Author Archives: Fouad Egbaria

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This morning in metals news, aluminum producers in the Middle East say any Section 232 measures implemented by the U.S. will ultimately only impact the American consumer, U.S. steel production was down last week and the next round of North American Free Trade Agreement (NAFTA) talks will start a little earlier than previously announced.

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The Impacts of Section 232? Will Only Hurt U.S. Consumers, Middle East Producers Say

Should the U.S. impose duties on aluminum imports — thus concluding its Section 232 investigation — U.S. consumers will be the only ones impacted, according to Middle East aluminum producers.

As reported by Platts, Middle East aluminum producers, meeting at the Arabal 2017 conference in Muscat, Oman, questioned the impact of trade remedies stemming from Section 232.

Tim Murray, CEO of Aluminium Bahrain, said that any measures will “ultimately be a tax on consumers.”

U.S. Raw Steel Production Drops 1.4%

Raw steel production in the U.S. dropped 1.4% for the week ending Nov. 4, with a total of 1,715,000 net tons (NT) produced, according to American Iron and Steel Institute (AISI) data.

Adjusted year-to-date production through Nov. 4 was 76,474,000 net tons, which is up 3.9% from the 73,583,000 net tons during the same period last year.

NAFTA Talks Moved Up

With a fifth round of NAFTA renegotiation talks scheduled for Nov. 17-21 In Mexico City, some aspects of the discussions will actually begin a little bit early.

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According to a Reuters report, talks on some issues will kick off Nov. 15.

Textiles, services, labor and intellectual property are among the subjects that could be discussed during the early meetings, according to one official quoted by Reuters.

The Automotive MMI was stuck in park for the month, holding at 93 for the second consecutive month.

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It was an up-and-down month for the automotive basket of metals. Chinese primary lead dropped 12.1%, while LME copper shot up 4.6%.

Bucking historical trends, palladium continued to be hotter than its fellow platinum-group metal, platinum. Palladium rose 5.1% on the month, while platinum posted a modest 0.8% gain.

Ford Drives October Sales

Ford Motor Co. led the way this past month, according to sales data released by Autodata Corp.

Ford’s October sales rose 6.4% year-over-year, although year-to-date sales through the month are down 1.9% compared to the same time frame last year.

General Motors, meanwhile, saw a 2.3% year-over-year dip in October with 252,614 units sold in the U.S. market. In the year to date, GM’s sales are down 1.0%.

Despite the drops in year-to-date sales, both GM and Ford are doing well in one particular market: trucks.

While there is increasing momentum behind electric vehicles (EVs) and greener energy, in general, light truck sales for both GM and Ford are up, 6.6% and 3.6%, respectively, through the first 10 months of the year. Across all automotive brands, light trucks sales were up 3.6% year-over-year in October, and are up 4.3% through the first 10 months of the year.

Even so, as our Stuart Burns wrote last week, the big brands are preparing for the future.

“The auto industry is certainly going through challenging times. In some quarters there is an expectation the established old order will be swept away by new challengers, such as Tesla,” he wrote. “The fact is, however, the incumbents have a huge depth of experience in supply chains, manufacturing, marketing and distribution.

“After an arguably slow start, they are moving swiftly to both develop new technologies in-house and to buy smaller firms in areas they recognize they lack the skills or expertise.”

Down the sales list, Fiat Chrysler saw a 13.2% year-over-year drop in October. Fiat sales are down 8.4% in the year to date.

Speaking of EVs, it wasn’t the best month for Tesla. Again, small sample sizes notwithstanding, Tesla’s October sales were down 15.9% year-over-year (although they’re up 18.5% for the year to date).

Meanwhile, Toyota (up 1.1%), Honda (up 0.9%), Nissan (up 8.4%) and Volkswagen (up 10.7%) all posted sales in October.

BMW Recalls 1 Million Vehicles

In general automotive news, BMW announced Friday it was recalling 1 million vehicles in North America, Reuters reported.

According to the report, the recalls — most of which are in the U.S. — are related to two separate vehicle fire risks. Per BMW spokesman Michael Rebstock, the vehicle recalls could expand to other countries.

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This morning in metals news, China is looking to the World Trade Organization (WTO) to make its case with respect to the ongoing aluminum foil dispute with the U.S., copper and nickel are up, and Kobe Steel executives are deciding whether or not to resign.

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China, the U.S. and the WTO

According to a Reuters report, China has asked the WTO report for consultations regarding the recent U.S. Department of Commerce antidumping decision on Chinese aluminum foil.

China’s Ministry of Commerce submitted the request for supplementary consultations under the WTO dispute resolution mechanism on Nov. 3, according to the report.

Copper, Nickel Rise With EV Optimism

Copper and nickel saw their fortunes rise on Monday, according to Reuters, backed by optimism regarding the electric vehicle market, pollution crackdown in China and global economic strength.

Nickel rose 10% last week to hits its highest price since June 2015.

Kobe Execs Consider Resignation

According to a Reuters report, Kobe Steel executives will decide whether or not to resign following the results of an independent probe into the firm.

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The firm also plans on releasing an internal report regarding the company’s quality data falsification scandal, which has seen the company’s share price plummet in recent weeks and significantly dented the firm’s credibility in the global market.

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The Construction MMI dropped a point for the second consecutive month, falling from 90 for a November reading of 89.

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There were not many significant movements in either direction within the basket of metals. Chinese rebar rose in price, while Chinese H-beam steel dropped. U.S. shredded scrap, meanwhile, fell 6.3%. European commercial 1050 sheet aluminum also fell, dropping 1.3%.

Total Construction Spending

According to U.S. Census Bureau data released Nov. 1, total spending for September amounted to an estimated $1,219.5 billion, up from the revised August total of $1,216 billion.

September spending was up 2.0% from the September 2016 estimate of $1,195.6 billion. As for the year to date, during the first 9 months of this year construction spending amounted to $917.0 billion, which was up 4.3% from the $879.6 billion spent during the first nine months of 2016.

Spending on private construction amounted to a seasonally adjusted annual rate of $942.7 billion, or 0.4% below the revised August estimate of $946.2 billion. Residential construction was at a seasonally adjusted annual rate of $515.4 billion in September, only slightly lower than the revised August estimate ($515.6 billion). Nonresidential construction was at a seasonally adjusted annual rate of $427.3 billion in September, 0.8% below the revised August estimate ($430.6 billion).

Public construction, however, was up for the month.

In September, the estimated seasonally adjusted annual rate of public construction spending was $276.8 billion, 2.6% above the revised August estimate of $269.8 billion. Within the public construction umbrella, educational construction was at a seasonally adjusted annual rate of $71.9 billion, or 5.2% above the revised August estimate of $68.3 billion. Highway construction was at a seasonally adjusted annual rate of $84.3 billion, 1.1% above the revised August estimate of $83.4 billion.

ABI Shows ‘Modest Slowdown’ in Billings

According to the most recent Architecture Billings Index (ABI), put out by The American Institute of Architects, billings slowed down in the month of September.

The ABI posted a 49.1 for the month (a reading of 50 indicates no growth, while anything below 50 indicates a drop in billings). The September figure broke a multimonth streak of billings growth.

However, the ABI report cautions against hasty reactions to the relatively down month.

“Billings have been growing at a strong pace in recent months, so it is too early to determine whether this is a new trend or just a modest course correction,” the report states.

The impact of Hurricanes Irma and Harvey, which rocked Florida and Texas, respectively, also showed in this month’s batch of data.

“The general economy showed more signs of the impact of the hurricanes in September, with nonfarm payroll employment posting its first monthly decline in seven years,” the ABI report states.

Nonetheless, in this month’s ABI survey questions, a majority of construction firms indicated either it was still early to ascertain the scope of any potential impacts to projects as a result of the hurricanes or that they had not seen any impacts to date.

According to the survey results, three-fourths of respondents said they have not seen any hurricane-related impacts on their projects (49%) or that it was too early to tell (26%).

Probing into the results further: 12% of respondents indicated they have seen higher construction materials prices from companies impacted by the hurricane; 8% have seen higher energy prices due to refineries affected by the hurricanes; 7% have seen labor shortages due to increased demand from areas affected by the hurricanes; and 6% have seen construction material shortages due to increased demand from areas affected by the hurricanes.

On the other hand, only 5% of firms nationally said they had to cancel or delay projects due to the hurricanes (unsurprisingly, that figure rises to 12% when focusing specifically on firms based in the South region).

Broken down by region according to billings from September 2016-September 2017, the Northeast led the way with a ABI reading of 56.9, followed by the South (54.0), the Midwest (50.4) and the West (48.4).

The Housing Market

As always, the U.S. housing market is something to keep an eye on.

According to Census Bureau data released last month, privately owned housing starts in September dropped 4.7% below the revised August estimate. Single-family housing starts were down 4.6% for September from the previous month.

The next new residential construction report is scheduled to be released Nov. 17.

As for existing-home sales, the National Association of Realtors (NAR) put out a rosy outlook for 2018.

The NAR’s chief economist, Lawrence Yun, estimated existing-home sales will finish at a pace of 5.47 million, which would be the best number since 2006 (6.47 million). However, that number would represent a 0.4% uptick from from 2016 (5.45 million).

In 2018, sales are forecast to rise 3.7% to 5.67 million, according to the NAR.

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The Renewables MMI dropped a few points this month, falling from 83 for a November reading of 80.

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The sub-index dropped for the second consecutive month after hitting a 2017 high of 84 for the September reading.

Within the basket of metals, Japanese steel plate, Korean steel plate, U.S. steel plate and U.S. grain-oriented electrical steel (GOES) coil all posted price drops. Chinese steel plate, however, posted a slight price increase.

Cobalt in Cobalt

As demand for electric vehicles (EVs) increases, so, too, will demand for that rare but vital metal: cobalt.

Most of the world’s cobalt is mined in the Democratic Republic of Congo — political instability there this year has led to production slowdowns and skyrocketing prices, leading some batterymakers to recalibrate their battery formulas to make their batteries less dependent on cobalt.

Speaking of cobalt, one aptly named town is experiencing a boom related to the metal.

Bloomberg earlier this week reported on the town of Cobalt in Canada’s Ontario province.

Ironically, the town was built on another metal — silver — but a recent “cobalt rush,” in line with growing global demand for cobalt, has breathed new life into the small town, Bloomberg reported.

While the DRC produces a majority of the world’s cobalt, Canada sits at third in cobalt production behind China, contributing about 6% of global supply. As the Bloomberg report indicates, political instability in the DRC could lead to growing demand from other sources, like Canada, where the business climate is more predictable.

“This area’s seen more airborne surveys in the last year than in the last hundred,” said Gino Chitaroni, a local prospector and geologist, to Bloomberg. “Two years ago, if you had a cobalt property you couldn’t give it away. All of a sudden, within six months, everything changed.”

Cobalt, Ontario, is just one example of a town experiencing such a boom. As EVs become more and more prevalent, there’s no doubt others will follow in its footsteps.

The Kobe Steel Saga

Kobe Steel, Japan’s third-largest steelmaker, has been in the news in recent weeks because of the firm’s quality data falsification scandal.

Of relevance here, as reported by Reuters, is the fact that steel plate is included in the scope of the problems for Kobe.

According to Reuters on Oct. 19, Kobe Steel Executive Vice President Naoto Umehara said the company had found a new case of falsification of data at a unit that cuts and processes steel plate.

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This morning in metals news, a rival of Kobe Steel has taken orders from Kobe customers, a Chinese metals magnate grapples with governmental control and 3D printing can strengthen stainless steel.

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UACJ Snaps Up Kobe Orders

Japanese aluminum fabricator UACJ Corp — a rival of Kobe Steel, currently suffering the fallout of its quality data falsification scandal — has come out a winner where Kobe has lost.

According to Reuters, UACJ has picked up orders from customers of Kobe. Mitsuru Okada, president of UACJ, said the company has received orders to replace Kobe products that were sold to  manufacturers of cars, planes, trains and more.

Hongqiao Chairman Faces Tightening State Control

Zhang Shiping, chairman of the world’s largest aluminum producer (China Hongqiao), may be faced with increasing state control of business going forward.

A Bloomberg report Wednesday outlines some of the challenges Shiping and his firm face.

Strengthening Stainless

According to a report in Science magazine, 3D printing can double the strength of stainless steel.

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The development could have far-reaching implications — namely, a way to print tough and flexible stainless steel and, moreover, faster and cheaper production of things like rocket engines or parts for nuclear reactors and oil rigs, according to the report.

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The European Steel Association (Eurofer) had good news about the EU steel sector last week, albeit with a caveat.

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According to a report from Eurofer last week, EU investment in steel and its exports have trended positively.

“Strengthening investment and robust exports are boosting the performance of steel-using sectors in the EU,” the report states. “Steel demand is expected to continue its gradual recovery in 2018.”

The report continues with a caveat.

“However, increasing import pressure in in the second quarter of 2017 signals that foreign supply remains a critical issue for the EU steel sector.”

Steel consumption in the EU dipped slightly in the second quarter compared to the first quarter, according to the report. As a result, EU domestic suppliers suffered. Deliveries by EU domestic suppliers in the second quarter fell 3.5% year-over-year. In addition, third country imports rose by 10% year-over-year.

“The relative balance between growth in domestic and foreign supply seen in the first quarter of 2017 was reversed at the expense of EU steel mills,” said Axel Eggert, director general of Eurofer, in a prepared statement. “Despite a reduction in imports from China and several other countries owing to corrective anti-dumping duties put in place third country import volumes have risen again in the second quarter.”

Overall, however, EU steel consumption for 2017 is forecast to rise 2.3%. The report also notes that steel demand is expected to continue its “gradual recovery” into next year (a recovery dating back to 2014). The report cites the “expected rise in real steel consumption in the EU market and very modest support from the stock cycle” as factors underpinning the ongoing bounceback.

As for steel-using sectors, the report states production activity grew by 3.1% year-on-year. Moreover, first-quarter growth was revised up to 6.3% (compared to the same period in 2016).

“We welcome the healthy performance of relatively steel-intensive sectors,” Eggert said in the release. “These include the automotive and engineering industries, as well as tube manufacturers, over the first half of 2017. Growth in the construction industry was the strongest it has been for many years and clearly reflects improving fundamentals in this important steel-using segment.”

Eurofer expects total output to continue to trend positively throughout the remainder of the year, building on the momentum of the first half. Total output is forecast to rise by 4.2% for the year, according to Eurofer.

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Despite import pressures, the total economic picture for the EU bloc leaves room for optimism. Eurofer’s October outlook forecasts GDP growth of 2.1% this year and 1.9% for 2018.

“The business climate looks set to remain supportive to continued healthy investment growth, whereas private consumption growth is foreseen to slow down somewhat,” the report states. “In combination with stable growth of government consumption, domestic demand will be the major driver of economic growth in the EU.”

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This morning in metals news, U.S. manufacturers are pleased that the U.S. Department of Commerce’s ruling in a recent antidumping case treats China as a non-market economy, BHP looks to meet copper demand with more drilling and U.S. Steel reports its third-quarter earnings.

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Manufacturing Group Praises DOC’s China Decision

The Manufacturers for Trade Enforcement (MTE) expressed their support for the Department of Commerce’s recent antidumping ruling on Chinese aluminum foil (for which dumping margins were assigned based on the department’s non-market economy dumping methodology).

“Fair international competition and a level playing field are essential for the global competitiveness of U.S. manufacturers,” said Thomas J. Gibson, president and CEO of the American Iron and Steel Institute and co-chairman of the MTE. “China has not met the statutory criteria to be treated as a market economy, and we applaud our government’s commitment to ensuring China is not prematurely awarded market economy status.

“Substantial state intervention in the Chinese economy has resulted in significant overcapacity in many manufacturing sectors in China while also distorting global markets and hurting American manufacturers. Jobs have been lost in all of our industries. China should not be afforded market economy status while still maintaining a state-controlled economic system that encourages unfair trade practices that injure multiple U.S. industries.”

BHP Aims to Meet Copper Demand

Miner BHP, in efforts to meet growing copper demand in an increasingly electrified automotive market, is turning to the drill, according to Reuters.

According to the report, BHP’s copper exploration budget has hovered at an annual average of $60 million the last 4-5 years.

U.S. Steel Posts Solid Third Quarter

U.S. Steel reported third-quarter net earnings of $147 million, or $0.83 per diluted share. Third quarter 2016 net earnings were $51 million, or $0.32 per diluted share.

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“Our third quarter results were modestly better than we expected, with stable operating performance at each of our segments and our Tubular segment producing positive EBITDA in the quarter,” said Dave Burritt, U.S. Steel’s president and CEO, in a release. “Our results for the first nine months of 2017 improved over the first nine months of 2016, with all three of our segments improving compared with 2016.”

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This morning in metals news, growth in China’s steel industry has slowed down significantly, U.S. steel production was up 8.6% year-over-year and a Russian firm launches a new copper and gold mine near the Chinese border.

Chinese Steel PMI Falls to 6-Month Low

The Chinese steel Purchasing Managers’ Index (PMI) fell to a 6-month low this month as the government attempts to curb pollution, according to a Reuters report.

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This month, the PMI dropped to 52.3 from 53.7.

U.S. Steel Production Up 8.6%

Through the month of September, U.S. steel production was up 8.6% year-over-year, according to a report by the Northwest Indiana Times.

According to the report, citing stats from the World Steel Association, steel output rose by 5.6% internationally in September compared to September 2016.

Russia’s Norilsk Opens New Mine Near Chinese Border

The Russian firm Norilsk Nickel has launched a new copper, iron and gold mine near the Chinese border, according to Reuters.

The project, situated about 250 miles by rail from the border, will send iron ore exports to China.

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Chinese copper demand continues to be strong. According to the report, Shanghai copper futures have surged 18% this year.

The U.S. Department of Commerce. qingwa/Adobe Stock

One day after issuing an affirmative ruling in one case, the U.S. Department of Commerce announced it had opened a new investigation.

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On Wednesday, Oct. 25, the department announced an affirmative preliminary determination in an antidumping investigation of carbon and alloy steel wire rod from Italy, the Republic of Korea, South Africa, Spain, Turkey, Ukraine and the United Kingdom.

On Oct. 26, the department announced it was opening a new antidumping probe of imports of forged steel fittings from Italy, China and Taiwan. The announcement also cited a related countervailing duty probe of Chinese forged steel fittings.

“The Department of Commerce intends to act swiftly to halt any unfair trade practices, while also assuring a full and fair assessment of the facts,” Secretary of Commerce Wilbur Ross said in a prepared statement. “The U.S. market is the most open in the world, but we must take action to ensure U.S. businesses and workers are treated fairly if our rules are being broken.”

The antidumping and countervailing duties probes stem from petitions filed Oct. 5 by two Pennsylvania entities: the Bonney Forge Corporation (Mount Union, Pennsylvania), and the United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International Union, of Pittsburgh.

According to the release, estimated dumping margins alleged by the petitioners are 142.72% for China, 18.66% to 80.20% for Italy and 116.17 % for Taiwan.

Forged steel fittings coming into the U.S. from the three countries amounted to a total value of $114.7 million (with China’s share at an estimated $78.4 million).

A Victory for U.S. Aluminum Producers

The Department of Commerce also late Friday announced an affirmative ruling in its antidumping probe of aluminum foil from China.

The department’s preliminary determination stated Chinese exporters of aluminum foil sold their product at prices that resulted in preliminary dumping margins of 96.81% to 162.24% to be applied.

The petitioner in the case was the Aluminum Association Trade Enforcement Working Group.

According to the Department of Commerce, last year’s imports of aluminum foil from China were valued at an estimated $389 million.

The Aluminum Association released a statement praising the Department of Commerce’s decision.

“Following the positive preliminary countervailing duty determination this summer, the association and its foil-producing members are very pleased with this finding that again underscores the Commerce Department’s commitment to combatting unfair trade,” said Heidi Brock, president and CEO of the Aluminum Association, in the release.

“We appreciate Secretary Ross’s leadership in enforcing rules-based global trade. U.S. aluminum foil producers are among the most competitive producers in the world, but they cannot compete against products that are sold at unfairly low prices and subsidized by the Government of China.”

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A final determination is scheduled to be made Feb. 23, 2018.