Non-ferrous Metals

Outlays for US construction projects fell 0.6% in March to a seasonally adjusted annual rate of $967 billion, the US Commerce Department said last week. Commerce also revised February’s result to show almost no change.

Why Manufacturers Need to Ditch Purchase Price Variance

Despite the lower spending, the monthly Construction MMI® registered a value of 74 in May, on par with April's value. Flat is, apparently, the new up until construction starts and spending pick up some steam. The low prices have not yet incentivized developers enough, it would seem, to sign off on new projects or increase purchasing for anything but stockpiling, as credit is still hard to obtain and consumer demand for commercial and residential space remain tepid.

Construction_Chart_May-2015_FNLThe energy sector, which accounted for much of last year's construction gains, is still shrinking due to low oil prices which are causing projects to get canceled because oil has become too cheap to go to the expense of pulling it out of the ground and then turn a profit.

Energy Loans Called In

In fact, banks in the US are cutting credit lines to energy companies and forcing the firms to cough up more collateral to guard against fallout from the fall in oil prices.

* Get the complete prices every day on the MetalMiner IndX℠

The US International Trade Commission upheld tariffs against both rebar and, more recently, oil country tubular goods (OCTG) from China, but the flood of imports has already done its damage when it comes to both traditional construction and the steel pipes used for oil and gas drilling. Supply is high and demand is simply not high enough to push prices upward.

It's a testament to the resilience of the US construction market that our MMI was even able to hold steady this month. For complete prices, read the complete story – log in or sign up for MetalMiner membership!

For full access to this MetalMiner membership content:
Log In |

MetalMiner's aluminum price index, the monthly Aluminum MMI®, registered a value of 90 in May, a significant increase of 2.3% from 88 in April.

Aluminum on the London Metal Exchange is back above $1,900 per metric ton, breaking short-term resistance to hit a four-month high.

China Ends Export Taxes

China erasing aluminum export taxes didn't seem to weigh down on prices; however, aluminum premiums took a beating when the news of China’s removal of export taxes came.

As my colleague Stuart Burns wrote in a recent article, the tax removal should reduce the domestic surplus of metal, supporting domestic prices and depressing prices in overseas markets. With current primary production counting for about 75% of total primary capacity, Chinese producers will have the ability to increase production without creating any shortages in China's domestic market.

Even outside China, production has been ramping up over the past six months. UC Rusal and Alcoa, Inc. have responded by closing older and less-efficient capacity, but even so, both they and other primary producers are investing in new capacity at the same time. Demand for aluminum remains robust, but the excess of supply is something that is clearly bugging aluminum producers.

Certainly, the supply outlook doesn't explain the recent price increase. However, the recent weakness in the dollar does. The dollar index is experiencing some turbulence for the first time in more than 9 months and that supported aluminum and most industrial metal prices in April.

Battery Research Continues

In other aluminum news this month we also had Stanford University  building an aluminum-ion battery prototype that offers various improvements over lithium-ion batteries. These aluminum-ion batteries will potentially make consumer electronics safer, charge faster and allow thinner or even flexible-form factors.

Get all of this month's exact prices in the full article.

For full access to this MetalMiner membership content:
Log In |

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 }

MetalCrawler is covering the labor issues beat today and they might affect your metal purchases.

Century Hints at Lockout

Century Aluminum will invoke a lockout of unionized workers at its Hawesville, Ky., smelter starting on May 11 if the union does not approve a final offer on a labor deal, according to a letter posted on Century’s website on Friday.

Pool 4 Tool’s Automotive SRM Summit

United Steelworkers Local 9423 is set to vote on the proposed contract today, according to a post on the union website. If workers go on strike, it would be the first industrial action at a US aluminum smelter in more than a decade.

Train Drivers Strike in Germany

A seven-day strike by German train drivers could cost the German economy €500 million ($556.70 million), Germany’s DIHK Chambers of Commerce said on Monday.

The strike, the eighth in a dispute between the GDL train drivers union and state-owned Deutsche Bahn over work conditions, began today for freight trains and will be extended to passenger trains from Tuesday.

BP Refinery Strike Could Soon End

Workers and management at BP have reached a tentative agreement that would end a months-long strike at the multinational’s refinery in Whiting, Ind.

The United Steel Workers employees must still ratify the contract, and officials expect a vote to occur in the next few days.

{ 0 comments }

This week, our metals markets fell lower as they were buffeted by seemingly ever-increasing exports of steel, aluminum and other products from China.

Why Manufacturers Need to Ditch Purchase Price Variance

Even though China’s economic growth has been falling, its government still gives producers strong incentives to produce steel and aluminum that eventually ends up exported elsewhere. My colleague Stuart Burns rightfully points out that if Chinese 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.”

Can Debt Fuel Long-Term Growth?

But what’s the eventual result of state support? In China or anywhere else? Can government debt actually lift these economies back into growth mode? Stuart was there again, with an assist from the Daily Telegraph, postulating that sluggish growth and low inflation is the new normal and “advanced economies — and perhaps emerging ones, too — seem to have run out of productivity-enhancing growth and, therefore, need constant infusions of financially destabilizing debt to keep them going.”

{ 0 comments }

In January 2015, Saudi Arabian company ACWA Power surprised industry analysts when it won a bid to build a 200-megawatt solar power plant in Dubai that will be able to produce electricity for 6 cents per kilowatt-hour.

Why Manufacturers Need to Ditch Purchase Price Variance

That price was less than the cost of electricity from natural gas or coal-fired power plants, a first for a solar installation. Electricity from new natural gas and coal plants would cost an estimated 6.4 cents and 9.6 cents per kWh, respectively, according to the US Energy Information Agency.

Technological advances, including crystalline silicon-solar photovoltaic panels can now convert higher percentages of sunlight into energy and have made solar panels more efficient. As a result, we may be seeing a long-awaited rise in the price of silicon used for the panels, microchips and semiconductors. The week's biggest mover on the weekly Renewables MMI® was the price of silicon, which saw a 7.4% increase.

Last week, manufacturer SolarCity began construction on a $900 million, 1 million-square foot PV panel factory in Buffalo, as well.

The price of silicon rose 7.4% on the renewables MMI last week.

For full access to this MetalMiner membership content:
Log In |

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 }

Zinc producers, along with investors, have been hoping for a supply crunch to materialize after repeated warning of mine closures and predictions of ore shortages, but supply has remained stubbornly robust.

Pool 4 Tool’s Automotive SRM Summit

As recently as October, the International Lead and Zinc Study Group (ILZSG) was predicting a zinc deficit for this year of 366,000 tons, a figure more than halved to 151,000 tons this month, and itself still higher than a recent Reuters poll predicting a 143,000-ton deficit for the year. Overall, about a million tons of supply will eventually be taken out, Robin Bhar of Societe Generale predicts, but one unknown is how much mothballed production could come back onstream.

New Mining Coming Online

At $2,200 per metric ton most miners are operating profitably, a 10% rise (we have seen this much already over the last two months) would probably seal the case for restarts, in addition to several smaller projects already in the pipeline.

Some point to falling London Metal Exchange inventory as a sign of deficit but to what extent this is metal coming off-warrant to be moved into lower rent non-LME storage is not clear. Zinc has suffered from the same distortion as aluminum in recent years, with the stock and finance trade soaking up a percentage of production and inflating the impression of apparent demand.

The current LME forward curve does not support that trade at present, but that doesn’t negate the fact a significant percentage is still locked up in those deals.

For now there is ample ore supply, Reuters reports, as evidenced by treatment charges that have risen to $245 an mt, a 10% gain, from last year. To clear up a misconception, treatment charges rise with supplies as mining groups compete to find smelters to process their material.

Everyone Gets a Surplus

This year, the Chinese domestic zinc market is expected to be in surplus as domestic output and imports rise, while demand for the metal weakens. A slowing manufacturing sector and tightening environmental standards could also trim zinc demand sapping expectations of a rise in demand.

Against such a backdrop the rally in prices seen in recent weeks could be said to be overly bullish, fueled as it is by falling inventory and expectations of a looming supply crunch, the current market realities don’t support a near-term supply shortfall, but markets are said to trade on expectation so maybe investors’ optimism about higher prices is right, just ill-timed.

{ 0 comments }

Today in MetalCrawler, losses widened at a major stainless steel manufacturer, an aluminum giant gets a new CEO and two design and construction software companies team up for better workflows for HVAC designers and installers.

AK Steel Loss Widens

AK Steel Holding Corp. said its first-quarter loss widened from a year earlier on a big write-down related to its investment in iron-ore pellet joint venture Magnetation LLC.

Why Manufacturers Need to Ditch Purchase Price Variance

Average selling prices fell 8.9% from a year earlier, while shipments increased 39%, with a boost from an acquisition and strong demand from the automotive sector.

Ohio-based AK Steel in March predicted that shipments of carbon and stainless steel to the automotive market would remain strong because of market demand. However, the company warned that it expected its shipments to decline 14% from the fourth quarter to roughly 1.7 million tons on weakness in the carbon steel spot market, which AK Steel attributed to rising imports.

Martens Leaves Novelis

Novelis Inc., the US’ largest aluminum recycling and rolling company, has announced the departure of Philip Martens as the company’s president and CEO. Replacing Martens as president on an interim basis is Steve Fisher. Novelis says it has begun a search for a permanent CEO.

Martens, a former Ford Motor Co. executive, joined Novelis in 2009. During his tenure with Novelis the company shifted its focus toward servicing the automobile industry.

Vulcan Works With AECOsim for Ductwork

Geo-positioning and construction software manufacturer Trimble recently started supporting new construction modeling workflows with enhanced integration between Bentley Systems‘ AECOsim Building Designer software and Trimble’s Vulcan sheet metal cutting software for the HVAC market. The new workflow integration enables design models to be shared easily, securely and accurately. The move expands the companies’ ongoing collaboration around “Construction Modeling” and enhanced information mobility.

Vulcan is a sheet metal cutting software product for HVAC contractors, design/build firms and duct manufacturers, who rely on the software to increase shop productivity, plan duct design and installation and reduce waste.

{ 0 comments }

In a surprise move, the Chinese Ministry of Finance announced this week that, effective May 1, they are scrapping export tariffs on alloyed and unalloyed aluminum bars and rods, according to Reuters.

Pool 4 Tool’s Automotive SRM Summit

Along with similar changes to a host of other metals including molybdenum, tungsten and rare earth metals, Beijing has moved to support domestic aluminum producers by opening the flood gates to export markets. This will have the effect of reducing the domestic glut of metal, supporting domestic prices and depressing prices in overseas markets.

China Increases Exports

Even with tariffs in place, China has been rapidly ramping up exports, Reuters said. China’s exports of semi-finished aluminum products rose 49% year-on-year to 1.07 million metric tons in the first quarter, of which 182,257 mt were bars, rods and profiles.

With a domestic primary production capacity of 36 million metric tons and actual production last year of about 27.5 mmt Chinese producers have the ability to easily increase production without creating any shortages in their domestic market. Recent power tariff reductions by the national grid will aid smelters in controlling costs even if prices in export markets fall further.

{ 0 comments }