Articles in Category: Ferro Alloys

Steel production in China, the world’s biggest supplier and consumer, will likely contract this year and shrink further in 2017 as local demand slows, according to Li Xinchuang, a vice chairman at the China Iron & Steel Association.

Two-Month Trial: Metal Buying Outlook

“There will be significant declines in the next three months,” said the influential Li, who’s also dean of the China Metallurgical Industry Planning & Research Institute, in a phone interview with Bloomberg News. “If steel consumption and production are set to decline, then there’ll definitely be less demand for iron ore.”

morningstar_chinese_steel_investment_550_082931

Metals and minerals are actually in a decade-long down cycle. Source: Morningstar/World Bank.

“Our original estimate was for a 3% decline this year,” Li told Bloomberg. “Based on how things have played out this year, I think the decline in output might be less than anticipated but the downtrend remains unchanged. Iron ore should be on a downtrend, not on an uptrend.”

This falls in line with many public statements from Beijing that have said China will get serious about curtailing production in the second half of the year and also reduce stimulus measures to the sprawling Chinese carbon steel industry. Citigroup, UBS Group, Morningstar and others are predicting a fall in steel prices and iron ore, as well, as demand wanes in the world’s largest consumer. This group includes James May of Steel-Insight, a MetalMiner contributor.

Morningstar’s Andrew Lane recently cautioned that steel is one of many metals and minerals in a decade-long decline. The investment research firm also pointed out that China’s excess capacity equates to nearly 4 times actual steel production in the U.S. in 2015, so the resilience of loss-making capacity in China reflects the heavy involvement of local governments eager to support employment, GDP, and tax revenue rather than optimize profitability.

Free Download: The August 2016 MMI Report

Whether Li is right and China actually cuts back in the second half — through mergers, closures or other instruments — the odds against steel prices continuing to increase, globally, are still long.

The month of August has seen the Indian government slap anti-dumping duties on the import of a variety of steel products from six countries including China, South Korea, Brazil and Indonesia.

Two-Month Trial: Metal Buying Outlook

In the first week, the import duty was imposed on hot-rolled steel products, while a few days ago, the duty was enforced on certain cold-rolled flat steel products from different countries to protect the domestic industry from cheap imports.

In the first case, anti-dumping duties $474-557 per metric ton were imposed on hot-rolled flat products of alloy or non-alloy steel from China, Japan, South Korea, Russia, Brazil and Indonesia, according to a government notification.

Coiledsteel_585

Imports of coiled steel will be heavily tariffed in India, too. Source: iStock.

The duty will be in force for six months until February 7.

Hot-Rolled Duties

An anti-dumping duty of $474 per ton was imposed on import of hot-rolled flat products of alloy or non-alloy steel of a width up to 2,100 millimeter with a width up to 25 mm from Korea and Japan.

According to an Indian Express report Korean firms affected by this were Hyundai Steel Co. and POSCO. Three Japanese companies — JFE Steel Corp., Nippon Steel and Sumitomo Metal Corp. are also on the list. A similar anti-dumping duty was slapped on imports of similar products from China. Exporters Angang Steel Company Ltd. and Zhangjiagang were among the hardest hit. Imports of the same from Indonesia, Russia and Brazil attracted the $474 per mt duty. Read more

Source: Thomson Reuters Datastream/China Customs 8/9/2016

Source: Thomson Reuters Datastream/China Customs 8/9/2016

Chinese steel exports rose in the first half of 2016, despite promises of production cutbacks.

While demand for iron ore is up in China, the Philippines has shut down its only producer.

Chinese Iron Ore Imports Increase

On July 19th, the iron ore benchmark for immediate delivery to China’s Tianjin port fell by 2% to $55.10 per metric ton, the lowest since July 1st. Chinese iron ore imports rose 8.3% in July from the previous month to hit its second-highest on record, customs data showed on Monday.

Two-Month Trial: Metal Buying Outlook

The move followed a significant drop in the most traded benchmark for construction material rebar on the Shanghai Futures Exchange. Demand for the key steel-making ingredient has increased as Chinese steel mills fired up furnaces on the back of higher prices.

Philippines Shuts Down Lone Iron Ore Miner

The Philippines has suspended the operations of the country’s only iron ore miner due to environmental infractions, officials said on Monday, bringing to eight the number of mineral producers halted in a government crackdown.

Free Download: The July 2016 MMI Report

The Southeast Asian nation, the world’s top nickel ore supplier, began an audit of all its metallic mines on July 8, shaking global nickel markets as seven nickel miners were suspended for causing environmental harm.

The steel industry is awaiting a decision this week by the U.S. International Trade Commission on whether U.S. Steel‘s 337 petition, an attempt to block all Chinese carbon and alloy steel from entering the U.S. market, should continue to be investigated or be suspended.

Free Download: The July 2016 MMI Report

Friday, Aug. 5 marks the 30-day statutory deadline for the ITC to rule on a suspension order, although the ITC can give itself an extension. The ITC could decide to uphold Administrative Law Judge Dee Lord’s temporary suspension order issued July 6, overturn her order or do nothing.

Lord temporarily suspended the investigation on the grounds that at least two issues raised in the case fall under the Commerce Department‘s purview, and that there was no record Commerce was notified of the ITC investigation.

Two-Month Trial: Metal Buying Outlook

U.S. Steel has requested  that the ITC issue a permanent limited exclusion order and cease-and-desist orders for Chinese steelmakers. It’s also seeking a general exclusion order from the ITC barring all unfairly traded Chinese steel products that are manufactured abroad, sold for importation, or sold in the U.S. after importation.

There’s a quiet battle being fought outside the limelight between India and other steel producing nations over the world’s largest democracy’s protectionist measure, the Minimum Import Price (MIP), introduced in February.

Two-Month Trial: Metal Buying Outlook

The MIP, essentially a tariff on imports targeted mainly at neighboring China, is set to expire August 5. While large steelmakers in India are pushing for the continuation of MIP by the government, some member-nations of the World Trade Organization have started to apply pressure to remove the MIP. The MIP on 173 steel items for six months was introduced as a way to curb cheap imports and firm up steel prices in the home market. The MIP ranged from $341 a metric ton to $752/mt depending on which product.

Other Nations Protest the MIP

In a recent meeting of the goods council at the WTO, nine members, including the U.S., the European Union and China, asked India to justify its continued restrictions on imported steel.

There are some who say that if India continues with the MIP after the deadline it could be dragged into dispute proceedings at the WTO by any of the complaining members, although India has consistently maintained it’s done no wrong and the MIP is a general agreement on tariffs and trade-compliant instrument to regulate imports. Almost all steel producing major countries have imposed one form or the other of tariffs or other protectionist measures to curb steel imports. There are also reports here that India could prune the list of 173 steel products and still keep the MIP in effect for most products.

MIP Effect: Imports Fall

In the first quarter of FY17 (India’s fiscal year begins in on April 1) total steel production in India grew by 3.8% year-on-year, while overall steel consumption grew by only 0.3%. In the same period, imports fell by 30.7% year-on-year, according to a new report by rating agency India Rating and Research (Ind-Ra).

According to the agency, the increase in Indian steel production was supported by the MIP policy but was unlikely to continue beyond August after it expires. Since the imposition of the MIP, domestic producers benefited by way of import substitution. Ind-Ra felt the continuation of the industry protection measure beyond August is required to “safeguard the interest of the domestic steel industry, which has shown signs of a recovery in the current fiscal on the back of MIP.”

Free Download: The July 2016 MMI Report

Ind-Ra opined that profitability for most steel producers is likely to remain under pressure due to the newly added capacity. The interest cost and depreciation from these new capacities has now started to impact the income statements and increased both operations and financial leverage for India’s steel industry. For India’s steel companies to see healthy profit generation, capacity utilization levels need to increase significantly.

A recent report by five U.S.-based steel trade associations analyzed 25 of the largest steel companies in China detailed the amount and type of government subsidies each company received in recent years.

Two-Month Trial: Metal Buying Outlook

The analysis found that these subsidies and policies have led to tremendous overcapacity and created a fragmented domestic steel sector in China made up, primarily, of inefficient, heavily polluting companies, all of which require government subsidies at several levels to stay open. Read more

A new report attempts to quantify government subsidization of Chinese steel and the Fed has left interest rates alone again.

Steel Associations Release Chinese Subsidy Report

Five of the leading American steel trade associations today released a report documenting that the steel industry in China is heavily subsidized by its government, and the rapid growth in the industry there has been fueled by government subsidies and other market-distorting policies.

Two-Month Trial: Metal Buying Outlook

The report was released by the American Iron and Steel Institute, the Steel Manufacturers Association, the Committee on Pipe and Tube Imports, the Specialty Steel Industry of North America and the American Institute of Steel Construction.

The report analyzed each of the 25 largest steel companies in China and detailed the amount and types of government subsidies each company received in recent years. The analysis also found that these subsidies and policies have led to tremendous overcapacity and created a highly fragmented domestic steel sector in China made up of many inefficient, and heavily polluting, companies.

The full report is available from AISI.

Fed Holds Rates Steady Again

The Federal Open Market Committee of the Federal Reserve decided to maintain the target range for the its benchmark interest rate, the federal funds rate, at 1/4 to 1/2 of 1%.

Free Download: The July 2016 MMI Report

The Fed, in a statement after a two-day meeting of its policy-making committee, said that the economy had overcome wobbles this year and that job creation had increased with moderate economic growth. The central bank added that it saw fewer clouds on the horizon as the U.S. entered the eighth year of an economic expansion.

Allegheny Technologies, Inc. reported sales were up 7% for the second quarter over the year before, increasing to $811 million, with the company reporting an overall net loss largely due to its recent work stoppage.

Two-Month Trial: Metal Buying Outlook

ATI CEO, President and Chairman Richard Harshman described reason for cautious optimism to an uptick in orders in the aerospace market — both in engine components and airframes — and lowered capital expenditures in the near future ATI continues to ramp up production at its $1.2 billion Brackenridge, Pa., flat-rolled stainless production facility.

Aerospace Growth

“Commercial aerospace market sales increased another 3% compared to the first quarter of 2016,” Harshman said. “Sales to the aerospace and defense market continued to drive ATI’s results, representing over 50% of total 206 sales. Our aerospace market is being driven, in large part, by the growth of ATI’s next generation mill products, forgings and castings.”

Harshman and other ATI executives described the nickel and titanium alloys — and powders that ATI sells for additive manufacturing — it provides to the defense and aerospace markets as the future of the company. Harshman also said the business momentum ATI is experiencing “certainly the best it’s been in quite a while.”

Flat-Rolled Products

While flat-rolled stainless products are clearly not ATI’s future, ATI  officials said the flat-rolled products division improved financially in Q2. According to the earnings report, officials expect the division to be “modestly profitable” in the fourth quarter. This opened up the possibility of ATI considering reopening its Midland, Pa., production facility. ATI officials had previously said the plant won’t return to production until the flat-rolled market improves.

Free Download: The July 2016 MMI Report

“In our FRP segment, our second quarter results demonstrate that we are making progress in our journey toward a consistently profitable business, during a period of continuing low raw material prices, global stainless steel sheet and strip overcapacity, and uncertain end market demand,” Harshman said.

The United Steelworkers and the petitioning domestic steelmakers praised new anti-dumping tariffs against cold-rolled flat steel products, while also saying that the damage from cheap imports has already hurt their operations.

Two-Month Trial: Metal Buying Outlook

“Today’s final duty orders by the Obama Administration expands fairer pricing conditions on cold-rolled steel products from five countries, combined with duties placed earlier this summer on the same steel import products from China and Japan,” United Steelworkers President Leo Gerard said. “We have nearly 19,000 steelworkers and iron ore miners still on extended layoff status since last year as the remaining steel trade case investigations continue to reduce huge inventories of unfairly dumped and subsidized finished steel imports that have been stockpiled before the case was initiated.”

Non-coil stainless is included in a new anti-dumping petition. Source Adobe Stock/Jovanning.

Cold-rolled steel flat products from five countries received new tariffs. Source Adobe Stock/Jovanning.

 

The cold-rolled case hit producers in Brazil and the Republic of Korea hardest — South Korea’s POSCO was hit with 64.62% combined anti-dumping and countervailing duties due to a failure to confirm key elements of its response to investigators — but tariffs have already had an effect on steel imports into the U.S. Most of them were already being collected as preliminary duties that became final last week. The initial case was filed last year.

Injury Before Remedy

“The year-long investigation and duty orders show our trade laws need a rewrite in today’s world of steel overcapacity that’s putting American manufacturing workers and miners on layoff in their our own market, while foreign producers keep shipping illegally-subsidized and dumped products,” USW International Vice President Tom Conway told the Times of Northwest Indiana. Read more