Articles in Category: Product Developments

Alcoa, Inc. revealed a new name, Arconic, for its value-added business unit in a recent regulatory filing and Iranian oil exports are decreasing but still adding more supply to global markets.

Alcoa Reveals Spinoff Details, Names Value-Added Business ‘Arconic’

Alcoa, Inc. said on Wednesday it will spin off its traditional aluminum smelting business as part of its planned company split and the renamed company will serve the aerospace and transportation industries.

Free Download: The June 2016 MMI Report

The company to be spun off will be named Alcoa, Corp. The value-added business unit will take on the name Arconic, Inc., according to a recent regulatory filing. It will make engineered products for growth markets such as automotive and aerospace. Alcoa revealed its plans in a regulatory filing.

Iranian Oil Exports Fall From June High, Still Adding Supply to Markets

Iran’s oil exports in July will fall June levels as the country battles Saudi Arabia and Iraq for market share, but the Islamic Republic’s output is still about 70% higher than a year ago, a source with knowledge of the country’s crude oil lifting plans told Reuters Africa.

Two-Month Trial: Metal Buying Outlook

Exports will be about 2.14 million barrels per day in July, down from about 2.31 million bpd in June, but still the highest since January 2012, the source said.

They say there is nothing like competition to spur innovation and improve efficiency but the same could be said of adversity. Volkswagen is a case in point.

Two-Month Trial: Metal Buying Outlook

After the biggest corporate scandal of the decade, VW finds itself in an invidious position. Last year it posted a $1.82 billion (€1.6 billion) net loss, its worst ever result in 78 years, as it recorded $18.3 billion (€16.2 billion) of charges to cover the cost of fixing diesel cars caught up in the emissions reporting affair.

Share Prices Down

Sales held up remarkably well when you consider the betrayal of trust the firm’s actions invited, but the share price remains 28% below its pre-scandal level after recovering from an initial 40% fall. Nevertheless, VW’s share of its home European market have fallen to a 10-year low and although sales rose slightly in May they rose more slowly than the 10 other top-selling marques across Europe according to an Financial Times article. From 12.9% market share in 2013, VW has fallen to 11.1% in May and spurred the board into action.

2013vwbeetletdi_565

Can VW turn its fortunes around? Perhaps with Electric Beetles? Source: VW

VW has announced a number of targets. First, an ambitious move into electric vehicles, saying the company will introduce 30 electric models by 2025 with annual sales of between 2 and 3 million units. To achieve this, VW is opening up the doors for collaboration with external parties, planning to spend $11.2 billion (€10 billion) on new technologies, acquisitions and venture capital investments. Read more

Stockpiling of rare earths by China’s six largest producers has pushed up prices over the past two months.

Two-Month Trial: Metal Buying Outlook

Following the completion of the first stage of a national inventory-filling effort in mid-April, China’s rare earths prices have seen increases almost across the board. This stockpiling comes as China prepares to finalize consolidation of its industry under six large state-owned firms — Chinalco, Northern Rare Earth, Xiamen Tungsten, China Minmetals, Southern Rare Earth and Guangdong Rare Earth — by the end of this month.

Rare-Earths_Chart_June-2016_FNL

It’s a time of both stockpiling and tightening in the People’s Republic, the world’s largest producer, as a nation, of the metals used in batteries, magnets and high-tech is trying to reform both how it mines and how it sells rare earths. As we previously reported, much of the expected consolidation in China was slowed in the first two quarters by the weak market and stimulus measures that gave producers new reasons to overproduce. Now, the Chinese industry is scrambling to consolidate and force the closure of smaller producers.

Tax Reform in China

After July 1, China will expand its reform of resource taxes across the board and base this tax on prices instead of quantity. Authorities believe that a price-based tax would reduce tax burdens on unprofitable resource sectors (such as rare earths) and boost taxes on the more profitable sectors. The expectation is that taxes will then follow the resource-cycle.

Our Rare Earths MMI was up 11% this month, but it was only a 2 point increase, belying how low the level that rare earths have traded in for the last year really is. The price boost can be attributed, almost entirely, to the aforementioned stockpiling.

China’s second quarter commercial stockpiling supposedly ended on May 31. The initiative helped boost prices, but that’s really just a temporary market effect ahead of the expected consolidation. In the long term, the market is still oversupplied and forcing out smaller producers in China really won’t have much of a practical effect.

Compare Prices With The May 2016 MMI Report

Companies such as Mitsubishi are also touting new methods they are researching for rare earth magnet and battery recycling, processes that would be a further threat to primary mining. We advise buyers to approach rare earths with caution as this is one market whose supply still exceeds considerable demand.

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

U.S. Automotive sales for May came in at 17.45 million. Down from April but also down from 17.8 million a year earlier. In May 2015, vehicle sales were a record 17.47 million vehicles, according to Autodata Corp. There were two fewer sales days this year vs May 2015. Having one less weekend was also a factor in the drop.

Two-Month Trial: Metal Buying Outlook

Some analysts are taking the drop as a sign that the historically strong growth that automotive sales have enjoyed since the end of the recession is over. For the full year, auto sales are still historically strong but General Motors, Ford Motor Co. and Toyota reported sales that fell more than analysts had estimated, while Nissan matched predictions with a 1%. Fiat Chrysler Automobiles surprised forecasters with a small gain by making more sales to fleet customers.

End of Automotive Growth?

If the strong period of automotive sales is truly over, then that would have a huge impact on steelmakers, aluminum smelters and other metal producers who have relied on the automotive market to provide both strong sales and a home for higher-priced, value-added products since 2011. Auto sales leveling off could also factor into whether the Federal Reserve raises interest rates this summer, or even if the Fed considers two rate hikes in the next three months.

Automotive_Chart_June-2016_FNL

If the U.S. dollar strengthens and the unemployment rate continues to fall the Fed would be hard-pressed to forego rate hikes even if automotive sales level off. Bolstering the case that this is merely a sales blip thanks to two important lost days, our Automotive MMI still held its value, 76, from May and automotive metals such as hot-dipped galvanized still posted strong price increases over the last month.

Automotive Metals Demand

Demand for specialty automotive metals continues to outpace base metals and provide a boost to the bottom lines of the steelmakers that produce them. So much so that U.S. Steel and the International Trade Commission brought a convincing case, this month, that Chinese hackers stole the formula and production setup of high-strength automotive alloy dual-phase 980 to give to Chinese steelmakers such as Baosteel that are now offering the product.

Compare Prices With The May 2016 MMI Report

If U.S. consumer demand really is leveling off, we have not seen it in sales of automotive metals.

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

No term has brought up more discussion in the pages of MetalMiner than Ford Motor Company‘s insistence that the F-150 pickup truck is made of “military grade” aluminum.

Free Download: The May 2016 MMI Report

On this Memorial Day, we thought we’d revisit whether military grade was actually a specification or a simple marketing ploy on Ford’s part. Since the aluminum-bodied F-150 was introduced in the 2015 model year, more information about its actual construction has been shared by Ford.

Individual dealers are now touting the strength and research that went into the cab and other body parts of the F-150. “Military grade” is still sprinkled throughout the the video, but they also concede the alloy is also part magnesium and silicon. Ford also mentions that a large portion of the F-150 is, in fact, high-strength steel.

Ford has also admitted that the F-150 is primarily built from 6,000 series aluminum alloy, the strength of which is increased by heat-treating after it is formed.

The “military grade” refers to the specs that military applications of 6,000 series alloy is used in. In fairness to Ford, manufacturers and fabricators have been promoting their products as “military grade” for decades, and that’s really no different than Ford’s use of the term.

Two-Month Trial: Metal Buying Outlook

We certainly wouldn’t recommend that anyone take an aluminum-bodied F-150 into a war zone to test just how “military grade” it really is, but, from a specification standpoint, Ford seems to have good reason to be proud of the rigor of the processes it uses to produce the F-150.

As we recently reported, the West’s energy watchdog, the International Energy Agency, faces a possible legal split from its parent body, the Organization for Economic Cooperation and Development, following decades of friction and fresh disagreements over cooperation with China.

Two-Month Trial: Metal Buying Outlook

A document seen by Reuters shows that the complexity of cooperation between China and Western organizations such as the OECD, which has a stated commitment to democracy and market economies, has created friction between the two organizations.

The IEA, whose role includes coordinated stocks releases to address global oil shortfalls, could leave the Paris-based OECD, which sent a letter to the IEA in April, proposing the split. The argument has everything to do with China and the difference between market economies and China’s planned one.

“The IEA started negotiating with China in 2016 to establish an IEA center in Beijing, without prior consultation with the OECD which, as the IEA was aware, was itself negotiating with China to create a policy center and a country office,” the document said.

Created in 1961 to stimulate economic progress and world trade, the OECD originated from the Organization for European Economic Co-operation, set up in 1948 to help administer the Marshall Plan to reconstruct Europe with U.S. financial aid.

The IEA was established in 1974 at the proposal of then U.S. Secretary of State Henry Kissinger to help industrialized nations deal with the oil crisis after the Arab embargo squeezed supplies and sent prices surging.

Since then, energy markets have changed radically. OPEC no longer has the same power and non-IEA China has overtaken the U.S. as the biggest energy user. The fight between the two organizations highlights the difficulty regulators face in attempting to work with China and account for its energy consumption using rules and regulations that were largely designed for market-based economies.

IEA Executive Director Fatih Birol made strengthening ties with emerging powers the agency’s top priority, choosing China for his first trip into the job and breaking with the practice of previous chiefs, who began their tenure by visiting an IEA country.

The OECD groups 34 of the world’s leading economies and has about 2,500 staff. The IEA has 240 employees and 29 member states, all of which are also OECD members.

Under its autonomous status, the IEA’s governing board consists of energy ministers of member countries, which contribute four fifths of its budget of around $30.74 million (27 million euros) with the rest generated from sales of publications.

Free Download: The May 2016 MMI Report

Even if OECD and IEA are able to work out their differences and continue to work together, the problem of trying to recognize China’s massive buying power while also regulating it the way that a market economy would be is one that won’t go away any time soon.

The CME Group is taking actions to more directly compete with the London Metal Exchange and China’s Ministry of Commerce has responded to tough U.S. tariffs and anti-dumping duties.

CME Group Will Take on the LME

The CME Group is talking to several warehouse companies to expand its metal storage network globally, three metal industry sources exclusively told Reuters, a move that could further challenge the London Metal Exchange‘s (LME) dominance.

Two-Month Trial: Metal Buying Outlook

In recent years the CME, the world’s largest futures market operator, has been steadily building its storage network , partly as a result of controversy surrounding the LME warehouse system.

Chinese Ministry of Commerce Slams U.S. Steel Tariffs

U.S. efforts to protect its steel industry will not solve the sector’s fundamental problems, which stem from “past protectionist measures,” China’s Ministry of Commerce said on Saturday.

Free Download: The May 2016 MMI Report

The comments were posted on the ministry’s website following a decision on Friday by the U.S. International Trade Commission to continue probing imports of certain steel products from 12 countries, including China and Korea.

My colleagues over on Spend Matters recently penned a pair of articles on 5 Critical Supply Risk Mitigation Principles And Practices for Your Supply Chain Sourcing Process and How to Make Category Management Do Supply Chain Risk Management.

Two-Month Trial: Metal Buying Outlook

Given today’s metals markets, we thought we’d “make it real” by providing some examples and specific strategies and tactics buying organizations may wish to consider in this quickly evolving commodities market.

Supply_risk_chart

Source: Hackett Group Key Issues Study: 2016.

By way of background, we refer to the Krajlic Matrix which plots categories against supply impact and supply complexity. So let’s take a look at a couple of metals — specifically stainless steel and steel. Read more

The Silver Institute released its “World Silver Survey 2016” Thursday, reporting both tightening supply and increaing demand for the precious/industrial metal.

Two-Month Trial: Metal Buying Outlook

According to the report, the silver market saw record demand in 2015, with the jewelry, coin and bar, and photovoltaic sectors posting new highs, helping to boost total silver demand to 1.17 billion ounces last year. Overall silver supply to the market was lower, led by the continued weakness in silver scrap sales. Last year’s supply and demand scenario led to the third successive annual silver market deficit, reaching 129.8 million ounces, more than 60% larger than 2014 and the third largest deficit on record.

You can install PV panels on our roof, collect a tax credit and bring down your own electricity bill. A wind turbine? Not so much. Source: Adobe Stock/rob245.

More silver panels this year, but less silver per panel. Source: Adobe Stock/rob245.

“We expect the silver price to average $15.90 this year and that’s going to be defined by an overall upward trend,” said Erica Rannestad, precious metals demand senior analyst for Thomson Reuters GFMS, who contributed to the report. “We’ve seen prices reach highs last week and we expect that trajectory to continue through the 4th quarter of this year.”

Rannestad said in an interview that the bargain buying of the last two to five years, in the silver market, has largely given-way to more sophisticated investing as a weak dollar has heightened the white metal’s demand. Read more

resilinc-webinar-adJoin our sister site, Spend Matters, for a deep dive into global supply chain risk: How to uncover, assess, manage, and mitigate it now that IBM’s Business Value Institute has recognized risk as one of six mega trends that have an impact on shaping the global economy today and moving forward. Are You Acting or Reacting? Lessons in Global Supply Chain Risk from IBM will take place Wednesday, May 4 at 10 a.m. CDT.

Lou Ferretti, project executive, product environmental compliance and supply chain social responsibility at IBM will cover:

  • Resiliency and responsiveness as a key differentiator to successfully navigate a sea of uncertainty
  • The need to address risks that result from expanding from local to global sources of supply
  • How best to mitigate the cumulative risk that comes from complex supply chains
  • The need to view risk management through a holistic lens, including harnessing the power of data/analytics

Sign up today!