This Morning in Metals: BHP Forecasts Increase in Copper Production

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This morning in metals news, BHP forecasts increases in copper and iron ore production, Alcoa released its second quarter financial results and ArcelorMittal USA is asking its suppliers to cut costs.

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Copper and Iron Ore

Miner BHP Billiton forecast an increase in copper and iron ore production for the coming fiscal year, according to Kitco News.

BHP forecasts an increase in copper production between 1% and 8% and an increase of between 2% and 6% for iron ore.

Alcoa Releases Q2 Results

Pittsburgh-based aluminum firm Alcoa announced Q2 revenue of $2.71 billion, about flat with Q1, but down from the $3.6 billion in Q2 2018.

Alcoa posted adjusted EBITDA of $455 million in Q2, down from $467 million in Q1 and from the $783 million in Q2.

ArcelorMittal USA Asks Suppliers to Cut Costs

According to S&P Global Platts, ArcelorMittal wants its suppliers to cut costs in a steel market that has lost some steam over the past year.

MetalMiner Executive Editor Lisa Reisman argues the move sends the wrong message and could be harmful for ArcelorMittal’s otherwise strong brand.

“Research has shown that establishing strong win-win supply arrangements always yields better outcomes relative to product innovation, quality, reliability, etc.,” Reisman said. “It’s an absolute mistake to wield a hammer as a punishment for margin erosion due to falling prices.”

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Reisman said the company should have hedged some of its sales with exchange-traded products (like the CME HRC contract). In addition, with prices likely having hit their bottom and a cyclical uptick being very possible, the request for lower prices could be unsuitable to near-term market conditions.

What happens from here remains to be seen, but Reisman argued this move could have repercussions, including suppliers questioning the move and potentially reconsidering their allocations to ArcelorMittal in future tight markets.

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