Articles in Category: Ferrous Metals

Before we head into the weekend, let’s take one last look back at the week that was:

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HRC and HDG prices seem to have recovered a bit since the start of the month. CRC price increases appear less sharp, but may follow suit.

U.S. HRC and CRC prices. Source: MetalMiner data from MetalMiner IndX(™)

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Some steel forms have increased such as CRC and HDG for three consecutive weeks. If the price increases continue at this pace, prices could breach previous levels, which may signal strength and the start of a rally.

Chinese Steel Prices

Chinese steel prices drive U.S. domestic prices. Both usually tend to follow a similar pattern, which means that when Chinese steel prices increase, we would expect a similar movement in U.S. prices.

Despite the Chinese steel price’s cooldown during the last quarter of the year, a new sharp uptrend appears to have started this month.

China HRC and CRC prices. Source: MetalMiner data from MetalMiner IndX(™)

Increasing Chinese prices add strength to the bullish case for steel. Buying organizations may want to follow Chinese prices closely, as they seem to have recovered.

Let’s Remember the Bullish Case

MetalMiner has watched steel prices closely since commodities and industrial metals turned bullish in August 2017.

Although base metals and steel do not necessarily trade in the same direction at the same time, industrial metals do tend to move together. December began with a stronger U.S. dollar caused by expectations of the Congress passing a tax bill. A stronger U.S. dollar caused commodities to fall slightly. However, this commodity downtrend appears short term, as the bullish case remains supported.

What This Means for Industrial Buyers

Buying organizations may want to closely follow both domestic steel prices and Chinese steel prices. Now that the bullish case appears more probable, steel-buying organizations may want to readjust their purchasing strategies.

MetalMiner sends automatic notifications when buying signals trigger a change in purchasing behavior.

Free Download: The December 2017 MMI Report

Take a free trial now to our Monthly Buying Outlook for a short-term analysis.

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This morning in metals news, Chinese aluminum output fell to its lowest total since February 2015, Liberty House considers buying a large Rio Tinto smelter in France and copper approaches a two-week high.

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Chinese Aluminum Output Falls

Chinese primary aluminum production dropped for a fifth straight month, Reuters reported.

In fact, winter smelting restrictions saw output fall to its lowest in the country since February 2015, according to the report.

Liberty House Eyes Rio Tinto Smelter

According to Reuters, Liberty House is considering a bid for Rio Tinto’s aluminum smelter in northern France.

The Dunkirk plant is valued at around 200 million euros, according to Reuters sources familiar with the matter.

Copper Rises Near Two-Week High

A weakening dollar and positive Chinese manufacturing data saw copper rise on Thursday, Reuters reported.

The Chinese industrial sector grew faster in November than markets expected.

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London Metal Exchange copper traded at $6,760 a ton in official midday rings, according to the report.

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This morning in metals news, Toyota and Panasonic are considering working together on developing electric car batteries, U.S. Steel did not test for toxic materials after a chemical spill into Lake Michigan in October and U.S. raw steel production last week was up 4.3% compared with the same week in 2016.

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A Toyota, Panasonic Partnership?

According to Reuters, Toyota and Panasonic are considering joining forcing in developing electric batteries for vehicles.

Panasonic already manufactures batteries for Toyota’s gasoline-electric and plug-in hybrid vehicles, according to the report.

U.S. Steel Didn’t Test Water After October Chemical Spill

Documents posted online by state regulators Tuesday show that following a U.S. Steel chemical spill in a Lake Michigan tributary in October, the company did not test the waters for toxic materials, according to the Chicago Tribune.

The October spill was the second of the year for U.S. Steel, the first affecting the same waterway in April.

According to the Tribune report, an inspector from the Indiana Department of Environmental Management visited U.S. Steel last month, when plant managers told the inspector they decided not to test for hexavalent chromium in the water.

U.S. Raw Steel Production Up 4.3%

U.S. raw steel production for the week ending Dec. 9 jumped 4.3% compared with the same week last year, according to a report from the American Iron and Steel Institute (AISI).

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Domestic raw steel production was 1,672,000 net tons, while it was 1,607,000 net tons in the week ending Dec. 9, 2016.

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This morning in metals news, Wisconsin Gov. Scott Walker signed a bill ending the state’s moratorium on gold and silver mining, Chile approaches a busy year for mine union negotiations, and Chinese steel futures drop.

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Going for the Gold in the Badger State

Wisconsin Gov. Scott Walker signed a bill ending the state’s moratorium on gold and silver mining, Wisconsin Public Radio reported.

The moratorium was imposed in 1998, when Walker was a member of the state Assembly.

Union Negotiations on the Horizon in Chile

Chile’s copper mining industry has a busy schedule next year, with 32 union contracts on the docket, Bloomberg reported.

Chile, a dominant force in the copper industry, will negotiate the contracts, which represent approximately 75% of the country’s copper output, according to the report.

China Steel Futures Drop

Chinese steel futures took a dip Tuesday as a result of concerns regarding demand in the country, the world’s top steel consumer, according to Reuters.

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According to the report, upward price movement driven by supply constriction is expected to be counterbalanced by a drop in demand as winter weather affects construction projects.

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This morning in metals news, Chinese steel got a boost on the heels of another round of output cuts, Goldman Sachs executives warns about the potential of a U.S. departure from the North American Free Trade Agreement (NAFTA) and Thyssenkrupp looks to get union backing for its European merger deal with Tata Steel.

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Chinese Steel on the Rise

On the heels of output cuts, Chinese steel got a boost Monday, according to a Reuters report.

According to the report, the most-active rebar on the Shanghai Futures Exchange (SHFE) jumped 1.6%, ultimately closing at 3,912 yuan ($591.26) a ton.

Goldman Warns About NAFTA Exit

Goldman Sachs warned clients that it wasn’t optimistic regarding a positive resolution to the renegotiation talks.
“While we expect the rising odds of tax reform to put less pressure on the trade agenda, we do not expect passage of tax reform will raise the odds of a successful Nafta renegotiation,” Goldman Sachs said in a note to clients, according to Bloomberg. “And so a withdrawal announcement looks more likely than not, even if tax reform is enacted soon.”

Thyssenkrupp Looks to Win Union Favor

As German firm Thyssenkrupp works to execute a merger deal of its European operations with Tata Steel’s, the company is looking to win over its workers’ favor.

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According to Reuters, Thyssenkrupp is offering workers commitments on jobs and investments to get union backing for the deal (which was agreed to in September by the two companies in September).

China is the world’s top producer of steel, but it hasn’t been that good or profitable for years.

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Despite, or more likely because of the supply side squeeze enforced by Beijing, possibly up to 100,000 tons of “illegal” (not approved) production capacity has been closed down. Much of this was Electric Arc Furnaces (EAF) based on scrap raw material and deemed too polluting to be tolerated by Beijing.

In practice, EAF technology is anything but polluting and should be preferable environmentally to the blast furnace route. However, much of China’s capacity was small-scale private plants lacking environmental controls and permits.

According to Reuters, quoting CRU data, China’s steel capacity has fallen by 240 million tons over the past three years to about 1,020 million tons this year. Ironically, production has never been higher. It rose 6% from January to October, according to Reuters, and 2017 is set to be an official record high.

The key word here is “official” because historically none of this “illegal” capacity appeared in the official figures, so approved mills are running at near record capacity, estimated to be 85%, making up for the removal of their domestic competitors. Many of these EAF furnaces were making rebar, so not surprisingly rebar is in short supply and prices are on a tear.

Iron ore, particularly higher grade 65% minimum Fe content iron ore is also doing rather well. Despite port stocks running at over a month’s supply prices have reached over $72/ton as mills re-stock with the most efficient-to-produce and least polluting highest grade ore, according to Bloomberg.

All this rationalisation of supply and robust domestic demand has taken its toll on exports. As we reported earlier this week, China’s steel exports have slumped by a third this year. And as the domestic market gradually moves from a buyer’s market to an allocation-driven seller’s market, prices are rising. Read more

The Stainless Steel MMI dropped five points this month as nickel prices fell by 10%. Despite the increase in stainless steel surcharges this month, the sharp fall in nickel prices drove the index lower.

Nickel price volatility has increased over the past few months. Prices currently trade in a +/-$3,000/mt range. Strong demand in the stainless and battery sectors and heavy trading volumes have driven nickel prices.

Price volatility is being driven by increased activity in nickel transactions. Nickel has become one of the “hottest metals” due to its demand in electric batteries. Therefore prices and trading volumes have shifted:

Source: MetalMiner analysis of FastMarkets

Trading volume for LME nickel remains strong, and does not reveal a downtrend. Although the red lines in trading volume above seem to signal heavy selling volume, prices do not slip together with volume. Therefore, the outlook for nickel remains bullish.

In bullish markets, buying dips also present good opportunities to buy some additional volume.

Domestic Stainless Steel Market

Despite the slower momentum of the Stainless MMI, domestic stainless steel surcharges increased again this month. Surcharges reached May 2015 levels and remain far from last year’s lows (under $0.4/pound).

Source: MetalMiner data from MetalMiner IndX(™)

Global Stainless Steel Market

Chinese crude stainless steel output has grown five-fold since 2006, reaching approximately 55% of total worldwide output. This month, Chinese domestic stainless steel prices fell. The drop in stainless steel prices followed nickel’s short-term downtrend.

Chinese chrome metal prices and the ferrochrome prices demonstrate a market anomaly. Ferrochrome (FeCr) is a chromium and iron alloy, containing 50% to 70% chromium by weight. Ferrochrome price increases in the May-September 2017 period appear sharper than the chrome metal price increase.

Source: MetalMiner data from MetalMiner IndX(™)

Therefore, iron ore may be the culprit increasing the ferrochrome price. When looking at the iron ore chart, readers may see that iron ore prices appeared higher during Q2 and Q3.

Source: MetalMiner analysis of Trading Economics

Despite the sideways trend during the last few months, iron ore prices increased in November and have continued their uptrend in December too. Therefore, ferrochrome prices may continue to increase driven by higher prices in both raw materials (iron ore and chrome metal).

India overtook Japan in 2016 and serves as the world’s second-largest stainless steel producer. Indian stainless steel output continues to expand and is forecasted to reach 4 million tons in 2018. Strong domestic demand from both the automotive and construction sectors has driven Indian growth.

The European domestic 304 stainless steel remains flat due to weaker domestic demand.

What This Means for Industrial Buyers

Stainless steel momentum appears slow, just as it does for all the other forms of steel. However, due to nickel’s high price volatility, buying organizations may want to follow the market closely and buy in the dips. To understand how to adapt buying strategies to your needs, dive deeper into our Monthly Metal Buying Outlook or you can take a free trial now.

To read more about longer-term stainless steel price trends, download the free Annual Outlook.

Actual Stainless Steel Prices and Trends
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The Renewables MMI dropped 2.5% for the month of December, ending at a value of 78.

Here’s What Happened

  • Since our recalibration of this index back in May 2017 to better take into account cobalt price fluctuations, the Renewables MMI has been slowly but surely gaining ground the latter half of 2017, hitting a high of 84 in September.
  • Within this basket of metals and materials used in the renewable energy industry, the Big Heavy is the U.S. steel plate price. Yet from November to December, that price point only dropped a single dollar per short ton.
  • The China steel plate price, however, did move much more – increasing 4.3% on the month.

What’s Going On in the Background?

  • The biggest news for the renewables industry has been the controversial tax plan put forth by legislators and still awaiting final House/Senate reconciliation – mainly, the fact that the Base Erosion Anti-Abuse Tax (BEAT) has been kept intact in the latest version of the Senate bill.
  • As Sydney Lazarus wrote in MetalMiner last week, currently, “many companies have large multinational corporations finance wind or solar energy projects, and in return, give the latter the renewable energy credit that the government provides.” But the BEAT tax, which is meant to discourage multinationals from moving profits abroad — and which the Senate bill kept intact — would make the crucial solar investment tax credit (ITC) and wind production tax credit (PTC) “unusable for multinational banks and other corporations who have low tax rates,” according to this article.
  • It’s unclear if this move was intentional or not, but regardless, it injects huge uncertainty into the renewable energy industry as the bill hurtles toward law. (Some, such as American Wind Energy Association’s Peter L. Kelley, say it “could put an end to more than half of the country’s wind projects,” as reported by Lazarus.

What Metal Buyers Should Look Out For

  • Keep an eye out on steel plate’s raw material inputs — iron ore prices increased over the past month, as we reported in our December Monthly Buying Outlook, while coal prices decreased. Although steel plate prices appear a bit sluggish at the moment, China’s demand is something worthy of paying attention.

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This morning in metals, some big news on the international trade and steel imports front.

The U.S. Department of Commerce yesterday announced preliminary affirmative rulings that corrosion-resistant steel (CORE) and certain cold-rolled steel flat products (cold-rolled steel) imported from Vietnam “produced from substrate originating in…China are circumventing existing antidumping and countervailing duty (AD/CVD) orders on CORE and cold-rolled steel imported from China,” according to their news release.

The Details on Duties

“The Commerce department has directed the United States’ customs and border protection agency (CBP) to collect anti-dumping (AD) and Countervailing Duty (CVD) cash deposits from importers of CORE produced in Vietnam using Chinese-origin substrate at rates of 199.43 percent and 39.05 percent, respectively,” according to this article, writing from the release. “CBP has also been directed to collect AD and CVD cash deposits on imports of cold-rolled steel produced in Vietnam using Chinese-origin substrate at rates of 265.79 percent and 256.44 percent, respectively.”

What This Means for Metal Buyers

Many in the steel manufacturing are hailing the decision as a victory as far as solidifying the case against China when it comes to proving that country’s circumvention and “substantial transformation” tactics.

The decision on CORE and cold-rolled products may open the door for the steel pipe and tube industry to file or follow up on similar cases.

Learn more on Trade Circumvention here, including a free white paper download on the topic.

Listen to our MetalMiner Podcast series, “Manufacturing Trade Policy Confidential,” for more discussion around circumvention and other trade topics that matter to metal buyers.