Despite talks of negotiations over a potential Tata Group bailout in the U.K., the Indian firm has proved itself a generally good steward of the businesses it has purchased in the U.K. over the years.
In hindsight, its purchase of Jaguar Land Rover from Ford for U.S. $2.3 billion in June 2008 was a steal. However, it was half what Ford had paid for the brands at the time, as JLR had an aging product range and a stodgy image.
Tata invested billions in product design and new model development. As a result, sales and profitability soared.
Tata’s purchase of Tetley Tea was also seen as buying into a mature market with limited growth prospects back in 2000. However, since then, the brand has grown into the second-largest tea brand in the world.
Tata’s largest European acquisition, however, has not been so successful.
Corus Steel comprised an earlier merger of British Steel and Corus of the Netherlands. Principally, the merger included the giant steelworks at Ijmuiden and British Steel’s Port Talbot Steel complex (the largest steel mill in the U.K.).
Combined with some smaller steel operations, this makes Tata Steel the third-largest steelmaker in Europe. Tata manages a workforce of 20,000 in Europe.
The U.S. Department of Commerce. qingwa/Adobe Stock
This morning in metals news: the Department of Commerce on Friday announced the rollout of an updated Steel Import Monitoring and Analysis (SIMA) system; Rio Tinto’s chief executive will step down; and, lastly, China’s steel exports are facing a growing number of anti-dumping probes.
The DOC will release the updated platform Oct. 13, 2020.
According to a DOC statement, the regulatory changes adopted by the final rule will:
“require steel import license applicants to identify not only the country of origin, but also the country where steel used in the manufacture of the imported product was melted and poured, as defined in the final rule”
“expand the scope of steel products subject to the import licensing requirement to include all products subject to Section 232 tariffs”
“extend the SIMA system indefinitely”
“codify the existing low-value license requirement for certain steel entries up to $5,000. Commerce received public comments on these regulatory changes, as published in a March 2020 proposed rule”
Executive shakeup at Rio Tinto
The fallout from Rio Tinto’s destruction of Juukan Gorge in May 2020 finally reached the executive level late last week.
The miner’s operations led to the destruction of rockshelters at Juukan Gorge, including two Aboriginal caves considered sacred. The destruction of the area was part of a mine expansion project.
As a result, CEO J-S Jacques will step down. Jacques will remain in the role until March 31, 2021, or until Rio Tinto finds a successor (whichever is earlier). Jacques has occupied the position since 2016.
“What happened at Juukan was wrong and we are determined to ensure that the destruction of a heritage site of such exceptional archaeological and cultural significance never occurs again at a Rio Tinto operation,” Rio Tinto chairman Simon Thompson said. “We are also determined to regain the trust of the Puutu Kunti Kurrama and Pinikura people and other Traditional Owners.”
Furthermore, Chris Salisbury will step down as chief executive of Rio’s iron ore division. In addition, Simone Niven will step down as group executive for corporate relations.
“We have listened to our stakeholders’ concerns that a lack of individual accountability undermines the Group’s ability to rebuild that trust and to move forward to implement the changes identified in the Board Review,” Thompson continued.
This morning in metals news: July steel shipments fell by 25.6%; Nucor announced its 190th consecutive quarterly dividend; and the Energy Information Administration released its September Short-Term Energy Outlook.
According to the American Iron and Steel Institute, U.S. steel shipments in July fell 25.6% year over year.
U.S. steel mills shipped 6.04 million net tons during the month, a 0.2% increase from the previous month. The July total marked a 25.6% decrease from July 2019, when U.S. mills shipped 8.12 million net tons.
For the year to date, shipments totaled 47.25 million net tons, down 16.1% from the same period in 2019.
“Against the backdrop of significant cost savings measures being taken across the business, the Board determined it both appropriate and prudent to suspend dividend payments until such a time as the operating environment normalizes,” the company said in its quarterly earnings release earlier this year.
“Reduced economic activity related to the COVID-19 pandemic has caused changes in energy demand and supply patterns in 2020,” the report states. “This STEO assumes U.S. gross domestic product declined by 4.6% in the first half of 2020 from the same period a year ago and will rise beginning in the third quarter of 2020, with year-over-year growth of 3.1% in 2021.”
The Brent crude oil spot price reached an average of $45 per barrel in August, according to the EIA, up $2 per barrel from July.
The bump in the price comes on the heels of a significant decline in new inventories.
Per the EIA, global liquid fuels inventories rose by 7.2 million barrels per day in the second quarter. Meanwhile, inventories rose by 3.7 million barrels per day in the third quarter.
Consumption, on the other hand, declined in August compared with 2019 levels.
Per the EIA, global consumption of petroleum and liquid fuels reached 94.3 million barrels per day in August. The August total marked a decline of 8.2 million barrels per day from August 2019 consumption.
Still, consumption has recovered somewhat in recent months. For example, August consumption increased from the 93.3 million barrels per day consumed in July, the EIA reported.
This morning in metals news: India is looking to curb its imports of copper and aluminum; Rio Tinto and Turquoise Hill reached a financing agreement for the Oyu Tolgoi underground mine project; and Germany’s steel industry needs state aid.
Per the report, India is particularly targeting imports from China and other Asian countries. Among the proposed measures is a requirement for importers to register with the government.
Rio Tinto, Turquoise Hill reach financing deal
Miner Rio Tinto and Turquoise Hill have reached a financing deal toward the completion of the Oyu Tolgoi underground mine in Mongolia.
“The MOU agreed today with TRQ provides a clear funding pathway for the completion of the Oyu Tolgoi Underground Project,” said Arnaud Soirat, Rio Tinto’s chief executive of copper and diamonds. “We will continue working with TRQ and the Government of Mongolia to progress the underground project, which has the potential to unlock the most valuable part of the mine for the benefit of all stakeholders.”
IG Metall head says German steelmakers need state aid
2020 has been a difficult year for Europe’s steelmakers.
Already battling imports, European steelmakers have struggled on the heels of the coronavirus pandemic and its resulting impact on demand.
In Germany, IG Metall head Joerg Hofmann said the country’s steelmakers need state aid, Reuters reported. In addition, German steelmakers need to form alliances in order the facilitate the transition to greener fuels for blast furnaces, Hofmann argued.
This morning in metals news: copper prices gained momentum Wednesday; the rival of German steelmaker Thyssenkrupp rejected the idea of an alliance; and a Pakistani steelmaker is looking to ramp up its output amid a construction spike in the country.
This morning in metals news: General Motors announced a partnership with Nikola Corporation; U.S. manufacturing corporations saw their profits plunge in Q2 2020; and Chile’s copper shipments fell in August.
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GM announces partnership with Nikola
General Motors on Monday announced plans to partner with Nikola Corporation, a partnership that would see the Detroit automaker manufacture the Nikola Badger.
“As part of the agreement, Nikola will utilize General Motors’ Ultium battery system and Hydrotec fuel cell technology, representing a key commercialization milestone for General Motors,” GM said in a release.
After-tax profits for U.S. manufacturing corporations reached $47.2 billion in Q2, according to the U.S. Census Bureau. The quarterly total marked a decline from the $113.0 billion in Q1 2020 and the $136.3 billion in Q2 2019.
Before we head into the long Labor Day weekend, let’s take a look back at the week that was in the world of metals.
Automakers released August sales reports, mostly showing sales remain down compared with 2019 levels.
Meanwhile, for the week ending Aug. 29, U.S. steel mills’ capacity utilization fell compared with the previous week, interrupting an extended stretch of weekly capacity increases.
In other news, President Donald Trump took aim at steel imports from Brazil and Mexico. With respect to Brazil, Trump opted to cut Brazil’s semi-finished steel quota for the remainder of the year down to 60,000 tons from 350,000 tons.
This morning in metals news: steelmaker Nucor will open a new steel plant in Florida by the end of this year; U.S. gasoline prices are low heading into the Labor Day weekend; and Chinese demand continues to power high iron ore prices.
This morning in metals news: the U.S.’s levels of exports and imports were approximately equal in May, according to the Energy Information Administration; Vale offered an update on emergency protocols at two of its dikes; and the U.S. has seen elevated levels of imports of standard pipe and tin plate in recent months.
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Energy exports, imports even in May
Per the Energy Information Administration, the U.S.’s energy exports and imports came in approximately even in May.
“The United States had been a net exporter of energy in several months of the past year,” the EIA reported. “Changes in domestic production and declines in global demand for energy since mid-March in response to COVID-19 have shifted energy trade balances back in the direction of net imports, especially for U.S. crude oil and petroleum products.”
Vale updates on Paracatu, Patrimônio dikes
Brazilian miner Vale offered updates on ongoing emergency protocols related to two of its dikes.