Articles in Category: Company News

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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, President Donald Trump escalated trade tensions by threatening to slap tariffs on essentially all Chinese imports, Nucor reported its Q2 and first-half earnings, and copper hits a one-year low.

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On Another Level

The back-and-forth of tariffs and threats between the U.S. and China has continued to increase in intensity in recent weeks and months, but that back-and-forth made its biggest step yet today (at least, in words).

In a taped interview, President Donald Trump said he is willing to bring the volume of tariffs on Chinese goods to over $500 billion — that is, covering the approximately $505 billion in imports that came in from China last year.

Nucor Reports Q2 Earnings

In Q2, Nucor reported net earnings of $683.2 million, up from Q1’s $354.2 million.

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In the first half of 2018, Nucor reported consolidated net earnings of $1.04 billion, up from $679.9 million in the first half of last year.

Copper Hits One-Year Low

Copper has been sliding of late, this week hitting a one-year low, CNBC reported.

Aluminum firm Alcoa Corporation reported its second-quarter earnings Wednesday, with some numbers showing the impact of current market trends and forces.

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The Pittsburgh-based firm reported $3.6 billion in Q2 revenue and $904 in adjusted earnings before interest, tax, depreciation and amortization (EBITDA). The firm’s Q2 EBITDA marked a 34% increase from Q1’s $653 million.

“Higher alumina and aluminum prices, as well as a stronger U.S. dollar, were the primary factors driving this sequential increase,” Alcoa’s Q2 earnings report states. “Somewhat offsetting these factors were unfavorable mix and higher costs for energy, raw materials, and maintenance activities.”

However, the firm downgraded its annual EBITDA forecast from $3.5 billion and $3.7 billion down to between $3.0 billion and $3.2 billion “due to current market prices and other factors.”

“Market pricing continued to be favorable in the second quarter and drove a 38 percent sequential increase in adjusted EBITDA excluding special items,” Alcoa President and CEO Roy Harvey said. “These market tailwinds also facilitated greater progress on our strategic priorities to reduce complexity in our Company, drive returns from our assets, and address pension liabilities to strengthen the balance sheet for the long-term.”

The firm attributed the lower forecast to “current market prices, tariffs on imported aluminum, increased energy costs, and some operational impacts.”

“While markets and trade dynamics are likely to remain fluid, we will continue to be focused on driving value for our stockholders through all market cycles,” Harvey added.

On the operations side, Alcoa reported that the third potline at its Warrick Operations in India will be restarted by the end of the year. Two of three potlines were restarted, and the third line due for a restart was shut down in May due to a power outage.

Alcoa estimates the restart of the third potline during the second half of the year to cost an estimated $5 million. In addition, once the partial restart schedule is completed at Warrick, the company estimates the smelter’s annual operating capacity will be 161,000 metric tons.

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Alcoa closed Wednesday at $47.96/share on the New York Stock Exchange. The stock’s 52-week high came on April 18 ($62.35), buoyed by the then still relatively new Section 232 tariff on aluminum (and steel).

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This morning in metals news, British Steel is set to make a big investment, steel production for the week ending July 14 dropped from the previous week and BHP Billiton’s iron ore production is up.

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British Steel to Invest £50M

According to the Financial Times, British Steel is set to drop £50 million into its Scunthorpe steelworks’ rod mill.

The firm’s earnings rose 48% in the 2018 financial year, per the report.

U.S. Steel Production Drops Last Week

According to the American Iron and Steel Institute (AISI), for the week ending July 14 domestic raw steel production was 1,783,000 net tons, at a capability utilization rate of 76.1%.

While the week’s production represents a 2.9% increase from the same period in the previous year, it marked a 0.5% decline from the previous week (ending July 7). 

More Iron Ore

BHP Billiton’s iron ore output was up 3% for the year as June 30, according to data released by the mining firm Wednesday. Q2 2018 ore output was also up 10% compared with Q1 2018.

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According to the announcement, the company exceeded full-year production guidance for copper, iron ore, petroleum and energy coal.

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This morning in metals news, President Donald Trump threatened China with an additional $200 billion in tariffs, copper fell to a one-year low and Glencore released a statement regarding the subpoena it received from the U.S. Department of Justice in its corruption probe.

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Tariff Saga Escalates

Trade tensions continue to rise as the U.S. and China trade tariff threats, which have evolved from mere threats to reality (as a batch of $34 billion in tariffs on Chinese goods went into effect Friday, July 6).

Now, Trump has threatened China with an additional $200 billion in tariffs, Reuters reported, as China has vowed to protect itself in response.

Per a release from U.S. Trade Representative Robert Lighthizer, the announcement comes after China retaliated to the aforementioned $34 billion in tariffs with matching tariffs of their own “without any international legal basis or justification.”

According to the state-run Xinhua News Agency, a Chinese Foreign Ministry spokesperson said the U.S.’s actions represent “trade bullying.”

“This is a war between unilateralism and multilateralism, between protectionism and free trade, and between power and rules,” spokesperson Hua Chunying said. “China will work with the international community to jointly safeguard the multilateral trading system and rules.”

Copper Slides

London copper dropped to a one-year low on the heels of the Trump administration’s $200 billion tariff threat, Reuters reported.

LME copper fell to to its lowest level since July 25, 2017, according to the report.

Glencore Issues Statement on DOJ Subpoena

As our Stuart Burns discussed on Monday, Glencore has found itself under the microscope of late, particularly the microscope of the U.S. Department of Justice.

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Glencore is being investigated for its dealings in Nigeria, the Democratic Republic of the Congo and Venezuela. In response to a subpoena, Glencore released a statement on its next steps.

“Glencore takes ethics and compliance seriously throughout the Group,” Chairman Tony Hayward. “The Company will cooperate with the DOJ, while continuing to focus on our business and seeking to maximise the value we create for our diverse stakeholders in a responsible and transparent manner.”

According to the release, Glencore has formed a committee to coordinate the firm’s response to the subpoena.

This is not the first time critics have lined up to suggest Glencore is on the ropes, but close to the wind as the trader often sails, the firm will likely find solutions to its current challenges, substantial as they are.

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And let’s not belittle the challenges the firm is facing. The U.S. Department of Justice, no less, is investigating the company’s business dealings in the Democratic Republic of the Congo, Venezuela and Nigeria as part of a corruption probe, Reuters reports.

If wrongdoing is proven, then Glencore and its executives could face huge fines or even criminal prosecution under the Foreign Corrupt Practices Act the U.S. is pursuing.

Some have speculated that the DoJ’s action was triggered by Glencore’s announcement that it would settle a case for mining debts with Dan Gertler — a mining billionaire on a U.S. sanctions list — in Euros to avoid the sanctions, which forbid payments in dollars. It is suggested the authorities would have taken a dim view of circumventing the sanctions by switching currencies, even though Glencore claims it had taken advice from the appropriate authorities.

Source: Financial Times

Not surprisingly, the share price reacted negatively to the news, dropping 12% and suffering its worst day in over two years following this week’s announcement of the U.S. subpoena.

The share price is down about 18% this year and was hovering near one-year lows as the company’s share price continues to underperform its peers, despite producing healthy profits and slashing its debts. The company reacted by announcing a $1 billion share buyback. Some critics saw that as an act of hubris, but the announcement helped the share price recover (at least in the short term).

In the longer term, investors will want to see a lower risk profile, but in life you can rarely have your cake and eat it too. Much of Glencore’s success and phenomenal growth has been down to successfully managing a high-risk profile, operating in unstable parts of the world and dealing with less scrupulous regimes in the process. That doesn’t make Glencore unscrupulous themselves, but it does open them up to the attention of authorities keen to ensure such a major corporation is behaving responsibly.

Suggestions that this investigation is the beginning of the end of Glencore are far overdone, but the investigation will prove lengthy, absorbing of management time and has the potential to unearth connections and dealings that the firm may not even be aware of (guilty by association, if you like).

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Still, Glencore has been here before and will no doubt weather this storm as it has previous ones.

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This morning in metals news, the U.S. and China trade tariff jabs, the steel import market share numbers for June are in and thyssenkrupp CEO Heinrich Hiesinger offers his resignation just days after the German firm’s finalization of a merger deal with Tata Steel.

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Trade Tensions Rise

At midnight, $34 billion of the U.S.’s previously announced $60 billion tariff package on Chinese goods went into effect. As previously indicated, China responded in kind, placing $34 billion in tariffs on American goods.

According to the Xinhua news agency, China’s 25% tariff will include agricultural products, vehicles and aquatic products. A China Ministry of Commerce spokesperson said the U.S. has acted like a “trade bully” that poses a “great threat to the security of global industry and value chains.”

Echoing previous comments from Chinese government officials, Premier Li Keqiang said that no one will win a trade war, but that China is “prepared to take countermeasures in the face of unilateral moves.”

Steel Imports Hit 22% Market Share in June

According to the American Iron and Steel Institute’s (AISI) report on steel imports in June, import permit applications were down 3.7% compared with the previous month. Steel import permit applications for June totaled 2,894,000 net tons (NT).

The countries with the largest finished steel import permit applications in June were: South Korea (206,000 NT, up 88% from May preliminary), Japan (134,000 NT, up 11%), Germany (105,000 NT, down 25%), Taiwan (103,000 NT, up 32%) and Vietnam (88,000 NT, up 18%).

Thyssenkrupp CEO Offers Resignation

It’s been a busy week for the German steelmaker.

Heinrich Hiesinger, CEO of thyssenkrupp AG since 2011, has offered up resignation just days after the German company finalized a merger deal with Indian firm Tata Steel, Reuters reported (the deal would merge the firms’ European operations to create Europe’s second-largest steelmaker, behind ArcelorMittal).

“Today I informed the Supervisory Board that I would like to step down from my position as CEO of thyssenkrupp,” Heisinger said in a prepared statement. “I take this step very consciously to enable a fundamental discussion in the Supervisory Board on the future of thyssenkrupp. A joint understanding of Board and Supervisory Board on the strategic direction of a company is a key pre-requisite for successfully leading a company. The broad support of our shareholders and the Supervisory Board was the basis for the success of our Strategic Way Forward since 2011.

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“This path always balanced the interests of our customers, employees and shareholders. Today thyssenkrupp is a completely different company regarding culture, values and performance. The joint venture of our steel activities with Tata is the next significant step to turn thyssenkrupp into a strong industrial company. We can be proud of what we achieved until now. For this I would like to thank all employees. They are the most valuable capital of thyssenkrupp.”

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Until a few years ago, Tata Steel was in the process of selling off most of its businesses in Europe because of the poor performance of steel globally.

A few days ago, though, the Indian steel major announced its joint venture (JV) with German company thyssenkrupp.

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Tata Steel Chief Financial Officer Koushik Chatterjee was quick to point out that the main reason for the deal was to establish three manufacturing bases in the U.K., the Netherlands and Germany.

In reply to a question by CNBC on why the need for a European presence now, the CFO explained that in 2015-2016, the steel industry globally was in a very difficult situation. Things had, however, changed externally, and also internally in Tata Steel, as the company had undertaken a series of portfolio restructuring moves.

What’s more, the signing of the deal is expected to spell relief for Tata Steel in India, with multimillion-dollar debt offloaded from its own books to the JV.

Tata Steel and thyssenkrupp signed a deal on Saturday after months of protracted negotiations to form Europe’s second-biggest steel company (behind ArcelorMittal) in which Tata and thyssenkrupp will have a 50:50 partnership.

Tata Steel Chairman N. Chandrasekaran told reporters at a press conference in Brussels on Monday that his company would be able to nearly double its capacity because of the JV.

Chandrasekaran and thyssenkrupp CEO Heinrich Hiesinger jointly addressed the conference. The deal will allow Tata Steel to transfer up to U.S. $3 billion (2.6 billion euros) of debt on its European business to the JV company. The chairman added Tata Steel aims to increase its capacity in India from 13 million tons per annum currently to 25 million tons, possibly within the next five years.

In the last few months, Tata Steel has been quite bullish in picking up distressed steel assets after a new bankruptcy code pushed several steel companies into debt resolution in India.

A few weeks ago, for example, it picked up the debt-ridden Bhushan Steel Ltd for about $5.12 billion (Rs 352.33 billion).

But the move does not seem to have gone down well with the stock markets in India. Brokerages gave a thumbs down to the JV, citing economic fallout and uncertainty in the short to mid term.

Most brokerages cut the target price of Tata Steel, citing concerns of a bloated balance sheet and a potential fall in economic interest in the partnership during an IPO.

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Both firms will have to hold a combined stake of at least 50% for at least six years, but at the time of the IPO upon conversion of warrants, thyssenkrupp’s stake will likely increase to 55%.

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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®:

Need buying strategies for steel? Try two free months of MetalMiner’s Outlook

Want to see an Aluminum Price forecast? Take a free trial!

gui yong nian/Adobe Stock

This morning in metals news, Sanjeev Gupta reopened his GFG Industrial Group’s steelworks in South Carolina in an effort to beat the U.S. steel tariff, the steel tariff could lead to the loss of jobs at a Missouri nail production plant and Harley-Davidson feels the sting of the E.U.’s counter-tariffs.

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Shuttered Steelworks in South Carolina Reopens

A shuttered steelworks in South Carolina was reopened by Sanjeev Gupta’s GFG Industrials, The Telegraph reported, in an effort to beat the U.S. steel tariff.

The plant produces wire rod for use in the automotive and construction sectors, according to the report.

U.S. Nail Producer Feels Effect of Tariff

According to Newsweek, Mid Continent Nail Corporation lost 50% of its business in the two weeks after President Trump’s 25% steel tariff went into effect.

Furthermore, that could mean the loss of jobs for the Missouri plant. According to the report, the company may have to lay off 200 more workers by the end of July.

Harley-Davidson Looks Abroad

As Harley-Davidson now faces counter-tariffs from the E.U. — instituted in response to the U.S.’s steel and aluminum tariffs — the company is now looking to shift its production overseas, according to a CNBC report.

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According to the report, Harley-Davidson said shifting targeted production overseas could take anywhere between nine and 18 months.