Articles in Category: Ferro Alloys

While our Renewables MMI is the only major index that showed positive growth this month, essentially erasing last month’s loss and increasing 1.8% to 55 from a score of 54 in September, it’s still mired in the low price trend it’s been stuck in for the last 5 months.

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That mini-trend, itself, was a drop from the renewable materials’ previous price range when it fluctuated in the 60s, itself a low-price trend. That string of monthly prices lasted all the way back to 2012.

As we have noted before, the renewables MMI is a bit of an outlier index. Its supply and demand picture hasn’t changed that much since we began tracking it, with demand for wind turbine metals, electrical transmission raw materials and solar silicon still operating as fairly niche markets.

Renewables_Chart_October-2015_FNLHow the Lockout GOES

A lot of the component metals of the index continue to suffer price problems due to market gluts that have nothing to do with end user adoption, particularly steel plate. We also can’t discount the fact that supplies may be a bit more constrained this month, at least for US grain-oriented electrical steel, due to the now 7-week-long worker lockout by Allegheny Technologies, Inc., 1 of only 2 US GOES producers. ATI claims that production is carrying on as usual, but work stoppages such as these rarely happen without some in production. Even a perceived lack of supply of GOES could cause buyers who need it to stockpile the metal.

On the demand side, another application of silicon solar photovoltaic panels is being attempted in California, using the solar power generated from them to heat, desalinate and clean used farm water for irrigation in the Golden State’s water-deprived central valley, the source of much of the produce enjoyed by the rest of the nation. It’s another of many promising applications that we don’t see affecting prices anytime soon. We’ve been there before.

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We expect renewables to continue to trade in this range for the rest of the year and likely for much of the next until commodities, as a class of investments, experience a wider market recovery. If you are a buyer of silicon, GOES or other renewables we would caution against buying forward as prices have shown no sign that this is a bottom and another shoe could drop at anytime, even in this low range.

TThe Renewables MMI® collects and weights 8 metal price points used extensively within the renewable energy industry to provide a unique view into renewable energy metal price trends over a 30-day period. For more information on the Renewables MMI®, how it’s calculated or how your company can use the index, please drop us a note at: info (at) agmetalminer (dot) com.

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Based on the Commerce Department’s most recent Steel Import Monitoring and Analysis (SIMA) data, the American Iron and Steel Institute (AISI) reported that steel import permit applications for the month of September total 2.89 million net tons. That was an 8% decrease from the 3.13 million permit tons recorded in August and a 6% decrease from the August final imports total of 3.06 nt.

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Import permit tonnage for finished steel in September was 2.22 million nt down 10% from the final imports total of 2.47 nt in August. For the first 9 months of 2015 (including September SIMA and August Final), total and finished steel imports were 30.95 million nt and 25.18 million nt, respectively, down 5% and up 3% from the same period in 2014. The estimated finished steel import market share in September was 25% and is 30% year-to-date.

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Finished steel imports with large increases in September permits vs. the August final included standard rail (up 334%), cut length plates (up 59%) and cold-rolled sheets (up 19%). Products with significant year-to-date increases vs. the same period in 2014 include reinforcing bar (up 48%), line pipe (up 35%), standard pipe (up 21%), tin plate (up 15%), sheets and strip hot-dipped galvanized (up 13%) and wire drawn (up 11%).

The monthly Stainless MMI® registered a value of 59 in October, flat from last month.

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Most base metal prices stabilized this month and nickel was exception. The metal is finding support just above its 2008 lows. Nickel is the metal closest to its recession level. This level could act as a psychological support level for traders, helping support prices in the coming months. However, we suspect this won’t be enough to hold prices longer-term if bad news keeps coming out of China.

China is still producing more than it can absorb. Weak Chinese demand and the fear that the worst has yet to come remains the overriding theme for nickel. Price-related closures in the nickel industry have been frequent over the past few months. However, as we’ve been pointing out, it’s hard to determine how many more mine closures we will need to see before prices find that elusive floor.

Stainless_Chart_October-2015_FNLBesides weak demand, investors remain worried about the high level of visible inventories. Not that inventory levels are a good price indicator but, for what it’s worth, inventories today are way higher than what they were when nickel bottomed out after the recession. Today’s LME nickel inventory levels appear closer to 450,000 metric tons, still near their all-time high of last June, while in 2008 nickel stocks fell below 60,000 mt.

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The inventory picture looks similar in the stainless market. Domestic and import mill inventories remain high, with domestic mill lead times remaining short. With inventory well-stocked and the end of the year approaching, service centers will keep trying to reduce inventories, hesitant to order more than what’s absolutely necessary.

What This Means For Metal Buyers

We’ll have to wait and see if prices are able to bounce off their record lows. So far, we only see a lack of upside momentum. Nickel prices might need more than that before making a significant rally.

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The Commerce Department announced final determinations in the anti-dumping investigations of imports of welded line pipe from South Korea and Turkey, and the countervailing duties investigation of imports of welded line pipe from Turkey.

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Commerce also announced a negative final determination in the countervailing duties investigation of imports of welded line pipe from Korea. This means the countervailing investigation is terminated and no Korean producers or exporters will be subject to cash deposits for countervailing duties.

The investigations cover circular welded carbon and alloy steel line pipe not more than 24 inches in nominal outside diameter. Such welded line pipe is typically used in oil and gas pipelines.

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Commerce determined that imports of welded line pipe from South Korea and Turkey have been sold in the US at dumping margins ranging from 2.53% to 6.19% and 6.66% to 22.95%, respectively. Commerce also determined that imports of welded line pipe from Turkey have received countervailable subsidies ranging from 1.31% to 152.20%.

The Automotive MMI fell again in October, inching down 1.4% from its previous all-time low of 73.

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It’s more of the same for an automotive metals market that, while strong on both the supply and demand sides here in the US, is being dragged down by falling demand in other large markets. Automotive specialty metals have been cited as the savior and the future demand driver for many a steel or aluminum company in this bear market.

Automotive_Chart_October-2015_FNLGerdau is practically staking its entire Indian business on it. Aerospace and automotive are also regularly cited as the growth markets for stainless and aluminum overseas, too. The aluminum-bodied Ford F-150 continues to be the darling of the US automotive market with its lighter corporate average fuel economy (CAFE) load and its Denis Leary commercials about “military-grade” aluminum. Even the Super Duty is getting in on aluminum. The emerging markets were on the aluminum train before Ford was, too, and that trend is only growing.

US, European Auto Sales

So, what gives?

In September, US vehicle sales topped a SAAR (seasonally adjusted annual rate) of 18 million vehicles. Leading automakers reported the healthy year-over-year increase in sales number thanks, in part, to big gains over the Labor Day holiday weekend.

It wasn’t just us yanks buying cars constructed cold from specialty metals, either. The Czech Republic will report its highest car sales ever this year. The Volkswagen scandal might be hurting platinum prices but it’s clearly not denting overall vehicle sales, even in Europe where the scandal hits close to home with more diesel cars on the road.

VW has a market share of around 48% in the Czech Republic, a country of roughly 10.5 million people, with the company’s domestic maker Skoda Auto the top seller.

Chinese Demand Collapses

The fly in the automotive metals ointment is demand in China. Like steel, aluminum and other markets, the economic collapse in China has eroded what was once healthy automotive – and automotive metal – demand there.

The urbanization that economists counted on to fuel more Chinese car purchases went away with housing demand there, as well as the un-manipulated renminbi. Beijing is looking entirely to exports now (hence the purposeful devaluation) to pull its economy out of the doldrums, and isn’t even trying to goose those domestic markets much.

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Sad to say, but no matter how strong the US or European automotive markets are, they can’t make up for the loss of Chinese demand, which numbers sales (and people) in the neighborhood of a billion. That’s one of the reasons so many steel companies are looking to India, with its large population, to make up for that demand. The problem there is India’s urbanization isn’t as far along as China’s was. Still, automakers and steel companies such as Gerdau are digging in there for the long haul. Here’s to hoping it’s not as long as some predict.

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US construction spending in August was up 0.7%, to a seasonally adjusted $1.09 trillion, reaching its highest level in 7 years, according to data from the Commerce Department.

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Government projects and home building were big contributors to the gains, even as office and shopping-center projects declined.

Construction_Chart_October_2015_FNLThe construction sector added 8,000 jobs, and the unemployment rate remained steady at 5.1% here in the US. Increased employment and a 7-year high spending high should be good news for construction product prices eventually rising, yet oversupply in steel, aluminum and copper is still keeping materials prices low.

China’s Housing Collapse

The flip side to the positive US growth numbers is the continued collapse of the Chinese construction industry, based heavily on stalled urbanization in the world’s second-largest economy.

This month, China tried some new measures to jump-start home buying and, hopefully, construction there. The central bank and banking regulator said they would be lowering minimum down payments for first-time home buyers to 25%, from the previous 30%, in cities that do not have restrictions on purchases.

The problem immediately facing China’s construction industry, however, is production, there, to be entirely export-oriented as construction activity has fallen there.

Global steel production fell by 3% in August, according to the Brussels-based World Steel Association (WSA), its biggest fall this year, which was led by a decline in Chinese production.

Lower Your Expectations

It’s still difficult to envision US construction offering much more than shelter from the storm going on in China right now. Chinese growth and urbanization fueled a boom in construction there that we likely won’t ever see again. That being said, if the current oversupply situation can be dealt with, prices of steel, aluminum and copper could increase in 2016. Oversupply is the biggest problem for products such as H-beams, rebar and steel pipes.

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We echo the sentiments of analysts who are advising caution before investment in construction materials.

MetalMiner co-founder and editor-at-large Stuart Burns had this to say recently: “It’s definitely a bullish tone that bank and senior research analysts have taken…in our view, there’s still plenty of excess capacity out there, demand is weak, and the dollar is strengthening.”

While US construction might be a safe haven as compared to the markets in other parts of the world, investors should temper their expectations.

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The monthly Raw Steels MMI® registered a value of 51 in October, a decrease of 1.9% from 52 in September.

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Even though the 1.9% decline is not very big, we keep seeing sharp declines among steel products. A recent example was plate prices in the US, one of the steel products featured in our monthly forecast. Toward the end of the month, plate fell from $561 per short ton to $519/st. That’s a 10% decline in only one week.

Raw-Steels_Chart_October-2015_FNLSharp declines are par for the course in our current bear market. Over the past few years, placing forward buys has only served to reduce profit margins, not to manage risk. It is critical to understand the market we are in, because different buying strategies work for different markets.

Foreign markets have provided a home for the glut of steel that the oversupplied Chinese market has created with its overcapacity and weak demand. Chinese exports continue to grow year-over-year. In September, the vice-chairman of the China Iron Steel Association (CISA) said that they expect Chinese steel product exports to exceed 100 million metric tons this year. So far, during the first 8 months, product exports reached 71.87 mmt, up 26.5% compared to the same period in 2014.

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Solid automotive and construction data simply don’t make up for the slowdown in the same sectors in China. On top of that, we have a steel production cost declining thanks to lower oil, scrap and iron ore costs. In September crude oil fell again, remaining below $50 a barrel. Similarly, iron ore prices remained at low levels in September, below $55/mt.

What This Means For Metal Buyers

Based on the latest numbers, Chinese automotive, construction and manufacturing activity keep pointing down. As long as we don’t see improvements in China, more steel price declines might be around the corner. It seems like the time to start buying forward hasn’t come yet.

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A weak jobs report had far-reaching effects for commodities and metals this morning.

Fed Still Wants to Increase Interest Rates

Eric Rosengren still expects the Federal Reserve to raise interest rates this year despite what the head of the Boston Federal Reserve Bank called a “weak” September jobs report, which could signal a more significant economic slowdown that delays the policy tightening.

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In a Reuters interview, Rosengren said the slowdown in hiring last month effectively heightens his sensitivity to the economy’s performance the rest of the year.

Precious Metals, Stocks Jump

Gold rose on Monday as the dollar weakened after a disappointing US jobs report.

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Spot gold, was up 0.2% at $1,139.81 an ounce by 1333 GMT, having been lower earlier.

The metal had gained 2.2% on Friday, its biggest one-day rise since Jan. 15, after data showed US employers slammed the brakes on hiring over the last two months. Non-farm payrolls rose by only 142,000 last month, below economists’ expectations of 203,000.

The Architecture Billings Index slowed down in August after showing mostly healthy business conditions so far this year. An economic indicator of construction activity, the ABI reflects an approximate 9 to 12-month lead time between billings by design firms and construction spending.

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The American Institute of Architects (AIA) reported the August ABI score was 49.1, down from a mark of 54.7 in July. This score reflects a decrease in design services (any score above 50 indicates an increase in billings). The new projects inquiry index was 61.8, down from a reading of 63.7 the previous month.

Employment Up, Billings Down

Construction employment has been generally healthy in the US this year. Employment on construction projects increased in 163 of 358 metro areas in August compared with year-ago levels, but it fell in nearly as many with 153 showing a loss over the previous year, according to the Associated General Contractors of America report. Florida’s metro areas saw an increase of 7%, while 2 Texas metro areas saw steep declines.

The recovery in construction employment looks every bit as fragile as that of the overall economy. Fixed-asset investment growth in China served as the key growth engine across the broader basic materials space for roughly the last 15 years.

Morningstar: US Construction a Safe Haven

With that growth engine sputtering out, pockets of growth in the basic materials sector, including metals, have become scarce. Morningstar‘s outlook for residential and nonresidential construction in the US points to an attractive long-term growth story. Really? Why?

Read more

Brazil’s top steel producer, Gerdau, seems to be well on its path to making its India operations turn a profit by 2016.

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The company, which is listed on the Sao Paulo and New York Stock Exchanges, recently said with a rise in demand for specialty steel in India, its wholly-owned Gerdau Steel India subsidiary, which mainly serves India’s automobile sector, is trying to double its sale over last year.

Counting on Automotive Specialty Demand

The demand for specialty steel is rising across the auto sector, and Gerdau India expects to sell 200,000 metric tons this calendar year, a report in Financial Chronicle said. Sridhar Krishnamoorthy, Managing Director at Gerdau Steel India, said “The market is looking up. The demand for our steel is rising from across the auto sector, and we will be able to sell 2 lakh tonne (200,000 metric tons) this calendar year,”

Krishnamoorthy revealed the company recently received an order to supply specialty steel to some Japanese automobile companies in India, which were also Gerdau’s global clients.

How Did Gerdau Get to India?

Gerdau entered India in 2006-07 through a joint venture with Kalyani Group to acquire the SJK Steel Plant at Tadipatri. Gerdau took almost total control of the business in 2013. At that time, it was only making pig iron and billet.

Since then, the company has invested in a factory in the southern province of Andhra Pradesh, and in setting up the state-of-the-art production specialty steel production facility. The plant consists of iron and steelmaking facilities, has an installed capacity to produce 300,000 metric tons of specialty steel per year, he said. The integrated steel factory also supplies steel to India’s defense, rail and related industries.

New Products

The Brazilian multinational recently started selling a new type of steel for the US, Brazilian and European automotive industries. According to the producer, the material was 20% more resistant to heat and pressure, and will be used in diesel engines, mostly for pistons.

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Krishnamoorthy said the company adopted a 2-pronged strategy to make the operation sustainable. It is cutting down the sale of merchant bars, a commodity steel item, and was increasing the sale of value-added products to the more lucrative auto component sector.

Krishnamoorthy, being a company man, said the market is looking up, and the India operations will be able to break even and start making a profit in 2016.