Author Archives: Lisa Reisman

This is part 2 of a blog on a possible ban of “unqualified” Chinese petcoke and how it relates to global aluminum prices. Check out part 1 if you missed it.

Let’s just examine prior history… prior Chinese history….prior Chinese history involving reducing pollution and emissions.

We have to look no further than the rare earths market – one in which China controls a lot more of the global supply than it does aluminum.


Can an “unqualified” Chinese petcoke ban cause the cost of smelting to go up? Is the ban even real?

For several years China implemented controls to help “clean up” the rare earths processing industry.

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The scare had many pundits suggesting that quotas would cause rare earth metals price spikes. Guess what? It never happened. Instead, prices have plunged. They have plunged farther than any other group of metals we track.

What if the Ban Really Happens?

Going back to our criteria, could this impact one of the metals markets we track? Absolutely. How big is the order of magnitude impact? Well, without even being able to validate that China’s supposed new law banning unqualified petcoke was published, the fact that there is no clarity on what the Chinese authorities consider to be “unqualified” and that we haven’t even discussed the fact that there are likely dozens, if not tens of dozens, of refiners who would jump into this market if there was a supply squeeze, could we see rising aluminum prices?

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Sure, but there are many other reasons we may see rising aluminum prices in the coming years. It might be hard to ascertain the causal factor.

Therefore, unless/until we see evidence of enforcement, this “petcoke” supply shortage will stay firmly in the “low impact” category to metal buying organizations.

Carry on with business as usual.

We’re glad that got your attention. We’re just not convinced that it will happen. Yet, we received an industry alert to that effect. Allegedly, a new law in China (for which we can find no public reference) goes into effect January 1, 2016 banning “unqualified” petcoke.

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So what? you might say. Well, petcoke is a necessary raw material in aluminum production.


Will this pile of petcoke set off a global aluminum shortage? Image courtesy of China Environment

But before we move to the point of hysteria our readers might find it helpful to understand the quick criteria we deploy in determining whether or not we’ll publish something forwarded to us:

  • Does the news item have the potential to impact one of the metal markets we cover?
  • What is the likely order of magnitude of said news item?
  • Do we think this will have any impact on the underlying metals price? And if so, in what direction?

A set of criteria that seems relatively straightforward to us right?

Why This Law Might Not Matter

Even ThomsonReuters’ Andy Home sounded the alarm bells on this issue. However, we here at MetalMiner remain more skeptical.

The email from an associate in China, who has extensive experience in that country’s aluminum industry sent an overview with the headline, “New law in China to hit global aluminum market.” Andy Home undoubtedly received the same information.

The basics of the situation include the following:

  • China [may have] implemented a new law starting January 1, 2016 that bans the import, sale or burning of “unqualified” petcoke.
  • Petcoke is an essential raw material used to make aluminum.
  • There is no clarity as to what will be considered “unqualified” petcoke. “Unqualified” pertains to the sulphur content. If a 3% sulfur (and up) standard is adopted, the thought is that there could be severe ramifications to the aluminum industry. If a 5% sulfur standard is considered “unqualified” then there will be a much smaller impact.

Is China Really Tackling Its Greenhouse Gases?

Without a doubt, petcoke yields more greenhouse gas emissions than its cousin coal. And China, for obvious reasons, wants to clean up its environment. Limits to the sale and usage of petcoke represent as logical an opportunity as any to help reduce harmful pollutants.

Time and again we’ve heard China say that they want to clean up their environment. And yet the country’s actions suggest otherwise.

Free Download: Latest Metal Price Trends in the September MMI Report

Therefore, we fail to understand how one could draw the conclusion that the aluminum market would actually be harmed and some sort of supply shortage might ensue.

This is part 1 of a 2-part series on Chinese petcoke and what a potential ban might mean. Check in tomorrow for part 2!

MetalMiner’s September spot market GOES M3-grade price index held nearly steady from a month ago dropping by only 1%. However, in a closely watched transaction, buying power just got a lot stronger as the EU recently approved the acquisition of Alstom’s energy business by GE.

GOES_Chart_September_2015_FNLAlthough authorities rightfully focused on potential anti-trust issues, back over on the purchasing side, the combined entity makes GE a formidable power buyer, no pun intended.

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The acquisition has been cleared for go, pending the sale of Alstom’s turbine business to Ansaldo, an Italian turbine manufacturer.

Powerful New Player

From a global sourcing perspective, we’d expect GE to become a price maker in terms of the company gaining significant European GOES buying power from Alstom as well as the ability to leverage opportunities for any/all global GOES contracts going forward.

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The European GOES producers have a reprieve on imports due to the anti-dumping case. Whether or not they can achieve price hikes with a more powerful GE remains to be seen.

Another New GOES Market Player

Meanwhile, Big River Steel confirmed their intent to allocate $600 million in capital for a phase 2 silicon steel-finishing mill for GOES FP and NOES (non-oriented electrical steel) FP at a recent Steel Market Update conference. Allegheny Technologies, Inc. has entered its fourth week of a lockout for steel workers. Thus far, all plants impacted remain operational.

In future follow-up posts we will examine China as a market-based economy and, in particular, China’s role in GOES markets.

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We recently received a note from a reader with questions regarding the recent Chinese remninbi currency devaluation and how sourcing professionals ought to engage with their Chinese metals suppliers. The questions included:

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  1. Should I be approaching all of my Chinese suppliers for a 3.5% price reduction?
  2. Should I expect to get it?

There are several ways to answer that question. So let’s start with the narrow answer and then expand into other aspects of China’s currency announcements.

US dollar vs. RMB

What will the devalued yuan mean for your metal buying strategy?

The Basics

First, if you pay your Chinese metal suppliers in RMB (yuan) then you ought to expect an automatic price reduction of 3.5% because the currency has depreciated. In other words, when you convert your dollars to RMB, you should see a 3.5% advantage (or whatever the newest/latest currency exchange rate is). Read more

Any outside observer (or inside observer for that matter) may struggle to keep up with the continuous stream of trade complaints filed by practically everyone involved in the global trade of grain-oriented electrical steel.

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Consider the following:

  1. US producers AK Steel and Allegheny Technologies filed (and lost) a trade case against multiple producers from multiple geographies and in a stunning decision last year, the domestic producers were found not to have been “materially injured” by foreign imports of GOES produced by Japan, Germany and Poland.
  2. Back in May, European GOES producers asked the European Commission to investigate dumping by producers from several countries including: Russia, USA, Japan, Korea and the People’s Republic of China.
  3. China appears to be working on its second anti-dumping case in a year – the first against imports from the US (in which the WTO recently ruled against China) and a new case against producers in Japan, South Korea and the EU.
  4. Please note who has not filed trade cases – producers from Japan and South Korea. We will come to why in a moment.

But First: What the August 2015 GOES Price Index Did

Based on the latest M3-grade pricing, MetalMiner’s monthly GOES MMI® registered a value of 190 in August, a decrease of 3.5% from 197 in July:


metaltalk signAre you new to the GOES market and trends? Listen to our recent podcast in which I give listeners a “GOES Market 101.”

Back to trade: If we go back in time, we’d see that electrical steel serves as one of the most popular metals involved in all metal trade-related cases.

If Only Free Markets Prevailed

One might think all of these trade cases actually helped producers, but we are coming to the conclusion that they are all likely an enormous waste of time and taxpayer dollars. Here in the US, GOES prices have largely traded sideways and certainly well off 2011 highs. Global transformer and power equipment producers shifted their transformer production to both Canada and Mexico in anticipation of a favorable trade ruling.

Moreover, the battle really centers on which producers can make the highest-performing grain-oriented electrical steels around a few parameters – high permeability, low core loss and low magnetostriction.

Here, the Japanese, Germans and South Koreans rule the day. For their capability in producing the higher-performing materials, they have earned handsome price increases for the second half of this year, according to TEX Reports (in the $700-$1,000/mt range).

Compare Prices With the July MMI Report

The balance of the producers taking their case to the streets in the form of dumping cases do not have suitable high-end products to fill the “growth” portion of the market and have, instead, only received “lower” prices for their efforts.

Meanwhile, New Government Policies…

The US government has upped the ante by implementing a range of regulations and rules that require these transformer and power equipment producers to adhere to new more stringent efficiency standards. The new EPA Clean Power Plan final rule will also put pressure on power producers to make pollution cuts and become more efficient – driving more demand for transformers and power equipment using higher-performing raw materials.

If I were Big River Steel, I’d be seriously looking at how to create my GOES lines to compete head-on with the Japanese producers. In fact, it makes little sense that AK Steel and Allegheny Technologies haven’t done that already. It’s clear that playing at the low- and mid-ends of the markets yields poor price realization.

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Earlier this week the London Metal Exchange announced that its clearinghouse would now accept offshore Chinese renminbi as collateral, effective immediately. MetalMiner Editors and Co-Founders Lisa Reisman and Stuart Burns discuss the significance of this announcement but more important, its potential impact on industrial buying organizations.

US dollar vs. RMB

For the first time, the LME will accept renminbi as collateral.

Lisa: Do you think this could mean that eventually metals are offered in a currency other than US dollars?

Stuart: I think that is still some way off for the main London market but the HKEx has run RMB-priced Asian mini metals markets for aluminum, zinc and copper since late last year in Hong Kong. This announcement by the LME now is about collateral placed by market participants for open positions. They are not suggesting London contracts will be priced in RMB.

Three Best Practices for Buying Commodities

 Lisa: Why do you think the LME made this move?

Stuart: On one level there is the recognition of the RMB’s growing importance as an international (although we’d like to point out, not freely traded) currency and of China (and Chinese companies) importance as a major player in the global metals markets. On another level, it could also be seen as a political move. The LME is owned by the Hong Kong Exchanges and Clearing Group (HKEx) and the key to unlocking fair value in their purchase of the LME was always their ability to open up China as a market for the LME’s services. Anything they can do to make the LME more accessible and more acceptable as a trading platform for Chinese companies is a beneficial step in that direction. Read more

Steel Drivers

July 2015 Monthly Metal Buying Outlook copy

Want a short-term buying strategy for steel? Check out our complimentary July Metal Buying Outlook!

1. MOH service center inventory

2. US import levels (volume trends)

3. Total China steel exports

4. Raw material input cost trends

5. Quoted lead times

Market Commentary (HRC)

Without a doubt the historical passage of several trade measures in the US has the potential to change the steel products landscape in the coming years. After all, US HRC steel prices have dropped by 25% since the start of this year. The steel industry (e.g. producers) believes this price drop has come as a result of massive imports that have begun to slow. Certainly the data supports that conclusion though other factors undoubtedly contribute to falling steel prices.

Regardless of where one stands on the import issue (either for or against) buying organizations are likely to feel the impact of the new legislation. We will discuss some of these impacts in upcoming reports.

A Fundamentals View (HRC)

Meanwhile HRC pricing has held steady from a month ago (up slightly). However, service center inventory levels (which supply some 40% of all metal to buying organizations) still suffer from too much MOH inventory. According to the latest MSCI data, steel product inventories jumped 11% in June from the same period in 2014 and perhaps more significantly, the current MOH inventory of 2.8 months of supply remains above “healthy” inventory levels.

With higher than healthy MOH inventory, service centers remain weak buyers in the market and that helps keep a lid on prices.

The Outlook (HRC)

HRC prices seem to have begun to stabilize after falling for nearly a year by closing the month of May at $464/st. We remain hesitant to call bottom particularly as the broader commodity markets remain bearish and the dollar still holds stronger. It would appear challenging for HRC to make any bold price moves to the upside. But we may have found HRC’s floor. This will require buying organizations to be particularly mindful of any upward price movements.

Market Commentary (CRC)

CRC has fallen by some 21%+/- since the beginning of the year. The pricing dynamics for CRC are similar to HRC. Undoubtedly the impact of the trade legislation signed into law in late June will impact all steel product market segments including CRC.

Globally, European mills have filed an anti-dumping suit against cold rolled coil imports from China. India has begun collecting duties on HRC products from three countries but could add CRC tariffs as well. In short, all eyes remain on China but other countries are also contributing to the oversupply.

In the meantime, domestic steel capacity utilization rates are running at 72.5%, down 7.4% from a year ago. Generally speaking a “healthy” capacity utilization rate is up above 80%.

The Outlook (CRC)

CRC prices have crept up during the month of June closing at $590/st but failing to breach last month’s short-term resistance levels. We also still see some price weakness on the horizon and continue to remain hesitant to call bottom particularly as the broader commodity markets remain bearish and the dollar holds stronger. Like HRC, it would appear challenging for CRC to make any bold price moves to the upside.

Market Commentary (HDG)

HDG continues to face price weakness, falling from $619 to $594/st, a 4% price drop. Interestingly, while steel imports have dropped during the month of May by 3.6% from April, HDG imports have continued to increase growing by nearly 17% from April to May after having jumped 20% from March to April. As with the other forms of metal, the new trade legislation will provide more enforcement “teeth” to the import process.

Six steelmakers with major US operations filed a trade complaint over HDG in June, seeking punitive tariffs for alleged unfair pricing of imported steel from China, India, Italy, South Korea and Taiwan. The suit is the first salvo in the campaign this year by the beleaguered US steel industry to protect itself against a record flood of imports.

And though US auto numbers remain positive, Chinese automotive sales continue to decline placing additional price pressure on HDG prices – which have fallen some 24% since the beginning of the year.

The Outlook (HDG)

We remain hesitant to call bottom particularly as the broader commodity markets remain bearish and the dollar holds stronger. Like HRC and CRC, it would appear challenging for HDG to make any bold price moves to the upside. It is possible, however that we will see some price stabilization.

Market Commentary (Plate)

Steel plate prices have held nearly steady this past month despite continued weakness in the energy sector, which contributes heftily to plate demand. US imports of plate products grew 13% in May and are up 36% from the same five- month time period one year ago June – May.

The Outlook (Plate)

Plate prices held steady this past month at $574/st. And indeed last month we indicated prices may be stabilizing. However, we remain hesitant to call bottom particularly as the broader commodity markets remain bearish and the dollar holds stronger. In addition, plate suffers from an inventory overhang that will take some time to work off.

So What Should My Industrial Buying Strategy Be?

This steel price forecast was excerpted from our brand new Monthly Metal Buying Outlook report. For a short- and long-term buying strategy with specific price thresholds, consult the July 2015 report!

July 2015 Monthly Metal Buying Outlook copy

Want a short-term buying strategy for zinc? Check out our complimentary July Metal Buying Outlook report!

Zinc Drivers

1. Dollar to Euro exchange rate

2. Global production

3. Global capacity utilization

4. Zinc refining capacity utilization rates

Market Commentary

Last month we reported the International Lead and Zinc Study Group suggested 2015 demand for refined zinc would exceed supply by 151,000 metric tons. Those numbers have turned out to be wildly wrong – in fact zinc is running a surplus to the tune of 181,000 metric tons. In addition, buying organizations will want to pay careful attention to the flow of metal into LME warehouses.

According to the most recent LME data available, zinc stocks declined in May by some 57k+
metric tons but some analysts believe that just the opposite will happen through July – more
inventory will make its way into LME warehouses than out of them. In addition, plenty of
extra inventory exists in non-LME warehouses throughout Asia and the United States.

Market sentiment toward zinc has hinged on the supply/demand equation and it has become a little less likely that any real zinc shortage will materialize.

The Outlook

Three-month zinc fell significantly in June, closing at $2,000/mt. As with lead, zinc’s rally this spring wasn’t sustainable in the face of a bearish commodity market. In the long-term we expect zinc prices to stay range-bound at best.

So What Should My Industrial Buying Strategy Be?

This zinc price forecast was excerpted from our brand new Monthly Metal Buying Outlook report. For a short- and long-term buying strategy with specific price thresholds, consult the July 2015 report!


Lead drivers:

July 2015 Monthly Metal Buying Outlook copy

Want a short-term buying strategy for lead? Check out our July Metal Buying Outlook report!

1. Dollar to euro exchange rate

2. Global production

3. Global capacity utilization

4. Automotive production Europea/NA/China

5. China lead prices

Market Commentary

Lead looked a little exciting in May but June has brought prices down on the back of soaring LME inventories (please note MetalMiner does not subscribe to the notion that inventory levels necessarily correlate with metal prices). However, in March a 100,000-ton surge in canceled warrants (metal to be taken out of LME warehouses) does not suggest sudden industrial demand but rather a storage arbitrage, similar to what has happened with
aluminum and to a lesser extent, zinc.

China lead prices (not SHFE but industrial trade prices) peaked in early May and have
declined ever since according to MetalMiner IndX™ data.

Last month we made mention of data that suggested a global balance between lead supply
and demand. The most recent data from the International Lead and Zinc Study Group
suggests demand is down across the board from Europe (4.2%), the US (3.9%), China (4.3%)
and Korea (9.8%). Nonetheless the market appears in somewhat of a balance. Regardless,
we don’t see lead’s fundamentals much differently than some of the other base metals.

The Outlook

Lead prices continued to fall in June closing at $1,761/mt. The rally that we saw in April has already vanished. Neither fundamentals nor technicals support a sustainable price rally. The long-term outlook remains bearish, especially while we see other industrial metals making record lows.

Lead price forecast 2015

So What Should My Industrial Buying Strategy Be?

This lead price forecast was excerpted from our brand new Monthly Metal Buying Outlook report. For a short- and long-term buying strategy with specific price thresholds, consult the July 2015 report!

Nickel Drivers

July 2015 Monthly Metal Buying Outlook copy

Want a short-term buying strategy for nickel? Check out our complimentary July Metal Buying Outlook report!

1. Dollar to Euro exchange rate

2. Stainless steel global production

3. Global capacity utilization

4. China coking coal prices (impacting Chinese nickel pig iron production)

5. China GDP & PMI data

Market Commentary

Nickel fundamentals do not tell a very good story if you are a stainless producer or service center. However, buying organizations likely feel differently about bearish metals. Nickel faces a number of headwinds that will continue to put pressure on prices.

Specifically, nickel suffers from weak global demand, excess service center inventory levels, an Indonesian export ban that failed to do what it intended to do (we’ll come to that in a moment) and increased stockpiles in China (although we do not accept the one-to-one correlation that higher inventory levels necessarily equate to lower prices and vice versa, lower inventory levels don’t necessarily equate to higher prices).

Service centers tell MetalMiner that inventory levels remain well above historical “healthy” MOH averages (about 2.4-2.6). Instead, inventory levels are up over 3.5 months, seasonally adjusted. This is a very bearish indicator. Demand has slowed for the typical summer slow-down. Service centers report transactional business is slow.

The Indonesian Export Ban

As many are aware the Indonesian government banned the export of unprocessed minerals back in January of 2014. Instead of having the desired effect of generating new investment for higher value added processing in country, exports have dried up and the government has begun tinkering with the ban to allow for some copper exports. The ban on nickel and aluminum exports remains intact but news reports suggest the ban for bauxite might be lifted which may be an indicator that the government could change its policy.

Regardless, this too is a bearish factor weighing on nickel.

The Outlook

Three-month nickel closed the month of June at $12,000/mt, sliding to a 6-year low. Nickel is in free-fall as shortage expectations faded. The long-term outlook remains bearish, especially while the rest of base metals keep falling. We expect to see high price volatility in the coming months.

So What Should My Industrial Buying Strategy Be?

This nickel price forecast was excerpted from our brand new Monthly Metal Buying Outlook report. For a short- and long-term buying strategy with specific price thresholds, consult the July 2015 report!