Articles in Category: Company News

Construction has been one of the few pockets of strength in the U.S. economy – until recently. Construction payrolls have declined since March and spending in May rose less than 3% from a year earlier, the lowest rate since 2011.

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Coming after strong growth of 10% last year, the question now is whether the sputtering is just a blip or something more lasting that portends a significant drag on the economy.

The Associated Builders & Contractors, American Institute of Architects and National Association of Home Builders‘ chief economists recently gathered in Washington, D.C., for a mid-year market forecast, outlining stable to strong residential and commercial project activity through 2017.

Each economist discussed present and future indicators for sector performance, including ABC’s Construction Backlog Indicator (8.6, 1Q2016); AIA’s Architecture Billings Index (52.6 in June) and the Construction Consensus Forecast (5.6% growth in 2017); and, the NAHB/Wells Fargo Housing Market Index (60, August 2016).

While all of the economists predicted growth in 2017, they had varying degrees of optimism.

Anirban Basu, ABC Chief Economist: “Nonresidential construction spending growth will continue into the next year with an estimated increase in the range of 3 to 4%. Growth will continue to be led by privately financed projects, with commercial construction continuing to lead the way. Energy-related construction will become less of a drag in 2017, while public spending will continue to be lackluster.”

Robert Dietz, NAHB Chief Economist: “Our forecast shows single-family production expanding by more than 10% in 2016, and the robust multifamily sector leveling off. Historically low mortgage interest rates and favorable demographics should keep the housing market moving forward at a gradual pace, but residential construction growth will be constrained by shortages of labor and lots and rising regulatory costs.”

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Kermit Baker, AIA Chief Economist: “Revenue at architecture firms continues to grow, so prospects for the construction industry remain solid over the next 12 to 18 months. Given current demographic trends, the single-family residential and the institutional building sectors have the greatest potential for further expansion at present.”

An administrative law judge who suspended U.S. Steel Corp.‘s 337 case against 40 Chinese steel companies earlier this year improperly linked the case to the anti-dumping and countervailing duty investigations handled by a separate government agency — the Department of Commerce — according to an International Trade Commission opinion.

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The commissioners initially overturned the suspension on Aug. 5, but did not issue their opinion until yesterday.

US Steel’s Anti-Dumping Cases Not Significantly Related

The commissioners, in overturning the suspension of U.S. Steel’s case, determined ITC rules do not allow for the suspension of a 337 investigation simply in order to notify the Commerce Department as required by statute, and that elements of U.S. Steel’s case involving allegations of price fixing and transshipment “are, at most only partially related to anti-dumping and countervailing duties.”

Administrative Law Judge Dee Lord suspended the case on July 6 because Commerce was not notified of the investigation, and because elements involving price fixing and transshipment, at least partially, fell under the scope of Commerce’s antidumping and countervailing duty investigations.

U.S. Steel’s initial petition, filed on April 26, cites allegations of collusion and price fixing, transshipment to evade anti-dumping/countervailing duties, and theft of trade secrets via hacking by Chinese agents.

Free Download: The August 2016 MMI Report

U.S. Steel is seeking a general exclusion order to block all Chinese carbon and alloy steel products from the U.S. market, a limited exclusion order blocking imports from 40 listed steel companies and a cease-and-desist order for their alleged illegal practices.

U.S. Steel claimed that a hack similar to one that happened in 2011 to it and other companies was carried out to acquire the recipe and production process of a popular automotive steel alloy, dual-phase 980, that Baosteel and other Chinese companies began offering shortly after the hack,

As a counterbalance to our article this week about proposed tariff changes intended to counter the flow of unwrought metal out of China, China Hongqiao, the world’s largest aluminum producer, is reported in the South China Morning Post rejecting concerns the Chinese aluminum industry has a major overcapacity problem.

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In fact, in the words of Chief Executive Officer Zhang Bo, China’s high demand for aluminum and improving “self-discipline” in production and capacity expansion has already resulted in a much healthier state than some analysts’ believe. As in steel — and several other commodities — China’s position in the global aluminum market cannot be overstated, but unlike steel an export regime is supposed to keep excess production from being exported onto the world market.

China’s Aluminum Demand and Supply

Broadly speaking, up to a couple of years ago that held good. China accounts for some 53% of global demand of 30 million metric tons in the first half of this year and is self sufficient in primary aluminum although it does import bauxite and alumina, intermediate products.

How are Chinese smelters making money? Source: Adobe Stock/Pavel Losevsky

How much excess aluminum is being produced by Chinese Smelters? Source: Adobe Stock/Pavel Losevsky.

Zhang Bo says given that the industry’s (in China) overall plant utilization exceeds 80%, and over 80% of the smelters are profitable, “nobody should have the idea that the industry is in major overcapacity.”

He also noted mainland China’s 8.6% year-on-year first-half aluminum demand growth has far outstripped output growth of just 1% with robust demand from the transportation, electronic and electrical markets this year. To be fair, China Hongqiao figures appear — on the face of it — to support his position. On Friday the group posted a 20.7% year-on-year rise in net profit for the first half to $510 million (3.28 billion CNY) as a 9% fall in selling prices was more than offset by a 25% growth in sales volume the article stated.

Nor is China Hongqiao an exception. The industry’s daily output volume has surged from a low of around 75,000 mt early this year to 90,000 mt now, not far short of last year’s highest levels, ANZ Senior Commodity Strategist Daniel Hynes is quoted as saying.

Earlier promises of smelter closures when prices were around $1,599/mt (10,600 CNY per mt) are now a distant memory, as prices have surged to $1,885.95/mt (12,500 CNY) today gradually idled capacity is being brought back into production. Nearly 200,000 mt of annual capacity having resumed in the second quarter and another 300,000 mt is due to come back in the third quarter, according to the SCMP.

Smelting Capacity Expands

Earlier targets to cut 4.5 million mt of outdated aluminum capacity, even if implemented, will be rapidly replaced by some 3.7 mmt-a-year of new capacity scheduled to come onstream in the second half of this year alone. China Hongqiao expanded its annual aluminum smelting capacity by 29.8% to 5.89 mmt in the 12 months to June 30, and Zhang expects it to reach 6.5 mmt by year-end.

Free Download: The August 2016 MMI Report

China Hongqiao will, of course, talk up the market and downplay suggestions of excess production. The company’s share price has done well on a resurgent aluminum price and rising profits, the last thing Zhang Bo wants is talk of overcapacity.

China’s aluminum semis exports have reduced a little this year, suggesting domestic demand is robust and mills do not have such a pressing need to dump metal abroad as they did last year. Still, with such a dominant position in the global aluminum market a sneeze at home could easily result in a cold for smelters in the rest of the world.

smu-ad-2A who’s who of manufacturing companies, fabricators, service centers, wholesalers, trading companies, steel mills, toll processors and companies that provide products and services to the steel industry will be present at Steel Market Update‘s annual conference later this month, including our own Lisa Reisman.

Lisa will be providing a steel price forecast to those in attendance at the Georgia International Convention Center in Atlanta, August 29-31. She will be joined by representatives from the Institute for Trends Research, Cliffs Natural Resources, AK Steel and the Federal Reserve Bank of Atlanta, who will be delivering the keynotes during the 3-day event.

To learn more and register for the conference, click here.

Dr. Christopher Bayer, Ph.D., of the Payson Center for International Development of Tulane University Law School, recently responded to an e-mail interview with MetalMiner Editor Jeff Yoders about the recent Conflict Mineral Benchmarking Study he led of Dodd-Frank Conflict Minerals compliance.

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More than three years after U.S. companies began filing reports about their efforts to find conflict minerals linked to armed militias in Africa in their supply chains, 65% say they still can’t make a determination about what minerals are in those chains. Bayer explained more in this MetalMiner Q&A.

Chris Bayer. Image courtesy of Tulane University.

Chris Bayer. Image: Tulane University.

Jeff Yoders: Analysis of the reports shows that conflict-minerals reports are boosting supply-chain transparency for many of these companies. Is that an added benefit to reporting?

Chris Bayer, PhD: Yes, a company can use Dodd-Frank Section 1502 to gain insight into its own supply chain, to a degree that would probably not have been previously possible. Whether and how companies may leverage that to their advantage is up to them, but without question, information is power. Quite a number of companies are weeding out non-performing suppliers in their supply chain according to their defined parameters on conflict minerals.

JY: 10% Of all filers said, or implied, they had conflict-free products. What did you and your team’s research tell you about these claims?

CB: First off, it is in fact an extraordinary claim for a company to make. A whole lot of work would go into ruling out the possibility that the company is indeed not — through its procurement practices — fueling conflict in the Democratic Republic of the Congo. Your due diligence inquiry is, by definition, very involved, given the sheer amount of tiers and suppliers to traverse on average. But as per the Securities and Exchange Commission, a company should take care not to designate is products as DRC conflict-free unless it can also provide independent assurance that would lend credibility to such a claim.

JY: Incomplete reports were still an issue. How long do you think it will be until companies can, at least, fill out complete reports?

CB: Since many companies are already able to achieve full compliance — including reporting smelter Or Refiner (SOR) and Country of Origin (COO) data — the we-need-more time argument becomes less plausible.

JY: More companies underwent product audits this year. Are outside product audits necessary for full compliance?

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CB: A company that does not opt to use the “DRC conflict free” designation is, as per the SEC statement of April 29, 2014, not required to have an independent, private-sector audit performed.

After a gap of 30 years, the London Metal Exchange is, in collaboration with the World Gold Council, getting back into precious metals. Not just because it sees an opportunity, but because the industry is in desperate need of an efficient and professional marketplace following the departure of principal banks from London’s Gold Fix in the wake of the Libor scandal and suggestions the Gold Fix could be manipulated.

Free Download: The July 2016 MMI Report

The LME announced this week it will launch centrally cleared gold and silver contracts on a platform called LMEprecious in the first half of next year, followed by platinum and palladium.

Gold bars

Gold will trade on the basis of London good-delivery 99.5% bars in 100 ounce lots. Source: Adobe Stock/misunseo.

According to Bloomberg, the new contracts are designed to complement London’s $5 trillion over-the-counter gold and silver market and will include contracts for spot, daily and monthly futures, options and calendar spread contracts, according to the statement.

Who’s Got the LME’s Back?

Trading house OSTC and banks Goldman Sachs Group Inc., ICBC Standard Bank Plc, Morgan Stanley, Natixis SA and Societe Generale SA will co-own the LMEprecious platform and will act as liquidity providers and some 30 firms have expressed a desire to be engaged from the initial offering. Read more

Profits were down at Hong Kong Exchanges & Clearing Ltd. in the first half of 2016 and Rio Tinto and BHP Billiton are fighting an Australian iron ore mining tax.

Profits Down at HKEX in First Half

Core first-half earnings of the Hong Kong Exchanges & Clearing Ltd.’s commodity division slumped by 19% as trade in metals declined while hiring linked to a new spot commodities trading platform in China drove up costs, the exchange said on Wednesday.

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HKEX’s second-quarter net profit slumped 38% as falling trading volumes pushed down fees for buying and selling shares and commodities contracts.

BHP, Rio Blast Proposed Australian Iron Ore Mining Tax

Mining giants Rio Tinto Group and BHP Billiton on Tuesday issued statements attacking proposals for a new Australian mining tax as damaging and unfair. Brendon Grylls, leader of the National Party in Western Australia, has proposed an iron ore levy of $3.86 (Australian $5) a metric ton that would specifically target BHP and Rio.

Olympics organizers on Monday rushed to fix bad wiring, broken plumbing and other problems in the athletes’ village in Rio de Janeiro after several foreign teams complained that accommodations were dirty and in disrepair less than two weeks before the start of the Games.

Entirely Expected

Here at MetalMiner, we often write about the quirks of Olympic construction and the graft, price inflation and other things that come along with them. We also document how major steelmakers often set up new operations just to provide products for events such as World Cups and Olympics. Brazil is definitely the rule and not the exception.

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We even scraped together a World Cup of industrial metals to see which metals were gaining the most from World Cup demand back in 2014 when Brazil was rushing to get stadiums, athlete accommodations, hotels and businesses done in time … as opposed to today when just Rio is rushing to get stadiums, athlete accommodations, hotels and businesses done in time.

Construction_yoders_550_030116

Can we do Olympic construction better? Choosing cities years ahead just makes prices escalate faster anymore. Photo: Jeff Yoders

Why isn’t Olympic construction ever done on time, on budget and up to the quality standards that International Olympic Committee member-countries demand anymore? Sochi wasn’t smooth by any stretch of the imagination but, aside from the study in hubris that was Bob Costas’ pink-eye broadcasts, it’s looking like Rio’s problems dwarf Sochi’s. Yes, Rio, you made Sochi look good. Why is each Olympics worse than the last? And more costly? Read more

Our Renewables MMI was flat again this month, another sign of stagnant prices and renewable power generation markets that are simply not maturing very fast.

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Perhaps it’s a sign of just how tepid renewable technology metals markets are, that the purchase of major photovoltaic panel manufacturer SolarCity and electric/hyrid automaker Tesla Motors didn’t really make a blip in the prices of silicon or our other renewable metals.

Industry consolidation is usually a good sign for emerging technologies and the synergies that Tesla could possibly take advantage of in providing electric car batteries, home energy storage and now solar-energy-collecting panels sort of make sense to allow Tesla to own the green power storage segment. If vertical integration hadn’t been abandoned by the auto industry decades ago.

Renewables_Chart_August-2016_FNL

Markets have responded with a veritable shrug. SolarCity shareholders are almost certain to file a lawsuit questioning the merger, all the shareholders who are, of course, not Tesla CEO Elon Musk who is also a major SolarCity shareholder. SolarCity’s CEO is Musk’s cousin. The $2.6 billion takeover will pay shareholders only $25.83 a share. Less than SolarCity’s share price the day the deal was announced.

Analysts hate the merger, too. Adam Jonas, an influential auto industry analyst at Morgan Stanley, slashed his price target for Tesla and wrote in a note to clients that potential rewards would not adequately compensate investors for the greater risks and cash flow drain. Expanding into a non-auto business like solar energy exposes Tesla to “untested cost, competitive and regulatory forces,” he warned.

Tesla shares, themselves, dropped 10% the day the deal was announced. Even if this deal won’t move markets for silver, silicon, lithium or neodymium anytime soon, there are economies of scale that could pay off in the long run that Musk is looking at.

Compare Prices With the July 2016 MMI Report

Tesla owners will eventually need to get power from energy sources other than plugging into a wall unit fed by a coal-fired electricity plant, after all. Just don’t expect Tesla to become the vertically integrated battery/solar panel/electric car maker that changes the world in the next five to 10 years.

Actual Renewables Prices

Neodymium dropped from $50,642.96 per metric ton in July to $48,920/mt this month, a big drop of 3.4%. Silicon increased to $1,821.33/mt this month from $1,818.34/mt in July, an increase of .2%.

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While India’s Tata Steel’s effort to sell its U.K. assets enters its second round of bids, there’s some good news for the company from the other side of the Atlantic.

The provisional government of Quebec in Canada has decided to invest $133 million (C $175 million)  in Tata Steel’s iron ore project in the region between Quebec and Labrador.

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According to an announcement made by Tata Steel Minerals Canada (TSMC), the company’s Canadian subsidiary, it had been awarded the financial contribution to support the development of its Direct Shipping Ore (DSO) Project. The contribution included an equity stake of $95.72 million (C $125 million) through the Capital Mining Hydrocarbons Fund which supported mining activities in the northern region of Québec and a loan of $38.29 million (C $50 million) through Investment Québec.

Canada Supports Iron Ore

Analysts said the equity/loan assistance was aimed at fueling growth in the mining sector in the region and would also create jobs. TSMC, a joint venture, is developing the iron ore project in Quebec. Tata Steel holds a 94% stake in the JV while the remainder is held by the Toronto-listed New Millennium Corporation.

The DSO project involves mining, crushing, washing, screening and drying the run-of-mine ore, and is expected to produce 4.2 million tons of sinter fines and pellet feed a year.

The finished product will be transported to Sept-Îles, Québec, from where it will be shipped to Tata Steel Europe’s steelmaking facilities.

With the Canadian government’s equity infusion in TSMC, Tata Steel’s stake will come down though it’s not yet clear how much. The Quebec Government’s financial package is in line with a similar financial package proposal by the U.K. Government for Tata Steel’s Port Talbot operations, aimed at rescuing the British steel industry.

Port Talbot Still on the Block

Last week, CNBC TV 18 reported that Tata may keep the Port Talbot unit. Quoting unnamed sources, the report claimed Tata Steel is likely to sell off downstream units in Rostherham, Hartlepool and Stocksbridge, instead. Each of these operations have a 100-million-metric-ton production capacity and together employ about 3,000 workers. Management buyout firm Excalibur and Indian-origin businessman Sanjeev Gupta’s Liberty House are said to be in the fray for the assets of the other operations.

Free Download: The July 2016 MMI Report

Tata had written down the value of its U.K. steel assets to almost zero and was also exploring a merger of its European business — including its profitable assets in the Netherlands — with German peer ThyssenKrupp.