Articles in Category: Logistics

A three-nation trip by Indian Prime Minister Narendra Modi – to France, Germany and Canada – begins April 14, but metal analysts here are focusing on the Canadian leg. They expect India and Canada to sign a commercial deal for the supply of Canadian uranium for India’s nuclear power plants during Modi’s three-day visit.

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In 2010, Canada and India signed a civil nuclear cooperation agreement, followed by another agreement in 2012. Since then, Canada’s main uranium supplier Cameco has been in talks with Indian officials about supplying uranium to India. Diplomatic circles of both nations expect the deal to be sealed when Modi visits Canada next week.

Canadian Uranium

Modi dropped several hints about the deal in his Facebook posts. He said India was looking into resuming its civil nuclear energy cooperation with Canada, especially for sourcing uranium fuel for nuclear power plants. Canada, incidentally, was the first country to have completed all the formalities for civil nuclear cooperation with India in 2008. Canada sits on vast uranium reserves, and is one of the largest uranium producers in the world.

On this front, Canada, too, has been making overtures in the last few years. Late last year, Brad Wall, Premier of the province of Saskatchewan in Canada, let it be known that he was discussing sale of uranium to India along with proposals for partnering with India in clean coal technologies.

In fact, going by media reports here, Modi’s focus on this three-nation foreign tour will be garnering investments in energy, security, space and military sectors, under his favorite project’s mantle – Make in India.

One report also suggests that problems related to nuclear liability will be discussed by Modi and his French counterpart, President Francois Hollande. French company Areva is involved in the 9,900-megawatt Jaitapur power plant project in India.

In recent times, India has been bullish on acquiring fuel for its reactors, and Modi’s European and Canadian trip will only serve as one more opportunity for that.

Aussie Supply

India already has Australia on its side. As MetalMiner reported in September, India and Australia concluded a long-pending civil nuclear deal, which involved the supply of uranium from Canberra to India. The Australian supply, expected to have started shipping in the first quarter of 2015, has run into opposition, especially because of India’s stated position that all foreign nuclear material was subject to scrutiny under the guidelines of the International Atomic Energy Agency, thus negating bilateral checks, something the Australians are not giving in to so easily.

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

While funding in Washington is bogged down by partisan resistance to new taxes or cutting spending in the complicated process of trying to replenish the Federal government’s Highway Trust Fund, funding is only one part of the problem of why our crumbling infrastructure isn’t being replaced. Much of it is simply held up in red tape.

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Philip K. Howard, Chairman of Common Good, an organization that seeks to streamline government bureaucracy, recently wrote in The Daily Beast that even with funding, “no government body has the ability to approve the work or to build it in a commercially reasonable way.”


The eastern span of the Bay Bridge connects San Francisco to Oakland. Rust and microscopic cracking were found after one of the 424 high-strength steel rods, intended to keep the tower from being damaged in an earthquake, was removed for testing last year.

“Red tape is so dense that even obvious fix-it projects require years of review. Raising the roadway of the New Jersey-to-New York Bayonne Bridge, for example, was a project with almost no environmental impact, because it used the bridge’s existing foundations and right of way,” Howard said. “But it still required 47 permits from 19 government agencies, and a 5,000-page environmental assessment.” Read more

Today, in MetalCrawler: a federal regulator urged replacement of rail tank cars, but just wants new tank cars and doesn’t want to replace them with pipelines. Alcoa, Inc., insists it’s now a “multi-materials” company and not just an aluminum producer, and construction associations have petitioned the federal government for guaranteed costs for change orders on federal projects.

NTSB Wants New Rail Cars

Federal officials Monday called for the urgent replacement of railroad tank cars to make them more fire-resistant in the event of an incident like last month’s fiery derailment near Galena, Ill., of a train hauling crude oil.

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The current rail car fleet should be aggressively replaced or retrofitted with better protection against heat from fires and by increasing the capacity of pressure relief devices, the National Transportation Safety Board recommended.

“We can’t wait a decade for safer rail cars,” NTSB Chairman Christopher Hart said in a statement. “Crude oil rail traffic is increasing exponentially. … The industry needs to make this issue a priority and expedite the safety enhancements, otherwise, we continue to put our communities at risk.”

The New Alcoa

Alcoa is at the forefront of two trends changing the metals industry, the Wall Street Journal reports, both of which will be on display Wednesday, when the company is expected to report earnings of 25 cents a share, up from nine cents a year earlier. In January, it reported its best full year results since 2008.

The first trend: an eastward shift in raw production, driven by economic growth in Asia and changes in relative costs.

The second: a turn by metals companies toward making parts for fast-growing markets like aerospace and automotive, which are more profitable than making raw metal.

Alcoa now produces predominantly in places such as Iceland and Saudi Arabia, and has scaled back in Tennessee and upstate New York. The US might have cheaper energy these days, thanks for the natural-gas boom, but it also has too many other industries—and people.

Construction Associations Want Cost Certainty

Nine associations representing construction contractors, subcontractors, and design professionals petitioned the Office of Federal Procurement Policy (OFPP) to alter how the office handles change orders.

The groups want the Federal Acquisition Regulation (FAR) amended to “make explicit” that before ordering a change to a construction contract, the contracting officer must assure that funds are available to pay for additional work being ordered.

“Our members are facing increasing numbers of instances in which a Contracting Officer will direct a change in the scope of work on a construction project, lacking funds available to pay for the increased costs being imposed upon the contractor,” the associations wrote in a March 18 letter to OFCPP Administrator Anne Rung.

The groups signing the letter included the Design-Build Institute of America, the American Council of Engineering Companies, the American Subcontractors Association, the Associated General Contractors of America, the Mechanical Contractors Association of America, the National Association of Surety Bond Producers, the National Electrical Contractors Association, the Sheet Metal and Air Conditioning Contractors’ National Association and The Surety & Fidelity Association of America.



James May, Steel-Insight

Current US prices for hot-rolled coil are around $470 per ton ex-works, although big buyers dealing with some mills can still pay $450 per ton.

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Steel-Insight believes that this is close to the bottom, but we don’t expect a sharp turnaround anytime soon. So why is this a pricing trough?

Further Discounting

First, those big discounted prices have been available for around three weeks and some big distributors and tube buyers have pulled the trigger at the $450 per ton level. That has helped push out mill lead times back to four weeks and lessened the need to discount heavily. We understand that integrated mills are now far more reluctant to discount below $470 per ton. There could be further discounting on cold-rolled coil front as the spread remains too high compared to cost.

Carbon Flat-Rolled Inventories (Months’ Consumption)


Source: MSCI, Steel-Insight.

Second, shredded scrap prices look like they are stabilizing at around $250-260 per ton delivered to Midwest mills. That means mini-mills are not likely to discount below $450 per ton as they would lose money and they don’t need to take that business to fill their order books now. International scrap prices have bumped up a little, although they lack the overall momentum to rise much more, while scrap flows into yards slowed with the lower prices.

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Caterpillar Inc.’s recent announcement that it is investing in Chicago-based technology startup Uptake shows how much the US construction industry has evolved when it comes to data analytics. Cat, a company that once operated as a pure supplier to a loose network of construction companies and the subcontractors they work with, viewed sales of equipment – and not what happens to that equipment once it exits its warranty period – as their key business just five years ago.

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Cat’s statement to the media sounded like something out of Silicon Valley, hitting major buzzwords such as predictive and dynamic analytics. It read, “to help customers around the world better understand the health of their equipment and optimize machine availability, Caterpillar Inc. today announced it has entered into a technology and predictive analytics agreement with Uptake, provider of a dynamic analytics and insight platform for a wide array of industries, based in Chicago, Ill.”

Cat CEO and Chairman Doug Oberhelman took it a step further.

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In the last couple of months, the price of iron ore may have come down by about 15% in India, reflecting global trends, but local steel companies remain unimpressed. In fact, some have even gone on record to claim it was a case of too little, too late.

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The cheaper iron ore prices have gone down due to lower production costs of the ore, itself, and subdued demand in the domestic market. The state-run mineral producer, National Mineral Development Corporation (NMDC) had cut the price this month, too, by about $5 (Rs 300) per metric ton of lumps or higher grade iron ore and about $10 (Rs 500) per mt in fines, which contain less iron.

Too Little, Too Late

Steel companies said the price correction had come in too late and was too little to boost their margins. They said the NMDC price correction, and that by other iron ore manufacturers, had come “very late in the day,” and that it was also less than the global price correction.

Many steel companies in India have been relying on imported ore, once available at cheaper rates than Indian ore, to meet their needs. The Indian Government informed Parliament that while there was a dearth of iron ore in India, regional shortages due to the previous Supreme Court-imposed ban had led to a gap in supply and demand.

Lease renewals in the provinces of Goa and Odisha, and cancellation of mining leases in Karnataka had led to regional shortages of iron ore.

In Odisha, for example, there was a sudden spurt in ore imports this year due to a shortage of raw material locally caused by a slowdown in mining activities. Steel mills for major steel companies such as Tata Steel and Visa Steel were among the largest importers of iron ore.

The government instructed miners to increase value addition and improve iron ore availability for the domestic steel industry. Export duties on iron ore have been increased to 30%. For exports of iron ore pellets, a 5% export duty was imposed, while the government also reduced the Special Additional Duty on the import of melting scrap from 4 to 2% in the budget for 2015-16.

Export Duties A Point of Contention

As was to be expected, the export duty has become a sore point with iron ore miners. Some miners, like those in Goa, are demanding an immediate withdrawal of export duties on iron ore, as the current market conditions are making the export of low-grade ores from Goa unusable, according to a statement from the Goa Mineral Ore Exporters’ Association. Goa miners largely export the low-grade ore to China.

As reported earlier by MetalMiner, Indian steel companies have been grappling with the cheap imports problem for a long time. The imports are mainly coming from China, Japan, Korea and now, even Russia, where demand for the ore has plummeted recently.

MetalCrawler’s latest news today includes an agreement in the oil strike that’s had managers camping in at a refinery in Toledo, Ohio.

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Low prices and cheap imports have caused a Minnesota iron ore operation to be shut down and Ford Motor Co.’s aluminum-bodied F-150 truck is enjoying sales success.

Steelworkers Reach Agreement With Shell in Oil Strike

The United Steelworkers of America said Thursday that a tentative agreement has been reached on a new four-year contract with Shell Oil, a first step toward ending the first major strike against the oil industry in 35 years that includes 1,100 workers at the BP Whiting Refinery in Northwest Indiana.

According to the union, the tentative settlement, which is a pattern agreement for the industry, includes wage increases as well as improvements on safety issues and routine maintenance.

U.S. Steel Shuts Down Minnesota Iron Ore Operation

U.S. Steel said it will lay off workers and shut down an iron ore plant in Keewatin, Minn., which ships ore to U.S. Steel mills as it continues to fight lower-priced, surging imports and declining demand in the energy sector, saying it will temporarily idle one of its iron-ore operations in Minnesota, affecting 412 workers.

Aluminum-Bodied F-150 Selling Well

Officials say the aluminum-bodied Ford F-150 pickup truck has sold well, though a lack of inventory through the changeover has dragged on Ford’s overall sales. The Toledo Blade reports that Ford officially will officially launch F-150 production at its Kansas City Assembly Plant. Ford says it will be able to build about 700,000 trucks per year between Kansas City and its Dearborn, Mich., plants.

MetalCrawler searches the globe far and wide for the latest in metal market news and trends. Today that went as far as India and China.

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It’s also being reported that aluminum sales won’t help a major iron ore miner make up for its losses in that market and the gold price was rising as of this posting.

India Places Anti-Dumping Duties on Far East Stainless Steel

  • India’s trade ministry has recommended anti-dumping duties ranging from $180 to $306 per metric ton for some industrial-grade stainless steel imported from China, Malaysia and South Korea, Reuters reported. After a year-long investigation based on complaints from Jindal Stainless Ltd., the ministry said it found that the domestic industry was suffering “material injury due to such dumped imports” and that a definitive measure was required to stop it and place tariffs on the stainless imports.

China’s Gargantuan Size Now Its Metals Community’s Undoing

  • China has far more steel mills than it needs, according to a New York Times article. Once a strength of the domestic steel industry, this is now a problem made worse by the country’s shrinking housing market, the most voracious consumer of the metal. Companies have scaled back or closed, as domestic steel prices have collapsed. With scant demand at home, the remaining mills have looked beyond their borders for business.

Aluminum Not Saving Rio Tinto

  • Optimism that a recovery in profit at Rio Tinto Group’s aluminum division will provide an enduring counter to a slump in iron-ore prices and underpin increased investor returns looks misplaced, Bloomberg News reported. When the world’s second-largest mining company reported a 9% dip in underlying profit last month, CEO Sam Walsh touted a turnaround at the much-maligned unit that emerged from the value-destructive $38 billion acquisition of Alcan Inc. in 2007. A surge in Chinese exports of the lightweight metal threatens a global-supply glut, Bank of America Merrill Lynch said last week.

Interest Rate Increase Speculation Isn’t Hurting Gold… Yet

  • Gold prices rose this morning as a retreat in the dollar from 12-year highs arrested its eight-session slide, though speculation that US interest rates could rise sooner rather than later kept prices under pressure.The dollar extended its decline in early US trading on Thursday as a surprise drop in retail sales in February dampened expectations that the Federal Reserve would raise interest rates this summer.

Check back daily for the latest MetalCrawler news.


“This (reform of the LME warehouse system) is really about recommitting to the quality of LME pricing, a goal that’s always going to receive our top attention because the smooth operation of that physical delivery network really underpins everything we do for both the financial and the physical players in the market.” – Matthew Chamberlain, Head of business development, London Metal Exchange

LME Aluminum for three-month delivery has fallen back below the $1,800-per metric ton level from over $2,100 in the third quarter of last year. The prospect of a disorderly unwinding of the stock and financing trade, which, until recently, had locked up large amounts of aluminum in deals, is causing a chilling effect in the entire aluminum market.

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Physical delivery premiums are also falling worldwide. Reuters reports that South Korea’s state stockpiler bought 2,000 mt of aluminum at a premium of $330/mt over LME cash. That’s the lowest level in a year. Our own Stuart Burns reports that, in Europe, premiums for aluminum without duty have gone from $425 in November to $305 and that much of the fall can be attributed to the fact that “the stock and finance trade is not the game it was 12-18 months ago, so those hedge funds and banks previously engaged in that activity are not sucking up metal in the same way.”

Falling Premiums

How rapidly these declining physical delivery premiums will affect the aluminum market is unknown even by the major players, but companies such as Alcoa are diversifying themselves away from primary production of the light metal.

If the metal continues to exit the LME system, however, would the exchange’s goal of supply transparency actually be served? Much of this metal is moving to off-warrant warehouses and not going into immediate production. The new rent-capping and decay measures the LME is discussing implementing would take away an incentive for LME warehouse operators to keep metal in a queue and likely give players in the market yet another reason to pick up their aluminum and take it off-warrant. The decay factor affects the rate at which queues are reduced under LILO (for a warehouse continuing to load in metal).

The “decay factor” broadly means that LILO must be in operation for two business days to eliminate one calendar day of queues. The proposed increase in decay factor to 1.0x means that LILO must only be in operation for one business day to eliminate one calendar day of queues.

PowerPoint Presentation

By accelerating “decay time” in a queue the LME wants to give another incentive to take metal out of warehouses with long queues. Source: London Metal Exchange.

Since the International Aluminum Institute stopped reporting monthly numbers, it’s nigh impossible to tell how much aluminum has moved to off-warrant storage.

Solving the 50+day queue problem at the warehouse operations at  Metro International in Detroit and Pacorini Vlissingen in the Netherlands would certainly be a good thing for users of the LME system, but it may not deliver the overall market transparency that exchange’s executives desire.

The London Metal Exchange hosted a forum at Chicago’s Virgin Hotel last week and paramount on the minds of attendees was the Exchange’s recent clarification of “load-out” at warehouses, particularly those with long LME aluminum queues. The rules were changed  to prevent the abuse of LME load-in, load-out (LILO) requirements.

The Effect of New LILO Rules

The new definition of “load-out,” which went into effect February 1, states that metal must be shipped to a different warehouse operator or to a consumer in the same LME location, or it must physically leave the location altogether. This is to stop the so-called “merry-go-round” deals pioneered by Metro International in Detroit and that have taken hold at the Pacorini Vlissingen (Flushing) warehouse complex in Vlissingen, Netherlands.

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However, certain respondents in the LME’s consultation process indicated that participants would like to be able to temporarily use non-LME, or off-warrant, storage situated in the same warehouse complex, before the metal is loaded out per the revised definition.

PowerPoint Presentation

After the consultation announcement in July 2013, the London Metal Exchange contends that aspirant queues at warehouses fell off and incumbent queues, at Detroit and Vlissingen, were driven by warrant cancellation given flat load-in rates. Source: London Metal Exchange.


The LME has agreed to ask the physical market committee it created to address such questions to consider whether such a service could be allowed, while not diluting the protection against potentially abusive behavior provided by the new definition.

Further Warehouse Reform

Matthew Chamberlain, head of business development at the LME, said further planned reforms such as capping or banning rents for metal held up in queues, are moving forward in the LME’s consultation process and the overall reform package is partially aimed at enabling the warehouse network to cope with a sudden, unprecedented, “worst-case scenario” increase in metal demand to get warehouse stock out if a sudden event. He also asserted that the reforms are working.

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