Global Trade


There’s no reprieve from the bearish metals environment in this month’s MMI Report.

More Analysis: The July Metal Price Forecast

With the exception of the very specialized grain-oriented electrical steel (GOES) market and the Renewables MMI®, all of our indexes lost ground in June and could not gain traction amid falling commodity prices and a strong US dollar.

The one index that was steady from last month, which tracks raw material inputs of the renewable energy sector, has been stagnant for two years and, until trends show otherwise, its steadiness is more a measure of a lack of market activity than anything close to a turnaround or a new trend toward increasing prices.

The Stainless MMI is flirting with two-year lows and our Raw Steels index is up against lows not seen in years as well. Weakness in the Chinese stock market has put additional pressure on metals that were already reeling from the effect of the strong dollar. This is bad news for steelmakers, miners, refiners and smelters by itself, but coupled with increased supply in most of the metals we track, it’s become a real deterrent to profitability.

Moreover, both Europe and the US have higher-than-normal inventories of semi-finished products at service centers. Mill lead times remain short suggesting weak demand. Weak demand will continue to place downward pressure on prices.



The stock and finance trade is investing in Japanese aluminum again and republicans in the US House unveiled an $8.1 billion infrastructure bill.

Big Banks Investing in Aluminum Again

Aluminum stocks at major Japanese ports fell for the first month in more than a year in June as western banks started snapping up metal in Asia after spot premiums fell to two-year lows.

Free Download: July Metal Price Forecast

Aluminum stocks held at three major Japanese ports fell 0.5% to 499,900 metric tons at the end of June from a month earlier, trading house Marubeni Corp. said on Wednesday.

It was the first decline since March last year.

Prior to June’s fall, stocks had risen to record levels over several months due to rising exports from China and lackluster Asian demand.

Republicans Unveil Infrastructure Bill

Republicans in the US House of Representatives on Monday unveiled an $8.1 billion plan to fund highway and rail transit projects through the end of 2015, paid for by extending an airport security fee increase and tax rule changes.

Congress faces a July 31 deadline to renew federal transportation spending authority and avoid a major slowdown in road construction projects nationwide.

The five-month funding extension would replenish the Highway Trust Fund for five months. It was introduced by House Ways and Means Committee Chairman Paul Ryan (R.-Wis.) and House Transportation Committee Chairman Bill Shuster (R.-Pa.).

Forecast Companion: The Latest Metal Price Trends in the July MMI Report

Both Republicans and Democrats have said they would prefer a longer, six-year transportation bill, but lawmakers have not been able to agree on a funding mechanism for the nearly half-trillion dollar cost.


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How is the Grain-Oriented Electrical Steel Market Different?

Screen Shot 2015-07-09 at 3.25.29 PMIn Part One of this inaugural episode, we ran down the super-basics of what steel dumping is all about…which got us wondering about all the recent anti-dumping hullabaloo surrounding GOES (grain-oriented electrical steel). Luckily, our in-house expert on the GOES market, esteemed executive editor and our first guest Lisa Reisman was on hand to edify us all. Listen below!

Music: “All Those Devils…” by Holy Pain (


For almost 3 months now, oil prices have moved in a very narrow range. However, this month prices fell 15% in a matter of days, breaking that range and stressing the bearish sentiment among commodity investors.

Oil price CME 1 year out

CME Group Oil price, one-year out. Graph: MetalMiner.

Some analysts point out that the decline was caused by a jump in rigs drilling for oil in the US. The increase came as a surprise as it was the first gain since December.

Free Download: July Metal Price Forecast

However the increase was very small and we doubt this caused prices to decline that sharply.

Why The Plunge?

Another factor to watch is the historic Iranian nuclear agreement with the US and five other world powers. This deal might have risen the bearish sentiment as Iranian oil output is expected to increase. Oil from Iran will take time to return, and will not have a market impact before next year, but given that the global petroleum market has an oversupply of about 2.5 million barrels per day, the mere prospect of new oil doesn’t help market sentiment.

This September: SMU Steel Summit 2015

We believe, whatsoever, that the main driver of the sharp decline has been China’s stock market tumble. Base metal prices were the most impacted but commodities fell across the board and not even oil showed any resilience to the effect of China’s sell-off.

What This Means For Metal Buyers

The fact the oil prices broke below their recent price range is just another reason to expect further weakness in commodity markets, which will likely put a lid on industrial metal prices this Fall.


Our very first episode of our very first podcast! We’re on DumpWatch for steel dumping: Listen below – and crank up the volume to 11!


The Reserve Bank of India‘s 5/25 plan allows banks to extend loan repayment periods up to 25 years, with an option of refinancing the loan every five years.

Free Download: July Metal Price Forecast

India’s most indebted steel company Tata Steel Ltd., according to a Business Standard news report, also announced plans to sell its long products division in Europe, but it had not been able to close that deal because international steel prices had weakened, reducing the unit’s valuation. The company had initiated talks with lenders to reduce its interest cost by 0.9 percentage points on a $1.5 billion loan taken out last year. Tata Steel signed $1.5 billion term loan as part of a $3.1 billion refinancing plan last year.

In its financial stability report last week, the RBI warned that steel companies would not be able to service their debt as the infrastructure sector in India struggled with stalled/delayed projects.

Another report by Credit Suisse had estimated the total debt of stressed steel companies in India was about $31 billion, which was 75% of the banking system’s gross non-performing assets.

Many bankers and analysts have also pointed out that some steelmakers which had set up plants between 2008 and 2010, when land acquisition and material costs were high, had even bigger problems at hand.

At today’s price levels of $360 per ton of steel, most of their revenue was going to the servicing of their debt. Not many expected a spectacular rise in steel prices in the coming months. That coupled with the Greece and the looming Chinese stock market crisis meant that Indian steel companies were left with very few options. They had to either sell off some of their assets or infuse more cash, which means more borrowing.

Free Download: Last Chance for the June MMI Report

Steel and banking experts are of the view that if this situation is allowed to continue, India’s banking sector may end up with a crisis of its own. As such, borrowing could turn into bad debt. To avoid that, they suggested that the government, banking and steel sector leaders sit together and hammer out a solution to give both sectors a fresh start. The RBI’s 5/25 scheme was essentially just an offering of liquid cash to keep steelmakers afloat, It’s not a permanent solution.

The author, Sohrab Darabshaw, contributes an Indian perspective on industrial metals markets to MetalMiner.


A historic deal on nuclear and atomic energy between Iran and several nations is causing havoc with oil markets this morning.

Iran Deal Reached

Crude oil prices initially fell by as much as 2.3% to $50.98 a barrel as investors reacted to the freshly-inked deal between Iran and six world powers which would open Iranian oil up to new markets. However, oil bounced off those levels as investors weigh the details of the agreement and whether or not it will overcome deep skepticism in Congress. Oil was recently trading unchanged at $52.20 a barrel.

Free Download: July Metal Price Forecast

Experts have warned that the deal could lead to a flood of new oil supply from Iran – the Islamic Republic has 30 million of barrels of crude in storage and ready for sale, according to FACTS Global Energy, an industry consultancy.

End of China’s Untaxed Aluminum Semi Industry?

Alcoa CEO Klaus Kleinfeld said it was his “strong assumption” that the Chinese authorities will soon try to shut down China’s untaxed semi-finished aluminum exporting industry.

“I’ve last been in China four weeks ago or so, and had a lot of conversations also with high level folks. They are very clear that this is not in line with their policy, and that they are deeply looking into this,” Keinfeld told Reuters’ Andy Home.

This would make sense because not only do semis skirt China’s aluminum 15% primary metal export tax but they also qualify for a rebate of China’s value-added tax.

This September: SMU Steel Summit 2015


Contrary to the belief that Indian steelmakers are well off as compared to those in other economies, it’s just not the case.

Free Download: July Metal Price Forecast

For the last three years, Indian steel companies, including market leaders such as Tata Steel Ltd., have been hammered from all sides. Low consumption, dropping prices, a weak economy and cheap imports have all combined to push many of them into debt. The plunge continues, and some financial analysts have now forecast that even an expected rate of economic growth in India of 7-8% may not be enough to bring the spiral to a halt.

According to one report, the total borrowings by “stressed” steel companies was estimated to be $31 billion. Now the fear is that many of them will be unable to ever repay their loans, leaving banks that lend to steel companies exposed and facing financial ruin.

India’s central bank, the Reserve Bank of India (RBI) has said five of India’s top 10 private steel companies were under huge financial stress. Most are now taking steps to reduce their debt and a few have shown an an inclination to sell more assets in 2015-16.

To help out domestic steelmakers, the RBI recently announced a “5/25 scheme,” which, at heart, is essentially a debt restructuring option. It extends the tenure of loans to 25 years with an option to refinance in five years. At least two steelmakers, Bhushan Steel Ltd. and Essar Steel India Ltd., have opted for it. Companies have an option to refinance the loan every five years.

At this midpoint of the year, Essar Steel, backed by the billionaire Ruia brothers, is reported to be seeking to restructure part of its about $6 billion in debt.

Earlier this week, New Delhi-based Bhushan Steel finally received approval from its bankers to refinance its approximate $55 million debt under the RBI’s 5/25 scheme.

This September: SMU Steel Summit 2015


We have all heard about the Greek crisis by now.

Free Download: July Metal Price Forecast

On Wednesday, Greece formally asked for a three-year bailout. The European Union’s leaders have given a Sunday deadline on whether formal negotiations on this bailout program make sense or not.

So, How Will a Resolution Impact Metal Prices?

First, let’s start with: Greece is not China. Greece is not a major producer or consumer of metals. Therefore, its economic situation doesn’t have that big of an impact in the supply and demand balance of any base metal.

Some argue that a Greek exit could worsen the European economy. That, in theory, could deteriorate global demand for metals, driving metal prices down. Nonetheless, others (including me) think that a Greek exit would be beneficial for both Greece and Europe.

Austerity measures have already proven to be painful for the country over the past few years, leading to its economy slowing further, making its deficit even worse. A Grexit, however, would leave Greece with the ability to print money, which would increase inflation but allow Greece to meet its national obligations in a potentially more viable way than raising taxes and reducing pensions.

In either case, these are just opinions, no matter how informed they are. There is no obvious answer for the question since we don’t even have a precedent to compare the situation to. A national default in a currency block such as the Eurozone is truly unprecedented. Moreover, the longer-term costs — and any possible benefits — could take years to become apparent.

What This Means For Metal Buyers

Therefore, in the short/medium term, we believe that whether Greece exits the euro or not is irrelevant when it comes to metal prices. The only thing that matters is how the market will react to the news, which we don’t yet know. That Greece is in a bad situation is already well known, maybe any change from its current position will only be taken as positive. Who knows?

We are, however, keeping an eye on the euro exchange rate. A further depreciation of the euro against the dollar would normally be bad for commodities. So far, we are seeing the dollar remain strong against the euro and this seems to favor a continuation of the bearish market commodities such as metals are in.

Free Download: Last Week for the June MMI Report


The statistics on steel imports to India speak for themselves.

Steel imports went up 72% in the last fiscal year to 9.3 million metric tons, of which South Korea and Japan together sent 3.5 mmt. They’re still going up. In the first two months of this fiscal year, the situation got worse, with shipments from Japan at 111% and from South Korea 51%.

This September: SMU Steel Summit 2015

Fitch Ratings, for example, in a recent report, said it, too, did not expect the Indian government’s recent tariffs on the two free trade agreement partners to increase customs duties on steel imports would alleviate the pressure on Indian steel producers. The higher customs duties will likely result in only a marginal increase in the landed costs of imported steel products.


What Indian steel companies are hoping is that, just like in the US, the Indian government starts thinking of imposing anti-dumping and safeguard measures. Contrary to their expectations, the government is said to be actively toying with the idea of signing a free trade agreement with the Philippines. It also extended a previous deal to supply high-grade ore to Japan and Korea.

Steel in Free Trade Agreements

Steel is one of the many commodities that make up an FTA. At the time of signing its FTAs with Japan and Korea, the global steel scenario was very different compared to the one seen today. It was flourishing and market demand for quality steel was high, both in India and abroad. Now, in 2015 though, the situation is downright bleak.

India represents a growing market, which will require copious amounts of steel for infrastructure and other sectors. So nations such as China, Japan and Korea are dumping inferior steel into the Indian market. The foreign steel is being bought and specified because of its attractive price range.

Many here feel that the FTAs that India signed with Japan and Korea are flawed. Under these agreements, duties paid on imported finished steel products from these countries were given a waiver of 5%. Import duties on goods imported from these two countries was 2.5% compared to the usual duty of 7.5%.

Then Vs. Now

While such FTAs may have worked before, experts are of the opinion that India’s deals with South Korea and Japan weighed heavily in the latter’s favor. The Indian steel ministry already highlighted these concerns to the government, which eventually came around to the view that steel should now be removed from the FTA list. Unfortunately that’s not going to happen any time soon.

Some steel leaders here have pointed to the recent passage of the Leveling the Playing Field Act. This legislation, they said, was designed to give American companies new ways to fight unfair trade practices. That’s the way the Indian government needs to go if it is to protect its own steel industry.

Free Download: Last Week for the June MMI Report

The author, Sohrab Darabshaw, contributes an Indian perspective on industrial metals markets to MetalMiner.