Articles in Category: Ferrous Metals

This part two of our sit down with Steel Manufacturers Association President Philip K. Bell at the recent S&P Global Platts Steel Markets North America conference here in Chicago. Bell currently serves on the Department of Commerce International Trade Advisory Committee on Steel (ITAC 12), advising the Secretary of Commerce and United States Trade Representative on trade policy, trade agreements, and other trade related matters that benefit U.S. businesses, workers, and the economy.

Jeff Yoders: You mentioned that the proposed border-adjustment tax is something you have to be very, very careful about.

Philip K. Bell: Ironically, when I look at things the administration should prioritize, I would really like to see infrastructure rise higher on that top five list as opposed to things like a healthcare repeal because that’s one clear way that you can jump start the steel industry.

Benchmark Your Current Metal Price by Grade, Shape and Alloy: See How it Stacks Up

Philip K. Bell

Philip K. Bell. Source: SMA

The steel industry, to me, if you look at it in the simplest terms, is based on cost and demand. You can help lower steel producers’ costs by reducing taxes and regulatory burdens, but you can increase demand by having this $1 trillion infrastructure plan and that would be very important. Making sure you deal with countries that dump, subsidize exports, etc. would also help.

JY: Using countervailing duties, anti-dumping duties and the existing tools commerce has, right?

PB: Right.

JY: I asked Chad Utermark, executive vice president of Nucor, what, exactly, their representatives had heard about when we might get to see the ideas for an infrastructure bill precisely because of that. This seems like a slam dunk for economic growth for all the industries that support construction. Why isn’t it being pushed more?

PB: We certainly would like to see infrastructure investment made a higher priority. I love the idea of public-private partnerships. The P3 approach is good, you’re going to bring better managerial skill with people who can manage the entire supply chain of infrastructure investment. Keep in mind, infrastructure can be financed this way, but it also needs to be funded (to an extent by the government). There are some infrastructure projects that are very important but might not appeal to private investors. They might not be easy to get done. Read more

President Donald Trump said today that his administration has approved the Keystone XL pipeline, reversing the Obama administration’s decision to block the oil transportation project.

Benchmark Your Current Metal Price by Grade, Shape and Alloy: See How it Stacks Up

Speaking from the Oval Office, Trump officially announced the approval shortly after the State Department issued TransCanada‘s permit, making good on one of his campaign promises. The approval greenlights the Canadian company to complete construction on the pipeline that will funnel crude oil from Canada to refineries on the Gulf Coast.

The American Petroleum Institute praised the approval.

“Today’s action to approve the Keystone XL pipeline’s cross-border permit is welcome news and is critical to creating American jobs, growing the economy, and making our nation more energy secure,” said API President and CEO Jack Gerard. “This critical infrastructure project has been studied longer than any pipeline project in U.S. history with exhaustive reviews by the State Department concluding that the project is safe for the environment and the best option for transporting domestic crude and Canadian oil to U.S. refineries.”

The 1,179-mile addition to existing pipelines that will stretch from Alberta, Canada to the U.S. Gulf Coast is estimated to create 42,000 construction jobs but only 35 full-time, maintenance positions once it’s completed.

Lopez Allows Suspended Mines to Ship Out Stockpiled Nickel Ore

The Philippines’ environment ministry, led by Environment and Natural Resources Secretary Regina Lopez, has allowed eight suspended nickel ore miners to ship out stockpiles of mined ore, sources told Reuters, temporarily boosting supply from the world’s top exporter of the raw metal after a major crackdown.

Two-Month Trial: Metal Buying Outlook

More than half of all the mines in the Philippines have been ordered to permanently shut to protect watersheds in an eight-month campaign led by Lopez.

We had a chance to sit down and discuss the issues facing members of the Steel Manufacturers Association with SMA President Philip K. Bell at the recent S&P Global Platts Steel Markets North America conference here in Chicago. Bell also currently serves on the  Department of Commerce International Trade Advisory Committee on Steel (ITAC 12), advising the Secretary of Commerce and United States Trade Representative on trade policy, trade agreements, and other trade related matters that benefit U.S. businesses, workers, and the economy.

Philip K. Bell

Philip K. Bell. Source: SMA

Jeff Yoders: We’ve heard a lot about North American Free Trade Agreement and what changes to it might mean in the last two days. How do your members feel about reopening NAFTA to changes?

Philip K. Bell: NAFTA is over 20 years old and it’s probably time to look at it again. A lot has changed over the last two decades. We hope the approach that the administration takes is one that’s more methodical and takes into account that not only are Canada and Mexico two of our biggest trade partners but, when it comes to the steel industry, they ARE our two largest trade partners.

There is a lot of integration in this area. You have a lot of steel producers that either have businesses in Mexico such as Gerdau, ArcelorMittal and Nucor — through its joint venture JFE — and you have a lot of companies that want to do business there like Steel Dynamics which is hoping to increase its presence in that market by importing flat-rolled into Mexico. Read more

Indian billionaire Anil Agarwal’s audacious purchase of 13% of mining giant Anglo American PLC  took the stock markets by surprise last week. But Agarwal, chairman of London-listed Vedanta Resources is known for his bold and sometimes seemingly counter-intuitive acquisitions.

Benchmark Your Current Metal Price by Grade, Shape and Alloy: See How it Stacks Up

Agarwal has bought the shares in the name of his family trust Volcan, saying it is just an investment in a “great company with excellent assets,” stating that he had no immediate plans to launch a takeover, according to the Financial Times.

No one believes him, of course, or at least not the part about it just being an investment in a great company with excellent assets. True, the prospect of Agarwal’s Vedanta with a market cap of $2.99 billion, being able to takeover Anglo-American with a market cap of  $20.84 billion (£16.7 billion) is verging on the absurd, but the truth is Agarwal is probably more interested in a seat on the board and the opportunity to influence Anglo-American’s future in South Africa than seriously taking over a group that is seven times the size of his own.

Source: Financial Times

Anglo-American has made no secret of its desire to divest some of its more troublesome South African investments.

Two-Month Trial: Metal Buying Outlook

The political instability and red tape in South Africa has caused the miner problems in recent years and Anglo has already sold two assets to Vedanta including the Gamsberg zinc project in the Northern Cape which Vedanta should bring to production next year. Read more

Late last week, Indian media was rife with reports of Vedanta Resources PLC Chairman Anil Agarwal making a “surprise” bid for about 13% of mining giant Anglo American PLC for $2.4 billion, even as the British newspapers headlined the development as a “raid.” Anglo American owns De Beers, one of the world’s largest diamond exploration and mining companies.

Benchmark Your Current Metal Price by Grade, Shape and Alloy: See How it Stacks Up

The move to acquire the shares was made through Agarwal’s personal investment firm Volcan Investments in London.

Here’s the lowdown on Anglo American: The U.K.-headquartered Group, with operations in South Africa, North and South America, Asia and Europe, has revenue of $23 billion, EBITDA (earnings before interest, tax, depreciation and amortization) amount to $6.1 billion, and it has a market value of over $20 billion. In addition to diamonds, Anglo is a global player in platinum and base metals and minerals — it mines copper, nickel, niobium and phosphates. It also sells commodities such as iron ore and manganese, metallurgical coal and thermal coal.

When the 13% shares are acquired, Agarwal’s Volcan will be the second-biggest shareholder after the South African Government investment firm Public Investment Corp., which owns 14%. Volcan, said news reports. Volcan intends to finance the investment through mandatory exchangeable bonds. Led by JPMorgan Chase & Co., the bond sale will take place on or around April 11, the closing date.

Agarwal is the founder of Vedanta but he said he doesn’t intend to make a takeover offer for Anglo American, though a merger between the two failed last year. Incidentally, in 2010, Vedanta acquired Anglo American’s portfolio of zinc assets in Namibia, South Africa and Ireland.

Agarwal told the Sunday Times that he “liked” Anglo’s entire balanced portfolio, both in South Africa and elsewhere.

Some years ago, through his entities, Agarwal had also signed an agreement with the South African government for sharing mining technology.

Two-Month Trial: Metal Buying Outlook

He said he would be “fully supportive of the board, management and strategy”.

Metal trader turned mining tycoon Agarwal started as a scrap dealer way back in 1975, and his has been a rags to riches story so far but we’ll have to wait and see if his interest in Anglo American is more than just that of a minority investor.

Chinese steel exports tumbled to a three-year low in February, customs data showed last week, lower than expectations, as steelmakers in the world’s top producer shifted to meeting rising demand at home.

Benchmark Your Current Metal Price by Grade, Shape and Alloy: See How it Stacks Up

Shipments for the month were 5.75 million metric tons, the lowest since February 2014, data from the General Administration of Customs showed. It was down 29.1% from a year ago and down 22.5% from January.

Duterte Wants Mining Compromise

Philippine President Rodrigo Duterte said recently he hopes there will be a “happy compromise” between the mining industry and protecting the environment, throwing support to Environment and Natural Resources Secretary Regina Lopez will appear before Congress ahead of her confirmation hearing. Lopez is under pressure because she has closed nearly half the nation’s mines.

Two requests for proposals were released yesterday by Customs and Border Protection for the planned border wall between the U.S. and Mexico along the southern border in several states.

Benchmark Your Current Metal Price by Grade, Shape and Alloy: See How it Stacks Up

New descriptions in the RFPs include this language: “CBP seeks highly qualified Contractors to assist in the development of a new border wall design standard as well as construct border wall and supporting tactical infrastructure/technology along the southwest border. CBP seeks highly qualified Contractors to propose a reinforced solid concrete wall that meets or exceeds CBP’s performance requirements. The proposed prototype designs shall not include the use of proprietary design or equipment. CBP plans to enter into multiple-award, indefinite-delivery, indefinite-quantity (IDIQ), task order contracts for Border Wall Design/Build Construction. The IDIQ may include various, simultaneous task orders ranging from $100,000 up to $275,000,000 per task order.

“CBP anticipates awarding IDIQ contracts to multiple Contractors. All selected Contractors will be awarded one (1) task order to construct its proposed prototype.”

The RFP goes on to state that “the prototypes will inform future design standard(s) which will likely continue to evolve to meet USBP’s requirements. Any and all prototypes will be designed to deter illegal entry into the United States. Through the prototyping process, CBP may identify new designs or influences for new designs that will expand the current border barrier toolkit that CBP will use to construct a border wall system. The border barrier toolkit is based on USBP’s requirements.”

Steel Industry Supports Revisiting Auto Emissions Standards

The American Iron and Steel Institute, the largest trade body representing the steel industry,  issued a statement in reaction to the Trump administration’s recent announcement that it is re-examining fuel-economy standards set by the Obama administration for 2022-2025 model year light-duty vehicles.

Two-Month Trial: Metal Buying Outlook

“AISI is pleased the administration has withdrawn the final determination of the EPA Light Duty Vehicle Emission Standards issued in January,” Thomas J. Gibson, president and CEO of AISI said in the statement. “As a key materials solutions provider, we look forward to a dialogue between EPA, National Highway Traffic Safety Administration, California Air Resources Board, auto manufacturers and other relevant stakeholders on the Mid-Term Evaluation. The steel industry is making investments in new grades of lightweight, high-strength steels to assist our automotive customers in reducing emissions and improving fuel economy performance.  We are confident that getting the partnership between the government and stakeholders back on track will result in a plan for the future which protects the environment by establishing a common sense, implementable single national program for CAFE and GHG standards.”

President Trump’s $1.1 trillion budget blueprint, released today, proposes dramatic cuts to the State Department and the Environmental Protection Agency, while seeking billions more for defense issues and $1.5 billion for the president’s proposed U.S.-Mexico border wall.

Benchmark Your Current Metal Price by Grade, Shape and Alloy: See How it Stacks Up

It proposes the previously reported $54 billion increase in defense spending and corresponding cuts to non-defense spending at the State Department, the Department of Housing and Urban Development, the Environmental Protection Agency and the wholesale elimination of other federal programs.

Mick Mulvaney, Trump’s director of the Office of Management and Budget, described the proposal as a “hard power budget” in a Wednesday briefing with reporters, meaning the Trump administration will prioritize defense spending over diplomacy and foreign aid. It significantly cuts funding to global institutions such as the World Bank and the United Nations, too.

While the budget notes that plans and costs for the border wall are not yet completed, according to Mulvaney, the budget will include a request for $1.5 billion as the first installment payment for the promised wall and then another installment of $2.26 billion in 2018.

Steel Shipments Up in January

The American Iron and Steel Institute recently reported that for the month of January 2017, U.S. steel mills shipped 7,708,416 net tons, a 7.5% increase from the 7,173,245 nt shipped in the previous month and a 9.6% increase from the 7,031,307 nt shipped in January 2016.

Two-Month Trial: Metal Buying Outlook

A comparison of January 2017 shipments to the previous month of December 2016 shows the following changes: hot-dipped galvanized sheets, up 14%, cold rolled sheets, up 13% and hot-rolled sheets, up 4%.

More and more Indian companies, including steelmakers such as Tata and Essar Steel, are entering the defense manufacturing sector. Essar Steel, for example, recently announced a game plan to develop steel grades for land and naval defense applications.

Benchmark Your Current Steel Price by Grade, Shape and Alloy: See How it Stacks Up

Essar Steel made a low key entry into the sector about five years ago, but it’s now turned bullish on defense because of the increased marketability of its products. Essar’s products include an indigenous armor plate for ballistic protection. Some of its products are innovative while others are simple substitutes for imports for India’s native contractors looking to keep more of their supply chains close to home. The latter have been used in the construction of naval destroyers, offshore patrol vessels and floating docks. Other products are used in the construction of Coast Guard vessels, so also the repair of naval ships.

In land defense, Essar Steel’s products are used in battle tanks, the motor casings of missiles, combat vehicles, and artillery guns. Read more

The leaders of the Environmental Protection Agency and Department of Transportation said today that they will revisit Obama-era corporate average fuel economy standards on greenhouse gas emissions for 2022 to 2025 model cars and light trucks, a win for automakers that said the standards were too tough to meet.

Benchmark Your Automotive Steel Price by Grade, Shape and Alloy: See How it Stacks Up

President Donald Trump, speaking at the American Center for Mobility in Ypsilanti, Mich., went even further saying his administration would cancel Obama’s executive order establishing the standards outright.

“Today I am announcing we are going to cancel that executive action,” President Trump said. “We are going to restore the originally scheduled midterm review and we are going to ensure any regulations we have protect and defend your jobs, your factories. We’re going to be fair.”

The American Iron & Steel Institute, the largest industry association of steelmakers, which count themselves as important members of the automotive supply chain, praised the action.

“AISI is pleased the Administration has withdrawn the final determination of the EPA Light Duty Vehicle Emission Standards issued in January,” said Thomas J. Gibson, president and CEO of AISI in a statement. “As a key materials solutions provider, we look forward to a dialogue between EPA, National Highway Traffic Safety Administration, California Air Resources Board, auto manufacturers and other relevant stakeholders on the mid-term evaluation.”

The CARB’s inclusion is notable as California has said it will go forward with state emissions standards that are more stringent than the federal government’s, no matter if the federal CAFE standards are changed or not.

Federal Reserve Raises Interest Rates

For the first time this year, the Federal Reserve raised interest rates one quarter point to a range of .75% to 1%, a widely expected move following strengthening economic reports and signals from Fed officials.

After its two-day policy meeting, the Federal Open Market Committee voted to raise the range of the federal funds rate to 0.75% and 1.00%, citing progress in labor market growth, business fixed investment and inflation.

Two-Month Trial: Metal Buying Outlook

“In view of realized and expected labor market conditions and inflation, the Committee decided to raise…the fed funds rate,” the central bank wrote in its statement.

One member of the committee, Minneapolis Fed President Neel Kashkari, voted against the decision, preferring to keep the federal funds rate between 0.50% to 0.75%. Kashkari is a new voting member of the FOMC this year.