Articles in Category: Company News

China Zhongwang Holdings failed to close a deal to buy Aleris last year after concerns were raised about the national security and corporate responsibility track record of the Chinese group.

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Not that we think of Novelis as Indian, but they are. Since 2007, the ex-Alcan flat-rolled manufacturer has been owned by Hindalco, part of India’s Aditya Birla Group. Novelis was already the world’s largest flat-rolled aluminum product producer before the Aleris deal.

Now, with the addition of Aleris, Novelis will acquire some very sophisticated aerospace technology — particularly in the plate market — and further secure the combined group’s position in high-technology products for the aerospace, automotive and defense sectors, not just in the U.S. but globally. Aleris is particularly strong in Europe and has just opened a new rolling mill in China.

Hindaloc will acquire Aleris in a $2.6 billion deal, which will include $775 million of equity and $1.8 billion of debt, funded by Novelis rather than the parent, Reuters reported.

The market reacted positively to the news.

The combined entity, comprising Novelis and Aleris, will have annual revenues of $15 billion when Aleris’ $3 billion has been added.

Revenue aside, the group’s combined sheet-rolling position will become even more significant at 4.4 million metric tons, raising concerns in some quarters about its market-dominating position.

Although Novelis has invested heavily in facilities to meet rising automotive demand, it is traditionally one of the largest suppliers of aluminum for beverage cans, which is more at the commodity end of the market. Novelis’ ability to competitively serve these markets could be of immense value if the culture can be migrated to Aleris, whose focus has been more in the high-value aerospace and automotive industries and has struggled with profitability.

Market dominance fears aside, Western producers need to invest and create critical mass to counter growing exports from China’s giant semi-finished product manufacturers, which are continuing to add capacity despite having much more than the domestic market can consume.

China is exporting in excess of 4 million tons per annum of semi-finished products, so far aimed more at the commodity end of the market. But Chinese producers have the ability, certifications and domestic experience to service aerospace and automotive markets, too.

Current trade tariffs notwithstanding, Chinese producers are going to be increasingly targeting these markets, if not penetrating the U.S. then displacing Aleris and Hindalco in Europe, South America and Asia.

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In the short term, the merger of Novelis and Aleris could generate cost savings, technology transfers and adoption of beneficial best management practices. In the longer term, it should be seen as positioning a more robust Western market leader against a growing threat from China, eager to compete in higher-value markets and willing to play the long game to get there.

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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, U.S. Trade Representative (USTR) Robert Lighthizer said Canada is a national security threat with respect to steel, the U.S. posted 4.1% GDP growth in Q2 and The Coca-Cola Company says it is raising prices on account of the Trump administration’s 10% aluminum tariff.

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Canada…Steel Threat?

Answering a question regarding whether Canada presents a national security threat to the United States, USTR Robert Lighthizer responded in the affirmative — in the case of steel, according to a report in the Globe and Mail.

GDP Growth Rises to 4.1%

The U.S. posted GDP growth in Q2 of 4.1%, up from 2.1% in Q1, the Bureau of Economic Analysis reported, marking the highest quarterly growth level since 2014.

The figure represents an estimate; according to the BEA, a second estimate encompassing more data will be released Aug. 29.

According to the Bureau’s analysis, the Q2 increase reflected “positive contributions” in personal consumption expenditures, exports, nonresidential fixed investment, federal government spending, state and local government spending, and residential fixed investment.

Coke Raises Prices Because of Tariffs

Beverage giant Coca-Cola is raising prices on account of the 10% aluminum tariff, CEO James Quincey said during the company’s earnings call this week, CNN reported.

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“Obviously, while [customers] may understand the cost pressures that are out there on freight, on the increases in steel and aluminum and other input costs that affect the bottling system and affects some of our finished products, clearly, these conversations are difficult,” he was quoted as saying on the call.

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This morning in metals news, U.S. imports of steel dropped from May to June, Novelis is making a $2.6 billion acquisition, and President Donald Trump has agreed to work with the E.U. to remove trade barriers.

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Steel Imports Drop

U.S. imports of steel fell 15.5% from May to June, the American Iron and Steel Institute reported this week.

Through the first six months of the year, imports were down 9.8% compared with the first six months of 2017.

Novelis to Buy Downstream Aluminum Producer Aleris

Aluminum firm Novelis Inc. announced it will buy downstream producer Aleris Corporation for a cost of $2.6 billion (including assumption of debt).

Aleris is a global supplier of rolled aluminum products.

“Acquiring Aleris is the right opportunity at the right time as they are set for transformational growth,” said Steve Fisher, president and CEO of Novelis, in a company release. “The significant investments they’ve made in the high-demand, high-value aerospace and automotive segments have resulted in favorable long-term, global contracts. These investments, coupled with a diverse and talented workforce, will add tremendous value to our organization and allow us to deliver the highest quality innovative aluminum solutions to our customers.”

Trump Says He Will Work With E.U. to Remove Trade Barriers

Recent weeks have been full of news about rising global trade tensions, but Wednesday President Trump hinted at the beginning of “a new phase” in relations with the E.U.

Trump said he had reached an agreement with European Commission President Jean-Claude Juncker on holding new talks to discuss removing tariff barriers between the U.S. and the 28-member bloc, USA Today reported.

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According to the report, the agreement will include a European commitment to purchase more soybeans from the U.S.

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Miner Freeport-McMoRan Inc., the world’s largest publicly traded copper producer, announced its second-quarter earnings Wednesday.

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The miner reported Q2 net income attributable to common stock of $869 million and $1.6 billion for the first six months of the calendar year. The figures compare with $268 million in Q2 2017 and $496 million for the first six months of 2017.

The miner reported copper sales of 989 million pounds in Q2 (1.982 billion pounds through the first half of the year). The miner, also a producer of gold, reported gold sales of 746,000 ounces in Q2 (1.345 million ounces through the first six months). In addition, Freeport reported sales of 24 million pounds of molybdenum (48 million pounds through the first six months).

“Our second quarter results reflect strong performance from our global operations and a continued focus on productivity, cost management and capital discipline,” President and CEO Richard C. Adkerson said. “During the first half of 2018, we generated $2.7 billion in cash flow from operations and capital expenditures totaled $0.9 billion, enabling further strengthening of our balance sheet and advancement of initiatives to build value for FCX shareholders.

“We achieved important progress during the quarter to reach a new long-term partnership structure with the Indonesian government, and we remain focused on completing negotiation and documentation of definitive agreements to restore long-term stability for our Grasberg operations.”

The miner’s share price dipped Wednesday, Bloomberg reported, as a result of operational issues at its Grasberg mine in Indonesia. After hitting $16.43 in the early part of the day, the price dropped 6.4% to $15.06 around noon. It rallied the rest of the day, closing at $15.86 (down 1.37% for the day).

In addition, the miner reported paying off $454 million in debt in April.

Copper Price Slumps

As a major copper producer, Freeport-McMoRan is eyeing the copper market’s recent slide.

The LME copper price has been falling fast since early June. After hitting $7,271.50 on June 8, the copper price proceeded to drop 17.6% and even dipping below $6,000/mt on July 17.

The price then bounced back slightly, moving to $6,166.50 as of July 24.

Source: LME

Adkerson referred to the slide in the copper price in tandem with the trade measures currently being undertaken by the U.S., in particular vis-a-vis China (the world’s top copper consumer).

As we sit here today, there is an anomaly between market sentiment and fundamentals in the marketplace,” Adkerson said. “We’re continuing to see real demand being very positive for our global business, including our business in China.”

Adkerson added that copper demand in the future will benefit from renewable-energy projects and electric vehicles.

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“Absent having some sort of global recession or a major setback in China, market deficits in copper appear to be inevitable,” Adkerson added.

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This morning in metals news, China initiated an anti-dumping probe of stainless steel imports worth a total of $1.3 billion, LME copper held above its one-year low Monday and President Trump will visit the Granite City steelworks in Southern Illinois this Thursday.

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China Investigates Stainless Imports

According to Reuters, China has initiated an investigation of stainless steel imports from Indonesia, Japan, Korea and the E.U.

The imports are worth a total of $1.3 billion, according to the report.

LME Copper Staves Off Further Losses, For Now

After hitting a one-year low, LME copper held above that level on Monday, Reuters reported.

London copper traded at $6,154/mt on Monday after falling to $5,988/mt on Thursday.

Trump to Visit Granite City

Announcements of the restarting of blast furnaces at U.S. Steel’s Granite City steelworks in Southern Illinois have represented a victory for the Trump administration, which has embarked on a program of tariffs and other trade remedies (including a 25% tariff on steel imports).

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Now, the president has announced he plans to visit the facility this Thursday.

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

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

MetalMiner’s Annual Outlook provides 2018 buying strategies for carbon steel

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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.