Articles in Category: Ferrous Metals

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This morning in metals news, U.S.-China trade talks have led to a tenuous truce, Nippon Steel says strong demand is easing the blow of the U.S.’s steel tariff, and shares of US Steel and AK Steel dropped on the heels of the latest developments in the U.S.-China trade talks.

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Trade Truce

On the heels of a visit from Chinese trade officials to Washington late last week, Treasury Secretary Steven Mnuchin over the weekend announced the two countries had reached somewhat of a truce, for now.

Of course, the longevity of that truce remains in question. According to the Washington Post, Mnuchin said on Monday that the president could still impose tariffs on Chinese goods if a deal can’t be reached to scale back the U.S. trade deficit with China.

Nippon Says Demand Working to Lessen Blow of U.S. Tariffs

Japan’s Nippon Steel & Sumitomo Metal Corp said strong demand for steel has cut the impact of the U.S.’s import tariff on the metal, according to a Reuters report.

“There has been no major impact from the U.S. tariffs thanks to solid global demand,” Katsuhiro Miyamoto, Nippon Steel executive vice president, told Reuters.

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US Steel, AK Steel Shares Down After China Truce Announcement

Shares of US Steel and AK Steel fell 1.1% and 2.6%, respectively, in premarket trade Monday, according to MarketWatch. The drop came on the heels of the weekend’s announcement regarding a truce between the U.S. and China on trade.

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Even as news came in late last week that some of India’s biggest steelmakers were set to expand production after reporting solid quarterly earnings amid strong steel prices, well-known research agency CRISIL has said in a report that resolution of stressed steel assets – those that are bankrupt – will “alter” the Indian steel sector irrevocably.

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Steel companies with about 22 million tons (MT) of crude steel capacity have been referred to the National Company Law Tribunal (NCLT) in the first round of the stressed assets resolution process by India’s apex bank, the Reserve Bank of India (RBI).

The CRISIL research report said the resolution of these cases would alter India’s steel sector landscape in three ways:

  • Over half of steel sector’s outstanding debt would stand resolved
  • About a fifth of India’s crude steel capacity held by these companies will move to stronger hands, resulting in better working capital and liquidity management (which, in turn, would lead to improving utilization levels)
  • The flat steel segment would consolidate further and be controlled by fewer players – both domestic and global

“For acquirers of these assets, apart from attractive product portfolios & locational advantages, these assets also offer easy scalability,” said Prasad Koparkar, senior director of CRISIL Research. “The 22 MT of capacities under resolution have brownfield expansion potential of another 20-21 MT – based on their environment clearance and regulatory filings.”

India’s flat steel market is dominated by six players that account for 85% of the capacity, with the rest being distributed between smaller players and re-rollers. Of the six, three are currently part of the NCLT I resolution process.

Many, as reported by MetalMiner earlier, were being eyed by large domestic and international steelmakers for expansion or entry strategies.

The CRISIL report further claimed that based on various acquisition scenarios, the flat steel market in India was expected to consolidate further from the current scenario — of 85% being controlled by six players — to three or four players.

Already, India’s biggest steelmakers, such as JSW Steel Ltd., posted record net income last Wednesday and outlined a $6 billion plan to raise output. Tata Steel Ltd., which aims to double domestic capacity, swung to profit, helped by a one-time gain. Both are ramping up to meet an anticipated surge in domestic consumption, with the government set to spend trillions of dollars on expanding infrastructure.

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The Bloomberg report said JSW has forecast Indian steel consumption to rise by about 7.5% in the 2019 financial year.

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This morning in metals news, we updated our China MES page on market-economy status, steel production dropped in the Great Lakes region and the White House still hopes for a deal on the North American Free Trade Agreement (NAFTA) before the Thursday deadline.

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China and Market-Economy Status (MES)

MetalMiner originally published its China MES (Market Economy Status) page in 2016, covering everything about the years following China’s accession to the World Trade Organization (WTO) and its ensuing quest to receive all-important market-economy status.

As you probably know, a lot has happened since 2016 on the U.S.-China trade front, particularly since Donald Trump’s election as president. So, we updated the comprehensive page to cover recent developments, including the Section 232 and Section 301 probes, not to mention the recent back-and-forth threats of major tariffs on goods.

You can check out the updated page here.

Great Lakes Steel Production Falls

Steel production in the Great Lakes region last week fell 2.23% compared with production the previous week, according to American Iron and Steel Institute (AISI) data reported by the Northwest Indiana Times.

Production in the region last week amounted to 655,000 tons, according to the report.

Looking For a Deal

Despite a fast-approaching Thursday deadline, the U.S. is still hopeful it can reach a deal on renegotiating NAFTA with partners Canada and Mexico.

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White House Press Secretary Sarah Sanders told Fox News, as quoted by Reuters: “We still want to see something happen and we’re going to continue in those conversations. They’re ongoing now and we’re pushing forward and hopeful that we can get something done soon.”

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This morning in metals news, the deadline for Section 232 tariffs exemptions for certain countries falls tonight at midnight, AK Steel’s stock is up and the LME copper price tracked up Monday.

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Tariff Exemption Expiration Approaches

Several countries negotiated temporary exemptions from the Trump administration’s Section 232 tariffs on steel and aluminum (imposed last month). Canada, Mexico, Argentina, Australia, Brazil and the E.U. won temporary exemptions. South Korea also won a temporary exemption, which eventually became a long-term exemption after the progression of talks on the U.S.-Korea Free Trade Agreement (KORUS).

The key term there is “short term” — the deadline for the expiration of that exemption falls at midnight tonight.

Naturally, the E.U. and others are scrambling to win long-term exemptions before the tariffs hit their metal exports.

“For the time being our priority is the ongoing high-level dialogue to secure a permanent exemption,” said Cecilia Malmstrom, the E.U. trade commissioner, as quoted by the BBC.

AK Steel Stock Rises

After AK Steel reported better-than-expected Q1 financials, its stock jumped 2.3%, according to a MarketWatch report.

According to the report, the company expects market conditions to strengthen in Q2.

Copper, Aluminum Up

LME copper and aluminum rose on Monday, Reuters reported, as the U.S. dollar fell back from a recent three-month high.

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Despite light trade Monday, according to the report, LME copper rose 0.4%, while aluminum was up 0.1%.

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This morning in metals, steel mills in China’s second-biggest steelmaking province are shutting down, U.S. Steel reports its Q1 financials and Ecuadorian officials are engaging in talks to potentially bring a copper refinery to the country.

Chinese Mills Shut Down in Pollution-Curbing Measure

Several steel mills in the Chinese city of Xuzhou have been shut down in a pollution crackdown effort, Reuters reported.

According to the report, at least three mills have been shut down until they meet anti-pollution rules.

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The three mills have a combined annual steel capacity of 4.25 million tons, according to the report.

U.S. Steel Brings in $18M in Q1

U.S. Steel made $18 million in Q1, the Northwest Indiana Times reported, a far cry from the $180 million loss it posted in Q1 2017.

According to the report, U.S. Steel reported its stronger balance sheet was aided by investment at its mills in addition to the Section 232 measures from the Trump administration last month.

Potential Copper Refinery in Ecuador

According to a Bloomberg report, Ecuadorian officials are in talks with foreign companies with respect to building a copper refinery in the country.

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According to the report, Rebeca Illescas, the Ecuadorian mining minister, said Chinese and Japanese companies might be interested in the project, in addition to Glencore.

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This morning in metals, steel imports rose in March, global steel output was also up in March and miner Antofagasta reported a 10.5% drop in production in Q1.

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U.S. Steel Imports Jump in March

Citing U.S. Census Bureau data, the American Iron and Steel Institute (AISI) reported the U.S. imported a total of 3,327,000 net tons (NT) of steel in March 2018, including 2,480,000 net tons (NT) of finished steel (up 34.2% and 23.0%, respectively, vs. February final data).

Through three months of 2018, total and finished steel imports are 8,690,000 and 6,831,000 net tons (NT), down 3.0% and 1.7%, respectively, vs. the same period in 2017.

The finished steel import market share was an estimated 26% in March, up from the estimated 25% in the year to date.

Global Steel Output Rises 4% in March

The world produced more steel in March, Reuters reported.

Global steel output rose 4% last month, powered by lifted winter cuts in China and U.S. steel producers enjoying a post-Section 232 boost, Reuters reported.

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Antofagasta Production Slides in Q1

Miner Antofagasta, which operates primarily in Chile, announced its Q1 production dropped 10.5%, Reuters reported.

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The E.U.’s steel safeguard mechanism should work to prevent a “surge of imports” but should not “close the market,” European Steel Association (EUROFER) Director General Axel Eggert said Monday.

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“The safeguard mechanism should be broad, but the purpose is not to close the market, as some steel importers have claimed. The EU safeguard mechanism explicitly serves only to prevent a further, sudden surge in imports resulting from deviated steel trade flows,” Eggert said.

European steel imports rose significantly between 2013 and 2017, according to EUROFER, up by 66%, with 18 million tons in 2013 and 30 million tons in 2017. In addition, steel imports in Q1 2018 rose 8% year over year, EUROFER reported.

In March, the European Commission launched a safeguard investigation in an effort to protect the European steel industry on the heels of the U.S. Section 232 tariffs on steel and aluminum. Last month, the U.S. imposed a 25% tariff on steel imports and a 10% tariff on aluminum imports. The E.U. won temporary exemptions from the tariffs, but the exemptions expire May 1 unless a deal to extend them is reached.

Eggert also addressed concerns expressed by some steel exporters regarding the potential for the safeguard measures to “close” the market.

“There have been claims made by some steel importers that the safeguard will close the EU market to imports,” Eggert said. “This is concretely untrue – these are claims made by undertakings that benefit from unsustainably low-priced, dumped imports. In practice, the safeguard will guarantee the open access of steel trade flows to the EU market at a nevertheless historically high level.”

On Monday, the E.U. requested to join the U.S.-China consultation on steel and aluminum at the World Trade Organization (WTO), Reuters reported. Hong Kong, Thailand, India and Russia have also filed requests to join the consultations, according to the report.

Earlier this month, China took the U.S. to the WTO over the tariffs, requesting 60 days of consultation on the matter, arguing the tariffs violated WTO rules.

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“The US practice severely violated the non-discrimination principle of the multilateral trading system and its commitments on tariff concession of the WTO and the rules and disciplines of safeguards, and harmed the legitimate interests of China as a WTO member,” a China Ministry of Commerce statement April 6 read. “As for that the US refused to have compensation negotiation with China according to WTO rules, China had to start the trade dispute settlement procedures, to safeguard its legitimate interests.”

The WTO process moves notoriously slowly, but the May 1 deadline for the Section 232 exemptions presents a far more near-term policy point for the E.U. steel industry.

U.S. domestic steel prices steadily increased after the release of the Section 232 report and President Donald Trump’s formal proclamation. However, the pace of the increases has started to slow down, signaling a possible top.

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After what now looks like sluggish steel momentum in 2017, the current steel price rally appears to have no end. Prices climbed to more than seven-year highs. However, MetalMiner previously reported on a possible top for steel prices.

U.S. HRC and CRC prices. Source: MetalMiner data from MetalMiner IndX(™)

So far, steel prices have not dropped. In fact, HRC and CRC prices have moved closer toward the $900/st and $1,000/st, respectively. Also, the approaching date of May 1, when several countries’ tariff exemptions expire, could still add support to domestic steel prices. This expiration date involves the Section 232 country exemptions for the EU, Argentina, Brazil and Australia.

The only exception is South Korea, which is exempted from steel imports under the bilateral trade deal, KORUS. The agreement with South Korea removes steel tariffs permanently but replaces that with a quota. The steel quota is equivalent to 70% of South Korea’s average exports to the U.S. from 2015-2017. In return, South Korea has agreed to improve access for U.S. automakers, who can now export up to 50,000 vehicles per OEM per year. South Korean aluminum tariffs however will go into effect after May 1, similar to the other countries listed above.

Whether the countries remain exempted or not may affect U.S. domestic steel prices. The country exemption could create downward price pressure on steel. However, steel prices could stay well supported if the country exemptions go away.

Global Steel Demand

According to the World Steel Association, global steel demand is forecasted to grow by 1.8% in 2018 and 0.7% in 2019. Despite the steel markets’ risks from current trade tensions (Section 232 tariffs, Section 301), the world’s favorable economic momentum may drive actual demand growth. Global steel demand in 2018 is forecasted to reach 1.616 billion tons, increasing to 1.627 billion tons next year. Read more

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This morning in metal news, Chinese iron ore futures rebound from a 10-month low, Saudi Arabia emerges as OPEC’s leading supporter for further reducing oil supply, and researchers discover a major supply of rare earth minerals in the seabed near a remote Japanese island.

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Chinese Iron Ore Rebounds from 10-Month Low

After dropping to a 10-month low on Tuesday, Chinese iron ore has rebounded somewhat, Reuters reported.

The price of iron ore had dropped nearly 15% this year as a result of oversupply, with stocks totaling 161 million tons. As the Wall Street Journal’s Rhiannon Hoyle wrote, “there’s enough iron ore sitting at Chinese ports right now to produce more than 100 million automobiles, in theory.” However, experts say that most of the iron ore is likely of low-quality.

A $100/Barrel Oil Price

Saudi Arabia wants to see the price of crude to rise to $80 to $100 per barrel. Reuters reported that these were the figures discussed by senior Saudi officials in recent closed meetings.

In January 2017, OPEC, Russia and other producers had agreed to reduce supply, a pact that extends until December 2018. Although the original goal of the pact is in sight, with oil prices currently at $73 a barrel, Saudi Arabia is emerging as the OPEC’s leading supporter for further supply cuts.

Off the Coast of Japan, a Rare Earths Find

A team of Japanese researchers recently discovered a treasure trove of rare earth minerals in the Pacific Ocean seabed near Minamitori Island, a small Japanese island about 1,150 miles from Tokyo, CNN reported. Read more

The Stainless Steel MMI (Monthly Metals Index) inched one point higher in April. The current reading is 76 points.

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The index’s increase was driven by the rise in stainless steel surcharges, despite slightly falling  LME nickel prices this month. Other related metals in the stainless steel basket increased.

LME Nickel

In April, nickel price momentum appears to have recovered from its previous pace.

LME nickel prices dropped in March, along with other base metals. However, the drop appears less sharp than for aluminum or copper. 

Source: MetalMiner analysis of FastMarkets

LME nickel prices remain high and far away from 2017 lows back in May or June, when MetalMiner recommended buying organizations buy some volume forward. Prices back at that time were around $8,800/mt versus the current $13,200/mt price level.

Domestic Stainless Steel Market

Following the recovery in stainless steel momentum, domestic stainless steel surcharges increased this month.

The 316/316L-coil NAS surcharge reached $0.96/pound. Therefore, buying organizations may want to look at surcharges to identify opportunities to reduce price risk either via forward buys or hedging.

Source: Source: MetalMiner data from MetalMiner IndX(™)

The pace of stainless steel surcharge increases appears to have slowed this month. However, surcharges have increased from 2017. The 316/316L-coil NAS surcharge is closer to $0.96/pound.

What This Means for Industrial Buyers

Stainless steel momentum appears stronger this month, with steel prices skyrocketing.

As both steel and nickel remain in a bull market, buying organizations may want to follow the market closely for opportunities to buy on the dips.

To understand how to adapt buying strategies to your specific needs on a monthly basis, take a free trial of our Monthly Outlook now.

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Actual Stainless Steel Prices and Trends

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