Author Archives: Fouad Egbaria

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This morning in metals news, President Donald Trump might be close to a decision on how to deal with what are considered unfair Chinese trade policies, environmentally friendly aluminum produced by hydro-powered smelters is coming at a hefty price tag and aluminum got a positive boost Wednesday that might prove short-lived.

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Trump Could be Close to Decision on China Trade

According to a Reuters report, a Trump administration official said President Trump is close to a decision on how to respond to Chinese trade practices he considers unfair.

While the results of the Section 232 investigations into steel and aluminum imports have yet to be announced, Reuters reports Trump might ask U.S. Trade Representative Robert Lighthizer to initiate a Section 301 investigation of Chinese trade practices. A Section 301 investigation offers the “authority to enforce trade agreements, resolve trade disputes, and open foreign markets to U.S. goods and services.”

Section 301 was most recently used this past December by the Obama administration in the long-running dispute over the EU’s ban on U.S. beef, which dates back to 1989.

‘Green’ Aluminum to Cost a Lot of Green

Hydro-powered aluminum smelters producing so-called “green” aluminum are charging quite a bit for their product, according to a Reuters report.

Why? It’s partly because industrial consumers are under pressure to reduce their carbon footprints, so demand is high.

Big names like Norway’s Norsk Hydro, U.S.-based Alcoa, Russia’s Rusal and London-listed Rio Tinto all view this green wave as good news, Reuters reports.

Will more and more companies get on board with aluminum produced by more environmentally friendly processes? It’s safe to say that demand will likely only continue to grow in this sector (and for greener products and processes, generally).

Aluminum Gets a Boost, But It Might Not Last

Continuing with the aluminum thread, the metal got a boost Wednesday on news of expected capacity cuts, Reuters reported.

According to Reuters, the aluminum price moved up because of expectations of Chinese capacity cuts. However, as has been mentioned here before, the aluminum momentum might not last, as the capacity cuts might just end up being wiped out by new capacity.

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For example, Hongqiao Group plans to shut more than 2 million tons a year of outdated smelter capacity, Reuters reported — but after new investments, capacity will likely remain around current levels.

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This afternoon in metals news, a recent survey of automakers indicates aluminum’s use in vehicles will grow in a big way over the next decade, U.S. steel production for the week is down slightly from the previous week and copper keeps on soaring.

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The Rise of Aluminum

According to a recent survey of automakers released by The Aluminum Association and conducted by Ducker Worldwide, automakers expect usage of the light, durable metal to increase significantly in the manufacturing of automobiles.

Total aluminum content for North American lightweight vehicles will increase to nearly 9 billion pounds, reaching 565 pounds per vehicle (PPV) and representing 16% of total vehicle weight by 2028, according to the survey results.

“As our automotive customers embrace a multi-material approach to new car and truck design, that directly translates to increased amounts of aluminum,” said Heidi Brock, president and CEO of the Aluminum Association, in the release. “On top of 40 years of uninterrupted growth, the aluminum industry is experiencing a level of sustained growth not seen before in any market or product sector. However, the true winners of this change are American consumers who can choose next-generation cars and trucks that are high performing, efficient, safe, sustainable and more fun to drive.”

According to the release, the expected rise in aluminum use is “consistent with the emerging trend of automakers transitioning to a multi-material vehicle (MMV) design approach, choosing aluminum for doors, hoods and trunk lids, body-in-white, bumpers and crash boxes.”

Steel Production Has Small Week-Over-Week Dip

U.S. steel production dipped 0.2 percent from the week ending July 22 to the week ending July 29, according to data from the American Iron and Steel Institute (AISI).

Approximately 1.67 millions tons were produced last week, compared with 1.77 million tons during the week ending July 22.

However, the July 29 total is a significant step up from total production for the same week in 2016. Production last week was up 6.1% from the same week in 2016.

Copper Continues Surge

Copper continues to have a great 2017, recently hitting its two-year peak. According to CNBC, the metal jumped 7% in July alone.

A global supply deficit and a flagging dollar have supported copper prices this year.

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While some think copper could keep its momentum in the short term, many analysts predict a slowdown as the year progresses.

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This morning in metals news, copper hits a two-year high, economic signals in July for China were a bit of a mixed bag and the London Metal Exchange continues a balancing act between tradition and change.

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Copper Reaches Highest Point in 2 Years

It’s been a big year for copper.

Copper reached a two-year peak on Monday, partially a result of solid manufacturing data in China, Reuters reported.

LME copper reached $6,431 per ton, its highest since May 2015.

Construction Up in China

Speaking of China, July saw a dip in factory growth but a surge in construction, Reuters reported.

China’s Purchasing Managers’ Index (PMI) remained above 50, however, as the Chinese government spent money on construction, fueling demand for building materials.

The Chinese steel industry, for example, had its strongest month of growth since April 2016.

Changing Times at the LME

Matthew Chamberlain became the boss of the world-famous London Metal Exchange at age 34.

A lot has changed for the LME, which was founded in 1877.

The exchange was sold to HKEX in 2012, and is currently engaging in efforts to bring back volumes, The Guardian reports.

The so-called “ring” where LME traders do their work is governed by a set of long-standing rules, like the prohibition on chewing gum. According to the report, Chamberlain says those rules aren’t likely to change.

However, he also acknowledges that the LME needs to be prepared to deal with changing demands — for instance, for cobalt and lithium to be used in electric car batteries.

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For metals industry professionals looking to plan out their purchases — especially as Section 232 investigations continue to loom — there can be an almost dizzying number of factors to consider.

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MetalMiner’s Budgeting Workshop on Wednesday, July 26, in Chicago aimed to bring a little clarity to the decision-making process.

The workshop, attended by 16 metals industry professionals, featured expert advice from MetalMiner Founder and Executive Editor Lisa Reisman, Editor-at-Large Stuart Burns, stainless steel expert Katie Benchina Olsen and Procurement Forecast Analyst Irene Martinez Canorea.

Many of the event attendees were looking for the same thing: information to improve their company’s forecasting abilities. Luis Velez, for example, the strategic sourcing and supply chain director of the Welding Group at ITW, said he hoped for a “better way of forecasting and outlooking prices on metals,” citing inconsistency of other forecasting tools.

Reisman began the workshop with a presentation covering everything from the genesis of MetalMiner, the state of various markets — in a snapshot, commodities are bullish, industrial metals are bearish — and MetalMiner’s Benchmark service.

MetalMiner’s Benchmark service, launched in February, allows prospective metal buyers to tap into a database that includes: data from 1,300-plus companies in 21 industries; more than 31 million actual price points of industrial metals; and the ability to compare metals by type, grade, form and size. The application offers self-service and an enterprise versions.

Reisman also discussed the framing of MetalMiner’s forecasting approach. In short, she reviewed the reasons for not engaging in long-term forecasting — the time frame lends itself to unreliable predictions. Rather than focusing on trying to predict what the specific price of something will be at a specific time — somewhat of a fool’s errand — MetalMiner aims to find out how those in the metals industry can source, buy and procure with greater confidence by understanding market trends. 

Moving away from a macroeconomic approach focused on demand factors (GDP, China PMI and others), MetalMiner zeroed in on statistical regression models, starting with aluminum.

“We reframed the challenge,” Reisman said. “It’s not predicting what the price is going to be at a specific point of time. That’s irrelevant. And guess what? All of us would be multimillionaires sipping margaritas on the beach because we wouldn’t be doing metal-buying if we had that information or figured out how to do that.

“The challenge is having the confidence to say ‘should I buy long now?’ or ‘should I be buying on the spot market? Should I enter into a volume contract, should I use an index, should I not use an index?’. … That’s the challenge we want to seek to address.”

In short, the approach is about behaviors, not specific numbers at specific times.

“When we look at our track record, our track record is not based on predicting the price of metal, it’s based on ‘did we call the right behavior at the right time?'” Reisman said.

So what does go into the analytical approach for the short term? Surveying commodities trends, industrial metals by class, individual metals, and price and volume all factor into the outlook.

“One of the things that we find that there’s been a disconnect in our industry is there’s a lot of fundamental analysis — supply and demand — and not a lot of quantitative analysis looking at what the markets are doing,” Reisman said. “Hedge funds and traders are taking more of a quantitative approach to looking at markets and I think we as industrial buyers also need to have a similar approach.”

Before breaking up into small discussion groups by metal class, the workshop invariably turned to Section 232 — that is, the Trump administration’s still-pending investigations of steel and aluminum imports on the grounds of national security — and the North American Free Trade Agreement (NAFTA).

In terms of Section 232, trade policy measures that have been suggested include tariffs, quotas or a hybrid approach combining the two.

“I think 232 scares most people only if quotas are put in,” said Jack Bellissimo, sourcing manager for Hubbell, Inc. “So if they put a quota in and say you are able to ship 20,000 tons a year in, and now you can only ship 1,000 tons, now tube and pipe business is able to really come out and be aggressive.”

Many expected Secretary of Commerce Wilbur Ross to announce the findings of the steel investigation by the end of June. That didn’t happen, however, and comments from President Trump earlier this week indicated steel trade policy might not be at the top of the administration’s to-do list at the moment.

Other questions that need to be resolved, aside from which specific measure (tariff, quota or a combination) could be employed, include designation of a baseline year for the policy and potential carveouts for certain metals, like grain-oriented electrical steel (GOES), Reisman said.

As for NAFTA, the Trump administration is looking to renegotiate the 23-year-old trilateral trade agreement in order to reduce long-standing trade deficits with Mexico and Canada. The Office of the United States Trade Representative recently announced negotiations on NAFTA will begin Aug. 16 in Washington, D.C.

Following the conclusion of the presentation, the workshop attendees split up into groups to trade notes on a number of industry issues, including ways of measuring performance, cost-saving, indexes and more.

The stainless steel sub-group talked amongst each other about contract length (six months was the most common length discussed), surcharges and how weights are determined.

“Are you billed on actual weight or theoretical weight, or are your requiring that you’re billed on minimum thickness of the material,” Olsen said, recapping the questions posed.

The consensus was that they were billed theoretically, Olsen said.

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“But the best practice, I think, that we all agreed was if you can get away with it, [is] minimum,” said Trevor Stansbury, president of Supply Dynamics.

For more information about MetalMiner’s Benchmark service, visit the Benchmark page at benchmark.metalminer.com

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This morning in metals news, a recent report predicts the precious metal catalysts market will reach $19.4 billion by 2022, Reliance Steel and Aluminum Co. posted strong second-quarter numbers and   China’s Ministry of Commerce says it is willing to work with the U.S. on global aluminum market issues.

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Precious Metal Catalysts Market to Grow to $19.4B

Precious metal catalysts will prove to be especially precious on the market in the near future, according to a report from Research and Markets.

The report indicates the market will grow from $14.37 billion this year to $19.41 billion by 2022, at a compound annual growth rate (CAGR) of 6.19%.

Why is this metal sector set to become even more precious? Advances in automobile technology and pharmaceutical applications will see a rise in demand for this subset of metals, according to the research report.

“The newly developed emission standards demand additional improvements in catalyst technologies to successfully remove toxic substances from car exhausts, which will, in turn, drive the precious metal catalysts market growth through the automobile sector,” the report states.

A Good Q2 for Reliance

Reliance Steel and Aluminum Co. — the largest metals service center operator in North America,  headquartered in Los Angeles — posted strong numbers for this year’s second quarter.

According to a report on the Nasdaq website, the company reported a bottom line of $103.1 million, ($1.40 per share), compared with $99.5 million, or $1.36 per share, for Q2 of 2016.

The company’s revenue total also rose in Q2 by 12.7% to $2.48 billion, up from $2.20 billion last year.

China Signals Willingness to Work on Aluminum Market Issues

Ever since announcing Section 232 investigations of steel and aluminum, the Trump administration and the U.S. Department of Commerce have made it clear that Chinese excess capacity is the primary focus (notwithstanding the fact that Chinese steel and aluminum represent relatively small portions of U.S. imports).

On the heels of the U.S. International Trade Commission’s (USITC) Section 332 report on competitive factors affecting U.S. aluminum, China’s Ministry of Commerce suggested a global approach to tackling problems within the aluminum market, Reuters reported.

According to the Reuters report, Ministry of Commerce spokesman Gao Feng did not agree with the assessment that the USITC report accused China of “sponsoring” its aluminum industry.

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The results of the aluminum investigation will likely not be coming for some time, as the steel report is expected to come first. However, June came and went without a steel 232 announcement. Plus, if President Donald Trump’s comments earlier this week are any indication, steel trade policy doesn’t seem to be a top priority at the moment, particularly as the health care debate continues to heat up.

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This evening in metals news, President Donald Trump indicated yesterday Section 232 might be going on the backburner, data show a sharp rise in steel imports during June and a new report predicts the 3-D printing metals market will be worth $12 billion by 2028.

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Taking 5 on Section 232

The Trump administration’s Section 232 investigations are being watched closely by metals producers around the world — but Section 232 is just one thing on the administration’s plate.

On Tuesday, President Trump told the Wall Street Journal that when it comes to enacting measures against steel imports (like tariffs or quotas), “we don’t want to do it right now.”

In April, the administration launched a national-security probe of steel and aluminum imports. Under Section 232 of the Trade Expansion Act, Secretary of Commerce Wilbur Ross has 270 days to present the president with a report and recommendations.

With health care currently in the spotlight — in addition to Trump’s announcement today regarding banning transgender individuals from serving in the military — Section 232 has seemingly lost a little steam. Previously, the steel investigation results were expected to be announced by the end of June.

Steel prices performed well in the weeks following the April announcement, but that initial optimism has fizzled. Trump’s noncommittal comment regarding the investigation sent several domestic steel companies downward yesterday, according to MarketWatch, including AK Steel, Nucor and ArcelorMittal.

Steel Imports Rise in June

U.S. imports of steel rose sharply for the month of June, according to U.S. Census Bureau data cited by the American Iron and Steel Institute (AISI) on Wednesday.

The country imported approximately 3.87 million net tons in June. In the year to date, 19.64 million tons have been imported, up 25% from the same time frame in 2016. Finished steel imports amounted to 15 million tons in the year to date, up 17.2% compared with the same time period in 2016.

Per the report, products which saw significant increases from May to June included: reinforcing bars (84%), sheets and strip all other metallic coatings (61%), heavy structural shapes (40%), cold-rolled sheets (32%), hot-rolled sheets (29%), mechanical tubing (25%), oil country goods (19%), hot-rolled bars (12%) and plates in coils (11%).

Notable year to date increases versus the same period in 2016 include: oil country goods (248%), cold rolled sheets (41%), sheets and strip all other metallic coatings (36%), standard pipe (35%),  line pipe (32%), mechanical tubing (29%), hot-rolled bars (28%), sheets and strip hot-dipped galvanized (26%), tin plate (17%) and wire rods (10%).

3-D Printing Worth $12B by 2028: Report

Momentum continues to build for 3-D printing technology, so much so that a recent report predicts the growing sector will be worth $12 billion in just over a decade from now.

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The report, from IDTechEx Research, states that “at this stage it would be a mistake to underestimate the enormous potential for innovation in 3D printing of metals.”

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The U.S. steel industry upped its production levels during the week ending July 22.

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In total, U.S. raw steel manufacturers produced 1.77 million net tons for that week, according to weekly data from the American Iron and Steel Institute (AISI). Compared with the previous week (ending July 15), that figure makes for a 0.6% increase.

Meanwhile, compared with the same week in 2016, production was up 6.4%.

Production is also up when comparing the year to date (until July 22) with the same time frame last year. Thus far in 2017, U.S. steel amounts to 50.3 million net tons, a 2.5% increase from the 49.1 million net tons in 2016.

The weekly AISI report also breaks down production by region. Once again, the Great Lakes region came in first with 677,000 net tons, followed by the Southern region (637,000), Northeast (214,000), Midwest (166,000) and Western (79,000).

Of course, the elephant in the room continues to be the Section 232 investigation into steel imports.  The results of the Department of Commerce probe were expected to be announced by the end of June, but that has long come and gone.

Most have speculated that the administration will opt to slap tariffs on steel imports in an effort to combat excess capacity from China.

It remains to be seen when the administration will announce anything on Section 232. However, if tariffs come to pass, other steel-producing nations will likely have something to say about it. As reported yesterday, Kosei Shindo, chairman of the Japan Iron and Steel Federation, warned of the opening of a Pandora’s box — meaning, nations might retaliate by placing tariffs on other products.

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That is on top of comments made in June by European Commission Trade Commissioner Cecilia Malmstrom regarding the EU’s intent to retaliate in the face of U.S. steel tariffs.

According to preliminary data from the U.S. Census Bureau, the U.S. imported 3.1 million tons of steel, with a monetary value of about $2.6 billion. The preliminary May data show Canada leading the way in steel exports to the U.S. (514,488 tons). Mexico shipped 266,544 tons, while Germany (135,279), Turkey (139,728), Korea (298,527) and Brazil (513,889) featured near the top of the list. China, meanwhile, exported 73,594 tons, according to the preliminary May data.

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This morning in metals news, the chairman of the Japan Iron and Steel Federation warns that U.S. tariffs on its steel imports could lead to retaliation, copper hit its five-month high and aluminum producer Norsk Hydro expects 2017 to present a balanced aluminum market.

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Section 232 Tariffs, If Instituted, Could Lead to Blowback

The world continues to wait for the Trump administration’s announcement regarding the conclusion of its Section 232 investigation into steel imports. Most, however, predict that tariffs will be the remedy President Donald Trump chooses, a course of action which EU Trade Commissioner Cecilia Malmstrom in recent weeks said would lead to retaliatory measures from the EU.

Japan has also joined the fray in warning of retaliation if tariffs are slapped onto steel coming into the U.S.

In a report from Industry Week, Kosei Shindo, chairman of the Japan Iron and Steel Federation, told reporters Monday that other countries could respond with protectionism on products other than steel, opening Pandora’s box.

Copper Riding High

Copper continues its strong run, hitting a five-month high Tuesday, Reuters reported.

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Positive news on the Chinese economy and a weak U.S. dollar contributed to the rise for copper.

Earlier today, our Stuart Burns wrote about copper’s big year to date.

A Balanced Market

Norsk Hydro CEO and President Svein Richard Brandtzaeg said he expects a “largely balanced” global aluminum market this year.

“We see a global primary aluminium deficit in the quarter. This is driven by increasing deficit outside China. For the full year, we are maintaining our 4-6 percent annual aluminium demand growth outlook for 2017 and expect a largely balanced, global aluminium market,” Brandtzæg said in the aluminum producer’s second-quarter results announcement.

Hydro, which earlier this month announced the acquisition of Sapa, reported second-quarter earnings of NOK 2,930 million.

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This morning in metals news, a team of researchers has developed a magnesium alloy that is billed to be at least 1.5 times stronger than aluminum sheet metal, copper is up and one analyst writes that China should not be the primary focus of the U.S. steel industry.

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A New Metal

Aluminum is renowned for its many qualities, including its strength, light weight and durability.

Now, scientists have developed a new magnesium alloy that appears to be even stronger than aluminum sheet metal.

According to a phys.org report, a team at NIMS and Nagaoka University of Technology has developed a high-strength magnesium sheet metal that “has excellent formability comparable to that of the aluminum sheet metal currently used in body panels of some automobiles.”

According to the report, the new magnesium alloy is lighter than aluminum and composed of common metals, making it a low-cost material.

Copper Gets a Boost

Copper rose Monday on news of supply disruptions and a weak dollar, according to Reuters.

The metal crossed the $6,000 dollar mark while the U.S. dollar approached 13-month lows.

Elsewhere, halting of mine operations also pushed prices up. In Chile, talks last week fizzled between union workers and management at the Zaldivar copper mine.

According to the report, the government-mediated talks will continue into this week.

China’s Not the Problem?

Ever since the Trump administration announced Section 232 investigations into steel and aluminum imports, China has been the primary focus. Chinese excess capacity, the administration and many in the U.S. aluminum and steel industries argue, has driven prices down worldwide and negatively impacted U.S. primary producers.

Clyde Russell, however, writing for Reuters, argues that China isn’t the U.S.’s biggest obstacle when it comes to strengthening its domestic steel industry.

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Russell points to statistics showing China’s relatively small U.S. market share, which even lags behind fellow Asian countries Japan, South Korea and India. In May, China was the 10th-largest supplier of steel products to the U.S., Russell writes.

Russell argues that rather than looking at China, the U.S. should focus on fellow North American Free Trade Agreement (NAFTA) partners Canada and Mexico, which exported significantly more steel in May to the U.S. than did China.

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Before we dive into the weekend, let’s take a look back at the week in metals news:

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  • Our Stuart Burns started out the week with a piece on confirmation bias and how those in the media and metal-buying communities can sometimes let bias affect their interpretation of data.
  • What’s the diagnosis for the ailing U.K. steel industry? According to Burns, it’s a product of a lack of government support and global oversupply. A recent report showed that the U.K. steel industry has declined in monetary output value by 30% from 1990 to 2013.
  • In case you missed it, our July MMI report has long been in the books. You can download it here.
  • What did the recent G20 summit in Germany mean for India? Our Sohrab Darabshaw touched on the subject this week.
  • What’s up with oil prices? Unsurprisingly, as with the metal markets, prices are so low because there is just so much of the stuff out there. Burns dug deeper into oil price trends in a piece earlier this week.
  • What’s a Section 332? In short, it’s a fact-finding investigation by the United States International Trade Commission, which recently conducted a large-scale look into the competitive factors affecting the U.S. aluminum industry.
  • Another big story, the ongoing debate regarding a potential renegotiation of NAFTA, got an update this week when it was announced that the U.S., Canada and Mexico will come together for talks beginning Aug. 16.

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