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.
The Copper Monthly Metals Index (MMI) increased by 3.5% for July’s reading, as the LME copper price increased by approximately the same.
LME trading volumes, along with prices, traded sideways for the first three weeks of the month and picked up pace toward the end of the month, signaling an uptrend. Prices reached $9,856/mt before closing the month. Prices and trading volumes have dropped since.
SHFE prices behaved similarly to LME prices, trading sideways the first three weeks of the month and climbing the last week. The SHFE price closed the month at CNY 71,180/mt. Just like the LME, prices dropped the first week of August. Trading volumes on the SHFE were unusually lower than previous months. Even when prices jumped toward the end of the month, volumes picked up.
The light movement in the SHFE could be due to a slowdown in the Chinese economy. This month, China’s Caixin Index fell by 6.4% compared to June. Consumer spending slowed due to higher prices. While new orders declined for the first time since May 2020.
All eyes on Chile
On July 31, after negotiating for two months, members of the union at BHP Escondida mine, the largest copper mine in the world, voted to reject the final labor contract offer and approved a strike. However, before the union can start a legal strike, BHP requested a 5- to 10-day mediation period between them and the union, facilitated by the Chilean government. The 10-day period expires Aug. 13.
The Aluminum Monthly Metals Index (MMI) increased by 7.0%. Prices remain historically high, with Chinese prices increasing the most this month.
Throughout July, LME aluminum traded mostly sideways until the last few days of the month when the price spiked. LME prices reached $2,619/mt on Aug. 1. Prices are close to the decade high of March 2011, when prices went over $2,700/mt. While prices remain high, trading volumes on the LME were lighter than the previous month with the exception of the last day of month when prices and volume peaked. Volumes declined since, signaling that the uptrend looks weak.
Chinese prices differ from the LME, trading consistently higher throughout July. Trading volumes were light though and only spiked on the last day of the month, signaling a similar trend to LME prices.
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Aluminum prices get U.S. Senate attention
The aluminum Midwest Premium price hit a record high of $0.32/lb at the end of July. The Midwest premium increase is driven by a rundown in Western warehouses and off-warrant inventory to locations convenient for onward shipment to China, which remains a net importer of unwrought aluminum since Q2 of 2020. Another driver was the 15% Russian export tax on aluminum, as Russia is the second-largest exporter of primary aluminum to the U.S.
The Raw Steels Monthly Metals Index (MMI) rose by 6.6%, as U.S. steel prices continued their rally.
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Production, capability utilization rise
According to the World Steel Association, global crude steel production increased by 14.5% year over year for the first five months of 2021. North American steel production rose by 11.3% during that period, with a sharp 47.7% increase in May alone.
For the week of July 3, the American Iron and Steel Institute reported that domestic raw steel production totaled 1,842,000 net tons. The capability utilization rate reached 83.0%. There has been a slow but continuous increase since the week of Jan. 2, when the institute reported steel production was 1,650,000 net tons at a capability utilization rate of 74.6%.
Despite this increase, all forms of steel prices remain at an all-time high.
U.S. imports increase
The latest data from the Steel Import Monitoring and Analysis (SIMA) showed steel import permit applications for June increased by 12.4% compared to the previous month. Imports totaled 2,965,000 net tons.
Import permit tonnage for finished steel in June increased by 6.8% month over month to 1,982,000 net tons.
As steel prices continue to rally, stainless steel producers in China seem to be saving costs by replacing refined nickel with nickel pig iron (NPI). NPI is a lower-nickel-content substitute for refined nickel.
Satellite service SAVANT, which tracks smelter activity, reported that nickel smelting activity was lower than seasonally expected. The company claimed global nickel activity for June was at its lowest in five years.
At the same time, NPI smelting activity in China grew significantly, making April and June the highest readings in the past five years.
The agreement includes onetime payments, wage increases and a premium-free health insurance plan for union members. As soon as the agreement is signed, USW members are expected to resume work.
The strike affected approximately 1,300 workers in specialty rolled products locations across nine locations: Brackenridge, Latrobe, Natrona Heights, Vandergrift, Washington (Pennsylvania), Lockport (New York), Louisville (Ohio), New Bedford (Massachusetts) and Waterbury (Connecticut).
The specialty rolled products include a variety of stainless steel sheets, specialty coils, cold rolled stainless steel, and stainless and specialty alloy plates. More specifically, these plants produce: light gauge cold rolled stainless steel strip; titanium strip and sheet; nickel; precision rolled strip; cold rolled stainless; and alloys, such as high-temperature, corrosion-resistant, nickel-based and duplex.
As MetalMiner previously reported, the ATI strikes constrained U.S. stainless flat-rolled supply. For months, industrial metal buying organizations faced serious challenges in purchasing metal, not only due to the supply constraint but also because stainless steel prices are at an all-time high. In addition, soaring freight rates have also made imports a costly proposition.
Base price consolidates
After U.S. mills announced their fourth base price increase of the year in June, no further increases were announced for July.
U.S. mills have increased prices on products, which reduce available production capacity. Alloys other than 304, 304L and 316L have been subject to greater increases. Non-standard widths and light gauge extras have risen several times in the last six months.
Buyers should expect additional extras increases as mills continue to optimize their product mix to maximize volume.
Alloy surcharges are increasing in July. NAS’ July alloy surcharge for 304 is $0.9930/lb, an increase of $0.0318/lb compared to June.
Actual metals prices and trends
The Allegheny Ludlum 304 stainless surcharge ticked up by 3.0% month over month to $1.02 per pound this month. Meanwhile, the Allegheny Ludlum 316 surcharge surged to $1.45 per pound.
Chinese 316 cold rolled coil dropped 0.6% to $3,903 per metric ton as of July 1. Meanwhile, 304 cold rolled coil climbed 2.5% to $2,865 per metric ton. Chinese primary nickel surged by 0.5% to $21,093 per metric ton.
LME three-month nickel jumped 3.3% to $18,440 per metric ton.
Indian primary nickel declined by 1.4% to $18.20 per kilogram.