Industry News

A major customs enforcement bill could be voted on in the U.S. Senate this week and Goldman-Sachs is bearish on metals for 2016.

Customs Bill Senate Vote

American Iron and Steel Institute President and CEO Thomas J. Gibson said the U.S. Senate could vote this week on a long-delayed bill to strengthen customs and intellectual property enforcement, facilitate shipments at U.S. ports and implement a permanent ban on taxing Internet access.

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This echoes a statement from the National Association of Manufacturers on Friday that said it expects the Senate to vote on the customs bill this week as well.

Goldman-Sachs is Bearish on Metals

Goldman Sachs on Monday said metals, particularly copper and aluminum, are set to underperform oil in the near future on subdued global demand growth and a sluggish Chinese economy.

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“Around mid-2016 and through 2017, we expect that the oil market will adjust, while metals markets are set to weaken further, particularly copper and aluminum, resulting in substantial downside to metals prices relative to oil over the period,” the bank said.

Seven EU nations asked the European Commission to intervene to stop cheap imports of steel, particularly from China and Russia and the London Metal Exchange is giving its warehouses the chance to cut rent prices.

Help From Cheap Steel Imports

Seven countries including France, the UK and Germany, in a letter, urged the European Union to step up action to relieve an ailing steel industry suffering from tumbling prices and cheap imports from China and Russia.

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Ministers from the three countries, along with Italy, Poland, Belgium and Luxembourg, sent the joint letter on Friday to the European Commission.

The letter also argued that in order to safeguard the competitiveness of sectors such as steel, the most efficient plants should not be subject to what it called undue carbon costs.

LME Gives Warehouses Option to Cut Rent

The London Metal Exchange is giving its approved warehouses the chance to cut rent and free-on-truck levels for the year starting April 1, after saying last year it would look at capping charges due to plans for large increases.

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Those that want to submit lower rates should do so before February 19 and the LME will publish the revisions by March 1.

Democratic senators want more restrictions on investment banks activities in commodities markets, including industrial metals. Chinese metal traders are thinking of taking an even longer break for the Lunar New Year due to to low prices.

Democrats Push for Commodities Oversight

Democratic senators pressed the Federal Reserve on Wednesday to act more forcefully, and quickly, to limit banks’ involvement in the commodities business.

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For months, Congress has been evaluating complaints that the huge commodities holdings of investment banks such as Goldman Sachs and Morgan Stanley pose a risk to the financial system. Businesses and consumer groups have also expressed concern that the banks’ financial heft gives them an unfair advantage over other competitors as well as the ability to manipulate prices for essentials like energy, cotton and food.

Senator Sherrod Brown (D.-Ohio), who led Wednesday’s hearing on the issue, said he was “incredulous” that the Fed had been examining the matter for six years and had yet to make significant changes.

“The Fed’s proposal yesterday was a timid step,” said Brown. “It was too slow in coming, and there is still too much that we do not know about these activities and investments.”

A Longer Break for Chinese New Year

Chinese metal traders and merchants are likely to take longer than usual Lunar New Year holiday break this year, Reuters reported. They are betting that spot demand for metals such as copper will stay weak at least in coming few weeks, industry sources said.

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Manufacturers and merchants see weak demand weighing on spot prices that are already at multiyear lows, although some futures prices are higher as investors see demand recovering after the holidays. The most-active base metal contracts on the Shanghai Futures Exchange were up 1-7% on Thursday from late January levels.

China vowed to cut its steel production over the next five years and the Trans-Pacific Partnership is now officially signed.

TPP Signed, Legislative Fights Ahead

Trade ministers for the 12 Trans-Pacific Partnership nations formally signed the massive accord on Wednesday in New Zealand and vowed to throw their weight behind surpassing the various legislative hurdles necessary to actually put the deal into place.

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The 12 nations account for some 40% of the world’s economy. They now have two years to ratify or reject the pact.

China Vows to Cut Steel Production

China will cut crude steel capacity by 100 million to 150 million metric tons within the next five years in a bid to tackle a crippling glut that has dragged prices down to multiyear lows and saddled firms with huge debts, the nation’s cabinet said recently.

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The State Council also said it would ban new steel projects and work to eliminate so-called stricken “zombie” mills, which have stopped producing steel but have not formally shut down.

Toyota Motor Corp. said on Saturday it may halt production at its domestic plants early next month due to a steel shortage, following an explosion at a steel plant operated by one of its affiliates.

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The blast at an Aichi Steel plant has curbed production of steel parts, which may impact output at the world’s best-selling automaker which produces around 40% of its global output in Japan.

“At the moment, there is enough supply inventory to keep our domestic plants running until Feb. 6,” a Toyota spokesman told Reuters, adding that overtime and weekend shifts for next week had been canceled.

“After that, we will be monitoring our supply situation on a day-by-day basis and decide accordingly.”
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Aichi Steel said that the Jan. 8 explosion at its Chita plant in central Japan dented production of specialty steel parts. It added that it aimed to resume operations in March.

A major steel merger happened in Japan over the weekend and, despite assurances from Russia’s oil minister, details on a global oil production slowdown are still not forthcoming.

Nippon Steel Acquires Nisshin Steel

Japan’s top steelmaker, Nippon Steel & Sumitomo Metal Corp., unveiled a plan on Monday to take control of fourth-ranked rival Nisshin Steel and trim some of their combined steel output in the face of a global supply glut. A deal would be the latest in a series of consolidations and plant closures as producers ace a slump in prices due to falling demand and competition from export of overproduced Chinese steel.

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Nippon Steel, which already holds 8.3% of Nisshin, said the two firms struck a memorandum of understanding on Monday to turn Nisshin into a subsidiary. Nippon Steel said it is considering extending its stake to 51% to 66%.

No Details on Oil Production Cutbacks

Talk of a deal among major oil exporters to cut production has lifted oil prices back to around $35 a barrel in recent days. Still, it remains far from clear whether a deal between OPEC and non-OPEC producers, mentioned by Russia’s energy minister, is possible.

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With Iran and Iraq determined to boost output, the pressure to cut production has only intensified.

The European Union imposed tariffs as high as 13% on steel reinforcing bar (rebar) from China, the latest in a series of sanctions against Chinese overproduction.

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The duties punish Chinese exporters of high-fatigue performance steel concrete rebar for allegedly selling them in the EU below cost, what’s known as dumping in international law.

rebarforconcretepour_550

Steel reinforcement bar (rebar) being prepared before a concrete foundation pour. Source: Jeff Yoders

The targeted companies include Jiangyin Xicheng Steel Co., Jiangsu Yonggang Group Co. and Zhangjiagang Shatai Steel Co.

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EU-based petitioners including the Celsa and Riva groups suffered “material injury” as a result of dumped imports from China, the European Commission, the 28-nation bloc’s executive arm in Brussels, said today in its Official Journal. The duties, which will take effect on Saturday, are for six months and may be prolonged for up to  five years.

Chinese exporters expanded their share of the EU market for high fatigue performance steel concrete reinforcement bars — also called HFP rebars and known for their resilience — to almost 36% in the 12 months through March 2015 from 7.9% in 2013 and zero in previous years, the commission said today.

The original anti-dumping complaint was made by European steel industry group Eurofer on behalf of producers that account for more than a quarter of the EU’s output of HFP rebars. Chinese shipments of HFP rebars to the EU go to the U.K. and Ireland, Eurofer said at the time.

The provisional duties range from 9.2% to 13%..

The London Metal Exchange‘s “ring” is being moved and steel imports into the US hit 29% of the market in 2015.

LME Moves its Ring

The 139-year-old London Metal Exchange (LME) wrapped up open outcry trading on Wednesday at its red leather couch “ring” before moving the trading floor to a new home, Finsbury Square, in London’s financial district.

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The LME, the world’s biggest market for base metals such as copper and aluminum, is the only financial exchange to maintain open outcry trading in Europe. While the ring is being moved to the new location today and tomorrow, trading will take place at the LME’s disaster recovery site in Chelmsford, east of London.

Steel Imports Into the US Hit 29% in 2015

Based on preliminary Census Bureau data, the American Iron and Steel Institute (AISI) reported  that the US imported a total of 2,323,000 net tons (NT) of steel in December 2015, including 2,017,000 NT of finished steel (down 5.3% and up 3.2%, respectively, vs. November final data). Full Year 2015 total and finished steel imports were 38,718,000 and 31,425,000 NT, respectively, down 13% and 7%, respectively, vs. 2014. Finished steel import market share was an estimated 26% in December and is estimated at 29% for the full year.

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Key finished steel products with a significant import increase in December compared to November were wire rods (up 77%), tin plate (up 71%), cut lengths plates (up 65%), heavy structural shapes (up 46%), hot rolled bars (up 20%) and cold rolled sheets (19%). Major products with significant import increases in 2015 vs. the prior year include reinforcing bar (up 38%) and standard pipe (up 13%).

AISI_steel_imports_2015_550_012816

The rolling average of steel imports into the US in 2015 vs. 2014. Source: AISI

With sanctions lifted Iran is joining the international community and steel supply and production deals are a big part of their entrance.

POSCO Buys Into Iranian Steel Mill

South Korea’s POSCO plans to sign a preliminary agreement with Iranian steelmaker PKP in March to buy a stake in a $1.6 billion steel mill project in the Middle Eastern country, a source with knowledge of the matter told Reuters.

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In September, the firms signed a memorandum of understanding to build the plant with an annual production capacity of 1.6 million metric tons in Iran’s Chabahar free economic zone and Reuters’ source says more business is on the way now that sanctions have been lifted.

Danieli Will Sign Iranian Steel Contracts

Italian steel firm Danieli will sign about $5.7 billion in commercial agreements with Iran during President Hassan Rouhani’s visit to Rome this week, a company spokesman confirmed on Monday.

A government source told Reuters earlier that the contracts were worth about $4 billion, but a company spokesman later said the total value of the agreements was higher and included a joint venture with other international investors, including Iranians.

The joint venture, worth $2 billion, will be called Persian Metallics, the Danieli spokesman said, giving Reuters further details.

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Danieli will directly sign contracts with several Iranian companies for machines and equipment to produce steel and aluminum for a total of $3.7 billion, the company said.

Rouhani arrived in the Italian capital on Monday morning and will leave for Paris today.

Today in MetalCrawler, major oil exporters Saudi Arabia and the Russian Federation talked about possible cuts in production to combat low, low prices caused by a worldwide glut. Final figures for 2015 showed that US construction had a great year.

Russia and Saudi Arabia Talk Oil

Senior OPEC and Russian oil industry officials had vague talks, Reuters reported, about possible joint action to remedy one of the worst supply gluts in decades, while Saudi Arabia signaled its resolve to allow the market to balance itself.

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The latest volley of comments highlighted the intensifying pressure of $30 a barrel oil prices on cash-strapped countries such as Russia, but did not appear to tilt the scales meaningfully towards any concerted action to reverse the price crash from the Saudis and their controlling bloc of votes in OPEC. The Saudis are said to have asked for more “cooperation” on any future production cuts.

US Construction Starts Up in 2015

Dodge Data and Analytics reported that, for the full year of 2015, residential construction was up 14% to $265.4 billion, beating 2014’s increase by 4%, and non-building (mostly civil projects such as utility work) rose an impressive 23% to $176 billion, bouncing back from last year’s 8% decline.

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By contrast, non-residential construction fell 8% to $204.2 billion, giving back some of the 2014 increase of 24% but still 14% higher than 2013.