Aluminum

Yes, the aluminum price has fallen back this month.

Yes, it is looking decidedly weak compared to its high point of $2,215 per metric ton earlier this month.

Yes, inventory on the Shanghai Futures Exchange (SHFE) is building rapidly, hitting a record high this week of 666,581 tons, according to Reuters.

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That’s not where we expected aluminum to be back in the summer when the market was talking all about smelter closures in China this winter and supply constraints.

Does that mean the market thinks the constraints are not going to happen? Is this another case of Beijing talking up their policies but failing to enforce them?

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Welcome to the (re)launch of the MetalMiner Podcast!

(We’re calling it a relaunch because, well, remember this?)

With everything that’s been happening on the international trade policy front over the past year, we wanted to give metal buying organizations more insight into the issues they may not be reading or hearing enough about — or at all — in the mainstream B2C media.

What better way to do so than go straight to the source — or sources — and interview some key movers and shakers on the manufacturing and policy fronts? So we’re starting a brand-new series called “Manufacturing Trade Policy Confidential.”

New Series: Manufacturing Trade Policy Confidential

In this first episode of the series, MetalMiner Executive Editor Lisa Reisman interviews Michael Stumo, CEO of the Coalition for a Prosperous America.

Stumo’s concerns, and those of his organization, cut across industry sectors and political leanings. In this conversation, Stumo outlines what he sees as the most crucial elements to consider in today’s trade environment, touching on everything from China to the German Mittelstand to Alexander Hamilton as economic visionary.

Manufacturing Trade Policy Confidential: Background

If you’ve visited MetalMiner’s digital pages over the past several months, you’re no stranger to the phrase “Section 232” — shorthand for the U.S. Department of Commerce investigation into whether certain steel imports constitute a national security risk, under the namesake section of the U.S. Trade Expansion Act of 1962.

The outcome of the investigation (findings from which were slated to come down last summer but have been delayed) could have significant effects on upstream and downstream manufacturing organizations, ranging from metal producers to buying organizations – even the mom-and-pops.

But Section 232 is only one small part. Trade circumvention, China’s non-market economy status, domestic uncertainty amidst proposed tax plans and many other issues have pushed us to start this new podcast series.

We’ll be publishing several more interviews in the coming weeks and months – stay tuned!

Follow the MetalMiner Podcast on SoundCloud.

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This morning in metals news, the CEO of Northam Platinum indicated the platinum price is due for upward movement, raw steel production in the U.S. last week was up significantly and Chinese aluminum production was down during October.

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Platinum on the Rise?

As we’ve noted here in recent weeks, palladium has outdone platinum of late — normally, it’s the other way around.

But according to Northam Platinum CEO Paul Dunne, platinum should be on its way back up.

“We have said for a number of years from various public platforms that you would see a phased recovery with palladium running first, then rhodium, and finally platinum,” Dunne said in a report by Mining MX. “Palladium has been off to the races over the past year and the rhodium price has now started to move in recent months rising around 50%.”

Raw Steel Production Up

According to data from the American Iron and Steel Institute (AISI), U.S. raw steel production was up 9.3% for the week ending Nov. 11 compared with the same week last year.

Domestic raw steel production was 1,739,000 net tons for that week, with a capability utilization rate of 74.6%. 

Production for the week ending Nov. 11 was up 1.4% from the previous week, when production was 1,715,000 net tons and the rate of capability utilization was 73.6 percent.

Chinese Aluminum Production Drops in October

Primary aluminum production in China fell 2.3% in October from the previous month, according to a Reuters report citing government data.

Free Download: The November 2017 MMI Report

According to the report, factors contributing to the drop include high costs and the closure of illegal capacity.

The U.S. Department of Commerce. qingwa/Adobe Stock

This morning in metals news, the U.S. Department of Commerce issued a ruling that has U.S. aluminum interests applauding, the London Metal Exchange might be considering deferring a plan to charge fees on over-the-counter contracts and Kobe Steel pulls its full-year profit forecast as the fallout from its data falsification scandal continues.

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DOC Issues Affirmative Ruling in Aluminum Foil Antidumping Case

On Friday, the DOC announced that it had found exporters of aluminum foil from China sold their product at prices that resulted in preliminary dumping margins of 96.81% to 162.24% to be applied, “based on factual evidence provided by the interested parties using the Department’s standard non-market economy dumping methodology.”

The petitioner is the Aluminum Association Trade Enforcement Working Group.

Not long after the announcement, the Aluminum Association applauded the DOC’s decision.

“Following the positive preliminary countervailing duty determination this summer, the association and its foil-producing members are very pleased with this finding that again underscores the Commerce Department’s commitment to combatting unfair trade,” said Heidi Brock, president and CEO of the Aluminum Association, in a prepared statement.

“We appreciate Secretary Ross’s leadership in enforcing rules-based global trade. U.S. aluminum foil producers are among the most competitive producers in the world, but they cannot compete against products that are sold at unfairly low prices and subsidized by the Government of China.”

According to the DOC release on the announcement, in 2016 imports of aluminum foil from China were valued at an estimated $389 million.

Change of Plans?

According to Reuters, the LME might be having a change of plans vis-a-vis fees on over-the-counter contracts. The LME last month it would institute the new fees in January, but is now considering deferring them.

According to the report, LME CEO Matt Chamberlain said the exchange is trying to balance out the costs of trading on and off exchange.

Kobe Steel Holds Earnings Forecast

On the heels of the Japanese steelmaker’s quality data falsification scandal, the firm has decided to withdraw its full-year profit forecast, according to the BBC and other media reports.

Free Download: The October 2017 MMI Report

Kobe Steel, Japan’s third-largest steelmaker, has seen its shares drop more than 30% as a result of the scandal.

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Iran didn’t need to take a cue from its arch enemy Saudi Arabia’s success with its Alcoa joint venture Ma’aden Aluminium smelter and downstream operations — just about every Middle Eastern natural-gas producer with production to spare has invested in aluminum smelting as an easy win outlet for vast natural gas reserves.

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Exporting natural gas as liquefied natural gas (LNG) is a profitable business, but building the infrastructure is costly. An alternative is building an aluminum smelter, which is also costly but arguably yields a higher value add.

According to AluminiumInsider, the Iranian Mines and Mining Industries Development and Renovation Organization’s (IMIDRO) Amir Sabagh told Platts the firm was in the midst of building a 300,000-metric-ton-per-annum aluminum smelter in the southern coastal province of Bushehr.

Funding is still problematic for Iranian firms, so it is no surprise the Chinese are involved, with China Nonferrous Metal Industry’s Foreign Engineering and Construction Co. largely footing the bill.

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This morning in metals news, the chairman of Chinalco says Chinese aluminum demand growth will stay ahead of the country’s GDP, a hedge fund is suing Barclays for over $850 million related to copper trading losses and a Chinese investor is placing big bets on copper.

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Chinese Aluminum Demand Growth

According to Chinalco, China’s biggest state-run aluminum producer, consumption of the metal will  grow 9-10% this year, Reuters reported.

According to the report, strong downstream demand is a primary factor behind the uptick.

Ge Honglin, chairman of Chinalco, told Reuters that demand growth is expected to rise faster than the country’s GDP in 2018. China is targeting GDP growth of around 6.5 percent this year, but has not yet set a 2018 goal, according to the report.

Red Kite Suing Barclays

A hedge fund is suing for over $850 million related to losses in copper trading, Reuters reported Monday.

The hedge fund, Red Kite, is suing Barclays, alleging that it manipulated the copper market and ultimately resulted in $850 million in losses for the hedge fund.

Futures of Chinese Copper

There has been a sharp rise in Chinese copper futures bets — why?

According to one source quoted by Kitco, a private coal mining industry investor in China, Gelin Dahua Futures Co Ltd, is behind the surge.

Free Download: The October 2017 MMI Report

Gelin Dahua holds more than 35% of the open interest in copper contracts for the first half of 2018 on Shanghai Futures Exchange (SHFE), per exchange data referenced by Kitco.

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This morning in metals news, U.S. raw steel production went up last week, aluminum is heating up as China prepares for winter cuts to excess capacity and Kobe Steel’s data falsification scandal could stretch back a decade.

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Raw Steel Production Up 5.4%

U.S. raw steel production for the week ending Oct. 14 was up 5.4% from the same week in 2016, according to weekly data from the American Iron and Steel Institute (AISI).

Production for the week amounted to 1,744,000 tons, up from 1,655,000 for the same time frame in 2016.

Aluminum Heating Up

It’s been a big year for aluminum — and with Chinese winter cuts to excess capacity on the way, the aluminum price could continue to rise.

According to a Reuters report, China is preparing to reduce its aluminum smelting capacity by one-tenth by the end of the year.

Kobe Steel Scandal Could Go Back More Than 10 Years

The data falsification scandal plaguing Japan’s third-largest steelmaker could go back more than a decade, according to a Bloomberg report.

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According to the report, Kobe Steel will cooperate with the U.S. Department of Justice. A company executive quoted in the report told Bloomberg that data falsification at the firm has likely been happening for over a decade — stretching further than Kobe’s admission of falsification dating back to 2007.

Before we head into the weekend, let’s take a look back at the week that was. 

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  • In case you missed it, our October MMI report is out. Make sure to check out the free PDF download for the rundown on the last month for our 10 MMI sub-indexes: Automotive, Construction, Aluminum, Copper, Renewables, Rare Earths, Raw Steels, Stainless Steels, GOES and Global Precious.
  • Also, our Annual Outlook is out, too. Check it out for a comprehensive look ahead to 2018.
  • Coal India Ltd. is looking to diversify beyond coal, Sohrab Darabshaw wrote earlier this week.
  • Aluminum officials are in “wait-and-see mode” when it comes to the ongoing Section 232 probe vis-a-vis aluminum imports. The investigations into the national security impact of aluminum and steel imports were launched in April and have a January statutory deadline; at that point, Secretary of Commerce Wilbur Ross must present President Donald Trump with a report and recommendations.
  • Glencore bet big on zinc — and won, our Stuart Burns writes.
  • Although oil prices are well below 2014 numbers, supply cuts in some cases have seen the price start to climb. Are more cuts on the way, further constraining global supply and driving up prices? Burns wrote about the subject and what OPEC Secretary General Mohammad Barkindo called a “rebalancing process.”
  • In big news, Kobe Steel is in hot water for a data falsification scandal, one which threatens the firm’s credibility among consumers and manufacturers. The scandal has already had major financial ramifications, as the company’s share price has been in free fall since the news hit.

Free Sample Report: Our Annual Metal Buying Outlook

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Aluminum industry officials restated a long-held stance that in the U.S. Department of Commerce’s Section 232 investigation into aluminum imports, China should be the primary focus of any trade action.

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During a roundtable conference Wednesday, Oct. 4, in Washington D.C., Michelle O’Neill, Alcoa’s senior vice president for global government affairs and sustainability (and newly elected chairwoman of the Aluminum Association); Ganesh Paneer, vice president and general manager of Automotive North America for Novelis; and Garney B. Scott, president and CEO of Scepter, answered questions about the state of the aluminum industry and outstanding trade legislation in the Department of Commerce.

O’Neill said the Aluminum Association will soon release a new statistical review of the aluminum market through 2016.

Citing shipment figures, O’Neill said overall demand is high, with shipments of aluminum from the U.S. and Canada up 40% from the trough of the recession in 2009 and “within striking distance “of record shipment numbers in 2005-2006. In that same vein, Paneer noted aluminum’s growing market share in the automotive market as another indicator of the versatile metal’s strength.

Despite these figures, however, the officials reiterated concerns about leveling the global trade playing field.

Scott, O’Neill’s predecessor as chairman of the Aluminum Association, said one of the Association’s biggest efforts is ensuring U.S. aluminum producers, recyclers and fabricators get to operate in a “predictable regulatory environment” and in a “rules-based global trading system internationally.”

In that vein, Scott referred to the levels of aluminum coming into the U.S.

“We continue to have a serious issue with the aluminum supply coming into the U.S.,” he said. “Last year saw record levels of imported aluminum into North America and more specifically the United States. The 13.1 billion pounds of imports accounted for more than half of U.S. supply.”

Scott further zeroed in on the problem, noting that while imports in general aren’t always a negative, the volume of imports from China continues to be a problem for the U.S. aluminum industry.

“While this industry has many responsible trading partners and does not view all imports as a problem, we do take issue when we see imports surg2ing from a country like China that operates outside the bounds of our global system of rules-based trade,” Scott said.

Imports from China have increased 200% since 2012, Scott said, and in the year to date are up 30%.

“These imports are a direct result of metal overcapacity,” he said.

He added that a negotiated agreement between the U.S. and Chinese governments is needed.

Recently, the Commerce Department opted to defer the issuance of a preliminary antidumping duty determination in its investigation of aluminum foil from China. Underpinning the deferral was a desire to incorporate information regarding the ongoing study of China’s non-market economy status. According to a Commerce Department release, rulings on China’s status and on aluminum foil will come no later than Nov. 30.

As for Section 232 — the administration’s investigation into the national security implications of aluminum (and steel) imports — there hasn’t been much chatter since the early summer, when an announcement appeared to be coming, but the administration’s self-imposed June deadline came and went.

“We’re in wait-and-see mode,” Scott said regarding the Section 232 investigation.

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According to the law, once a Section 232 investigation is launched, the secretary of commerce has 270 days to present findings and recommendations to the president, which makes for January deadlines for both the pending aluminum and steel investigations.

As for the ongoing talks geared toward renegotiating the 23-year-old North American Free Trade Agreement (NAFTA), Scott emphasized the industry’s trade ties with Mexico and Canada, adding that the industry isn’t looking for a “significant amount of changes” with respect to NAFTA.

Trade negotiators from the U.S., Canada and Mexico recently met in Ottawa in late September for a third round of negotiations focusing on NAFTA.

This morning in metals news, the Environmental Protection Agency (EPA) announced it will take steps to repeal the Obama-era Clean Power Plan, copper hit a four-week high and two Russian tycoons are selling a 3% stake in aluminum giant Rusal.

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Obama Initiative to Curb Emissions to be Rolled Back: EPA

The EPA announced Monday that it would begin to take steps to roll back the Obama-era Clean Power Plan, which sought to bring down emissions from power plants, The New York Times reported.

While constituting a loss for the environment, the measure marks a win for industry. (For a review of the costs associated with the plan, our Taras Berezowsky delved into the issue in this 2015 post.)

Scott Pruitt, head of the EPA, made the announcement in Kentucky yesterday.

“The war on coal is over,” Pruitt said, as quoted by The New York Times. “Tomorrow in Washington, D.C., I will be signing a proposed rule to roll back the Clean Power Plan. No better place to make that announcement than Hazard, Ky.”

The repeal proposal will be filed with the Federal Register today. The EPA announced its launch of a review of the plan on April 4.

Copper Bounces Back

After a cooling down in September, copper has hit a four-week high, Reuters reported.

The uptick comes as a function of expected supply shortages in China, according to the report.

Rusal Stake to Be Sold Off

Russian tycoons Mikhail Prokhorov (who also owns the NBA’s Brooklyn Nets) and Viktor Vekselberg are selling a 3% stake in aluminum giant Rusal, Reuters reported.

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The value of the 3% stake is worth $341 million based on Rusal’s closing price Tuesday, Reuters reported.