Author Archives: Fouad Egbaria

Our September MMI report is in the books — overall, it was another strong month for metals.

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For our latest batch of readings, all 10 of the MMI sub-indexes posted upward movement.

It was a big month for aluminum, as the Aluminum MMI rose 8.2% and LME aluminum jumped 10.73% through the month. The Construction and Automotive MMIs also had solid months, while the Copper MMI shot up 7.7% in what was another good month for Dr. Copper.

Meanwhile, in policy news, last week the U.S. Department of Commerce launched an anti-dumping and countervailing duty investigation into stainless steel flanges from China and India. As our Irene Martinez Canorea wrote in her Stainless MMI report, a preliminary determination in the case is coming Oct. 2.

In addition, today the DOC announced it had launched an investigation into imports of titanium sponge from Japan and Kazakhstan.

More broadly, the Section 232 investigations into aluminum and steel imports are still ongoing. It’s unclear when exactly a ruling will be made, but Secretary of Commerce Wilbur Ross has January deadlines to meet, as he is required to present President Donald Trump with a report and policy recommendations vis-a-vis the probes.

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You can read about all of the aforementioned — and much more — by downloading the September MMI report below.

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This morning in metals news, Chinese steel production once again hit a record last month, copper took a dip, and the gap between high-grade and low-grade iron ore grew larger as China attempts to combat its smog problem.

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Steel Output Hits New Record in China

Steel mills in China cranked up production levels en route to hitting a new monthly production record, according to Bloomberg.

According to the report, Chinese crude steel output hit 74.59 million metric tons in August, surpassing the previous peak of 74.02 million in July.

Copper Falls Back

Copper has been having a good year, but it fell to a four-week low Thursday as a result of what Reuters calls lackluster Chinese economic data.

What appears to be slowing demand from China, the world’s top metals consumer, contributed to the metal’s drop, according to the report.

Premiums Soar for High-Grade Iron Ore

Sticking with the China theme, Reuters reported the gap between high-grade and low-grade iron ore in China grew as a result of the country’s efforts to fight pollution.

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The trading gap between the two forms of ore was at its highest since August 2011, according to the report.

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This morning in metals news, U.S. primary aluminum is still low despite an increase in prices, China Zhongwang Holding announced it had purchased a German aluminum producer and associations representing steel, soybeans and poultry were united by the issue of steel tariffs.

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U.S. Primary Aluminum Production

Aluminum prices have been on a steady climb in recent months, but primary aluminum production remains low, according to a report in Hellenic Shipping News.

In fact, since January 2015, the country’s primary aluminum production has dropped 50%.

Zhongwang Makes Investment

China Zhongwang Holding announced Wednesday that it is making an investment in a German aluminum producer Aluminiumwerk Unna AG, according to state-owned news agency Xinhua.

The value of the deal has yet to be disclosed, according to the report, but the acquisition is part of Zhongwang’s effort for an increased presence in the aircraft aluminum market.

Steel, Soybeans and Chicken

Associations representing steel, soybeans and chicken came together this week to express their belief regarding the potential negative impact of steel tariffs.

Platts reported that the American Institute for International Steel, the National Chicken Council and the American Soybean Association published a new report covering the impacts of steel tariffs on supply chains.

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The Trump administration’s Section 232 investigation into steel imports is ongoing. The probe, launched in April, has a January deadline for completion.

Hurricane Harvey left a trail of destruction throughout southeastern Texas and southwestern Louisiana. Those impacted regions have a long road to recovery.

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But not long after Harvey, Hurricane Irma made landfall in the continental United States, compounding the havoc wreaked by Harvey.

According to Dr. Joel N. Myers, founder, president and chairman of AccuWeather, Irma will prove to have been the worst hurricane to hit Florida since Hurricane Andrew in 1992.

Millions of Floridians lost power because of Irma. According to the Department of Energy, there were 4,864,148 customer outages in Florida, or 49% of the state, as of Tuesday morning. That figure is down from the 6,117,024 reported customer outages as of Monday afternoon — or a whopping 59% of the state.

The storms, one after the other, marked the first time in 166 years of weather records that two Atlantic Category 4 hurricanes made landfall in the United States in the same year.

Like Harvey, the extent of Irma’s damages will become clear over time, but there will certainly be significant damages to homes and other properties, and even vehicles. Enki Research estimated damages may reach $49 billion.

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This morning in metals news, raw steel production this year through Sept. 9 is up 3.3% compared with the same period last year, U.S. steel shipments in July fell by 3.3% compared with the previous month and Tata Steel‘s shares surged after the news regarding its separation from its U.K. pension scheme.

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Steel Production On the Rise

According to weekly data from the American Iron and Steel Institute (AISI), U.S. raw steel production for the week ending Sept. 9 amounted to 1,733,000 net tons.

The week’s production marked an 8.9% increase from the same week in 2016, but a 0.8% decrease from the week ending Sept. 2.

In the year through Sept. 9, however, production has hit 62,633,000 net tons, up 3.3% from the same period in 2016.

July Steel Shipments Dip From June Total

According to AISI data, U.S. steel mills shipped 7,480,241 net tons in July, a 3.3% decrease from the 7,736,846 net tons shipped in the previous month. The July total, however, marked a 1.7% increase from the 7,352,698 net tons shipped in July 2016.

The AISI report said shipments for the year-to-date are 52,939,327 net tons, up 2.8% increase versus shipments during the first seven months of 2016.

Tata Steel Shares Jump After Pension Scheme News

After settling its pension liability scheme in the U.K., Tata Steel shares jumped 3%, the Economic Times reported.

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As part of the agreement in which the Indian company separated the British Steel Pension Scheme from its U.K. business, Tata was required to make a payment of £550 million and offer a 33% stake in Tata Steel UK to trustees of the pension scheme, according to the Economic Times.

The Renewables MMI rose seven points in August, reaching a reading of 84.

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The basket of metals in this sub-index posted a strong month. Steel plate from Japan, Korea and China rose in the month. U.S. steel plate, however, fell 4.6%.

Meanwhile, in the topsy-turvy world of grain-oriented electrical steel (GOES), the U.S. GOES price jumped 7.3%.

Of the nine metals in the sub-index, only one (U.S. steel plate) posted a drop in price as of Sept. 1. Chinese silicon, cobalt and neodymium all also posted price gains.

Charged Up for Cobalt

Last month, we wrote about cobalt, which is in high demand for its application in electric vehicle batteries. Cobalt is mined predominantly in the Democratic Republic of Congo, which has been shaken by violence and political instability this year.

The instability there has seen production in the DRC decrease this year, yielding significant price increases in the metal. As we wrote last month, the instability of cobalt (not to mention growing ethical concerns vis-a-vis child labor at mines) has some battery makers looking to adjust their metal formulas, in some cases suggesting the use of more nickel, instead.

According to a Reuters report, however, cobalt has been boosted by projections touting a rise in purchases of electric vehicles. According to the report, UBS forecasted electric vehicles will account for 3.1% of global car sales in 2021 and 13.7% in 2025, up from 1% this year.

In addition, cobalt listings have skyrocketed, the report says. As of the end of July, 100 companies that explore or mine for cobalt were listed on the Toronto Stock Exchange and TSX Venture Exchange, up from fewer than 30 in 2015, according to SNL Financial.

In short, despite issues of supply volatility — and, thus, material cost — cobalt’s profile continues to rise in tandem with the rise of electric vehicles.

What About U.S. Steel Plate?

Like the rest of the U.S. steel industry, steel plate producers are anxiously awaiting the Trump administration’s determination in its Section 232 investigation of steel imports.

The investigation, announced in April, has a January deadline. The investigation picked up steam earlier on in the summer, but has seemingly been put on the backburner for the time being. As such, initial optimism from U.S. steel producers regarding potentially imminent trade action stemming from the investigation began to wane.

In a letter to the Trump administration last week, the American Line Pipe Producers Association (ALPPA) urged the president to take action, also mentioning steel plate in the process.

“The ALPPA strongly supports the imposition of tariffs to address this crisis,” wrote Timothy Brightbill, counsel to the ALPPA. “With tariffs in place, we could quickly return to full capacity, adding hundreds of direct jobs in addition to upstream and downstream jobs as well.

“However, in order for tariffs to be effective for our industry, steel pipe must be included in any tariff covering steel coil and plate, as failure to do so would be devastating for domestic large diameter line pipe producers and workers.”

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This morning in metals news, a U.S. line pipe producing association is the latest group to urge President Donald Trump to act vis-a-vis Section 232, Tata Steel officially sheds a major pension liability and the U.S. once again invokes the possibility of withdrawing from the North American Free Trade Agreement (NAFTA).

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ALPPA Asks Trump Administration to Take Action

The American Line Pipe Producers Association (ALPPA) is the latest U.S. metals association to petition the Trump administration to take action regarding its ongoing Section 232 investigation.

The Trump administration launched Section 232 investigations into steel and aluminum imports back in April, and has January deadlines for both.

In a letter to the Trump administration, Timothy Brightbill, counsel to the ALPPA, wrote: “There is an urgent need for immediate Section 232 relief for the domestic large diameter line pipe industry. The large diameter line pipe industry continues to face a sustained surge in imports, largely driven by global overcapacity. Chinese producers are increasingly shipping greater volumes of dumped and subsidized steel to other countries for production of large diameter line pipe that can then be shipped to the U.S. market at lesser duty rates or, in many cases, duty free.”

Tata Steel Gets Rid of U.K. Pension Scheme

One major holdup in Indian steel giant’s merger talks throughout the last year has been its £15 billion U.K. pension scheme, The Telegraph reported.

After much effort, Tata has finally rid itself of the massive pension liability, which should make merger talks go a little more smoothly.

Ross Adds NAFTA Threat of His Own

As the U.S, Mexico and Canada continued NAFTA renegotiation talks earlier this month, Trump, on numerous occasions, has threatened to pull the U.S. out of the trade deal.

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On Friday, Secretary of Commerce Wilbur Ross further backed up the president’s comments about the 23-year-old trade deal, restating the president’s assertions that if a negotiated solution favorable to the U.S. can’t be reached, withdrawal is a serious possibility (if not a certainty).

The Rare Earths MMI ticked up one point for a September reading of 24.

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After hitting 29 in April 2015, the sub-index fell as low as 16 last year before slowly climbing back up this year with an uptrend that began in March.

For this MMI period, several of the sub-index’s heavy hitters posted strong months. Chinese terbium oxide rose 2% and Chinese dysprosium oxide rose 5.6%. Neodymium oxide rose a whopping 35% in the month.

An overwhelming majority of rare-earth metals production comes from China, and the metals are crucial for use in things like computers, phones and other electronic devices.

According to a recent report on nasdaq.com, China’s Rare Earth Industry Association recently proposed “releasing some of the country’s reserves and suspending the purchase and storage of additional volumes to ease price volatility for the raw materials that are crucial to mobile phones and electronics.”

Reuters’ Andy Home recently wrote about the topsy-turvy world of rare-earth metals prices.

“The prices of neodymium and praseodymium oxide are going stratospheric again, up by over 80 percent since the start of the year,” Home wrote. “As ever with rare earths, this is all about what is happening in China, the world’s dominant producer of these critical materials.”

Rare earths have come a long way since the market collapsed underneath them in 2012. The Financial Times reported last month that the price of two rare earths, neodymium and praseodymium, has jumped by more than 50% this year.

In short, Chinese policies significantly impact the direction of the global market.

The question, as it often is with the rare earths market’s peaks and valleys: when is the next valley?

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This afternoon in metals news, steel imports are up 21.4% through the first eight months of the year, a report considers whether copper’s run will last and China has agreed to loan Guinea $20 billion in exchange for concessions on the country’s bauxite reserves.

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Steel Imports Up 21.4% This Year

The American Iron and Steel Institute (AISI) released steel import data earlier this week showing that total steel imports have risen 21.4% through the first eight months of this year compared with the same time frame in 2016.

According to the report, steel import permit applications in August totaled 3,572,000 net tons (NT).

The largest finished steel import permit applications for offshore countries in August were for: South Korea (418,000 NT, up 24% from July preliminary), Germany (141,000 NT, down 5%), Turkey (132,000 NT, down 48%), Taiwan (115,000 NT, down 4%) and Japan (107,000 NT, down 22%).  Through the first eight months of 2017, the largest offshore suppliers were South Korea (2,683,000 NT, down 1% from the same period in 2016), Turkey (1,855,000 NT, up 9%) and Japan (1,044,000 NT, down 18%).

Can Copper Keep Up the Pace?

Copper has been on a tear, earlier this week hitting a three-year high.

But can it last? Is the metal due for a market correction?

A report on nasdaq.com speculated about the future of the metal.

“While copper has lately been enjoying a stellar run, analysts are skeptical about the sustainability of the recent price rally,” the report states. “Many believe that prices of the metal will come under pressure as the market remains adequately supplied and demand is not strong enough.”

China Makes Deal on West African Nation’s Aluminum Ore

On Wednesday, China agreed to loan Guinea $20 billion over 20 years in exchange for concessions on the country’s bauxite reserves, Reuters reported.

Guinea is Africa’s leading bauxite producer.

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According to Guinean Mines Minister Abdoulaye Magassouba, the revenues generated from the mines would be used to pay for infrastructure in the country.

The Construction MMI jumped eight points for our September reading, rising from 83 to 91.

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According to U.S. Census Bureau data released Sept. 1 for the month of July (the most recently available data), U.S. construction spending amounted to $1,211.5 billion, down from the revised June total of $1,219.2 billion.

However, construction spending from January-July amounted to $691.2 billion, up 4.7% from the $659.9 billion for the same period in 2016.

Spending on private construction dipped 0.4% to a seasonally adjusted annual rate of $945.5 billion, down from the revised June estimate of $949.4 billion.

As for public construction, the estimated seasonally adjusted annual rate of spending was $266.0 billion, 1.4% below the revised June estimate of $269.8 billion.

As for the individual metals in this particular basket, every single one posted a price increase for the month. Chinese rebar steel, H-beam steel, and aluminum bars all posted sizable price increases. The European 1050 aluminum sheet price also rose, as did U.S. shredded scrap steel.

ABI Shows Continued Upward Trend

Although overall spending was down in July, the Architecture Billings Index (ABI) painted a positive picture for the month.

The ABI, put out by the American Institute of Architects, showed architecture firms continued to grow. All four regions included in the ABI — South, Midwest, West and Northeast — posted an uptick in architecture billings on the month. With a score of 50 indicating no movement, the South and Midwest led the way with scores of 53.8, followed by the Northeast at 53.6 and the West at 50.9.

Another major takeaway from the survey was the increased interest in 3D printing.

“Almost 30 percent of architecture firms have some experience with the applications of this technology,” the ABI report read. “About half of these have used it in-house on billable projects, while others are testing it, outsourcing it, or have design partners, subcontractors, or construction firms that are using the technology. When last surveyed on this topic a little over a year ago, about 20 percent of architecture firms had some involvement with 3D printing, so adoption seems to be increasing at a brisk pace.”

NAFTA and Section 232

The Trump administration’s Section 232 probes into steel and aluminum imports have yet to be publicly concluded. As the world’s No. 1 steel importer, imposition of tariffs (or quotas) on imports would certainly have a ripple effect across all industries, including construction.

As for the North American Free Trade Agreement (NAFTA), the second round of negotiations concluded earlier this week, with the parties having reached very little in the way of breakthroughs, according to Bloomberg.

From a metal perspective, as mentioned before, an overwhelming majority of Canadian steel exports go to the U.S. As with Section 232, if Trump follows through on numerous threats to withdraw the U.S. from the 23-year-old trilateral trade deal, supply chains would be impacted.

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