Global Trade

New metal technologies play a key role in all we do here at MetalCrawler and none could be more promising than Tesla Motors‘ line of batteries for the home. The Chinese yuan may also be on the cusp of being declared not manipulated by the International Monetary Fund.

Tesla Home Batteries

The idea is that homes and businesses powered by solar panels could harvest and store energy during the day that could be used to run homes at night, or be used as a backup during a power outage.

Why Manufacturers Need to Ditch Purchase Price Variance

Although the exact technology involved in the battery, called Powerwall, is a closely guarded Tesla secret, it probably isn’t based on revolutionary concepts, Jordi Cabana, a chemistry professor at the University of Illinois at Chicago told Live Science. Cabana studies new battery materials and said the batteries look as if they are based on the same lithium-ion batteries in Tesla’s cars.

“Just looking at the specs that they publicize, it doesn’t look very different — in terms of the cost — to what they’re putting in their cars,” Cabana said.

The company is also planning to unveil a business-based battery-storage system, called the Powerpack, though the price for that system has not been released yet. Tesla is already taking orders for its residential system, but the products won’t ship until late summer, company representatives said at the news conference.

IMF Close to Calling Chinese Yuan ‘Not Manipulated’

In what would be a blow to US manufacturers, particularly steelmakers, the International Monetary Fund is close to declaring China’s yuan fairly valued for the first time in more than a decade, according to the Wall Street Journal, a milestone in the country’s efforts to open its economy that would blunt US criticism of Beijing’s currency policy.

The fund’s reassessment of the yuan—set to be made official in IMF reports on China’s economy due out in the coming months—follows years of IMF censure of Beijing’s management of the currency.

{ 0 comments }

Although stainless steel demand is expected to grow moderately this year, service centers are flush with inventory which is putting pressure on US mills.

Why Manufacturers Need to Ditch Purchase Price Variance

Combined with successive months of declines in nickel prices, service centers are only purchasing what is absolutely necessary. Both domestic mills and Asian mills have robust North American inventories, a stark contrast from a year ago when lead times went beyond the standard 6-8 weeks, causing service centers to seek alternative sources.

Technical Issues Hurting Mills

Another exacerbating factor in last year’s supply was Outokumpu’s technical issues with its cold-rolling mills and a lack of alternative domestic supply led service centers to seek other sources. With lead times extended, the domestic mills were able to pass through several base price increases in 2014.

With higher US base prices and the strength of the US dollar, Asian imports did not subside. Asian producers need other markets for their surplus material as Chinese demand is weak and both Europe and India have taken anti-dumping actions against China.

End market demand is strong for automotive,​ residential​ appliance and food service/food processing equipment. The only market that appears to be suffering is energy which is due to the low price of oil. Stainless demand is decent according to many sources and stainless base prices will remain under pressure.

Inventory Backlog

The North American market​ ​is ​saturated with inventory​ ​so​ lowering the base price will not spur on demand. Until service centers reduce their inventory backlogs and nickel prices start to improve, service centers will not buy, regardless of price. Service centers need to focus on getting their inventories in check before they resume anything resembling regular buying patterns. ​​Unfortunately, the mills are under pressure to book capacity which oftentimes leads to acts of desperation.

{ 0 comments }

Several news articles this week have led with comments made by UC Rusal executives regarding the price of aluminum. The FT led with Rusal battles with LME on aluminum price and Reuters added Rusal plays down concerns of Chinese aluminum flooding market.

Free Webinar: MetalMiner’s Q2 and Q3 2015 Forecasts

All of which says to me, Rusal is worried sick that a combination of falling physical delivery premiums and rising Chinese product exports are going to depress aluminum prices this year and into the medium term. The fact is, there is no shortage of aluminum and, although demand continues to grow robustly, supply is growing faster.

Primary Producers Opening New Capacity

Mills such as Rusal’s and Alcoa, Inc.‘s have manfully responded by closing older, less-efficient, higher-cost capacity but even so both they, and other primary producers, are investing in new capacity at the same time. Production outside of China has been creeping higher over the last five months.

Reuters’ Andy Home tells us it’s creeping up to the tune of an annualized 650,000 metric tons. Part of this is older European plants being purchased and restarted by smaller players. Part is new capacity such as Alcoa’s Ma’aden joint venture plant in Saudi Arabia. Likewise, while Rusal has closed older, higher-cost plants it is now talking about a ramp up of it’s 600,000-mt per year Boguchansk plant in Siberia, although, admittedly, only the first 150,000 mt phase for next year.

Semi-Finished, Completely Sold and Shipped

Meanwhile, China exported 1.07 million mt of mostly semi-finished products in the first quarter of this year, representing a year-on-year increase of 353,000 mt. Although December’s almost 500,000 mt was an outlier, the removal of a 13% export tax on May 1st and the consideration of further tariff reductions signals that Beijing has no intention of reining in this overcapacity, but rather is setting course to support domestic producers as domestic demand slows.

{ 0 comments }

Construction spending falling again was the big news in today’s MetalCrawler report. The race for world’s largest steelmaker by market value heated up, too.

Construction Spending Falls

Outlays for US construction projects fell 0.6% in March to a seasonally adjusted annual rate of $967 billion, the Commerce Department reported Friday.

Why Manufacturers Need to Ditch Purchase Price Variance

Economists polled by MarketWatch expected a drop of 0.5%, compared with an originally reported decrease of 0.1% in February. On Friday, the government revised February’s result to show almost no change. Looking at private outlays in March, spending fell 1.6% for residential projects, and rose 1% for nonresidential projects. For overall public construction projects, spending fell 1.5%.

Baosteel Keeps Growing

Baoshan Iron & Steel Co., spurred by China’s stock-market rally and growing car market, is poised to overtake Japan’s Nippon Steel & Sumitomo Metal Corp. as the world’s largest steelmaker by market value.

Baosteel, supplier of half of China’s automotive steel, had a market capitalization of $23.8 billion to Nippon Steel’s $25 billion on Thursday. The spread on Tuesday was only $52 million. Also tracked in the attached chart is South Korea’s Posco, which wrestled with the Japanese steelmaker for the crown from 2013 until last year.

Shares of Shanghai-based Baosteel more than doubled in local-currency terms since Oct. 30 as the benchmark Shanghai Composite Index rallied 86% Nippon Steel’s stock rose 14% and Posco fell 18% in the same period.

{ 0 comments }

We have a problem, by we I don’t mean we in the metals markets specifically, nor we in the US or UK, nor even we in the western world.

Why Manufacturers Need to Ditch Purchase Price Variance

I mean we all have a problem: too much debt.

The International Debt Pile

“Whoa!” you say. Hold on, wasn’t the last financial crisis all about too much debt? Haven’t we learned our lessons – corporations are awash with cash, dividends and share buy-backs are at record highs, austerity measures are curbing government spending around the world, household debt — after years of recession — are under control again, what are you talking about?

Quantitative Easing (QE), started in the US by the Federal Reserve, was taken up by the Bank of England, followed by the Bank of Japan, the latest is the European Central Bank at €60 billion-a-month and even the Bank of China is talking about some form of unconventional monetary support, which we can read as QE to support flagging growth.

{ 0 comments }

While India leads the world in Direct-Reduced Iron production, the domestic industry has been facing an uphill production battle for the last four years.

Why Manufacturers Need to Ditch Purchase Price Variance

India’s DRI sector is hoping for help from the government and clarity in the overall steel policy to see it through, what many have dubbed, its most critical phase ever.

Demand DRIs Up

What is worrisome is that the falling demand for steel, especially construction steel globally, could further, negatively impact the sector. Some are quick to note that India’s DRI units need not worry much on this front as the market in India has remained insulated from global trends owing to steadily increasing domestic steel consumption.

Two other risks facing the sector are imported scrap being used by steel companies in India, DRI is an excellent substitute for scrap in electric arc furnaces, and the reliance by medium-sized DRI producers on inferior technology. That means technological limitations stop the producers from exploiting inferior grades of iron ore and coal.

Further, the limited availability of coking coal only motivates steel production in the country through a combination of DRI and blast furnace. What has added to the misery is the recent round of coal auctions held by the federal government.

Unable to Bid in Coal Auction

DRI companies were unable to participate in the auction, and a hitherto discounted source of fuel was lost, pushing the cost of DRI production by an estimated 40%, some have said. The DRI segment has brought this to the government’s attention.

While many steel companies prefer to use DRI instead of scrap, the slowdown in the global steel industry has seen some amount of the steel melting scrap being imported into India because of lower import duties. What makes steel plants happy in such cases, besides the cheap duty, is the fact that the imported scrap percentage works out to be higher, which eventually negates the cost of imported scrap.

To many analysts, the DRI sector in India is poised on the cusp of a turnaround, but only if there is adequate government backing as well as support from domestic steel companies. Even then, it could easily take four years for the industry to come back to an even keel and ramp up production.

{ 0 comments }

When domestic markets weaken, most producers turn to export markets to sell excess capacity, but you don’t just break into export markets overnight. It’s not that easy. Sort of like one does not simply walk into Mordor.

Why Manufacturers Need to Ditch Purchase Price Variance

The tried and trusted short-term approach is to sell cheap, making it hard for buyers to refuse the low-priced product being offered.

Sell Low, Buy Even Lower

If those mills are supported by plunging raw material costs and extensive local state support gifting them a break-even price around the lowest in the world, then the intent to simply “dump” metal into export markets has few barriers.

{ 2 comments }

Why Manufacturers Need to Ditch Purchase Price Variance

High costs and lower demand are just two of the problems plaguing India’s DRI sector. DRI is used by the steel industry in flat as well as long steel product segments, and is also used in infrastructure projects.

Low Steel Demand Hits DRI Producers, Too

According to figures put out by the World Steel Association, in the first quarter of 2015, India, with over 4,500 tons of DRI, headed the list of 14 nations that accounted for 87 % of the world’s total DRI production. The Sponge Iron Manufacturers Association has estimated India to have an installed capacity of 37 million metric tons, although it’s difficult to arrive at an accurate figure due to a general lack of proper research.

EAF and Induction Resources

India’s DRI industry has nurtured secondary steel producers who largely use electric arc or induction furnaces to make their steel, for which DRI comes as handy substitute for scrap.

{ 1 comment }

Deepwater Wind began construction off the coast of Rhode Island on a five-turbine wind farm that will, eventually, have the ability to power 17,000 homes.

Why Manufacturers Need to Ditch Purchase Price Variance

The 30-megawatt, $290 million wind power project began construction this week 18 miles off the coast of Rhode Island, but, itself, is a much smaller project than the stalled Cape Wind farm project originally planned for the area around Cape Cod in Massachusetts.

US Wind Power Lags

Offshore wind projects are common in Europe and a real driver of renewable energy success there. The fact that the US is only starting to get into the offshore game is a testament to how the regulatory framework and maturity of the renewable energy industry are both lagging here in the states.

The death knell for the proposed 130-turbine Cape Wind project may have come early this year when the two largest electric utilities in Massachusetts backed out of a plan to buy most of the power that was slated to be generated by the proposed turbine project, the latest casualty of what can only be described as an environmentalist civil war over whether to place turbines off Nantucket Sound.

Green vs. Green

The Humane Society, the International Fund for Animal Welfare, the International Wildlife Coalition and and others are against the project. On the other side are groups that might normally be considered allies, including the Natural Resources Defense Council, the Union of Concerned Scientists and Greenpeace.

Opponents, such as environmental lawyer Robert F. Kennedy, Jr., say the natural environment of the Sound should be preserved and that the industrial nature of the turbines would spoil views from the shore. They also say that native birds would be decimated by the 40-foot-tall turbines.

{ 3 comments }

Yesterday’s post explained how the Short Range Outlook (SRO) report released by the World Steel Association for 2015-2016 predicted steel demand would grow by just about 0.5% to 1.544 million metric tons in 2015.

Pool 4 Tool’s Automotive SRM Summit

The world’s steel sector looks on with hope to India to see it through this downturn. The country’s per capita consumption was still low, at about 60 kg as against the world average of 220 kg. With the government’s Make In India (manufacturing) plan slowly grinding into motion, it is hoped that this will lead to an increase in steel consumption.

The End of Annual Growth for Chinese Steel

So, the China steel story is over, at least for the short-term. The economic deceleration there, following low investment growth since 2008, is expected to adversely impact any steel growth there, and it has so far this year.

{ 0 comments }