Articles in Category: Company News

BHP Billiton’s decision announced last week to approve a capital expenditure of U.S. $2.46 billion for the Spence Growth Option (SGO) at the Spence open-cut copper mine in Chile should come as no surprise given the roll copper has been on this year and the forecasts of supply shortages toward the end of the decade.

Benchmark Your Current Metal Price by Grade, Shape and Alloy: See How it Stacks Up

Whether criticism from activist investors Elliot Advisors had anything to do with the decision is doubtful, but comments from CEO Andrew Mackenzie on announcing the investment may well have had one eye on shareholder approval.

The investment will “create long-term value for shareholders in one of our preferred commodities,” the Financial Times quotes him as saying.

Elliott this week disclosed it has a 5% stake in the U.K.-listed shares of the miner, up from a 4.5% position held mostly in derivatives. The fund, founded by billionaire Paul Singer, is right when it says BHP has underperformed rivals and spent billions on mistimed acquisitions.

It is wrong in its solution, however, by demanding the firm return more money to investors through dividends and buybacks and to review an exit from its U.S. shale business.

Share buybacks reward current investors, but do nothing for the firm’s long-term growth. If you are a short-term activist after a quick buck, buybacks have a lot of appeal.

If you are a pension fund, life insurance company or other long-term investor you want to see a 10- to 20-year growth strategy, not a quick buck.

The investment in Spence represents just that kind of solid long-term bet on copper demand.

Read more

You don’t come from near obscurity to become the largest aluminium producer in the world, seemingly overnight, without courting some controversy — but China Hongqiao Group seems to have garnered more than its fair share.

Benchmark Your Current Metal Price by Grade, Shape and Alloy: See How it Stacks Up

The company is mired in allegations of misreporting profits, underreporting power costs and saddled with massive debts built up as the company went on a spending spree opening new smelters and buying rivals, the company. According to the South China Morning Post, net debt has surged to 62 billion yuan (U.S. $9.3 billion) at the end of last year, or 137% of Hongqiao’s shareholders’ equity. That is up from 97% two years earlier.

Unable to raise more capital on the markets following the suspension of shares earlier this year, the firm has had to turn to Citic Group, founded in 1979 to handle China’s overseas investments and run directly by the central government.

Hongqiao has enjoyed Citic’s support for some years as the investment conglomerate has funded previous acquisitions for the group. China Hongqiao Group will get a HK$8 billion (U.S. $1.02 billion) financial lifeline from Citic Group to repay bank loans, following its agreement to sell 806.6 million new shares and U.S. $320 million of convertible bonds to Citic and the conglomerate’s unit CNCB (Hong Kong) Investment. If they are fully converted into shares this could give Citic up to 13.3% of Hongqiao, making the conglomerate the smelter’s second-largest shareholder, the South China Morning Post reports.

The Fast Rise and Criticism

China Hongqiao Group’s rise has been dramatic.

With an installed capacity of 6.46 million tons, the firm has overtaken domestic rival Chalco and Rusal to become the world No. 1.

But the achievement is not without its critics.

Read more

Before we head into the weekend, let’s take a look back at the week that was.

Benchmark Your Current Metal Price by Grade, Shape and Alloy: See How it Stacks Up

  • In case you missed it, our August MMI Report is out. Metals like copper and aluminum hit record highs, and nine of our 10 sub-indexes posted upward movement as a result of a strong July. Will that momentum continue? Check back next month for the September MMI report.
  • Many have predicted a decline for iron ore prices, but as our Stuart Burns wrote on Monday, reports of its demise have been greatly exaggerated. A weak U.S. dollar, combined with strong equities and global GDP, have helped keep iron ore performing well, not to mention Chinese steel and the wider metals market. Read through for Burns’ assessment of the iron ore market.
  • In India, a boom of bauxite production is expected, wrote our Sohrab Darabshaw. In fact, it is expected to more than double by 2021. How is that possible? One reason, Darabshaw writes, is “increased domestic demand for aluminium, which will largely be sourced from the quintupling of land under mining lease in the Odisha province (which has the bulk of India’s bauxite reserves).”
  • One commodity almost everyone is interested in is oil. On Tuesday, Burns wrote about the future of oil prices. But, since this is MetalMiner, after all, those prices also have an effect on metal markets.
  • Everyone loves a good M&A story, and Burns had one earlier this week on the ongoing talks between Indian steel giant Tata Steel and Germany’s ThyssenKrupp. Plus, he touches on ArcelorMittal’s takeover of Italy’s Ilva. Burns writes: “For the first time in years, steelmakers at least seem to have a plan and are actively pursuing it. Whether that plan is to the eventual benefit or detriment of consumers remains to be seen — but a healthier domestic steel industry must certainly be advantageous to all.”
  • How about zinc? Burns wrote about the metal’s rise to $3,000, and the reasons behind zinc’s price hitting its highest point since 2007.
  •  Last week was a busy one for the U.S. Department of Commerce, which handed down preliminary determinations in countervailing duty investigations for both Chinese aluminum and silicon coming from a trio of countries.
  • Back in India, steel exports are on the rise as the Indian government’s protectionist measures seem to be paying off for its domestic industry.
  • Lastly, representatives of the U.S., Canada and Mexico began talks on Wednesday regarding renegotiation of the North American Free Trade Agreement (NAFTA), the trade deal instituted in 1994. The U.S. is focused on, among other things, bringing down ballooning trade deficits with the two countries (particularly Mexico). The talks are scheduled to continue until Sunday, so check back for updates on the proceedings.

Free Download: The August 2017 MMI Report

Zerophoto/Adobe Stock

India’s protectionist measures to safeguard its steel industry seem to be paying off.

Benchmark Your Current Metal Price by Grade, Shape and Alloy: See How it Stacks Up

As reported consistently by AG Metal Miner, the Indian government, responding to the call of its steelmakers, had time and again imposed various forms of anti-dumping measures and fines to stop cheap imports of steel — especially from the world’s steel manufacturing leader, China.

Along with the U.S. and Brazil, India was said to be one of the world’s leading initiators of anti-dumping investigations, according to the World Trade Organization (WTO).

Well, now, all this has resulted in India’s steel exports doubling to 8.2 million tons and imports have been slashed by about one-third in 2016-17.

As per a report by the Press Trust of India (PTI), quoting from portions of the released Economic Survey, the rise in exports of steel could also wipe away the excess capacity built up in the steel sector. The mid-year survey by the government said steel imports had declined in 2016-17, while exports of steel had doubled.

Alloy imports dipped by 36.6% to 7.4 million tons in 2016- 17 against 11.7 million tons in the previous fiscal year. Exports doubled to 8.2 million tons last fiscal year, over 4.1 million tons in the corresponding year.

The news was welcomed by steel companies like Tata Steel. T.V. Narendran, managing director for Tata Steel India and South East Asia, told newsmen that steel demand in India was increasing, making it just right to make future investments. Stability was being witnessed in the steel sector globally, though it had faced some problem two years ago, Narendran told reporters.

Ironically, much of Indian steel joy stems from its traditional rival China, where there’s been a visible improvement in the economy — which meant much of its steel being produced was once again being used within the country. It was against the backdrop of China’s economic slowdown that the global steel industry had faced distress due to decline in global demand.

The Indian survey report said, in response to the dumping of cheap imports, the government in 2016 introduced a host of measures like raising Basic Customs Duty, imposition of Minimum Import Price (MIP) and anti-dumping duties in order to shield domestic producers. The government imposed the MIP for steel in February 2016 for a period of one year.

On April 12, 2016, India initiated countervailing duty investigation concerning imports of certain hot-rolled and cold-rolled stainless steel flat products originating in China.

According to the WTO, India’s share in total global steel exports increased from 1.1% in 2000 to 2.8% in 2016. During this period, China’s share in total steel exports rose from 3.7% in 2000 to 19.2% in 2016. Japan’s share in total steel exports in 2000 which was 12.2%, but fell to 9.1% in 2016.

Free Download: The July 2017 MMI Report

Meanwhile, the U.S. share in total steel imports was 17.0% in 2000, but has since come down to 12.1% in 2016.

stockquest/Adobe Stock

This morning in metals news, European aluminum maker Constellium moves its U.S. offices from New York to Baltimore, copper and aluminum take a step back, and AK Steel announces a price hike.

Benchmark Your Current Metal Price by Grade, Shape and Alloy: See How it Stacks Up

Constellium to Set up Shop in Baltimore

European aluminum firm Constellium announced it will move its U.S. corporate offices from New York to Baltimore, The Baltimore Sun reported Wednesday.

According to a statement from Constellium, at least 25 senior management and executives will be relocated to the new Baltimore office by the end of 2018.

Constellium, which has its corporate headquarters in Amsterdam and two additional corporate offices in Paris and Switzerland, produces aluminum products for a wide range of industries, including aerospace, automotive, transportation, defense and packaging.

Copper, Aluminum Fall Back

After recently hitting multi-year highs, copper and aluminum fell on Thursday.

According to Reuters, the drop is the result of investors who “locked in profits from a steep rally amid doubts about future demand in top metals consumer China.”

Speculator activity has seen the LME index rise 16% from early June, according to the report.

AK Steel Announces Price Hike

Effective immediately, AK Steel will raise the price for all carbon flat-rolled steel products by a minimum of $30 per ton, according to a report on Nasdaq.com.

Since last August, AK Steel’s shares have risen 5%, compared with 21.8% for the industry, according to the report.

Despite that disparity, AK Steel had a strong second quarter, topping earnings and sales estimates, according to the Nasdaq report.

Free Download: The July 2017 MMI Report

The company reported net income of $61.2 million (or 19 cents per share), up 253.7% from net income of $17.3 million (or 8 cents) recorded in the prior-year quarter, the report says.  The company also recorded net sales of $1,557.2 million for the quarter, up 4.3% from the year-ago quarter, exceeding the Zacks Consensus Estimate of $1,530 million.

Unlike the steel mergers of the mid-noughties, the mergers currently in the news are born out of weakness, not strength, a recent Financial Times article suggests.

Benchmark Your Current Metal Price by Grade, Shape and Alloy: See How it Stacks Up

According to the piece, profitability among the continent’s steelmakers plunged from a peak in the third quarter of 2008 — when each ton shipped delivered on average €215 in earnings before interest, tax, depreciation and amortization — to just €46/tonne in the first quarter of 2016, according to calculations by UBS.

The figure has recovered since to about €83/tonne in the first quarter of 2017, but at the cost of 86,000 job losses since the financial crisis and years of losses contributing to the bankruptcy of the continent’s largest steel production plant, Ilva, in Italy.

Source Financial Times

Despite years of suboptimal capacity utilization, there has been limited rationalization of production continentwide, with governments fiercly opposing job losses in their backyard and steelmakers hoping the other guy will make the cuts. Even Ilva is now being taken over by ArcelorMittal rather than closing completely, and following a major investment will be back in production next year.

Source Financial Times

Although the industry acknowledges Europe will never need as much steel as it once did, ArcelorMittal is quoted as saying the industry is looking to governments to do more to stem imports from Russia and China, and facilitate the planned and phased closure of persistently loss-making plants. Less foreign competition and more consolidation is the agenda in the hope fewer more-consolidated steelmakers can achieve greater clout with buyers in a more constrained market, forcing through higher prices.

Source Financial Times

When ArcelorMittal’s takeover of Ilva is complete, the combined entity will control some 30% of European flat-rolled steel production, up from 26.5% for ArcelorMittal now. While Tata Steel’s proposed and much-delayed merger with ThyssenKrupp’s steel division — currently Europe’s second-largest steel producer — would raise their combined market share for hot-rolled flat products to over 20%.

Steel prices are already up nearly 60% from the bottom in 2015 on the back of improved recovery in steel demand and a gradual increase in anti-dumping legislation restricting some types of steel imports into Europe. Producers would like to see this go a lot further, of course, but consumers are fighting to keep the import market open, fearing — with some justification — that more action will reduce competition and result in significantly higher prices.

Free Download: The July 2017 MMI Report

For the first time in years, steelmakers at least seem to have a plan and are actively pursuing it. Whether that plan is to the eventual benefit or detriment of consumers remains to be seen — but a healthier domestic steel industry must certainly be advantageous to all.

gui yong nian/Adobe Stock

This morning in metals news, China pressured iron ore traders not to buy from North Korea even before the newest round of U.N. sanctions were imposed, a Chilean copper company is preparing to invest in Mongolia and China produced a record amount of steel in July.

Benchmark Your Current Metal Price by Grade, Shape and Alloy: See How it Stacks Up

China Puts Pressure on N. Korean Iron Ore Business

As the political situation on the Korean peninsula continues to intensify and President Donald Trump criticizes China for allegedly not doing enough to rein in North Korea, a Reuters report indicates China has taken some action against North Korean interests.

According to Reuters, China pressured its iron ore traders not to buy North Korea iron ore, pressure that even preceded the latest round of U.N. sanctions.

Per two traders Reuters spoke to, the Chinese government stopped issuing permits to bring in iron ore “several weeks ago.”

Codelco Looks to Make Investment in Mongolia

Chilean state miner Codelco is planing to make an investment in faraway Mongolia, Codelco’s chief executive told Reuters on Friday.

According to CEO Nelson Pizarro, the company is looking for medium-term investments in the country, which may have untapped copper deposits.

Chinese Steel Output Hits 74M Tons in July

Chinese steel producers had a prolific July, churning out  a record 74 millions tons, Reuters reported.

Free Sample Report: Our Annual Metal Buying Outlook

The output bested the previous month’s then-record total of 73.23 million tons, reached in spite of government efforts to combat pollution.

gui yong nian/Adobe Stock

This morning in metals news, steel prices in China are up and the government is looking to strike a balance, German company Thyssenkrupp isn’t in a rush to forge a merger with the European business of India’s Tata Steel and China responds to the U.S. Department of Commerce’s ruling this week regarding Chinese aluminum foil, which the DOC determined was being unfairly subsidized by the government.

Benchmark Your Current Metal Price by Grade, Shape and Alloy: See How it Stacks Up

Steel Prices On the Way Up in China

Rising steel prices have Beijing looking for ways to adapt, according to a CNBC report.

On the heels of efforts to cut excess Chinese steel production, prices are rising — but the government is looking to strike a balance.

“For Beijing, it’s a tough situation: tackle steel overcapacity, rebalance economic growth, control environmental pollution and also manage market stability — especially in advance of a leadership shuffle due in the fall,” CNBC’s Sophia Yan writes.

No Rush to Merge, Thyssenkrupp CFO Says

Talks of a merger between the European businesses of Thyssenkrupp and India’s Tata Steel have hung around since last year.

They even seemed to get a boost in light of news reported yesterday about Tata’s plans to separate its British pension scheme from its businesses.

Despite that step, Thyssenkrupp CFO Guido Kerkhoff says not so fast.

Kerkhoff told reporters Thursday that while they prefer a “fast solution” in potential merger talks, quality comes first.

China Warns U.S. After DOC’s Aluminum Foil Ruling

Unsurprisingly, the U.S. aluminum industry applauded the Department of Commerce’s preliminary determination Tuesday regarding Chinese aluminum foil.

Also unsurprisingly, China had something to say about it, too.

The Chinese Ministry of Commerce wrote in a statement on its website that the DOC’s claims were “without foundation” and urged the U.S. to “act cautiously and make a fair decision to avoid any negative impact on the normal economic and trade exchanges between China and the U.S.”

On Tuesday, Secretary of Commerce Wilbur Ross announced the findings of the countervailing duties investigation, declaring that Chinese exporters of aluminum foil received countervailing subsidies of 16.56 to 80.97 percent. As a result, the U.S. could impose duties of up to 81 percent on Chinese foil in return.

Free Sample Report: Our Annual Metal Buying Outlook

Meanwhile, the outcome of the Section 232 investigation into aluminum imports, however, remains pending.

stockquest/Adobe Stock

This morning in metals news, the U.S. aluminum industry expressed support for the U.S. Department of Commerce’s ruling that Chinese aluminum foil is benefiting from government subsidies, Indian steel company Tata Steel is expected to detach its U.K. pension scheme from its business and, in consumer products news, a recent report says copper cocktail mugs may be causing food poisoning.

Benchmark Your Current Metal Price by Grade, Shape and Alloy: See How it Stacks Up

DOC Rules Chinese Aluminum Foil Benefits From Government Subsidies

The U.S. aluminum industry came out in support of a U.S. Department of Commerce ruling Tuesday, which said that Chinese aluminum foil was benefiting from government subsidies.

According to the preliminary determination of the countervailing duty investigation, Chinese exporters of aluminum foil received countervailing subsidies 16.56 to 80.97%, Secretary of Commerce Wilbur Ross announced Tuesday.

Per a DOC release, the Commerce Department “will instruct U.S. Customs and Border Protection to collect cash deposits from importers of aluminum foil from China based on these preliminary rates.”

“The United States is committed to free, fair and reciprocal trade, and will continue to validate the information provided to us that brought us to this decision,” Ross said. “The Trump Administration will not stand idly by as harmful trade practices from foreign nations attempt to take advantage of our essential industries, workers, and businesses.”

Per the release, imports of aluminum foil from China last year were valued at an estimated $389 million.

The Aluminum Association applauded the DOC determination.

“The association and its foil-producing members are very pleased with the Commerce Department’s finding and we greatly appreciate Secretary Ross’s leadership in enforcing U.S. trade laws to combat unfair practices,” said Heidi Brock, President and CEO of the Aluminum Association, in a prepared statement. “This is an important step to begin restoring a level playing field for U.S. aluminum foil production, an industry that supports more than 20,000 direct, indirect, and induced American jobs, and accounts for $6.8 billion in economic activity.

“U.S. aluminum foil producers are among the most competitive producers in the world, but they cannot compete against products that are subsidized by the Chinese government and sold at unfairly low prices.”

The ruling stems from the March 9 filing of antidumping and countervailing duty petitions by The Aluminum Association’s Trade Enforcement Working Group. The petition marked the first time the Aluminum Association has filed unfair trade cases on behalf of its members in its nearly 85-year history, according to the Aluminum Association release.

Tata Steel Inches Closer to Potential Merger

According to a BBC report, an announcement from Tata Steel regarding the separation of its British pension scheme from its businesses could be coming within days.

The pension scheme has been a “significant barrier” in merger talks between Tata and German steel producer ThyssenKrupp, according to the report.

According to the BBC, Tata “has been in negotiations with pension regulators and trustees” of the £15 billion British Steel Pension Scheme.

Health Officials Say Copper Cocktail Mugs Could Cause Food Poisoning

A recent report might give drinkers of Moscow Mules pause.

CBS News reported health officials in Iowa made the declaration that copper cocktail mugs — often used to drink the popular Moscow Mule cocktail — might cause food poisoning “after examining the poisonous nature of copper and copper alloys mixing with food.”

Per an advisory bulletin from Iowa’s Alcoholic Beverages Division, the federal Food and Drug Administration’s Model Food Code prohibits copper from coming into direct contact with foods that have a pH below 6.0 — for example, vinegar, fruit juice or wine.

Free Sample Report: Our Annual Metal Buying Outlook

The Moscow Mule, an increasingly popular cocktail, includes lime juice.

There’s been a shift in one of India’s biggest steel company’s plans.

Benchmark Your Current Metal Price by Grade, Shape and Alloy: See How it Stacks Up

Steel giant Tata Steel will now focus more on India, its home base, than on global markets.

Chairman Natarajan Chandrasekaran has said Tata Steel’s priorities will be to focus on the Indian market, achieving operational excellence, and delivering value-added and differentiated products to its customers.

He told shareholders in the company’s Annual Report for 2016-17 that steel demand in India was set to witness a “significant growth in the future,” considering the current stage of development of the country’s economy and its expected growth path in the next decade.

Protectionism and Political Uncertainty

The global steel industry continued to witness challenging times, though the performance of the industry has been better this fiscal year.

While most in this sector, including Tata Steel, are keenly aware of the slow growth in global steel pickup for the last several years, they are also too aware of the fact that only China and India, where infrastructure development is the fastest, are the two places on earth where steel will continue to be used at a faster rate than the rest of the world.

The global steel industry continues to face structural overcapacity, but we see recovery in developed economies, such as Europe, gradual improvement in demand in India and better industry conditions in China.

At the same time, risk of uncertainty was likely to remain at elevated levels due to structural issues such as geopolitical uncertainty, especially in the U.S. and U.K., and the rising trend of protectionism, Chandrasekaran said.

In March 2016, Tata Steel announced plans to sell its U.K. business, as the company battled to control its “deteriorating financial performance.” In February, the company inked a pact to sell its Specialty Steel business, which employs 1,700 people, to Liberty House Group for £100 million.

Tata Launches Graphene-Coated Stirrups Products

What’s more interesting is the fact that Tata Steel was working on the commercialization of superconductor graphene, an advanced material. The company has launched ready-made graphene-coated stirrups called Tiscon Superlinks+.

Explaining this, Peeyush Gupta, vice president of steel marketing and sales at Tata Steel, said when four columns are built, the support link was normally made of steel. However, the link normally starts rusting after a while. Tata Steel has changed that by coating it with graphene.

Tata has said Superlinks+ comes with enhanced corrosion resistance and better bonding strength than other stirrups in the market. Incidentally, Tata Steel has filed seven patent applications in this area of work. The company is said to be contemplating other areas where graphene can be used. For this, a graphene development cell has been set up at Jamshedpur to identify applications and establish new businesses. In addition, two advanced material research centers of excellence have been established.

According to other media reports, Tata planned to start manufacturing graphene, which can be used in filtration systems, batteries and smartphones. The company is also working on drones and hydrogen fuel cells.

Graphene is ultra-light, 200 times stronger than steel and yet highly flexible. It is a superb conductor and is also transparent. Graphene research is focused on applications in energy, membranes, composites and coatings, biomedical, sensors, and electronics.

Free Sample Report: Our Annual Metal Buying Outlook

Tata was working on using graphene in highly targeted wearable technology products, including a smartwatch meant for yoga enthusiasts.