ARI (Arrium) : At Rock bottom, ore not?

[Snoopy]

The main thing left is the steel distribution business within Australia, in which Arrium is the market leader under brandname 'OneSteel'. This is more a 'price taking' business. But the federal government has agreed to protect them from the below cost dumping of products out of Asia. So over the business cycle 'Onesteel' should be profitable.

Article in the AFR on Bluescope Steel dated 13-08-2015 p36 referenced Arrium.

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<snip>
It costs about $480 a tonne to produce the hot rolled coil (HRC) that Bluescope makes in Port Kembla.
<snip>

The price of Chinese HRC has fallen nearly 30% this year, reaching lows in recent weeks as the Middle Kingdom's domestic steel demand continues to undershoot production schedules. As a result through July, Chinese Steel exports rose by up to 25% with expectations that up to 100Mt of product will leak into regional, North American and European markets.

That potential has been made almost certain by the devaluation that will leave Bluescope even more firmly poised on dilemma's horn.

<snip>

Given the struggle that Bluescope and fellow domestic producer Arrium have had in securing anti-dumping protections this would likely bring O'Malley (Bluescope CEO) no succour. Bluescope argues that even the beefed up regime of recent years is too slow and too easily beaten.

The most recent 'boron scam' is a classic example. Apparently some foreign steelmakers have danced around our anti-dumping tariffs by subtly changing the specification of their steel through the addition of a bag of boron (chemically neutral in this application) to their raw materials mix. It is reported this window of opportunity is being closed slowly.

<snip>

Looking at through the prisim of right now, Chinese hot rolled coil is selling at around $300m a tonne. (if Port Kembla's game changing cost reduction of $50m to $100m a tonne, the Australian production cost will still be at least $80/tonne above this).

<snip>

For all that Arrium was one of the few listed companies with an obvious exposure to competitive risk from the yuan's devaluation that was not spanked by investors on Wednesday. Then again when past slip-ups and continuing structural flaws have seen your share price slide six-fold over a year to a spare 12.5c a pop, there is not a whole lot of downside left.

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What the article didn't mention was that as an iron ore producer, Arrium will see benefits from the spike in the iron or price back over $US50 in the last few weeks.

SNOOPY

[Snoopy]

Article in the AFR on Bluescope Steel dated 13-08-2015 p36 referenced Arrium.

------

<snip>
It costs about $480 a tonne to produce the hot rolled coil (HRC) that Bluescope makes in Port Kembla.
<snip>

The price of Chinese HRC has fallen nearly 30% this year, reaching lows in recent weeks as the Middle Kingdom's domestic steel demand continues to undershoot production schedules. As a result through July, Chinese Steel exports rose by up to 25% with expectations that up to 100Mt of product will leak into regional, North American and European markets.

That potential has been made almost certain by the devaluation that will leave Bluescope even more firmly poised on dilemma's horn.

<snip>

Given the struggle that Bluescope and fellow domestic producer Arrium have had in securing anti-dumping protections this would likely bring O'Malley (Bluescope CEO) no succour. Bluescope argues that even the beefed up regime of recent years is too slow and too easily beaten.

The most recent 'boron scam' is a classic example. Apparently some foreign steelmakers have danced around our anti-dumping tariffs by subtly changing the specification of their steel through the addition of a bag of boron (chemically neutral in this application) to their raw materials mix. It is reported this window of opportunity is being closed slowly.

<snip>

Looking at through the prisim of right now, Chinese hot rolled coil is selling at around $300m a tonne. (if Port Kembla's game changing cost reduction of $50m to $100m a tonne, the Australian production cost will still be at least $80/tonne above this).

<snip>

For all that Arrium was one of the few listed companies with an obvious exposure to competitive risk from the yuan's devaluation that was not spanked by investors on Wednesday. Then again when past slip-ups and continuing structural flaws have seen your share price slide six-fold over a year to a spare 12.5c a pop, there is not a whole lot of downside left.

--------

What the article didn't mention was that as an iron ore producer, Arrium will see benefits from the spike in the iron or price back over $US50 in the last few weeks.

Excerpts from an article in the AFR dated 17-09-2015

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Fair Work commissioner Julius Roe found on Tuesday that Arrium was within its rights to alter employee hours and abolish the rostered day off system at a WA processing and distribution centre. <snip>

Since the 1980s workers on the site have worked a 38 hour week, with two hours a week accumulating towards an 8 hour rostered day off (RDO) every four weeks. The Fair Work Commission decision gives Onesteel the ability to abolish the RDO system and reduce the overlap of workers shifts.

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The rest of the article tells that fellow steel producer Bluescope have not been so lucky with their labour reforms, a decision that may yet mothball the remaining blast furnace at its iconic Port Kembla steel works.

SNOOPY