Rising raw material surcharges are driving up U.S. steel prices, particularly stainless surcharges. The Allegheny Ludlum304 and 316 stainless surcharges rose 34% and 25%, respectively, on the MetalMiner IndX from December to January.
Turner Construction Company reported recently that its Fourth Quarter 2016 Turner Building Cost Index — which measures costs in the nonresidential building construction market in the U.S. — has increased to a value of 1006. This represents a 1.11% quarterly increase from the Third Quarter 2016 and a 4.90% yearly increase from the Fourth Quarter 2015.
The U.S. construction market continues to experience broad growth, with the West and Southeast regions seeing more significant gains, and the Northeast and Central regions seeing more moderate gains. While raw material prices have remained flat, they have experienced an overall gain this year and fabricated material prices have seen a continuous growth this quarter.
The Commerce Department has placed anti-dumping and countervailing duties on mechanical drive parts from Canada and China, some as high as 400% for the latter. U.S. auto sales are forecast to fall this month.
The Auto Sales Plateau Begins to Slope
U.S. auto sales are forecast to drop more than 7% in October from the same period in 2015, the sixth monthly decline so far this year, as automakers offer steep discounts and adjust production to manage inventories, J.D. Power and LMC Automotive said on Friday.
The two auto industry consultants said October U.S. new vehicle sales will number 1.347 million, down 7.3% from 1.453 million units a year earlier. The seasonally adjusted annualized rate for October will be 17.7 million vehicles, down from 18.1 million on the same basis a year earlier. This October has two fewer auto sales days than October of 2015. Read more
Siemens and Local Motors announced a new partnership at the recent International Manufacturing Technology Show in Chicago, which is intended to help advance the future of manufacturing by optimizing the development and large-scale 3D printing of automobiles.
The partnership combines the power of Siemens’ product lifecycle management (PLM) software technology with Local Motors’ leadership in co-created and 3D-printed vehicles — a process called direct digital manufacturing (DDM), wherein parts are produced directly from CAD files.
All 115,612 International Manufacturing Technology Show attendees could ride Olli, Local Motors’ first 3D-printed, autonomous vehicle to get around the massive show floor. Source: IMTS.
Local Motors plans to enhance productivity in its LM Labs program by leveraging Siemens’ expertise in creating “digital twins,” while Siemens expects to further enhance its digital enterprise software suite to support the latest advances in additive manufacturing/3D printing.
For the first time, Local Motors provided an autonomous vehicle, “Olli” that ferried IMTS goers throughout the halls of McCormick Place. The vehicle used Watson’s capabilities to enable riders to ask complex questions in “natural language” voice such as where to visit in Chicago while in town. Olli can be hailed by an app and is in real-life testing Local Motors testing locations right now including National Harbor, Md., Las Vegas and, later this year, Miami. The autonomous vehicle can take route instructions and explain what’s happening during the trip.
Local Motors brought other 3D-printed vehicles — including Strati, the first 3D-printed show car created at IMTS 2014 — tot the show, too.
On the Siemens side of the partnership, the PLM software provider insists that additive manufacturing is not in direct competition with existing manufacturing processes and will not completely replace them.
“Instead, 3D printing will provide an ideal complement to traditional procedures like injection molding and milling,” said Ulli Klenk, chairman of the board of the Additive Manufacturing Association within VDMA — a German manufacturing association trade and certification association — and also manager of Siemens’ digital factory division.
Klenk said the certifications and standards VDMA is working on will bring legitimacy to the technology and, within 10 years, additive manufacturing could effectively be commoditized with 3D printing powders and their prices treated as any other raw materials.
China is planning a bailout of sorts for Bohai Steel Group and standards organization ASTM International wants to develop certifications for commercial space flight.
A New Lifeline for Bohai Steel
Financial authorities in Tianjin, China, plan to convert a portion of debt-stricken Bohai Steel Group‘s liabilities into bonds, according to rescue plans drawn up recently, the online financial magazine Caixin reported on Monday.
According to the plan, high-quality assets from Bohai Steel will be restructured to form a new company, which will take on 50 billion Chinese yuan of the total debt. Officials met last week to discuss a comprehensive restructuring plan for the firm, which has liabilities of $28.78 billion (192 billion yuan) from 105 creditors.
ASTM Seeks To Develop Private Space Travel Standards
ASTM International will host an organizational meeting to potentially create a new technical committee that develops voluntary consensus standards for commercial spaceflight.
This meeting comes in part as a result of the updated U.S. Commercial Space Launch Competitiveness Act of 2015 (SPACE Act). The U.S. Federal Aviation Administration’s Commercial Space Transportation Advisory Committee (COMSTAC) Standards Working Group is recommending the organization of the new group.
For the purpose of countervailing duty investigations, a countervailable subsidy is financial assistance from foreign governments that benefits the production of goods from foreign companies and is limited to specific enterprises or industries, or is contingent either upon export performance or upon the use of domestic goods over imported goods.
Commerce calculated a preliminary subsidy rate of 64.81% for the mandatory respondent, International Industries Limited. The preliminary subsidy rate is based on facts available and adverse inferences following Commerce’s preliminary determination that the mandatory respondent and the Government of Pakistan had not fully cooperated in the investigation. All other exporters/producers in Pakistan have also been assigned a preliminary subsidy rate of 64.81%.
The investigation covers welded, carbon-quality steel pipes and tube, of circular cross-section, with an outside diameter not more than nominal 16 inches imported from Pakistan. Source: Adobe Stock/ pavelyudin.
Commerce will instruct U.S. Customs and Border Protection to require cash deposits based on these preliminary rates.
The petitioners in this investigation are Bull Moose Tube Company, EXLTUBE, Wheatland Tube, and Western Tube & Conduit.
The investigation covers welded, carbon-quality steel pipes and tube, of circular cross-section, with an outside diameter of not more than nominal 16 inches, regardless of wall thickness, surface finish, end finish, or industry specification, generally known as standard pipe, fence pipe and tube, sprinkler pipe, and structural pipe.
OSHA says the rule will help prevent lung cancer, silicosis, chronic obstructive pulmonary disease, and kidney disease in workers by limiting their exposure to crystalline silica, which can cause all of the above diseases and disorders when inhaled. The final rule is written as two standards, one for construction and one for general industry and maritime.
This pile of white silica sand is now being more tightly regulated by OSHA. Source: Adobe Stock/Coprid.
Construction companies have until June 23, 2017 to comply with most of the new requirements, such as:
Reducing the permissible exposure limit for crystalline silica to 50 micrograms per cubic meter of air, averaged over an eight-hour shift.
Mandating employers to use engineering controls (such as water or ventilation) and provide respiratory protection when controls are not able to limit exposures to the permissible level.
Limiting access to high exposure areas . Training workers to recognize exposures.
Provide medical exams to highly exposed workers.
OSHA says the new regulations, which replace ones established in 1971, provide greater certainty and ease of compliance to construction employers — including many small employers — by including a table of specified controls they can follow to be in compliance without having to monitor exposures.
As we’ve mentioned before, the new rules are the culmination of 45 years of debate and consideration of a new silica rule. Regulators have sought to strengthen the 1971 since its inception as silica, in its natural sand state, is pretty much everywhere on construction sites.
Our Stainless MMI remained steady at 51 points. However, we currently see some factors that could lift prices in the short term.
Stainless Anti-dumping Case
On March 4, the U.S. Commerce Department launched an anti-dumping and countervailing duty investigation into Chinese imports of stainless steel sheet and strip, for possible illegal subsidies and selling prices at below cost to illegally gain market share. A preliminary determination of injury to U.S producers is scheduled by March 28.
China’s Ministry of Commerce didn’t respond well to the this new case, arguing that simply restoring prices via protectionist means is not the solution. Chinese steel firms have already been impacted by trade cases. Recently the Commerce Department had imposed 266% preliminary duties on imports of cold-rolled steel from China, punishing Chinese steel makers for dumping or selling below cost. In December, China received a dumping margin of 266% on corrosion-resistant steel products.
These tariffs have helped U.S. imports come down this year. That led to lower inventory levels here and have given U.S. mills the ability to rise prices. Steel prices climbed over the past few weeks, and stainless prices could follow. With the threat of anti-dumping lawsuits looming, the volume of imported stainless sheet and strip had already been diminishing, which should be seen in the upcoming months. The lack of imports has already pushed out domestic lead times and could create a supply shortage once service center restocking starts. However, it’s still questionable whether prices will hold just on import tariffs alone. Low international prices will add downside pressure if stainless domestic prices rise, especially since China is the only named party.
Back in 2014 when the ban was implemented, nickel was trading above $15,000 per metric ton. However, Indonesian companies didn’t expected that nickel would be trading today at half that price.
Indonesia Might Ease Export Ban
Because of falling nickel prices, many of the smelters that miners intended to develop have not materialized. Now, the government is going to review its export ban policy as miners struggle and Indonesia´s smelting capacity will not be sufficient by next year amid miners’ unwillingness to develop those costly smelting operations.
The removal of the export ban would add more nickel supply to international markets, possibly driving prices down while demand is weak, especially in the energy sector.
What This Means For Metal Buyers
Stainless prices could experience a short-term bounce on new import tariffs and overall strength across the base metal complex. However, prices will likely struggle to rise longer term while demand remains weak and producers don’t cut production in a big way.
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Commerce calculated a preliminary subsidy rate of 2.96% and 6.21% for mandatory respondents Steamline Industries Limited and Sunrise Stainless Private Limited, Sun Mark Stainless Pvt. Ltd., and Shah Foils Ltd., respectively. All other producers/exporters in India have been assigned a preliminary subsidy rate of 4.55%.
As a result of the preliminary affirmative determination, Commerce will instruct U.S. Customs and Border Protection to require cash deposits based on these preliminary rates. The petitioners for the investigation are Bristol Metals, LLC; Felker Brothers Corporation; Outokumpu Stainless Pipe, Inc.; and Marcegaglia USA Inc.
Aluminum Association Speaks
The U.S. aluminum industry has stepped up efforts to work through multiple channels to address China’s production overcapacity and resulting glut in the global market, Politico reported. The “China Trade Task Force,” a cooperative effort between smelter Century Aluminum and the United Steelworkers union, have been working to slow imports of cheap Chinese product for some time, but now the industry trade group the Aluminum Association is speaking out more forcefully.
The association said in October that it would work with its Chinese counterparts to curtail overproduction there, but now the group is talking more stridently about the imports and Chinese authorities’ inaction to this point
China is “not slowing down their run-up in capacity,” Charles Johnson, the association’s vice president for policy, told Pro Trade in an interview. “We believe we have to get to the underlying issue.” The group is working toward the overall goal having the U.S. negotiate an agreement with Beijing to cut back production for which there is no demand.”
Politico reported that the industry association also persuaded Customs and Border Protection to reverse tariff reclassifications that Chinese producers use to conceal exports of minimally processed primary aluminum in order to avoid a 15% tariff and capture a Chinese value-added tax rebate.
Construction product prices had to, eventually, increase as the US industry has remained strong and demand for new buildings continues to outpace the regular economy. Post-recession construction activity reached a new high in 2015, with office space under construction peaking at 92.8 million square feet, according to professional services and investment management company Jones Lang LaSalle (JLL).
The American Institute of Architects‘ Architecture Billings Index showed positive growth for eight of the 12 months of 2015, as well. With such robust building and spending, why didn’t construction product prices increase sooner?
Like many industries, US construction is a supply side business. With so much rebar, steel, aluminum sheet, copper wire and other product readily available in all locales no critical mass of demand formed during 2015 and prices actually fell as cheap transportation costs — thanks to the low price of oil — conspired with the surplus to deliver record low construction costs. Labor, on the other hand, was a different story as skilled construction laborers enjoyed high demand as fewer of them were available in the robust market — due to retirement and the wealth of projects to work on — and they could demand top dollar.
That’s one of three trends predicted to effect construction later this year, JLL said: The upcoming election’s effect on consumer behavior, the Federal Reserve increasing interest rates and the aforementioned labor shortage of trained construction employees, especially in trade positions.
Other factors might also play a role in pricing. The recent cold-rolled steel tariffs will hit China particularly hard after imports were hit with 256% tariffs. Cold-rolled steel is thought of as a manufacturing product more than for its use in construction, but it is widely used for cold-rolled structures such as frames and joists.
With all of this being said, the overall commodity picture is still quite bleak and — as oil prices remain weak and most metals continue their bear runs — there is little to suggest that this is a true market bottom. Construction products could have much further to fall before anything close to market equilibrium is reached. Buyers should remain cautious and continue to watch regional prices of products such as rebar and H-beam steel.
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It was a third flat month in a row for the Automotive MMI as strong sales in the US and surprisingly resilient ones in China paced end-user markets, but still couldn’t increase the prices of automotive metals as oversupply still plagues global markets.
Here in the US, Ford Motor Co. sold 20.2% more new vehicles in February than a year earlier. Fiat Chrysler Automobiles posted a 12% gain, while General Motors sales fell 1.5% as it cut back on fleet sales.
Toyota Motor Corp. sales rose 4.1% on strong sales of its RAV4 compact SUV (up 16%), the 4Runner midsize SUV (up 32%) and the Tacoma midsize pickup truck (up 14.5%). The Lexus luxury brand was up 1%.
Nissan Group posted a 10.5% increase, fueled by a 12.9% improvement that more than offset an 11% decline at the Infiniti luxury brand. American Honda sales jumped 12.8% as its top selling Civic and Accord rose 32% and 19%, respectively.
Chinese Sales Resilient
In China, sales in the world’s biggest auto market rose 7.7% in January, as demand was driven by a lowered tax for small engines.
Sales of passenger and commercial vehicles jumped to 2.5 million units in China in January, according to data released by country’s Association of Automobile Manufacturers. Passenger vehicle sales rose 9.3% to 2.23 million units, while commercial vehicle sales declined 3.4% to 303,600 units, the body said.
Oversupply continues to be the culprit for flat automotive metal prices as products such as London Metal Exchange copper and hot-dipped galvanized steel still have large stockpiles available in major markets. The US scrap steel is markedly bearish even by the low standards of the overall sluggish commodity market.
There is also growing concern that end-product demand from large consumer markets such as the US and China cannot last at current rates. While finance costs in the US are expected to stay low, many are concerned that automakers have overextended themselves by investing in aluminum and steel production facilities and, if demand does fall in 2016, automakers will find themselves shuttering new production or borrowing to meet construction costs.
In China, growth has been fueled by the burgeoning used car market there, one whose sales do not trickle down to metal suppliers.
Continue to monitor automotive metal prices and be cautious with forward purchases as there’s still not any real indication that this is a flat bottom or just a plateau momentarily pausing a larger fall.
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