Articles in Category: Ferrous Metals

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Before we head into the weekend, let’s take a look back at the week that was.

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  • Holidays in India mean an uptick in gold buying — our Sohrab Darabshaw covered India’s holiday gold surge.
  • The fourth round of renegotiation talks focused on the North American Free Trade Agreement (NAFTA) concluded earlier this week. We covered the latest round of talks, which by all accounts have the three negotiating teams at an impasse.
  • As the fallout continues from Kobe Steel’s quality data falsification scandal, our Stuart Burns wrote about what exactly might have gone wrong at Japan’s third-largest steelmaker.
  • The World Steel Association’s Short Range Outlook came out this week, predicting solid, albeit moderated growth for the global steel market.
  • Precious and base metals have been behaving similarly, our Irene Martinez Canorea wrote this week.
  • The U.S. International Trade Commission launched a new Section 337 probe related to automation systems.
  • The value of the U.S. dollar has a significant impact on the fortunes of a number of metals, our Stuart Burns explained.
  • And how about palladium? Burns also touched on the rise of the platinum group metal and its leapfrogging of platinum (for the time being).
  • It’s third-quarter earnings report time. Alcoa and Nucor were among the latest companies to announce their earnings for the latest quarter.

Free Download: The October 2017 MMI Report

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This morning in metals news, U.S. raw steel production went up last week, aluminum is heating up as China prepares for winter cuts to excess capacity and Kobe Steel’s data falsification scandal could stretch back a decade.

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Raw Steel Production Up 5.4%

U.S. raw steel production for the week ending Oct. 14 was up 5.4% from the same week in 2016, according to weekly data from the American Iron and Steel Institute (AISI).

Production for the week amounted to 1,744,000 tons, up from 1,655,000 for the same time frame in 2016.

Aluminum Heating Up

It’s been a big year for aluminum — and with Chinese winter cuts to excess capacity on the way, the aluminum price could continue to rise.

According to a Reuters report, China is preparing to reduce its aluminum smelting capacity by one-tenth by the end of the year.

Kobe Steel Scandal Could Go Back More Than 10 Years

The data falsification scandal plaguing Japan’s third-largest steelmaker could go back more than a decade, according to a Bloomberg report.

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According to the report, Kobe Steel will cooperate with the U.S. Department of Justice. A company executive quoted in the report told Bloomberg that data falsification at the firm has likely been happening for over a decade — stretching further than Kobe’s admission of falsification dating back to 2007.

Before we head into the weekend, let’s take a look back at the week that was. 

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

  • In case you missed it, our October MMI report is out. Make sure to check out the free PDF download for the rundown on the last month for our 10 MMI sub-indexes: Automotive, Construction, Aluminum, Copper, Renewables, Rare Earths, Raw Steels, Stainless Steels, GOES and Global Precious.
  • Also, our Annual Outlook is out, too. Check it out for a comprehensive look ahead to 2018.
  • Coal India Ltd. is looking to diversify beyond coal, Sohrab Darabshaw wrote earlier this week.
  • Aluminum officials are in “wait-and-see mode” when it comes to the ongoing Section 232 probe vis-a-vis aluminum imports. The investigations into the national security impact of aluminum and steel imports were launched in April and have a January statutory deadline; at that point, Secretary of Commerce Wilbur Ross must present President Donald Trump with a report and recommendations.
  • Glencore bet big on zinc — and won, our Stuart Burns writes.
  • Although oil prices are well below 2014 numbers, supply cuts in some cases have seen the price start to climb. Are more cuts on the way, further constraining global supply and driving up prices? Burns wrote about the subject and what OPEC Secretary General Mohammad Barkindo called a “rebalancing process.”
  • In big news, Kobe Steel is in hot water for a data falsification scandal, one which threatens the firm’s credibility among consumers and manufacturers. The scandal has already had major financial ramifications, as the company’s share price has been in free fall since the news hit.

Free Sample Report: Our Annual Metal Buying Outlook

Life is full of ups and downs.

So, too, is the world of metals.

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

Last month, all 10 of our MMIs saw upward movement. This month? Not so much.

Eight of 10 MMIs tracked back this month, albeit several of them fell by small amounts. The GOES MMI, meanwhile, picked up a point, while the Aluminum MMI posted no movement.

If you’ll remember, copper and aluminum had big months in August, as we detailed in last month’s MMI report. After a cooling period last month, though, so far in October copper has tracked back upward — so maybe it was just a September slump for the good Dr. Copper.

“However, market watchers can see a new rally taking place within the base metals industry,” wrote our Irene Martinez Canorea in her Copper MMI report. “Copper prices — along with lead and tin — increased sharply on heavy trading volumes. Buying organizations can expect upward movements within the bullish market.”

Meanwhile, as for aluminum, the flat month is actually an encouraging sign for the metal’s strength.

“Aluminum traded sideways in September,” Martinez Canorea wrote. “This trading pattern suggests resilience, as aluminum prices digest price gains and become strong again to continue the uptrend. Trading volumes continue to support the current rally, driving aluminum prices to a five-year-high in September.”

The aforementioned represents a small snippet of the analysis available in this month’s report.

You can read about all of the aforementioned — and much more — by downloading the October MMI report below.

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This morning in metals news, steel production through Oct. 7 is up for the year, the Kobe Steel scandal continues and India’s steel capacity could more than double by 2030.

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U.S. Steel Production Outpaces 2016 Levels

According to data from the American Iron and Steel Institute (AISI), U.S. steel production through Oct. 7, amounting to 69,545,000 net tons, is up 3.7% compared with the same time frame last year.

Production in the week ending Oct. 7 amounted to 1,741,000 net tons, up 5.2% from the same period in 2016 and up 2.1% from the week ending Sept. 30.

Kobe Steel in Hot Water

Kobe Steel’s troubles could be extending beyond aluminum and copper.

The data falsification scandal is now touching iron powder products, according to the Nikkei Asian Review.

Earlier this week, Kobe Steel admitted it altered inspection certificates to falsely show that certain aluminum and copper components had satisfied client specifications for strength, the Review reported.

India Steel Capacity Rising

According to the Economic Times, India’s steel capacity will more than double by the end of 2030.

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Steel Secretary Aruna Sharma said capacity, currently at 126 million tons, is expected to hit 150 million tons by 2021 and 300 million tons by 2030.

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  • The strength of the U.S. Dollar
  • Oil prices and trends

While the 2018 Annual Metals Outlook report is free of charge, we do recommend you pair it with a subscription to our Monthly Metal Buying Outlook report in order to get the most valuable, up-to-date information and analysis of market conditions.

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Steel prices in China have been rising, but iron ore prices have been falling — what’s going on there?

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China is shutting domestic iron ore mines at an accelerating rate, forcing steel companies to import iron ore from overseas, which would normally be supportive for the iron ore price.

The answer it would seem, as is so often the case, has more to do with speculators’ view of future fundamentals than actual current fundamentals.

Strong Chinese Demand for Steel

Steel prices in China are strong because steel demand remains robust, despite exports being crimped by protectionist measures in North America, Europe, India and elsewhere. Domestic demand is holding up well.

Meanwhile, supply-side action by Beijing is cutting swathes of steelmaking capacity. Initially, much of the cuts came to “illegal” production, such as EDF scrap based long products mills — which has happened largely under the radar — but also older, less efficient and more polluting steel plants. All of this follows Beijing’s pledge to cut 50 million tons this year as part of an environmental drive to reduce air pollution by November (the start of the winter heating season).

Source Financial Times

After strong price rises this year, investors have done well and are now taking their profits ahead of a perceived fall in demand, as steel curtailments really begin to bite later in the year. It would be a brave speculator who bet against the wave of negative sentiment toward the iron ore price, including even the Australian government, which has been warning of price falls.

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It would be an exaggeration to say steel producers have never had it so good, but on the whole, conditions have been supportive of the sector this year — both globally and in top producer China.

What’s Up, Beijing?

Beijing’s supply side reforms, cutting out older, less efficient steel plants largely on environmental grounds has directly supported the larger state steel sector. Much of the “illegal” and less well-regulated (therefore more polluting) producers are concentrated in the smaller end of the private sector. These have been the first to suffer enforced closure as Beijing pushes through its aim of closing some 50 million tons of capacity this year.

A widespread clampdown on the scrap-based EAF producers (virtually all of whom are in the private sector, and deemed illegal because they often do not have licenses and more polluting because they are based on scrap)  has constrained supply and given rebar prices a drug-induced high.

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

The move underpins Beijing’s rationale to achieve as many wins as possible, reduce capacity to avoid anti-dumping moves by trading partners, improve environmental conditions (specifically particulate emissions, which cause smog), and consolidate a highly fragmented domestic steel industry all while simultaneously minimizing job losses and supporting the state sector at the expense of the private sector.

Bingo — they have it all!

Tale of the Tape

So far, you should say, Beijing is doing very well. Capacity has closed, particularly older and therefore likely less efficient capacity; steel production is actually up 4% year-on-year, and prices have risen robustly.

The state sector is doing very well, enjoying high prices, strong demand with the removal of their smaller competitors and, following an 18% fall in iron ore prices over the last month, look set to make even better profits in the last quarter. Iron ore import volumes have also fallen of late, as the graph below from the FT shows, but that may partly be due to large inventories that had built up as the price rose.

Source: Financial Times

Steel prices in China as tracked by MetalMiner’s IndX have weakened this month, but with the fall in raw material costs Chinese producers’ margins have held up well.

Free Download: MetalMiner’s September 2017 MMI Report

In the rest of the world, China’s reduced exports, down 26% year-to-date due to anti-dumping barriers and improved domestic demand, have created some respite for foreign steel mills, particularly Russian, Turkish, Ukrainian and Canadian suppliers that have stepped in to take China’s place as low-cost supplier to the U.S. and European markets.

Producers in Europe are still complaining bitterly about competition, but as with the U.S., realistically it is less about China and more about low-price suppliers in Russia, Ukraine and elsewhere.

Outlook

On the back of rising global steel demand and soft input costs, steel producers’ margins should be supported even in Western markets and prices remain firm next year — even if China’s demand grows only slowly.

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This morning in metals news, the International Trade Commission rules that imports of solar cells are hurting U.S. manufacturers, iron ore enters a bear market and the UN proposes that businesses take responsibility for environmental pollution.

A Bear Market for Iron Ore

The price of iron ore has undergone the biggest weekly fall in 16 months, Bloomberg reports. Having slipped into a bear market, the metal was trading at $63.56/ton on Friday, more than 20% lower than its August 21 high of $79.93/ton.

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

We may see this price slump to continue for the near future. Some expect the price of iron ore to drop to the $50s in the fourth quarter. If China’s steel production cuts do go into effect as planned this winter, the country’s steel output may decrease as much as 30 million tons, thus cutting iron consumption by 50 million tons.

End of the U.S. Solar Boom?

The U.S. International Trade Commission voted in a 4-0 decision on Friday that the U.S. solar energy industry is being hurt by foreign overcapacity and cheap solar cell imports, the Washington Post reports. However, the proposed 40-cent-per-watt tariff on solar cells would double the price of solar panels, putting pressure on the rest of the U.S. solar industry.
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Thyssenkrupp and Tata Steel have finally made it to the altar.

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After 18 months of mostly behind-the-scenes negotiations to resolve several potentially “deal-off” stumbling blocks, all the major issues have been resolved. The two firms have signed a memorandum of understanding to create a 50:50 joint venture based in Amsterdam, Netherlands, called Thyssenkrupp Tata Steel (TTS).

The behemoth will rank second to ArcelorMittal with 21 million tons of annual steel capacity generating sales of €15 billion ($17.8 billion) and employing 48,000 people, The Telegraph reported.

New Focus

TTS will focus on three main production hubs: Ijmuiden in the Netherlands, Duisburg in Germany and Port Talbot in South Wales, the paper reports, Analysts say improved viability will come from cost savings of between €400 million and €600 million a year arising after 2,000 redundancies and another 2,000 jobs going out of the combined business as overlapping operations are removed.

Not surprisingly, TTS sees the value proposition as the enhanced opportunity for the combined group to move its business up the value chain in cooperation rather than competition with each other.

Hans Fischer, Tata Steel Europe’s chief executive, said “We need to focus on higher value products, China has huge overcapacity and there is a risk they will flood the market. The answer is not to compete with them, but try but find a solution where we have products that cannot be produced easily. We need to be a technology leader.”

Tata wriggling out of the old British Steel Pension fund liabilities was the final major hurdle to overcome — albeit to be fair, at considerable cost to the parent — and the willingness of British workers to agree to an end to the final salary scheme and reduced benefits for existing members underlines their desperation for a deal, matched by compromises made in Germany by workers fearful of the prospects of foreign competition with the European steel industry.

But therein lies the dilemma.

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