The demise of the primary aluminum smelting industry in the western world has been like a long, slow train crash. As this graph from CRU shows, the decline has been relentless, and although many reasons are cited for the closures of U.S. and European smelters, power costs and the resulting cost of production are a primary cause.

Source: CRU Group

According to North American trade group the Aluminum Association, since 2015 seven U.S.-based aluminum smelters — more than 60% of U.S. primary aluminium smelting capacity — have been curtailed or closed. Over a similar time frame as the graph shows, Chinese aluminum production has grown from 11% of global primary aluminum in the year 2000 to nearly 55% today.

Two-Month Trial: Metal Buying Outlook

The West has been surprisingly philosophical about the loss of smelting capacity, appearing to take the view that aluminum is such an energy-intensive product that the movement of smelters to low-power cost locations has a logical inevitability about it.

Where is Aluminum Production Going?

That argument holds true for the growth in the Middle East. Production in and around the cradle of civilization has jumped from 0.9 million metric tons in 1999 to an expected 5.7 mmt this year. But it hasn’t until recently had much logic for high-power cost locations like China. Even Beijing would appear to agree that power production and prices are sufficiently precious and high-cost that exporting primary aluminum is not a logical business model even for an export-orientated economy like China’s. Read more

You read right, dear readers – MetalMiner unveiled its forecast of average 2016 prices for aluminum, copper, nickel, lead, zinc, tin and hot-rolled and cold-rolled steel yesterday, and you may be surprised that we’re more bearish than the big banks (the Standards, Macquaries, Goldman Sachses and the like) and their 2016 average price forecasts.

And all of these average price forecasts can be yours…as soon as our Annual Metal Buying Outlook is published and ready for download. (Hint: it could drop as early as the end of this week. We’ll update this post with the link to the report, so bookmark us!)

As far as MetalMiner’s departure from the banks’ forecasts, co-founder and editor-at-large Stuart Burns had this to say recently: “It’s definitely a bullish tone that bank and senior research analysts have taken…in our view, there’s still plenty of excess capacity out there, demand is weak, and the dollar is strengthening,” and those factors, ultimately, may make many of the banks’ forecasts turn from bullish to bearish sooner rather than later.

We’re not the only ones on the block with a bearish outlook – just yesterday, the WTO released updates on its 2015 and 2016 global trade outlook. According to their full release, WTO economists have lowered their forecast for world trade growth in 2015 to 2.8%, from the 3.3% forecast made in April, and reduced their estimate for 2016 to 3.9% from 4.0%.

WTO Trade Forecast Revised Downward

Some main takeaways:

  • The same exact things we at MetalMiner have been hammering home. Falling import demand in China, Brazil and other emerging economies; falling prices for oil and other primary commodities; and significant exchange rate fluctuations drove the revisions downward. (What’d we tell ya?!) Also, the WTO goes so far as saying, “Risks to the forecast are firmly on the downside, the most prominent being a further slowing of economic activity in developing economies and financial instability stemming from eventual interest rate rises in the United States.”
  • China, China, China. Globally and regionally, China’s lower economic growth rates and falling demand have really upset the apple cart. According to the WTO, Asian export and import growth for 2015 has been revised down as slower growth in Chinese imports has reduced intra-regional trade. Also, China’s struggling import demand plays a big role in world merchandise trade volume, which is expected to rise only 2.8% in 2015 – lower than the previous estimate of 3.3%.
  • Trade took H1 2015 hits – just like the overall commodities and metals sectors. As the WTO puts it, “At the time of our last forecast in April 2015, world trade and output appeared to be strengthening based on available data through 2014 Q4. However, results for the first half of 2015 were below expectations as quarterly growth turned negative, averaging ‑0.7% in Q1 and Q2.” Yep, the first half of 2015 was definitely not great for the metals sector, either.

For more on what US and global construction sector indicators can tell us, make sure you check out my colleague Jeff’s rundown today.

Don’t forget, come back for our annual 2016 outlook!

India has lost a case against the US at the World Trade Organization over protection for local crystalline silicon and thin-film solar cells.

Free Sample Report: Our Monthly Metal Buying Outlook

The WTO ruled that India’s domestic content requirements under its new solar power program were inconsistent with international agreements. Indian officials have said they will appeal the ruling to the WTO’s dispute panel in the next two months.

Solar Panel array

Photovoltaic solar array, the kind US manufacturers would love to send to India.

The US alleged that India’s ambitious solar program discriminates against US crystalline silicon photovoltaic and thin-film solar panel manufacturers by requiring Indian producers to use locally manufactured silicon or thin-film cells and by offering subsidies to those developers who use domestic equipment. Read more

Which countries are to blame for the glut of steel and aluminum imports flooding American shores? Sure, the usual suspect – China – looms front and center, but another culprit lurks just in its shadow. (We set the stage in Part One of this article; read here if you missed it.)

The wild card is South Korea, specifically if we look at oil country tubular goods (OCTG) imports. According to the EPI report, Korea’s capacity for producing OCTG – which is entirely for export; they use none of it – increased 21.1% from 2010 and 2012, which enabled 47.4% for export, over 90% of which was US-bound.

FREE Download: The Monthly MMI® Report – covering Steel markets.

As for aluminum, other than the spike in Russian imports, Canada took the biggest piece of the pie (as it has for many years); but the second-largest exporter to the US for the first two months of 2014, according to USGS data: the United Arab Emirates. Since power supply is cheap in the Middle East, primary producers have been ramping up smelter capacity, and of course, there’s nowhere for the excess metal to go – except the US.

What do record steel and aluminum imports have in common? China, Korea, India and other countries’ governments essentially shun economics and unfairly subsidize these industries in myriad ways, creating a huge oversupply bubble.

Price Effect

No need to look further than the tale of two charts:

Read more

The World Trade Organization has ruled against China and its export restrictions on rare minerals, according to the FT, saying Beijing had for years used trade policy to control key markets for strategic commodities and encourage manufacturers to move their operations to China.

Of course, China will appeal, so the status quo will remain for the time being, but speculation is already growing that an increase in exports could depress global prices for rare earths further, possibly making some of the start-ups unviable and certainly deterring new mining ventures currently on the drawing board.

A Reuters article quotes Ryan Castilloux, founding director at Adamas Intelligence in Sudbury, Ontario, saying, “If the recent WTO ruling leads to a softening of China’s rare earth industry policy measures, the nation’s only tangible defense becomes competing head-to-head on price with emerging global producers,” ergo prices will fall.

FREE Download: The Monthly MMI® Report – covering the Rare Earths market.

What’s happening to rare earth prices now?

Read more

us anti dumping duty india steel pipe

Once again, Indian steel manufacturers, especially those into making steel pipes, are in the news vis-a-vis the US Department of Commerce.

A few days ago, the Commerce Department, according to reports, decided to set tariffs on the imports of steel pipes from four nations — India, Vietnam, Oman and the United Arab Emirates.

The step did not come as much of a surprise to Indian steel sector analysts, as many anticipated the move following several complaints by US companies. Those companies had said that imported steel pipes were being sold at below-market rates, leading to unfair practice.

Reports here said a consortium of US pipe manufacturers and steelmakers had claimed that India and the other named countries were dumping steel pipe products in the US markets, and that these products enjoyed government subsidies.

Read more

What happens when the majority of the world’s trade-driving regions encounter economic crises?

Short answer: current and future-forecast global trade grinds to a halt.

Although the grinding and the halting is not as pronounced as it was in the dark days after the 2008 economic crash, the dominoes of economic slowdown are falling one after the other — and the implications for industrial metals markets could be bigger than we’ve experienced in years.

Read more

When I received my daily press alert for goings-on within the World Trade Organization (WTO), I almost chuckled.

Turns out that both the US and China — apparently coincidentally — levied cases against each other before the WTO at virtually the same time.

In the first, the US accused China of unfairly subsidizing its automobile exports, to the tune of $1 billion — that’s right, billion — between 2009 and 2011, according to Keith Bradsher’s article in the New York Times.

In the second, China took the “kitchen sink” approach, turned around and accused the US of unfair countervailing and anti-dumping duties placed on various goods such as “paper, steel, tyres, magnets, chemicals, kitchen appliances, wood flooring, and wind towers,” according to a WTO press release.

The FT reminds us that the Obama administration has filed two other cases against China this year, one on rare earths and another on China’s imposition of countervailing and anti-dumping duties on car exports.

Does this sound like a weird, global-trade see-saw? Well, it is. Here’s what’s interesting this time around, however.

Read more

A bill (HR 4402) that would streamline the process of bringing US mineral reserves to market passed the House of Representatives last week. China’s announced moves to stockpile rare earth metals highlight the need for the US to identify alternative means of sourcing a broad spectrum of metals deemed both critical and strategic to national security — not to mention industry.

But the bill will likely languish in the Senate (Sen. Lisa Murkowski introduced the companion bill) and faces an uncertain future as President Obama has indicated he does not support the legislation for environmental reasons.

Ironically, the president issued Executive Order 13604 back in late March, “which requires a significant reduction in the review and permitting timeframes for infrastructure projects,” but opposes the bill to “include domestic mines that provide strategic and critical minerals within the scope of “infrastructure projects” for the purposes of Executive Order 13604,” according to the NMA.

Read more

As the available market for all kinds of products becomes more global, less confined to the once dominant markets of North America and Europe, and as corporations’ fortunes rest on their ability to compete across those global markets rather than just the US or Europe (historically seen as enough to ensure a prosperous future), are we likely to see producers of all kinds of products lobby not just their own trade offices, but maybe their governments to take cases to the WTO?

Take the wind turbine market as an example. Although the world’s largest manufacturer is Vestas of Denmark, US producers were historically not far behind in their home market, but in recent years the global No. 2 and 3 slots have been taken by Sinovel and Goldwind of China as the top 3 increasingly vie for business in emerging markets.

Growth in what is now an $80 billion global market has shifted to developing markets as subsidies have been pegged back in Europe and the US.

Read more