Articles in Category: Commodities

Reports in the media that natural gas prices in the U.K. have more than quadrupled over the last year to highs of 180p per therm from around 40p per therm this time last year are making headlines. This is largely because of the impact on small, startup gas suppliers who have been forced out of business over recent weeks.

However, natural gas — and energy prices, broadly — have been rising strongly. This has been the case, not just in the U.K. but across Europe for much of this year.

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Power prices on the rise

natural gas tap

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In part, this is weather-related. Exceptionally low winds are failing to generate sufficient renewable energy. However, the situation is also due to the rise of natural gas prices, globally and specifically in Europe.

Demand from China and severe weather in Texas have led to increasing demand and constrained supply. As such, those have created the perfect conditions for speculators to drive prices higher.

Another less talked about contributor is the failure of Russia to supply more than its minimum contractual requirements to the European market for some months. The move is widely seen as the Russian authorities trying to apply pressure on Europe for the approval of the Nord Stream 2 gas pipeline.

According to The Guardian newspaper, around half of the U.K.’s electricity is generated by natural gas-fired power plants.

The situation is exacerbated by unplanned outages of nuclear power plants this year. Furthermore, fire shut down a main power cable importing electricity from France just this month.

Natural gas surge

The U.K. relies heavily on natural gas for both residential and industrial use. The resulting rise in prices has already led to the closure of two major U.K.’s fertilizer plants.

This has had the knock-on effect of crimping CO2 production. Ir is made as a byproduct and is the source of some 80% of the UK’s supply. CO2 is needed for a wide variety of industrial and agricultural applications.

Steel impact

The U.K.’s second-biggest steel producer, British Steel, is quoted by the Financial Times as saying that the U.K.’s power prices are spiraling out of control.

The company is on variable electricity prices. British Steel has warned it could have to close production in the face of unprecedented price increases.

Electricity costs can represent up to 20% of the cost of converting basic raw materials into steel. The company is quoted as saying it is facing a maximum price at peak times of up to £2,500 per MWh.

Meanwhile, it saw an average of £50 per MWh in April.

Spot prices in excess of £1,000 per month MWh are becoming increasingly common this month after wholesale prices in the U.K. rose dramatically.

Nor is the UK well served with reserves of natural gas. It has just 1% of Europe’s total storage after failing to invest in storage facilities over the last 10 years. So, if supplies from Russia do not increase as the winter season approaches, the U.K. is probably the worst-placed of all European markets in having no alternatives to limited supply and rising prices.

While European steel producers are more protected in terms of energy prices by state rules and long-term agreements, producers in Italy are voicing worries. Rising power costs are said to be behind the current price of steel products in southern Europe, which had expected to decrease on falling scrap input costs but were being hampered by record power costs.

With winter approaching, the situation is likely to get much worse before it gets better.

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ArcelorMittal and Liberian President George Weah have announced a 25-year commitment to stay in Liberia. Through the deal, the steelmaker will triple its iron ore production in the country and invest an additional $800 million. The steelmaker said it has invested $1.7 billion in the country over the last 15 years.

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ArcelorMittal invests in Liberia

ArcelorMittal logo

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The steel and mining company had initially signed a 25-year agreement with Liberia in 2005. It shipped the first iron ore from its Yekepa mine in 2011.

During the newly signed first phase of expansion, annual production would reach 15 million tons (MT), with the potential of reaching 30 MT a year, ArcelorMittal Executive Chairman Lakshmi Mittal said at the signing ceremony.

ArcelorMittal will provide the government with a total of $65 million from the production of 15 million MT of iron ore in three years. Since the end of a 1989-2003 civil war, the mining and agriculture potential of Liberia has attracted billions of dollars in resource investments. However, the country’s infrastructure remains underdeveloped and the majority of its 5 million people live in poverty.

Going green

Of late, the UK-headquartered ArcelorMittal has been in the global headlines for its determined drive on the “green steel” and clean energy fronts, joining the trend of steelmakers foraying into green hydrogen and increasing the footprint in renewable power generation.

Just last week, Germany pledged to offer funding of $65 million toward of ArcelorMittal’s investment of 110 million euros ($131 million) in a hydrogen plant powered by renewable electricity.

German Environment Minister Svenja Schultze said Berlin would pay 55 million euros — subject to EU approval — toward a new direct reduced iron (DRI) plant. The plant will use green hydrogen to reduce iron ore in a CO2-free steelmaking process.

By 2025, ArcelorMittal Hamburg’s Chief executive Uwe Braun expects his company to produce 100,000 tons of DRI for steelmaking with green hydrogen from the plant.

ArcelorMittal invests in Indian solar power

Elsewhere, in India, ArcelorMittal plans to invest in solar energy in the Indian provinces of Rajasthan & Gujarat.

According to a report by pv magazine, Group Chairman Lakshmi Niwas Mittal met representatives of the local governments in Rajasthan and spoke of setting up a 4.5 GW solar park at an investment of about U.S. $2,586 million (Rs 19,000 crore) in the province. The plant is to be set up by ArcelorMittal arm HPCL-Mittal Energy Limited.

In another meeting with the Gujarat officials, Mittal also expressed his intention of investing about U.S. $6,809 million in Gujarat’s solar energy, wind energy and hydrogen gas production sectors.

ArcelorMittal currently produces DRI using grey hydrogen, which comes from natural gas. In a green hydrogen system, the hydrogen is produced by using renewable energy sources, like wind or solar power, and then run through an electrolyzer.

ArcelorMittal would have achieved its goal of expanding output to 15 MT per year would have been accomplished much earlier, but the Ebola outbreak in 2014 disrupted its expansion plans in Liberia, for which it declared force majeure.

ArcelorMittal said the project will generate more than 2,000 new jobs during the construction phase.

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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, including stainless steel consumption’s impact on nickel prices, surging aluminum prices and much more:

stainless steel rods

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Week of Sept. 13-17 (stainless steel drives nickel, aluminum prices rise and more)

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This morning in metals news: U.S. Steel released its third-quarter guidance yesterday; U.S. petroleum exports just edged out imports in the first half of the year; and, lastly, unemployment rates fell in 15 U.S. states in August.

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U.S. Steel releases Q3 guidance

U.S. Steel logo

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On Thursday, U.S. Steel released its Q3 2021 financial guidance, forecasting EBITDA of $2.0 billion, up from $1.3 billion in the second quarter.

“We expect the third quarter to be a quarter of records for U. S. Steel,” U. S. Steel President and CEO David B. Burritt said. “Supported by strong reliability and quality performance, sustained customer demand, and continued increases in steel selling prices, we expect our Best for All℠ business model to generate record quarterly adjusted EBITDA and EBITDA margins, demonstrating the power of our strategy.”

Burritt added U.S. Steel is bullish that market fundamentals “will support a stronger for longer steel market.”

Higher steel prices into adjusted contracts and spot selling prices, plus strong customer demand, will contribute to record EBITDA in the company’s flat-rolled segment, the guidance report indicated.

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This morning in metals news: global aluminum production picked up in July; the WTI crude price continues to hover around $70 per barrel; and, lastly, the Producer Price Index for final demand increased by 0.7% in August.

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Aluminum production increases in July

aluminum ingot

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Global aluminum production totaled 5.74 million metric tons in July, the International Aluminum Institute reported.

The total marked an increase from 5.52 million metric tons in July 2020. Furthermore, the total increased from 5.56 million tons in June 2021.

China’s estimated production rose to 3.34 million metric tons in July 2021. The total marked an increase from 3.24 million tons in June 2021.

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Before we head into the weekend, let’s take a look back at the week’s news and some of the metals storylines here on MetalMiner: Aluminum prices reach 10-year high while a coup in Guinea threatens to disrupt global bauxite supply, China-Australia iron ore trade surges ahead despite ongoing tensions; and see MetalMiner’s analyst-driven Monthly Metals Index updates for aluminum, raw steels, copper, stainless.

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Each month, MetalMiner hosts a webinar on a specific metals topic. Explore the upcoming webinars and sign up for each on the MetalMiner Events page.

News for the Week of Sept. 7-10

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aluminum ingot stacked for export

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This morning in metals news: Aluminum prices reach 10-year highs after a coup in Guinea threatens to disrupt global bauxite supply. In other news, steep commodity prices send China’s factory-gate inflation to a 13-year high. Also in the news, Hurricane Ida’s damage leaves more than 75% of U.S. Gulf of Mexico oil production offline.

Each month, MetalMiner hosts a webinar on a specific metals topic. This month’s discussion is Carbon Steel 2022: What types of steel contracts to set up and when to execute them. Explore the upcoming webinars and sign up for each on the MetalMiner Events page.
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This morning in metals news: U.S. steel capacity utilization dropped slightly last week; the number of drilled but uncompleted oil wells in the U.S. declined in July; and, lastly, the construction sector shed 3,000 jobs in August.

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Steel capacity utilization hits 84.5%

hot rolled steel

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The U.S. steel capacity utilization rate for the week ending Sept. 4 fell to 84.5%, the American Iron and Steel Institute (AISI) reported this week.

The rate marked a decline from 84.9% the previous week.

Meanwhile, steel output last week totaled 1,866,000 net tons, AISI reported. The total marked a 0.4% decline from the previous week but a 23.5% year-over-year rise.

DUCs decline in July

Meanwhile, in energy news, the Energy Information Administration (EIA) reported drilled but uncompleted (DUC) wells in the U.S. fell to their lowest monthly level in July since November 2017.

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Diplomatic relations between China and Australia have been strained over the past year.

However, that does not seem to have affected trade between the two nations.

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China-Australia trade

China and Australia flags

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After posting record exports in May and June 2021, Australia recently announced a new record in July. Exports of iron ore, coal and liquefied natural gas exports all rose strongly, giving Australia a record trade surplus, plus a boost to mining profits and tax revenue.

“Non-rural goods rose $2,275m (7%), driven by other mineral fuels, metal ores and minerals and coal, coke and briquettes,” the Australian Bureau of Statistics reported.

“The increases in other mineral fuels and coal, coke and briquettes were driven by LNG and thermal coal, respectively. Increased exports to Northern Asian countries coincided with an unseasonably warm northern summer.

“The increase in metal ores and minerals was driven by iron ore on the back of strong demand from China.”

In July, total exports, including services, reached a record of A$45.95 billion.

The Australian Bureau of Statistics reported the trade surplus climbed to A$12.1 billion (US $8.91 billion) in July. The surplus reached an already high A$11.1 billion in June.

Overall, exports were up 5% because of strong demand from Asian countries for LNG and thermal coal, combined with higher prices for iron ore, Reuters reported.

Imports rose 3% to $33.8 billion, largely due to a sharp increase in parts and accessories for telecommunications equipment.

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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:

Western European steel factory

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Cut-to-length adders. Width and gauge adders. Coatings. Feel confident in knowing what you should be paying for metal with MetalMiner should-cost models.

Week of Aug. 30-Sept. 3

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