4 FEBRUARY 2010 – Steel This Week

4 FEBRUARY 2010

  WILL BHP BILLITON PUT A MOVE ON A SASKATCHEWAN POTASH PRODUCER?

Is BHP Billiton, the largest global mining corporation, in the market for one of Saskatchewan’s major potash producers?

“If it's not Potash Corp., it's Mosaic or Agrium,” speculates the Globe and Mail’s Fabrice Taylor. “But someone will get taken out and relatively soon, is my inflation-adjusted two cents worth.”

Billiton’s purchase last month of Athabasca Potash “surprised many in the mining community who expected BHP to splash out on a bigger potash name,” adds the UK Financial Times. “Potash Corp and Mosaic, leaders in the highly consolidated industry, have long been rumoured as top targets for BHP.”

Athabasca represents a major move into potash for BHP. It comes with almost 7,000sq km for potash exploration and development and includes Athabasca’s Burr project, which abuts BHP’s Jansen potash project. The company recently said it would spend $240 million to develop the first stage of Jansen. The plans for that project are so large, with annual production targeted around 8m tonnes, “that BHP could be slowly, organically growing its way to a position of market influence to rival Potash Corp and other established players,” suggests Taylor. BHP, whose cash and equivalents was $10.8b on June 30, has signaled strong interest in potash since it bought Anglo Potash in July 2008 for C$284m.


  STEELWORKERS ISSUE STRIKE NOTICE AT NELSON CREDIT UNION

Steelworkers at the Nelson and District Credit Union have issued a 72 hour strike notice and informed their employer they will not work beyond Feb. 15 if a new collective agreement isn't signed.

The members have been without an agreement for 18 months; bargaining broke down last year and the union and employer recently returned to the bargaining table along with a mediator. USW Local 1-405 financial secretary Doug Singer says the first four days didn't result in an agreement but optimism is high for three days of talks this week in Nelson. Singer says the main issues include job security, wages and terms.

CRISIS, WHAT CRISIS?

In many sectors of the Canadian economy workers’ pay has fallen in the past year. But at the same time, managers have taken a huge pay increase.

Overall, wages and salaries rose by a slim 1.3%, precisely the rate of inflation over the past year, according to a new Statistics Canada report. But break that down a little and you find a huge disparity. Workers in the forestry and logging (-1.9%), construction (-0.9%), transportation and warehousing (-5.4%) and administrative and support, waste management and remediation services (-0.7%) categories actually took pay cuts. Most other workers saw no change or else paltry raises.

But not so on the management side of the table: managers of companies and enterprises saw a hefty 17.5% year-on-year increase in pay! In addition, a recent report for the Canadian Centre for Policy Alternatives by Hugh Mackenzie shows the average compensation for Canada's 100 highest paid CEOs was $7,300,884 in 2008 – a stark contrast from the total average Canadian income of $42,305. CEOs pocketed what takes Canadians earning an average income an entire year to make by 1:06 pm January 4 – the first working day of the year.

Is it any wonder some people think the recession is over and don’t care about job creation?

  RAILROADS’ PROFITS UP IN SPITE OF SLIPPING REVENUES

Excluding special items, Canadian National Railway reports fourth-quarter net income of $424 million. That compares with adjusted net income of $531m during the same period last year. Net income for all of 2009 (excluding special items) totaled $1.533 billion compared to $C1.778b in 2008.

Meanwhile Canadian Pacific Railway reported higher profits in the fourth quarter, even as revenues slipped by 16% due to the economic crisis. The railway – regarded by some observers as a bellwether for the Canadian economy – said net income in the final three months of last year rose to $194 million from $188 million, or 3%, compared to the same period in 2008.

  GODIN URGES EI EXTENSION

A New Democrat MP is urging the federal government to extend employment insurance for workers who are running out of benefits. Yvon Godin says more than 500,000 workers have yet to find work, but are close to exhausting their EI entitlements. The government has a responsibility to take care of workers left jobless in the economic crisis, he said Tuesday. People shouldn't be forced onto welfare because they've run out of EI time.

The New Brunswick MP and long-time Steelworker says the government has spent billions to help corporations through economic hard times and it should be prepared to do the same for workers.
Bolstering EI might cost a few billion, Godin said, but “we're going to have a deficit anyway.”
Since the government has not produced a job-creation plan, it has a responsibility to the jobless, he told a news conference. “The government cannot simply offload the problem onto the provinces,” he said. “Until jobs become available, it is our duty as MPs to help these unemployed workers.”

MEPS SEES GLOBAL STEEL PRICES RISING ON HIGHER INPUT COSTS

A flurry of price-hike announcements in December has translated into substantially higher steel prices in the US, says global steel monitor MEPS. The primary driver for the increases was escalating input costs, since there is no pick-up in real demand from any of the main consuming sectors and distributors continue to keep inventories at minimum levels. “There is a scarcity of attractive import opportunities and the weak US dollar should help keep overseas material at bay for some time to come,” says MEPS. Recently producers have tabled more proposed price hikes for February deliveries due to rising scrap prices.

Canadian customers appear to be slightly more optimistic about future business levels, although they are expecting only gradual improvement as the year progresses. They are keeping inventories down with only a small amount of rebuilding from the minimum volumes seen in mid 2009. Output is slowly reviving but remains significantly below the norm. As their material costs are rising, producers have been raising sales prices and warn that further increases are on the way. Some buyers are ordering ahead of the perceived hikes. Imports are at a low enough volume not to be considered a major factor.

Local prices continued to rally in China in early January until the government announced that bank lending requirements would be tightened. Since then, the upward tendency has started to reverse. Nevertheless, MEPS says January prices are still above those listed in December. There is concern that most of the price rises seen recently were caused by surging raw material costs, not increased demand.

Japanese steelmakers are benefiting from a significant recovery in consumption by carmakers and home appliance manufacturers as they continue to rely heavily on overseas sales. Domestic inventories remain stubbornly high. However, quayside stocks of imported flat products, as of the end of November, fell by 3.5% compared to October, mainly due to a slowdown in arrivals from foreign suppliers.

The South Korean economy is moving out of recession and steel producers are enjoying growing demand from key consumers such as auto and appliance makers. However, not all sectors are booming. Inventories of flat products, for instance, rose by just over 1% from November to the end of December.

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If you have any questions, comments or information you would like to make known to Steelworkers in District 3, please feel free to contact Brother Kim Pollock, Canadian Research Representative: kpollock@usw.ca or 694-683-1117 in the Burnaby, BC office District 3