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This morning in metals news, an NFL franchise’s new stadium project in Las Vegas is facing delays in steel deliveries, Indonesia and China have taken anti-dumping action against each other’s steel products, and Ford earlier this week announced workers in southeast Michigan will make the automaker’s first autonomous vehicles in 2021.

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Steel Deliveries Delayed at Raiders’ Las Vegas Stadium

The National Football League’s Oakland Raiders are scheduled to make the move to Las Vegas in 2020, when the franchise’s new stadium is scheduled to open.

However, completion of the stadium project — for which taxpayers are contributing $750 million — is expected to be pushed back due to recent delays in deliveries of steel components, the Associated Press reported.

Indonesia, China Take Aim at Each Other’s Steel

Sticking with steel, Reuters reported Indonesia and China have slapped anti-dumping duties on each other’s steel products.

According to the report, Indonesia opted to extend an existing 20% duty on flat-rolled steel products, which targeted imports from China and six other countries.

Ford Announces Battery Electric, Autonomous Vehicle Moves

Automakers around the world are preparing for an increasingly electrified and/or autonomous vehicle market.

In that vein, Ford Motor Co. recently announced moves related to those two next-generation vehicle segments.

Ford announced it is expanding its electric vehicle production to a second plant, its Flat Rock Assembly plant in southeast Michigan.

“We’ve taken a fresh look at the growth rates of electrified vehicles and know we need to protect additional production capacity given our accelerated plans for fully electric vehicles,” said Joe Hinrichs, Ford’s president of global operations, in a company release. “This is good news for the future of southeast Michigan, delivering more good-paying manufacturing jobs.”

In addition, Ford said it will begin production of the automaker’s first autonomous vehicles at a new production center in southeast Michigan.

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“As we ramp up AV production, this plan allows us to adjust our investment spending to accommodate the pace of growth of this exciting new technology,” Hinrichs said in the prepared statement. “This new plan combines our core strength in mass manufacturing with the agility and leanness we’ve shown with our modification centers for specialty manufacturing.”

[Editor’s Note: This is the second of a two-part series on steel supply and prices. Revisit Part 1 here.]

Actual Chinese Steel Prices

Looking at longer-term trends in Chinese steel prices, we can see after hitting a low during mid-to-late 2015, prices trended upward overall (with some ups and downs along the way). For example, prices dipped in summer 2016, in spring 2017 and somewhat less so in spring 2018.

More recently, prices dropped off last fall:

Includes partial March price data through the 12th. Source: MetalMiner data from MetalMiner IndX(™)

HRC and CRC prices trended very similarly, with the price gap narrowing over time. In fact, Chinese CRC prices stood higher in August 2014 than today’s prices. However, prices for CRC have remained above 4,000 RMB since August 2017.

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HRC prices increased slightly, while plate prices started out lower but trended higher than CRC. Over time, the price differential for HDG increased; however, the price trends reliably with HRC and CRC, especially since August 2017.

U.S. HRC Versus Chinese HRC Prices

Chinese HRC prices turned around in February and have gained momentum in March.

Includes partial March price data through the 12th. Source: MetalMiner data from MetalMiner IndX(™)

Prices moved similarly for both U.S. and Chinese HRC late in February and into March.

Meanwhile, the price gap between Chinese and U.S. prices narrowed into the early months of 2019:

Source: Analysis of MetalMiner data from MetalMiner IndX(™), including price data through March 12

U.S. CRC Prices Versus Chinese CRC Prices

China CRC prices have also increased in the early months of 2019.

Includes partial March price data through the 12th. Source: MetalMiner data from MetalMiner IndX(™)

The price gap between Chinese and U.S. prices narrowed, but still remains wider than prior to imposition of the U.S.’s Section 232 tariffs of March 2018.

However, with the shrinking price gap, U.S. purchases of U.S. domestic CRC, like U.S. domestic HRC, became relatively more attractive again:

Includes partial March price data through the 12th. Source: MetalMiner data from MetalMiner IndX(™)

Implications for Buying Organizations

What can we expect from the Chinese government in terms of production reductions?

Why do high-level goals, such as reduced production, fail?

“The profit gained from selling one ton of steel is less than the profit from selling one dish of fried pork,” Shen Wenrong, chairman of the largest private steel company in China, was quoted as saying in a 2015 Bloomberg article. This points to a lack of actual willingness of Chinese domestic producers to throttle production.

China’s stated policy of production reduction has not happened on a net basis, even after environmental protocols paused production at times. At any rate, production and export figures continue to rise out of China, even as the domestic economy apparently weakens.

Given that global production capacity for steels continues to increase, we can expect this to have a depressing effect on steel prices overall.

On the other hand, if Chinese production moves upstream, it is realistic to expect price increases that stick as production becomes more advanced.

Even with China’s continued increase in production, U.S. imports of steel from all global markets decreased by 11.5% in 2018 over the year prior, according to the American Iron and Steel Institute. Revenue also improved overall for U.S. steelmakers, according to government data.

However, what happens in China price-wise, will not stay in China.

Pricing impacts in China continue to affect global prices given the country’s consistent global share of production numbers at around the 50% over the past few years.

MetalMiner’s Annual Outlook provides 2019 buying strategies for carbon steel

As the Chinese government pushes the steel industry toward more advanced production, we can expect no less from domestic industry players in the U.S. As newer production facilities come online, we can expect to see closures of older production facilities. On a net basis, that is a good thing. If the U.S. industry continues to revitalize itself toward building long-term sustainable competitive advantages, it could avoid the so-called “Steelmageddon.”

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U.S. steel mills produced 1.93 million net tons of raw steel during the week ending March 16, according to the American Iron and Steel Institute (AISI).

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Production for the week — which came at a capacity utilization rate of 82.9% — was up 5.7% compared with the same week the previous year but down 0.6% from the previous week.

Adjusted year-to-date production through March 16 reached 20.3 million net tons — up 6.7% compared with the same period in 2018 — at a capacity rate of 81.4%. For the same period in 2018, mills produced 19.0 million tons at a capacity utilization rate of 76.6%.

By region, the Great Lakes holds the top spot in terms of steel production for the year through March 16:

• North East: 226,000 net tons
• Great Lakes: 729,000 net tons
• Midwest: 205,000 net tons
• Southern: 711,000 net tons
• Western: 59,000 net tons

The U.S. steel sector’s capacity rate continues to climb on the heels of the Trump administration’s Section 232 action last year. In general, a capacity rate of 80% is considered a mark of a healthy industry.

MetalMiner’s Annual Outlook provides 2019 buying strategies for carbon steel

U.S. steelmakers increased production in 2018, as they were able to compete against reduced import levels (steel imports into the U.S. were down 12% year over year in 2018).

According to the World Steel Association, the U.S. produced 86.7 million tons of crude steel in 2018, up from 81.6 million tons in 2017.

According to Bank of America Research Analyst Timna Tanners, Steelmageddon looms on the horizon due to massive planned capacity increases in the U.S. steel industry.

Her analysis indicates the equivalent of around a 20% capacity increase when aggregating investments across companies and production methodologies over the next few years. Due to the massive ramp-up, the Steelmageddon theory predicts 2022 or so as the time when we may see greatly suppressed prices, and therefore rampant mill closures, due to a steel supply glut in the U.S.

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Meanwhile, in recent years, the Chinese government policy for the steel industry focused on capacity reduction and shutting down outdated plants. These closures resulted in an estimated reduction of 300 million metric tons of China’s steelmaking capacity.

In addition to these outdated blast furnace steelmaking facilities closing during the past few years, others still in operation face ongoing production restrictions during pollution alert periods. While some outdated capacity closed, other facilities with the latest technology brought new capacity onstream.

This “upgrade strategy,” if we could call it that, could have profound ramifications.

Read more

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This morning in metals news, Chilean miner Antofagasta expects a copper deficit this year, Polish lawmakers have proposed slashing the country’s mining tax and hackers have targeted Norwegian aluminum maker Norsk Hydro.

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Copper Deficit

Chilean miner Antofagasta forecasts a 2019 copper deficit ranging between 100,000 and 300,000 tons, Reuters reported.

“When we talk about the deficit, I don’t think it’s going to be a big one… it’s probably in a range between 100,000 and 300,000 tonnes,” CEO Iván Arriagada was quoted as saying.

Poland Mulls Cutting Mining Tax

According to another Reuters report, Polish lawmakers are considering cutting the country’s mining tax.

The tax — introduced in 2012 — primarily affects copper and silver producer KGHM, which is a major employer in the country, according to the report.

Norsk Hydro Hacked

The news turned from the announcement of a new Norsk Hydro CEO Monday to hacking on Tuesday.

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According to Reuters, the Norwegian aluminum maker suffered an attack by hackers that forced several plants to go offline.

According to a recent report from the U.S. Geological Survey (USGS), U.S. mines churned out $82.8 billion worth of minerals in 2018.

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The 2018 total marked a 3% year-over-year increase from $79.7 billion in 2017, according to the report from the USGS National Minerals Information Center.

“The Mineral Commodity Summaries provide crucial, unbiased statistics that decision-makers and policy-makers in both the private and public sectors rely on to make business decisions and national policy,” said Steven M. Fortier, director of the National Mineral Information Center, in a prepared statement. “Industries – such as steel, aerospace and electronics – processed nonfuel mineral materials and created an estimated $3.02 trillion in value-added products in 2018, which is a 6 percent increase over 2017.”

The report highlights the U.S.’s dependence on foreign sources for a number of minerals. According to the report, “imports made up more than half of U.S apparent consumption for 48 nonfuel mineral commodities, and the U.S. was 100 percent net import reliant for 18 of those.”

Of the 18 commodities for which the U.S. is totally reliant on imports, 14 were named on a critical minerals list designated in May 2018 by the U.S. Department of the Interior.

The full list of critical minerals included: aluminum (bauxite), antimony, arsenic, barite, beryllium, bismuth, cesium, chromium, cobalt, fluorspar, gallium, germanium, graphite (natural), hafnium, helium, indium, lithium, magnesium, manganese, niobium, platinum group metals, potash, the rare earth elements group, rhenium, rubidium, scandium, strontium, tantalum, tellurium, tin, titanium, tungsten, uranium, vanadium, and zirconium.

China topped the list of exporters of nonfuel minerals to the U.S., followed by Canada. As noted in our Rare Earths MMI series, the U.S. — the whole world, in fact — is largely dependent on China for rare earths elements, as China controls most of the sector.

Unsurprisingly, when it came time for the Trump administration to roll out a finalized list of tariffs in September — $200 billion worth in tariffs on Chinese goods, in addition to the $50 billion worth of tariffs imposed earlier in 2018 — rare earths were left off the list.

While it certainly is not enough to counterbalance China’s dominance in the sector, the USGS report notes rare earth mining resumed in the U.S. last year for the first time since 2015, when Molycorp, owner of the Mountain Pass rare earths mine, declared bankruptcy. Mountain Pass, the U.S.’s only operating rare earths mine, was eventually sold to MP Mine Operations LLC for $20.5 million in 2017.

Minerals Production Up, Metal Mine Production Down

Breaking down U.S. mine production further, U.S. industrial minerals production came in at a value of $56.3 billion last year (up 7% from 2017), while metal mine production checked in at an estimated $25.9 billion (down 4% from 2017).

Crushed stone, construction sand and gravel accounted for 45% of industrial minerals production, at a value of $25.3 billion. Meanwhile, gold, copper, iron ore and zinc led the way in metal mine production.

MetalMiner’s Annual Outlook provides 2019 buying strategies for carbon steel

Other Highlights

A few other items of note from the USGS report:

• U.S. imports of aluminum fell by an estimated 11% last year, as the U.S.’s Section 232 tariff on imported aluminum went into effect. Argentina and Australia were exempted from the duty (Argentina was tagged with a quota), while the tariff rate for Turkish aluminum doubled amid diplomatic tensions last year.
• A New York zinc mine, last operational in 2008, reopened last year.
• Twelve states produced more than $2 billion worth of nonfuel mineral commodities in 2018, according to the report. The list includes, in descending order: Nevada, Arizona, Texas, California, Minnesota, Florida, Alaska, Utah, Missouri, Wisconsin, Michigan and Wyoming.

Piotr Pawinski/Adobe Stock

Before we head into the weekend, let’s take a look at the week that was and some of the metals storylines here on MetalMiner:

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• The palladium price continues to soar, MetalMiner’s Taras Berezowsky explained in this month’s Global Precious MMI.
• Rare earths miner Lynas Corp. is appealing a condition put forth by the Malaysian government related to the miner’s license renewal.
• Stainless steel surcharges and LME nickel prices made gains this past month.
• The copper price also trended upward last month, but it could be entering a sideways trend.
• MetalMiner’s Stuart Burns writes about recession concerns in the U.S. and elsewhere, and signs pointing in that direction.
• Several billionaires are backing a new startup that aims to find new sources of cobalt, using “statistical modeling, big data aggregation, and basic science” to improve methods of exploration.
• ArcelorMittal’s resolution plan for the bankrupt Essar Steel Ltd. received approval from an Indian tribunal — but an additional challenge awaits, MetalMiner’s Sohrab Darabshaw explained.

MetalMiner’s Annual Outlook provides 2019 buying strategies for carbon steel

Zerophoto/Adobe Stock

This morning in metals news, China iron ore futures hit a two-week high, the Office of the United States Trade Representative (USTR) announced the first consultations under the revised U.S.-Korea Free Trade Agreement (KORUS) and hot-rolled coil inventories in China dipped for a third straight week.

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Iron Ore Futures Rise

China iron ore futures rose to a two-week high, Reuters reported.

According to the report, the May 2019 iron ore contract picked up 1.5% to reach 627 yuan ($93.32) per ton.

U.S. Requests First Consultations in Revised KORUS Era

The USTR announced Friday that it has requested the first consultations with South Korea since the institution of the revised KORUS.

The revised free trade agreement with South Korea came into effect in September 2018 after being signed by Presidents Donald Trump and Moon Jae-in; KORUS was originally introduced in 2012.

“At issue is Korea’s non-compliance with KORUS Article 16.1.3, which states, in relevant part, that a party in an administrative hearing related to competition must ‘have a reasonable opportunity to… review and rebut the evidence and any other collected information on which the determination may be based,'” the USTR said in a statement. “Following extensive efforts to resolve this concern, USTR is requesting consultations at this time because recently drafted amendments to Korea’s ‘Monopoly Regulations and Fair Trade Act’ fail to address U.S. concerns that KFTC hearings continue to deny U.S. firms due process rights under the KORUS agreement that are necessary to secure a fair competition hearing in Korea.”

HRC Inventories Down in China

In other China news, the country’s inventories of hot-rolled coil have declined for the third straight week, according to Shanghai Metals Market.

MetalMiner’s Annual Outlook provides 2019 buying strategies for carbon steel

According to the report, HRC inventories were 3.64 million tons as of March 14, down 1.1% from the previous week and down 4.7% from the same period in 2018.

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This morning in metals news, Reuters reports the launch of the London Metal Exchange’s planned steel contract will likely be pushed back to 2020, China’s average daily steel output in January and February increased, and India’s imports of iron ore were up 157% during the April-December 2018 period.

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Steel Contract Delay

According to a Reuters report, the LME’s plans to launch a new steel contract could have to wait until next year.

Traders want the contract to be priced in euros rather than the dollar, according to the report.

China’s Steel Output Picks Up

According to another Reuters report, China’s average daily steel output picked up for the first two months of 2019 taken together compared with December 2018.

Average daily output for January and February combined (to account for the Lunar New Year holiday) reached 2.54 million tons, up from 2.32 million tons in December, according to the report.

India’s Iron Ore Imports Surge

India’s imports of iron ore during the April-December 2018 period jumped 157% year over year, according to the Business Standard.

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The report, citing the CARE Ratings agency, notes that India’s July 2018 iron ore import total of 1.93 million tons marked the country’s highest monthly import figure in the past five years.

Steel tycoon Lakshmi Mittal’s dream of re-entering the Indian steel market is about to come true.

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After almost a year of legal tussles, the National Company Law Tribunal (NCLT), Ahmedabad bench, gave the green light to ArcelorMittal’s resolution plan for the debt-laden Essar Steel Ltd. The latter was put on the block after lenders asked the court to recover about U.S. $7 billion in dues.

The approximately U.S. $5.9 billion acquisition of the distressed plant, though, has run into one more road block.

Essar Steel Ltd’s ex-promoter Prashant Ruia and two other directors of the erstwhile board of the steelmaker have approached the National Company Law Appellate Tribunal (NCLAT) to thwart the move.

Standard Chartered Bank, a dissenting bank among the Committee of Creditors (CoC) of Essar Steel, has challenged the NCLT’s order.

The bank’s contention was the resolution plan approved by the CoC of Essar Steel favored the secured creditors.

In late January, the same Tribunal had rejected a full debt settlement proposal by shareholders of Essar Steel, ruling that the offer violated Section 12A of the Insolvency and Bankruptcy Code (IBC), which says the promoters can reclaim a company from bankruptcy by paying full settlement, but not after others have submitted their expressions of interest.

This is one more hurdle that Mittal will now have to overcome to take over the mill, which boasts an annual capacity of 10 million metric tons.

A joint venture between Japan’s Nippon Steel & Sumitomo Metal Corp. with ArcelorMittal has offered an upfront cash settlement of about U.S. $ 1 billion and a multimillion-dollar capital infusion as part of the acquisition process.

ArcelorMittal SA is the world’s largest steel company by volume but doesn’t have a steel plant yet in India. Once the formal acquisition is done, Essar Steel’s capacity will immediately make ArcelorMittal the fourth-biggest player in India. The Essar plant is operating at much lower capacity; experts say will need a large influx of funds to run at capacity.

MetalMiner’s Annual Outlook provides 2019 buying strategies for carbon steel

ArcelorMittal has a presence in 60 countries and an industrial footprint in 18 countries. Mittal has made several attempts in the past to get into the Indian market, but none bore fruit.

In 2010, the company signed an agreement with the Karnataka provincial government to set up a 6 million ton per annum capacity plant, but the land acquisition process itself has taken about eight years.