Articles in Category: Company News

Sanjeev Gupta, the industrial buyer of distressed steel, aluminum and coal assets (to name just a few of the areas he has expanded into in recent years), has so far managed an uncanny knack of good timing.

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Buying steel assets just before the global steel market finally lifted even Europe out of the doldrums, and now aluminum. To be fair, Gupta is not new to aluminum.

Gupta’s Liberty Group bought the Lochaber aluminum smelter and hydro-electric power plant from Rio Tinto in 2016 in a $410 million deal when Rio was desperate to shed “non-core” assets and raise cash.

Since then, the aluminum price has risen some 30%. Now, with aluminum on a roll, Gupta is again picking over the carcass of Rio’s aluminum assets, this time putting in a $500 million offer for Europe’s biggest refinery: the Dunkerque aluminum smelter.

Lochaber was only 47,000 tons capacity, but Dunkerque is on an altogether different scale, producing 280,000 tons a year. That disparity makes it a steal with respect to purchase price per ton of capacity compared to Lochaber, and is said to be profitable at current aluminum prices.

For most aluminum producers — unless they are niche, high-purity players or have integrated downstream activities — tend to have larger concerns leveraging economies of scale and sometimes integrating upstream into alumina, and even bauxite mining, to secure their supply chains. It is rumored Gupta may have something of the same objective. He is apparently in talks with Rio for more of its aluminum assets, according to the Financial Times. Rio is also looking to sell a 205,000-ton-per-year Isal aluminum smelter near Reykjavik, Iceland, and its Pacific Aluminum business, which analysts say could fetch more than $2 billion, with Gupta rumored to be interested.

Quite how he has managed to fund his rapid acquisition spree in recent years is the subject of some speculation. With purchases of generally distressed assets in shipping, recycling, banking, commodities trading and energy, there does not appear to be an obvious theme to his empire building beyond being broadly metals-related and presumably cheap.

Turning distressed assets around, though, is a hugely intensive and time-consuming process — and not without considerable risk, as many fail.

Yet so far, Gupta’s vehicles, Liberty Group and Simec under the GFG Alliance holding company, have apparently done rather well.

The success of Dunkerque will be contingent on the French nuclear generator EDF continuing to supply electricity at viable rates. That is probably, for now, a given, since the French apparently are more concerned about maintaining employment of the 600 workers at the plant.

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This morning in metals news, a law proposed in the U.K. could have a negative impact on the domestic steel industry as the country moves forward with Brexit talks, steel production in the U.S. Great Lakes region has jumped to start the year, four firms have submitted resolution plans for Electrosteel Steels and the U.S. Department of Commerce announced affirmative final determinations in the antidumping duty investigations of imports of carbon and alloy steel wire rod from South Africa and Ukraine.

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Union Warns About Proposed U.K. Law

A U.K. bill that aims to institute trading provisions for after the U.K.’s exit from the European Union could prove to offer fewer protections than existing E.U. tariffs, members of the Community trade union warned, according to the BBC.

Community union members wrote to Chancellor Philip Hammond, warning that the Customs Bill would not prove as strong as E.U. safeguards against antidumping already in place.

In the letter, quoted by the BBC, the members wrote: “When the UK leaves the European Union we will of course need to set up our own way of preventing unfair trade or dumping of goods. We understand this Customs Bill is putting down the framework for that to happen. But as it is currently written, we fear it will not be effective.”

Steel Production Up in the Great Lakes

Steel production has gotten off to a fast start in the U.S.’s Great Lakes region, the Northwest Indiana Times reported.

Production rose to 640,000 tons for the first week of 2018, constituting a 7.7% jump, the paper reported. Steel mills in the Great Lakes produced 594,000 tons of steel the previous week.

Companies Bid for Debt-Laden Electrosteel

Tata Steel, Vedanta and two other bidders are vying for the acquisition of Electrosteel Steels, which is currently involved in an insolvency resolution process, the Economic Times reported.

Electrosteel was one of 12 companies sent to insolvency proceedings by the Reserve Bank of India, the Economic Times reported.

DOC Makes Affirmative Determination on Wire Rod Imports

The U.S. Department of Commerce announced this morning that it had made affirmative determinations in its antidumping investigation of carbon and alloy steel wire rod from South Africa and Ukraine.

According to a department release, it determined that exporters from South Africa and Ukraine sold wire rod in the United States at 135.46-142.26% and 34.98-44.03% less than fair value, respectively.

The petitioners in the case are companies from four states: Gerdau Ameristeel US Inc. (Florida), Nucor Corporation (North Carolina), Keystone Consolidated Industries (Texas) and Charter Steel (Wisconsin).

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This morning in metals, a major player in domestic steel announced when its full-year earnings call will drop, China looks to be giving used cars some love, and Australia’s government appears a bit bearish on iron ore in the next couple years.

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Iron Ore Price Forecast for 2018-2019

Australia’s Department of Industry, Innovation and Science noted in recent commodities report that it expects iron ore prices to drop 20% in 2018 over this past year’s level, and continue that trend into 2019, according to Reuters.

A demand slowdown in China is much to blame, according to the department’s resource and energy analyst David Thurtell, as quoted by the news agency.

China Pivots to Used Cars

Speaking of demand slowdowns, China’s consumers may also be to blame for current — and future — automotive metals demand in Asia (and globally).

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Before we come to the end of the first business week of 2018, let’s look back at some of the stories on MetalMiner so far this year:

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  • Chinese supply-side reforms generally have a big impact on metal prices — such was the case for copper, as our Stuart Burns wrote early this week.
  • In case you missed it, the fourth episode of our podcast series, Manufacturing Trade Policy Confidential, dropped this week. This time, we spoke with Heidi Brock, CEO of the Aluminum Association.
  • With 2018 just under way, many publications are making predictions for the year with respect to the markets and how they will perform (among other things). Burns rounded up some of the predictions being made for the year, ranging from the political to the economic.
  • After a solid 2017, Tata Steel has big plans for 2018, Sohrab Darabshaw writes.
  • Speaking of supply-side actions, Burns touched on oil output cuts led by OPEC.
  • We kicked off our monthly round of Monthly Metals Index (MMI) posts with the Automotive MMI.
  • Gold and Bitcoin, in terms of finance, sit on opposite ends of the spectrum, with the former representing tradition and the latter representing the rise of modern cryptocurrencies. However, their relative fortunes are more connected than you might think, Burns writes.
  • For our second MMI post, we surveyed the month in construction trends and prices.

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This morning in metals news, Chinese steel futures fell, iron ore has done well to start 2018 and a new copper deposit has been discovered in Ecuador.

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Chinese Steel Futures Break Three-Day Upward Streak

Chinese steel futures fell on Thursday, breaking a three-day streak of gains, according to Reuters.

The drop comes as demand is expected to slacken with upcoming winter snows, which will slow down construction projects in the country. According to the report, winter weather is expected to hit the country, in the form of rain and snow, in the coming week.

Iron Ore Rises in the New Year

Meanwhile, iron ore has had a nice start to 2018, according to this report by Business Insider Australia.

Quoting Metal Bulletin numbers, the price for benchmark 62% fines rose 0.3% to $74.97 a ton, an increase which came on the heels of a 2.9% increase on Tuesday.

Miner Makes Copper Discovery in Ecuador

Miner SolGold is “elated” by its recent discovery of a new copper deposit in Ecuador, The Telegraph reports.

According to the report, SolGold confirmed a mineral resource estimate (MRE) of more than 1 billion tons of copper equivalent at its Alpala site in northern Ecuador.

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“With a further 120km of drilling planned for 2018 this is likely to be a dynamic resource with many updates to follow,” said Michael Stoner, an analyst at Berenberg, to Business Insider. “It is positive to see the group lay down a sizable first marker for the resource and we are most interested in the high-grade core, which, if expanded, will greatly ease the route to first production.”

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Tata Steel has a couple of things going for it in the new year — but before we get into that, 2017 was a bit kinder to it than the preceding two years.

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And we are not saying that, but the CEO and MD of Tata Steel, T.V. Narendran himself, told a gathering of employees and some reporters here recently that 2017 was somewhat better than the previous two years for the company.

Looking Back: A Recovery in Steel Demand, Prices

In 2014, Tata Steel dealt with some of the challenges relating to the closure of its mines because of changes in regulations. The next year, it dealt with the challenge posed by neighboring China, which had increased its export volumes globally (including to India). Tata Steel continued to perform and grow in these two years, Narendran said.

According to him, 2017 saw “a recovery in global steel demand, prices and trade,” leading to better-than-expected performance by India’s steel sector. The year, he added, not only saw India becoming the third-largest steel producer in the world, it managed to successfully reverse the trend of increasing imports, as it became a net exporter.

Narendran was also positive on India’s National Steel Policy 2017, which draws up a long-term road map for steel.

Another point which went in favor of the steel sector, Narendran pointed out, was the rollout of the Goods and Services Tax (GST), which had positive implications across the company’s value chain in India.

The Year Ahead

Tata Steel has big plans for 2018.

Its board recently approved an expansion from 3 million tons (MT) per annum of its Kalinganagar plant in Odisha province to 8 MT. The plant’s expansion will be completed in four years and is expected to meet demand in automotive, general engineering and other valued-added segments. The project will be funded through a mix of both debt and equity, according to the board.

Meanwhile, Tata Steel Ltd has initiated the process of raising U.S. $2.15 billion in six-year syndicated loans as part of its $5.1 billion loan program to refinance its existing debt. It has already appointed a domestic investment bank to manage the issue. The Indian steelmaker is seeking $2.15 billion in six-year syndicated facility to refinance loans in the books of TS Global Holdings Pte and NatSteel Asia Pte on an immediate basis.

Analysts, too, seem positive regarding Tata Steel’s performance in the coming years. Credit Suisse, for example, has maintained an “Outperform” rating for the company.

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Citigroup has said Tata Steel Ltd notes that management had indicated plans to double capacity in five years. Tata Steel’s plans to double capacity in five years providing growth visibility, while attractive M&A and the Tata-Thyssen joint venture could take the stock higher. Strong spreads, captive India iron ore, improving leverage and reasonable valuations should benefit the company, said its analysts.

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This morning in metals news, U.S. raw steel production for the final week of 2017 hit 1.63 million net tons, some Indian steel companies are upset about a hike in iron ore prices and zinc hits a 10-year high.

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Raw Steel Production to Close ’17 Falls From Previous Week

According to weekly data from the American Iron and Steel Institute (AISI), U.S. raw steel production for the week ending Dec. 30, 2017, hit 1,637,000 net tons (NT), which was up 1.9% from the same week in 2016 but down 4.7% from the previous week.

Adjusted year-to-date production through Dec. 30, 2017, was 90,106,000 NT, which was up 4.3% from the 86,379,000 NT during the same period in 2016.

Iron Ore Prices Up, Steel Companies Frown

According to a report from the Economic Times, a hike in iron ore prices has some Indian steel companies unhappy.

According to the report, Indian steel companies are worried that the rise in iron ore prices, among other materials, could force them to raise their prices.

Zinc Soars on Deficit Concerns

Zinc reached a 10-year high on expectations of a supply deficit, according to a Reuters report.

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Benchmark zinc rose 0.9% to $3,349/ton, its highest price since August 2007, according to the report.

The U.S. Department of Commerce. qingwa/Adobe Stock

Do we have a case of genuine material injury to U.S. jobs or do we have a case of commercial shenanigans in Boeing’s application to the U.S. Department of Commerce reported imposition of triple digit duties on Bombardier’s sale of new C-Series jets to number two U.S. airline Delta Air Lines?

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Boeing had called for countervailing duties of 79.41% to offset what it described as harmful Canadian subsidies to Bombardier. It also identified a “dumping margin” of 80.5%, based on the unpublished prices at which it claims Bombardier sold the C-Series planes to Delta, for a combined border charge of just under 160% on the Bombardier jets.

Delta, placed an order for 75 of the 100- to 150-seat single aisle C-Series jets some 18 months ago, according to Reuters. While the list price starts at $79.5 million, new project early sales typically enjoy substantial discounts to generate interest in the program and generate an early start to production. In that respect, initial launch discounts are common in the airline industry — whether they constitute dumping is debatable. It may be simplistic, but if all airlines do it then no one airline should be penalized.

Boeing claims that Delta received the planes for $20 million each, well below an estimated cost of $33 million and below what Bombardier charges in Canada. So far inconclusive, the numbers suggest — possibly, if correct — extreme discounts and some action may be valid.

However, dumping prices are usually imposed on products imported into a country. In this case, Delta’s order is to be manufactured on a new assembly line at Airbus’ factory in Mobile, Alabama, technically making it a U.S. airplane.

But this assembly option has arisen only in recent months following Airbus’ surprise move last October buying a majority stake in the struggling C-Series program.

At root, this could be a large part of the issue.

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This morning in metals news, imports of steel into the U.S. are up 18% through the first 11 months of the year, Rio Tinto completed a $1.5 billion buyback of its shares, and Japan’s biggest copper smelter expects copper price to continue to rise in 2018 and beyond.

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Imports Up 18% Through November

Imports of steel in the U.S. are up 18% through the first 11 months of the year, according to preliminary Census Bureau data cited by the American Iron and Steel Institute (AISI).

The U.S. imported a total of 2,718,000 net tons (NT) of steel in November 2017, including 2,126,000 net tons (NT) of finished steel (down 14.6% and 16.8, respectively, versus October final data).

Total and finished steel imports through 11 months are 35,632,000 and 27,637,000 net tons (NT), up 17.5% and 14.3%, respectively, versus the same period in 2016. 

Rio Tinto Finishes Major Buyback

Mining firm Rio Tinto said it had completed a $1.5 billion share buyback, with more to come, according to a Nasdaq report.

According to the report, Rio Tinto said today that it will commence a further $1.925 billion on-market buyback of Rio Tinto plc shares, to be completed no later than Dec. 31, 2018.

Copper on the Rise

According to a Japanese copper smelter, 2018 offers a healthy diagnosis for “Dr. Copper.”

The largest copper smelter in Japan, Pan Pacific, says copper prices will continue to rise next year, according to a Reuters report.

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Executive officer Satoshi Arai said the firm expects copper prices to average $7,280 a ton in 2018 and $7,720 a ton in 2019 (compared with $6,100 a ton this year).

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This morning in metals news, the top copper producer in China was forced to stop production on account of a pollution order, Chinese steel futures are down, and Chinese officials falsified data in order to avoid steel and aluminum capacity cuts.

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Jiangxi Gets the Government Red Light

Jiangxi Copper Co., China’s top copper producer, had to halt its production after a local government order related to pollution from its facility’s activities, Bloomberg reported.

According to a company official Tuesday, the local Chinese government made the order in an effort to cut pollution in the area. The halting of production is set to last for at least a week, according to the report.

Chinese Steel Futures Drop

Chinese steel futures fell as a result of dropping output during the winter season, Reuters reported.

A drop in demand during the cooler season also contributed to the futures decline. According to Reuters, the most active rebar contract on the Shanghai Futures Exchange (SHFE) dropped 3% to close at 3,787 yuan ($578.54) a ton.

Chinese Officials Fake Data to Avoid Capacity Cuts

According to the state-run China Youth Daily, officials in China’s northern Shandong province used fake data to help aluminum and steel producers avoid mandatory production curbs.

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According to the Ministry of Environmental Protection, officials in Binzhou used fake certificates and false data to obtain approval for the construction of 2.4 million tons of new aluminum production capacity in 2014.