The US steel industry is suffering because a barrage of imports has reached a record 34% of market share, steel executives said today at the American Iron and Steel Institute‘s press briefing in Chicago.

steelexecs

From right: Roger Newport, AK Steel: Regulo Salinas, Ternium Mexico; Jim Baske, ArcelorMIttal NA Flat-rolled; John Ferriola, Nucor Corp.; Chuck Schmitt, SSAB Americas and Thomas J. Gibson, AISI. Photo: Jeff Yoders.

Nucor Corp. CEO John Ferriola said 4 million people whose livelihoods depend on the steel industry are at risk, but also that enforcing existing trade and anti-dumping laws consistently would make a wealth of difference for today’s producers.

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“The first step is enforcing existing law as written,” he said. “Legally and consistently enforcing the laws on the books would help immensely… The American worker is still the most efficient worker in the world. We have relatively inexpensive energy, we have the raw material available, we have the best market in the world. When you look at those natural advantages, it makes no sense we should be operating at 60-70% capacity while the rest of the world is overproducing.”

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Outlays for US construction projects fell 0.6% in March to a seasonally adjusted annual rate of $967 billion, the US Commerce Department said last week. Commerce also revised February’s result to show almost no change.

Why Manufacturers Need to Ditch Purchase Price Variance

Despite the lower spending, the monthly Construction MMI® registered a value of 74 in May, on par with April’s value. Flat is, apparently, the new up until construction starts and spending pick up some steam. The low prices have not yet incentivized developers enough, it would seem, to sign off on new projects or increase purchasing for anything but stockpiling, as credit is still hard to obtain and consumer demand for commercial and residential space remain tepid.

Construction_Chart_May-2015_FNLThe energy sector, which accounted for much of last year’s construction gains, is still shrinking due to low oil prices which are causing projects to get canceled because oil has become too cheap to go to the expense of pulling it out of the ground and then turn a profit.

Energy Loans Called In

In fact, banks in the US are cutting credit lines to energy companies and forcing the firms to cough up more collateral to guard against fallout from the fall in oil prices.

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The US International Trade Commission upheld tariffs against both rebar and, more recently, oil country tubular goods (OCTG) from China, but the flood of imports has already done its damage when it comes to both traditional construction and the steel pipes used for oil and gas drilling. Supply is high and demand is simply not high enough to push prices upward.

It’s a testament to the resilience of the US construction market that our MMI was even able to hold steady this month. For complete prices, read the complete story – log in or sign up for MetalMiner membership!

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Monthly Aluminum Price Index Rises as China Ends Export Taxes

by Raul de Frutos May 5, 2015 Metal Prices

MetalMiner's aluminum price index, the monthly Aluminum MMI®, registered a value of 90 in May, a significant increase of 2.3% from 88 in April.

Aluminum_Chart_May-2015_FNL

Aluminum on the London Metal Exchange is back above $1,900 per metric ton, breaking short-term resistance to hit a four-month high.

China Ends Export Taxes

China erasing aluminum export taxes didn't seem to weigh down on prices; however, aluminum premiums took a beating when the news of China’s removal of export taxes came.

As my colleague Stuart Burns wrote in a recent article, the tax removal should reduce the domestic surplus of metal, supporting domestic prices and depressing prices in overseas markets. With current primary production counting for about 75% of total primary capacity, Chinese producers will have the ability to increase production without creating any shortages in China's domestic market.

Even outside China, production has been ramping up over the past six months. UC Rusal and Alcoa, Inc. have responded by closing older and less-efficient capacity, but even so, both they and other primary producers are investing in new capacity at the same time. Demand for aluminum remains robust, but the excess of supply is something that is clearly bugging aluminum producers.

Certainly, the supply outlook doesn't explain the recent price increase. However, the recent weakness in the dollar does. The dollar index is experiencing some turbulence for the first time in more than 9 months and that supported aluminum and most industrial metal prices in April.

Battery Research Continues

In other aluminum news this month we also had Stanford University  building an aluminum-ion battery prototype that offers various improvements over lithium-ion batteries. These aluminum-ion batteries will potentially make consumer electronics safer, charge faster and allow thinner or even flexible-form factors.

Get all of this month's exact prices in the full article.

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Never Mind Peak Oil, What About Uneconomic Oil?

by Stuart Burns May 5, 2015 Commodities
Never Mind Peak Oil, What About Uneconomic Oil?

There has been a lot of attention recently to the longer term viability of global fossil fuel reserves. Due to the fall in oil, natural gas and coal prices, the FT reports this week that all the oil majors have slipped into loss as a result of of the low oil and natural gas prices.

Why Manufacturers Need to Ditch Purchase Price Variance

That’s not the reason for the viability questions, though, that attention is due more as a result of future climate change legislation raising the cost of carbon-based fuels. Another article leads with comments made by Glencore Plc’s chief executive, Ivan Glasenberg, in the company’s recent sustainability report.

Glencore’s Bullish

Reacting to investor concerns (not just at Glencore but at all energy companies) he is quoted as saying “Although climate change issues are part of the political, societal and regulatory landscape, we do not believe that the global energy reality will economically support carbon measures that would prevent us from fully utilizing our fossil fuel reserves.”

In essence, what he is saying is a middle way will have to be found between reducing CO2 release and continuing to provide energy at an economically viable cost. Some investors have taken what they see as a moral stand such as the Church of England who have sold their investments in coal mines.

Others, like the heirs to the Rockefeller family and Stanford University are getting out more on economic grounds fearing assets will be “unburnable” if the world is to keep the rise in global warming below 2%. Some scientists have estimated that 80% of the world’s coal will never be mined if this objective is to be met, although it has to be said this does not account for the possibility that technology will ride to our rescue.

Humans do have a habit of coming up with technological developments to overcome challenges. Economically viable carbon sequestration for example could make coal viable even in a world demanding near-zero release of CO2 into the atmosphere. As the article points out, many energy companies appear to cling to the belief their assets will be in the economically recoverable 20% rather than the unrecoverable 80% – which clearly they cant all be.

Although Glencore has major exposure to the sector – they are the world’s largest seaborne coal shipper – they can viably argue theirs are among the lowest-cost and they are more likely than most to be the last coal man standing, and still turning a profit come what may.

Paris Match

Much will hinge on the outcome of this December’s climate change conference taking place in Paris, it is hoped the UNFCCC will achieve consensus among polluters on binding targets. Optimistically, by the end of the meeting, it is intended that all the nations of the world, including the biggest emitters of greenhouse gases, will be bound by a universal agreement on climate.

The chances of success in this respect were increased late last year when China and the USA reached a breakthrough agreement to reduce CO2 emissions. Notably the USA committed to cut carbon emissions 26% and 28% on 2005 levels by 2025 – a marked acceleration of its existing goal to reduce emissions by 17%.

China said it “intends” to start cutting carbon emissions in 2030 and make “best efforts” to peak emissions before 2030. It also agreed to increase the share of non-fossil fuels energy consumption to around 20% by 2030, a target it is already on its way to achieving as the world’s biggest investor in renewable energy.

As the world’s two biggest polluters, it was crucial that these two countries should be on board if the conference in Paris was to have any chance of success. It now looks more likely that binding targets will be agreed and as a consequence policy changes will develop over the next few years that could raise the cost of carbon and make existing fuels less viable.

Whether you agree with the climate change argument or not is irrelevant, the impact on you, your business and society will happen regardless. Fossil fuel resource companies are therefore looking at their position on the cost curve and, regardless of what is being said in public, you can bet it takes up board time.

Which almost as a postscript raises a question: if governments are serious about limiting a rise in global warming by reducing carbon dioxide emissions, surely they would be advised to spend some of the billions they will be raising in carbon taxes and fuel taxes on research into carbon sequestration. If we could economically use that 80%, which some are suggesting may never be burnable, it would keep the lights on for billions in the developed and developing world alike without costing us the planet.

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Increased Stainless Steel Demand May Not Be Enough to Clear Inventory Surplus

by Katie Benchina Olsen May 4, 2015 Automotive

Although stainless steel demand is expected to grow moderately this year, service centers are flush with inventory which is putting pressure on US mills.

Why Manufacturers Need to Ditch Purchase Price Variance

Combined with successive months of declines in nickel prices, service centers are only purchasing what is absolutely necessary. Both domestic mills and Asian mills have robust North American inventories, a stark contrast from a year ago when lead times went beyond the standard 6-8 weeks, causing service centers to seek alternative sources.

Technical Issues Hurting Mills

Another exacerbating factor in last year’s supply was Outokumpu’s technical issues with its cold-rolling mills and a lack of alternative domestic supply led service centers to seek other sources. With lead times extended, the domestic mills were able to pass through several base price increases in 2014.

With higher US base prices and the strength of the US dollar, Asian imports did not subside. Asian producers need other markets for their surplus material as Chinese demand is weak and both Europe and India have taken anti-dumping actions against China.

End market demand is strong for automotive,​ residential​ appliance and food service/food processing equipment. The only market that appears to be suffering is energy which is due to the low price of oil. Stainless demand is decent according to many sources and stainless base prices will remain under pressure.

Inventory Backlog

The North American market​ ​is ​saturated with inventory​ ​so​ lowering the base price will not spur on demand. Until service centers reduce their inventory backlogs and nickel prices start to improve, service centers will not buy, regardless of price. Service centers need to focus on getting their inventories in check before they resume anything resembling regular buying patterns. ​​Unfortunately, the mills are under pressure to book capacity which oftentimes leads to acts of desperation.

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How US Manufacturers Should Tackle Upcoming EPA Clean Power Plan Rule

by Kyle Fitzsimmons May 4, 2015 Environment

The new Clean Power Plan from the Environmental Protection Agency (EPA), set to be finalized in mid-summer 2015, has a lot of US manufacturers worried about whether their bottom lines will be affected. On a global scale, US companies are concerned about how increased compliance and other costs initiated by the EPA Clean Power Plan will hinder […]

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Exponential Technologies: Artificial Intelligence, Real Performance

by Raul de Frutos May 4, 2015 Logistics

This is a fourth post on a series of posts on exponential technologies (see part 1, part 2 and part 3).

Why Manufacturers Need to Ditch Purchase Price Variance

Yesterday, I realized I was running out of underwear, which means that I didn’t have any more excuses to not do my laundry. As I was walking down the street, I pulled out my phone and without clicking any button I said: “Ok Google, remind me to do laundry when I get home.”

Despite my strong Spanish accent, the phone perfectly understood what I meant to say. Four hours later, as soon as I opened the door to my apartment I felt a vibration in my pants. My phone knows where I live and it used its GPS to figure out that I had just arrived home. I looked at the screen, and saw the reminder. A couple of hours later… I had a new set of clean underwear. Thank you, Google!

This is not just an example of low-level artificial intelligence, but also a sign that AI is reaching the knee of the exponential growth curve, getting ready to run wild as a disruptive technology. AI is an exponential technology about to be found everywhere in our daily lives and jobs.

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UC Rusal: Whistling in the Falling Aluminum Price’s Wind

by Stuart Burns May 4, 2015 Global Trade
UC Rusal: Whistling in the Falling Aluminum Price’s Wind

Several news articles this week have led with comments made by UC Rusal executives regarding the price of aluminum. The FT led with Rusal battles with LME on aluminum price and Reuters added Rusal plays down concerns of Chinese aluminum flooding market.

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All of which says to me, Rusal is worried sick that a combination of falling physical delivery premiums and rising Chinese product exports are going to depress aluminum prices this year and into the medium term. The fact is, there is no shortage of aluminum and, although demand continues to grow robustly, supply is growing faster.

Primary Producers Opening New Capacity

Mills such as Rusal’s and Alcoa, Inc.‘s have manfully responded by closing older, less-efficient, higher-cost capacity but even so both they, and other primary producers, are investing in new capacity at the same time. Production outside of China has been creeping higher over the last five months.

Reuters’ Andy Home tells us it’s creeping up to the tune of an annualized 650,000 metric tons. Part of this is older European plants being purchased and restarted by smaller players. Part is new capacity such as Alcoa’s Ma’aden joint venture plant in Saudi Arabia. Likewise, while Rusal has closed older, higher-cost plants it is now talking about a ramp up of it’s 600,000-mt per year Boguchansk plant in Siberia, although, admittedly, only the first 150,000 mt phase for next year.

Semi-Finished, Completely Sold and Shipped

Meanwhile, China exported 1.07 million mt of mostly semi-finished products in the first quarter of this year, representing a year-on-year increase of 353,000 mt. Although December’s almost 500,000 mt was an outlier, the removal of a 13% export tax on May 1st and the consideration of further tariff reductions signals that Beijing has no intention of reining in this overcapacity, but rather is setting course to support domestic producers as domestic demand slows.

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BP Refinery Strike Close to an End as a Lockout Looms at Century Aluminum

by Jeff Yoders May 4, 2015 Commodities
BP Refinery Strike Close to an End as a Lockout Looms at Century Aluminum

MetalCrawler is covering the labor issues beat today and they might affect your metal purchases.

Century Hints at Lockout

Century Aluminum will invoke a lockout of unionized workers at its Hawesville, Ky., smelter starting on May 11 if the union does not approve a final offer on a labor deal, according to a letter posted on Century’s website on Friday.

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United Steelworkers Local 9423 is set to vote on the proposed contract today, according to a post on the union website. If workers go on strike, it would be the first industrial action at a US aluminum smelter in more than a decade.

Train Drivers Strike in Germany

A seven-day strike by German train drivers could cost the German economy €500 million ($556.70 million), Germany’s DIHK Chambers of Commerce said on Monday.

The strike, the eighth in a dispute between the GDL train drivers union and state-owned Deutsche Bahn over work conditions, began today for freight trains and will be extended to passenger trains from Tuesday.

BP Refinery Strike Could Soon End

Workers and management at BP have reached a tentative agreement that would end a months-long strike at the multinational’s refinery in Whiting, Ind.

The United Steel Workers employees must still ratify the contract, and officials expect a vote to occur in the next few days.

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Week-in-Review: The Lighter Side of Dumping and Debt-Fueled, Slow Growth

by Jeff Yoders May 1, 2015 Anti-Dumping

This week, our metals markets fell lower as they were buffeted by seemingly ever-increasing exports of steel, aluminum and other products from China.

Why Manufacturers Need to Ditch Purchase Price Variance

Even though China’s economic growth has been falling, its government still gives producers strong incentives to produce steel and aluminum that eventually ends up exported elsewhere. My colleague Stuart Burns rightfully points out that if Chinese mills are “supported by plunging raw material costs and extensive local state support, gifting them a break-even price around the lowest in the world, then the intent to simply ‘dump’ metal into export markets has few barriers.”

Can Debt Fuel Long-Term Growth?

But what’s the eventual result of state support? In China or anywhere else? Can government debt actually lift these economies back into growth mode? Stuart was there again, with an assist from the Daily Telegraph, postulating that sluggish growth and low inflation is the new normal and “advanced economies — and perhaps emerging ones, too — seem to have run out of productivity-enhancing growth and, therefore, need constant infusions of financially destabilizing debt to keep them going.”

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