Articles in Category: Global Trade

The size of the U.S.contingent at India’s DefExpo 2016, held recently in the state of Goa, was enough to send out a clear message.

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Of the 47 participating countries, the U.S. was among the event’s largest international exhibitors, clearly underlining the importance of the region to the American defense and security business. This was the first time that DefExpo, India’s most prominent defense and security trade event, was held outside the capital, New Delhi.

Who Makes What? Or Asks For it?

The event saw a bit of “Make in India” mingling with “Ask America First.” The U.S. International Pavilion saw potential buyers looking for ways to meet a critical mass of U.S. suppliers, and an onsite business hub for American exhibitors looking to maximize their exposure and impact at the event.

Polaris_Dagor_550_041516

The Polaris DAGOR was designed for U.S. SOCOM (Special Operations Command) and U.S. Special Operations Forces. Source: Polaris. 

“When U.S. companies commit to exhibit at DefExpo, they’re saying they believe in the power of this event to attract real business prospects and customers. The global interest in this show speaks for itself,” said Kallman Worldwide President and CEO Tom Kallman, in a media release. Kallman Worldwide, Inc., was the designated U.S. Representative of the show, in coordination with numerous U.S. government agencies

“The United States is the world’s biggest aerospace and defense supplier, but that’s no guarantee that buyers will look to work with American companies over others,” Kallman said. We want every visitor to ‘Ask America first’ at DefExpo, and to be assured that America is listening.”

Heavy Defense Hitters

The list of participating companies read like a veritable who’s who of the U.S. defense and aviation industry. Boeing was there, of course, along with Honeywell, Lockheed-Martin, Raytheon and Textron, along with a cross section of leading American suppliers working to strengthen or initiate international partnerships. A high-level federal government delegation, which included General Dennis L. Via, Commander of the Army Material Command; Ann Cataldo, Deputy Assistant Secretary of the Army for Defense Exports and Cooperation; and Thomas L. Vajda, the Consul General of the U.S. Consulate in Mumbai were part of the U.S. delegation.

Clearly, as voiced by the Consul General, defense and space technology is now high on the list of cooperation between the U.S. and India. And the efforts of the federal government to reach out to local Indian manufacturers such as Tata Steel and Mahindra, who of late have formed their own defense equipment producing units, should boost India’s “Make in India” campaign.

Such collaboration could be music to the ears of both Indian and American steel and other metals manufacturers since outside of infrastructure and automobile, defense is one of the largest consumers of steel and aluminum.

For example, Polaris India Pvt. Ltd., a wholly owned subsidiary of Polaris Industries Inc. a leader in off-road and all-terrain vehicles, showcased its  products, the Dagor (Deployable Advance Ground Off-Road) and the Mrzr4 at the DefExpo India 2016.

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These vehicles were brought to India for the first time. Polaris also showcased its six-wheel drive off-roader, BosSportsman Big s 6×6 and its Ranger 6×6 800 at the event.

Polaris India has developed the DAGOR vehicle under a contract from elements of the U.S. Special Operations Command (SOCOM) and international Special Operations Forces (SOF) customers.

Just about two weeks ago, we pointed out that something was rotten in the  Q1 base metals rally: The most-liquid and the most-used industrial metals were not leading the market rally.

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In a powerful turn around situation, we would like to see Dr. Copper and his esteemed colleagues aluminum and nickel showing strength. Instead, we are witnessing tin and zinc leading this rally.

Copper Erases Gains for the Year

3M LME copper coming under renewed bear attack

Three-month LME copper coming under renewed bear attack. Source: MetalMiner analysis of Fastmarkets.com data.

Last week we saw copper prices coming under renewed bear attack. The gains made in Q1 have already begun to shrink. Read more

It has become difficult to ascertain if any party that sells it, or those that buy it, have received any benefit from the spate of trade cases involving grain-oriented electrical steel.

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The most recent case involves the Chinese producers Wuhan Iron & Steel and Baoshan Iron & Steel who brought an anti-dumping action against Japanese and Korean producers of grain-oriented electrical steel. Provisional duties of 45.7% to Nippon Steel & Sumitomo Metal, 39% to JFE Steel and 14.5% to POSCO with final duties to be determined during Q3 of this year, according to a recent TEX Report.

High-Grade Materials

The industry knows, however, that only the three mills named in that case can provide the high-grade materials needed to produce transformers that meet higher efficiency standards imposed by governments the world over, including China.

GOES_Chart_April_2016_FNL

For sure, the domestic Chinese producers will likely reap a small bump in prices but their customers, the global transformer and power equipment producers, will make adjustments as required, as well. Read more

In March and February, gold prices — whether U.S., Indian or Chinese — were the standout performers, with some even nearly doubling in value as investors stocked up on the hard currency as a haven from a falling U.S. dollar and other global economic turmoil.

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But that’s not the case this month. Gold lost value in all the markets we track, a predictable pullback from its runaway performance during most of the first quarter. The precious metal that’s pacing the globe and keeping our sub-index positive is silver, helping the sub-index achieve a 1.2% increase.

Global-Precious-Metals_Chart_April-2016_FNL

Sure, the platinum group metals were predictably positive, too, but silver’s unique position as both an investment and industrial metal allowed it to gain in all the markets we track and its future potential is stronger as safe haven status doesn’t make up such a huge part of its value as with its cousin, gold.

Secondary Mining, Primary Industrial Usage

Silver is mined alongside just about every industrial metal in the world and selling it has been padding the profits of base metal miners during the first quarter. U.S.-based primary silver producer Coeur Mining reported Q1 production of 3.4 million ounces of silver and slightly more than 78,000 ounces of gold. That was in line with expectations, as the company transitions to lower-tonnage, higher-grade, higher-margin underground operations from two ore sources, Guadalupe and Independencia in Mexico.

The electronics uses of silver are pushing miners to bet their future on the metal as its still the world’s best conductor of electrical current and heat. Electronics in automobiles such as Tesla Motorsnew Model 3 “affordable” electric car will require more silver than any automobile on the road today. And electronics are already invading the comfort of our conveyances more than ever before.

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When you add electrical transmission and use in renewables to silver’s demand side equation it’s easy to understand why its global prices could easily keep rising independently of its performance as an investment.

What This Means for Metal Buyers

Continue to expect silver and PGMs to experience strong demand independent of investment potential. Gold could still gain back its losses but its prospects, long-term, are not as strong.

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The Renewables MMI got a boost from increasing steel prices and resilience in solar silicon to increase 3.8% to 54 this month.

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This is likely not related to the broader rally in metals prices as renewables are fairly niche and this sub-index is still trading well within the low range we’ve seen it inhabit for most of the last year. Many renewables aren’t even publicly traded and we have long lamented the effect government incentives have on hiding and keeping prices low for metals and end products subsidized at several points in the supply chain such as silicon.

Renewables_Chart_April-2016_FNL

So, to get a real feel of what’s going on out there it’s sometimes necessary to look at other metals used in the end products. For solar panels, that’s our precious/industrial friend, silver.

The average solar panel actually uses about two-thirds of an ounce of silver. That might not sound like a lot, but at around $15 an ounce on the MetalMiner IndX, U.S. silver contributes more to the cost of a crystalline photovoltaic silicon solar panel than it does to most other industrial products that use silver. Laptop computers use way less than half-an-ounce of silver while a cell phone contains a minute 200-300 milligrams of the shiny metal.

Silver Breaks Out

Silver has broken out from the lows of 2015 and has joined its precious cousin gold in seeing its value increase exponentially this year. Unlike gold, though, silver has a ton of renewable applications. The solar industry uses about 5% of the world’s annual silver supply, or an estimated 52.4 million ounces.

Demand Effect

Some might say an increase in the price of silver doesn’t have any direct correlation to the rise in silicon prices or any real connection to solar adoption, either. While this has a grain of truth to it, such a healthy increase in a related component metal can’t entirely be discounted. Silver is actually the primary ingredient in PV cells, and 90% of crystalline silicon PV cells use a silver paste. As a regularly tracked commodity, silver’s demand is relevant. Not just in the U.S. but in massive solar adopters China and India, as well.

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That being said, a big price spike in silver could keep adoption of the technology low, too, but that spike would still be a better indicator of loss of demand than some of the prices of subsidized metals. That and, of course, the undeniable rally in steel products being used in all of those wind turbines and solar panels.

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The Rare Earths MMI was flat at 16 this month, continuing to trade in the narrow band we’ve seen it vacillate in since 2012.

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Apparently, a rising tide does not always lift all boats as Rare Earths bucked a price increase trend that touched all the metals we track this month. Stable supply from China ever since export quotas were lifted could either be blamed or thanked for the price stability, depending on which side of the buying fence you’re on. Substitution is also a factor, as less-tracked REs such as scandium are being used in alloys by more multinationals such as Airbus.

Rare-Earths_Chart_April-2016_FNL

No major supply disruptions have materialized in the last few years and elements such as niobium and neodymium have appeared to be more price stable than their publicly traded, base-metal cousins. The only thing that could be construed as affecting rare earths this month was the announcement that the Indian government, quite cautiously, might open up a few RE mining blocks to companies sometime later this year.

According to a senior official in the Mines Ministry, the Indian government is looking at at least one rare-earth deposit in the central Indian desert province of Rajasthan to be put on the block, on an experimental basis, to widen the number of rare-earth miners in the country and ramp up production to pose a challenge to China, the undisputed top global supplier of REs.

State-owned Indian Rare Earths Limited is currently the sole miner and producer of REs in India, and it has joint ventures with Toyota Tsusho for production of mixed rare earth chloride.

The new supply would be welcome, if not entirely necessary right now, to companies that produce motors, magnets, light-but-strong structural steel and other RE end uses. Prices are so low right now that even Japan, which famously dealt with a de facto Chinese RE embargo in 2010 and 2011, is seeing its leading domestic RE producers pull back or abandon production entirely.

In February, Showa Denko President Hideo Ichikawa hinted at a further overhaul of its RE metals business, raising the prospect of either merging with another company or just getting out of REs entirely.

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While our other prices have risen, it’s still a great time to be an RE buyer and this most niche of markets shows little to no sign of catching up with the pack.

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Steel imports are up and China may soon send a shock to copper markets by selling its stockpiles of the red metal.

China Could Send Shock to Copper Markets

China may be about to shock the global copper market by unleashing some of its stockpiles of the metal, which are near record highs according to sources inside the secretive government warehouses, onto the global market.

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Four traders of copper, including two from state-owned Chinese smelters, said they expect China to raise its copper exports — which are usually tiny — in the next few months. China’s refined copper exports averaged less than 10,000 metric tons a month in the first two months of 2016, and around 17,000 a month in 2015.

Market watchers are concerned that such a supply shock could stunt or even reverse recent price gains the red metal has made.

Steel Imports Up in March

Based on the Commerce Department’s most recent Steel Import Monitoring and Analysis (SIMA) data, the American Iron and Steel Institute reported today that steel import permit applications for the month of March total 2,969,000 net tons.

This was a 23% increase from the 2,414,000 permit tons recorded in February and a 30% increase from the February final imports total of 2,276,000 nt. Import permit tonnage for finished steel in March was 2,120,000, up 1% from the final imports total of 2,099,000 in February. For the first three months of 2016 (including March SIMA and February final), total and finished steel imports were 7,894,000 nt and 6,448,000 nt, respectively, each down 33% from the same period in 2015. The estimated finished steel import market share in March was 24% and is 25% 0on the year-to-date.

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Finished steel imports with large increases in March permits vs. the February final included standard rails (up 387%), cut lengths plates (up 62%), sheets and strip all other metallic coatings (up 19%), heavy structural shapes (up 16%) and wire drawn (up 11%).

This is part two of an examination of how the U.K. steel industry has come so close to becoming non-existent. Read about Tata Steel‘s plans to sell its U.K. branch from yesterday for more.

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The rest of Europe is not without it’s problems, but as we will find in the U.K., the European Union is preventing direct government aid to sustain steelmaking. The E.U. has ordered Belgium’s government to recover $239 million (€211 million) in aid given to Duferco, which operates steel mills in Wallonia. It is also investigating whether Italy acted illegally in spending €2 billion to support the Ilva steel mill in Taranto.

Possible Sale?

Tata’s massive plaint in Port Talbot, South Wales, has one last hope, really, and that’s that another India-born entrepreneur called Sanjeev Gupta, head of commodities firm Liberty House that has already bought several downstream operations from Caparo and Tata this year, and has voiced an interest in looking at Port Talbot — on the condition the British government “plays its part.” Read more

Today, U.K. politicians are somewhat belatedly calling for requirements that national infrastructure projects use U.K. steel. Meanwhile, Tata Steel and Thyssenkrupp are said to be eying a merger.

U.K. Politicians Clamor to Protect Steel Industry

U.K. Leaders said on Sunday that U.K. steel producers must be considered for infrastructure and other government contracts involving steel supplies, as part of plans to find a long-term solution to a crisis in the industry. The government is looking for ways to support domestic steel producers after India’s Tata Steel put its loss-making British plant up for sale on Wednesday, putting thousands of jobs at risk.

Tata-Thyssen Merger?

Speaking of which, Tata Steel and Germany’s Thyssenkrupp have been talking about combining their European steel operations, a person aware of the talks said on Friday. The source, who did not want to be named because he is not authorized to speak publicly, said talks had been ongoing for about a year but declined to comment on their current status.

About 15,000 jobs are at risk at Tata Steel U.K. after its Indian parent, Tata Steel, put the business up for sale. There are a further 25,000 jobs in the supply chain in jeopardy, as well.

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Sources told the London Guardian that Tata is looking to resolve the future of its U.K. plants and workers within weeks, rather than months, as it emerged that billions of dollars are needed to even make it viable.

Steelworks coke blast furnace Port Talbot South Wales UK

The steelworks coke blast furnace at Port Talbot, South Wales, U.K. 15,000 Jobs could be lost Port Talbot is Tata Steel is unable to find a buyer. Source: Adobe Stock/Petert2.

A senior source close to Tata told the Guardian that the U.K. business’ main steel mill at Port Talbot, Wales — and the overall U.K. business — are losing significantly more than £1 million ($1.4 million) every day. Read more