Author Archives: Stuart Burns

It’s  not just  small- to medium-sized manufacturing companies in the U.S. that are seeing work coming back onto domestic soil from China. The UK  is also experiencing a drift of contract work back to British suppliers  for even quite basic semi-finished products, like metal castings, metal formed parts and plastic injection moldings. The reasons cited by an FT report are cost, quality, and timely deliveries. Read more

When is a Contract Not a Contract?

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Ferrous Metals

When is a contract not a contract? Apparently it’s when you are a U.S. Steel company in an extremely tight market. Honda chief executive Takeo Fukui told Reuters in Tokyo that an unnamed U.S. mill had requested (polite speak for demanded)  a price increase during April on an annual contract negotiated earlier this year. Favorites are U.S. Steel or Arcelor Mittal, as both have imposed surcharges on contracts recently and both have been at the forefront of pushing through price  increases above those widely believed purely necessary to cover raw material costs. If Honda has been asked to pay more, then probably so have Toyota and Nissan. This comes on top of cost increases facing the Japanese transplants, caused by the weak dollar inflating the cost of imported parts made overseas. Read more

Scrap Tightness Set to Ease

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Green, Non-ferrous Metals

The market is slowly improving for copper consumers as Comex/LME prices have drifted lower over the last two months and scrap prices decline. Whether prices will get back to the levels seen last December of $6500/ton remains to be seen, but falling scrap demand in China has helped the availability of raw material supply to domestic US mills. Opinions vary as to why demand has dropped off —  many believe it is due to industries closing down ahead of the Olympics, others point to the tightening credit situation in China and the rising cost of sorting scrap, making scrap imports less attractive. Either way, the drop in Chinese demand on top of the normal North American seasonal lull has proved welcome for consumers. Read more

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 Purchasing.com. 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

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