Articles in Category: Ferrous Metals

ft2010/Adobe Stock

Two significant developments on the steel front took place last week that will ensure that India continued on its chalked-out path of global dominance in steel production.

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

Jindal Steel and Power Limited (JSPL) launched its 6 million ton per annum (MTPA) integrated steel plant at Angul in the Odisha province. The plant, one of the biggest in India, was dedicated to the nation on May 27, 2017. Naveen Patnaik, the chief minister of Odisha, said the plant would lead to an addition of 20% of steel to India’s ultimate goal of steel manufacturing capacity of 300 MTPA by 2030.

For JSPL, this was a major milestone, too. According to Chairman Naveen Jindal, the 6 MTPA steel plant at Angul was a major landmark in defining the future growth trajectory of JSPL. The latter is part of US $18 billion diversified O.P. Jindal Group.

Spread over 3,500 acres, JSPL’s integrated steel plant at Angul will provide direct employment opportunities to over 30,000 people and indirect employment to over 100,000 individuals.

JSPL’s capacity addition would further enhance the cost efficiencies of steelmaking — a continuous focus area of JSPL’s business philosophy, adding to its overall plan of debt reduction, said some of its top honchos.

In another development on the steel front, ArcelorMittal, the world’s largest steel producer, said it has agreed to make concessions to Steel Authority of India Ltd (SAIL) to jumpstart a delayed US $897 million automotive joint venture.

ArcelorMittal and SAIL, according to a report by news agency Reuters, had agreed to a proposal to export a fifth of the auto-grade steel they aimed to make as part of the joint venture.

Incidentally, the proposal was one of several made by Indian government think tank NITI Aayog, which is mediating talks on commercial terms for the delayed venture.

At present, a bulk of the high-grade steel used by India’s vehicle industry was imported from countries such as Japan. With this new joint venture all set to take off, reliance on such imported steel would fall drastically, experts say.

The Reuters report quoted a company spokesperson as saying that in the interest of the strategic partnership, some concession from ArcelorMittal on technology had been extended.

Experts believe if the deal does come to fruition, it would help SAIL compete with local rivals, such as JSW Steel and Tata Steel, which have foreign partnerships to make steel for the car industry.

AdobeStock/SeanPavonePhoto

Last month, China announced plans to build a new megacity from scratch. Since the city will be twice the size of New York City, analysts expect the project to require huge amounts of steel and other industrial metals such as aluminum and copper.

Two-Month Trial: Metal Buying Outlook

According to Citi Research analysts, 12-14 million tons of extra steel will be required annually to build this new development. Since the country’s current domestic demand is about 700 million tons, that would lift Chinese steel demand by 2% per year over the next 10 years.

But are the analysts correct? Should we expect a steel demand boost over the next 10-15 years?

Although building this city from scratch will indeed require a lot of steel, analysts are making the mistake of missing the forest for the trees. The key driver for steel demand in China is the net migration from the countryside to cities. It doesn’t really matter whether China builds a new megacity or it expands its city limits. The key measure is the rate of urbanization in the country at a national level.

Urban and rural population in China. Source: China’s Economy book by Arthur R.Kroeber

China’s urban share has grown quickly over the past two decades since its rural population peaked in 1995. Last year, China’s urban population share reached 57.9%. The share, however, is still small given the country’s income level. Read more

As I pointed out two weeks ago, U.S. steel prices had no choice but to decline as the spread between U.S. and international prices had widened to unsustainable levels.

Two-Month Trial: Metal Buying Outlook

That’s exactly what I’ve seen so far in May, and I suspect that the recent price decline is just the beginning of a deeper correction that could easily extend to the rest of the second quarter.

U.S. hot-rolled coil prices fall in May. Source: MetalMiner IndX

Hot-rolled prices have fallen around 5% since they peaked in April. Meanwhile, steel prices in China have started to stabilize after a slump during March/April. As the chart below shows, the price spread appears to have peaked near the same levels as it did last summer. U.S. steel prices will likely continue to fall, bringing this price arbitrage down.

Hot rolled coil price spread US vs China. Source: MetalMiner IndX

U.S. Steel Imports Hit a Two-Year High

Although the U.S. doesn’t import steel directly from China, Chinese steel prices set the floor for international prices. Therefore, when China’s steel prices fall, imports become more appealing to U.S. buyers. That’s exactly what’s happening now. In March, U.S. steel imports rose 31% year-over-year, hitting the highest level since May 2015. Read more

There have been some doubts over India’s stated plans to triple its steel production capacity by 2030. The Indian cabinet recently passed a revamped policy to the extent.

While some have welcomed the document, other sector experts have expressed uncertainty over the projections in the policy.

Free Download: The May 2017 MMI Report

Ratings agency Crisil, for example, said in a statement that the ambition to add 182 million tons of new steel capacities over the next 14 years under the National Steel Policy was unlikely to be achieved. Crisil’s doubts seem logical. After all, India has managed to add capacity at the annual rate of 55 million tons in the last decade.

The National Steel Policy 2017 projects crude steel production capacity of 300 million tons by 2030-31 from the present level of about 120 million tons and per-capita consumption of 158 kilograms of finished steel as against the current consumption of 61 kilograms. The policy also sees an increase in domestic availability of washed coking coal by 2030-31.

Crisil Research said that it expects 24-26 million tons of steel capacities to be added over the next five years, leading to aggregate steel capacity to rise to 140-145 million tons by 2021-22. Beyond this, Crisil said, the key factors that would determine the pace of capacity addition would be demand growth, continued government support, and pricing environment against the backdrop of global overcapacity led by China. Crisil has also projected a 6-6.5% growth in steel demand in India over the next five years, lower than the 7% annual growth rate projected by the government till 2030. Read more

Last month we reported that in March, U.S. domestic steel prices generally rose while the GOES M3 price fell. This month, we can safely report the exact opposite price change. U.S. domestic steel prices fell while GOES prices rose in April.

Two-Month Trial: Metal Buying Outlook

In our April update, MetalMiner indicated that GOES prices might find a price floor on the back of a large 20,000/mt tender from Bharat Heavy Electricals. That indeed appears to have happened. Moreover, according to a recent TEX Report, GOES prices have continued to climb in China as Baoshan Iron & Steel needs to service the domestic market due to anti-dumping cases preventing Japanese and Korean imports to that market.

The TEX Report also suggests that global inventories remain low and that many countries have come into the market all at the same time, requiring material. This could lead to higher prices, particularly from the Japanese mills for contracts awarded during the second half of the year.

The Gorilla in the Room

The real challenge for domestic GOES prices, however, rests on the results of the Section 232 steel product investigation launched by the Trump administration in late April. The results will likely not come much before January 22, 2018, assuming the Secretary of Commerce takes the allowable 270 days to present findings to the President. At its core, the investigation seeks to address the issue of

For full access to this MetalMiner membership content:
Log In |

Here’s What Happened

  • The Construction MMI, tracking metals and raw materials used within the construction industry, slipped 1.3% to a value of 79 for May.
  • Chinese steel prices — for forms such as rebar and H-beam — dropped precipitously this month.
  • Based on the last few months’ values, the last time this sub-index has performed this well was the start of 2015 — back when California was the first state to pass a carbon tax and Bill Gates turned human waste into potable water.

What’s Going On in the Background?

  • We’re in the salad days for the U.S. construction sector, at least as far as 2017 is concerned. According to the Associated General Contractors’ analysis, “Construction spending is at record levels for the second straight month in March [in spite of the month’s slip] and is up 4.9% for the first three months of year compared to the same period in 2016,” as quoted by com.
  • Better days for Chinese construction markets may be coming down the pike as well. Beijing recently announced plans to build a new megacity “the size of New England,” which should result in quite the appetite for industrial-grade steel, aluminum and other materials. For example, the government approved $36 billion to build 700 miles of rail within the next three years, according to this article. More salad days for the global construction industry to come, perhaps?

What Metal Buyers Should Look Out For

  • The latest drops in Chinese steel prices may have a knock-on effect on U.S. and other Western steel, which make the latter ‘pricier,’ comparatively. This could lead to lower prices on both sides of the ocean hanging around for a while.
  • We’ll see if President Trump’s 232 investigation begins to have any medium-term effect on steel once the determinations come down on whether imports constitute a threat to national security. In the meantime, “iron ore and Chinese steel prices could recover if China cuts overcapacity later this year,” as we write in our latest Monthly Outlook Report. (Free two-month trial here.)

Key Price Movers and Shakers

  • The China rebar price plummeted, the U.S. shredded scrap price fell below a key threshold to start the month for the third time this year, and weekly U.S. bar fuel surcharges for the Midwest, Gulf Coast and Rocky Mountain regions all fell slightly from April to May. Exact numbers in the membership-only article:
    For full access to this MetalMiner membership content:
    Log In |

No one factor has led to the turnaround in the fortunes of Europe’s steelmakers. While still not spectacular, global growth is certainly broader-based and better distributed that it was a few years ago. The fortunes of the European steel industry have improved markedly since their low point in late 2015, with prices rising some 45%, according to Reuters.

As with virtually every ferrous and non-ferrous metal, China has been a key component. Responsible for over 50% of global production capacity, China’s steel industry was undoubtedly a contributor to low prices around the middle of the decade. Beijing’s decision to cut capacity while boosting infrastructure spending has certainly resulted in increased domestic demand and reduced Chinese exports.

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

China announced its intention to cut 100 to 150 million tons of steel capacity by 2020 in part to tackle pollution. It was also to address a rising tide of protectionism around the world fearful of the impact China’s excess supply was having on producers in home markets. According to Reuters, China cut 60 million tons of steel capacity last year and plans to cut another 50 million tons this year. There remains considerable debate as to how much of last year’s capacity closures really curtailed production and how much was simply the permanent closure of already mothballed or idle plants.

But either way, in conjunction with the $700-billion stimulus package targeted mostly at infrastructure and construction, Chinese steel prices jumped over 70% last year, while exports fell 3.5%. Even better news for overseas producers has been exports dropped a further 25% this year in part many would argue due to some 39 anti-dumping and anti-subsidy measures introduced in Europe over recent years of which 17 are directed at China and some 150 similar duties in place in the U.S. Read more

Liquid steel.

Photollug/Adobe Stock

This morning in metals, a big trade finding from last Friday is making the news.

The U.S International Trade Commission (ITC) found that imports of carbon and alloy cut-to-length steel plate from steelmakers in 8 different countries officially harms U.S. manufacturers, thereby “locking in” duties imposed by U.S. Commerce in March for five years, according to Reuters.

According to the ITC’s site and the Reuters report following shortly after the release, the finding applies to cut-to-length plate from Austria, Belgium, France, Germany, Italy, Japan, South Korea and Taiwan.

The exact anti-dumping duties Commerce imposed on eight producers’ products in March range “from 3.62 percent to 148 percent…while imports from South Korea would also face a countervailing duty of 4.31 percent,” according to Reuters. Much more detail on those duties in this MetalMiner report.

What Does It Mean for Steel Plate Prices and Buyers?

“We anticipate the dumping order will help provide support to U.S. domestic prices, at least in the short term,” said Lisa Reisman, executive editor of MetalMiner, “as the case included a fairly broad number of both European and Asian suppliers.”

In many cases, Reisman mentioned, the duty rate appears significant, which will curtail imports from both specific countries and specific producers.

From a short-term pricing perspective, according to Reisman, steel prices have slid across the board this past week, but “certainly this trade case will help support plate prices,” she said.

“Interestingly enough,” she concluded, “according to analysis conducted by Steel Market Update, domestic cut to length plate exports are at their highest level since May 2015.”

Here’s What Happened

  • The Renewables MMI spiked upwards for the month of May (but not a terribly huge spike in the scheme of things; see the bullet below), ending at a value of 71.
  • * Editor’s note: We’ve recalibrated the index to better take into account cobalt price fluctuations, hence the spike from 54 in April to 71 in May.
  • However, the Big Heavy of our sub-index that tracks metals and materials going into the renewable energy industry is the U.S. steel plate price. That price point took a 4.8% dive.

What’s Going On in the Background?

  • Several stories from the solar sector have been making waves lately. “Growth has slowed in the rooftop solar industry in the past year,” writes Jessica Goodheart in this piece, “but many see the evolution of battery storage technology and vehicle electrification as promising for the long-term health of the residential solar industry.”
  • And the policy picture? “Industry leaders have been cautiously optimistic that Republicans will leave be the federal Solar Investment Tax Credit (ITC), a major policy driver of rooftop solar, in spite of Trump’s efforts to roll back the Clean Power Plan,” Goodheart notes.

What Metal Buyers Should Look Out For

  • Keep an eye out on steel plate’s raw material inputs — iron ore prices surged in April, as we reported in our May Monthly Buying Outlook, while coking coal prices swelled due to supply disruptions in Australia.

Key Price Movers and Shakers

For full access to this MetalMiner membership content:
Log In |

President Donald J. Trump has completed his first 100 days in office and thus far has signed into law 28 pieces of legislation.

While Trump has made traction in some respects, the fate of the nation’s steel industry was still up in the air — that is, until Trump signed a Presidential Memorandum in late April calling on Department of Commerce Secretary Wilbur Ross to prioritize an investigation into the effects of steel imports on U.S. national security.

Two-Month Trial: Metal Buying Outlook

Here are three things you should know about this directive and what it could mean for the nation’s steel industry.

The Trade Expansion Act of 1962

The investigation is being conducted under Section 232 of the Trade Expansion Act of 1962. According to the Department of Commerce, Ross is tasked with determining the following:

  • “Whether steel imports cause American workers to lose jobs needed to meet security requirements of the domestic steel industry;
  • Any negative effects of steel imports on government revenue; and
  • Any harm steel imports cause to the economic welfare of the U.S.”

The Current Situation

Despite an existing steel industry, steel imports saw a 19.6% year-over-year increase in February, and, currently, imported steel accounts for 26% of the U.S. market share, according to the Department of Commerce.

Further, the U.S. steel industry is only operating at 71% capacity, and jobs in the industry has continued to take a steady hit. Read more