Articles in Category: Company News

The aluminum price is a contrary thing, isn’t it?

For months, aluminum prices have been falling on the basis that demand is waning due to slowing global growth (particularly in top consumer China).

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China’s gross domestic product growth slowed again to 6.0% year over year in the third quarter, its weakest pace in almost three decades, Aluminium Insider reports. Citing a Reuters poll, the report notes industrial activity is expected to have shrunk for the sixth month in October, quoting a Reuters poll, suggesting hardly any relief from slowing global demand and the trade war.

The latest economic data from the E.U. and the U.S. also indicate slowing growth, with Germany flirting with a recession in the manufacturing sector. Although the aluminum market was estimated to be in deficit last year and this, a Reuters poll suggests it is likely to flip into a surplus of 304,000 metric tons next year — almost a 1 million ton turnaround from the 658,500-ton estimate for this year.

The article went on to say the consensus among major producers is that global aluminum demand growth will be flat (around zero) this year. Norsk Hydro predicts demand outside China will fall by 1-2%, meaning global demand is likely to fall by 0.5%. Alcoa took a similarly pessimistic view.

So why has the aluminum price currently taken a run-up to nearly $1,800 per metric ton on the back of, Reuters reports, supply fears?

It would seem investors are somewhat jittery and struggling to read the fundamentals.

Talk of Rio Tinto having to reduce output (or worse, shut its New Zealand smelter due to high power costs) and China’s second-place Chalco closing 200,000 tons of capacity in Shandong for the same reason seem to have stoked fears a number of smelter cutbacks could lead to a shortage.

Investors also view falling LME and SHFE inventories as a sign of a tightening market.

Aluminum stocks in SHFE warehouses dropped to their lowest level since March 2017 at 278,736 tons, while LME aluminum inventories dipped to their lowest since Sept. 30 at 956,200 tons, according to Reuters.

On the flip side, top consumer China is importing more and more remelt alloy ingots as part of its raw material product mix, which is finding its way through to increased exports of low-priced semi-finished products. China exported 4.37 million tons of mostly semi-aluminum products in the first nine months of the year – 2.8% more than in the previous year.

Primary production may be marginally down, but China is still supplying the world with semis, depressing activity at domestic extrusions and rolling mills in Japan, Europe and, by extension, the U.S.

Although the U.S. doesn’t import Chinese extrusions or billet, material supplied from elsewhere that has been displaced by Chinese metal does find its way in. Extruders are suffering, as illustrated by the low billet premiums prevailing in the U.S. right now.

Keep up to date on everything going on in the world of trade and tariffs via MetalMiner’s Trade Resource Center.

While some polls have suggested aluminum prices could be back over $1,800 per ton next year if current conditions prevail, that looks unlikely.

More than just sentiment is being depressed by the trade war. With little chance of a resolution this side of the presidential election, manufacturing is unlikely to recover strongly enough to materially impact the supply-demand balance anytime soon.

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This morning in metals news, miner Rio Tinto has advanced work on its Oyu Tolgoi copper and gold mine project, the U.S. is reportedly considering rolling back some tariffs against China, and Novelis announced its quarterly financial results.

Keep up to date on everything going on in the world of trade and tariffs via MetalMiner’s Trade Resource Center.

Rio Tinto Reaches ‘Significant Milestone’

Earlier this year, MetalMiner’s Stuart Burns weighed in on delays at Rio Tinto’s massive Oyu Tolgoi project in Mongolia, citing possible delays of 16-30 months.

This week, however, the miner offered positive news, announcing the completion of a portion of the project.

“Rio Tinto has achieved a significant milestone at the Oyu Tolgoi mine in Mongolia with the completion of Shaft 2, which enables the acceleration of work on the underground development,” the miner said. “Shaft 2, a 10 metre diameter shaft sunk to approximately 1.3 kilometres below the surface, has now entered into the final stages of commissioning.

“This is a critical piece of infrastructure and will enable a step change in terms of delivering the underground mine. Shaft 2 can carry 300 people per cage cycle versus a maximum of 60 people per cage cycle through Shaft 1. The 48 tonne capacity cage can now be used to support logistics, transporting supplies and components for development of the mine.”

Tariff Talks

Among other issues, tariffs remain at the center of the trade dispute between the U.S. and China.

China has asked the U.S. to drop tariffs in exchange for an initial deal. In that vein, according to several media reports, the U.S. is considering rolling back approximately $112 billion worth in tariffs on Chinese goods toward a first-phase trade deal.

Novelis’ Net Income Rises 31% YoY

For the second quarter of Novelis’ fiscal year 2020, the firm reported net income of $160 million, marking a 31% year-over-year increase.

Adjusted EBITDA reached $374 million, up 5% year over year.

In addition, Novelis’ acquisition of Aleris Corporation is expected to close in the coming months.

Keep up to date on everything going on in the world of trade and tariffs via MetalMiner’s Trade Resource Center.

“On July 26, 2018, Novelis announced it signed a definitive agreement to acquire Aleris Corporation,” the company said. “Having received conditional approval in the European Union, as well as a clear path forward for approval in the U.S., Novelis continues to work closely with the Chinese State Administration for Market Regulation to receive its approval. The company expects to close the transaction by January 21, 2020, the outside date under the merger agreement.”

The Automotive Monthly Metals Index (MMI) ticked up one point for an MMI reading of 86.

Keep up to date on everything going on in the world of trade and tariffs via MetalMiner’s Trade Resource Center.

U.S. Auto Sales

As mentioned in previous reports, the top three automakers in the U.S. — General Motors, Ford and Fiat Chrysler — all now report sales on a quarterly basis.

GM reported net income of $2.3 billion in the third quarter, down 8.7% on a year-over-year basis. GM delivered 739,000 vehicles in the third quarter, up 6% on a year-over-year basis.

Ford reported third-quarter net income of $400 million, down from $1 billion in Q3 2018.

Fiat Chrysler’s worldwide shipments fell 9% “primarily due to continued dealer stock discipline in North America.”

Honda’s U.S. sales rose 7.6% in October, with its truck sales rising 15%. For the year through October, Honda’s U.S. sales are up 0.6% compared with the same period in 2018.

Toyota Motor North America saw its October sales drop 1.2% on a volume basis and by 4.9% on a daily selling rate basis.

Nissan’s October sales dropped 5.8% on a year-over-year basis.

According to a forecast report by J.D. Power and LMC Automotive, new-vehicle retail sales in October were forecast to decline by 0.9% year over year (when adjusted for number of selling days).

Average transaction prices, however, are at a record high. According to the jointly released report, the average transaction price moved above $34,000 for the first time ever in October and was up nearly $1,300 compared with October 2018.

GM Strike Comes to an End

After 40 days, the nationwide strike at General Motors finally came to an end.

“The work stoppage in the U.S. negatively affected North American business results in the third quarter and expected results for the year,” GM said in its third-quarter earnings release. “In the third quarter, about two weeks of vehicle production was lost.”

According to GM, the strike resulted in a net EBIT-adjusted impact of $1 billion, or $0.52 per diluted share; GM expects the full-year impact to come in at $2.00 per diluted share.

In September, the United Auto Workers union initiated the first nationwide strike at GM since 2007.

On Oct. 25, UAW announced it had ratified a new four-year labor deal.

“General Motors members have spoken,” said Terry Dittes, UAW vice president and director of the UAW-GM department. “We are all so incredibly proud of UAW-GM members who captured the hearts and minds of a nation. Their sacrifice and courageous stand addressed the two-tier wages structure and permanent temporary worker classification that has plagued working class Americans.”

According to UAW, the approved deal included “an economic package of an $11,000 per member signing bonus, performance bonuses, two 3% annual raises and two 4% lump sum payments and holding the line on health care costs.”

Fiat Chrysler to Merge with PSA Groupe

As MetalMiner’s Stuart Burns explained earlier this week, Fiat Chrysler and France’s PSA Groupe — maker of Peugeot — have plans to merge.

According to Fiat Chrysler, the merger would create the world’s fourth-largest OEM by annual unit sales.

“FCA abandoned attempts to merge with Peugeot’s French rival, Renault, earlier this year when the French government, a 15% shareholder, blocked the move,” Burns explained.

“But the FCA has long held that consolidation within the European car industry, if not globally, is inevitable as the industry goes through unprecedented disruption in terms of a switch to electric and competition from Asia.

“There is arguably a better logic to a Peugeot-FCA merger than a Renault-FCA tie-up.”

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Actual Metal Prices and Trends

U.S. HDG fell 7.2% month over month to $746/st as of Nov. 1.

LME three-month copper rose 3.7% to $5,840/mt. U.S. shredded scrap steel fell 11.4% to $225/st.

The Korean 5052 aluminum coil premium rose 2.2% to $3.21/kg.

bas121/Adobe Stock

This morning in metals news, Workday is acquiring sourcing and procurement firm Scout RFP, the Italian government and ArcelorMittal are butting heads over the latter’s intention to pull out of its Ilva contract and the U.S. might not have to impose tariffs on imported automobiles.

Keep up to date on everything going on in the world of trade and tariffs via MetalMiner’s Trade Resource Center.

Workday Acquiring Sourcing and Procurement Firm Scout

MetalMiner sister site SpendMatters has all the news regarding Workday’s acquisition of sourcing provider Scout RFP for $540 million.

According to Workday, a finance and HR solutions provider, closing on the deal should occur by Jan. 31, 2020.

Check out other SpendMatters coverage of the acquisition, including Jason Busch’s analysis of the acquisition and background information on the companies.

Italy, ArcelorMittal Clash Over Ilva

On Tuesday, ArcelorMittal sent a letter to Italian firm Ilva detailing its intention to terminate a previously announced deal to purchase the struggling steelmaker.

ArcelorMittal closed on the deal Oct. 31, 2018.

“The Agreement stipulates that, in the event that a new law affects the environmental plan for the Taranto plant so as to materially impair the ability to operate it or to implement its industrial plan, the Company has a contractual right to withdraw from the Agreement,” ArcelorMittal said. “Effective on 3 November 2019, the Italian Parliament has removed the legal protection necessary for the Company to implement its environmental plan without the risk of criminal liability, thus justifying the withdrawal notice.”

However, Italian Prime Minister Giuseppe Conte pushed back, arguing the contract must be respected and that he won’t “bend” on the issue, Reuters reported.

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U.S. Auto Tariff Deadline Draws Near

A deadline is fast approaching.

This month, President Donald Trump will have to decide whether to impose tariffs on imported automobiles and auto parts, much to the chagrin of European automakers.

The decision comes pursuant to the processes of Section 232 of the Trade Expansion Act of 1962 — the same statute used to impose tariffs on imported aluminum and steel based on national security concerns.

Secretary of Commerce Wilbur Ross, however, cited conversations with automakers in the E.U. and Japan in noting the U.S. may not need to impose the new tariffs, Bloomberg reported.

The U.S. steel sector notched a capacity utilization rate of 81.6% for the week ending Nov. 2, according to a recent American Iron and Steel Institute (AISI) report, as U.S. steel prices continue to plunge.

Keep up to date on everything going on in the world of trade and tariffs via MetalMiner’s Trade Resource Center.

U.S. steel production reached 1.89 million tons for the week ending Nov. 2, marking a 0.1% year-over-year increase over the week ending Nov. 2, 2018 (when production reached 1.88 million tons at a capacity utilization rate of 80.5%).

Meanwhile, production during the week increased 1.2% compared with the previous week ending Oct. 26, 2019, when production totaled 1.87 million tons at a rate of 80.7%.

For the year to date, production reached 81.60 million tons at a capacity utilization rate of 80.3%. Production during the period was up 2.5% compared with the 79.58 million tons produced during the same period in 2018 (when the capacity utilization rate checked in at 77.5%).

By region, production totals checked in at:

  • Northeast: 190,000 tons
  • Great Lakes: 676,000 tons
  • Midwest: 181,000 tons
  • Southern: 767,000 tons
  • Western: 74,000 tons

Steel’s Slide Continues

On the price side, October proved to be another downward month for U.S. steel prices.

U.S. hot-rolled coil was down to $483/st as of the start of the month — nearing MetalMiner’s short-term support level. The price declined 12.97% month over month.

U.S. cold-rolled coil fell to $684/st, down 7.69% month over month. U.S. hot-dip galvanized is down 7.21% month over month, having fallen to $746/st.

The plate price dropped 7.07% to $684/st.

Steelmakers continue to grapple with the reality of falling prices, now with over 18 months gone by since the Trump administration slapped a 25% tariff on imported steel.

U.S. Steel, for example, reported an adjusted net loss of $35 million in its third-quarter earnings announcement. Meanwhile, in 3Q 2018, the steelmaker reported adjusted net earnings of $321 million.

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For the first nine months of the year, U.S. Steel reported adjusted net earnings of $124 million, down 80.6% from the $640 million reported during the first nine months of 2018.

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Mining companies are not renowned for their cutting-edge use of the latest technologies; I’m not trying to be derogatory, but mining is not the first industry you think of when talking about the digital age.

Keep up to date on everything going on in the world of trade and tariffs via MetalMiner’s Trade Resource Center.

Their association has been more in the use of their products – copper, rare earths, lithium, etc. are required for these new technological developments.

But an article by Neil Hume in the Financial Times this week reports on the world’s largest copper producer Freeport-McMoRan’s adoption of artificial intelligence (AI) to optimize production at its aging Bagdad Copper mine in Arizona.

As the report states, most of the best copper has been extracted at Bagdad, so miners are having to crush more lower-grade rock just to sustain output.

Apparently, Freeport has developed a process with McKinsey, which uses data from sensors around the mine and suggests new ways to improve the performance of its crushers and processing mills. The system found that the mine was producing seven distinct types of ore and that the processing method, which involves the use of large flotation tanks, could be adjusted to recover more copper by adjusting the PH level, the article states.

Freeport-McMoRan CEO Richard Adkerson is quoted as saying the development has been “a remarkable success.” With very little investment, it has boosted production at Bagdad by 9,000 metric tons of copper this year.

On the basis of this pilot, Freeport-McMoRan is rolling the application out to all its mines in the Americas. The miner has set a goal of increasing production by 90,000 tons, or 5% of its production, by applying this technology.

Putting this in context, the article quotes typical costs to develop 90,000 tons of new copper capacity at about $1.5 billion to $2 billion. Cost include buying new haul trucks, giant shovels and ore crushing equipment; according to the firm, this AI program costs very little.

Looking for metal price forecasting and data analysis in one easy-to-use platform? Inquire about MetalMiner Insights today!

Where the majors lead, others will follow.

Freeport’s success in using AI to optimize its extraction processes will no doubt be rapidly copied by its peers.

Bombardho/Adobe Stock

This morning in metals news, miner Antofagasta lowered its full-year copper guidance by 20,000 tons, a new favorite has emerged in the British Steel sweepstakes and the U.S. unemployment rate was unchanged in October.

Keep up to date on everything going on in the world of trade and tariffs via MetalMiner’s Trade Resource Center.

Antofagasta Lowers Copper Guidance Amid Supply Disruptions

Protests and labor stoppages in Chile have impacted copper production in the country, the world’s top copper producer.

Antofagasta announced it was lowering its full-year copper guidance from a range of between 750,000 to 790,000 tons down to a range of 750,000 and 770,000 tons.

“Further to the 3Q 2019 Production Report announcement on 23 October 2019 and following the unrest in Chile, all of the Company’s mines are now back in operation,” the company said. Disruptions of the mines’ supplies mainly affected Los Pelambres whose access road was blocked. This, combined with some damage to ancillary infrastructure outside Los Pelambres’ perimeter, is estimated to have an impact on the Company’s full year production of approximately 10,000 tonnes of copper, including the 5,000 tonnes previously disclosed.

“At Antucoya, labour negotiations have been successfully concluded with the union ending the strike which started on 16 October. The impact on copper production is estimated at approximately 4,000 tonnes.”

New Favorite in British Steel Bidding

Following the failure to reach a deal with Ataer Holding, an arm of the Turkish military pension fund OYAK, a Chinese firm has emerged as the favorite to take over the insolvent British Steel.

According to The Guardian, Jingye is “extremely interested” in making a bid for the U.K.’s second-largest steelmaker, which was forced into liquidation in May.

Unemployment Rate Holds Steady

According to the latest jobs report from the Bureau of Labor Statistics (BLS), the U.S. unemployment rate held steady at 3.6% in October.

In October, nonfarm payroll employment increased by 128,000 jobs, according to the BLS.

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However, jobs declined in the motor vehicles and parts manufacturing sector due to strike activity (namely, the 40-day General Motors strike, which recently concluded).

Employment in manufacturing dropped by 36,000 in October. Employment in the motor vehicles and parts manufacturing sector fell by 42,000.

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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 coverage here on MetalMiner, which included a PwC report on mining and metal deals, global steel production, lead and zinc forecasts, and an automotive merger of PSA Groupe and Fiat Chrysler.

Keep up to date on everything going on in the world of trade and tariffs via MetalMiner’s Trade Resource Center.

Looking for metal price forecasting and data analysis in one easy-to-use platform? Inquire about MetalMiner Insights today!

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This morning in metals news, the United Auto Workers (UAW) union has a tentative labor deal with Ford, the U.S. Office of Inspector General says the Section 232 tariff exclusion process needs more transparency and U.S. Steel officially completed the acquisition of a 49.9% ownership stake in Big River Steel.

Keep up to date on everything going on in the world of trade and tariffs via MetalMiner’s Trade Resource Center.

UAW Announces Tentative Ford Deal

Not long after UAW members voted to ratify a new labor deal with General Motors late last week, the union now appears to be close to finalizing a deal with Ford.

In a statement this week, the UAW said it had reached a tentative agreement with Ford.

“Our national negotiators elected by their local unions have voted to recommend to the UAW-Ford National Council the proposed tentative agreement,” UAW Vice President Rory Gamble. “Our negotiating team worked diligently during the General Motors strike to maintain productive negotiations with Ford. The pattern bargaining strategy has been a very effective approach for UAW and its members to secure economic gains around salary, benefits and secured over $6 billion in major product investments in American facilities, creating and retaining over 8,500 jobs for our communities.”

Ford confirmed UAW’s announcement but did not provide further details.

“Ford can confirm the UAW’s announcement that the UAW and Ford have reached a proposed tentative agreement on a four-year contract,” said Bill Dirksen, vice president for labor affairs at Ford. “Further details will be provided at a later date.”

IG: More Transparency Needed in Section 232 Exclusions Process

U.S. importers have been applying for Section 232 tariff exclusions over the last year — a process that has come in for criticism.

Criticism has focused on the Commerce Department’s capacity to process the thousands of applications and accusations that some domestic firms are asserting an outsized influence on the Commerce Department’s decisions with respect to exclusion requests.

In a letter and management alert to Commerce Secretary Wilbur Ross, Carol Rice, assistant inspector general for audit and evaluation, shared her office’s concerns.

“Attached is a management alert regarding a lack of transparency that contributes to the appearance of improper influence in decision-making for tariff exclusion requests under Section 232 of the Trade Expansion Act of 1962, as amended,” Rice wrote. “Issues regarding this topic came to our attention during fieldwork for the ongoing audit of the Bureau of Industry and Security’s and International Trade Administration’s processes and procedures for reviewing and adjudicating Section 232 exclusion requests.”

The Inspector General’s office initiated an audit of the process Oct. 29, 2018. The management alert lists some of the findings unearthed by the audit, which include:

  • Evidence of an “unofficial appeals process”
  • Communications with an objector “prompted a change in internal review criteria”
  • No documentation for off-record conversations between “interested parties and Department officials”

U.S. Steel Finalizes Big River Steel Deal

U.S. Steel has finalized its $700 million acquisition of a 49.9% ownership stake in Arkansas-based Big River Steel (initially announced Oct. 1).

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“Today is a true milestone for our 118-year old company,” said David B. Burritt, president and CEO of U. S. Steel. “The closing of our investment in Big River brings us one step closer to creating a differentiated, world-competitive company that can offer our customers, employees and stockholders the ‘best of both’ integrated and mini mill steel making technology. We have done more than make an investment in the newest and most advanced flat-rolled mill in North America … we have invested in the future of U.S. Steel. We are gratified by the positive response we have received from our stakeholders recognizing the strategic rationale of this transaction since we announced it on October 1. We now look forward to executing the next phase of our strategy with our new partners at Big River.”

The board of France’s PSA, owner of Peugeot, has given chief executive Carlos Tavares approval to launch a full-scale merger with Fiat Chrysler Automobiles, creating one of the world’s largest carmakers, the Financial Times reports.

Keep up to date on everything going on in the world of trade and tariffs via MetalMiner’s Trade Resource Center.

The FCA board is expected to follow suit, paving the way for the companies to pursue a deal that would create a combined group with a market value in excess of €44 billion (U.S. $48 billion).

Shares in FCA have risen some 7% since the merger was back on the table last week in anticipation of a successful outcome, Peugeot shares have barely moved. Both movements — or lack thereof — are in sharp contrast to the preceding year, during which Peugeot’s shares have risen 38% and FCA’s just 1%.

Peugeot’s Tavares has earned widespread praise for his turnaround of car maker Opel — formerly owned by General Motors — since 2017.

FCA shareholders are maybe hoping he can do the same for them.

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