Articles in Category: Company News

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The announcement this week that Norwegian aluminum firm Norsk Hydro had agreed to buy the 50% of extrusion company Sapa that it did not already own from its partner Orkla probably makes good sense for all parties concerned.

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Norsk Hydro and Orkla took on Sapa in 2013 as a joint venture, but the Norwegian consumer goods company Orkla was never an obvious fit to be owning aluminum extrusion mills. Meanwhile, Norsk Hydro, with its significant position at the primary end of the market, makes a natural buyer for downstream assets, particularly if it carries the strong brand name of an established producer like Sapa.

The $24 million deal is said by the Financial Times to value Sapa at $3.2 billion. Assuming the deal passes regulatory approval, it will make Hydro the second-largest Norwegian company, trailing only the energy group Statoil.

The markets seem to agree with the logic of the deal. Orkla’s shares rose 2.44% on the news while Hydro’s rose a more modest 0.74%. But while Hydro said it planned to make $24 million of synergies a year from the deal, analysts said it really only made sense if the Norwegian group could achieve more cost savings over time.

While Hydro is a very significant primary and flat-rolled products producer, it is only through its shareholding in Sapa that it has held any significant position in extrusions. The purchase will allow Hydro to justifiably call itself a vertically integrated aluminum producer with a broad product range rivaling the likes of Alcoa and Rusal.

No doubt a question in the minds of many Sapa employees and of their clients is whether the purchase will result in a cutback of Sapa’s global operations.

On the back of an upturn in aluminum prices, both Norsk Hydro and Sapa have been doing well lately. However, the aluminum industry faces headwinds from excess Chinese production and price pressure from resulting Chinese exports. One benefit of the purchase mentioned by the Financial Times was that of European consolidation in the face of excess Chinese supply.

With no comment from the company yet, both employees and customers may justifiably be wondering what that means for them.

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This morning in metals news, the LME launched a bid to acquire a piece of the over-the-counter gold market, Chilean miners are set to go on strike and the Liberty House group has purchased two more steel mills from Indian firm Tata.

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LME Launches Gold Contract

The LME’s new LMEprecious spot contract saw more than two tons of gold traded in its first day, Reuters reported.

According to Reuters, the suite of gold and silver contracts was formed via a group of backers, including big banks. The contracts launched at 0000 GMT Monday.

By the close of business Monday, approximately $91.3 million in gold had been traded on the LMEprecious spot contract, according to exchange data cited by Reuters.

“LMEprecious has been developed in response to market demand and in close consultation with key precious metals stakeholders,” the LMEprecious page on LME’s website reads. “Offering daily and monthly futures for both gold and silver, LMEprecious delivers greater choice for market participants, modernising the gold and silver markets to better reflect the needs of global players in precious metals markets.”

Strikes Pave Way for Higher Prices

With Chilean miners’ recent vote to go on strike, the price of copper will get a boost upward.

According to Reuters, a buildup of inventories since late June came to a stop and miners voted to strike on Tuesday, both factors which contributed to a rise in the price of copper.

LME copper was up 0.4% to $5,845.50, according to the report. However, an expected slowdown in Chinese economic growth and the strengthening of the U.S. dollar are factors behind why many analysts think the copper price will fall.

“Our forecasts suggest that most prices will fall from here,” Caroline Bain, a Capital Economics analyst, told Reuters.

Tata Deals Hartlepool Steel Mills

The Liberty House group purchased two of Indian company Tata’s steel mills, according to a report in The Telegraph.

According to the report, Liberty House signed a provisional deal to purchase the mills, located in Hartlepool, England, which produce heavy-duty 42-inch and 84-inch steel pipes used in the oil and gas industries.

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According to the report, Tata will retain a third Hartlepool mill, where 270 are employed and make 20-inch tubes.

Last March, Liberty House bought two Scottish steel mills Tata was preparing to shutter.

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This morning in metals news, European steel association Eurofer predicted increased steel demand in its Monday forecast, but also sounded a cautionary note regarding the U.S. potentially imposing steel tariffs (as a product of the Department of Commerce’s Section 232 investigation); Norwegian metals company Norsk Hydro inks a $3.2 billion deal to buy a 50% stake in aluminum products maker Sapa; and LME copper stabilized Monday after U.S. jobs report news.

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Demand To Go Up … But Eurofer Wary of Section 232 Tariffs

Eurofer, the European steel association, offered a mix bag of news in its Monday steel forecast.

On the one hand, it predicted an uptick in demand for steel, according to Reuters. According to the report, the forecast predicts a 1.9% rise in apparent EU steel demand, to 159 million tons, up from a previously forecasted 1.3%.

On the other hand, Eurofer sounded a warning note regarding the potential for “market distortions,” including tariffs, like the ones the U.S. Commerce Department may impose on steel and aluminum imports at the conclusion of its Section 232 investigations.

“In particular, measures potentially stemming from the U.S. section 232 investigation may lead to a proliferation of disastrous global trade flow distortions,” Eurofer director general Axel Eggert said in a statement quoted by Reuters.

Norsk Hydro Buys Aluminum Products Maker Sapa

Norwegian metals firm Norsk Hydro, in a deal worth $3.2 billion, bought a 50% stake in aluminum products maker Sapa, Reuters reported Monday.

Norsk Hydro’s acquisition allows it to spread its business across the value chain — the Norwegian firm makes primary aluminum from scratch, while Sapa presses, cuts and shapes it, according to the report.

Sapa, which has 22,400 employees and in 2016 recorded sales of 53 billion crowns ($6.84 billion), has been jointly owned by Orkla and Hydro since 2013, according to Reuters.

LME Copper Steadies

Copper prices stabilized Monday after news of a solid U.S. jobs report inspired optimism in a U.S. economic recovery, Reuters reported Monday.

This follows June’s news of expansion in Chinese manufacturing, which also buoyed prices by virtue of increased demand for the metal.

Since late June, copper prices have been consolidating in the range of $5,800-$5,965, according to the report.

For more on copper, come back to check out Irene Martinez Canorea’s Copper MMI piece this afternoon, which will survey the month that was and market trends for the metal.

Swedish carmaker Volvo is betting the farm on electric vehicles.

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In an announcement this week, Volvo cars said beginning in 2019, it will no longer launch new car models powered only by an internal combustion engine. According to the Financial Times, pure and electric hybrid cars will be the only game in town for the Swedish carmaker.

Following hot on the heels of Tesla’s launch of its most affordable mass-produced Model 3 — which, since March last year, has taken nearly 400,000 pre-orders, a remarkable vote of confidence in what has become one of the most exciting brands in the automotive industry — does Volvo’s announcement spell the end of the internal combustion engine?

Regardless of the headlines, Volvo is not turning its back on petroleum and diesel engines just yet.

Reading between the lines, the pledge is to launch five new models between 2019 and 2021, all of which will have petrol and diesel hybrid options, plus electric vehicle EV) versions, not five new models which are EV only. Although Volvo is owned by Chinese manufacturer Geely — and as such does not have to report to shareholders on a quarterly basis, giving greater flexibility to invest today for the longer term — the Swedish carmaker is still not saying it can achieve this on its own.

Rather, Volvo’s announcement is saying to the market it is seeking cooperation among battery manufacturers and infrastructure providers to provide solutions to the two biggest challenges EVs face: limited range and limited charging infrastructure.

The first challenge, range, requires continued massive investment in research and development to drive down battery costs and increase power density. The latter challenge requires a massive investment, not just in charging points, but also in configuring electricity grids to cope with demand if EVs achieve scale.

Volvo’s Chinese ownership probably influenced these strategic goals in another way.

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This morning in metals news, LME copper bounced back Thursday after a down Wednesday, Saudi steel producers are happy about a cut in export tariffs and Volvo made a major announcement regarding the future of its vehicle inventory.

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Copper Rebounds Slightly After Hitting One-Week Low

After a Wednesday that saw a 0.9% drop for LME copper, the metal bounced back Thursday, ticking up by 0.1%, Reuters reported.

The metal moved up from its one-week low, which on Wednesday stood at $5,815 per ton.

In the backdrop was the recent release of the minutes of the Federal Reserve’s June meeting, revealing “policymakers were increasingly split on the outlook for inflation and how it might affect the future pace of interest rate rises,” according to Reuters.

Saudi Steel Gets Tariff Cut Relief

Steel producers in Saudi Arabia received good news this week as the government announced it would stop export duties on steel for two years, according to Reuters.

According to the report, the government also cut cement export duties by 50%.

While Saudi stocks overall were down early Thursday, stocks in the building materials sector showed well, including Al Yamaha Steel Industries, which surged by 2.1%, according to Reuters.

Volvo Looks to Go All-In on Green Rides

The traditional combustion engine took a hit this week when automaker Volvo announced it would build only electric or hybrid vehicles beginning in 2019, The New York Times reported.

While the “green” vehicle market is still relatively small, it is growing. As Autodata Corp numbers released this week show, sales of Tesla vehicles, for example, have surged. In the year to date, Tesla sold 23,550 vehicles, good for a 42.7% increase in sales from the same point last year.

Of course, those sales figures are tiny when compared with traditional automakers, like GM and Ford, which sold 1.41 million and 1.29 million units, respectively, in the calendar year to date. Sales for those giant automotive brands, however, are down (albeit down from a big 2016 in sales for automakers).

Clearly, battery-powered and hybrid vehicles are picking up steam. What does this green wave mean for metals? The boom presages increased demand for metals like cobalt, for example. Also, according to Seeking Alpha, the coming electric vehicle revolution bears bad news for platinum group metals (PGMs), like platinum and palladium.

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This afternoon in metals news, gold inches upward, partially stemming from concerns on the heels of a North Korean missile test; Germany, among others, waits to hear what the U.S. has to say about steel; and, in anticipation of protectionist policies from the Trump administration, U.S. Steel rose by 8% in June.

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Gold Up on N. Korea Concerns

After North Korea’s recent test strike of an intercontinental ballistic missile (ICBM), the price of gold ticked upward, a common reaction for the safe-haven metal.

“Safe-haven buying re-emerged in the gold market after the latest missile test in North Korea,” ANZ Research said in a note to Reuters.

Also looming over the gold price are the minutes of June’s Fed meeting, which many awaiting for news about the Fed’s plans for further interest rate hikes this year, Reuters reported.

Germany Anticipates Trump Administration’s Words on Steel

While China is the central focus of the Trump administration’s Section 232 investigations of steel and aluminum imports, other nations are interested in the investigations’ results.

Germany is among those nations, as a top exporter of steel to the U.S. The Germans are waiting to hear from President Donald Trump during the G20 summit, which begins on Friday in Hamburg, Germany.

When asked during a news conference Wednesday whether steel would be an issue discussed during the G20 summit, German government spokesman Steffen Seibert said, “That will become apparent. It also remains to be seen what the American president brings (to the meeting).”

U.S. Steel Up Big

Many expect the Trump administration to announce new tariffs or quotas, a result of the 232 investigations into steel and aluminum imports launched in April.

While the policy recommendations of those probes haven’t been announced, some U.S. businesses are feeling pretty good about what those protectionist policies might do for them. For example, U.S. Steel went up 8% in June.

But what happens next? A self-imposted Department of Commerce deadline came and went this past Friday with no announcement of the steel investigation’s conclusion. According to Section 232 of the Trade Expansion Act, the Secretary of Commerce has 270 days to prepare a submit a report to the president.

As such, the Trump administration still has plenty of time to think about the subject of steel imports. With that said, any momentum felt by the domestic steel industry as a result of talk of impending protectionist policies could begin to deflate the longer the process drags out. Many are looking to Trump’s participation at the Group of 20 summit later this week for more specific answers regarding the president’s thoughts on steel overcapacity.

In a recent interview, Rusal Deputy CEO Oleg Mukhamedshin reaffirmed his company’s commitment to the Paris climate-change accord and indicated that it will continue investing in the research and development of lightweight aluminum alloys, both to distance itself from the commodity end of the market and to provide improved materials for lightweighting.

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The interview with the South China Morning Post was reported by Aluminium Insider largely within the context of Rusal and Russia’s continued commitment to tackling climate change following President Donald Trump’s rejection of the process.

To what extent one takes any Russian company’s commitment to climate change is a debatable and personal point, but in one area Rusal’s stated commitment to meet 100% of its power needs from renewable power sources by 2020 has a much stronger economic argument than the simple angle of climate change.

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MetalMiner’s sister site, Spend Matters, recently put out a series of questions to a range of experts at technology vendors. Our line of questioning centered on the technology renaissance, which is in its early days of taking shape, as more firms take advantage of specialized manufacturing-centric procurement technology.

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We’ve been featuring this series on MetalMiner over the past couple months and hope you’ve been getting as much out of it as we have.

This interview features Dan Willmer, vice president of sales and operations at Jaggaer, a leading procure-to-pay provider in the higher education and government sectors.

MetalMinerWhy are we hearing about a “direct procurement” renaissance of sorts in terms of procurement technology? What’s changed?

Dan Willmer: Since auctions were introduced to the direct materials sourcing area 20 years ago, you have seen that generation of materials and commodity managers look for ways to leverage technology to create efficiencies within that market. There have been a few runs at creating efficiencies in that market, with integrating sourcing into the design process probably being the most worthwhile from my perspective.

The challenge is that direct materials sourcing is usually seen as a competitive advantage versus one’s peers and utilizing third parties to help given that mindset. Consultants have always been a popular choice (AT Kearney, McKinsey, etc.) but I think, while an engagement like that adds value, those are short-term fixes which have hindered sustainable options like technology to take root.

As Spend Matters has rightly said in an article a couple years ago, direct materials technology is very broad and “can” address many issues, but it’s impossible for one solution to do all of it. That fragmentation has created a big hurdle initially, but I think we’re finally at a point where some solutions are getting critical mass in addressing a larger portion of those challenges.

MM: What are the top challenges your customers in the manufacturing sector are facing right now?

DW: Globalization, M&A and other factors in the manufacturing sector have created a lot of opportunities but equal amount of challenges. Those dynamics have put commodity managers in the middle of a microeconomic storm:

1) They have limited budgets to integrate back-end systems to best address procurement challenges like spend visibility, sourcing and supplier management.

2) With divestitures, acquisitions, new capital projects and reorganizations, commodity managers need to be able to quickly pivot to add value when the target keeps moving.

3) Global markets, which some of them may have little experience with, are calling for their attention but with little financial/budget support available to stay in touch with each segment.

The answer is that solutions within procurement/sourcing require a technology- and back-end-system-agnostic solution that aggregates knowledge and data into one work desk so that they can appropriately prioritize and act against the savings opportunities that are available. Whether a customer wants to analyze spend, find common suppliers across regions, business units or similar corporate entities or manage supplier data effectively, the need is there for a solution to help in these areas.

MM: What is your view on commodity price volatility? What are you hearing from your customers?

DW: While each customer has some unique themes they are trying to address, a common theme and concern we hear is the emergence of an inflationary market. Commodity prices have remained relatively stable/flat for an abnormally long time. For a variety of reasons, we are seeing some leading indicators point to a price increase across commodities. I’m sure supply chain and commodity managers cringe upon reading that, but based on what we’re seeing we do believe that cost increases are in the future.

MM: What technologies are most “in demand” for procurement in manufacturing today? Do you see this evolving or changing in the second half of 2017 and in 2018?

DW: As I mentioned before, I think aggregation technologies are most valuable – pulling data from multiple systems to address spend visibility, supplier management or sourcing are very popular.

Given our recent acquisition, we obviously are seeing an increase in the need to manage direct materials in a different way going forward. Manufacturers have always been engineering- and process-driven organizations and introducing solutions that allow technology to facilitate those processes in a scalable solution has been on the wish list of a number of professionals. We believe that the Pool4Tool (JAGGAER: Direct) solution set addresses this need in a unique way and allows our combined solutions to become a complete toolset for direct and indirect materials.

As far as the future, I think continued digitization will continue to be a theme. The influence of AI and digital innovations will force providers to embed those gains into their platforms. The winner in this space, I believe, is one that can be proactive in understanding a customer’s situation and offering alternatives to solve challenges that the customer may not even be aware of. While at one stage in my career I would have said that it takes a service to do this (working in Accenture’s BPO practice), I believe that software providers will be the conduit for this shift.

Embedding knowledge and insights based on the existing data within the platform is the holy grail that I know we at Jaggaer are driving toward. I could go further on this topic but I feel like this topic should/could be a separate discussion.

MM: How do you see procurement and supply-chain applications overlapping (or not) from a technology perspective in manufacturing? What is “the line” between them (if there is one anymore)?

DW: The fundamental challenge in this area is who “buys” the applications – is it the CPO or someone within operations? If indirect and direct are managed within the same vertical org structure, then you see that customer think more holistically and ask for broad solutions. However, if you are working/selling into an organization that doesn’t align its spend holistically, then you get different requests and wish lists. Within both worlds, though, spend visibility, sourcing and supplier management are common – the metadata, the analytics/reporting and the flexibility to do both types of spend are a huge differentiator. IT organizations are pushing their enterprises more toward a single solution, so being able to address a broad footprint (direct and indirect) provides value beyond the actual business sponsor needs.

MM: If you had $100 to invest in different procurement technology-centric solutions in a manufacturing context, how would you divide it up (assuming only MRP/ERP as a baseline)? In what areas would you place your bets and in what order?

DW: Not to be coy, but I think I’d spend it all on a spend visibility solution if I didn’t already have one. If I can’t see what I buy or have a platform to get insights, any other tool I have would be a guess as to what I need to do. I would then use what I learn with that solution to self-fund other solutions that I have. The insights you should be getting from your spend analytics solution are hiding in a usually cumbersome array of disparate data and inputs. Providing a tool that peels that onion to your most intellectually curious team members would be a crucial step toward procurement excellence.

MM: On Trump, Mexico and China: Where do we end up from a trade perspective in 12 months? Can technology help mitigate any trade risks?

DW: If I’ve learned anything from the political arena in the last 12 months, it’s that it is wildly unpredictable. Putting politics aside, though, I am seeing the private sector respond. Here in the Steel Belt (I’m based in southwestern Pennsylvania), nearly dormant steel mills are laying groundwork to increase production, business leaders are thinking more toward growth versus just bottom-line savings, which is typical in a flat economy. Will that growth come in short order? Again, the last 12 months make me put my chips back in my pocket when considering a bet, but signs are pointing toward a more bullish business future.

Can technology help? Going back to my previous answer, I think the best thing is to have a spend visibility solution that at least sheds light on your international exposure, as I do think a more “pro-American” stance on trade by this administration will come at a cost for international sales for those companies that are more globally reliant on foreign consumers.

MetalMiner would like to thank Dan Willmer for his thoughtful input and analysis.

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Join MetalMiner‘s Lisa Reisman, Ecovadis‘ Daniel Perry and Jaggaer‘s Roger Blumberg as they share the tools with which to bolster your organization in these times of uncertainty. Learn about:

  • Quickly drawing up a model of a company’s parts and bill of materials to identify areas in need of support and glean insight into the negotiation process
  • Managing the lifecycle relationship of parts, products and suppliers
  • Reducing risk and improve agility in the MRO supply chain while more reining in small-dollar spend

And much more — Join us at 12 p.m. EDT/9 a.m. PDT on Tuesday, June 27, for the FREE WEBINAR:

 

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MetalMiner just reported that the Trump administration, in its efforts to curb imports it maintains are harmful to U.S. industry, may just have injected more volatility into the landscape for domestic manufacturers.

The European Union is worried about a “trade policy readjustment” from President Trump’s team, which could evidently include tariffs placed on the bloc’s metals and materials imported into the U.S.

The Section 232 investigation has mainly put China and its imports into the crosshairs, but now the EU is concerned that these new tariffs would “unjustifiably hit” EU nations, according to Cecilia Malmström, the EU trade commissioner.

What does this mean for U.S. manufacturers — and will events such as this affect how you should be managing your organization’s (and your suppliers’) commodity risk?

Find Out in a Free Webinar Tomorrow

Join MetalMiner‘s Lisa Reisman, Ecovadis‘ Daniel Perry and Jaggaer‘s Roger Blumberg as they share how to bolster your organization in these times of uncertainty in the following ways:

  • Quickly drawing up a model of a company’s parts and bill of materials to identify areas in need of support and glean insight into the negotiation process
  • Managing the lifecycle relationship of parts, products, and suppliers
  • Reducing risk and improve agility in the MRO supply chain while more reining in small dollar spend

And much more — Join us on June 27th at 12pm EDT/9am PDT for the FREE WEBINAR:

 

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This morning in metals news: copper slides slightly but is still near its recent 11-week high; shares of a U.S.-based aluminum company fell after a Reuters report that the company knowingly supplied flammable panels for use in Grenfell Tower and the European Union is considering retaliatory measures if the U.S. places tariffs on steel and aluminum imports.

Copper Hovers Near 11-Week High

Copper fell on Monday but still hung around its previous 11-week high, Reuters reported, hanging tough amid good news about Chinese demand and potential supply shortages.

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On Friday, LME copper reached its highest price since April 7. According to a report cited by Reuters, a seasonal rise in electricity usage in China is likely to contribute to a rise in demand for the metal.

Arconic Shares Fall After Report Linking Company’s Products to Grenfell

On the heels of the deadly June 14 fire at Grenfell Tower in London, metal company Arconic‘s shares are falling after a report indicated the company knowingly provided flammable panels for use in the tower.

According to a Reuters report, emails sent to and from an Arconic sales manager include questions about why the company provided combustible cladding material for use in the building of the tower.

Arconic argued that while it knew the panels would be used for construction of the tower, it was not its role to decide what materials are or aren’t compliant with building codes, the Reuters report says.

Shares of Arconic dropped 6% early Monday, CNBC reported.

EU Considers Response to Potential U.S. Tariffs

While China is the primary target of the U.S.’s Section 232 investigations into steel and aluminum imports, other countries are preparing for the effects of potential U.S. tariffs.

EU nations are among those concerned about a trade policy readjustment from the Trump administration.

Cecilia Malmström, EU trade commissioner, said the bloc was “making preparations” to respond to the imposition of U.S. tariffs, USA Today reported. She added U.S. tariffs would “unjustifiably hit” EU nations.

The Trump administration launched the investigations in April. The U.S. Department of Commerce held public hearings on the subjects of steel and aluminum imports May 24 and June 22, respectively.

Chinese excess capacity has been the main talking point for U.S. producers, who argue that China is flooding the market with the metals and leading to depression of prices and, as a result, job losses and plant closures in the U.S.

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The trade commissioner also said the EU would study any actions by the Trump administration to determine if they are in line with World Trade Association rules.