Author Archives: Fouad Egbaria

The Construction Monthly Metals Index (MMI) held flat at 81 for the July MMI reading.

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U.S. Construction Spending

U.S. construction spending in May totaled an estimated $1,293.9 billion, according to the U.S. Census Bureau, marking a 0.8% decline from April’s $1,304.0 billion.

The estimated May 2019 spending figure marked a 2.3% decline on a year-over-year basis; according to economists polled by Reuters, construction spending was forecast to increase 0.1% in May.

Private construction spending in May was $953.2 billion, down 0.7% from the revised April estimate of $960.3 billion.

Under the umbrella of private construction, May residential construction spending fell 0.6% from the previous month, down to $498.9 billion. Nonresidential construction spending fell 0.9% in May, down to $454.3 billion.

Meanwhile, public construction spending fell 0.9% to $340.6 billion. Under public construction, educational construction was nearly flat at a seasonally adjusted annual rate of $79.3 billion. Highway construction fell 3.2% to $111.6 billion.

Billings Growth Ticks Up Marginally

After a decline in March billings, billings grew for the second straight month in May, according to the American Institute of Architects’ (AIA) monthly Architecture Billings Index (ABI).

The May ABI checked in at 50.2 after recording a value of 50.5 in April; any value greater than 50 indicates billings growth.

Billings grew in the Midwest (51.6) and the South (51.4) regions, held flat in the West (50.0), and fell in the Northeast (47.6).

Despite the technical increase as reflected by the ABI, the past four months have showcased a slowdown not seen in seven years, according to the AIA.

“In fact, for the last four consecutive months, firm billings have either decreased or been flat, the longest period of that level of sustained softness since 2012,” the AIA said in its ABI release. “In addition, while both inquiries into new projects and the value of new design contracts remained positive, they both softened in May as well, another sign that the amount of pending work in the pipeline at firms may be starting to shrink.”

May Housing Starts Fall 0.9%

Last month, we reported U.S. housing starts, at a seasonally adjusted rate of 1.29 million, fell 0.9% in May compared with the previous month.

In addition, the National Association of Realtors (NAR) reported April pending home sales dropped 1.5% over the previous month. NAR’s Pending Homes Sales Index, which is based on contract signings, fell 2.0% in April, marking the 16th consecutive month of decline for the index.

Actual Metal Prices and Trends

The Chinese rebar price rose 0.6% month over month to $582.52/mt as of July 1. Chinese H-beam steel dropped 1.5% to $554.85/mt.

U.S. shredded scrap steel fell 7.1% to $274/st.

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European commercial 1050 aluminum sheet rose 2.3% to $2,552.81/mt.

The Automotive Monthly Metals Index (MMI) picked up one point this month, rising for a reading of 87.

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U.S. Auto Sales

General Motors reported Q2 deliveries of 746,659 vehicles, marking a 1.5% decline on a year-over-year basis.

GM’s chief economist said U.S. light-vehicle SAAR for the first half of the year is expected to reach 17.0 million units.

“The U.S. economy continues to grow at a healthy pace. Jobs are plentiful and inflation remains low,” said Elaine Buckberg, GM’s chief economist. “Auto demand was better than anticipated in the first half and we expect strong performance in the second half of the year. If the Fed cuts rates, as widely expected, lower financing costs will provide further support to auto sales.”

Meanwhile, Ford Motor Co. is scheduled to announce its Q2 sales results at 9:15 a.m. ET on Wednesday, July 3.

Fiat Chrysler reported it had its best June in 14 years, posting total sales growth of 2%, tallying 206,083 vehicle sales. Ram pickup truck sales surged 56% in June to 68,098 vehicles and 179,454 vehicles in the quarter.

Total Honda sales fell 7.3% in June, while Nissan sales fell 14.9%. Hyundai sales were up 2% in June and rose 2% in the first half of the year. Subaru reported 61,511 vehicle sales in June, marking a 2.8% year-over-year increase.

Toyota sales fell 3.5% on a volume basis and increased 0.3% on a daily selling rate basis.

According to a monthly forecast released jointly J.D. Power and LMC Automotive, June retail sales were expected to fall 2.9% compared with June 2018, while total sales were forecast to drop 1.5% year over year.

Despite slumping sales this year, automakers have cashed in on higher average transaction prices. According to J.D. Power and LMC Automotive, new-vehicle prices are up 4% in the first half of the year compared with the first half of 2018.

“While the first half of 2019 is expected to deliver its weakest retail sales since 2013, the growth in prices has been nothing short of remarkable,” said Thomas King, senior vice president of J.D. Power’s data and analytics division. “Average transaction prices set a record during the first half, which has big implications for manufacturer revenues.”

GM Announces Michigan, Texas Investments

Last month, GM announced plans to invest $150 million in its Flint Assembly plant and $20 million at its Arlington Assembly plant.

At the Flint plant, the automaker aims to augment production of its Chevrolet Silverado and GMC Sierra models.

Meanwhile, the $20 million investment in the Texas plant aims to upgrade the plant’s conveyors in preparation for the rollout of the automaker’s new full-size SUVs. According to a GM release, the upgrades are expected to be completed next year.

Actual Metal Prices and Trends

The U.S. HDG price fell 6.9% month over month to $779/st as of July 1. The U.S. platinum bar price increased 1.7% to $834/ounce, while palladium surged 15.8% to $1,516/ounce.

U.S. shredded scrap steel fell 7.1% to $274/st. LME copper jumped 2.8% to $5,981.50/mt.

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Chinese primary lead ticked up 0.9% to $2,340.98/mt.

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This morning in metals news, India is likely to remain a net steel importer for at least the next two years, residents of Scunthorpe are concerned about the future of their town should British Steel close down and the copper price retreated to a one-week low.

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India to Remain Net Steel Importer

As steel imports continue to flow into the country, India is likely to remain a net steel importer over the next two years, Bloomberg reported citing Fitch Ratings Ltd.’s local unit.

India’s annual steel consumption is nearing 100 million tons, according to the report.

Worrying About the Future

A recent bid deadline came and went for the liquidated British Steel, based in Scunthorpe, England.

Media reports indicate there have been at least nine interested buyers, but it remains unclear if a buyer would be willing to take on the entirety of the business, as opposed to individual parts.

With the plant’s future in limbo, the BBC reported residents of Scunthorpe are concerned about a potential shuttering of the plant and the impact it would have on the town.

“If the worst comes to worst, and the steelworks does actually shut, it will be devastating for so many people here,” one resident is quoted as saying.

“People will probably have to move away.”

Copper Slides

On the heels of the weekend’s G20 Summit in Japan, the copper price fell to a one-week low Tuesday, Reuters reported.

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Copper prices soared to a six-week high on Monday. The LME copper price traded down 0.5% Tuesday, according to the report, down to $5,925 per ton, on weak global manufacturing data.

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According to the International Lead and Zinc Study Group’s (ILZSG) most recent report, the global lead and zinc markets both were in deficit through the first four months of the year.

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Zinc Deficit Hit 97,000 Tons

Global refined zinc supply fell short of demand by by 97,000 tons over the first four months of the year, according to the ILZSG.

World zinc mine production jumped by 1.5% during the four-month period to 4.12 million tons, paced largely by an increase in Australia, in addition to smaller increases in Europe, Namibia and South Africa. Meanwhile, zinc mine production fell in China, India, Mexico, Peru and the United States.

Meanwhile, refined zinc metal production fell during the first four months of the year to 4.25 million tons, down from 4.35 million tons during the equivalent period in 2018. According to ILZSG, refined zinc metal production increased in Mexico and Peru but fell in China, India and Russia.

Zinc usage, meanwhile, fell 1.3% to 4.35 million tons through the first four months of the year, depressed by a fall in apparent demand in China. Usage in the U.S., India, Japan and Europe remained flat.

Lead Deficit Reaches 39,000 Tons

The lead metal deficit for the first four months of the year hit 39,000 tons, according to the ILZSG.

Lead mine production ticked up 0.7% to 1.54 million tons, paced by increases in Sweden, India and Peru but partially offset by a decline in China.

Lead metal production also picked up during the four-month period, rising 2.3% to 3.87 million tons, paced by higher output in China, India and South Korea.

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Lead metal usage also increased 2.3%, up to 3.90 million tons for the four-month period.

According to ILZSG, China’s imports of lead contained in lead concentrates increased by 30.7% to 260,000 tons, while its net imports hit 67,000 tons compared with 13,000 tons of net exports during the same period in 2018.

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This morning in metals news, world leaders gathered in Japan this weekend for the G20 Summit, a deadline for bidding on the liquidated British Steel came and went June 30, and Australia’s iron ore exports are forecast to fall for the first time in 18 years.

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G20 Leaders Meet in Japan

Trade issues once again loomed over the proceedings at the latest G20 Summit, this time held in Japan over the weekend.

For the second straight summit, references to protectionism did not not appear in the summit’s communique, Reuters reported.

“We strive to realize a free, fair, non-discriminatory, transparent, predictable and stable trade and investment environment, and to keep our markets open. International trade and investment are important engines of growth, productivity, innovation, job creation and development,” the communique said.

The communique also offered support for the World Trade Organization (WTO), while also noting changes must be made to improve its dispute settlement system.

“Furthermore, we recognize the complementary roles of bilateral and regional free trade agreements that are WTO-consistent,” the statement said. “We will work to ensure a level playing field to foster an enabling business environment.”

British Steel Deadline Passes

Following the liquidation of the U.K.’s No. 2 steelmaker British Steel in May, a June 30 deadline was set for bidding on the embattled firm.

According to Yahoo Finance U.K., up to nine potential buyers have reported interest, but the challenge comes in finding a buyer willing to take up the entire firm, as opposed to just parts.

According to the Yahoo Finance U.K. report, Network Rail has made an offer for the “railway-critical parts of British Steel.

Australian Iron Ore Exports Down

This year could see Australia’s first drop in iron ore exports in nearly two decades, Bloomberg reported.

Australia’s Department of Industry, Innovation and Science cut its 2019 forecast for iron ore exports from 867 million tons to 814 million tons.

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Rio Tinto also recently downgraded its 2019 iron ore guidance.

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According to the International Copper Study Group’s (ICSG) most recently monthly report, global copper mine production dropped 1.3% in Q1 2019 compared with the same quarter the previous year.

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In addition, concentrate production fell 1% and solvent extraction-electrowinning fell 3.5%.

Top copper producer Chile saw production fall 5% in the quarter. More recently, a two-week strike at Codelco’s Chuquicamata mine reportedly came to an end last week, as the labor unions representing workers at the mine voted to accept an offer from the company.

Meanwhile, Indonesian concentrate production fell 52%. In the Democratic Republic of the Congo, production rose just 1.7% in Q1 after a total 11% jump in 2018.

While not enough to offset losses in Chile and Indonesia, production gains were realized in No. 2 producer Peru, Australia, China and Mongolia, according to the ICSG.

Global refined production also fell in the first quarter, dropping 1.1%, as primary production fell 1.5% while secondary scrap production increased 0.7%.

Chile’s refined output fell 32% “mainly to temporary smelter shutdowns whilst undergoing upgrades to comply with new environmental regulations.” Indian production fell 45% as Vedanta’s Tuticorin smelter remains shuttered.

Refined output was also down in Germany, Japan, Peru and the U.S.

However, apparent refined usage increased 0.8% in Q1, paced in part by a 4% increase in usage in China. World usage ex-China fell 2%.

In terms of prices, the average May price on the LME reached $6,028.31 per ton, down 6.5% from April’s average $6,445.10 per ton.

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Meanwhile, through the end of May, the high copper price on the LME was $6,572 per ton (reached March 1), with a low of $5,780.50 per ton (reached on May 31). The average price for the year through May was $6,221.50 per ton, marking a 4.6% decline from the 2018 annual average.

The European steel sector is facing an existential threat based on a variety of factors, according to the president of the European Steel Association (EUROFER), who spoke at the group’s annual conference June 26.

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The issue of rising imports has been a consistent complaint of the E.U. steel industry. Steel companies in the trading bloc have argued the U.S. Section 232 steel tariffs have diverted steel, ordinarily headed to the U.S., to Europe (among other places).

“As a result of the import duties applied by the United States as of 23 March 2018 under Section 232 the US Trade Expansion Act of 1962, exporting steel to the United States has become less attractive,” the European Commission said in February. “There are already indications that, as a consequence, steel suppliers have diverted some of their exports from the US to the EU.”

Earlier this year, the E.U. imposed steel safeguards in an attempt to mitigate the issue of rising imports; even so, many E.U. steel leaders argue the safeguards have not been effective.

“These challenges have the potential to erase the whole steel industry in Europe. On the other hand, these challenges bring us a great opportunity, if we can embrace change and use it to accelerate innovation,” EUROFER President Geert Van Poelvoorde said. “In 2018, there was a record 12% rise in European imports of finished steel products, in a market that grew only 3.3%. We are grateful that the European Commission recognised the problem and took action. However, the safeguard has failed in its objective for a large part of our industry.”

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In addition to rising imports and slowing demand, Van Poelvoorde referenced the E.U.’s role in curbing emissions and regulations aimed at doing so.

“For steelmakers, there are several possible routes to decarbonisation – and various pathways to achieve this are being tested by a range of steel companies,” Van Poelvoorde said. “However, funding for these projects has to come from many different sources: to achieve decarbonisation, Europe’s steel sector cannot go it alone, it needs massive investments and cooperation with other stakeholders.”

Val Poelvoorde added costs associated with emissions compliance in the E.U. represent a “cost restraint that non-EU producers do not face.”

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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, a workers’ strike came to an end at top copper producer Codelco’s Chuquicamata mine in Chile, South Korean steelmakers Posco and Hyundai Steel are facing government shutdown orders at some locations over emissions, and the liquidated British Steel has attracted some interest before a June 30 bid deadline.

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Strike Ends at Chuquicamata

A workers’ strike at Codelco’s Chuquicamata mine came to an end this week as workers voted to accept an offer from the company, Reuters reported.

The unions at the mine rejected a proposal from the company last weekend, as the strike dragged on for two weeks.

(MetalMiner’s Stuart Burns weighed in on the Chuquicamata strike yesterday.)

Posco, Hyundai Face Shutdowns

South Korean steelmakers Posco and Hyundai could see some of their furnaces shut down by government actions aimed at curbing emissions, the Nikkei Asian Review reported.

In fact, according to the report, one-third of the blast furnaces in the country are facing 10-day shutdown orders from the government.

Interest Comes in for British Steel

The previously set June 30 bid deadline for British Steel is fast approaching, and up to nine entities have expressed interest, Reuters reported.

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The steelmaker went into liquidation last May after it failed to secure a second government loan to continue its operations. The firm was owned by Greybull Capital, which purchased it from Tata Steel in 2016 for a nominal £1.

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This morning in metals news, the copper price didn’t budge Thursday ahead of a key meeting between U.S. President Donald Trump and Chinese President Xi Jinping, Nucor announced a price hike for flat-rolled steel products, and automaker Tesla won a tariff exemption on aluminum imported from Japan.

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Copper Price Holds Flat

Markets are anxiously awaiting the results of a key meeting between U.S. President Donald Trump and Chinese President Xi Jinping during the G20 Summit in Japan this weekend.

On Thursday, however, the copper price held flat.

The LME three-month copper price ticked up 0.1% Thursday after soaring to a five-week high during the previous session, Reuters reported.

Nucor Raises Flat-Rolled Steel Prices

Steelmaker Nucor announced its first price hike on flat-rolled steel since February, according to Yahoo! Finance.

The price hikes apply to HRC, CRC and HDG, according to the report.

Tesla Wins Aluminum Tariff Exemption

Electric car maker Tesla secured a tariff exemption for aluminum it imports from Japan, Reuters reported.

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The automaker sought the exemption for the aluminum — which it uses for the production of battery cells at its Nevada Gigafactory — at an annual rate of 10,000 tons, according to the report.