As global stocks rallied, metals saw gains with them this week. The bounce that precious metals got from Brexit has largely been sustained and lead and other base metals have come with them despite neutral fundamentals.
The European Union. went so far as to tell China to stop subsidizing unwanted steel if it wants to achieve market economy status in the World Trade Organization, only to have bilateral talks collapse. The export quotas that China maintains have also led manufacturers to substitute out rare earths metals, now the E.U. and U.S. are asking the WTO to eliminate more Chinese export quotas. The U.S. and the E.U. teamed up against Chinese export quotas on base metals.
The Hong Kong Stock Exchange will not move forward with its planned link to the London Metal Exchange and Komatsu has bought Joy Global, Inc.
HKEx-LME Link on Hold
The U.K.’s vote to leave the European Union has prompted the Hong Kong stock exchange to put on hold a commodities clearing link with its London Metal Exchange (LME), dealing a blow to its bid to make the LME more profitable.
The Japanese manufacturer of construction and mining equipment said on Thursday that it would buy 100% of the Milwaukee, Wis.-based company for $28.30 per share, about a $20 premium to Wednesday’s closing price.
We recently held a webinar on Brexit’s impact on metal prices and the geopolitical risk posed to North American Manufacturing (sponsored by Avetta). The turnout was incredible with more than 100 registrants, half of which were from the manufacturing industry.
We posed several poll questions throughout the webinar and the responses paint a clear picture of what this industry thinks of Brexit and its impact on various companies’ industrial sourcing strategies. Here’s a recap:
Before the recap, just a reminder you can take 20% off an annual individual subscription to our Monthly Outlook by entering promo code BREXIT7 at checkout. OFFER ONLY GOOD THRU 7/31!
Question 1: “Do you consider the Brexit vote to be a ‘black swan’ event?” 21% Yes; 48% No; 30% Don’t Know
Question 2: “Why are you concerned about Brexit?” 31% have exposure to UK and/or EU suppliers; 61% don’t have said exposure but are concerned about commodity volatility; 56% concerned about currency volatility; 31% worried about other countries leaving the EU
Question 3: “How much of an impact will Brexit have on your industry?” 3% a large impact and we’re concerned; 50% some impact and we’re assessing how much; 16% I have no clue which is why I’m here; 0% no impact
Question 4: “As a result of Brexit, do you think non-ferrous metal (e.g. aluminum, copper, nickel, etc.) prices will:” 20% rise; 14% fall; 66% stay the same
Question 5: “As a result of Brexit, do you think ferrous metal (e.g. steel) prices will: 26% rise; 16% fall; 58% stay the same
Question 6: “As a result of Brexit, do you think precious metal (e.g. gold, silver, platinum, etc.) will:” 41% rise; 7% fall; 52% stay the same
Question 7: “Does your company have operations in Europe or the UK?” 40% yes; 60% no
The Steel Market Development Institute (SMDI), a business unit of the American Iron and Steel Institute (AISI), today released statements about the release of the draft Technical Assessment Report (TAR) by the U.S. Environmental Protection Agency, Department of Transportation and California’s Air Resources Board.
The report is the first step in the mid-term evaluation of fuel economy and greenhouse gas emissions regulations and it examines a wide range of technology factors relevant to the 2022-2025 automotive model year standards.
Can a 54.5-miles-per-gallon average for all cars on the road be reached by 2025? Source: Adobe Stock/6th Gear.
The main question the report was created to address is should federal authorities adjust miles-per-gallon calculations in order to meet greenhouse gas reduction targets for the 2022-2025 model years. The stated goal by the Obama administration is to cut carbon emissions radically with rules that tighten to a nominal 54.5 mile-per-gallon average by 2025. Read more
The lightweight metals center will produce proprietary titanium, nickel and aluminum powders optimized for 3D printed aerospace parts. Alcoa has invested in a range of technologies to further develop additive manufacturing processes, product design and qualification.
The Alcoa Technology Center near Pittsburgh has been expanded to accommodate new research into 3D printing technology. Source: Alcoa
“Alcoa is forging a leadership path in additive manufacturing with a sharp focus on the critical input material—metal powders,” said Alcoa Chairman and Chief Executive Officer Klaus Kleinfeld. “We are combining our expertise in metallurgy, manufacturing, design and product qualification to push beyond the possibilities of today’s 3D printing technologies for aerospace and other growth markets.”
Arconic Will Inherit 3D Printing Research
The facility will form part of the spin-off, value-added metals company Arconicfollowing separation from Alcoa’s traditional commodity business in the second half of 2016. The plant is part of a $60 million investment in 3D printing materials and processes that builds on the Alcoa’ 3D printing capabilities in California, Georgia, Michigan, Pennsylvania and Texas. Read more
“In our view, the impact of the prior stimulus is still set to result in sufficient demand growth such that we will continue to see supply differentiation across the metals space during the second half of 2016,” the bank said in a note to investors.
Alcoa Reports Lower-Than-Expected 2Q Profit
Alcoa, Inc. on Monday reported a lower quarterly net profit, with falling aluminum and alumina prices pressuring revenue while plant operations have been scaled back ahead of a spinoff of its traditional smelting business later this year.
Alcoa reiterated its forecast for global automotive production growth in 2016 of 1% to 4%, but said continued weakness in the North American market would offset anticipated growth in heavy-duty truck, trailer and bus production in China.
In early June, the Chinese government held an auction for nine types of rare-earth metals, but bids came in below the production costs of China’s six major, consolidated suppliers.
This year, China plans to add about 20,000 metric tons to its rare earth stockpiles. The six major suppliers are to keep 5,000 mt at government-designated warehouses and Beijing is to purchase the other 15,000 mt from those same six suppliers.
Our Rare Earths MMI fell another 6% this month and there is little reason to expect the important metals for batteries and magnets to escape the low range they’ve fluctuated in for the last two years. Dysprosium and neodymium both lost ground this month as demand has faltered for the motors and batteries both are used in. Yet, it wasn’t an entirely lost month for rare earths.
Texas Mineral Resources signed a memorandum of understanding with an unnamed coal company in Pennsylvania to produce scandium and other rare earth byproducts from coal ash and tailings. Initial studies on the coal ash project there suggest modest capital expenditure would be required, along with profitability.
Scandium is used in fuel cells today but its future as an additive in high-strength aluminum is bright. We’ve already written about Airbus‘ experiments with it in both 3D-printing and generative design. If TMR’s scandium from coal ash experiment is successful, its plan to establish a new subsidiary titled Scandium America Corp. with the unnamed Pennsylvania Coal Company.
This won’t affect prices anytime soon. Scandium isn’t even a part of the Rare Earths MMI yet. However, it shows that manufacturing companies are demanding more and rarer metals snd companies are devoting significant resources to providing them.
India Sets Aside Rare Earth Blocs
India is also exploring more rare earths production. The nation recently issued new policy guidelines to encourage more private-sector exploration for the minerals that demarcates a total area of 1,000 square kilometers (386 square miles) where companies can search for rare earths, and introduce auctions for the right to explore for the deposits, according to Balvinder Kumar, the top bureaucrat in the nation’s Ministry of Mines.
India has one of the world’s bigger reserves of rare earths and Prime Minister Narendra Modi wants to cut the red tape involved with setting up new mines. The region to be earmarked for exploration includes states such as Kerala and Tamil Nadu, according to Kumar, with another 400 square kilometers set aside exclusively for state-run companies to search for uranium and thorium.
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Essar Steel Minnesota filed for bankruptcy protection after losing its mineral leases in the Iron Range and ThyssenKrupp AG insists it’s still talking to Tata Steel about a possible purchase of European steel mills.
The company’s assets and liabilities are estimated to be worth between $1 billion and $10 billion, according to a court filing in the District of Delaware. The filing was prompted by Minnesota Governor Mark Dayton (D.) giving the order to terminate Essar Steel Minnesota’s lucrative mineral leases on Minnesota’s Iron Range. The company had been told that if it did not repay $66 million in infrastructure costs to the state and also pay its overdue contractor bills that the leases would be terminated.
ThyssenKrupp Says it’s Still in Talks With Tata Steel
Thyssenkrupp AG, Germany’s biggest steelmaker, confirmed on Sunday that it is in talks with India’s Tata Steel about a consolidation of beleaguered European steel mills that are hit by overcapacity, weak demand and cheap imports.
Tata Steel said on Friday it had suspended the process of selling its troubled U.K. arm while it held talks with potential partners, including Thyssenkrupp, about alternative and more sustainable solutions for its entire European business. In addition to its U.K. operations, Tata Steel Europe also owns the former Hoogovens steel plant in the Netherlands which has been mentioned as part of a sale.
This week was more about markets shaking out from the initial shock of the U.K. actually voting to leave the European Union. U.K. politicians tried to stress stability, assuring India’s Tata Steel that the nation is still offering a lucrative equity stake and pension relief deal to keep the company’s sprawling Port Talbot, South Wales, steelworks open. Of course, Tata’s not buying it. At least not yet, as the whole steel deal making landscape has shifted in Europe. Could be that Tata just realized it has all of the leverage right now and U.K. politicians will have to sweeten the pot to keep Port Talbot’s doors open.
Gold is up as investors look to shield their money from volatile stock markets. Source: Adobe Stock/Nikonomad.
But things aren’t all unicorns and rainbows back in the E.U., either. Regulators in Germany are investigating the novel idea of a buyers’ price fixing cartel. You heard that right. Not a conspiracy of sellers to fix prices — like when Apple and several publishers colluded to set e-book prices and we all got Amazon credits for it — but one by German automakers and original equipment manufacturers such as BMW, Volkswagen, Robert Bosch, ZF Friedrichshafen and Daimler to somehow fix prices of the steel that they buy to create the cars they sell.
The fact that the buyers don’t have the power to set prices like sellers do did not deter the Federal Cartel Office, also known as the Bundeskartellamt, an independent “higher federal authority” established to protect competition in Germany.
MetalMiner Executive Editor and Co-Founder Lisa Reisman pointed out that it’s highly unlikely that all six companies decided that they would collude to extract steel price concessions from Germany’s largest steelmaker ThyssenKrupp AG, leaving ThyssenKrupp without a home for all of that hot-dipped galvanized steel it’s trying to sell to automakers. In that scenario, where would Germany’s automakers go for all of their steel? China? The U.S.? Good luck with your investigation, Bundeskartellamt.
One of my British colleagues forwarded me this Bloomberg article about several German automotive original equipment manufacturers — including BMW, Volkswagen, Robert Bosch, ZF Friedrichshafen and Daimler — who were apparently “raided” by a German regulator for creating a steel buying cartel.
Funny thing is, here in the States, we call these groups “buying groups” or “group purchasing organizations.” For the life of me, I can’t figure out how a GPO extracts pricing that would somehow harm a consumer. What would they do? Pass on too much of their savings to their customers?
Can German automakers set prices for the steel used in a Volkswagen Cabrio any more than Hot Wheels can set the price of plastic for this tiny version of one? And why don’t they still call it the Rabbit? That was a great car name. Source: Adobe Stock/VRD.
The details appear quite scant: in June, a raid occurred at six automotive OEMs and at least two Tier 1 suppliers (Tier 1 companies are direct suppliers to OEMs). According to Bloomberg, “antitrust rules may have been violated.” Read more