Articles in Category: Product Developments

One could say it’s slightly ironic that an industry championed in the U.K. as an area of expertise to be taken to the world is in practice dominated here by a Danish company, Dong Energy.

Benchmark Your Current Metal Price by Grade, Shape and Alloy: See How it Stacks Up

The industry is offshore wind turbines — and I make the distinction between onshore and offshore because many countries have been early adopters of wind turbines. The U.S. invested $14.5 billion in wind power project installations in 2015, and China leads the world in onshore wind generating capacity. Offshore, however is only just taking off — no pun intended.

The principal driver in offshore’s growth is cost, according to an article from Wind Energy Update: “Danish company Vattenfall’s record low offshore wind price of 37.2 ore per kWh (49.9 euros/MWh; $53/MWh) for the 600 MW Kriegers Flak project last year showed how falling costs and new tenders are spurring intense price competition in the offshore wind market.”

Cost reductions are being driven in part by the development of ever larger turbines, more practical off shore than on shore, where aesthetic objections are more frequent with giant wind turbines accused of spoiling the landscape. Wind also blows more consistently off shore, increasing the utilisation rate of offshore turbines closer to that of conventional power sources. Read more

This doubtful week, a Stanford economist made the bold proclamation that electric vehicles will completely displace their petrol and diesel counterparts by 2025, and India’s plan to triple steel production by 2030 was met with more than a few raised eyebrows.

Grand Plans

AdobeStock/yuratosno

Speaking of India, its ascent as a promising market for renewable energy has been truly impressive. Consultancy EY recently published its 2017 Renewable Energy Country Attractiveness Index (RECAI), and India took the number two spot, beating out the U.S., which slipped to third place.

India had been number nine in 2013, before Narendra Modi, who views developing renewable energy to wean India off coal as a top priority, became prime minister. Modi aims to boost India’s renewables capacity to 175 GW by 2022 (currently capacity stands at 57 GW).

India has similarly high ambitions for steel, as Sohrab Darabshaw reported earlier this week. The country aims to triple its steel production capacity by 2030, which would mean adding 182 million tons of capacity. Read more

Earlier this decade, there was no lack of hype around electric and hybrid cars. Sales were expected to take off, driving demand for lithium, nickel, cobalt and a host of rare earth elements above supply.

That was, in part, motivation for a rare earths bubble, but demand have remained manageable as high sales of electric vehicles have failed to materialise. In reality, electric and hybrid cars have gained traction only gradually as the range of EVs grew and as hybrids struggled to make dramatic improvements in fuel efficiency resulting from advances in internal combustion, particularly diesel engine technology.

Benchmark Your Current Metal Price by Grade, Shape and Alloy: See How it Stacks Up

Sooner or later, however, a combination of improving technology and pressure from legislation forcing changes in buyer choices should result in electric vehicles merging into the mainstream. A sure sign that the day is drawing nearer would be when established main brands set targets for themselves.

Well, this week Volkswagen did just that. The Financial Times covered an announcement made by Herbert Diess, head of the VW brand (the largest part of the VW Group), that the brand would sell one million electric cars by 2025 and leapfrog Tesla as the world’s premier volume EV manufacturer. As part of VW’s central plan, the FT reports, the firm is going to sell electric cars at the price of today’s diesel models and intends the entire electric fleet to be profitable from day one. Read more

10 years ago, the concept of self-driving cars seemed the stuff of science-fiction. Today, self-driving cars are not an uncommon sight in some cities and the U.K. government has just approved their trial operation between London and Oxford in a bid to bring the technology more rapidly to market.

Benchmark Your Current Metal Price by Grade, Shape and Alloy: See How it Stacks Up

Companies like Google, Uber, Apple and a host of mainstream automotive giants are all investing hundreds of millions of dollars to bring the technology to reality. Over a few brief years, we as the general public have begun to accept the statistics that self-driving cars are dramatically safer than those is piloted by human beings.

Flying car!

Why don’t we have flying cars yet? They’ve been promised by science fiction for decades. Source: Adobestock/Sergeysan.

As a result, acceptance by both the public and the insurance industry is now almost a given for the probable implementation by the end of this decade. But what of flying cars? A concept equally the stuff of science fiction for 70 years or more that now thanks to the dreams and deep pockets of Silicon Valley entrepreneurs may be becoming a reality sooner than we think.

Uber has announced plans to demonstrate flying vehicles by 2020 in Dubai and in the Dallas Fort Worth area, with full scale operations by 2023 the Financial Times reports. Unlike its efforts in self driving cars where Uber has spent hundreds of millions of dollars to develop the technology in-house for flying cars the ride-hailing service is forming partnerships with established aerospace firms like Brazil’s Embraer, Bell Helicopter; Mooney, a Texas-based light aircraft manufacturer and Aurora flight sciences, a Virginia-based drone maker. Like Uber’s taxi service, the firm sees flying taxis as being initially human piloted but later autonomous as the technology and FAA approval permits. Construction of four landing pads will begin in the Dallas Fort Worth area within the next year the FT reports and as part of the Dubai Road and Transportation Network Study into flying cars, Uber expects to have a demonstration service running there to coincide with the World Expo in 2020. Read more

Philadelphia Energy Solutions Inc., the largest refiner on the U.S. East Coast, will not be taking any rail deliveries of North Dakota’s Bakken crude oil in June, a source familiar with delivery schedules told Reuters on Tuesday, a sign that the impending start of the Dakota Access Pipeline is upending trade flows.

Benchmark Your Current Metal Price by Grade, Shape and Alloy: See How it Stacks Up

At its peak, PES would have routinely taken about three miles’ worth of trains filled with Bakken oil each day. But after the $3.8 billion Dakota Access Pipeline begins interstate crude oil delivery on May 14, it will be more lucrative for producers to transport oil to refineries in the U.S. Gulf Coast.

Alcoa Moves Headquarters Back to Pittsburgh

Alcoa Corp. announced today that the company’s expansive Pittsburgh, Pa., office will soon serve as its global headquarters again, a decade after its predecessor, Alcoa Inc., left for New York City.

Two-Month Trial: Metal Buying Outlook

Alcoa said in a statement that its headquarters in New York would be one of seven offices in the U.S., Europe and Asia that would shut in the next 18 months in a cost-cutting initiative. Alcoa had kept its offices in Pittsburgh’s North Shore even after it moved the headquarters to Manhattan, with the bulk of its administrative functions remaining in Pittsburgh. Now, the Pittsburgh presence will once again serve as the company’s international headquarters.

India’s renewable energy sector just got bigger thanks to an investment from U.K.-owned CDC Group  of up to $100 million to support renewable energy projects.

Benchmark Your Current Metal Price by Grade, Shape and Alloy: See How it Stacks Up

The announcement was made by the U.K.’s Secretary of State for Business, Energy and Industry Strategy Greg Clark at the inaugural India-U.K. Energy for Growth Dialogue in New Delhi on April 6. He also met with India’s Minister for Power, New & Renewable Energy, Coal and Mines, Piyush Goyal, to talk about large-scale, private sector investments between the two countries in the area of energy.

The two ministers agreed that on the power and renewables front, the focus will be on the introduction of performance-improving smart technologies, energy efficiency and accelerating the deployment of renewable energy.

For some time now, CDC Group Plc, the U.K. government’s development finance institution, has made its known that it seeks to set up its own renewable energy platform focused on the eastern part of India, and even neighboring countries such as Bangladesh.

The finance institution is contemplating leveraging its experience in running Globeleq Africa, a company in which it acquired a majority stake in 2015, for green energy investments in Asia. Globeleq has a 1,200-megawatt gren power generation capacity spread across Côte d’Ivoire, Cameroon, Kenya, South Africa and Tanzania.

As reported by MetalMiner, India aims to generate over half of its electricity through renewable and nuclear energy by 2027. The world’s largest democracy published a draft 10-year national electricity plan in December, which said it aimed to generate 275 gigawatts of renewable energy, and about 85 gw of other non-fossil fuel power such as nuclear energy, by the next decade. This would make up 57% of the country’s total electricity capacity by 2027, more than meeting its commitment to the Paris Agreement of generating 40% of its power through non-fossil fuel means by 2030.

Two-Month Trial: Metal Buying Outlook

India has been taking massive forward strides in the renewable energy sector. Already, as per one estimate, it is set to overtake Japan as the world’s third-largest solar power market in 2017.  Taiwanese research firm EnergyTrend predicted that the global solar photovoltaic demand was expected to remain stable at 74 gw in 2017, with the Indian market experiencing sustained growth. The country was expected to add 14% to the global solar photovoltaic demand, the equivalent of the addition of 90 gw over the next five years.

Arconic Inc. said today that Klaus Kleinfeld has stepped down as chairman and chief executive officer, leaving the specialty metals company after heavy pressure from activist investor Elliott Management Corp.

Benchmark Your Current Metal Price by Grade, Shape and Alloy: See How it Stacks Up

Kleinfeld’s departure came after he sent an unauthorized letter to Elliott Management that Arconic’s board said showed poor judgement. The internal battle between Kleinfeld and Elliott had been going on ever since the company was created by a split with the commodity aluminum production half of what used to be Alcoa, Inc., that company is now Alcoa, Corp.

Kleinfeld was appointed CEO of Alcoa, Inc. in May 2008 and shepherded the combined company through the commodities down-cycle. Leaving with Arconic was supposed to be a path to consistently higher profits, without the threat of commodity cycles harming the bottom line. But, as we have noted before, Alcoa Corp. has been flying high along with all other commodity aluminum producers ever since while Arconic has not been able to take advantage of the higher price of commodity-grade products.

Pruitt-Led Obama Rewriting Coal Plant Emission Rules

The Trump administration is moving to rewrite Obama-era rules limiting water pollution from coal-fired power plants. Scott Pruitt , the administrator of the Environmental Protection Agency , sent a letter announcing his decision to a coalition of energy companies that lobbied against the 2015 water pollution regulations.

The EPA’s regulations would have required utilities, by next year, to cut the amounts of toxic heavy metals in the wastewater piped from their plants into rivers and lakes often used as sources of drinking water. Arsenic, lead and mercury and other potentially harmful contaminates leach from massive pits of waterlogged ash left behind after burning coal to generate electricity.

Two-Month Trial: Metal Buying Outlook

The Utility Water Act Group petitioned Pruitt last month to reverse course on the regulations, which they claim would result in plant closures and job losses. Pruitt responded Wednesday, saying he would delay compliance with the rule while EPA reconsiders the restrictions. EPA will also request that the U.S. Court of Appeals for the Fifth Circuit freeze ongoing lawsuits filed over the rules by energy companies.

This is the final of a three-part series on MetalMiner Benchmark. Here’s part one and part two if you missed them.

We recently launched MetalMiner Benchmark. Source: MetalMiner.

One question we often field from readers is this one: “how are other companies buying their X and how well are we buying X?” We have previously written that many buying organizations fall into one of several different “buy” scenarios that include the following:

  1. The pure spot buyer (e.g. otherwise known as 3 bids in a box): Here, the buying organization goes out to market with a specific requirement, obtains three bids and typically places the award with the most competitive supplier who can meet delivery and quality requirements.
  2. The contract buyer: Prefers nearly the opposite type arrangement. He or she likes to “lock in” all or close to all known requirements or use some formula based on 80% of last year’s demand. The contract buyer often uses a price contracting mechanism known as an index whereby the price adjusts quarterly or monthly to the index depending on the agreed-upon arrangement.
  3. The hybrid buyer: This buyer is more strategic in that he/she buys both on the spot market and also contracts for forward buys or hedges when prices warrant that action.

Pros and cons exist for each scenario. Often times, the contract buyer in scenario two actually looks more like the spot buyer in scenario one because when a buying organization uses an index like CRU Group‘s, they do, in fact, pay the market price. They don’t actually pay less than the market or avoid a cost run-up if prices rise. In that sense, the scenario two buyer is actually a spot buyer — ultimately paying the market price.

We’d argue there are tools today that allow the buying organization to take their metals purchasing to the next level. Innovative practices such as benchmarking can actually allow the buying organization to reduce its average or budgeted purchase price. Let’s see how.

There are a number of ways to this. We have identified a few below:

  1. By benchmarking your company’s current monthly metal spend, and by doing so regularly, buying organizations can walk into a supplier negotiation armed with current market price data and knowledge of how well the company buys vis-à-vis the market. Access to superior metal price intelligence gives the buying organization a leg up in negotiations and the ability to lower costs.
  2. By pairing the benchmark report with forecasting, buying organizations can better time contract purchases both to avoid significant price increases as well as to “float” when prices are dropping. In this way, the buying organization can apply a more strategic hybrid approach to metals purchasing thereby lowering average costs.
  3. Think of benchmarking as laser surgery. Buying organizations now have the means of pinpointing specific SKU-level opportunity areas while leaving other areas untouched.
  4. Stop wasting time on metal sourcing projects that have little to no ROI. Conversely, identify high-ROI metal sourcing projects. Educate your executive team with where and how the procurement organization plans on creating value within some of the largest metals purchase areas.
  5. Conduct alternative supplier identification on the fly by seeing alternative suppliers within your geography for the form/alloy/grade/size you buy. By conducting these types of analyses quickly and efficiently the long cycle time of implementing savings can be streamlined and shortened.

Try Benchmarking for free with self-service!

Bonus benefit: improve your ISO certification scores by using benchmarking, which enables a fact-based approach to decision-making, a key requirement of certification.

The most innovative metal buying organizations will become the early adopters of this type of benchmarking capability. Just as Progressive Insurance and Kelley Blue Book created market access to greater pricing visibility, metal price transparency appears within reach. This innovation should significantly improve metal buying strategies.

This is the second of a three-part series on MetalMiner Benchmark. Here’s part one if you missed it.

If data is the new natural resource in business, then when examining the landscape of third-party metal price tools, indexes and services, it’s safe to say that most of them fall into one of three categories:

  1. They report out the exchange-traded metal (meaning the metal that is traded on a formal exchange, typically a raw material form of the metal)
  2. Some report alloying elements and minor metals — important for mills and producers but less relevant to OEMs and most metal buying organizations
  3. They report out only a parameter or two such as alloy and form, e.g. cold-rolled coil (and typically a geography) but don’t get more specific than that

Our own MetalMiner IndX(SM), which we are no longer actively marketing, reports out most of the above and in some cases, by multiple geographies. Helpful? Sure, but limited in a number of key respects.

Limitations of Current Metal Price Indexes

Based on our own analysis and analyses conducted by our readers and shared with us, the three primary limitations of current metal price indexes (including our own) are as follows:

  1. They aren’t correlated enough with the metal prices buying organizations actually pay. The London Metal Exchange three-month aluminum price plus the Midwest premium certainly goes a long way in helping buying organizations understand the general aluminum price trend, but that still leaves some portion of the price a company actually pays out of the equation.

For example, the 3003 H14 .020 x 48” x 120” sheet that a company actually buys from a service center includes more than what current indexes supply:

  • LME three-month aluminum price + MW premium + Conversion Premium + margin + delivery to the customer.

CRU Group publishes a weekly CRC, HRC, HDG and Plate price for several geographies in the midwest but that CRC price is still not the same price as the price for 100,000 pounds of 1011 12 gauge x 48” coil.

  1. In some cases, other metal price indexes have the form, alloy and grade-level data (see stainless prices from MetalBulletin). American Metal Market also publishes form/alloy/grade data but it may not include specific sizes, quantity breaks or price differences based on those parameters. In addition, some of these may only be updated monthly.
  1. Current price indexes are all one-sided — They go from the publication out to the reader/user. There is no two-way method of giving your data and getting something back that allows you to compare your purchase price against others in your industry.

Benchmarking is always free with self-service!

Why Form/Alloy/Grade/Size Matter

By providing a means to identify the market price at the granular level of form/alloy/grade/size, buying organizations can now effectively compare the actual industrial prices paid against peers as well as the market as a whole. This capability also allows buying organizations to identify alternative suppliers, pinpoint specific SKUs and areas of opportunity, and strengthen existing supplier relationships.

It’s clear that, indeed, “data is the “new” natural resource in business. In our next post we’ll cover how buying organizations can use these types of resources to lower their average cost.

Click here to see a sample enterprise benchmark report.

If “imitation is the sincerest form of flattery, then perhaps being labeled a “disruptor” and compared to the likes of Amazon by an industry luminary isn’t such a bad thing either. Referring to the recent launch of MetalMiner (SM) Benchmark, Denny Oates, CEO and President of Universal Stainless named MetalMiner as a potential “threat” to the industry [stainless] at the recent Specialty Metals Conference hosted by MSCI in March.  

I guess it all depends on your perspective. When it comes to the inevitable arrival of price transparency in metals markets you can see the proverbial glass as half empty or as half full. We (and a growing number of other industry leaders) view it in a far more positive light. It’s simple really — when it comes to consumer demand for transparency, the choice is  pretty clear — get on the train or get run over by it. As former Chief of Staff of the U. S. Army, General Eric Shinseki, put it less delicately:  “If you don’t like change, you’ll like irrelevance even less.”

It’s natural to view any change to the status quo as potentially threatening but that most basic of human instincts — to fear something new — can often prevent you from seeing the opportunities that change brings. This, the first of a multi-part series on MetalMiner (SM) Benchmark, will attempt to shed light on this crowd-sourced application and show metal buying organizations as well as service centers and producers how this new capability can serve as an enabler creating trust between buyers and sellers, accentuating often overlooked value added capability, quality and on time delivery.  It also reduces uncertainty, speculation, and risk for all parties.

First, let’s set aside emotion and take a look at the facts — what has price transparency really meant in other industries? Let’s begin with the problem because most new solutions and innovations come from addressing an actual problem. In this case, the number one problem we hear from our audience always involves a version of “where can I get the price of (fill in the blank)?” And that “fill in the blank” typically covers aluminum, steel, stainless steel, copper, tinplate and GOES (grain-oriented electrical steel). In our world, if a customer wants something, figuring out how to give it to them is a good thing.

We’d argue that buying organizations constantly want to know:

  • the price of the specific metal they are buying (form/alloy/grade/thickness)
  • the forecast for that specific metal they are buying
  • the historical price for that specific metal they are buying
  • what other people are paying for that specific metal they are buying
  • what the drivers are for the specific metals that they are buying

In that same presentation by Denny Oates, he argues wisely (below) the different strategies industry players, both mills and service centers will have to take in order to succeed.

Benchmarking

The role of the “trusted advisor” appears prescient, except that we’d argue that being transparent with customers on what constitutes a “fair and reasonable market price” is something service centers need to embrace not fear. Trust between supplier and buyer is the currency of business in the new, high information, digital world in which we live. A case in point: An Accenture study of B2B sales suggests that 94% of B2B buyers say they conduct some form of online research before purchasing a business product. For large corporate purchases of more than $5,000, 34% spend over three hours researching products. Metals price benchmarking does not change buyer behavior, it simply makes it easier.  What’s interesting, though, is what happens when sellers embrace transparency and use it to endear customers to them.   Read more