Articles in Category: Global Trade

Typically steel buyers look at short-term steel cycles — inventory cycles. These are what drive short-term pricing trends. Let’s face it. Most buyers think in terms of what their next purchase will be or, maybe at this time of year, the next year’s requirements.

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However, from time-to-time, it’s worth sitting back and looking at the big picture; the long-term; over-the-horizon. It’s a useful thing to do. It provides some perspective.

The chart highlights global steel output since 1950. Very simply, we can look at 3 cycles.

  • 1950-73 – steady growth. Post-war investment in North American infrastructure; the development of the automobile; reconstruction in Europe and the emergence of Japan. All drove steel production and consumption higher.
  • 1973-98 – stagnation. The oil shock; light-weighting in cars, packaging, construction and increased efficiency. The end of investment in Europe and North America led to demand falling and only partially offset by the growth in emerging Asia.
  • 1998-2014 – the emergence of China. A country of 1.4bn people industrialised and moved from the country to the city; a development model specifically based on steel-intensive capital investment.

Global Crude Steel Production ( 000 metric tons)


Steel prices since 1950. Source: Steel-Insight.

….and now?

The first two cycles lasted 25 years; the last one has been 15 years.

Europe, North America and Japan (25% of global steel consumption) are mature consumers where steel consumption will perhaps grow 1% over the longer-term, and even that is under threat from aluminum in the automotive industry and lightweighting and efficiency elsewhere.

China (50%) has peaked. Construction is 70-80% of demand and that is a one-off use of steel. Once cities and roads are built, they don’t need to be renewed for a while. Steel consumption has peaked and could fall by 20% from here over the next decade.

Emerging economies (25%) were expanding, but in many cases, they were investing the super-profits of commodity gains from oil, metals and agriculture — from China. Without that bulwark, capital expenditure may plummet.

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That means we could be in for a long period of stagnation and decline — 15-20 years based on previous cycles. It will be marked by mill closures, job losses and low prices. Yet the last period of stagnation gave birth to the minimills and a whole new dynamic group of steelmakers. It is not all doom and gloom.

Steel-Insight is a steel industry price-forecasting publishing company, based in Toronto. James May, the firm’s managing director, has been a steel industry analyst for 15 years and advises some of the major global steel trading companies, steel producers and steel consumers on the outlook for steel pricing and industry trends. For more information, visit

The Midwest aluminum premium has risen as fears about costs set in after Alcoa’s announcement that it is shuttering much of its North American smelting capacity. Despite cuts in China, zinc is still massively oversupplied.

Midwest Premium Rises on Alcoa Shutdowns Announcement

The US Midwest aluminum premium has risen to its highest level in six months, traders told Reuters on Tuesday, but the current forward curve and Alcoa‘s plans to save a US smelter from curtailment were seen pressuring prices in the near-term.

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The premium, paid on top of London Metal Exchange (LME) futures prices for physical delivery in the US, has risen to around 8.75 cents a lb., the traders said, citing the continued impact of Alcoa’s plans to shutter the bulk of its US smelting capacity, announced Nov. 2.

Chinese Cuts Fail to Balance Zinc Market

Output cuts announced by Chinese zinc smelters last week will do little to tighten next year’s global supply-demand balance in refined metal because already-known mining cutbacks would have forced smelters to reduce production anyway, Reuters reported.

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On top of that, hard-hit prices will fail to get much of a lasting boost in coming months due to a glut of world inventories, although there may be spikes of short-covering, analysts and investors said.

US construction continues to post robust numbers fueled, in part, by low materials prices. The London Metal Exchange’s new contracts haven’t drummed up support yet, but it’s still VERY early.

Nonresidential Construction Soars

Nonresidential construction in October soared 32% in October from the September level, according to a report by Dodge Data & Analytics, and the value of construction starts was up 13%.

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Residential construction was up 9% for the month, helped in part by 11 multifamily projects, each worth $100 million or more.

New LME Products Not Drawing Interest Yet

The London Metal Exchange‘s new aluminum and steel contracts failed to attract much interest at their launch on Monday, highlighting the struggle they face to gain traction and liquidity.

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In part one of this series, we analyzed how metal prices have fallen in three selling waves. In this section, we will analyze the current sell-off (third wave) in metal prices that a rising dollar is producing.

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Investors expect that the Federal Reserve will rise interest rates in December for the first time since 2006 while the European Central Bank plans to continue with more easing monetary policy. This, and the fact that growth prospects look brighter in US than they do overseas both add to the dollar’s attractiveness. Indeed, we suspect that the bullish move in the dollar over the past few weeks could be the beginning of a bigger move which could depress metal prices even more down the road.

Let’s take a snapshot of industrial metals to see the individual impact of a rising dollar since mid-October.


3M LME Aluminum

Three-month London Metal Exchange aluminum. Source: MetalMiner analysis of data.

Aluminum prices are trading below $1,500 per metric ton, the lowest level since 2009. Notice how prices fell sharply as the dollar surged in mid-October (red arrow). Read more

As the US Green Building Council finished its annual Greenbuild Conference in Washington, DC, last week, one somewhat unlikely organization came away touting better opportunities for its green and sustainable products: The Steel Market Development Institute.

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Steel, you say? Doesn’t it burn a lot of fossil fuels just to get the iron ore out of the ground? Isn’t the process to turn it into structural beams and bars energy-intensive and dirty, as well? Perhaps, if you’re looking at mined and milled steel only, but if you look at less-obvious concepts like reusability, material reduction through smart design, recyclability, decreased maintenance cost and empowerment of adaptive reuse, steel and, even some other metals, are ahead of the game when it comes to construction specification.


All of these green and sustainable steel-framed buildings might get a boost from new LEED standards. Source: Dmitry Ersler/Adobe Stock

The USGBC introduced will put its latest sustainable building certification, Leadership in Energy and Environmental Design version 4 (LEEDv4), into effect early next year. It  approaches building materials content credits in a completely different way than previous editions of LEED.

“The new version of LEED, the primary changes are in the materials section and those changes are mostly around things like lifecycle assessment, environmental product declarations, transparency really,”  said Mark Thimons, vice president sustainability at the SMDI. “What’s it take to make this product? What’s in it?” Read more

A quiet revolution is going on in India’s defense sector.

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It is set to give an impetus to steel, aluminum and composite materials demand in the country. Recently, US aircraft manufacturer Boeing Co. and India’s Tata Advanced Systems Ltd. (TASL) announced a joint venture to manufacture aerostructures for aircraft beginning with the reputed AH-64 Apache fighter helicopter.

AH-64 Apache

Make in India, in this case, means making Apache helicopters there thanks to a joint venture with Boeing. Source: Adobe Stock / VanderWolf Images

The joint venture, according to media reports, would also then compete for additional manufacturing work packages across Boeing platforms, both commercial and defense.

Burgeoning Private Defense Industry

Currently, as many as 14 Tata companies are providing support to India’s defense and aerospace sector. In addition to TASL. The list also includes Tata Advanced Materials, a company that has delivered composite panels for cabinets and auxiliary power unit door fairings for the P-8I long-range maritime surveillance and anti-submarine warfare aircraft.

Another company, TAL Manufacturing Solutions, has manufactured floor beams out of composite materials for the Boeing 787-9, and provided ground support equipment for the C-17 Globemaster III strategic airlifter. Read more


Three-month LME copper hits a six-year low. Source: FastMarkets.

Copper prices traded this week as low as $4,590/mt on demand worries and a strong dollar. Not only copper but all metal prices have suffered significant declines this month.

As part of the World Trade Organization, China is scheduled in December 2016 to achieve Market Economy Status, as opposed to its current Non-Market Economy status. This means, among other things, it will be much harder for US, Canadian or Mexican steel companies to bring anti-dumping actions against Chinese imports of steel and hundreds of other products. Some believe that status upgrade will be automatic, but not the NAFTA steel sector.

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“We don’t believe [Market Economy Status] happens automatically,” said Thomas J. Gibson, president and CEO of the American Iron & Steel Institute. “Under US law there are criteria, six, by which China’s status as a market economy should be judged. And we are just drawing the US government’s attention to that and asserting that China should not become a market economy. Our main focus was to impress upon our elected officials the urgency of the crisis. The focus was on the breadth of the problem.”

NAFTA United Against Chinese Market Economy Status

Gibson was speaking during a press conference and conference call that featured several North American steel industry executives speaking with one voice against China’s potential ascension to market economy status. It’s an issue that has united Canadian, US and Mexican steel producers and given the sometimes disparate North American Free Trade Agreement partners solidarity against what they see as a flood of particularly Chinese imports that has grown to 30% of the North America market for the first time ever.

Last week, AISI released a commissioned report concluding that treating China as a market economy in anti-dumping investigations would “severely damage the NAFTA steel industries and harm NAFTA economies.”

Six steel industry groups sponsored the report: AISI, the Steel Manufacturers Association, the Canadian Steel Producers Association, CANACERO (the Mexican Iron and Steel Producers’ Association), the Specialty Steel Industry of North America and the Committee on Pipe and Tube Imports.

Has the EU Already Decided for China?

Of course, the North American associations aren’t alone in this fight. European Union lawyers have already concluded that China should be formally designated a “market economy” at the end of next year. The EU would have been a powerful ally for North America.

The European Commission’s legal service circulated a confidential opinion within the institution this past summer, officials familiar with the opinion said. The confidential opinion is not binding, and the EU may still oppose China’s “graduation,” but it’s still a blow to the organizations proposing full review and not a standard graduation to market economy status for China.

The Problem With China: Overproduction

The main argument the US, Canadian and Mexican steel producers make would likely hold as much weight with the EU member nations as it does for NAFTA’s: That Beijing’s policies lead Chinese firms to pump out far more goods than China’s domestic market can consume. Or overseas markets, for that matter.

“There are almost 700 million metric tons of overcapacity globally,” said Nucor CEO John Ferriola in last week’s press conference. “That’s almost half China’s. We must allow basic market forces to influence China’s production.”

Ferriola said the case that he and his fellow steel executives made to their representatives in congress was that the ENFORCE Act, a bill stuck in congress after previous legislation was passed to address dumping, would do this. Ferriola called it a “major piece of unfinished business.”

ENFORCE would change customs enforcement and stop trans-shipments which the domestic producers say are being sent from China and other nations where their origins are concealed by relabeling and other shipping tricks. It also has a much more comprehensive definition of “material injury” than current anti-dumping laws.

The bigger issue, even if ENFORCE passes, however, would still be China achieving market economy status. The Canadian Steel Producers’ Association predicted that 400,000 to 600,000 NAFTA jobs will be lost if nothing is done about Chinese exports.

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“Our main focus was to impress upon our elected officials the urgency of the crisis. The focus was on the breadth of the problem,” Gibson said.

This week started with the horrible Samarco mine disaster in Brazil. Two mine dams burst and waste from tailings ponds created to service the iron ore mine flooded local villages and affected water supply within a 60-plus-mile area. The death toll has now reached eight people.

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My colleague, Stuart Burns, warned that the co-owners of the mine, BHP Billiton and Vale SA, could be in deeper water than anyone. Remember BP after the oil spill?

BHP CEO Andrew Mackenzie hopped the first flight to Brazil to put as best a face as he can on the response. Yet the Brazilian government has already set its sights on Vale and BHP as the responsible parties and literal owners of the disaster.

Read more

Purchasing Managers’ Indexes are suddenly up and Brazil has levied fines of $66 million against the operators of a mine whose dams failed last week.

PMIs Up, Good News for Commodities?

The recent uptick in PMI numbers in China and the developed world has led to optimism that a rebound in commodity demand and prices is just around the corner.

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This is largely based on previous experiences of rising PMIs being accompanied by stronger consumption of natural resources, and both data evidence and logic support the historical argument.

Brazil Fines Samarco Mine Operators

Brazil’s president slapped preliminary fines of 250 million reals ($66.2 million) against a mine in the country’s southeast where two dams burst, killing nine people and coating a two-state area with mud and mine waste.

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The fines, announced after President Dilma Rousseff flew over the affected area, come as federal prosecutors announced plans to work with state prosecutors to investigate possible crimes that could have contributed to the disaster at the mine, jointly owned by two of the world’s biggest mining companies, BHP Billiton Ltd. and Vale SA.