Author Archives: Fouad Egbaria


This morning in metals news, U.S. Steel contract talks continue with its workers, aluminum prices continued to rise today after a big surge yesterday and U.S. steel import permit applications dropped significantly in September.

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U.S. Steel Pulls Back From Some Proposals in Contract Talks

According to a report by the Times of Northwest Indiana, U.S. Steel has pulled back from some proposals in its contract talks with USW that had the union on the brink of a strike.

MetalMiner’s Take: Buying organizations need to pay much closer attention to labor disputes and production disruptions with tariffs in play. Yesterday, Norsk Hydro shut down its Alunorte alumina refinery plant in Brazil due to an environmental dispute. The shutdown sent aluminum prices soaring by over 2% yesterday and prices remain supported today. Any potential strike at either ArcelorMittal or U.S. Steel could have a similar impact on steel prices.

Aluminum Prices Continue to Rise

Aluminum prices surged yesterday, and continued to rise Thursday, MarketWatch reported.

The price continues to rise on Thursday after news of Norsk Hydro’s plans to close its Alunorte alumina refinery in Brazil.

MetalMiner’s Take: LME aluminum prices rose sharply yesterday, driven by demand concerns. News of a potential closure in the word’s largest alumina refinery in Brazil helped the boost in aluminum prices, as this could create a larger shortage of the metal.

LME aluminum prices have been trading sideways since July. LME aluminum prices increased again, showing a strong uptrend. Trading volumes also seem supportive of this uptrend.

We will see LME aluminum prices continue to increase in the upcoming days, unless supply concerns ease.

Steel Import Permit Applications Down 7.6%

Steel import permit applications fell 7.6% last month compared to August totals, according to a recent American Iron and Steel Institute (AISI) report.

The report, which cites the Department of Commerce’s Steel Import Monitoring and Analysis data, says applications for September totaled 2,739,000 net tons.

The Rare Earths Monthly Metals Index (MMI) stood pat this month for an MMI value of 17.

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Pentagon Reviews Critical Materials Dependence

Tariffs have been flying left and right this year, impacting a wide range of products, from steel and aluminum to everyday consumer goods.

Last month, the Trump administration imposed an additional $200 billion worth in tariffs on Chinese goods, marking a significant escalation of trade tensions between the two countries (the U.S. had already imposed a total of $50 billion in tariffs on Chinese goods).

But one sector that has avoided tariffs is perhaps not so difficult to guess: rare earths.

Given China’s overwhelming dominance of the market and the U.S.’s position as a relative non-factor in the industry (the U.S.’s only rare earths mine closed in 2015), the U.S. is thus dependent on China for many critical rare earths.

According to the U.S. Geological Survey, 78% of the total amount of U.S. rare earths imports from 2013-2016 came from China, followed by: Estonia (6%), France (4%), Japan (4%) and other sources (8%). The value of imports of rare earth compounds and metals reached $150 million in 2017, up from $118 million in 2016.

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This morning in metals news, the Aluminum Association expressed its disappointment in the United States-Mexico-Canada Agreement (USMCA), the Pentagon is reviewing the U.S.’s dependence on foreign sources of critical materials (including rare earths from China) and Section 232 steel tariff exemption requests continue to rise.

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Section 232 Aluminum Tariff

Not everybody was happy with the recently hailed United States-Mexico-Canada Agreement (the agreed-upon rebrand of the North American Free Trade Agreement, or NAFTA).

The Aluminum Association on Monday expressed its disappointment that the deal did not address the Section 232 aluminum tariff, which continues to apply to both Canada and Mexico.

“The Aluminum Association is disappointed that the Section 232 aluminum tariffs were not addressed as a part of the United States-Mexico-Canada Agreement (USMCA),” Aluminum Association President and CEO Heidi Brock said. “Now is the time for the United States to work with Canada and Mexico to provide a full exemption – without quotas – for aluminum imports from those countries. This should occur as soon as possible, and certainly before the final agreement is signed.”

MetalMiner’s Take: A confluence of factors continue to significantly impact aluminum prices and availability.

In terms of availability, Hydro’s Alunorte alumina refinery in Brazil has halted production due to an environmental dispute with the Brazilian government (alumina is the key raw material used to make aluminum). This sent aluminum prices up by 2% today.

The fact that the newly negotiated USMCA did not address the 232 tariffs on aluminum means the 10% tariffs on Canadian aluminum remain intact, which will also continue to support aluminum prices. Buying organizations are now experiencing a real tightness for semi-finished materials and many must source offshore or via Canada to meet manufacturing production schedules. The sanctions on Rusal also go into full effect Oct. 23.

Pentagon Reviewing Sources of Critical Materials

It’s no secret that the U.S depends on foreign sources for a number of critical materials, including, among others, rare earths from China (used in a wide variety of high-tech applications).

According to a Reuters report, the Pentagon is reviewing the U.S.’s dependence on certain critical materials, with plans to eventually release a report of its findings. In addition, the report indicates China will serve as a primary focus of the review.

Exemptions Continue to Rise

Requests from U.S. firms looking to win exemptions from the U.S.’s 25% steel tariff have continued to pour in, even into October, seemingly far exceeding what the Department of Commerce had initially expected when the process began in June.

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According to a MarketWatch report, as of Oct. 1. 35,872 steel tariff exemption requests had been filed, with 5,954 requests having been approved (9,057 decisions have been posted).

The Construction Monthly Metals Index (MMI) lost two points this month, falling for a reading of 90. 

U.S. Construction Spending

U.S. construction spending in August — the most recently available month of Census Bureau data — hit $1,318.5 billion, up 0.1% from the revised July estimate.

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In addition, August spending marked a 6.5% increase from August 2017 spending.

Through the first eight months of the year, spending hit $862 billion, marking a 5.3% increase from the same period in 2017.

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The Automotive Monthly Metals Index (MMI) held flat this month, holding for a reading of 96 for our October MMI.

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U.S. Auto Sales

General Motors, which now reports sales on a quarterly basis, reported a Q3 year-over-year sales decline of 11%.

“The U.S. economy and auto industry remain strong,” GM Chief Economist Elaine Buckberg said in a release. “A new United States-Mexico-Canada trade agreement will reduce uncertainty for the auto industry and all three countries. Consumer confidence is high and rising, thanks to the robust job market, faster wage growth and the boost to take-home pay from tax reform. We believe 2018 will be the fourth year in a row with total industry sales above 17 million units.”

Meanwhile, Ford Motor Co., after a solid Augustreported September sales were down 11.2% year over year, with drops even in its truck and SUV sales of 9.9% and 2.7%, respectively. Ford car sales were down 25.7% in the month.

Fiat Chrysler, on the hand, reported a 15% increase compared with September 2017 sales.

“Our Ram and Jeep brands propelled both our retail and total sales to their highest levels in 18 years,” said Reid Bigland, head of U.S. sales, in a prepared statement.

Honda’s U.S. sales were down 7.0% year over year, while Nissan was down 12.2%.

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This morning in metals news, steel production in China could be at a peak, Tesla missed its Model 3 weekly production target and U.S. steel capacity utilization hit 79.2% last week.

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Steel Peak

According to a Bloomberg report, China is at peak steel this year, with a decline in production forecasted for next year.

The report cites studies by the Australian government, the world’s top iron ore producer.

Hitting the Brakes

Tesla has missed its weekly production target for its Model 3, Reuters reported, and cited tariffs for its struggles in the Chinese market.

However, the maker of electric vehicles produced 80,000 vehicles in Q3, according to the report.

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Capacity Utilization Rate Hits 79.2%

The U.S. steel capacity utilization rate hit 79.2% for the week ending Sept. 29, according to an American Iron and Steel Institute (AISI) report.

Year-to-date production is up 4.5% compared with the same time frame in 2017.

MetalMiner’s Take: U.S. steel capacity utilization rate seems to be increasing, reaching 79.2% at the end of September.

In 2017, capacity utilization rate for the same week was 73.4%. An increasing capacity utilization rate is driving lower steel imports in the U.S., which fell 1% from July to August.

Higher domestic production may move domestic steel prices lower. Supply concerns are easing; however, the potential ArcelorMittal disruption could create uncertainty again and move domestic steel prices higher.

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This morning in metals news, the U.S. and Canada have reached a deal on the North American Free Trade Agreement (NAFTA) after several weeks of talks, Secretary of Commerce Wilbur Ross said the steel and aluminum tariffs on Canada and Mexico will remain in place, and copper prices are down on account of perceived drops in Chinese demand.

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Just in Time

In before a Washington-imposed deadline, Canada and the U.S. reached a deal on NAFTA late Sunday, which would keep the deal a trilateral arrangement (the U.S. and Mexico reached a preliminary agreement in August). The new deal is being called the United States-Mexico-Canada Agreement (USMCA).

“Late last night, our deadline, we reached a wonderful new Trade Deal with Canada, to be added into the deal already reached with Mexico,” President Donald Trump tweeted. “The new name will be The United States Mexico Canada Agreement, or USMCA. It is a great deal for all three countries, solves the many … deficiencies and mistakes in NAFTA, greatly opens markets to our Farmers and Manufacturers, reduces Trade Barriers to the U.S. and will bring all three Great Nations together in competition with the rest of the world. The USMCA is a historic transaction!”

United States Trade Representative Robert Lighthizer and Canadian Foreign Affairs Minister Chrystia Freeland released a joint statement on the deal.

“Today, Canada and the United States reached an agreement, alongside Mexico, on a new, modernized trade agreement for the 21st Century: the United States-Mexico-Canada Agreement (USMCA). USMCA will give our workers, farmers, ranchers and businesses a high-standard trade agreement that will result in freer markets, fairer trade and robust economic growth in our region.  It will strengthen the middle class, and create good, well-paying jobs and new opportunities for the nearly half billion people who call North America home.

“We look forward to further deepening our close economic ties when this new agreement enters into force.

“We would like to thank Mexican Economy Secretary Ildefonso Guajardo for his close collaboration over the past 13 months.”

Among the hangups for the U.S. in talks with Canada were dairy tariffs; however, the deal offers good news for U.S. dairy farmers, as it gives the U.S. greater access to the Canadian market.

Metals Tariffs Staying in Place

Even after the U.S. and Mexico reached their preliminary deal in August, questions remained regarding the U.S.’s Section 232 metals tariffs and whether they would remain in place with respect to Mexico (and Canada).

According to Secretary of Commerce Wilbur Ross, the new NAFTA — or USMCA, as it’s being called — will not result in the removal of the tariffs. Canada and Mexico initially had temporary exemptions to the steel and aluminum tariffs, but the exemptions were eventually allowed to expire June 1.

“There are problems specific to steel and aluminum relating to our national defense, and at this point of time, those stay the same,” Ross told Fox Business Network, as quoted by MarketWatch.

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Copper Slides on China Demand

Copper prices dropped on some not-so-positive news regarding Chinese demand, Reuters reported.

MetalMiner’s Take: A stream of bearish news out of China is having its impact on commodity prices.

For example, copper has shown weakness despite evidence from falling LME inventory that demand outside China remains firm.

Through the first five months of this year, China’s fixed-asset investment — a core driver of Chinese growth that includes spending on new buildings, machinery and infrastructure — grew at its slowest annual pace since at least 1995. Retail sales, an indicator of consumer demand, also increased at their slowest pace since 2003.

Investors are taking multiple data points indicating weakening demand and extrapolating slowing copper demand in the world’s largest consumer. Whether they are right depends in large part on the outcome of the current trade war with the U.S., to which an early resolution seems unlikely.

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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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This morning in metals news, copper and aluminum prices drop, Japanese steel exports fall and the U.S. and Canada still remain without a new deal vis-a-vis North American Free Trade Agreement (NAFTA) renegotiation efforts.

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Copper, Aluminum Prices Fall on Scaledown of China’s Winer Cuts

Copper and aluminum prices were both down Friday, partially stemming from news in China regarding its regimen of winter capacity cuts (aimed at reducing rampant pollution in the country).

According to Reuters, China’s decision to shy away from blanket winter cuts saw to a drop in copper and aluminum prices.

MetalMiner’s Take: LME copper prices decreased slightly this week.

However, LME copper prices have shown strength in September. Copper prices breached the $6,000/mt ceiling, back to July levels.

Meanwhile, LME aluminum prices traded more sideways this month.

China’s environmental curbs may create upward movement for the base metal, despite the decrease SHFE aluminum showed yesterday.

Winter cuts may reduce aluminum availability in a supply-concerned market.

Japan’s Steel Exports Drop

Japan’s August steel exports were down 0.9% compared with August 2017, according to S&P Global Platts.

However, exports were up 3.9% compared with July totals, according to the report.

NAFTA Standstill Continues

The U.S. and Canada have continued without having reached a deal on NAFTA, a month after the U.S. touted a preliminary deal with Mexico.

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According to Reuters, the U.S. plans on releasing the text of its trade agreement with Mexico, one that largely excludes Canada, according to lawmakers briefed on the text Thursday.

The Senate Finance Committee hosted a hearing on the impact of tariffs on the automotive industry Wednesday morning.

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The Department of Commerce self-initiated a Section 232 investigation of automobiles and automotive parts back in May.

“In short, the U.S. auto industry is a major driver of the U.S. economy, supporting approximately 10 million American jobs and accounting for 3 percent of our GDP,” Finance Committee Chairman Orrin Hatch (R-Utah) said during opening remarks. “Without question, any tariffs that are imposed will have a negative impact on the U.S. auto industry and our economy. Our focus should be on building on the benefits from our historic tax reform achievement earlier this Congress.

“Our trade policy should strengthen our relationships with our allies while targeting China’s most harmful trade practices. Tariffs on autos and auto parts are not going to help us achieve any of these things.”

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