Before we head into the weekend, let’s take a look back at the week that was and the metals storylines here on MetalMiner, including: the nickel market; aluminum prices on the SHFE and LME; China’s metals rebound; and much more.
Chinese President Xi Jinping recently unveiled an ambitious plan to bring the country to carbon neutrality. However, is it feasible and, moreover, likely to take place as laid out?
Circling back to the U.S.’s new anti-dumping duty on aluminum sheet, India’s sheet exports to the U.S. likely won’t be significantly affected.
The MetalMiner 2021 Annual Outlook consolidates our 12-month view and provides buying organizations with a complete understanding of the fundamental factors driving prices and a detailed forecast that can be used when sourcing metals for 2021 — including expected average prices, support and resistance levels.
This morning in metals news: U.S. steel prices have made significant gains in recent weeks; exports of liquefied natural gas (LNG) from two key Louisiana export terminals have resumed after Hurricane Laura; the coronavirus pandemic has impacted tin production in Bolivia.
However, on the heels of the hurricane, the Sabine Pass terminal resumed exports Sept. 11, per the Energy Information Administration. Sabine Pass is the largest LNG export facility in the U.S.
However, the resumption of activity at Cameron terminal did not occur until Oct. 5 due to persisting infrastructural damage at the facility.
Furthermore, the next hurricane on the way could lead to further damage.
“Currently, Hurricane Delta, a Category 4 storm in the Gulf of Mexico, is expected to make landfall in Louisiana on Friday, October 9,” the EIA reported. “Depending on the path of Hurricane Delta, Cameron and Sabine Pass may take precautionary measures and temporarily suspend operations as they did before Hurricane Laura.”
Tin output in Bolivia
The coronavirus pandemic has impacted tin production in Bolivia, the International Tin Association (ITA) reported this week.
Tin concentrate production in the first quarter of the year fell 30% year over year.
In addition, coronavirus-related closures prevented production 2,600 tonnes of refined ton in Q2, the ITA estimated.
This morning in metals news: an aluminum trade group filed anti-dumping and countervailing subsidy petitions relating to imports of aluminum foil from five countries; the consultation period for Alcoa’s San Ciprián aluminum plant ended without an agreement on a social plan for workers; and the U.S. Census Bureau released August import and export data.
The MetalMiner 2021 Annual Outlook consolidates our 12-month view and provides buying organizations with a complete understanding of the fundamental factors driving prices and a detailed forecast that can be used when sourcing metals for 2021 — including expected average prices, support and resistance levels.
Trade group files anti-dumping, countervailing duty petitions
The countries are Armenia, Brazil, Oman, Russia and Turkey.
“We continue to see how persistent aluminum overcapacity driven by structural subsidies in China harms the entire sector,” said Tom Dobbins, president and CEO of the Aluminum Association. “While domestic aluminum foil producers were able to invest and expand following the initial targeted trade enforcement action against imports from China in 2018, those gains were short lived. As Chinese imports receded from the U.S. market, they were replaced by a surge of unfairly-traded aluminum foil imports that are injuring the U.S. industry.”
The anti-dumping petition includes all five of the countries. Meanwhile, the countervailing duty petition alleges imports from Turkey and Oman benefited from illegal government subsidies.
India turned a net exporter of steel to China (and other countries) during April-August 2020 for the first time in several years, credit rating agency CRISIL reported.
“India turned net exporter of steel to China for the first time in several years, with 69% of semi-finished steel & 28% of finished steel heading there between April & August,” CRISIL said in a statement.
The rise coincided with border tensions rising between India and China, which led to clashes in India’s Ladakh region.
Chinese steel production, iron ore imports rise
China has been the largest producer of steel globally, followed closely by India.
In the January-June 2020 period, China’s steel production rose 1.4% to 499 million tons. Meanwhile, India’s production slumped 24.2% to 43.13 million tons.
The increase in exports, however, has eased the pressure on India’s steel sector. The sector has been buffeted by lockdowns and a major slump in economic activity because of the pandemic.
This morning in metals news: the copper price bounced back Tuesday after a down Monday session; ArcelorMittal issued a statement on the European Commission’s policy proposals aimed at reducing emissions; and U.S. oil exports have fallen in each month since February.
The MetalMiner 2021 Annual Outlook consolidates our 12-month view and provides buying organizations with a complete understanding of the fundamental factors driving prices and a detailed forecast that can be used when sourcing metals for 2021.
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.
There were 15 new anti-dumping investigations related to Chinese steel during the first nine months of 2020. Meanwhile, there were 13 such investigations in 2019.
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The Indian aluminum sector, which once stood firmly on the path of growth, today finds itself buffeted by the winds of uncertainty because of the COVID-19 pandemic.
Industry leaders have suggested many measures to the India government to put the sector back on track.
Indian aluminum sector calls for removal of export cap
Uppermost on the list is a request to allow an export scheme for aluminum without any cap on the total exports.
The Engineering Export Promotion Council (EEPC) of India recently wrote to the Commerce Minister to continue with the Merchandise Export from India Scheme (MEIS Scheme) without any limit on the aluminum exports. The change would help the sector survive the current crisis situation, the Council argues.
Floated last year, the government trimmed the MEIS in the fiscal relief package recently extended to exporters. The government found it “unsustainable.”
The view is that, in general, the MEIS had failed to boost exports and capture new markets.
Critics argue MEIS cut hurts Indian aluminum sector
But experts, like Economics Affairs Secretary R. Gopalan, beg to differ.
Writing in the Financial Express, Gopalan said shrinking the MEIS had hurt the Indian aluminum industry, as the industry had to continue to rely on exports because of weak domestic demand. As such, so, the government had to support aluminum exports.
The only option left for the industry to sustain itself in these times of the pandemic is to export aluminum products, Gopalan said. As such, the decision to suddenly stop the MEIS, he felt, could have “a debilitating impact” on exporters’ ability to survive under current difficult conditions. Gopalan felt it would hurt exporters that work on long-term contracts.
Indian aluminum is one of the high-growth areas which could propel the nation’s GDP. However, the COVID-19 pandemic has already affected India’s aluminum exports. Export values declined 11% from U.S. $5.7 billion in fiscal year 2019 to U.S. $5 billion in fiscal year 2020. The new directive with regard to MEIS would render aluminum exports vulnerable and uncompetitive.
Mining group calls for import curbs
In parallel, the Federation of Indian Mineral Industries (FIMI) has urged the government to curb aluminum imports. Furthermore, the federation asked the government to facilitate the “tapping of rich and almost inexhaustible” domestic resources by local players.
Despite robust domestic demand and sufficient domestic aluminum capacity, India imported 60% of the aluminum it consumed. The result of this forex outgo, according to Vice-president R.L. Mohanty.
Domestic primary aluminum producers — such as Hindalco Industries and the Anil Agarwal-led Vedanta Ltd — are already working with the government at three levels: primary aluminum, scrap and downstream products. They have been asking the government to implement remedial measures, such as anti-dumping and anti-subsidy duties, the Business Standard reported.
Hindalco, the world’s largest aluminum rolled products manufacturer (especially in beverage cans and auto body), recently acquired Aleris. With this move, the company can now produce aerospace-grade aluminum sheets. It is also focusing on building capability in India to be part of the India growth story.
Meeting future aluminum demand
Domestic consumption of aluminum is expected to reach 10 million tons by fiscal year 2031-2032. To meet this future demand, India needs to increase bauxite production from 23 million tons in fiscal year 2019 to approximately 70 million tons by that time. Alumina production would have to rise from 7.4 million tons to 20 million tons.
India is No. 2 in the world in aluminum capacity. The country has primary aluminum capacity of 4.1 million tons per year and downstream processing capacity of 3.9 million tons.
Recently, the aluminum industry had made huge investments to increase domestic production capacity from 2 million tons per year to 4.1 million tons per year.
But experts fear that the COVID-19 crisis, coupled with the new government policies, could derail this growth story.
See why technical analysis is a superior forecasting methodology over fundamental analysis and why it matters for your aluminum buy.
Much of the Indian steel exports headed to China, despite ongoing tensions between the two nations.
China’s emergence as a new leading buyer of Indian steel has caught producers and analysts unaware. China replaces traditional importers like Vietnam, Italy and Belgium.
According to a China Iron and Steel Association official, it was paying particular attention to the imports of hot-rolled coils. The latter is used mostly to make pipes, automobile parts, and engineering and military equipment.
The ratings agency said higher prices supported by the price rebound in China will drive margins in the second quarter of the fiscal year and beyond. Hot-rolled steel sheet prices in China have improved by around $100 per metric ton since April 2020. Indian prices had started to tick up since late July, with a lag.
But the silver lining, according to Fitch, is that steel volumes could further improve over the next few quarters. Rural consumption and government spending on infrastructure would lead the improvement, and lead to better margins due to operating leverage.
On the exports front, Indian steel companies, like Tata Steel Ltd and JSW Steel Ltd, sold a total of 4.64 million tons of finished and semi-finished steel products in the world market between April and July. That total compares to 1.93 million tons shipped in the same period a year earlier.
Of the 4.64 million tons, Vietnam and China purchased 1.37 million tons and 1.3 million tons of steel, respectively.
Steel analysts here feel the exports jumped because of reduced prices as Indian sellers tried to get rid of a surplus generated by the impact of COVID-19 on domestic demand.
Analysts are also optimistic that with the Unlock 4.0 plan now announced, activities such as construction would increase. As a result, the plan would lead to an increase in local consumption, too. Overall, in the short term, exports would continue to grow over domestic consumption in India.
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This morning in metals news: copper on the SHFE is headed for its fifth straight month of price increases; a Swedish joint venture is ramping up its efforts toward producing fossil-fuel-free steel; and Mexico is instituting a new export pre-approval process to avoid reimposition of steel tariffs by U.S. President Donald Trump.
According to the report, the five-month streak marks the longest such upward rise in 11 years.
Swedish JV eyes fossil-fuel-free steel production
A joint venture in Sweden, Hybrit, is looking to make big changes to how steel is produced.
In particular, the JV is looking to remove coking coal from the equation, Bloomberg reports. Instead, the steel production process would feature hydrogen and other forms of clean energy.
SSAB AB, LKAB and Vattenfall AB are the operators of the JV.
Mexico to institute steel export pre-approval process
On the heels of President Donald Trump’s recent reimposition of the 10% Section 232 tariff on some Canadian aluminum, the Mexican government is hoping to avoid a similar outcome for its steel exports to the U.S.
According to Bloomberg, Mexico is putting into place a new pre-approval process for steel exports.
In short, the approval process — which would go into effect Sept. 4 — would confirm the steel exports did not pass through a third country.
This morning in metals news: miner Rio Tinto revised its 2020 refined copper output guidance; Tokyo Steel resumed exports to China for the first time in a decade; and the future is uncertain for Liberty Steel’s Georgetown steel mill.
Amid operational delays at Rio Tinto’s Kennecott mine in Utah, the miner has revised its 2020 refined copper output guidance.
“We are working closely with our customers to limit any disruptions and expect to have the smelter fully operational in two months,” the miner said in a prepared statement.
As a result, Rio Tinto moved its production guidance for refined copper down to 135-175 kt (from 165-205 kt).
Tokyo Steel to resume exports to China
Meanwhile, Japanese steelmaker Tokyo Steel is set to send exports to China for the first time in 10 years, the Nikkei Asian Review reported.
The exports come amid surging steel demand in China as it recovers from the impact of the coronavirus pandemic.
