The National Development and Reform Commission (NDRC) ordered utilities to raise power prices by 0.5 yuan ($0.0719) per kilowatt-hour on top of current prices for steel mills preserving equipment that ought to be eliminated.
AISI Hires Tax and Trade Policy Director
The American Iron and Steel Institute today announced the appointment of Raphael Goodstein as director of tax and trade policy.
Goodstein has 15 years of Congressional and government affairs experience, including 10 years representing the common policy interests of the domestic auto industry as legislative director with the American Automotive Policy Council. He has also worked on Capitol Hill, for Senator Debbie Stabenow, and for a number of political and public affairs organizations.
Anti-dumping actions were once again a hot topic this year. Back in February India imposed a minimum import price for nearly all foreign steel entering the country. This was only one of many anti-dumping actions taken this year with both the U.S. and European Union tightening tariffs this year. — Jeff Yoders, editor
It’s a problem that’s dogged almost all the major economies as well as developing nations – the dilemma of steel cheap imports. Steelmakers in the U.S. have, in the past, not only cried foul at the World Trade Organization but also imposed steep anti-dumping duties on cheap imports from China, Korea and India making their way into the U.S. market, thus further depriving an already-stressed out market.
A few days ago, as reported by MetalMiner, seven EU nations asked the European Commission to intervene to stop cheap imports of steel, particularly from China and Russia.
India has imposed a minimum import price on most steel products. Source Adobe Stock/Jovanning.
In India, a market where steel consumption continues to grow bucking global trends, the situation is no different. So, finally giving in to the loud protests by domestic steel companies against cheap imports, the Indian government recently imposed a minimum import price (MIP) ranging from $341 to $752 per metric ton on 173 steel products as a “temporary” measure.
Minimum Import Prices
The MIP conditions are valid for six months from the date of the notification or until further orders, whichever is earlier. The MIP, though, will not be applicable on imports under the advance authorization scheme and high-grade pipes used for pipeline transportation systems in the petroleum and natural gas industry are exempt.
The move seems to have gone down well with a majority of the steel trade bodies and a large section of India’s steel industry, but some have called it simply a band-aid for the hemorrhaging steel sector.
India’s domestic steel production between April-January 2016 dropped 1.8 % to 75.66 million mt, while imports rose 24.1% to 9.3 mmt. Consumption grew 4.2% to 65.91 mmt. For domestic steelmakers, apart from the MIP, the import duty has also been raised to 10% for flat products and 7.5% for long products.
The rationale behind the MIP was explained by Steel Secretary Aruna Sundararajan, in an interview with The Economic Times. She said the move would give India’s steel industry much-needed breathing space to get healthy.
Over the last couple of years, India had seen a spurt in steel imports, leading to a decline in prices. According to the Steel Secretary, India had over 400 mmt of surplus steel. All that surplus has put the domestic steel industry into distress.
While imposing the MIP, the Indian government also took care to ensure that downstream users were not affected. That’s why certain categories of steel — required by end-user industries — not manufactured in India, were exempted.
The government’s decision to impose MIP will, however, reduce the benefit of lower commodity prices for automobile companies, according to many experts. Also, according to the engineering goods exporters’ body, EEPC India, the MIP will lead to further erosion in engineering exports. It has thus sought from the government a compensatory mechanism to make up for the increased raw material price (about 10%) for the distressed exporters, mostly in the small and medium-sized enterprises segments.
The Indian government has dubbed the MIP an “emergency provision.” In the next six months, it will be looking at anti-dumping duties and moving toward more stable, longer-term measures. It will also be keeping a close watch on imports after the MIP, as well as the response of domestic steel companies and consumers.
Price stories continue to dominate our look back at the most-read posts of 2016. Katie Benchina Olsen’s missive on why North American Stainless should hike prices was first published in late January. Stainless prices have taken off with the rest of the industrial metals since but this look back shows just how precarious the situation was for producers, who were afraid of scaring off customers with higher prices, back then. — Jeff Yoders, editor
North American Stainless (NAS), the US flat-rolled stainless market leader and the lowest cost producer, has a decision to make.
Will NAS implement another base price increase effective in March or April? Last month, NAS, never known to be a follower, announced a base price increase which was half that of its competitors Allegheny Technologies, Inc. (ATI), AK Steel and Outokumpu Coil Americas. This meant that the only increase buyers would be paying was the less aggressive 2-discount point adjustment (approximately $0.04 per lb. increase on 304 base gauge).
Will NAS increase base prices in March or April? Source: Adobe Stock/Jovanning.
Stainless base prices may have gone up since January 1, but buyers should still be paying a lower net price for standard 304 2B this month than they did in December. The increase on base gauge 304 was offset by the over $0.05 per lb. decline in the 304 alloy surcharge. 304 Base gauge net prices should decline in February since NAS’ February 304 alloy surcharge will be $0.3321 per lb., which is $0.0031 per lb. less than the January surcharge.
North American Stainless’ Market Position
NAS is in the best position to endure depressed stainless prices longer than any of its North American competitors, but now they are losing money, too. Acerinox, NAS’ parent company from Spain, posted a loss of over €8 million in Q3 2015, after being in the black the previous three quarters. Acerinox’s 2015 results will not be announced until February 29, but I would expect the results to be worse as alloy surcharges continued to decline through the end of 2015.
I believe NAS will announce another base price increase once its March production is filled, which should be in the next week. The base prices in Q4 2015 were unsustainably low as a result of Outokumpu Coil Americas’ push to fill its Calvert mill with lower prices than NAS.
As long as mill lead times remain in check, service centers will support the domestic mills so that they can keep inventory as lean as possible while still being able to provide for the manufacturer’s requirements. My experience has been that when alloy surcharges are still declining, price increases are easier for the market to accept. Another base price increase is not only feasible for March or April, it is necessary to realign base prices to manageable levels for producer, service center and manufacturers. NAS needs to lead the next price increase and act like the market leader.
As we continue to republish our highest-rated posts of the year during the holidays, we look back at the February announcement that Allegheny Technologies, Inc., exited the commodity stainless steel business.
Knowing what we now know, and considering that stainless prices have recovered and entered a bull market, you do have to wonder if ATI made the right call. Our Katie Benchina Olsen will continue to cover the latest developments for both ATI and the stainless market in the new year. — Jeff Yoders, editor
For the foreseeable future, Allegheny Technologies, Inc. (ATI) is out of the flat-rolled stainless commodity business as well as the grain-oriented electrical steel (GOES) market.
ATI will be focusing on global markets with high barriers to entry. As we reported last month, ATI is reducing its exposure in commodity products by idling its Midland, Pa., plant, a commodity stainless facility, and its Bagdad GOES production facility in Gilpin Township, Pa.
ATI’s Brackenridge facility is the future and commodity stainless is its past. Source: ATI
Earlier this week, ATI reported in its earnings call a net loss of $378 million for 2015 as compared to a net loss of $2.6 million in 2014. ATI’s flat-rolled products business segment is to blame for the staggering losses. Operating losses for flat-rolled products were $242 million for 2015. For this reason, Rich Harshman — ATI’s chairman, president, and CEO — stated that ATI is taking “rightsizing actions” to return the segment to profitability as quickly as possible and “execute our strategy for sustainable long-term profitable growth.”
As we continue to republish our top posts of 2016, we look back to April when cold-rolled coil prices hit a one-year high, an event that turned out to be a harbinger of higher steel prices later in the year.
We’ll continue to keep you informed of all movements in the steel markets in 2017. — Jeff Yoders, editor
Steel is being a different animal this year. While metals such as aluminum, copper and nickel are trading barely above multiyear lows, we are witnessing strong price momentum in domestic steel prices.
Cold-rolled coil is a good example. Prices last week climbed above $600 per standard ton, the metal’s highest price level since April 2015.
U.S. Cold-rolled coal hits one-year high. Source: MetalMiner index.
Why, in an Oversupplied Market, Did Steel Prices Get a Boost?
The duties imposed on steel products caused steel imports to taper down in a big way over the last three of months and U.S. steel mills now have the power to raise their base selling prices. U.S. aluminum markets didn’t enjoy this kind of protection. However, even if they did, which they might, aluminum prices wouldn’t get the same boost.
The reason is that aluminum (like the rest of base metals) is more global in nature than steel. U.S. steel prices can be much higher than in the rest of the world because prices are not decided on exchange-based trading unlike aluminum which is linked to London Metal Exchange reference prices. So, even if duties were imposed on aluminum products, aluminum producers couldn’t arbitrarily hike their selling prices.
Is This Rally Backed Up by Fundamentals?
In the short-to-medium term it is, whereas long-term it really isn’t since steel demand in China keeps contracting. The recent positive sentiment might help U.S. steel mills increase their spot offers even further, but we could see a revision later this year. Although there seems to be short-term scarcity of steel in U.S. markets, there is still plenty of steel overhanging in global markets. We’ll have to wait to see how much further mills can raise steel prices in Q2 before buyers turn to international suppliers for cheaper prices.
Chinese Exports Rise Sharply in March
Another factor driving global steel prices this year has been expectations of a decline in Chinese steel exports as earlier this year China committed to curtail its excess steel capacity. However, the latest data doesn’t seem to suggest that. In March, Chinese steel exports surged 30% compared to the same period last year. In Q1, Chinese steel exports are up 8% compared to the same quarter last year. That seems to suggest that rising steel prices have only ensured that Chinese steel mills produce more of the metal.
What This Means For Metal Buyers
Market dynamics are quite different for steel markets than to the rest of base metals. U.S. mills now have the power to increase their spot prices. Buyers should have, by now, locked in prices for the next one or two quarters.
Longer-term, there are still plenty of events that could change market sentiment later this year, limiting domestic mills’ ability to raise prices. We’ll have to keep monitoring markets to watch for more clues.
Over the holidays, we are republishing and revisiting some of our most well-read posts of 2016. While this one technically doesn’t fall into the 2016 (it was initially published December 14, 2015) but we are still looking back at it anyway since it deals with predictions about metal prices for the year we’re about to leave behind. It also gathered the second-most traffic of any post we published in 2016 despite predating the year by a few weeks.
At the time, my colleague Raul de Frutos wrote “Currently, some key Chinese indicators we are tracking are giving us no reason to expect higher metal prices in 2016.”
Yet, we have seen higher metal prices in 2016 and we are now in a full metals bull market. The reason we are is because of everything Raul cited in his post. He was 100% right that “the longer it takes China to clean up its mess, the later metal prices will hit bottom.”
China cleaned up its mess, hit bottom early in 2016 and turned global commodities demand around remarkably fast, all things considered. This reminds us that markets can make a turn around quickly. The future is unpredictable and we need to take the market day by day. Just four months after this post, we went from bearish to completely bullish on industrial metals. Enjoy the second of our Best of MetalMiner in 2016 series. -Jeff Yoders
As you well know, the main cause of the commodities meltdown has been China’s slowdown. Since China makes up half of the world’s demand for commodities, the economic slowdown means lower demand which has led to a situation where a glut of materials can’t find a home.
The role that China plays in commodity prices is so big that the future of metal prices is totally dependent on China. The longer it takes China to clean up its mess, the later metal prices will hit bottom. Currently, some key Chinese indicators we are tracking are giving us no reason to expect higher metal prices in 2016.
Imports to China dropped 8.7% to $143.14 billion in November from a year earlier, extending a slump in imports to a record 13 months, suggesting that government stimulus measures are failing to boost growth.
China Imports (millions $) Source: TradingEconomics.com from Customs Administration Data.
Meanwhile, Chinese exports declined 6.8% to $197.24 billion in November from a year earlier, marking the fifth straight falling month. The fact that China is struggling to increase its exports demonstrates that global demand is weak and that China will have to find a more painful solution to balance its surplus. The trade surplus and the inability to find a home for the excess of materials flow will continue to keep a lid on China’s growth, depressing commodity prices.
China Exports (millions of dollars). Source: TradingEconomics.com
Yuan Falls To Four-Year Low Against The Dollar
Chinese authorities want to see a smooth depreciation of the yuan/renminbi as China faces external pressure not to devalue its currency too quickly. A sharp depreciation would probably hurt the country’s credibility at the same time China wants to attract more foreign capital. In addition, it would raise criticisms that China is keeping its currency artificially low to encourage more exports.
Yuan versus dollar. Source: Yahoo Finance.
Recently, China’s central bank cut its reference rate to the lowest level since 2011. The yuan fell against the dollar to the lowest level since 2011. Although China has said that it has not allowed the yuan to slide to boost the economy or increase exports, it seems that the market is taking these developments as desperate actions from China’s government to help the economy, raising concerns among investors that the country’s slowdown might worsen.
China’s Equity Markets’ Slump Continues
We believe that equity markets are the best benchmark for the performance of China’s economy, or at least investors’ sentiment about China. We’ve analyzed before the link between China’s stock market and commodity prices. Currently, this link is even more noticeable.
China FXI shares continue to fall. Source: @StockCharts.com.
After the huge slump this summer, equity prices mildly recovered, but since October we see that equities are heading south again. The poor performance of Chinese stocks demonstrates that investors are still worried about the future of the country and not lured by its government actions.
Distributed solar capacity in the U.S., which includes all solar power capacity other than utility-scale installations 1 megawatts or larger, increased to 12.3 gigawatts as of September, according to new figures from the Energy Information Administration. In comparison, a cumulative 11.6 gw had been installed in the U.S. by the end of 2015.
According to the report, third-party owners own 44% of distributed solar capacity in the U.S. residential sector, compared with 11% in the commercial and industrial sectors. The residential sector accounts for 56% of distributed solar capacity but 84% of third-party-owned solar capacity. Nearly half of U.S. solar capacity is privately owned. However, panels owned by individual homeowners and businesses are expected to eclipse TPO as the largest owner-category in the next five years.
Like the Cleveland Browns losing, the sun rising or winter bringing cold weather and shorter days, the Renewables MMI didn’t move this month and held flat at 52 as it has for four straight months. That follows four years of relative flatness, too.
We’ve previously written about the relationship between manufacturers of crystalline silicon photovoltaic panels and incentives for solar expansion and this report highlights the cozy relationship between production and ownership. If, however, individuals, can really eclipse corporate owners like SolarCity in the next few years, it could be a watershed moment for solar power in the U.S. as lower costs are expected to finally make owning cheaper and better than leasing.
According to a recently released study from Future Market Insights, the GOES segment of the market 6 should grow by 7.5% in value in 2016 and 7.3% to 2026 due to increased demand from the energy and power generation industries.
From a geographical perspective, North America, Europe and Japan all contribute to a strong market, however, the Asia Pacific region serves as the largest market by volume with China leading the charge.
Despite the projected growth of GOES, many flat-rolled steel products have become subject to one form of trade case or another. Despite the anti-dumping duties imposed on China in the case of cold-rolled coil and other countries for hot-dipped galvanized, hot-rolled coil and others, when an exporting country receives a punitive duty, the flow of material merely moves to other exporting nations not identified in the specific trade case.
Steel prices have been in a steady decline since the beginning of August. At best, trade cases provide a few months of pricing power for domestic producers.
Two years have passed since AK Steel and Allegheny Technologies, Inc. brought their GOES trade petitions to the International Trade Commission. The ITC found the domestic producers “unharmed” by imports. The trade cases resulted in absolutely nothing for the domestic producers — ATI even shut down its GOES line. MetalMiner’s M3 MMI index and actual spot market coil prices have declined since 2014.
The GOES MMI® collects and weights 1 global grain-oriented electrical steel price point to provide a unique view into price trends over a 30-day period. For more information on the GOES 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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The duties are set at between 13.2 and 22.6% for hot-rolled flat iron and steel products and at between 65.1 and 73.7% for heavy-plate steel, according to a filing in the European Union’s official journal.
Anti-Dumping Duties on Phosphor Copper
Not to be outdone, The Department of Commerce placed tariffs on allegedly dumped imports of phosphor copper from the Republic of Korea yesterday.
Commerce found, preliminarily, that dumping occurred by mandatory respondent Bongsan Co. Ltd. by a dumping margin of 3.79%. All other producers from South Korea also received 3.79% anti-dumping duties. U.S. Customs and Border Patrol will now collect cash deposits upon import of the copper. The petitioner is Metallurgical Products Company of Pennsylvania.
For the purpose of an anti-dumping investigation, dumping occurs when a foreign company sells a product in the U.S. at less than its fair value.
n the Brazil investigation, Commerce preliminarily found that dumping has occurred by mandatory respondents, Companhia Siderurgica Nacional and Usinas Siderurgicas de Minas Gerais SA, at a preliminary dumping margin of 74.52%. The dumping margin for the mandatory respondents was based on adverse facts available (AFA) as a result of their failure to cooperate in the investigation. Commerce assigned a preliminary dumping margin of 74.52% for all other producers/exporters in Brazil. Read more