Author Archives: Fouad Egbaria

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This morning in metals news, mills in the Chinese city of Tangshan have increased steel production despite the official start of winter cuts, LME copper prices fell and U.S. imports of aluminum from Australia have been on the rise.

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Tangshan Boosts Steel Production

The Chinese city of Tangshan, a steelmaking hub in the country, has seen its steel mills boost production despite the start of winter cuts, Reuters reported.

According to the report, local officials did not give precise instructions on the targeted emissions curbs. Recently, Beijing delegated the imposition of its annual winter caps — part of the government’s effort to tackle pollution in the country — to local governments.

LME Copper Price Falls 1%

Also according to Reuters, the price of LME copper fell 1% Thursday as a result of a stronger U.S. dollar — the two are inversely correlated — and pressure on the Chinese economy.

MetalMiner’s Take: LME copper fell slightly this month. However, LME copper prices have shown a recovered momentum since September, when prices breached the psychological level of $6,000/mt.

Copper prices tend to react to Fed index rate increases — or, at least, the expectation of Fed rises. When that happens, the U.S. dollar tends to have a short-term trend reaction and prices move higher for a week. However, the long- and mid-term trend does not change for that reason.

Therefore, copper prices may continue their uptrend. Buying organizations can expect LME copper prices to trade higher.

Imports of Aluminum From Australia Rising

Imports of aluminum from Australia into the U.S. have been increasing of late, according to an S&P Global Platts report.

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Per the report, imports of aluminum from Australia have jumped 23% from July to August.

MetalMiner’s Take: It should come as no surprise to anyone that Australian P1020 aluminum ingots have started to arrive on U.S. shores at a discount.

Interestingly, the discount represents two driving factors: the fact that Australia is exempt from Section 232 aluminum tariffs and that U.S. buyers prefer T-bar or sows and not ingot (which is the form coming from Australia).

The U.S. does not produce enough primary material domestically and the tariffs have driven the trade shift from Canada (the previous dominant supplier) to Australia. What will become more interesting to OEMs and other large buying organizations, however, involves the semi-finished material market, in which the U.S. currently operates with a significant deficit.

MetalMiner expects large volumes of semi-imports from Europe to help mitigate domestic supply shortages.

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Alcoa, a leading producer of bauxite, alumina and aluminum products, announced a $200 million share buyback program on Wednesday as part of the release of its third-quarter financial results.

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“Today’s stock buyback announcement, our smaller net pension and OPEB liability, and our results since launching Alcoa Corporation nearly two years ago all point to the success of our strategic priorities,” President and Chief Executive Officer Roy Harvey said in a prepared statement. “By reducing complexity, driving returns, and strengthening the balance sheet, we’ve made Alcoa a much stronger company even as commodity markets remain volatile. We’re pleased to announce a program to return cash to stockholders, and we look forward to improving our Company further as 2018 comes to an end.”

In addition, the Pittsburgh-based firm announced slightly upgraded full-year guidance. In its Q2 report, the firm downgraded its full-year guidance for earnings before interest, taxes, depreciation and amortization (EBITDA) from a range of $3.5 billion to $3.7 billion down to a range of $3.0 billion to $3.2 billion, citing “current market prices,” among other factors.

This quarter, however, the firm has upgraded the full-year guidance at the lower end, bringing its range to $3.1 billion to $3.2 billion.

Alcoa reported Q3 EBITDA excluding special items of $795 million, down from the $904 billion in Q2 but up 37% from the $582 billion in Q3 2017.

Meanwhile, Q3 revenue hit $3.39 billion, up 14% from the $2.97 billion in revenues posted in Q3 2017.

In the supply markets, the firm continues to project global deficits for aluminum and alumina, but a surplus for bauxite.

“In aluminum, the Company expects a global deficit ranging between 1.0 million and 1.4 million metric tons, down from last quarter’s estimate of between 1.1 million and 1.5 million metric tons,” the release states. “Global aluminum demand growth is projected to be between 3.75 and 4.75 percent in 2018, down from the second quarter estimate of between 4.25 and 5.25 percent, driven by China.

“In alumina, Alcoa is projecting a higher global deficit of between 400 thousand and 1.2 million metric tons, compared to last quarter’s deficit expectation of between 200 thousand and 1.0 million metric tons.”

On the operations front, the firm announced the beginning of a formal consultation process with respect to dismissals of workers at two of the firm’s plants in Spain.

“Alcoa today announced its intention to begin a formal consultation process for collective dismissals that would affect all employees at its Avilés and La Coruña aluminum plants in Spain, which are the least productive within the Alcoa system due to their inherent structural issues,” the release stated. “Avilés employs 317 employees and La Coruña 369. Per Spanish law, Alcoa will initiate a mandatory 30-day consultation period with the workers’ representatives to achieve the best possible outcome for the Company and its workforce.”

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Alcoa closed at $36.70 per share on Wednesday, and continued to pick up steam in after-hours trading.

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This morning in metals, members of the House are asking the Trump administration to allow tariff exclusions (related to the latest round of tariffs levied against China), Chile’s state copper miner has plans to extend the life of one of its copper deposits and BHP reported a sharp year-over-year increase in iron ore production.

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House Representatives Ask for Tariff Exclusion Leeway

A group of 169 members of the House have signed a letter addressed to U.S. Trade Representative Robert Lighthizer, CNBC reported, in which they ask the Trump administration to allow for tariff exclusions with respect to the latest round of tariffs imposed on Chinese goods.

MetalMiner’s TakeMidterm elections will provide the first clue as to whether or not Congress will have the ability to weigh in on the impact of tariffs.

Unlike the Section 232 tariffs and the 301 tariffs, the latest round of tariffs does not include a formal exclusion process. A bipartisan group of Congressional representatives has now urged U.S. Trade Representative Lighthizer to allow for exclusions.

Still, any potential benefit to buying organizations in the form of an exclusion appears, at least for the short term, to have limited scope and impact.

Codelco Submits Environmental Assessment of Salvador Deposit

According to a Reuters report, state-owned Chilean miner Codelco has submitted an environmental assessment related to plans to overhaul its Salvador copper deposit.

Per the plans, the move would extend the life of the deposit by 40 years, according to the report.

BHP Iron Ore Production Rises

BHP’s Q1 iron ore production rose 8% year over year, the miner said Wednesday according to a Reuters report.

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Brazilian miner Vale also recently reported a significant uptick in iron ore production. (MetalMiner’s Stuart Burns wrote on the subject of iron ore and its defiance of current market trends.)

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The World Steel Association yesterday released its Short Range Outlook (SRO), in which it forecasts global steel demand to grow 3.9% in 2018.

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Global steel demand is projected to hit 1,657.9 million tons (MT).

Meanwhile, the SRO forecasts global steel demand will rise by 1.4% in 2019, hitting 1,681.2 MT.

“In 2018, global steel demand continued to show resilience supported by the recovery in investment activities in developed economies and the improved performance of emerging economies,” said Al Remeithi, chairman of the World Steel Association’s Economics Committee, in a release. “Demand for steel is expected to remain positive into 2019, growing at 1.4% globally.”

Within the U.S., Canada and Mexico, 2018 demand is forecasted to rise by 1.7% in 2018 and 1.0% in 2019. E.U. demand is projected to rise 2.2% and 1.7% in 2018 and 2019, respectively. In Asia and Oceania, demand is projected to rise 5.0% this year and 1.3% next year.

Unsurprisingly, the SRO refers to rising global trade tensions.

“While the strength of steel demand recovery seen in 2017 was carried over to 2018, risks have increased,” the report states. “Rising trade tensions and volatile currency movements are increasing uncertainty. Normalisation of monetary policies in the US and EU could also influence the currencies of emerging economies.”

Of course, that tension has a hand in the projected deceleration of demand growth in China, pending government-led stimulus measures.

“Both downside and upside risks exist for China,” the report states. “Downside risks come from the ongoing trade friction with the US and a decelerating global economy. However, if the Chinese government decides to use stimulus measures to contain the potential slowdown of the Chinese economy in the face of a deteriorating economic environment, steel demand in 2019 will be boosted.”

Elsewhere, the report states the E.U.’s steel demand recovery will continue in 2019, driven by domestic demand.

“With business confidence high, investment and construction continued to recover while the automotive market may see slower demand growth,” the SRO states. “Though the economic fundamentals of the EU economy remain relatively healthy, steel demand in 2019 will show some deceleration over the growth seen in 2017-18, partly due to uncertainties resulting from global trade tensions.”

The outlook for Japan is continued stability, the report states, while South Korean demand is expected to contract in 2018, with only a “minor recovery” projected for 2019.

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The full SRO report is available here.

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This morning in metals news, the U.S. is reportedly looking to impose steel quotas on Mexico, the World Steel Association boosts its forecast for global steel demand and U.S. Steel reaches a tentative agreement with United Steelworkers to avoid a potential strike.

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U.S. Eyes Mexico Steel Quotas

According to Reuters, citing the top trade negotiator for the incoming Mexican government, the U.S. is looking to impose steel quotas on Mexico as part of negotiations around removal of the existing Section 232 tariffs (which remain in play despite the recently agreed upon NAFTA deal, now called the United States-Mexico-Canada Agreement).

MetalMiner’s Take: If Canada or Mexico are granted quotas, domestic steel prices may continue decreasing slightly. Currently, steel imports from both countries are both subject to a tariff current situation on steel imports is for a 25% tariff from both countries.

Domestic steel prices are currently in a short-term downtrend, but still remain high. Buying organizations may want to understand steel trends to buy forward when prices start the uptrend again.

Global Steel Demand Forecasted to Rise

The World Steel Association doubled its steel demand forecast for 2018 and 2019, Reuters reported.

According to the report, steel demand is projected to rise 1.4% next year, up from a 0.7% projection in April.

Making a Deal

U.S. Steel announced Monday that it had reached a tentative deal with United Steelworkers, according to a MarketWatch report, staving off a strike.

On the heels of rising steel prices, workers had demanded an increase in wages. The deal covers approximately 16,000 workers across the country, according to a United Steelworkers release.

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Contract negotiations began over the summer and have continued long past Sept. 1, when the previous contract officially expired.

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The U.S. Department of Commerce (DOC) announced late last week that it had initiated anti-dumping and countervailing duty investigations related to imports of aluminum wire and cable from China.

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According to the DOC, imports of the products from China in 2017 were valued at $157.2 million (up from $116.6 million in 2016).

The petitioners in the case were Encore Wire Corporation (of McKinney, Texas) and Southwire Company, LLC (of Carrollton, Georgia), which filed petitions with the DOC on Sept. 21.

The DOC calculated dumping margins of 53.54-63.47% with respect to the aluminum wire and cable imports.

The case now moves to the U.S. International Trade Commission (USITC), which is scheduled to make a preliminary determination on or before Nov. 5. If the USITC rules in the affirmative, the case moves back to the DOC, which would be scheduled to make a preliminary ruling in the countervailing duty probe by Dec. 17 and a preliminary anti-dumping ruling by Feb. 28, 2019.

MetalMiner’s Annual Outlook provides 2018 buying strategies for carbon steel

According to the DOC fact sheet for the case — citing the U.S. Census Bureau — the U.S. imported 42,788 metric tons of the product from China in 2017, up 48.4% from the 28,839 tons imported in 2016.

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This morning in metals news, Credit Suisse has downgraded the outlook for the U.S. steel sector, a Turkish steel company CEO is optimistic the U.S. will roll back the recently doubled Section 232 metals tariffs and Brazilian miner Vale posted record Q3 iron ore output.

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Credit Suisse Downgrades U.S.’s Steel Sector

Citing oversupply, Credit Suisse downgraded its rating of the U.S. steel sector, Reuters reported.

According to the report, Credit Suisse downgraded the sector’s rating from “overweight” to “market weight.”

Turkish CEO Optimistic on Rollback of Doubled Section 232 Tariffs

Earlier this year, the U.S. doubled its Section 232 metals tariffs vis-a-vis Turkey, bringing them to 50% and 20% for steel and aluminum, respectively.

But one CEO of a Turkish steel firm is hopeful the tariffs will return to their original levels this week.

Ugur Dalbeler, CEO of Colakoglu Metalurji, said he was hopeful the decision would come down this week, according to S&P Global Platts.

Vale Posts Record Q3 for Iron Ore Production

It was a productive third quarter for the Brazilian miner’s iron ore operations.

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According to a Reuters report, Vale reported its iron ore output jumped 10.3% in the quarter compared to the previous year.

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Another month has come and gone, and MetalMiner’s October Monthly Metals Index (MMI) report is out.

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This month’s report featured four subindexes posting declines, four standing put and just two posting increases (Copper and Global Precious).

A few highlights from this month’s report:

  • Aluminum prices surged then drifted back down early this month following news surrounding Norsk Hydro and its Alunorte alumina refinery.
  • The Copper MMI, one of two MMIs to increase this month, reflected a recovering copper price. After a sluggish summer, the metal has recovered of late, recently breaching the $6,000/mt benchmark.
  • It was a down month for several big automakers in terms of U.S. sales.
  • U.S. construction spending in August was up 6.5% from August 2017 spending.

MetalMiner’s Annual Outlook provides 2018 buying strategies for carbon steel

Read about all of the above and much more by downloading the October 2018 MMI Report below:

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Before we head into the weekend, let’s take a look back at the week that was and some of the metals storylines here on MetalMiner:

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  • Many are hoping for a return to a heavy mining presence in the Indian state of Goa.
  • Could we be 0n the brink of a new Cold War?
  • Norsk Hydro announced plans to restart its Alunorte alumina refinery, capping a topsy-turvy week for the aluminum price.
  • Razor blade maker Gillette received a positive response to its tariff exclusion request and Century Aluminum signed a new power contract that will see to its Charleston plant remaining open through at least 2020.
  • The Chinese city of Tangshan ordered steel mills to curb production over the next week, Novelis broke ground on an automotive aluminum plant in China and AK Steel won a $1.2 million award from the Department of Energy to help conduct research on lightweight steel for automotive use.
  • In case you missed it, we concluded this month’s round of Monthly Metals Index (MMI) reports this week, with coverage on:
  • The London Metal Exchange is introducing new contracts amid competition from the CME and SHFE.

MetalMiner’s Annual Outlook provides 2018 buying strategies for carbon steel

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This morning in metals news, Canada plans to impose tariffs and quotas on seven categories of steel, the VIX surged this week to an eight-month high, and China’s steel and aluminum exports held relatively steady last month.

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Canada to Impose Steel Safeguards

The Canadian government announced Thursday it plans to impose quotas and tariffs on seven categories of steel, Reuters reported.

A 25% tariff will be applied beginning Oct. 25.

MetalMiner’s Take: Although the popular press will likely emphasize that Canada has now engaged in a trade war with the U.S. on steel, buying organizations should note that the 25% tariffs will be applied, “in cases where the level of imports from trading partners exceeds historical norms,” according to a government statement. Jerry Dias, the head of Canada’s plargest private sector union, said the tariffs will protect from subsidized steel from China and South Korea, according to Global News.

Fear Index Surges

The VIX, sometimes known as the “fear index,” has surged this week.

The index, which serves as an indicator of market volatility, reached its highest level since February.

MetalMiner’s Take: Stocks have since rebounded from a two-day rout. Although the VIX spiked to an eight-month high, these sharp moves in the past few days likely came as a result of the Federal Reserve’s actions on interest rates and the perception of rising inflation. Time will tell if the VIX blip portends any longer-term trend change or not.

Today, the VIX has flattened on news that consumer inflation remains in check. Commodities and stocks don’t have a strong correlation, meaning the movement in one may or may not impact the movement in the other. The only exception to that rule involves precious metals, which tend to increase when the stock market declines.

MetalMiner’s Annual Outlook provides 2018 buying strategies for carbon steel

Chinese Aluminum, Steel Exports

China’s exports of aluminum fell slightly in September while steel exports rose slightly, Reuters reported.