Author Archives: Fouad Egbaria

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Before we head into the weekend, let’s take a look at the week that was and some of the metals coverage here on MetalMiner, including: copper prices, “Steelmageddon,” rising palladium prices, and aluminum and steel demand in Europe.

Keep up to date on everything going on in the world of trade and tariffs via MetalMiner’s Trade Resource Center.

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This morning in metals news, the world is waiting on the Trump administration’s Section 232 auto tariff decision, an Indian Supreme Court ruling opens the door for ArcelorMittal to finally acquire the bankrupt Essar Steel and Rio Tinto plans to raise funds for the rehabilitation of the Ranger uranium mine in Australia.

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Section 232 Auto Tariff Decision Expected Soon

In May 2018, the Trump administration launched a Section 232 investigation related to the national security impacts of imports of automobiles and automotive parts.

The administration had already delayed the decision earlier this year, as talks with major exporters — including the E.U. and Japan — continue. The latest self-imposed deadline fell Thursday, Nov. 14.

A decision has yet to be announced, although E.U. officials have previously expressed confidence Trump would delay the decision once again.

Supreme Court Rules in Favor of ArcelorMittal’s Essar Acquisition Effort

ArcelorMittal’s bid to acquire the bankrupt Essar Steel has dragged on through the courts over the last two years, including a challenge of a National Company Law Tribunal order earlier this year.

According to Reuters, the Indian Supreme Court has approved ArcelorMittal’s resolution plan for the distressed steel firm, overturning a previous appellate court ruling regarding the claims of financial creditors versus those of operational creditors.

Rio Tinto to Invest in Ranger Rehabilitation Project

Rio Tinto plans to assist Energy Resource of Australia Limited (ERA) — of which Rio Tinto is a 68.4% shareholder — in efforts to raise money toward the rehabilitation of the Ranger Project Area in Australia, the company announced Friday.

The Ranger uranium mine is located in Australia’s Northern Territory.

“As a 68.4 per cent shareholder in ERA, Rio Tinto will subscribe to its full entitlement of approximately $221 million (A$326 million),” Rio Tinto said in a release. “Given ERA’s inability to secure third-party underwriting support, Rio Tinto has also agreed to fully underwrite the offer to ensure ERA has the funds it needs to meet its current rehabilitation obligations.”

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According to Rio Tinto, ERA is “required to end mining and processing activities at Ranger by January 2021 and complete final rehabilitation by January 2026.”

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This morning in metals news, China again emphasized its desire for a removal of tariffs toward the goal of an initial trade deal with the U.S., U.S. Steel has laid off more workers and a Taiwanese firm is planning to invest $100 million in a new Turkish steel factory.

Keep up to date on everything going on in the world of trade and tariffs via MetalMiner’s Trade Resource Center.

Tariff Talks Continue

As U.S.-China trade talks continue, with the parties aiming to reach a “phase one” deal, China’s Commerce Ministry renewed a call for the removal of tariffs.

“The trade war was begun with adding tariffs, and should be ended by canceling these additional tariffs. This is an important condition for both sides to reach an agreement,” said Gao Feng, spokesperson for China’s Ministry of Commerce, according to a CNBC report.

More U.S. Steel Layoffs

In addition to layoffs at its Minnesota taconite plants and at its Granite City, Illinois plant, the steelmaker has also laid off workers at its Gary Works and Midwest Plant in Portage, Indiana, the Times of Northwest Indiana reported.

The steelmaker reported a net loss of $84 million in the third quarter, compared with net earnings of $291 million in Q3 2018.

Taiwan to Continue Investment in Turkey

According to a report in the Daily Sabah, the president of the Taiwan External Trade Development Council said the company will invest $100 million toward a new steel factory in northwestern Turkey.

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Walter Yeh, president of the council, added Taiwan hopes to increase its trade volume with Turkey up to $2 billion, according to the report.

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The November 2019 Monthly Metals Index (MMI) report is in the books.

This month, just three of the Monthly Metals Indexes (MMIs) increased, while six declined and one held flat.

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Some highlights from this month’s MMIs:

Read about all of the above and much more by downloading the November 2019 MMI Report below:

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This morning in metals news, U.S. steel import permit applications surged in October, U.S. Steel has laid off workers at its Granite City operation and Port Hedland iron ore shipments to China dropped in October.

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Steel Import Permit Applications Surge

U.S. steel import permit applications for October jumped 34.6% compared with the September final import total, the American Iron and Steel Institute (AISI) reported this week.

Import permit applications for October totaled 2.56 million tons, according to AISI.

Meanwhile, steel import market share in October checked in at 17%.

U.S. Steel Lays Off Workers at Granite City

On the heels of news of layoffs at U.S. Steel’s taconite operations in Minnesota, the steelmaker has reportedly also laid off an unspecified number of nonunion workers at its Granite City, Illinois operation, the Belleville News-Democrat reported.

The Granite City operation famously received a boost after the Trump administration’s imposition of Section 232 tariffs on imported steel. Previously idled, in March and June of 2018, U.S. Steel announced it would restart two blast furnaces at the plant, welcoming back approximately 800 workers in the process.

Port Hedland Iron Ore Exports to China Drop in October

Exports of iron ore to China from Australia’s Port Hedland fell in October, Reuters reported.

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On a month-over-month basis, iron ore exports to China from the major port dropped 0.7% in October.

The Renewables Monthly Metals Index (MMI) fell one point for a November MMI reading of 97.

Slowing Cobalt Mine Output

According to research group Antaike, global cobalt output growth is expected to slow in 2020, Reuters reported.

The report cites Antaike nickel analyst Joy Kong, who said cobalt production is expected to rise by 5,000 tons in 2020.

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The cobalt price has suffered over the last 18 months. On the LME, cobalt has plunged from around $95,000 per ton as of March 2018 to as low as $25,000 per ton earlier this year.

Cobalt is coveted for, among other applications, its use in electric vehicle (EV) batteries, which will be expected to drive demand for several metals as EV demand rises.

However, plunging prices have proved to be a challenge for miners, even mining giant Glencore.

Earlier this year, Glencore announced it would idle production at its Mutanda copper and cobalt mine — the world’s largest cobalt mine — in the Democratic Republic of the Congo by the end of the year.

MetalMiner’s Stuart Burns earlier this year weighed in on the miner’s decision.

“Glencore has a record of taking the hard decisions early and shuttering mines that are loss-making,” he wrote.

“The miner closed zinc mines in 2015 in response to low global prices; its actions are credited with helping the zinc market recover as a result.

“Cobalt demand has traditionally been driven by its use as an alloying element, but it is increasingly being seen as part of the lithium battery demand story because of its role in production of advanced batteries. The electric vehicle (EV) market, though, has failed to match up to its hype this decade. Although both lithium and cobalt prices have risen as a result of battery makers securing their supply chain, the reality is supply is perfectly adequate.”

In fact, LME cobalt has had some upward momentum in recent months, reaching $35,000 per ton this week.

Furthermore, Burns added the fundamentals for the much-coveted cobalt remain strong.

“In the longer term, though the fundamentals remain solid, EV sales will rise over the next decade as prices become more affordable, ranges extend and charging infrastructure improves,” Burns explained. “Glencore is putting Mutanda on care and maintenance for the next two years, after which it will review its options.

“Taking some 20% of global supply out of the market will put a floor under prices and shorten the timeframe over which prices will recover.”

Trafigura’s Bet on Cobalt

Sticking with the cobalt theme, Burns delved into trader Trafigura’s bet on cobalt amid its price resurgence in recent months.

“According to the Financial Times, Trafigura is betting that the Mutoshi mine, which is owned by DRC-based company Chemaf, can become a competitive producer, just as demand starts to rise on the back of a global rise in EV sales,” Burns wrote.

“Trafigura is looking to contribute financing in return for marketing rights on the cobalt. Mutoshi hopes to produce 16,000 tons of cobalt annually by the end of next year, should financing be put in place.”

GOES

The GOES Monthly Metals Index (MMI), which tracks grain-oriented electrical steel, dropped five points for a November reading of 181.

The GOES price fell to 2.6% month over month to $2,499/mt as of Nov. 1.

AK Steel, the only U.S. producer of electrical steel, recently reported its third-quarter financial results. In the third quarter, the company’s stainless/electrical segment saw shipments of 187,900 tons, down from 206,600 tons in Q3 2018.

Meanwhile, for the nine months ending Sept. 30, AK Steel’s stainless/electrical segment saw shipments of 592,900 tons, down from 628,800 tons during the same timeframe in 2018.

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Actual Metal Prices and Trends

The U.S. steel plate price fell 7.1% month over month to $684/st as of Nov. 1.

Chinese steel plate fell marginally to $572.71/mt. Korean steel plate jumped 1.3% to $555.83/mt. Japanese steel plate fell 0.2% to $796.27/mt.

The Chinese silicon price increased 1.6% to $1,463.76/mt.

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This morning in metals news, the U.S.’s steel capacity utilization rate is 80.3% for the year through Nov. 9, up to 40 layoffs are coming at U.S. Steel’s Minnesota taconite operations and a South African steel plant operated by ArcelorMittal is being shut down.

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Capacity Utilization Reaches 80.3%

The U.S. steel industry’s capacity utilization rate reached 80.5% for the week ending Nov. 9, according to the American Iron and Steel Institute (AISI).

Capacity utilization for the year to date was 80.3%.

The sector produced 1.86 million tons of steel for the week ending Nov. 9, down 2.2% on a year-over-year basis and down 1.4% from the previous week.

Up to 40 Layoffs Coming at U.S. Steel’s Minnesota Plants

Challenging market conditions are prompting U.S. Steel to lay off up to 40 nonunion workers at two Minnesota taconite plants, the Minneapolis Star-Tribune reported.

According to the report, the Minntac and Keetac mines employ a total of approximately 2,200 workers.

ArcelorMittal to Shutter Saldanha Plant

Steelmaker ArcelorMittal will close its Saldanha steel plant in South Africa, India Today reported.

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“This difficult decision was taken in the context of constructive ongoing engagements with key stakeholders, including government and organised labour, to find alternative solutions to the dire situation in the South African steel industry,” the company was quoted as saying.

The Global Precious Monthly Metals Index (MMI) jumped six points this month, rising for a November MMI reading of 113.

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Palladium-Platinum Spread Widens

As noted here many times before, platinum had historically traded at a premium to palladium.

That relationship, however, flipped as of September 2017, and has remained flipped ever since.

The palladium-platinum spread widened this month, even as platinum made gains.

The spread rose to $850/mt this month, up from $763/mt last month.

Looking Ahead

Gold and silver enjoyed a strong run-up during the summer season, but what is ahead for the precious metals?

“Having risen into the summer, gold and silver prices have plateaued in Q3 even as some ETFs have seen strong inflows due to accommodative monetary policies, such as falling Fed rates and safe haven buying in the face of geopolitical uncertainty,” MetalMiner’s Stuart Burns explained. “But jewelry demand is down, central bank buying of gold is lower than the same time last year and a strong dollar set up a number of headwinds that have seen prices unwind as news comes out about a possible winding back of tariffs between the US and China.”

As for platinum, prices did not tick up as much as one might have expected given trends in the automotive industry.

“Likewise, platinum prices have failed to make any headway in Q3 despite a strong showing from other PGMs, such as palladium and rhodium, both of which continue to benefit from the switch to petrol internal combustion engines among European carmakers,” Burns added.

“Gold, silver and palladium prices are expected to ease further in the run up to the year-end while other PGMs will be swayed more by car production and dollar strength. Much will depend on a successful outcome to the encouraging progress on trade talks, which could see investors take a more bullish attitude on risk to industrial metals and weaken demand for safe-haven investment metals.”

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Actual Metal Prices and Trends

The U.S. silver ingot/bar price rose 5.0% month over month to $18.08/ounce as of Nov. 1.

U.S. platinum bars rose 6.3% to $930/ounce. U.S. palladium bars jumped 8.7% to $1,780/ounce.

Chinese gold bullion rose 1.7% to $48.79/gram. U.S. gold bullion increased 2.3% to $1,512.70/ounce.

This morning in metals news, a Chinese firm is poised to take over the insolvent British Steel, Chinese iron ore futures were down Monday and speakers at a recent convention in Budapest weighed in on the stainless steel market.

Jingye to Buy British Steel

After talks with Turkey’s Ataer Holding fell apart, Chinese firm Jingye Steel has reportedly signed a deal to rescue British Steel, the BBC reported.

British Steel was put into forced liquidation in May, setting off a bidding process for the ailing steelmaker.

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According to the BBC, Jingye plans to £1.2 billion in British Steel.

The deal is pending and still requires regulatory approval, according to a statement by the Official Receiver.

“Completion of the contract is conditional on a number of matters, including gaining the necessary regulatory approvals,” the Official Receiver said. “The parties are working together to conclude a sale as soon as reasonably practicable.

“The business will continue to trade as normal during the period between exchange and completion. Support from employees, suppliers and customers since the liquidation has been a critical factor in achieving this outcome.”

Chinese Iron Ore Futures Slide

According to Reuters, Chinese iron ore futures fell by as much as 3.1% on Monday.

The most-traded iron ore futures contract on the Dalian Commodity Exchange fell 2.1% to 594 yuan ($84.93) per ton.

Rising Nickel, Falling Stainless Steel

At the recent BIR World Recycling Convention Round-Table Sessions held in Budapest, speakers delved into the seemingly curious current relationship between nickel prices and stainless steel values.

According to Natalie Scott-Gray, senior metals demand analyst at INTL FCStone, stainless steel production is forecast to rise 2% this year, with demand projected to rise 16% over the next five years, Recycling Today reported.

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

Another guest speaker at the event, Olivier Masson, said the stainless steel market is going through a “relatively soft patch,” partially impacted by a shift in trading patterns as a result of the U.S.’s Section 232 tariffs and China’s exports of hot-rolled material, according to the Recycling Today report.

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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 coverage here on MetalMiner, including coverage of: Freeport-McMoRan’s use of artificial intelligence (AI), U.S. steel production, aluminum prices, U.S. automotive sales, construction spending and India’s decision to back away from the proposed RCEP trade pact.

Keep up to date on everything going on in the world of trade and tariffs via MetalMiner’s Trade Resource Center.

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