Author Archives: Stuart Burns

MetalMiner posted an article in late March on the possible peak of tin, calling the top to the market a few weeks early. From that point, tin continued to power on up to  $25,500/ton on the LME, but since then, the correction we called out has come through with a vengeance as prices have dropped to below $21,000 this week. The Asian markets have likewise followed the London market down. Prices in the Kuala Lumpur Tin Market (KLTM) have been sold off as long positions have been liquidated by traders desperate to avoid losses. Read more

If you can’t buy them, build them, seems to be the philosophy driving the major steel mills investment in new mines. A recent report in The Wall Street Journal details the challenges steel companies are facing in turning themselves into miners. Arcelor Mittal has purchased the rights to develop the old Liberian-Swedish-American mining company Lamco’s facilities in Liberia, closed in 1989 during the first of many civil wars and coups to blight the country in the 90’s. Mittal see this as one component of a hub of West African mining operations strategically placed to feed both their European and North American steel mills. The challenges are significant, since railway lines, bridges and roads have been lost over the last 20 years of strife. Prospective miners will need to rebuild the infrastructure before they can move one ton of iron ore. Project costs have already escalated from $900m to $1.5bn, and the mine isn’t due to start production before next year. Read more

In another example of how power costs are impacting both the South African metals industry and the aluminum industry, Rio Alcan announced at an investor conference in London this week that they are postponing a major smelter project. Following South Africa’s power producer Eskom Holdings’ failure to guarantee power for the $2.7 billion Coega smelter, Alcan have decided to halt any further construction work and are redeploying engineers to projects elsewhere to make up the shortfall. Read more

Have Steel Prices Peaked?

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Ferrous Metals

If not, then the peak is possibly in sight, according to Drawing on comments made by CIBC Capital Markets, the article states that recent price increases have been more than can be warranted by raw material price increases alone — something long suspected by distributors and consumers alike — and levels now being charged are unsustainable.

Feedback from our own contacts in the market suggest that some major mills are completing June orders early and have spot capacity opportunities available, both of which are an about-face from just a couple of months ago, when requests for additional capacity were flatly declined.

We would be hesitant to call mid summer as the peak, but the availability of more capacity coupled with the room for some price adjustments could be the ingredients needed to bring some sense to the market.

–Stuart Burns

With so much focus on China these days, it is a little-know fact that Russia, in 5th position, is one of the largest steel exporters in the world. Over half of the total is in ingots and semis such as HR coil and billets. Russia exported some 30 million tons in 2007, making them a major supplier to Western Europe and the US, according to steelonthenet. However, recent moves by the Russian government in response to rapidly rising domestic prices suggests this figure may dramatically decrease in the second half of this year if proposed export taxes are imposed. Read more

How interesting to see that at the same conference two contrary views of the magnesium industry could be aired. Hats off to the IMA for exploring both issues with such vigor.

On the one hand, stricter emission laws and the corresponding drive to reduce weight was cited as a reason why magnesium demand will increase in the long term. Magnesium can reduce the mass of a car by 20-40% more than aluminum, and hence play an important role in reducing the CO2 emissions for the vehicle. Lower weight equals smaller engine, which  equals lower emissions. In addition, magnesium is 100% recyclable, an issue of growing importance in environmentally sensitive Europe. There, cars have to be 85% recyclable by weight, rising to 95% in 2015. Read more

It’s an oft-cited fact that the steel price and level of demand is driven by a burgeoning need from China — yet in a recent conference speech, Xiong Bilin of the Chinese NDRC is reported to have said that China has 500 million tons of steel producing capacity and supply exceeds demand. In the same speech, the NDRC went on to explain the reason the authorities have been blocking the involvement of foreign steel companies in the building of new facilities in China: to try to head off a massive excess of production capacity. Read more

The announcement that Boeing will be offering increased quantities of aluminum scrap for auction this quarter may indicate an increase in activity at the Seattle plane maker and will certainly be a welcome increase in supply to a market in need of more top quality segregated scrap. Lack of plentiful good quality scrap has been one contributing factor in billet prices, and it doesn’t come much better than traceable segregated scrap from the aerospace industry. According to Metal Bulletin, Boeing will be offering an additional 380,000 lbs across all grades — equivalent to about an 18% increase.  As welcome as this scrap generation from Boeing will be, it is set to fall in the years ahead as production of the Dreamliner takes over from older models. The 787 has a far higher percentage of carbon fiber in its construction.

–Stuart Burns

I found this article based on a report by the Belgian bank Fortis in their Asian Metals Monthly Review  — interesting not so much for its predictions on copper, but rather their analysis of China and the wider impact that may have on metals prices in general. Read more

As we have reported previously, nickel prices have dropped  in half from their peak last year, following a combination of grade substitution and massive stock draw downs combining to hit production. When production drops, one automatically assumes demand must have dropped — but apparently demand has remained reasonably steady as stocks have dwindled, and is now forecast to grow this year, according to the Paris based International Stainless Steel Forum ISSF. During 2007, stainless production in the Americas and Europe/Africa declined by almost 12% and 13.3% respectively but is forecast to grow by 3.7% and 4.4% this year. You will not be surprised to hear the largest producer and the greatest growth is forecast to be from China, not least because there are several new plants in the commissioning stage that will shortly be coming on stream creating a 7.3% increase in capacity.  

It’s hard to  agree with the ISSF’s bullish growth forecasts, however,  since North America and Europe have both proved to be surprisingly resilient in the face of weakness in the housing and automotive markets.  I would expect any improvement in demand to be met by the new production capacity coming on stream and prices to hold reasonably steady through 2008. For the US, much will depend on the fortunes of the US Dollar. Continued weakness may prevent consumers from enjoying the benefits of wider import supply options and (as with steel this last year) seeing domestic producers take advantage of a tightening supply market.

–Stuart Burns

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