Author Archives: Fouad Egbaria

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This morning in metals news, the iron ore price continues to rise, China is reportedly in no rush to restart trade talks after the recent exchange of tariffs and Tokyo Steel once again held prices steady.

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Iron Ore Breaks Through $100/Ton Barrier

The iron ore price has moved above $100/ton to its highest level in five years, the Australian Financial Review reported.

The iron ore price has soared this year, in large part aided by operational failures in Brazil, where a dam breach Vale’s Corrego do Feijao mine killed hundreds and took a significant chunk of the global iron ore supply off the market.

No Rush to Talk

Many were hopeful that the U.S. and China were approaching the final stages of a deal to end their ongoing trade war, one that prior to this month had seen the imposition of tariffs on a total of $360 billion between the two countries.

Those hopes fizzled, as the U.S. accused China of reneging on commitments and President Donald Trump opted to increase tariffs on $200 billion in Chinese goods, raising the tariff rate from 10% to 25%.

So, what’s next?

According to the South China Morning Post, China is in no rush to get trade talks going again.

Tokyo Steel Prices Steady

Tokyo Steel has opted to hold its prices steady for the sixth straight month, Reuters reported.

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According to the report, prices are remaining unchanged on account of weaker market conditions overseas and high inventories in Japan.

A federal court in Brazil lifted one of two production embargoes on Norsk Hydro’s Alunorte alumina facility, as the Norwegian firm angles to bring the facility back to full capacity.

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In October, Brazil’s Institute of Environment and Renewable Natural Resources lifted its embargo against the refinery; however, Alunorte cannot return to full capacity until the federal courts lift their embargoes.

Currently, the refinery is operating at 50% capacity.

“I am pleased with the support from local stakeholders and our employees. We are looking forward to be able to resume operations at Alunorte and restart the full alumina value chain, which will be positive for us and the state of Pará,” said John Thuestad, executive vice president of Norsk Hydro’s Bauxite and Alumina business area.

According to the firm, the civil lawsuit related to the refinery was lifted; however, no decision has been made yet related to the bauxite residue disposal area, dubbed DRS2.

“The decision to lift the embargo came after successful trials of Hydro’s press filter technology earlier this month, in which the firm successfully demonstrated its “state of the art” — in Hydro’s words — technology could process bauxite residues to a high enough standard to satisfy SEMA, the local environmental agency in the state of Pará, that the new treatment area DRS2 would be safe,” MetalMiner’s Stuart Burns wrote in October followed the decision from the Institute of Environment and Renewable Natural Resources.

“However, the embargo on DRS2 from the federal court system remains in place; a return to 100% of production capacity cannot be resumed until that court order is lifted.”

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Norsk Hydro noted the Alunorte refinery continues to operate at 50% capacity utilizing the DRS1 system.

“As the federal court’s embargo preventing Alunorte from using its new DRS2 bauxite residue deposit area remains in force, Alunorte continues to utilize the DRS1 depository based on state-of-the-art press filter technology,” Norsk Hydro said. “Alunorte estimates a remaining lifetime of 8-18 months in DRS1, depending on production volume. Further geotechnical studies will be conducted, aiming at verifying an extended lifetime of DRS1.”

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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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  • MetalMiner’s Belinda Fuller’s Raw Steels MMI report runs down the month in the raw steels sector.
  • The World Bank recently launched a new fund targeting the development of sustainable mining practices to support renewable energy installation.
  • Stuart Burns on steelmaker ArcelorMittal’s decision to idle production at a number of its European facilities.
  • U.S.-China trade talks took a turn over the last week.
  • Fuller on rising China HRC prices.
  • Stocks markets have felt the pain on the heels of the latest chapter in the ongoing U.S.-China trade war saga.
  • What’s next for Tata Steel after its planned joint venture with German firm Thyssenkrupp fell apart amid regulatory scrutiny?
  • The International Lead and Zinc Study Group forecast a global surplus for lead this year and a zinc deficit.

MetalMiner’s Annual Outlook provides 2019 buying strategies for carbon steel

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This morning in metals news, the iron ore price continues to rise, the U.S. cut its import tariff on Turkish steel in half and copper is on its way to its fifth consecutive weekly loss.

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Iron Ore Rises After Vale Warning

The iron ore price has received several supply-side boosts this year, stemming from operational failures at miner Vale’s operations in Brazil and tropical cyclones in Australia.

An update from Vale regarding its Gongo Soco mine has offered even more support to the iron ore price, which climbed over the $100 per ton mark for the first time in five years, the Financial Times reported.

Earlier this year, a dam breach occurred at Vale’s Corrego do Feijao mine in Brumadinho, killing hundreds. Now, Vale is issuing a warning about a potential breach at its Gongo Soco mine’s Sul Superior dam.

“As soon as a movement was detected on the northern slope of a pit at the Gongo Soco mine in Barão de Cocais, Minas Gerais, paralyzed since 2016, Vale immediately informed the competent authorities and has taken a series of necessary measures to update the region’s population about the situation in the pit and at the Sul Superior dam, which is approximately 1.5 km from the mine area,” Vale said in a prepared statement.
“It should be noted that there are no technical elements so far that point towards an eventual slide of the northern slope of the Gongo Soco Mine, which could act as a trigger for a breach of the Sul Superior Dam. Even so, Vale is reinforcing the alert and readiness level for a worst-case breach scenario.”

U.S. Cuts Turkish Steel Tariff

Amid a year of diplomatic tension between the U.S. and Turkey, the U.S. last year doubled its Section 232 tariffs on steel and aluminum against the latter, raising them to 50% and 20%, respectively.

This week, however, the White House announced it would cut the steel tariff in half, back to the original 25% rate.

In a statement, the White House said steel imports fell 12% in 2018 compared with the previous year, including a 48% decline in imports of steel from Turkey.

“Given these improvements, I have determined that it is necessary and appropriate to remove the higher tariff on steel imports from Turkey imposed by Proclamation 9772, and to instead impose a 25 percent ad valorem tariff on steel imports from Turkey, commensurate with the tariff imposed on such articles imported from most countries,” the White House said. “Maintaining the existing 25 percent ad valorem tariff on most countries is necessary and appropriate at this time to address the threatened impairment of the national security that the Secretary found in the January 2018 report.”

Copper Down Again

The price of copper is on its way to its fifth consecutive weekly loss, Reuters reported.

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According to the report, LME copper dropped 1.4% this week, moving near a 3 1/2-month low reached on Monday.

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Automakers and consumers fearing a new U.S. tariff on imported automobiles and automotive parts breathed a sigh of relief on Friday when President Donald Trump announced he would delay his decision on the matter for up to six months.

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The U.S. Department of Commerce launched a Section 232 investigation related to imports of automobiles and automotive parts in May 2018. Commerce Secretary Wilbur Ross submitted a report to the president in February, beginning the 90-day period by which the period is required to make a decision.

However, a day before the May 18 deadline, the president announced he would delay the decision and issued a proclamation directing United States Trade Representative Robert Lighthizer to begin a negotiation period with the European Union, Japan and “any other country the Trade Representative deems appropriate.”

“United States defense and military superiority depend on the competitiveness of our automobile industry and the research and development that industry generates,” the White House said. “The negotiation process will be led by United States Trade Representative Robert Lighthizer and, if agreements are not reached within 180 days, the President will determine whether and what further action needs to be taken.”

The investigation, like the probe of steel and aluminum imports, is predicated on determining whether the import levels constitute a threat to U.S. national security. The aforementioned proclamation notes domestic auto producers’ market share has fallen from 67% in 1985 to 22% in 2017, and that the volume of imports doubled during that period.

Senate Finance Committee Chairman Chuck Grassley, R-Iowa, welcomed the delay in the tariffs.

“I’m glad President Trump decided to delay these tariffs,” Grassley said in a prepared statement. “As the president knows, I’m not a fan of tariffs. And I have serious questions about the legitimacy of using national security as a basis to impose tariffs on cars and car parts.

“I’ll continue to strongly support the Trump administration’s pursuit of trade negotiations with the European Union and Japan. I encourage Ambassador Lighthizer to pursue comprehensive trade agreements that benefit all Americans, including farmers, manufacturers and service providers.

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“In the meantime, I’m continuing to work on bipartisan legislation to update Section 232 to give Congress, which has constitutional authority to regulate international commerce, a meaningful role in the process.”

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This morning in metals news, the May 18 deadline for the president’s decision on potential new automotive tariffs is being pushed back up to six months, Chinese iron ore futures rose to a record high and the Trump administration reversed an Obama-era pause on mining in a northeastern Minnesota wilderness area.

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Pumping the Brakes

May 18 marked the statutory deadline for President Donald Trump to make a decision regarding whether or not to impose new tariffs on imported automobiles and automotive parts. The decision is prompted by a Section 232 investigation — launched in May 2018 — into whether those imports negatively impact U.S. national security.

However, the decision is being delayed by up to six months, CNBC reported.

China’s Iron Ore Futures Soar

China’s iron ore futures rose to a record high Thursday, Reuters reported, on the back of rising demand and tight supply.

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According to Reuters, the most-trade September iron ore contract on the Dalian Commodity Exchange rose by as much as 4.5% Thursday to reach 678.5 yuan ($98.62) per ton.

Trump Administration Opens Door to Potential Minnesota Copper Mining

The U.S. Interior Department this week renewed two mining leases near the Boundary Waters Wilderness area in northeastern Minnesota, leases which had been suspended under President Barack Obama, Reuters reported.

According to the report, the Bureau of Land Management granted the leases to Twin Metals Minnesota LLC, which is a subsidiary of Chilean copper giant Antofagasta.

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The International Lead and Zinc Study Group (ILZSG) released its most recent 2019 forecast for lead and zinc, forecasting a lead surplus, while zinc demand is forecast to exceed supply.

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Lead Surplus

The ILZSG forecast a lead surplus of 71,000 tons in 2019.

Global lead demand declined 0.2% in 2018, but is forecast to jump 1.2% this year to reach 11.87 million tons. According to the ILZSG, an increase in usage in India, Japan and the Republic of Korea will help offset an expected 1.1% decline in China’s lead usage.

Meanwhile, lead usage is also forecast to rise in the U.S. and Europe, by 1.1% and 1.8%, respectively.

On the supply side, world lead mine production is forecast to increase in 2019 by 1.8%, reaching 4.75 million tons. The increase comes largely on the back of expected increases in lead mine production in China and India, in addition to expected increases in Canada, Europe and South Africa.

Refined lead metal output is forecast to rise 2.5% up to 11.94 million tons, also primarily on the back of increases in China and India. In addition, refined output from Australia is forecast to surge 14.3% in 2019.

Zinc Demand to Rise 0.6%

Unlike lead, zinc is forecast to be in deficit this year, with demand exceeding supply by 121,000 tons.

Zinc demand is forecast to increase 0.6% in 2019, according to the ILZSG, to reach 13.77 million tons.

Usage is forecast to rise 0.7% in Europe, with increases also expected in India and Mexico.

On the supply side, zinc mine production is forecast to rise 6.2% in 2019 (compared with 1.3% in 2018). As with lead, zinc mine production is expected to surge in Australia (29.4%), powered by a rise in production at the “Dugald River, McArthur River and Lady Loretta mines together with increases at the recently commissioned Century and Woodlawn tailings projects.”

Meanwhile, U.S. zinc mine production is forecast to fall 2.3% this year.

MetalMiner’s Annual Outlook provides 2019 buying strategies for carbon steel

Refined zinc output is forecast to increase 3.6% to 13.65 million tons, which includes a bounceback in China’s output (expected to rise 5.3% this year after a 3.1% decline in 2018).

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This morning in metals news, a senior Mexican official indicated the U.S. and Mexico could be nearing a solution leading toward removal of the U.S.’s Section 232 metals tariffs, British Steel is looking for financial assistance and President Donald Trump referred to the ongoing trade conflict with China as a “little squabble.”

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Is a Deal Close Regarding Metals Tariff Removal for Mexico?

According to Mexican Economy Minister Graciela Marquez, Mexico may be getting closer to negotiating the removal of the U.S.’s tariffs on steel and aluminum, as the U.S., Canada and Mexico aim to push the United States-Mexico-Canada Agreement (USMCA) across the finish line.

“We are, I think, close to negotiating the lifting of the tariffs,” she told Canadian broadcaster CBC, as quoted by Reuters. “We’re having very fruitful conversations on lifting the tariffs not only in the U.S. but also here in Toronto.”

British Steel Looking for Help

A couple of weeks after securing a £100 million loan, British Steel is still looking for financial assistance as it attempts to navigate what it sees as challenges stemming from the Brexit process.

According to the BBC, the steelmaker said “uncertainties around Brexit are posing challenges for all businesses including British Steel.”

A ‘Little Squabble’

Ongoing trade talks and hopes for a deal took a hit last week when Trump more than doubled tariffs on $200 billion in Chinese goods; China retaliated with tariffs on $60 billion in U.S. goods.

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Despite the escalation after a relatively calm period during which optimism was on the ascent, Trump referred to the economic dispute between the two countries as a “little squabble” and that talks have not collapsed.

Stuart Burns earlier today delved into the market impact of the ongoing trade war between the U.S. and China.

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This morning in metals news, Brazilian miner Vale SA has plans to invest approximately $2.5 billion over the next five years in dry iron ore processing, Rusal reported a drop in its first-quarter profits and copper prices bounced back.

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Processing Plans

Miner Vale SA announced it plans to invest approximately $2.5 billion in dry iron ore processing at its operations.

The investment will be made over the next five years. Currently, approximately 60% Vale’s production comes from dry processing; the miner aims to make dry iron ore processing account for 70% of its production.

Dry iron ore processing does not require water, which means there is no need for dams and tailing are not generated. In January, a dam collapse at Vale’s Corrego do Feijao mine in Brumadinho led to hundreds of deaths.

Rusal Profits Slide in Q1

Still feeling the bite of U.S. sanctions that were then in effect, Rusal reported its Q1 profits fell to $300 million from $531 million last year, Reuters reported.

The U.S. sanctions were removed in January; after being applied in April 2018, aluminum prices skyrocketed on fears of Rusal aluminum being taken off the market.

Copper Prices Bounce Back

After dropping to a 15-week low, the copper price picked back up Tuesday (despite the conclusion of U.S.-China trade talks last week without a deal).

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LME copper picked up 0.7% to reach $6,049.50 per ton, according to Reuters.

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This morning in metals news, President Donald Trump has instructed the United States Trade Representative to begin the process of raising tariffs on the remaining approximately $300 billion in Chinese imports, Germany’s Thyssenkrupp is looking for new partners after the planned merger of its European operations with Tata Steel fell apart and China announced retaliatory tariffs against the U.S.

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USTR to Begin Process to Raise Tariffs on All Imports from China

In a move that delivered a shock to the ongoing trade talks between the U.S. and China, President Donald Trump opted to more than double the tariffs on a previously announced set of $200 billion in Chinese goods.

As talks continued last week, Trump set a Friday, May 10 deadline for a deal, threatening to raise the tariff rate on those goods from 10% to 25%. The deadline came and went without an agreement; as such, the tariff rate increased as of 12:01 a.m. ET Friday, May 10.

However, the escalation might not be stopping there.

Trump previously said he was considering imposing tariffs on essentially all remaining imports from China, which the Office of the United States Trade Representative (USTR) confirmed in a statement.

“Earlier today, at the direction of the President, the United States increased the level of tariffs from 10 percent to 25 percent on approximately $200 billion worth of Chinese imports,” the USTR said. “The President also ordered us to begin the process of raising tariffs on essentially all remaining imports from China, which are valued at approximately $300 billion.”

Thyssenkrupp Moves Forward After Tata Merger Collapse

German steelmaker Thyssenkrupp is looking for new partners after its planned 50-50 joint venture with Tata Steel collapsed under scrutiny from European competition authorities, who were concerned the European JV would yield higher prices and fewer choices for consumers.

Thyssenkrupp CEO Guido Kerkhoff told the Handelsblatt business daily’s online edition that the firm is assessing consolidation options, but that he doesn’t foresee the possibility of “bigger mergers” due to the “current position of the European Commission,” Reuters reported.

China Strikes Back

On the heels of the U.S.’s tariff rate increase, China vowed last week to take “necessary countermeasures” in response.

Last year, China imposed a total of $110 billion in tariffs on imports from the U.S. in response to the U.S.’s tariffs.

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This time, China announced the imposition of an additional $60 billion in tariffs on U.S. goods, the BBC reported, including beef, tea, coffee and vegetables, among other items.