The April 2019 Monthly Metals Index (MMI) report is in the books.
This month was marked by the status quo, as five of 10 MMI subindexes stayed put.
The Aluminum, Automotive, Copper, Renewables and Stainless MMIs all traded flat for the April reading. Raw Steels and Global Precious were down for the month, while Construction, GOES and Rare Earths made gains.
Despite the holding pattern evinced by the MMIs, the past month proved to be a news-packed one for metals markets.
The Brazilian government announced it would file charges against miner Vale SA in connection with a fatal dam collapse at one of its mines in January. Meanwhile, Norwegian aluminum major Norsk Hydro was hit by a cyber attack that forced many of its operations to come to a halt.
In other news, supplies of the steelmaking raw material iron ore were recently disrupted as Tropical Cyclone Veronica battered Western Australia.
On the trade front, U.S. Treasury Secretary Steven Mnuchin this week said the U.S. and China had reached an agreement on the formation of trade enforcement offices, a key issue for the U.S. side.
A few other highlights from this month’s round of reports:
Australian rare earths miner Lynas Corp. — the biggest outside of China – is considering domestic processing options as it continues to face regulatory pressure in Malaysia. The miner’s license to operate in Malaysia expires in September.
While most are following the U.S.’s ongoing trade negotiations with China, President Donald Trump this week announced potential tariffs on a diverse group of goods from Europe ranging from wine to helicopters.
This morning in metals news, iron ore shipments into China picked up in March after February’s 10-month low, India’s top court blocked ArcelorMittal’s attempt to buy the bankrupt Essar Steel and the E.U. opened the door to formal trade negotiations with the U.S.
With winter production curbs winding down in China, imports of the steelmaking material iron ore picked up in March, Reuters reported.
China imported 86.42 million tons of iron ore in March, up from 83.08 million tons in February.
Indian Supreme Court Blocks ArcelorMittal’s Bid to Buy Essar Steel
India’s National Company Law Tribunal (NCLT) in early March gave the OK to ArcelorMittal’s plans to buy the bankrupt Essar Steel, thus allowing the former to enter the Indian market.
However, India’s Supreme Court had other ideas.
The Economic Times reported the country’s high court superseded the NCLT approval by ordering a halt to ArcelorMittal payments to buy the debt-laden Essar Steel.
E.U. Gives Initial OK Toward Initiation of Formal Trade Talks with U.S.
As the Trump administration this week announced it is considering imposing $11 billion worth of tariffs on a wide range of imports from the E.U., European countries gave the green light in the process to initiate formal trade talks with the U.S., Reuters reported.
This morning in metals news, the Wall Street Journal reported the Brazilian government plans to file charges in relation to the fatal Vale SA tailings dam collapse earlier this year, Tata Steel’s European workers are having doubts about the proposed Thyssenkrupp merger, the U.S. and China reportedly made a breakthrough this week in their ongoing trade talks.
Brazil to File Charges After January’s Dam Collapse
The Wall Street Journal this week reported the Brazilian government plans to file charges in connection with the collapse of one of miner Vale SA’s tailings dams in January (which left hundreds dead).
The collapse occurred in late January at Vale’s Corrego do Feijao mine in Brumadinho, located in the southeastern state of Minas Gerais.
Some Tata Steel employees in Europe are questioning the balance of the planned merger with German firm Thyssenkrupp, Bloomberg reported.
The merger, which is under review by Europe’s competition authorities, would yield Europe’s second-largest steelmaking entity.
“The EWC will continue to support the joint venture only if we consider it to be in the best interests of the workforce at all our sites,” Tata’s work council said in a statement, as quoted by Bloomberg. “Due to these recent developments, we are now unconvinced the joint venture is the best option for Tata Steel Europe.”
U.S.-China Trade Talks
Trade talks between the U.S. and China continued this week, as the two sides aim to reach a resolution to the conflict that boiled over last year to the tune of a total of $360 billion in tariffs on each other’s goods.
The question for many, however, has been about enforcement — whatever deal was reached on paper, the U.S. has sought assurance of compliance.
In that vein, this week the two sides reached an agreement regarding the setup of trade enforcement offices.
“We’ve pretty much agreed on an enforcement mechanism,” U.S. Treasury Secretary Steven Mnuchin said on CNBC, as quoted by Bloomberg. “We’ve agreed that both sides will establish enforcement offices that will deal with the ongoing matters. So this is something that both sides are taking very seriously.”
The Renewables Monthly Metals Index (MMI) held flat this month, sticking at an MMI reading of 103.
Cobalt in … Missouri?
The St. Louis Post Dispatch reported an EPA agreement could open the door to cobalt mining at the site of an old lead mine.
On April 3, the EPA announced it had reached an agreement with Missouri Mining Investments, LLC, to “perform a removal action at Operable Unit 2 of the Madison County Mines Superfund Site in Madison County, Missouri. Operable Unit 2 consists of the Anschutz Subsite, also known as the Madison Mine.”
“Missouri Mining Investments plans to begin cobalt mining at the mine upon completion of the cleanup,” the EPA said in a prepared statement. “Under EPA oversight, Missouri Mining Investments will conduct supplemental characterization work, prior to developing a more detailed plan to consolidate and cover mine waste and contaminated soil at the site, and remove contaminated sediments from the Metallurgical Pond and other surface water ponds and streams within the property boundary.”
As Fuller notes, 2019 could be a banner year for LME cobalt futures volume.
“The London Metal Exchange (LME) cobalt contract launched in February 2010 and the exchange recently launched a new cobalt contract tied to Fastmarkets’ standard-grade cobalt price (the go-to benchmark on cobalt pricing for industrial buyers),” she noted.
She added that after fluctuations in the early years of the LME cobalt contract, volumes spiked beginning around November 2016.
Nucor Announces $1.3B Investment for Kentucky Steel Plate Mill
In other news, steelmaker Nucor Corporation announced late last month it would make a $1.35 billion investment toward building a new steel plate mill in Brandenburg, Kentucky.
The mill is expected to have an annual capacity of 1.2 million tons, according to a company release, and is expected to be fully operational in 2022.
The GOES MMI, the index for grain-oriented electrical steel (GOES), gained eight points for an April reading of 176.
The GOES coil price rose 4.4% to $2,423/mt.
Actual Metal Prices and Trends
The price of Japanese steel plate fell marginally on a month-over-month basis to $771.64/mt as of April 1. Korean steel plate rose 2.2% to $599.87/mt. Chinese steel plate rose 0.4% to $645.03/mt.
U.S. steel plate held flat at $997/st.
The U.S. grain-oriented electrical steel (GOES) rose 3.1% to $2,432/mt.
The Chinese neodymium price fell 4.8% to $55,490.40/mt, while silicon fell 0.3% to $1,534.37/mt. Chinese cobalt cathodes dropped 0.3% to $99,063.40/mt.
This morning in metals news, the International Monetary Fund (IMF) released a slightly more positive 2019 growth forecast for China, a fire led to damages at one of Rio Tinto’s Pilbara iron ore operations, and Polish copper producer KGHM said it may freeze operations in Canada and the U.S.
According to the report, the fire broke out Saturday night at the miner’s East Intercourse Island port operation.
Recently, Rio Tinto declared force majeure on some contracts after Tropical Cyclone Veronica battered the northwest Australian coast, damaging the Cape Lambert A port terminal.
KGHM Could Freeze U.S., Canada Mines
Polish silver and copper producer KGHM said it doesn’t have plans to sell its assets abroad, but it would consider freezing its mines in Canada and the U.S. if they require major investments, Reuters reported.
Lynas Considers Initial Ore Processing at Home Amid Pressure in Malaysia
Australian rare-earths miner Lynas Corp., as we’ve noted in previous Rare Earths MMI reports, has been facing regulatory pressure in Malaysia of late.
The Malaysian government has issued two conditions for renewal of the miner’s license in the country, which expires in September, related to disposal of two types of waste. Last month, Lynas appealed one of the conditions put forth by the government related to disposal of water leached purification residue.
“We have been giving great consideration to … our future industrial footprint,” CEO Amanda Lacaze was quoted as saying during an analyst and investor call. “We remain confident that we can agree a path forward with the Malaysian government which is good for Malaysia and good for our business.”
Lynas is the biggest miner of rare earths outside of China.
“We see value in operating alternative cracking and leaching processing close to our resource, and therefore the primary locations that we have been considering for growth are in Western Australia,” the miner said in a statement posted to its website. “Part of this planning has been to scope our future industrial footprint. Our preference has always been to add to our Malaysian capability, not replace it. Our Malaysian cracking and leaching operations are performing very well as a result of the IP our Malaysian team has developed and owned – IP which others cannot use – and the hard work of all the Lynas team. We remain committed to supporting the Malaysian economy and protecting our people’s jobs. However, this same work means we are well placed to deal with any change in Malaysian government policy.”
The company received a shock last Friday following comments by Malaysian Prime Minister Mahathir Mohamad, who indicated the miner’s Malaysian operations were being put up for buyers who can make good on cleanup of the radioactive waste.
“With regard to Lynas, we have imposed an extra condition, that is they must take away the waste,” Mohamad said. “But they want to take away the waste to where? They want to take it to Australia, but Australia doesn’t want to accept it, so they can’t do it anyway.
“So what we have done is we have opened up the business to other people, and there are other companies willing to buy up or somehow or other acquire Lynas, they have given us a promise that in future before sending the raw material to Malaysia they will clean it up first, they will crack it and decontaminate it in some way with regard to radioactivity, so that when the raw material comes here, the volume is less and the waste from that raw material is not dangerous to anybody.”
The comments came just over a week after Lynas rejected a $1.5 billion takeover bid from Australian conglomerate Wesfarmers.
Meanwhile, in perhaps promising news for Lynas, the Sydney Morning Herald reported the government of Western Australia has indicated it would consider offering assistance if the company should decide to build a new processing plant in the state.
China Becomes Top Rare Earths Importer
Speaking of China, the country exerts an overwhelming dominance in the rare earths market, which includes materials used in a wide variety of high-tech capacities, from smartphones to laptops and more.
Citing data from consultancy Adamas Intelligence, China’s imports of rare earths surged 167% last year. In addition, China became a net importer of at least seven rare earths, including praseodymium and yttrium, for the first time in more than 30 years.
Actual Metal Prices and Trends
The yttrium price fell 0.3% month over month as of April 1, down to $33.52/kg. Terbium oxide rose 4.7% to $465.52/kg.
Neodymium oxide dropped 5.2% to $43,573/mt.
Europium oxide fell 0.3% to $38.73/kg. Dysprosium oxide jumped 15.4% to $218.98/kg.
This morning in metals news, the U.S. steel sector’s capacity utilization rate for the year through April 6 reached 81.9%, the zinc price fell on easing supply concerns and miner Glencore is becoming a bigger and bigger player in the copper market.
The American Iron and Steel Institute (AISI) released its weekly production report Monday, showing the sector’s capacity utilization rate for the year through April 6 had reached 81.9%.
Production during that time by volume reached 26.1 million tons, up 6.8% from the 24.5 million tons produced during the same time frame in 2018.
Meanwhile, for the week ending April 6, domestic raw steel production hit 1.9 million net tons at a capacity utilization rate of 82.8%, up from 1.8 million net tons and 76.3% for the same week in 2018.
After the latest round of trade talks between U.S. and China late last week, there remains “significant work” on the road to a deal, Reuters quoted the U.S. Trade Representative as saying in a statement.
Meanwhile, Chinese state media hailed “new progress” in the talks.
Tewoo Group Sells Copper at Less than Market Value
According to the U.S. Census Bureau’s monthly construction spending report, U.S. spending in February reached $1,320.3 billion, up 1.1% from the revised January spending estimate of $1,307.3 billion.
The February spending total was also 1.1% above the February 2018 total of $1,305.5 billion.
Drilling down by category, spending on private construction hit a seasonally adjusted annual rate of $994.5 billion, up 0.2% from January’s estimate of $993.0 billion. Residential construction spending was $540.9 billion in February, up 0.7% from January’s $536.9 billion. Nonresidential construction was $453.6 billion in February, down 0.5% from January’s estimate of $456.0 billion.
Meanwhile, public construction spending was $325.8 billion, an increase of 3.6% from January’s estimate of $314.4 billion. Educational construction was at a seasonally adjusted annual rate of $76.3 billion, up 0.8% from January’s estimate of $75.7 billion. Highway construction was $111.1 billion, up 9.5% from January’s $101.5 billion.
The February ABI came in at a value of 50.3, down from 55.3 in January (the strongest value in over two years). An ABI value above 50 indicates billings growth.
“Overall business conditions at architecture firms across the country have remained generally healthy,” AIA Chief Economist Kermit Baker said in an AIA release. “Firms in the south recorded continued strong design activity, likely reflecting a healthy regional economy and ongoing rebuilding from the catastrophic 2018 hurricane season.”
By region, the South led the way with an ABI of 58.3, followed by the West (51.6), Northeast (51.5), Midwest (51.3).
Despite relatively minimal growth in February, the report indicates stronger billings growth may be on the horizon, if project inquiry levels are any indication.
“However, scores for both inquiries coming into architecture firms and new design contracts continued to reflect healthy growth rates,” the report states. “With sustained improvement in inquiries for future projects as well as new project activity, billings are expected to improve in the coming months.”
While billings growth remains on the positive end — despite it being less robust in February — concerns are mounting about the prospect of an economic downturn, not just in the U.S. but in major economies around the world.
Auto sales dipped in the first quarter of 2019, while U.S. housing starts were down 8.7%
This month’s ABI survey polled industry members about the economic indicators they most frequently look to for guidance on the general direction of the business climate. According to the report, 25% of respondents said interest rates, while 24% said stock market trends and 23% said business confidence scores.
Housing Starts Plunge 8.7%
As previously noted, U.S. housing starts fell 8.7% in February compared with January data, according to a recent joint report by the U.S. Census Bureau and the Department of Housing and Urban Development (HUD).
On a year-over-year basis, February’s 1.16 million starts marked a 9.9% decline from February 2018.
The next housing starts report is scheduled to be released April 19.
Actual Metal Prices and Trends
The Chinese rebar price rose 1.2% month over month to $573.53/mt as of April 1. Chinese H-beam steel dipped 0.3% to $563.10/mt.