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This morning in metals news: the U.S. steel capacity utilization rate reached 71.5% last week; the Energy Information released its monthly energy review; and the nickel price continues to move upward.

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Steel capacity utilization rate hits 71.5%

The U.S. steel capacity utilization rate hit 71.5% for the week ended Nov. 21, the American Iron and Steel Institute (AISI) reported.

U.S. steel output for the week totaled 1.58 million net tons, up 0.1% from the previous week but down 13.2% year over year.

For the year through Nov. 21, U.S. output totaled 70.5 million net tons, down 18.6% year over year.

EIA releases monthly energy review

Aside from steel capacity utilization, the EIA released its Monthly Energy Review today, reporting total energy production of 64.46 quadrillion btu through the first eight months of the year.

Fossil fuel production totaled 50.93 quadrillion btu during the period. Meanwhile, nuclear energy production reached 5.57 quadrillion btu and renewable energy production totaled 7.96 quadrillion btu.

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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, including Tata Steel and its attempt to spin off its European assets, the U.S.’s rising steel capacity utilization rate, China’s economic recovery and its impact on metals prices, and much more:

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Week of Nov. 16-20 (Tata Steel looks for buyers, capacity utilization rises and more)

• The Indian economy is showing some signs of recovery, MetalMiner’s Stuart Burns writes.
• A Senate committee included funding for a new Aluminum Import Monitoring system.
• Tata Steel is looking for buyers for its European assets.
• MetalMiner contributor Christopher Rivituso expanded on the aforementioned Tata Steel development, zeroing in on a potential buyer for the IJmuiden plant in the Netherlands.
• The U.S. steel capacity utilization rate rose to 71.4% last week.
• Meanwhile, in Europe, Rivituso delved into the Central and Eastern Europe steel picture in a two-part series earlier this week (Part 1, Part 2).
• Fifteen Asia-Pacific nations signed the Regional Comprehensive Economic Partnership (RCEP) trade pact earlier this week in a virtual ceremony.
• Norsk Hydro signed a memorandum of understanding with Panasonic and Equinor that will see the parties explore the possibility of a Norway-based green battery business.
• The aforementioned RCEP pact went forward without the U.S. and India, as Burns expanded on in a subsequent article on the matter.
• Meanwhile, in other green news, Nucor Corporation recently announced it had signed a power purchase agreement with EDF Renewables North America.
• China’s economic recovery has helped support metals prices. However, what does next year hold?
• Lastly, Burns weighed in on the factors sending shipping rates upward.

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Interest in the Central European steel sector came not only from the West, but also from further East.

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Interest in Central European steel assets

Ukrainian group Industrial Union of Donbass (ISD) acquired Hungarian integrated flats producer Dunaferr in 2004. The group also acquired Polish integrated plate producer Huta Czestochowa in 2005.

The Polish plant entered bankruptcy in 2019, however, amid what it called increasing difficulties in the European steel market.

Liberty Steel subsidiary Sunningwell leased in 2019 the plant from Czestochowa’s bankruptcy trustee. In 2020, it won a tender to purchase the plant. Polish media noted in October, however, that the plant would remain leased until mid-2021.

Czestochowa is now operating, an administrator for the plant confirmed to MetalMiner. However, she declined to indicate what shops were operating or at what percentage of capacity.

Steel situation in Ukraine

One difficulty Czestochowa faced was reportedly due to the armed conflict in 2014 between Ukrainian forces and Russian-backed rebels in eastern Ukraine, resulting in creation of the breakaway Luhansk People’s Republic and the Donetsk People’s Republic, a November 2014 report in Polish media stated.

ISD subsequently lost control of its slab producer at its Alchevsk plant, which is in Luhansk People’s Republic, and from which it sourced slabs for rolling at Czestochowa.

Donetsk region, once Ukraine’s industrial heart and the location for the majority of steelmaking and rolling assets, is now the within the breakaway and unrecognized Donetsk People’s Republic. The republic contains Donetsk Steel, integrated metal and mining group Metinvest’s Yenakievo and Makeyevo plants and the Khartzysk pipe plant.

Reports of low operating percentages against capacities, industrial action by workers over unpaid back salaries and out-of-date equipment are also coming out of steelmakers in the Donetsk People’s Republic, sources told MetalMiner.

“Nobody knows what’s going on there,” a second analyst said.

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(Editor’s Note: This is the first of a two-part review of the European steel sector.)

While steelmakers east of Berlin are working to meet rising demand, others are facing myriad technical and regulatory challenges.

Those challenges include a global pandemic that has severely impacted economies, industry watchers and market participants told MetalMiner.

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European steel faces higher costs, environmental restrictions

Steel plants in Central and Eastern European states that are members of the European Union face not only higher costs, but also environmental restrictions that could eventually mean an additional $30-40 per tonne to make steel.

China’s recovery from the coronavirus pandemic has led to increases there in steel production and cheaper imports.

As a result, China’s rebound has further impacted European steelmakers in Central and Eastern Europe.

‘Shifting east’

Foreign metals and mining groups started to acquire plants in Central and Eastern Europe in the late 1990s to early 2000s. Governments in those regions sought to privatize what in many cases were previously state-owned assets.

“The view was that the market was shifting east in terms of manufacturing bases,” as Western European automakers and white goods producers were setting up shop in those countries, one analyst said.

Some of the acquired assets also have either captive raw materials sources or easier access to them. This solved potential supply chain questions and allowed the acquiring groups to redistribute material elsewhere within their own network.

Many of the newer member states that joined from 2004 were also receiving subsidies from Brussels for infrastructure improvements. Those improvements would, in many cases, require steel, the analyst added.

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This morning in metals news: the U.S.’s steel capacity utilization rate reached 71.4% for the week ended Nov. 14; a survey by INVERTO took a look at procurement trends during the COVID-19 pandemic; and steel prices continue to rise.

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Capacity utilization rises to 71.4%

The U.S. steel sector’s capacity utilization rate for the week ended Nov. 14 reached 71.4%, the American Iron and Steel Institute (AISI) reported.

The rate marked an increase from 71.1% the previous week. However, the rate fell from 78.8% during the same time frame in 2019.

Steel production during the week ended Nov. 14, 2020, totaled 1.58 million net tons. The production total marked a 0.4% increase from the previous week but a 13.3% year-over-year decline.

INVERTO releases Raw Materials Study 2020

A survey conducted as part of INVERTO’s Raw Materials Study 2020 delved into the impact of the COVID-19 pandemic on procurement and ways buyers have tried to adapt to the challenges of 2020.

Among its key findings, INVERTO noted of the survey respondents that “supply security is underestimated,” with few expressing concern about raw materials supply in the future.

Furthermore, INVERTO concluded few companies had taken “structured, profound and long-term countermeasures” in response to the pandemic.

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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, including the copper price, oil price gains and steel imports:

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.

Week of Nov. 9-13 (copper price, oil price gains and more)

• The copper price gained on the heels of Democratic candidate Joe Biden’s presidential victory, Outokumpu released Q3 results and a Midwest-based service center could be looking to expand nationwide.
• The copper price surged to a 28-month high last month.
• Aluminum prices also made significant gains last month.
• Steel prices remain hot and show no sign of letting up.
• The U.S. steel sector’s capacity utilization rate rose to 71.1% last week.
• China’s import-export steel and aluminum balances are starting to revert back to historical levels after an import-heavy summer.
• China’s top legislature recently passed an export control law that will go into effect Dec. 1.
• Liberty Steel will lay off 104 employees at its Georgetown steel mill after Christmas this year.
• MetalMiner’s Maria Rosa Gobitz on South Africa’s proposed chrome export tax.
• Like the copper price (and other metals), oil prices also moved up, in part due to positive news regarding a potentially viable COVID-19 vaccine.
• U.S. steel imports are down 22.2% through the first 10 months of the year.
• The gold price this week notched its biggest one-day drop in seven years.
• Lynas Corp. recently released its quarterly activity report, including neodymium-praseodymium output.
• Finally, the November 2020 MMI report is available for download.

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This morning in metals news: U.S. steel imports were down by 22.2% year over year through the first 10 months of 2020; German steelmaker Thyssenkrupp AG is seeking state aid; and the nickel price has bounced back in November after falling during the second half of October.

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U.S. steel imports down 22.2%

U.S. steel imports through the first 10 months of the year totaled 19.3 million net tons, down 22.2% year over year, the American Iron and Steel Institute (AISI) reported.

Steel import market share reached an estimated 17% in October, down from the year-to-date share of 18%.

By product, import permits for oil country goods in October rose 126% compared with the September final import total.

Thyssenkrupp looks to government for aid package

Bloomberg reports German steelmaker Thyssenkrupp is in talks with the German government over a potential aid package.

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The Stainless Monthly Metals Index (MMI) increased by 5.3% for this month’s index value, as this month we touch on Chinese stainless production, South Africa’s proposed chrome export tax and more.

Upcoming negotiation on your stainless steel buy? Make sure you know how your service centers will negotiate with you. 

Chinese stainless steel market

The Stainless Steel Council of China Special Steel Enterprises Association anticipated domestic stainless steel production to increase by 2.1% at the end of 2020. The increase would bring total output to more than 30 million metric tons.

High demand incentivized production. Apparent stainless steel demand for 2020 is expected to rise by 6.4% to 25.5 million metric tons.

Besides producing stainless steel, China also imports significant quantities.

Most stainless steel imports come from Chinese mills in Indonesia such as Tsingshan Holding Group. China imported 1.1 million metric tons of stainless steel in the first three quarters of the year, a 24.3% increase compared to 2019.

Furthermore, China exported 2.37 million metric tons during the same period, a 12.4% decline from 2019.

South Africa chrome export tax

The world’s largest chrome producer, South Africa, proposed an export tax on chrome ore.

The export tax could have a significant impact for China, as 83% of its chrome ore imports came from South Africa in 2019.

The chrome export tax aims to incentivize the production of ferrochrome in South Africa. However, building or expanding chrome smelter capacity in South Africa could be challenging in the country, as smelters are highly power intensive.

The country already battles with unreliable electricity supply, which makes production more costly.

If South Africa approves the chrome export tax, stainless steel prices could go up as production costs rise.

The chrome export tax is not likely to impact stainless steel prices in 2020. However, the tax may have an impact on the first quarter of 2021.

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We wrote last month how China’s rapid recovery from the COVID-19 pandemic resulted in the country importing semi-finished products for which it previously had been self-reliant or even a net exporter for the last decade.

Some steel products and primary aluminum swung into becoming significant net inflows for the economy during the summer months.

But as we cautioned at the time, this was only expected to be a temporary phenomenon.

Are you on the hook for communicating the company’s steel performance to the executive team? See what should be in that report!

China’s steel flows recalibrate

Sure enough, although volumes are still down on this time last year, exports have picked up and imports have fallen.

In a recent post, Argus Media reported China’s steel exports in October rose by 5.2% from September to 4.04 million tons. Chinese mills shifted supplies to overseas markets, enabled — or forced, depending on your point of view — by falling domestic prices.

Summertime exports rose as domestic prices fell

Falling domestic prices in the summer aided Chinese steel mills’ ability to export so aggressively.

Domestic inventory levels rose and domestic crude steel production hit record levels of 3.09 million tons a day in September, in large part to meet domestic demand. Weakness in domestic steel prices suggests overoptimism by the steel mills, inevitably resulting in excess production leaking into export markets looking for a home.

Domestic Chinese steel prices have recovered since the summer as global steel prices have risen and imports have fallen.

As the global recovery has lifted demand and prices, mills in India and elsewhere have not felt the need to distress sell metal into China. In addition, the arbitrage window has narrowed.

Imports have therefore appeared less attractive to Chinese buyers and exports more attractive to mills. That is a trend we expect to continue through Q4.

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This morning in metals news: the U.S. steel sector’s capacity utilization rate rose to 71.1% last week; WTI crude oil has bounced back up over the last week; and Arconic recently released its Q3 financial results.

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.

U.S. steel capacity utilization up to 71.1%

U.S. steel mills posted a capacity utilization rate of 71.1% for the week ended Nov. 7, the American Iron and Steel Institute (AISI) reported.

Mills produced 1.57 million net tons during the week, up 1.0% from the previous week. Production during the week, however, fell 13.7% on a year-over-year basis.

Capacity utilization during the same week in 2019 reached 78.8%.

WTI crude bounces back

In addition to capacity utilization, the oil price is another factor MetalMiner considers in its long-term forecasting.

After dipping below $40 per barrel, the WTI crude price has bounced back.

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