Author Archives: Fouad Egbaria

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This morning in metals news, China says it hopes to reach a compromise with the U.S. on trade, the U.S. Department of Commerce self-initiated an investigation related to imports of corrosion-resistant steel products and iron ore prices continue to slide.

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Looking for a Deal

Chinese government officials recently expressed the willingness to do what is necessary to combat U.S. tariffs while also indicating a desire to reach the U.S. “halfway” for a trade deal.

The U.S.’s imposition of a 10% tariff on an additional $300 billion on Chinese goods is set to go into effect Sept. 1. Tensions were dialed back slightly this week when the United States Trade Representative announced that tariffs on select items from the $300 billion tariff list, including cellphones and laptop computers, would be delayed until later this year.

“We hope the U.S. side will meet China half-way, and implement the consensus reached by the two leaders during their meeting in Osaka, and look for mutually acceptable solutions through dialogue on the basis of equality and mutual respect,” said Hua Chunying, a Chinese foreign ministry spokesperson, as quoted by CNBC.

DOC Launches Circumvention Probe

The U.S. Department of Commerce plans to investigate possible circumvention with respect to imports of corrosion-resistant steel products from Costa Rica, Guatemala, Malaysia, South Africa and the United Arab Emirates.

“In these inquiries, Commerce will determine whether imports of CORE completed in Costa Rica, Guatemala, Malaysia, South Africa, and the UAE using Chinese-origin substrate, or imports of CORE completed in Malaysia using Taiwanese-origin substrate, are circumventing the antidumping duty (AD) and countervailing duty (CVD) orders on CORE from China or the AD order on CORE from Taiwan,” the Department of Commerce said in a release.

Iron Ore Prices Continue to Fall

Prices for the steelmaking material iron ore continue to fall after reaching five-year highs earlier this summer.

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According to Reuters, China’s stimulus spending has not been enough to offset the reintroduction of iron ore supplies to the market (after supply-side disruptions in Australia and Brazil earlier this year).

Source: The Coca-Cola Company

This morning in metals news, beverage maker Coca-Cola has announced it will shift to aluminum cans for its Dasani water brand, the U.S. Department of Commerce announced it found evidence of dumping of refillable stainless steel kegs from Mexico and China still plans to send trade officials to Washington next month for talks.

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Coca-Cola Announces New Dasani Packaging

In an effort to reduce plastic use and increase the use of recyclable materials, Coca-Cola announced plans to shift its Dasani water brand’s packaging from plastic bottles to aluminum.

“Updates to DASANI’s packaging line-up are designed to reduce plastic waste and increase the use of recycled and renewable materials in the United States, while ensuring that all DASANI bottles continue to be fully recyclable,” the company said.

Under the beverage maker’s proposed “World Without Waste” program, it aims to produce make its bottles and cans with an average of 50% recycled material by 2030. The company will roll out the water brand in aluminum cans in the northeastern U.S. in the fall (and 2020 everywhere else), and aluminum bottles in mid-2020.

U.S. Rules on Stainless Steel Keg Dumping Case

The U.S. Department of Commerce announced it had found evidence of dumping with respect to imports of stainless steel kegs from Mexico.

According to the department, the kegs were sold at less than fair value in the U.S. at a rate of 18.48%.

Last year, imports of the kegs from Mexico were valued at $13.4 million, according to the Department of Commerce.

China to Continue with Planned September Meetings

Despite the recent U.S. announcement of tariffs on an additional $300 billion in Chinese goods, Chinese trade officials still plan to visit Washington in September as planned, Bloomberg reported.

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However, according to a source cited by Bloomberg, China is unlikely to make concessions next month.

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

After a July in which seven of 10 MMI indexes moved upward, this month a majority of the indexes retraced.

Six MMIs declined, three moved up and one held flat (the Copper MMI).

A few highlights from this month’s round of MMI analyses:

  • U.S. construction spending in June fell 2.1% on a year-over-year basis.
  • Despite a 0.8% rise in the LME aluminum price, the Aluminum MMI retraced on global demand weakness.
  • Glencore announced plans to halt production at its Mutanda cobalt and copper mine by the end of this year, which would take approximately 20% of the world’s cobalt off the market.
  • Surging nickel prices led a six-point increase in the Stainless MMI.

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This morning in metals news, the United States Trade Representative (USTR) announced the U.S. would delay some of the recently announced tariffs on Chinese goods, what could be the largest copper mine project in North America recently got a key approval from the U.S. Forest Service and a Turkish military pension fund has a £900 billion revival plan for British Steel.

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U.S. to Delay Some Tariffs

On Aug. 1, President Donald Trump announced the U.S. would impose a 10% tariff on an additional $300 billion in Chinese goods as of Sept. 1.

On Tuesday, however, the USTR said the tariffs for select items included in that tariff list would be pushed back to Dec. 15.

“Further, as part of USTR’s public comment and hearing process, it was determined that the tariff should be delayed to December 15 for certain articles,” the USTR said in a release. “Products in this group include, for example, cell phones, laptop computers, video game consoles, certain toys, computer monitors, and certain items of footwear and clothing.”

The USTR said it will conduct an exclusion process for the items included in the tariff list. In addition, it plans to publish information today related to the items affected by today’s announcement.

Resolution Copper Project Moves Closer to Go-Ahead

Rio Tinto’s Resolution Copper project in Arizona, which the miner says could be the largest in North America, has received an important approval from the U.S. Forest Service, Kitco News reported.

According to the report, the government agency issued a Draft Environmental Impact Statement for the project, which moves the Arizona project closer to development.

A £900B Revival Plan

A Turkish military pension fund has emerged as the favorite to take over the ailing British Steel, which went into liquidation earlier this year after it failed to secure a second government loan.

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According to Sky News, Ataer Holding has a £900 billion investment plan to nurse British Steel, the U.K.’s second-largest steelmaker, back to health.

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The Renewables Monthly Metals Index (MMI) fell four points this month for an August reading of 101.

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Glencore Shakes up Cobalt Market

As covered by MetalMiner’s Stuart Burns, Glencore announced it would halt production by the end of the year at the world’s largest cobalt mine: Glencore’s Mutanda operation in the Democratic Republic of the Congo (DRC).

Last week, the miner reported its adjusted EBITDA for the first half of the year came in at $5.6 billion, down 32% on a year-over-year basis, with CEO Ivan Glasenberg citing “a challenging economic backdrop.”

Among the challenges has been a plummeting cobalt price. As a result, the miner announced it will move toward pausing production at its Mutanda copper and cobalt mine.

“However, our African copper business did not meet expected operational performance,” Glasenberg said. “We have moved to address the challenges at Katanga and Mopani with several management changes as well as overseeing a detailed operational review, targeting multiple improvements to achieve consistent, cost-efficient production at design capacity.

“Our teams have identified a credible roadmap towards delivering on the significant cashflow generation potential of these assets, at targeted steady state production levels. At Mutanda, we are planning to transition the operation to temporary care and maintenance by year end, reflecting its reduced economic viability in the current market environment, primarily in response to low cobalt prices.”

So, what kind of impact will the removal of Mutanda’s cobalt — making up a whopping 20% of global supply — have on the market? Burns explained Glencore’s closure of zinc mines in 2015 is credited with the recovery of that market, so there is precedent for the maneuver.

In addition, the electric vehicle (EV) revolution hasn’t taken off perhaps as much as expected.

“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,” Burns said. “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.”

GOES

Meanwhile, the GOES MMI, which tracks grain-oriented electrical steel, picked up six points for an August reading of 197.

The U.S. GOES price hit $2,719/mt as of Aug. 1, up 3.2% from the previous month.

A.K. Steel, the lone remaining electrical steel producer in the U.S., announced its second-quarter earnings late last month. The firm brought in net income of $66.8 million in 2018, up from $56.6 million in Q2 2018.

Shipments in its stainless/electrical segment were down, however, coming in at 198,400 tons in Q2 2019, down from 221,500 tons in Q2 2018. For the first six months of the year, shipments amounted to 405,000 tons, down from 422,200 tons in the first half of 2018.

Meanwhile, German firm Thyssenkrupp, also a producer of electrical steel (with plants in Germany, India and France), has announced it will continue to move forward with realignment plans amid disappointing quarterly results.

For the quarter ending June 30, 2019, the firm’s adjusted EBIT came in at €226 million, down 32% from the €331 million for the same quarter in 2018.

In addition, the firm revised its full-year 2018-2019 forecast down to €0.8 billion from the previous forecast of €1.1 billion-€1.2 billion.

In addition to improving performance, the firm cited its planned partial IPO of its elevator business in 2019-2020 and efforts to improve organizational efficiency as part of its realignment efforts.

“The most important portfolio measure is the planned partial IPO of Elevator Technology,” the company said. “This will allow thyssenkrupp to sustainably strengthen its capital base and make the value of its elevator business visible. By retaining a majority interest, the Group will also continue to profit from future value growth. With the expected proceeds, the Group will increase its financial leeway for necessary restructuring and securing the future of its businesses.”

Actual Metal Prices and Trends

Japanese steel plate fell 0.4% month over month to $790.22/mt as of Aug. 1. Korean steel plate fell 5.4% to $564.33/mt. Chinese steel fell 1.2% to $611.40/mt.

U.S. steel plate dropped 9.8% to $781/st.

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Chinese neodymium dropped 13.7% to $55,911.60/mt. Chinese silicon fell 0.3% to $1,495.82/mt. Chinese cobalt cathodes fell 0.3% to $96,574.60/mt.

The Global Precious Monthly Metals Index (MMI) picked up one point this month for an August MMI reading of 102.

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Time for Safe Havens

Amid the latest jolt of trade uncertainty — namely, President Donald Trump’s intention to impose a 10% tariff on an additional $300 billion in Chinese goods — safe-haven metals prices have increased.

Gold, for example, last week moved over $1,500 per ounce for the first time in six years, Reuters reported, while silver prices have also gained momentum.

Demand for gold in the first half of the year was strong, according to the World Gold Council, rising 8% on a year-over-year basis. The demand was largely powered by central bank buying and a rise in holdings of gold-backed ETFs, according to the World Gold Council.

“June was a big month for gold,” said Alistair Hewitt, head of market intelligence for the World Gold Council. “The price broke out of a multi-year trading range to hit a six-and-a-half year high and gold-backed ETF assets-under-management grew by 15% – the largest monthly increase since 2012. While the Fed’s dovish turn was a key driver for this, it also builds on a strong H1 which saw gold demand hit a three-year high, underpinned by extremely strong central bank buying. But we also saw an uptick in sales at an individual level as investors took advantage of June’s price rally to lock-in profits; jewellery recycling and retail bar and coin liquidations both rose.”

Meanwhile, silver — which had been a bit undervalued — posted its largest daily increase in over three years last week, bringing silver above the $17 per ounce mark.

Platinum-Palladium Spread Narrows

The palladium price retraced this past month while platinum picked up, narrowing the spread that has built up over the last over a year and a half.

However, that narrowing could be a blip on the radar in terms of performance throughout the rest of the year.

According to a Reuters poll, palladium’s premium over platinum is expected to hit an average of $609 per ounce this year and $595 per ounce next year.

Actual Metal Prices and Trends

The U.S. silver ingot/bar price rose 6.2% month over month to $16.23 per ounce as of Aug. 1. U.S. gold bullion rose 0.3% to $1,413.40; however, as noted above, the Trump administration’s tariff announcement sent the gold price past the $1,500 per ounce mark.

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Chinese gold bullion rose 2.1% to $45.88 per gram.

U.S. platinum bars rose 3.4% to $862 per ounce. U.S. palladium bars fell 1.1% to $1,500 per ounce.

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This morning in metals news, the world’s top aluminum producer was flooded after Typhoon Lekima, Chinese cities did not meet targets to cut pollution and iron ore prices continue to slide.

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China Hongqiao Takes Damages After Typhoon

The world’s largest aluminum producer, China Hongqiao, was flooded over the weekend after Typhoon Lekima struck Shandong province, Reuters reported.

According to an affiliate, a wall at the firm’s aluminum plants was “immediately overwhelmed” by water flooding from the Xiaofu river Sunday night.

Chinese Cities Fail to Meet Pollution Curb Targets

China has continued its battle against pollution, but some cities have failed to meet their targets.

According to another Reuters report, China’s steelmaking province of Hebei is summoning the leaders of three cities — Handan, Hengshui and Xingtai — after they did not meet pollution curb targets during the first six months of 2019.

Iron Ore Continues to Fall

After reaching a five-year high earlier this summer, the iron ore price has quickly retraced in recent weeks.

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According to Bloomberg, the iron ore price fell toward the $80 per ton mark, led by concerns regarding slowing economic growth in China.

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

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This morning in metals news, British Steel could have a buyer lined up, protests have disrupted copper mine activities in Peru and the American Iron and Steel Institute (AISI) released July steel import data.

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British Steel Update

According to The Guardian, a Turkish military pension fund will emerge as the preferred bidder for British Steel, which could ultimately save thousands of jobs, including around 4,000 jobs at its Scunthorpe plant.

The British steelmaker, the U.K.’s second-largest steelmaker went into liquidation earlier this year after it failed to secure a government loan, leading to a bidding process began for the firm.

Greybull Capital purchased the firm from Tata Steel for a ceremonial £1 in 2016.

Protests Disrupt Peruvian Copper

Protests have disrupted copper flows in the world’s No. 2 copper producer, Peru.

According to Reuters, anti-mining protests in the country have prevented approximately $400 million in copper exports from reaching their destinations.

U.S. Steel Import Market Share Hits 19% in July

The U.S.’s steel import market share reached 19% in July, according to the American Iron and Steel Institute this week, citing the U.S. Department of Commerce’s Steel Import Monitoring and Analysis data.

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Steel import permit applications surged in July. Applications totaled 3.57 million tons in July, up 31.0% from June and up 75.1% from June’s final total of 2.04 million tons.

The Rare Earths Monthly Metals Index (MMI) dropped one point this month for an August reading of 22.

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Tariffs, China and Rare Earths

Once again, the ongoing trade talks between the U.S. and China took a turn toward further tensions recently when President Donald Trump announced the U.S. would impose a 10% tariff on an additional $300 billion in Chinese goods (effective Sept. 1).

The move would subject nearly all of the U.S.’s imports from China to duties. The proposed $300 billion tariff list includes a wide range of consumer goods, including cellphones, cheeses, jackets, shirts, jewelry and toys.

In addition, the proposed tariff list included: various forms of iron/nonalloy steel; copper and copper alloy table, kitchen, household articles and parts; and aluminum kitchen or household articles.

Notably missing on any of United States Trade Representative’s tariff lists to date?

Rare earths.

The omission is not surprising given the U.S.’s reliance on China for rare earths, the latter which boasts an overwhelming dominance of the global market.

As the U.S.-China trade war has unfolded, speculation has increased regarding the potential for China to use that rare earths dominance as a weapon in trade talks with the U.S.

The Association of China Rare Earth Industry this week accused the U.S. of “bullying,” Reuters reported, adding it would support counter-measures by China to combat the U.S. tariffs.

“The cost of tariffs imposed by the United States should be borne by the U.S. market and consumers,” the association was quoted as saying.

Reuters: Lynas to Receive Malaysia License Extension

Given the specter cast over the rare earths market by China (and possible trade-related restrictions on its rare earths exports), the ongoing saga of Australia’s Lynas Corp. in Malaysia is of particular importance.

Lynas is the largest rare earths miner outside of China. The miner has been entrenched in a battle with the Malaysian government regarding disposal of radioactive waste at its facilities in the country; the miner’s license is set to expire as of Sept. 2, 2019.

According to Reuters, however, Malaysia plans to renew Lynas’ license to operate in the country, which would preserve a key source of rare earths production outside of China. Lynas announced Wednesday that it will receive an update from the Malaysian government on the license renewal in mid-August, Reuters reported.

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Actual Metal Prices and Trends

The Chinese yttrium price fell 0.3% month over month to $32.68/kg as of Aug 1. Terbium oxide fell 5.0% to $567.83/kg.

Neodymium oxide plunged 14.8% to $43,059.20/mt.

Europium oxide fell 2.5% to $31.95/kg. Dysprosium oxide fell 4.6% to $270.12/kg.