The 64 reporting countries to World Steel produced a total of 156.8 million tons (5.06 million tons per day) for August, compared to 171.3 million tons (5.71 million tons per day) in April, which was the highest monthly production of the year on a tons-per-day basis.
China continues as the world’s top producer by eight times more than the second-largest producer, India. Chinese production during August reached 83.2 million tons (2.68 million tons per day), over 50% of global production.
China, however, posted a fourth consecutive month of production declines on a tons-per-day basis. Since April, China’s daily steel production fell by 17.8%.
The Aluminum Monthly Metals Index (MMI) went up by 3.1% this month, as all forms of aluminum jumped this month.
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Primary capacity interest
Historically high prices, increasing demand and production cuts in China have opened a window of opportunity for aluminum producers.
Alcoa announced it is restarting the Alumar aluminum smelter in Sao Luis, Brazil. Alcoa owns 60% of the smelter, while South32 owns 40%. Operations were suspended in 2015, as aluminum prices declined. Its restart could bring a total operating capacity of 447,000 metric tons, with the first molten metal expected in the second quarter of 2022.
With this planned restart, Alcoa will have approximately 80% of its 2.99 million metric tons of global aluminum smelting capacity in operation.
As the Federal Reserve prepares to scale down its pandemic strategy, copper prices dropped. The Fed reported it would hike rates and pare back the asset purchase program (i.e., quantitative easing).
This news benefited the U.S. dollar, which increased over the past month. This is particularly important to copper. The U.S. dollar and commodities have historically moved in a perfect inverse relationship.
Moreover, Congress’ decisions — or lack of them — could cause market turmoil and impact copper prices. The bipartisan infrastructure deal remains delayed in the House of Representatives. Congress has not taken action on increasing the debt ceiling, adding to the potential market turmoil, though it does appear that Republicans have agreed to a short-term debt ceiling cover into December.
China looming over prices
Meanwhile, the second-largest economy in the world continues to show signs of volatility.
China is the biggest consumer and producer of refined copper. Its latest issue involves a power crisis that has impacted both copper production and also manufacturing. Both have experienced restrictions.
Both NAS and Outokumpu announced price increases effective Sept. 1.
Outokumpu increased base prices by reducing the discount by one point for all 200 series, 301, 304, 304L, 316L and 430. All other 300 series alloys will see increases by virtue of discount reductions by three points. Outokumpu raised all of its other 400 series alloys by reducing the discount by four points.
In addition to base price increases, Outokumpu increased its width extra for under 48″ to $0.12/lb and added a $0.15/lb gauge extra for 301 18 gauge and lighter. It also increased cut-to-length charges.
NAS increased its base price by reducing the functional discount by one point for 304, 304L and 316L. All other alloys — except for automotive ferritics — will be increased by reducing the discount by two points. Non-430 ferritics will be increased by $0.08/lb, which means these alloys have increased $0.27/lb in 2021.
The Raw Steels Monthly Metals Index (MMI) dropped by 1.4%, as Chinese steel and U.S. scrap prices declined.
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Chinese steel merger to form third-largest steel producer
On Aug. 20, Chinese steelmakers Ansteel Group and Ben Gangformally began the process of merging their operations. If the process is completed, this will create the world’s third-largest steelmaker, behind China Baowu Group and ArcelorMittal.
Since both companies are state-owned, there will be no money changed in the transaction. Instead, the merger will be a government-backed restructuring in an effort to consolidate production in China’s bloated steel sector. Ansteel will be taking a 51% stake in Ben Gang.
The merged entity will keep the Ansteel name. Its annual production capacity will reach 63 million metric tons of crude steel.
The Copper Monthly Metals Index (MMI) decreased by 3.4% in August, as forms of the metal included in the index dropped (with the exception of Chinese copper scrap).
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Copper prices trend downward
Similarly to the index, LME copper prices dropped by 3.3%. LME trading volumes spiked as the price declined from Aug. 16-19. This sell-off signaled a strong negative trend.
Since then, prices recovered. However, trading volumes remained muted, reinforcing the negative market sentiment.
SHFE prices behaved similarly to LME prices. Meanwhile, the volatility of the dips did not appear as strong. The SHFE’s heaviest trading volumes occurred toward the end of the month, when prices jumped, thus signaling a strong positive indicator.
LME three-month aluminum prices are only $100/mt away from 2011 prices.
Overall, LME aluminum traded up despite some volatility in August.
Prices took their largest dip Aug. 16-19 before recovering. During the same period, LME trading volumes got heavier, marking a negative trend.
However, volumes got even heavier as the price increased. This ultimately signals that the market remains bullish.
Chinese prices also climbed this month. SHFE volumes — along with prices — picked up heavily toward the end of the month, consistent with a strong bullish trend.
Beijing wary of rising aluminum prices
Rising aluminum prices have become a concern for China.
Bloomberg reported that the China Nonferrous Metals Association believes the steep increase of the aluminum price is not supported by fundamentals and substitutions could emerge.
Record high prices have already deterred the manufacturing sector in China.
China’s Caixin Index has dropped since June. In August, the index dropped below the 50 level, meaning factory activity is contracting.
On Sept. 1, China released its third batch of metals from state reserves. The move is an attempt to control prices and prevent commodities inflation from hurting economic growth. However, the release did not dent prices.
The Stainless Monthly Metals Index (MMI) increased by 8.2% for this month’s reading.
Stop obsessing about the actual forecasted nickel price — it’s more important to spot the trend.
Outokumpu demand outlook
Stainless steel producer Outokumpureleased its half-year report, reporting that their sales increased by 16.8% for the first half of 2021 compared to last year.
The company said second-quarter stainless steel demand continued to be strong.
“Total stainless steel deliveries grew by 3% and realized prices for stainless steel increased in all regions compared to the previous quarter,” Outokumpu said.
Despite a growing first half, Outokumpu expects global apparent consumption of stainless steel flat products to fall by 0.4% in the third quarter of 2021 compared to the previous quarter. The company’s outlook is based on CRU latest estimates, which anticipates a decrease in consumption of 10.5% and 0.7% in EMEA and Americas respectively, while APAC is expected to increase by 1.6%.
Moreover, Reuters reported Outokumpu CEO Heikki Malinen sees “demand for stainless steel and ferrochrome continuing to be strong and delivery volumes falling only due to planned maintenance.”
MetalMiner stainless steel expert Katie Benchina Olsen expects a tight U.S. stainless flat-rolled supply through the rest of the year. That will continue into at least the second quarter of 2022, she says. Imports into the U.S. are also limited, as demand in home markets remains strong. In addition, shipping containers are in tight supply.
This domestic environment might keep stainless steel prices high through the first half of 2022.
Nickel price surge
Similarly to copper, market fundamentals have influenced nickel prices lately.
The nickel market recorded a deficit of 42,700 metric tons for the January to May period after an approximate surplus of 92,700 metric tons for all of 2020, according to the World Bureau of Metal Statistics (WBMS). While refinery output increased, demand has outpaced refined production, thus bringing prices up.
Chinese refined output for the January to May period increased by 44,000 metric tons compared to 2020, WBMS reported. Meanwhile, apparent demand reached 564,900 metric tons (123,000 metric tons higher than in the previous year). In Indonesia, production in the first five months of 2021 rose 49% year over year and demand more than doubled.
The nickel price has increased by 19.8% in the year to date, closing July at $19,855/mt.
Be prepared to use 304 for 301, 201 and even 430 applications
Manufacturers are being forced to buy 304 at the spot price in order to keep production lines running.
For example, 301, 201 and 430 are in short supply. In the past, another service center or mill could compensate for late contract orders. However, this is no longer the case. The aforementioned 301, 201 and 430 are only produced based on contractual commitments.
When the mill is late, the only alternative right now is 304 — at a huge price premium.
Ultimately, the global stainless supply shortage will impact such products as commercial ovens, which are usually made with 430. The price differential between 430 and 304 should theoretically be around $0.65/lb at present. In reality, however, buyers are paying around $2.00/lb more for 304 on the spot market compared to the 2021 430 contract price.
Manufacturers are being forced to choose high-priced 304 to remain in production or shut down lines until the contracted material arrives.
Actual metals prices and trends
The Allegheny Ludlum 304 stainless surcharge ticked up by 4.9% month over month to $1.07 per pound this month. Meanwhile, the Allegheny Ludlum 316 surcharge surged to $1.57 per pound.
Chinese 316 cold rolled coil increased 13.0% to $4,411 per metric ton as of Aug. 1. Meanwhile, 304 cold-rolled coil surged by 17.2% to $3,359 per metric ton. Chinese primary nickel surged by 6.5% to $22,458 per metric ton.
LME three-month nickel jumped 7.8% to $19,885 per metric ton.
Indian primary nickel rose by 10.2% to $20.05 per kilogram.
Executive order on zero emissions, electric vehicles
On Thursday, Aug. 5, President Joe Biden’s office announced its intention to sign an executive order that sets a “new target to make half of all new vehicles sold in 2030 zero-emissions vehicles, including battery electric, plug-in hybrid electric or fuel cell electric vehicles.”
The announcement was well-received by the American Iron and Steel Institute (AISI), as this executive order will boost domestic demand for steel. AISI CEO Kevin Dempsey said “the use of American-made steel, which is the cleanest in the world, will be key in the transition to EVs.”
As for the bipartisan infrastructure deal, the Senate voted 69-30 on Tuesday to pass a $1 trillion infrastructure package.