Author Archives: Stuart Burns

An article in the Australian Financial Review (AFR) underlines the bullish narrative accompanying the iron ore price’s performance this year.

“Chinese steel consumption has just blown consensus out of the water this year,” the report notes, citing analyst comments, adding, “The macro backdrop, in terms of China, is very strong for all commodity consumption, and steel and iron ore is doing particularly well.”

We’re offering timely emails with exclusive analyst commentary and some best practice advice – and you choose how often you receive it. Sign up today.

Rising money supply

The post points to rising money supply, which moved up 10.4% year over year in August, as a market-leading indicator of further strength in demand this year and iron ore producers’ relative underperformance relative to projections.

That is particularly true for Vale, which would need to achieve a run rate of close to 400 million tons per annum for the second half of the year to achieve its earlier production guidance of between 310 million and 330 million tons as a whole after a poor, COVID-impacted first half.

Source: Australian Financial Review

Iron ore price recovery

The recovery in iron ore prices has been impressive.

Dalian iron ore has risen more than 60% this year. The Singapore SGX benchmark has gained about 50%, underpinned by China’s strong demand, Reuters reported. China continues to ramp up steel output after rolling out infrastructure-led economic stimulus measures.

Source: Australian Financial Review

Relatively robust steel prices and a lack of significant inventory build despite record-high run rates supports a story of strong demand recovery. Meanwhile, the rising iron ore price provides support for steel prices. Margins remain constrained, meaning mills have little scope of overproduction if prices were to slide in an oversupplied market.

Source: Australian Financial Review

Iron ore takes a step back

Yet, prices have eased in recent days.

Read more


alfexe/Adobe Stock

For buyers purchasing goods and materials from China, an unwelcome trend over the summer has been gradual gains in the Renminbi’s (RMB) strength.

We’re offering timely emails with exclusive analyst commentary and some best practice advice – and you choose how often you receive it. Sign up today.

RMB gains against the dollar

The Chinese RMB has strengthened against the dollar in the region of 2.5% in the last four weeks, as the below graph from XE currency exchange firm shows. The RMB moved from 6.951 to 6.770 per dollar — equating to a stronger RMB, or weaker dollar.

RMB vs. U.S. dollar chart

Source: XE currency exchange

The RMB is forecast to strengthen further, according to JPMorgan (as reported by the Financial Times).

Ken Cheung, a strategist at Mizuho Bank, is quoted as saying the onshore RMB could rise further, supported by stronger consumer spending and a tightening labor market.

To what extent, though, is this RMB surge a result of a markedly improving economy? How much is down to just a weakening dollar — a phenomenon we have explored previously on MetalMiner — as a major driver of commodity price recovery over the summer?

Read more

U.K. flag

Iakov Kalinin/Adobe Stock

Despite talks of negotiations over a potential Tata Group bailout in the U.K., the Indian firm has proved itself a generally good steward of the businesses it has purchased in the U.K. over the years.

In hindsight, its purchase of Jaguar Land Rover from Ford for U.S. $2.3 billion in June 2008 was a steal. However, it was half what Ford had paid for the brands at the time, as JLR had an aging product range and a stodgy image.

Tata invested billions in product design and new model development. As a result, sales and profitability soared.

Tata’s purchase of Tetley Tea was also seen as buying into a mature market with limited growth prospects back in 2000. However, since then, the brand has grown into the second-largest tea brand in the world.

Stop obsessing about the actual forecasted steel price. It’s more important to spot the trend. See why.

Tata’s steel operations

Tata’s largest European acquisition, however, has not been so successful.

Corus Steel comprised an earlier merger of British Steel and Corus of the Netherlands.  Principally, the merger included the giant steelworks at Ijmuiden and British Steel’s Port Talbot Steel complex (the largest steel mill in the U.K.).

Combined with some smaller steel operations, this makes Tata Steel the third-largest steelmaker in Europe. Tata manages a workforce of 20,000 in Europe.

Read more

copper mine

vadiml/Adobe Stock

A fair part of the bull story for copper this year has been supply-side fears.

The world’s largest mines are in South America, which has suffered from catastrophic levels of coronavirus infections. True, China’s recovery has played a role in the booster’s case. So have the role of copper in the growing electric vehicle (EV) market and the weakening U.S. dollar, which has lifted all commodities.

We’re offering timely emails with exclusive analyst commentary and some best practice advice – and you choose how often you receive it. Sign up here.

Copper outperforms other metals, including aluminum

But just comparing copper to aluminum, the latter lifted only in proportion to the weakening dollar. Meanwhile, copper has risen from March lows much more.

From April to date, aluminum has jumped some 20%, largely as a result of a weakening dollar and recovering Chinese demand sucking in imports.

But copper has risen some 33%, driven by the same dynamics but with the added anxiety of supply-side risks from major suppliers in South America.

Coronavirus crisis in Peru, world’s No. 2 copper producer

Adjusting for population size, two of the countries hardest hit my infections in the world have been Peru and Ecuador. Both countries have seen more than 1,000 excess deaths per million inhabitants.

The two Latin American countries also have the highest excess percentage — excess deaths expressed as a share of normal deaths for the same period — suggesting the impact on their economies, health care systems and working practices may be even more severe than the official statistics suggest.

Developing economies like Peru cannot afford prolonged or repeated lockdowns. Like India, South Africa and many other countries, containment is at best local and at worst nonexistent.

Read more

India faces a dilemma — the country has the second-highest coronavirus caseload in the world at 4.2 million people and its economy is struggling.

India overtook Brazil this week, as it reported a record 90,000+ new cases on Saturday and nearly 92,000 on Sunday.

Yet, despite surging infections, India desperately needs to get its economy working again. It will need to do so in order to avoid the brutal impact of unemployment and rising poverty.

Sign up today for Gunpowder, MetalMiner’s free, biweekly e-newsletter featuring news, analysis and more.

Debt approaches highest level in four decades as India’s economy struggles

According to The New York Times, the government’s tax revenues have plummeted. Some states are unable to pay health care workers and government debt is approaching its highest level in 40 years.

As the below graph from Trading Economics shows, unemployment soured in the spring following the government’s ill-fated lockdown March 24:

The recovery has been swift but far from complete. Tens of millions of migrant workers, for example, are reluctant to return from the countryside to the cities.

As the New York Times explains, the lockdown was announced with just four hours notice. Offices, factories, trains, roads and even the borders between states were closed.

Instantly, tens of millions of Indians lost their jobs. Facing potential starvation, many began streaming back to their homes in the countryside, often by foot, in an epic migration of biblical proportions.

In the process, they spread the virus to every corner of the country and within touching distance of all 1.3 billion people.

Back to work?

As the unemployment figures show, some businesses are getting back to work despite the rising infection rates. The authorities are trying to contain local outbreaks while limiting a nationwide surge, but it is a juggling act they appear to be losing.

Workers remain reluctant to go back to work. Construction and factory workers are in many cases staying in their countryside villages.

In addition, consumption is way down. That is due to consumers’ fear of catching the virus in shopping malls and because of uncertainty over what the future holds. As such, saving for tomorrow is more of a priority than spending today.

Cities like New Delhi that had seen a gradual return to life are now seeing local containment zones being applied again as infection rates rise.

The New York Times cited a recent Google Mobility Report — which tracks cell-phone data — that noted trips to retail and recreation areas have dropped by 39% compared with before the pandemic. In Brazil and the United States, the drops were less than half as severe.

Economy struggles even before pandemic

The economy was suffering before the pandemic.

Quarter by quarter, India’s economic growth rate has been dropping, The New York Times states, from 8% p.a. in 2016 to 4% right before the pandemic.

A growth rate of 4% would be great for the U.S. or Europe. In India, that level is nowhere near enough. Millions of young people are streaming into the workforce each year, hungry for their first job.

Thankfully, the death toll is low compared to the level of infections. However, even at the official figure of 71,680 to date, it is sufficiently high for the population to be extremely wary of returning to life as normal. Many suspect – both inside the country and outside observers – that the true figure is much higher.

The resulting caution is a major hindrance to the economy returning to any level of growth before next year and even beyond.

We’re offering timely emails with exclusive analyst commentary and some best practice advice – and you choose how often you receive it. Sign up here.


Andrey Kuzmin/Adobe Stack

Despite the economic and political challenges related to the coronavirus pandemic, the European metals industry is becoming increasingly vocal in trying to form the arguments around its own survival.

Are you under pressure to generate aluminum cost savings? Make sure you are following these 5 best practices!


Making the case

A recent article in the Financial Times — penned, it must be said by the president of Eurometaux, the European Association of non-ferrous metals producers — should not be dismissed as just a PR attempt to lobby Brussels.

The arguments made are repeated across the European metals sector. The arguments nod to social trends supported across the region to tackle climate change issues while trying to protect jobs and local economies.

Europe may not be able to set the world’s agenda. Collectively, however, the E.U. can set Europe’s agenda. In so doing, it can set an example other countries are already showing some interest in adopting.

Lost market share

As the post points out, since the 2008 financial crisis, Europe has lost a third of its primary aluminum production. Meanwhile, China has grown to produce some 60% of the world’s market.

Europe has lost market share for other base metals, too, missing the early boat for the cobalt, lithium and rare earths (used in electric cars).

Like the U.S., Europe has come to realize its dependency on foreign countries for strategic resources comes at its peril.

“The era of a conciliatory or naive Europe that relies on others to look after its interests is over,” Thierry Breton, the E.U. industry commissioner, is quoted by the Financial Times as saying.

Mining and refining in Europe has slashed its collective carbon footprint by more than 60% in the past two decades due to far higher and better-enforced standards in the region. Yet, not surprisingly, Europe’s metals sector cannot compete with subsidized imports from China and other regions.

A level playing field

But drawing on parallel commitments to achieve carbon neutrality by 2050, the region’s industry is making the case for creating a level playing field. That level playing would come not simply by imposing quotas but by applying a financial cost to imports that come with significantly higher carbon and environmental costs.

The wider industry is buying into the idea of products having a lower carbon footprint as a brand strength.

The LME is launching a low-carbon aluminum spot contract to promote and facilitate growing demand for metal with a definable carbon footprint.

Some producers are already onboard.

Rusal is at the forefront of promoting its primary metal as coming wholly from renewable (hydroelectric) sources. European metals producers may not have such a clear advantage in terms of power supply. However, a combination of technologies, practices and power sources means each ton of metal Europe produces emits on average eight times less carbon than its equivalent from China.

The industry wants the E.U. establish a coherent framework to assess, regulate and penalize imports that do not meet the same level of environmental responsibility. That could include a carbon tax on imports that would help level the playing field.

Ultimately, consumers always pay for taxes. However, at least this approach may have the benefit of helping to ensure a sustainable regional metals industry. It could encourage producers elsewhere to lower their environmental impact. Furthermore, it could reduce the supply chain risk of a growing dependence on countries like China that play by a different set of rules.

Want an occasional email from MetalMiner that highlights new content with NO sales ploys? Join that list here.

scrap steel

smilekorn/Adobe Stock

Pandemic-related lockdowns constrained the global scrap market earlier this year. Consequently, operations were restricted or closed down.

But even as containments have eased, the market has been slow to come back — resulting in rising prices for steel and base metal scrap over the summer.

Stop obsessing about the actual forecasted steel price. It’s more important to spot the trend. See why.

New EAF capacity coming onstream

Steel, in particular, is facing not one but two constraints.

On the one hand, as new electric arc furnace (EAF) steelmaking capacity has come onstream — with more planned to come onstream in the years ahead — steel scrap demand in the U.S. is likely to remain robust, even if the wider finished steel market remains under pressure from imports and only slowly recovering demand.

Meanwhile, China has not historically been a large producer of steel via the EAF route. However, the flexibility that the process affords and its lower environmental impact is attracting significant investment, spurring the country’s demand for more scrap.

As a result, steelmakers in China and their trade associations have been taking measures to make imported ferrous scrap shipments more welcome. They are trying to have scrap reclassified as a “resource,” according to Recycling Today.

Differing perspectives on nonferrous vs. steel scrap

Traditionally, China has treated metal scrap imports rather like general waste imports.

China in the past has even branded imported non-ferrous scrap as “foreign garbage,” according to the aforementioned article. The country has limited volumes with strict quota rules, which will decline to zero for base non-ferrous metals by 2021.

On the other hand, China is reviewing its steel scrap quotas, with a view toward relaxing them. Most expect import volumes to surge from early next year. As a result, that could potentially putting pressure on prices in an already constrained global market.

Scrap prices rose last month in Europe when Turkish buyers came back into the market. Those buyers had to bid for packages, even as their traditional U.S. sources were also facing limited availability.

All this is not to suggest we are facing runaway inflation in steel scrap prices.

Steel production generally is muted in most markets. Furthermore, finished steel prices are under pressure. However, there is a growing case, both economically and environmentally, for EAF production over the traditional iron ore-based blast furnace route.

That means there will be more buyers bidding for the finite supplies in the year ahead.

Are you under pressure to generate steel cost savings? Make sure you are following these five best practices!


Zerophoto/Adobe Stock

The COVID-19 pandemic has had a significant impact on the Indian economy, as detailed by the Financial Times in an article covering the country’s response to the challenges posed by the pandemic.

Want MetalMiner directly in your inbox? Sign up for weekly, monthly or quarterly updates now.

Q2 contractions for India, other large economies

India’s economy contracted by an annualized 23.9% in the second quarter ending June 2020, the Financial Times reported, as if that was an exceptional decline.

In fact, the U.K. and several European economies contracted the same amount.

Like India, they have begun to recover since.

With that said, nowhere is back to pre-pandemic levels.

Unemployment levels surge in India

Economically, more worrying for India is the level of unemployment.

Lockdown related to the pandemic caused an estimated 140 million job losses, the article notes. The pandemic hit after four years of gradually falling GDP growth – itself a cause of considerable worry when the rest of the world economy had been doing quite well.

India was falling below the level needed to create meaningful employment for its growing younger generation of job seekers.

Virus cases rise despite lockdown measures

More worrying for health officials is the lockdown has failed to stop the spread of the virus among the population. The country is detecting more new coronavirus cases than any other — with about 79,500 infections confirmed in the past 24 hours, the Financial Times reports.

At the current pace, India is expected to soon surpass Brazil in terms of cumulative COVID-19 cases, second only to the U.S.

The official death toll in India stands at 65,000. That compares with more than 183,000 lives in the U.S. and more than 120,000 in Brazil. Some put India’s number down to a relatively young population and hardy resistance to disease. However, the number may equally be due to underreporting of deaths due to the virus as opposed to deaths due to other complications.

Recovery slowdown

Since the end of the lockdown, the economy has been recovering.

The Financial Times cited investment bank Nomura, which said the pace of normalization was faltering.

The investment bank estimated aggregate demand in July reached just 67% of pre-pandemic levels. In August, the imposition of localized state-level lockdowns disrupted economic activity. New Delhi has now prohibited those lockdowns in the interests of encouraging economic recovery.

Like many countries, India is walking a fine line between controlling the spread of the virus and minimizing economic damage.

Unlike better-funded, mature economies, India does not enjoy the financial reserves or have the latitude to take on massive borrowing to support the economy. Priyanka Kishore, head of India and South East Asia Economics at Oxford Economics, is not alone in saying the central government needs to spend more to support incomes and, hence, consumption if it wants to see a sustainable economic recovery.

Sign up today for Gunpowder, MetalMiner’s free, biweekly e-newsletter featuring news, analysis and more.


Zerophoto/Adobe Stock

China became a net importer of steel for the second consecutive month in July.

This happened despite its crude steel production rising 9% year on year and demand from infrastructure and construction remaining subdued.

Are you prepared for your annual steel contract negotiations? Be sure to check out our 5 best practices. 

Demand drivers

Several factors have driven demand.

On the one hand, global steel demand was depressed in the spring, impacted by lockdowns and restrictions as a result of the COVID-19 pandemic. Steel producers looked to dump excess capacity.

As a result, China was able to access low-cost metal from overseas markets keen to find a home for unwanted metal. Ironically, China has briefly become the home for unwanted global overproduction.

On the other hand, finished steel demand, particularly hot-rolled coil (HRC), is robust. Traders turned to temporarily low-priced overseas suppliers to fill the gap and China bounced back from its own lockdowns in May.

Those orders will likely carry on into August but then peter out from September onward. The two largest supply markets for semi-finished steel have been India (660,851 tons in July, accounting for 27% of China’s total purchases), while shipments from Russia were at 479,044 tons (equating to 20% of the total).

Much of the increased metal supply has been in the form of billets and slabs as high-cost iron ore. High-cost iron ore, now back to price levels last seen in 2014, constrains integrated mills’ ability to compete.

Net exporter to net importer

According to Platts, semis such as slab and billet when added to finished steel imports took China’s total steel imports in July to 5.06 million metric tons. That total greatly surpassed July’s steel exports of 4.18 million metric tons, making China a net importer.

The switch, however, is likely to be temporary.

Since July, China’s steel import orders have slowed, while export orders have improved.

Construction is said to have been hampered by heavy rains and even flooding in some regions and typhoons in others.

China’s steel inventory levels have remained relatively steady. Prices have reflected relative sector demand, with construction steel rebar rising only modestly by about RMB 60/ton over the last two months but HRC rising by a much stronger RMB 310/ton, according to MetalMiner data over the last two months.

Regional steel markets have reacted to the change in China’s supply-demand pattern with modest increases in supply of finished products. However, they are also cautious about strong ramp-ups in the expectation their largest neighbor’s increased appetite for metal is going to be short-lived.

Stop obsessing about the actual forecasted steel price. It’s more important to spot the trend. See why.


Zerophoto/Adobe Stock

The headline sounds somewhat melodramatic.

But the numbers laid out in the World Bureau of Metal Statistics’s annual stainless steel report suggest the reality is not far from it.

Upcoming negotiation on your stainless steel buy? Make sure you know how your service centers will negotiate with you. 

Domination of the stainless sector

Asia in general and China in particular now dominate the stainless steel sector with the region producing 80% of stainless slab production in 2019. The largest players in the sector were China at 70% and India at 10%.

The region produced 39.5 million tons of stainless steel in 2018 and jumped to 41.9 million tons in 2019.

China led the ramp up, increasing production by 10%, followed by India and Indonesia (both up 5%). Meanwhile, others in the region — Japan, South Korea and Taiwan — declined. So, too, did Europe, which fell by 8%. The U.S.’s output also fell by 8%.

Steel consolidation drives China’s growth

It is not hard to see what is driving growth in China.

Beijing is actively pushing consolidation of the massive state sector, as a recent Reuters article illustrates.

China Baowu Steel Group, the country’s top steelmaker by output, is itself the product of a consolidation of Baoshan Iron & Steel and Wuhan Iron & Steel in 2016, plus further additions since. Baowu has now absorbed stainless producer Taiyuan Iron & Steel (Group) Co Ltd (TISCO) by taking a 51% controlling stake.

No money has changed hands, Reuters reports. The deal is valued at 14.5 billion yuan ($2.10 billion) because it is a “state-backed re-structuring.”

A controlling stake in TISCO will help Baowu achieve a goal of producing 100 million tonnes of steel per year, Reuters reports. The deal will also allow it to “enhance its overall competitiveness in the stainless steel sector,” the company said.

But analysts are reported as saying the aim is also to provide better control of market prices.

China Baowu Steel will be second only to stainless steel market leader Tsingshan Holding Group in terms of global ranking.

To gauge the size of these state-engineered behemoths, TISCO may be No. 2. However, at 4.5 million tons of capacity, it is greater than half the size of Europe’s 7 million tons stainless steel production and nearly twice as large as the U.S.’s 2.6 million tons.

TISCO alone could meet all of the raw tonnage needs of North and South America — plus the rest of the world outside of Asia and Europe, with capacity to spare.

The economies of scale and market influence such size provides is significant, not just in setting domestic prices but in setting raw material prices for constituents like nickel, chrome, and molybdenum used in stainless alloying.

China is driving consolidation reportedly to achieve better environmental compliance and “to achieve orderly market competition.”

Make of that what you will in a state-controlled, centralist economy.

Are you prepared for your annual stainless steel contract negotiations? Be sure to check out our five best practices.