Articles in Category: Company News

China vowed to cut its steel production over the next five years and the Trans-Pacific Partnership is now officially signed.

TPP Signed, Legislative Fights Ahead

Trade ministers for the 12 Trans-Pacific Partnership nations formally signed the massive accord on Wednesday in New Zealand and vowed to throw their weight behind surpassing the various legislative hurdles necessary to actually put the deal into place.

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The 12 nations account for some 40% of the world’s economy. They now have two years to ratify or reject the pact.

China Vows to Cut Steel Production

China will cut crude steel capacity by 100 million to 150 million metric tons within the next five years in a bid to tackle a crippling glut that has dragged prices down to multiyear lows and saddled firms with huge debts, the nation’s cabinet said recently.

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The State Council also said it would ban new steel projects and work to eliminate so-called stricken “zombie” mills, which have stopped producing steel but have not formally shut down.

Ford Motor Company took the automotive world by storm when it announced it was going to construct the iconic F-150 pickup truck from aluminum in 2015.

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The very idea that America’s workhorse could be made from something so fragile as aluminum was a complete anathema to some people, but the resulting product on the whole has been well received.

Classic car

An aluminum-bodied Rolls? It’s more likely than you think. Source: Adobe Stock/Dimitri Surkov.

Lighter, more economical and more responsive it can be said in most quarters to have been a success; so much so that Ford has recently announced it will increase the aluminum content in 2017 models.

GM Plays Catch Up

Despite initially trashing the idea, General Motors has now said it would sink $877 million into its Flint, Mich., truck factory this year with the intention of converting many of the bodies for models such as the Chevrolet Silverado and GMC Sierra pickups into aluminum. Read more

Honestly, what is the answer to the problem of China’s steel exports destroying domestic producers around the world?

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It is no exaggeration to say the United Kingdown faces the end of its domestic steel industry. Last week, Tata Steel announced the elimination of 1,050 redundancies mainly at its giant Port Talbot plant in South Wales, adding to the more than 2,000 positions the company cut last year.

Can the UK steel industry survive? Source: Adobe Stock/Inzyx.

Can the UK steel industry survive? Source: Adobe Stock/Inzyx.

In October, SSI shut its steel plant in Redcar Teeside with 2,200 staff being made redundant, shortly after the announcement that 400 jobs were lost with the implosion of Caparo in the Midlands, the London Telegraph reported earlier.

What’s at Stake

Port Talbot is Britain’s last integrated steel works, at two-and-a-half miles long and 100 years-old it is also one of Europe’s most productive, churning out 3.5 million metric tons a year of top-quality flat-rolled steel. It has, in recent years, broken every target the company has set for efficiency, production and tonnage, yet when faced with Chinese imports priced at $34 per mt below the cost of production, according to trade body UK Steel, it is at risk of closure. Tata is losing $1 million a week and the Indian owners have been forced to write down the value of their UK steel investments by over $1.2 billion last year. Read more

India’s National Aluminum Co. (NALCO) seems to be declaring it will, indeed, join ’em.

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The state-owned aluminum producer is sending a team to Iran, Qatar and Oman to explore opportunities for setting up a gas-fired thermal power plant and associated aluminum smelter next month according a report in the India Times.

NALCO has been looking at a $2 billion project to set up a smelter in Iran’s Kerman province, but sanctions meant it never got beyond the feasibility stage. Now, with sanctions lifted, the firm is exploring all locations in addition to the Iranian project probably with the intent that they can show the Iranians they have other options and negotiate a better deal.

New Suitors

India is reported by the Indian Aluminum Association (IAA) to have the world’s fourth-largest thermal coal reserves at 250 billion metric tons and the fifth-largest bauxite reserves at 3.29 billion mt while also being self-sufficient in aluminum production. So, you may ask, then, why is a state-owned producer looking to invest $2 billion in a project in the Middle East?

India_Alu_consumption

Source: Indian Aluminum Association.

Globally, aluminum has probably the best growth prospects of any of the base metals, even though prices are currently desperately low for producers struggling to cover costs, but India has even better growth prospects than much of the rest of the world. Per capita consumption is only 1.8 kilograms per person compared to over 20 kg in the developed world as this chart from the IAA shows. Read more

One of the largest tractor manufacturers in the world and one India’s top automakers, Mahindra & Mahindra Ltd. is reportedly building an SUV for the American market.

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A recent report in The Wall Street Journal said the company has cobbled together an engineering team to set up a unit near Detroit, home of much of the US auto industry. Mahindra’s new staff has been carefully poached from US giants such as Ford Motor Co. and Tesla Motors Inc.

Genze_20_Mahindra_550_012116

Mahindra’s new Genze 2.0 is a scooter designed for the North American market. Source: Mahindra.

The same report claims Mahindra was already testing the large SUV, said to be comparable to the BMW X5, on the streets of metropolitan Detroit. The SUV will have to meet stiff US safety and fuel economy regulations, and cater to the whims of American buyers if it wants to be successful.

Mahindra’s US Ambitions

This isn’t Mahindra’s first attempt to crack the US automotive market. About a decade ago, the $16.9 billion conglomerate, which controls about 40% of the SUV market in India announced partnerships with US dealers, with the promise of delivering vehicles by 2009. But Mahindra claimed it had trouble meeting US vehicle regulations and canceled its plans in 2010, and the entire episode ended up in US courts as at least 5 automobile dealers from the US filed a lawsuit accusing M&M accusing it of fraud, misrepresentation and conspiracy.

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Greece’s highest court overturned its government’s decision to stop Eldorado Gold‘s mining operation and Johnson-Matthey has lifted its estimate of last year’s platinum market deficit.

Eldorado Gold Wins Greece Gold Mine Appeal

Greece’s top administrative court has annulled the government’s decision last year to revoke Eldorado Gold‘s mining license, according to court documents published on Wednesday. The Canadian mining company had appealed to Greece’s top court to overturn the ban on its plans to develop gold mines in a forested area of northern Greece, in a case widely seen as a test of the new leftist government’s approach to foreign investment.

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Eldorado has put about $700 million into the project since 2012 and planned to invest another $1 billion to develop two mines at Skouries and Olympias sites in Halkidiki. Greece’s government initially revoked its permit in August, saying the tests for a so-called flash-melting method the company planned to use to ensure there would be no environmental damage did not take place on the spot, but rather outside Greece.

Johnson-Matthey Lifts Platinum Estimate

Johnson-Matthey has lifted its estimate of last year’s platinum market deficit after a surge in Japanese bar investment late in the year, though it cut its expectations for the palladium market shortfall.

Speaking at ETF Securities‘ annual investment conference on Wednesday, JM’s general manager for market research Peter Duncan said he expected deficits for both metals to persist this year, although he admitted this may have little impact on prices.

The company lifted its estimate for last year’s platinum market deficit to 702,000 ounces from 652,000 ounces in November, which Duncan cited in the earlier presentation. He credited the change to both an upswing in investment and a 13% drop in recycling.

Platinum hit its weakest point in more than seven years on Wednesday at $812.09 an ounce.

MetalCrawler is becoming a broken record of falling commodity and oil price news, as both fell deeply again this morning. Even top miner BHP Billiton is giving up any shred of optimism for iron ore and coal prices in its latest report.

Stock Plummet Continues

The Dow Jones industrial average sank more than 500 points this morning.

Energy companies were pummeled as the price of crude oil sank 7%, threatening more damage to an industry that has already been stricken with bankruptcies, layoffs and other cutbacks.

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The price of US crude fell below $27 a barrel amid a global glut in oil supplies that seems to be getting worse. That’s the lowest price since May 2003 and a far cry from the $100 a barrel it fetched in the summer of 2014.

BHP and the Bear

BHP Billiton said on Wednesday that it sees no recovery in iron ore or coal prices in the next few years. BHP is still holding out hope for a rebound in copper and oil as it fights slumping earnings set to hit its long-protected dividend.

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The top global miner reinforced the bleak outlook for most commodities in the near term, with markets slammed by oversupply as the economy slows in China, the world’s biggest metals consumer.

Today in MetalCrawler, Vale SA is drawing $3 billion from its credit line and one member says OPEC won’t meet about low oil prices after all.

Maybe OPEC Won’t Meet

The United Arab Emirates moved to quash talk of a potential emergency meeting of the Organization of the Petroleum Exporting Countries (OPEC) after Nigeria’s oil minister said on Tuesday a “couple” of members had requested a gathering.

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Benchmark Brent crude futures slipped towards $30 a barrel to a near 12-year low before rising slightly. They have shed almost three-quarters of their value since mid-2014 due to oversupply.

Vale Taps Credit Line

Vale SA, the world’s largest iron ore producer, said on Tuesday it drew down $3 billion from a revolving credit line to pay debt due this quarter, a move that shines a light on its fragile finances amid low commodity prices and faltering asset sales.

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Brazil-based Vale, which analysts expect to have a cash shortfall in 2016, said it took the action due to a delay in closing a deal announced at the end of 2014 to sell a stake in its Mozambique coal project to Japanese trader Mitsui & Co Ltd.

Metro International Trade Services — the dominant London Metal Exchange warehouse operator in Detroit but also with depots across the US, Italy, South Korea and Malaysia — was ever the stand out contrarian operator.

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Indeed, it was the fabulous profits the firm was generating that encouraged Goldman Sachs to buy the company in 2010, and it was the prospect of lower profits and regulatory oversight that probably prompted them to sell in 2014 to Swiss-based but British-owned investment house Reuben Brothers.

Metro and Pacorini’s Load-Out Game

It’s probably not unfair to say Metro, along with Glencore’s Paccorini, were the black sheep of the warehousing family in the years following the financial crisis, as they engineered massive load out queues, lasting up to two years, in order to generate vast rent profits from metal stuck waiting in the queue to be loaded out.

Aluminum ingots, possibly waiting at a Metro International warehouse for load out.

Aluminum ingots, possibly waiting at a Metro International warehouse for load out.

Consumers and processors put up with that for a while, but under threat of legal action the LME moved to tackle the problem in recent years and a number of rule changes have effectively forced warehouse firms to limit intake when queues are over a certain length. Increase load out rates and changes this year will force firms to reduce rent on metal in the load out queues.

Open and Transparent Warehousing

As a result, the warehouse business has been forced to operate on a more fair and open basis, charging rents on a competitive basis against other LME warehouses without the benefit of being able to offer massive incentives, in the form of secret discounts or up-front payments, to encourage firms to store metal in their sheds. Read more

BP is cutting oil exploration and production jobs and Alcoa, Inc., has posted a loss for the last quarter of 2015, mostly due to its smelter closures.

BP Cuts Jobs Due to Low Oil Prices

BP is cutting some 4,000 jobs in exploration and production over the next two years amid sharp drops in the price of crude.

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The cuts in BP’s upstream business globally will include the loss of some 600 jobs in the North Sea.

The cost-cutting announced Tuesday comes as the price of oil dropped to a 12 year-low near $31 a barrel. Part of the decline is due to concern over a drop in demand in China, which is depressing commodity prices worldwide.

Alcoa Takes a Loss

Metals company Alcoa, Inc., on Monday reported a quarterly net loss after charges related to shuttering parts of its traditional smelting business.

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The New York-based company has been curtailing smelting capacity as the industry endures tumbling prices amid rising trade tensions with China. Alcoa said last week it would close a plant in Evansville, Indiana, which would bring US aluminum output to its lowest level in more than 65 years.