The Stainless Monthly Metals Index (MMI) increased by 4.5%, as stainless flat rolled base prices continue to move upward due to extended lead times and limited domestic capacity (following a similar trend with steel prices).
Stainless steel producers raise prices
Stainless steel producers North American Stainless (NAS) and Outokumpu announced price increases effective for February deliveries.
Both producers announced a two-discount-point reduction for standard chemistry 304, 304L and 316L. For 304, the base price increase amounts to approximately $0.0350/lb.
Outokumpu diverged from NAS, as it increased all other 300 series alloys, 200 series and 400 series by reducing the functional discount by three points. In addition, Outokumpu also will be implementing a $0.05/lb adder for 21 gauge and lighter.
As the only producer of 72″ wide in North America, Outokumpu increased its 72″ wide adder to $0.18/lb.
Along with rising base prices, alloy surcharges are rising for the third month in a row. February alloy surcharges for 304 will be $0.8592/lb, an increase of $0.0784/lb compared to January.
Both NAS and Outokumpu are also revising their equalized freight rates, which take effect in March.
The Raw Steels Monthly Metals Index (MMI) increased for the ninth consecutive month, rising by 0.5% as US steel prices continued to rise.
Buying organizations should continue to buy as needed, as prices remain at all-time highs.
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US steel market
Universal Steel Products, along with four other American steel importing companies, challenged the 25% steel tariff imposed by former President Donald Trump in 2018 under Section 232 of the Trade Expansion Act of 1962.
Meanwhile, President Joe Biden reinstated tariffs on aluminum imported from the UAE. Trump had rescinded the tariffs on his last day in office. Biden’s decision seems to signal that the new administration sides with primary producers in view of ongoing global overcapacity.
Tariff supporters argue it promotes steel investment, newer technology, increases domestic market share, provides security of supply for steel customers and generates employment. Meanwhile, detractors believe the tariffs directly impact US steel prices.
The graph below, however, shows the correlation between US steel prices and tariffs is not particularly strong.
Rather, the bullish market drives steel prices (as it did in 2018).
Today, steel prices have increased on the back of a bull market. In addition, capacity reductions have led to material shortages, as we see now.
The Copper Monthly Metals Index (MMI) increased for the fourth consecutive month, rising by 1.1%, as copper demand is likely to remain strong this year.
Copper prices traded sideways throughout January, which proved to be a slow month for the red metal. Most of its momentum over the past year came from China, which has stopped some of its manufacturing ahead of the Chinese New Year celebrations.
However, copper prices might pick up as key industries — such as construction, consumer appliances and automotive — continue to grow. Copper demand should also benefit from the “Buy American” policy that the Biden administration plans to implement.
The plan would promote the U.S. manufacture of essential components in construction, appliances, electronics and automotive.
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Global copper demand
As mentioned above, it’s not likely that copper demand will slow down in 2021.
In the US, new home and home renovation demand spiked since the pandemic started, along with electronics demand. Analysts at CitiBank expect the copper market to shift into a deficit in the second half of the year with a minor surplus overall for 2021, Reuters reported. They also forecast deficits in 2022 and 2023.
The US Census Bureau and the US Department of Housing and Urban Development reported building permits in December increased by 4.5% compared to November and 17.3% above the December 2019 rate. Privately owned housing continued to increase in December, rising by 5.8% from the previous month and by 5.2% compared to December 2019. The uptrend started in September 2020.
China will continue to play an important role in the copper market. The country accounts for about half of global primary consumption, which is then used to manufacture export goods.
The Aluminum Monthly Metals Index (MMI) increased by 2.1% this month, as LME aluminum prices traded sideways and the US reinstated the Section 232 aluminum tariff on imports from the United Arab Emirates.
U.S. aluminum reinstates aluminum tariff on UAE
On Feb. 1, President Joe Biden reinstated the 10% aluminum tariff on imports from the United Arab Emirates.
Former President Donald Trump had lifted the aluminum tariff on his last day in office. The reinstated aluminum tariff went into effect Feb. 3.
The reinstatement suggests that it is unlikely the Biden administration will remove the aluminum tariffs imposed by the previous administration. However, as of today, no further decisions were announced on aluminum tariffs.
In addition, Biden’s “Buy American” plans could impact the U.S. domestic aluminum market. The plan will likely promote the manufacturing of essential components in construction, appliances and electronics in the US.
These measures are welcomed at the primary production level. However, not all end-product manufacturers are on board, as they claim these government interventions will artificially inflate the Midwest Premium.
The new administration also announced the delay of the effective date of the Aluminum Import Monitoring and Analysis (AIM) system that the U.S. Department of Commerce created. The Department of Commerce originally said the system would be available Jan. 25. However, it is delaying the launch until March 29. Licenses will not be required for covered aluminum imports until the new effective date.
A Midwest-based trader told Construction & Demolition Recycling that demand for aluminum scrap remains high at secondary smelters that supply the automotive industry in the US
Chad Kripke, an executive vice president of Kripke Enterprise, a nonferrous scrap brokerage firm, confirmed that many sellers are relying on the spot market rather than signing contracts for 2021. This signals that it is a seller’s market.
This market environment is due to the reduced flows of scrap, which has caused spreads to tighten. As a result, secondary producers are opting to purchase scrap at what they might view as high prices rather than risking a lack of material.
Besides the U.S. Midwest Premium Futures, the platform now includes prices for some of the most common forms of aluminum sheet and coil. It includes prices for: 1100 H14, 3003 H14, 5052 H32, 5083 H321, 6061 T6 and 6061 T651.
Price data goes back to Jan. 1, 2020.
Actual metals prices and trends
The Chinese aluminum scrap price increased 0.4% month over month to $2,067/mt as of Feb. 1. Meanwhile, LME primary three-month aluminum increased 0.4% to $1,988/mt.
Korean commercial 1050 aluminum sheet remained flat at $3.30/kg. However, its European equivalent increased 8.3% to $2,948/mt.
Chinese aluminum billet and aluminum bar rose 0.4% to $2,389/mt and $2,489/mt, respectively.
Chinese primary cash aluminum dropped 2.4% to $2,365/mt. Meanwhile, its Indian counterpart declined 2.2% to $2.24/kg.
The Stainless Monthly Metals Index (MMI) increased by 6.0% this month, as ATI issued a major announcement and China ups its stainless imports from Indonesia.
ATI exits stainless steel commodity market products
Allegheny Technologies Incorporated (ATI) announced Dec. 2 that the company would exit the standard stainless sheet product market. The move reduces availability of standard 36″ and 48″ wide material.
The announcement comes as part of the company’s new business strategy. ATI will focus on investing in enhanced capabilities on higher-margin products, primarily in the aerospace and defense industries.
ATI’s departure from the stainless steel commodity portion of the market also leaves a gap for 201 series materials, which is why 201 base prices will see bigger increases than 300 or 430 series materials. Both NAS and Outokumpu announced a 201 base price increase amounting to approximately $0.0500/lb.
The Raw Steels Monthly Metals Index (MMI) increased by 16.5% this month, as steel prices showed strength in December.
U.S. steel events
The American Iron and Steel Institute, the Steel Manufacturers Association, the United Steelworkers union, the Committee on Pipe and Tube Imports and the American Institute of Steel Construction sent a letter to Joe Biden urging him to keep the 25% national security tariffs on steel imports that were imposed in 2018.
The industry groups emphasized that the tariffs are essential “to ensure the viability of the domestic steel industry in the face of this massive and growing excess steel capacity.”
“Removing or weakening of these measures before major steel producing countries eliminate their overcapacity — and the subsidies and other trade-distorting policies that have fueled the steel crisis — will only invite a new surge in imports with devastating effects to domestic steel producers and their workers,” the letter continued.
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The Copper Monthly Metals Index (MMI) increased 3.3% this month, as copper producers have faced challenges that are impacting supply.
After a slow December, copper prices continued to increase the first week of January. Prices surpassed the $8,000/mt mark.
However, copper prices remain volatile. As the pandemic continues to develop, the U.S. dollar remains around 90, future demand is uncertain and supply is strained.
Supply constraints from copper producers
Major copper producers are experiencing supply constraints.
On Christmas Eve, MMG declared force majeure on its Las Bambas copper mine in Peru as the local community continued to block a nearby road in protest, making it impossible for the company to transport its concentrate to the port to be shipped. The blockage started Dec. 12, but production continued.
Las Bambas represents approximately 2% of global copper production.
Meanwhile, on Jan. 4 the Mongolian Government informed Rio Tinto — through the miner’s partly-owned subsidiary Turquoise HillResources — that if the Oyu Tolgoi underground expansion did not prove to be more profitable, it would terminate their 2015 agreement on fiscal terms.
The expansion would make Oyu Tolgoi the fourth-largest mine in the world by 2030. As such, a shutdown would represent a significant supply disruption.
Large disruptions mean supply constraints, which in the long term support prices even more.
Members of the China Smelters Purchase Team (CSPT) lowered treatment and refining charges to $53 per tonne and 5.3 cents per pound for the first quarter of 2021. These charges represented a 8.6% cut compared to the previous quarter.
Similarly, the annual TC/RC benchmark, set by Chinese smelters and Freeport-McMoRan, declined for the sixth consecutive year. The benchmark settled in at $59.50 a tonne and 5.95 cents per pound.
The TC/RC declines come as no surprise.
Mine supply remains tight (as mentioned above). Furthermore, smelting capacity continues to increase, particularly in China. This mix forced smelters to accept lower charges in order to secure raw material.
TC/RCs are a good indicator of raw material available in the market. When primary material is widely available, TCs go up. Meanwhile, when primary material is scarce, smelters lower their TCs. This can affect market sentiment and, ultimately, the price.
On Dec. 23, 2020, the U.S. Department of Commerce announced the creation of the Aluminum Import Monitoring and Analysis (AIM) system.
The system, similar to the Steel Import Monitoring and Analysis (SIMA) system, will collect and publish data on aluminum imports into the U.S.
The system will allow users to track trade flows more easily to help spot trends earlier and to provide better guidance to the domestic industry and government. Likewise, better data collection and its analysis should allow domestic producers to compete on a level playing field.
The system is expected to be available on Jan. 25, 2021.
LME aluminum changes
The London Metal Exchange announced its intention to move forward with its sustainability strategy after receiving market feedback. Part of the strategy will include a spot trading platform for price research and trading of low-carbon aluminum for interested buyers and sellers.
As part of this strategy, the LMEpassport, a digital credential register, will be launched to allow greater visibility of carbon sustainability criteria.
The LME will implement it gradually over three years across its physically settled metals requiring Certificates of Analysis (CoAs) and other value-add information to facilitate disclosure under existing standards across metal brands. The service will start in 2021 and will initially focus on aluminum.
Demand from automotive and white goods manufacturers has been strong in the past few months.
For this reason, mill sales have increased. However, mills are not operating at full capacity. Rather, mills have kept long lead times.
This is leading to declining inventory levels across the U.S. stainless steel market. The trend follows several months of destocking in the distribution sector, as well as at manufacturers’ warehouses.
This mix could create challenges for manufacturers to replenish their depleted stock levels in upcoming months. Nevertheless, mills remain hesitant to ramp up capacity to pre-pandemic levels given current unstable market conditions.
In the meantime, these dynamics may continue to support stainless steel prices.
Reported sales of household appliances in China this October showed a nearly 10% year-over-year increase.
Meanwhile, demand for stainless steel increased approximately 13% year over year.