Articles in Category: Commodities

Before we head into the weekend, let’s take a look back at the week that was and some of the metals storylines here on MetalMiner:

New Norsk Hydro CEO Hilde Merete Aasheim. Source: Norsk Hydro ASA

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  • U.S. mines had a productive 2018.
  • Automaker Toyota announced it would be increasing its $10 billion U.S. investment pledge, bringing it up to $13 billion.
  • Norwegian aluminum maker Norsk Hydro announced the resignation of its CEO of 10 years.
  • As growth levels slow in many places around the world, some are hoping China can help pick up the global economic outlook.
  • MetalMiner’s Belinda Fuller penned a two-part series this week on steel prices — check out Part 1 and Part 2.
  • U.S. steel capacity utilization continues to sit north of the 80% mark.
  • MetalMiner’s Stuart Burns took a look at the state of the oil price as OPEC members (and other oil-producing nations) strive to realize previously announced production curb targets.

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Oil prices have rallied this quarter, with Brent crude hitting a peak of U.S. $67.50/barrel, according to oil-price.com.

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Goldman Sachs is quoted in a note to investors as saying the resilient demand growth and supply outages could push prices up to U.S. $70/barrel in the near future.

Against a landscape of supply disruption, the surprise has been strong demand growth.

January saw demand increase by 1.55 million barrels per day year on year. Demand in China, in particular, is stronger than expected, the article noted. Despite subdued global GDP growth, consumers still see the outlook as positive — so, combined with comparatively low gasoline prices, consumption has remained robust.

On the supply side, OPEC and its non-member partners have done a remarkably good job of constraining excess supply. Following an agreement in October to trim production levels by 800,000 barrels a day through June 2019 — supported by Russia and other non-OPEC members matching a further 400,000 barrels a day — producers have managed to achieve most of the 1.2 million barrels of intended cuts.

Compliance has been high, too. MarketWatch reported the 11 OPEC members achieved 79% of their committed cuts in February, according to data from S&P Global Platts — an improvement from 76% a month earlier.

The Joint Ministerial Monitoring Committee, a production policy monitoring group, quoted even higher overall conformity with the production cut agreement last week, saying OPEC in February achieved almost 90% of its 1.2 million barrel daily reduction target. Sanctions against Iran and Venezuela have also made a significant dent to supplies, further squeezing the market.

The 800-pound gorilla is U.S. shale.

According to the Energy Information Administration (EIA), shale is expected to rise further in April, with the seven largest U.S. shale producers pumping 8.592 million barrels a day.

It is the potential for U.S. shale to more than make up for supply-side tightness elsewhere that is probably capping Goldman Sachs’ predictions of price rises beyond $70 a barrel.

MarketWatch quoted Baker Hughes, which reported active rig counts fell for a fourth straight week, suggesting output growth may be stalling — at least for the time being.

Crude price rises may stimulate more drilling if the price remains elevated; too much of a surge, however, will be self-defeating if inventories rise and the price subsequently falls.

The market, therefore, is in a delicate balance.

There is little OPEC and its partners can do to squeeze the market further. Deeper cuts are unlikely to garner support, but there is the option to extend the current cuts beyond the June deadline.

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All eyes will, therefore, be on U.S. tight oil production numbers in the months ahead. The medium-term oil price is largely down to shale oil producers’ enthusiasm to increase production at current prices.

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This morning in metals news, copper prices were up slightly Monday, Tokyo Steel held prices steady for the fourth straight month and Rio Tinto responds to criticism about carbon emissions stemming from its customers’ operations.

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Copper Prices

LME copper traded up 0.4% on Monday, Reuters reported, reaching $6,458 per ton.

Citing Society Generale analyst Robin Bhar, the report notes the second quarter of the year typically features conditions conducive to price support for copper.

Holding Steady

Japan’s Tokyo Steel has announced it is holding prices steady for its steel products for the fourth straight month, according to another Reuters report.

Kiyoshi Imamura, managing director of Tokyo Steel, was quoted as saying that domestic construction demand was “sluggish due to higher inventories and delays in some projects because of shortage of labour and some materials.”

Rio Answers Emissions Criticism

Rio Tinto has faced some criticism from environmental activists, who have called for the iron ore miner to bear more responsibility for the emissions caused by the miner’s customers.

Rio, however, says it can’t be held responsible for what customers do with their iron ore, the Australian Financial Review reported.

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Rio Tinto Chairman Simon Thompson wrote a letter to shareholders in which he explained that responsibility lies “within the control of our customers, not Rio Tinto,” he was quoted as writing.

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This morning in metals news, China iron ore futures hit a two-week high, the Office of the United States Trade Representative (USTR) announced the first consultations under the revised U.S.-Korea Free Trade Agreement (KORUS) and hot-rolled coil inventories in China dipped for a third straight week.

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Iron Ore Futures Rise

China iron ore futures rose to a two-week high, Reuters reported.

According to the report, the May 2019 iron ore contract picked up 1.5% to reach 627 yuan ($93.32) per ton.

U.S. Requests First Consultations in Revised KORUS Era

The USTR announced Friday that it has requested the first consultations with South Korea since the institution of the revised KORUS.

The revised free trade agreement with South Korea came into effect in September 2018 after being signed by Presidents Donald Trump and Moon Jae-in; KORUS was originally introduced in 2012.

“At issue is Korea’s non-compliance with KORUS Article 16.1.3, which states, in relevant part, that a party in an administrative hearing related to competition must ‘have a reasonable opportunity to… review and rebut the evidence and any other collected information on which the determination may be based,'” the USTR said in a statement. “Following extensive efforts to resolve this concern, USTR is requesting consultations at this time because recently drafted amendments to Korea’s ‘Monopoly Regulations and Fair Trade Act’ fail to address U.S. concerns that KFTC hearings continue to deny U.S. firms due process rights under the KORUS agreement that are necessary to secure a fair competition hearing in Korea.”

HRC Inventories Down in China

In other China news, the country’s inventories of hot-rolled coil have declined for the third straight week, according to Shanghai Metals Market.

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According to the report, HRC inventories were 3.64 million tons as of March 14, down 1.1% from the previous week and down 4.7% from the same period in 2018.

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This morning in metals news, Reuters reports the launch of the London Metal Exchange’s planned steel contract will likely be pushed back to 2020, China’s average daily steel output in January and February increased, and India’s imports of iron ore were up 157% during the April-December 2018 period.

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Steel Contract Delay

According to a Reuters report, the LME’s plans to launch a new steel contract could have to wait until next year.

Traders want the contract to be priced in euros rather than the dollar, according to the report.

China’s Steel Output Picks Up

According to another Reuters report, China’s average daily steel output picked up for the first two months of 2019 taken together compared with December 2018.

Average daily output for January and February combined (to account for the Lunar New Year holiday) reached 2.54 million tons, up from 2.32 million tons in December, according to the report.

India’s Iron Ore Imports Surge

India’s imports of iron ore during the April-December 2018 period jumped 157% year over year, according to the Business Standard.

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The report, citing the CARE Ratings agency, notes that India’s July 2018 iron ore import total of 1.93 million tons marked the country’s highest monthly import figure in the past five years.

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Before we head into the weekend, let’s take a look back at the week that was and some of the metals storylines here on MetalMiner:

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This morning in metals news, the Wall Street Journal reports the U.S. and China are approaching a deal to roll back tariffs imposed over the last year, the Steel Authority of India Ltd. (SAIL) boosted iron ore production last month and iron ore prices are on the rise.

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A Trade Resolution?

Global markets have followed every twist and turn in the ongoing U.S.-China trade talks with bated breath.

The two countries have imposed a total of $310 billion worth of tariffs on each other’s goods since last summer, injecting uncertainty into markets and raising concerns about the moves’ impact on growth.

However, this weekend the Wall Street Journal reported the two countries might be nearing a deal to roll back the tariffs, Reuters reported. According to a source cited in the report, the countries may ink the deal during a summit later this month.

SAIL’s Iron Ore Production Soars

The Economic Times reported SAIL’s February iron ore production jumped 11.62% year over year.

The state-owned steelmaker posted an all-time record in daily average output, producing 66,620 tons per day.

Iron Ore Prices

Iron ore prices are surging, Business Insider Australia reported, partially on policy news from China’s biggest steelmaking city.

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According to the report, the city of Tangshan issued a smog alert that curbed industrial activity, which thus offered price support to higher grades of iron ore.

Before we head into the weekend, let’s take a look back at the week that was and some of the metals storylines here on MetalMiner:

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MetalMiner’s Annual Outlook provides 2019 buying strategies for carbon steel

This morning in metals news, U.S. Agriculture Secretary Sonny Perdue is looking to convince President Trump to use quotas instead of standard tariffs on Canada and Mexico, Chinese steel mills are holding off on iron ore restocking amid rising price, and an Italian aluminum plant will be coming back online soon.

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Metals Tariffs Remain USMCA Sticking Point

The leaders of the U.S., Canada and Mexico last year signed the United States-Canada-Mexico Agreement (USMCA) — meant to serve as the successor to the North American Free Trade Agreement (NATFA) — during the G20 Summit in Buenos Aires.

The signing came approximately 15 months after the formal commencement of talks among the three countries, geared toward revamping and modernizing the 1994 NAFTA.

However, the countries’ legislature still need to ratify the deal if it is to go into effect. While the leaders signed off on the deal, the U.S. maintained its Section 232 tariffs on steel and aluminum vis-a-vis imports from Canada and Mexico.

The fate of the tariffs remains a critical point if the deal is going to be nudged across the finish line.

Aa reported by Reuters, U.S. Agriculture Secretary Sonny Perdue is looking to convince the president that simple quotas are the way to go with respect to steel imports from Canada and Mexico.

Shopping Around

Per another Reuters report, rising iron ore prices have Chinese steel mills holding off on procuring supply.

As noted in the report, iron ore prices surged in February, in part a result of a dam breach disrupting supply from Brazilian miner Vale SA.

Italian Aluminum Plant to Restart

An Italian aluminum plant will be getting back to business in 2020, according to S&P Global Platts.

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According to the report, Swiss company Sider Alloys will restart Alcoa’s former Portovesme aluminum smelter next year.

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This morning in metals news, Chinese steel prices are up ahead of the peak construction season, mining companies around the world are looking to change the way they operate in the wake of Vale SA’s fatal dam collapse and solar sector companies are sourcing prefab in order to find a way around the Trump administration’s steel tariffs.

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Chinese Steel Prices Up, Iron Ore Flat

Ahead of the peak construction season, Chinese steel prices have gone up, while iron ore traded flat, Reuters reported.

On Wednesday, the most active rebar contract on the SHFE ticked up 0.2% to 3,715 yuan per ton ($555.54 per ton), according to the report.

Changes in the Mining Sector After Vale

The fatal tailings dam collapse Jan. 25 at Vale SA’s Corrego do Feijao mine in Brazil has other miners thinking about what they can do to prevent such a disaster from occurring at their own operations.

According to a Reuters report, a group of 27 CEOs — including those of Freeport-McMoRan, Vale, BHP Group and Glencore — agreed this week to form a panel that will “set international design and maintenance standards” for dams.

Solar Makers and Steel Tariffs

Solar makers are using an end around to the Trump administration’s steel tariffs, Bloomberg reported.

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How are they doing this? By sourcing prefab products from overseas, as the article cites the case of one solar company sourcing steel racks from India.