HIGHLIGHTS: Disruptions in Ukraine, ArcelorMittal Europe recovery, Q2 iron ore analyst ranking

Editor Vera Blei looks at the main news covered by Steel First this week.

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The impact of continuing military action in the east of Ukraine on the country’s steel market became much more apparent this week.

At the beginning of the week we reported that Ukraine’s largest steelmaker Metinvest was cutting rolled steel output at its Azovstal and Ilyich Iron & Steel units because of supply chain disruption.

By the end of the week, the company announced that it will not accept any new export orders until the situation in the country becomes clearer.

And reports emerged that export clients of Metinvest are facing supply delays on their product orders.

ArcelorMittal Europe recovery
Attention turned to ArcelorMittal, as the world’s largest steelmaker reported higher Q2 earnings as the continued recovery in Europe offset the impact of lower iron ore prices.

The company’s European division saw a 29% quarter-on-quarter rise in earnings on the back of higher steel shipments, as it reaped the benefits of restructuring measures and higher margins as the cost of raw materials dropped.

Lower iron ore prices led to a 10.5% year-on-year drop in earnings at the company’s mining division.

Nonetheless, ArcelorMittal announced that it has entered sale-and-purchase agreements to obtain as much as 56.5% ownership of the Euronimba iron ore project in Guinea, located around 40km from its Yekepa iron ore mine in Liberia.

Iron ore analyst ranking
Analysts from Chinese investment bank CLSA and Bank of America Merrill Lynch (BAML) topped Steel First’s survey of iron ore price forecasts for the second quarter of 2014.

In the meantime, major Chinese mills saw first-half profits more than double as the sharp drop in production costs outpaced the fall in steel prices. 

China’s steel purchasing managers index rose to 48.6 points in July, as the country’s manufacturing sector continued to recover. The index stayed, however, below the 50-point threshold for the third consecutive month.

Latin America
In Latin America, Brazilian steelmaker Gerdau reported a 2% fall in net profit in Q2, while net sales increased by 5.7%, mostly on the back of higher net sales at its North America division. 

Miner Vale reported a 43.2% quarter-on-quarter drop in net profit, as a result of an impairment on Guinea’s Simandou iron ore project and Australia’s Integra Coal mine.

The company expects a better outlook for iron ore prices in the second half of the year. “I don’t want to forecast prices, but $110 per tonne is a good value level,” Vale’s executive director for iron ore and strategy, Jose Carlos Martins said. 

Japan
In Japan, Nippon Steel & Sumitomo Metal Corp (NSSMC) reported a 6.4% year-on-year increase in operating profit for April-June on the back of “robust” demand in the domestic market and a recovery in exports. 

The company is targeting a 10% increase in 2014 profit as the effect of the recent sales tax rise from 5% to 8% fades.

Meanwhile Japan’s auto output continues its upward trend, as the country’s carmakers produced 6.6% more vehicles in June than in the same month last year.

Mordashov interview
And finally, don’t miss our interview with Severstal’s majority owner and ceo Alexei Mordashov.

Following the sale of its US assets to Steel Dynamics and AK Steel, the company said it will use the proceeds to pay extra dividends and reduce debts.