability to operate closer to walls and lift loads higher; excellent hook approaches at both ends of the crane; minimal headroom requirement; and tandem operation further enhancing efficiency and utility.

Read more at http://www.ferret.com.au/c/konecranes/intelligent-konecranes-smarton-crane-helps-aussie-company-lift-safely-in-indonesia-n2519659#i7AdDk1AGHIpwfL3.99

The story of nickel is finally one of stability.

Since 2005 the me­tal has been wracked by skyrocketing highs and sharp declines that have caused massive job losses and uncertainty that has seen an exodus from the sector by many of the larger players.

Much of this was due to a fall in stainless steel demand, working inversely to the growing demand for construction steel.

IBISWorld put it succinctly: “Nickel prices, having reached unprecedented highs prior to the global financial crisis, plummeted as global economic growth slumped in subsequent years.”

And while the future is slated to be better, a swift and strong recovery is not forecast.

Earlier this year the metal reached a two year high in May, but since that time has reversed its gains, falling 27 per cent.

Much of this spike was based on Indonesia’s implementation of a ban on unrefined nickel being exported, with prices surging 56 per cent at the time, however the fall came quickly due to the likelihood of current global supply more than meeting the hole left by the Indonesian ban.

BHP’s attempts to sell off its Nickel West assets exemplified the confused nature of the sector.

While the miner saw the assets as valuable enough to retain during its greater demerger earlier this year, it did not see them as vital enough to keep within its mix.

Instead the miner attempted to sell off the various mines and smelter assets in Western Australia, and while there were plenty of alleged approaches for the suite from other majors such as Glencore and X2 Resources, BHP could not find a buyer and has now been left with the assets.

However the future is now looking more stable for nickel.

As opposed to the volatile movements seen earlier this century, there will finally be some stability ahead.

And much of this is due to the decline in the Australian dollar.

According to IBISWorld “trends in US dollar nickel prices, the value of the Australian dollar and in the volume of nickel production will continue to drive industry performance during the five years through 2018/19”.

Speaking to David McCombe, BNP Paribas managing director energy and natural resources investment banking Asia-Pacific, he told Australian Mining there is likely to be a net deficit in the metal moving out which will drive the price up.

“In 2015 we expect the price to sit around the mid US$18 000 mark, and then it will slowly move up to approximately US$19 000 by 2019,” he said.

Perth based Alto Capital ex-pects the price to hit approximately US$20 000 per tonne next year.

The price expectation is more than 11 per cent higher than the average US$18 000 evident in the sector so far in calendar 2014 – with Perth-based Alto Capital research analyst, Carey Smith, saying returns could go even higher due to pressure from the greenback.

“By next year, I expect that the Australian dollar will be trading around the range of 85-87c to the US dollar on average and that will be a bonus for Australian nickel producers,” Smith said.

“That exchange market environment can potentially add another 20 per cent in Aussie dollar terms to revenue for producers, so the outlook for nickel not only looks pretty rosy at the moment but continues to hold firm for the long-term,” he said.

There also positive trends predicted ahead, with IBISWorld stating “new firms are expected to enter the industry seeking new nickel resources”.

However “a dose of realism is also needed and while there is always pressure to unearth the next big discovery, our junior explorers have time on their side – particularly if they are venturing into Western Australia’s Fraser Range,” Smith said.

“While Sirius Resources ignited that region when it struck nickel sulphide mineralisation at Nova just over two years ago, Fraser Range is still a very fresh nickel province and we should not expect the Sirius success to be replicated in any sort of hurry.

“Two years in a whole new province isn’t a long time to get to understand its geology and my sense is that nickel explorers already in or planning to enter the province have a two-year window or so in order to make the level of discoveries that can keep market sentiment interested in both nickel, and the Fraser Range.”

Smith noted that some Aus-tralian explorers are seeking op­por­tunities away from Australia but nickel-minded players did not need to look much further than Western Australia.

Australian Nickel Conference Convenor, Bill Repard, said the nickel sector had been energised this year, partly by speculation about how rapidly China was depleting its 2013 ore stockpile of 25 million tonnes, and similar speculation on when and if the Philippines would follow Indonesia’s path and impose export bans on unprocessed nickel ore.

“Currently, there are no new large-scale nickel projects coming on stream and existing or mooted export bans will only add to the pace at which supply and demand pressures must invariably spike a price rise,” Repard said.

But a strong recovery is not on the cards.

“Nickel prices are forecast to bottom out in 2014/15 and remain low through 2018/19,” IBISWorld said.

Western Areas CFO Joe Belladonna pointed to next year as the pinch point for the metal, in particular quality nickel sulphides, which will force the industry to focus on new technological innovations if it is to remain viable.

In the previous 2013/14 period nickel revenues saw a decline of 6.9 per cent, which was an improvement on the previous period’s recorded 19.7 per cent decline.

The shrinking of the sector is predicted to slow again in the 2014/15 period to only 3.9 per cent before it records its first positive movement since 2010/11, registering a 2.1 per cent improvement in 2015/16.

This upwards trend will continue for the next few years, with a 3.3 per cent increase in 2016/17, a 4.7 per cent increase in 2017/18, and a larger 6.3 per cent increase in revenues in 2018/19.