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This morning in metals news, the nickel price has plunged to its lowest level in 11 months, Canadian Prime Minister Justin Trudeau spoke with President Donald Trump over the weekend regarding the U.S.’s steel and aluminum tariffs, and two train derailments appear to have had little impact on Australia’s iron ore sector.

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Nickel Falls to 11-Month Low

The nickel price dropped to an 11-month low Monday, Reuters reported, based on worries of slowing Chinese steel demand.

LME nickel fell 1%, while the most-traded Shanghai nickel contract fell 2.4%, according to the report.

MetalMiner’s Take: While nickel falls to an 11-month low, the MetalMiner analyst team has a close eye on several key metals market price drivers.

Oil prices have begun to drop but remain above the $58/barrel level, which serves as the long-term bear/bull threshold. As oil prices currently remain above that level, the long-term trend remains bullish.

The other key price driver to watch is the U.S. dollar, which has increased. However, it remains below the key resistance level MetalMiner has set as the level at which the markets turn from bullish to bearish.

MetalMiner readers will note the dollar and commodities trade inversely, so a higher dollar results in lower commodity prices.

Metal-buying organizations will want to pay careful attention now to oil prices, the U.S. dollar and China demand. A change in any two of these three could signal a market shift.

Trudeau, Trump Talk Tariffs

As world leaders gathered in France this weekend for the 100th anniversary of Armistice Day, Canadian Prime Minister Justin Trudeau and President Donald Trump exchanged words over the weekend regarding the U.S.’s steel and aluminum tariffs, Reuters reported.

Canada’s temporary exemption to the U.S.’s Section 232 steel and aluminum tariffs expired June 1.

According to the report, Trudeau said he hoped to reach a resolution on the issue before this year’s G20 Summit, which kicks off Nov. 30 in Buenos Aires.

Australian Iron Ore

A pair of recent train derailments have had minimal impact on Australia’s substantial iron ore sector, according to a Bloomberg report.

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According to the report, iron ore futures on the Dalian Commodity Exchange fell 1% Monday.

The much-publicized joint venture between Tata Steel and Thyssenkrupp will now go under the magnifying glass of the European Commission due to “preliminary competition concerns” around steel for automotive applications, metallic coated steel for packaging and grain-oriented electrical steel (GOES).

According to a press release from the European Commission, the commission has concerns about reduced choice of suppliers and higher prices impacting buying organizations.

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The commission has until March 19, 2019 to make a decision on the planned venture.

The concerns remain valid, as GOES remains a highly concentrated supply market (as well as buying market). Any reduction in the number of European players will add pricing power to producers.

ABB, AK Steel Battle on Exclusion Request

Tracking the exemption requests from Section 232 steel tariffs remains a challenge.

MetalMiner missed the fact that ABB had initially received an exclusion from the Department of Commerce for GOES this summer. That exclusion request was granted and then denied once AK Steel filed an objection.

As we reported last month, ABB challenged AK’s objection. In a series of rebuttals, AK recently filed another comment challenging ABB’s arguments that AK material does not meet its performance and quality requirements around “white edge,” that AK’s material is, “more prone to creating holes than the process employed by Nippon.”

AK took issue with these assertions by filing a comment challenging the fact that no country standard or other customer has a requirement or references “white edge” and that, therefore, the argument appears arbitrary.

However, ABB will likely respond with the regulatory threshold argument required for making exclusion requests: “Specifically, ABB used the BIS standard for exclusion requests regarding product substitution, “a ‘substitute product’ must meet “quality (e.g., … internal company quality controls or standards) … or testing standards, in order for the U.S. produced steel to be used in that business activity in the United States by that end user” (83 Fed. Reg.46026, 46058).

In addition, as MetalMiner reported previously, ABB argued that the actual data from 2016-2018 certified test reports using ASTM A804 test standards did not meet iron loss and core loss requirements.

The parties have until Nov. 12 to submit additional comments.

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Exact GOES Coil Price This Month

The U.S. grain-oriented electrical steel (GOES) M3 coil price held relatively flat moving from $2,421/mt to $2,434/mt.

The GOES Monthly Metals Index (MMI) moved one point from 175 to 176. MetalMiner received additional data after last month’s publication that lowered the GOES M3 MMI from 182 to 175.

The GOES MMI® collects and weights 1 global grain-oriented electrical steel price point to provide a unique view into price trends over a 30-day period. For more information on the GOES MMI®, how it’s calculated or how your company can use the index, please drop us a note at: info (at) agmetalminer (dot) com.

The Stainless Steel Monthly Metals Index (MMI) fell in November. The index moved back towards September 2017 levels (when it hit 67 points).  The current index stands at 68 points.

The drop came as a result of lower LME nickel prices and lower U.S. stainless steel surcharges.

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LME Nickel

LME nickel prices traded lower in October.

Nickel prices decreased sharply at the end of the month, showing greater volatility than in the past couple of months. However, nickel prices still appear to be strong and trading volumes seem supportive of the uptrend.

Source: MetalMiner analysis of FastMarkets

Nickel Global Tightness

The global nickel deficit continued to widen this year.

During the beginning of the year, the deficit widened to 106,000 tons from 60,800 tons during the same period in 2017.

However, the latest monthly data show a narrower deficit.

The latest data, published in October, signaled a deficit at 7,100 tons in August versus the previous 16,500-ton deficit in July.

Chinese nickel production dropped 8% due to a fire at the Kalgoorlie smelter in Australia. Full production should return later this month.

Japan’s Sumitomo Corp lowered its forecast for nickel output at its Ambatovy project in Madagascar to 40,000 tons. The initial projection called for 48,000 tons.

The decrease in nickel production came as a result of bad weather and a slow ramp-up after maintenance.

Domestic Stainless Steel Market

Domestic stainless steel surcharges fell again. This is the fourth consecutive drop in stainless steel surcharges this year.

The 316/316L-coil NAS surcharge fell to $0.91/pound, while the 304/304L decreased to $0.63/pound.

Source: MetalMiner data from MetalMiner IndX(™)

The stainless steel surcharge has started a short-term downtrend, driven by the general slowdown in the steel and stainless steel markets.

However, stainless steel surcharges still remain well above 2015 lows.

What This Means for Industrial Buyers

Stainless steel price momentum slowed down again this month, similar to carbon steel. However, nickel prices still remain strong.

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, request a free trial of our Monthly Outlook now.

For more efficient carbon steel buying strategies, take a free trial of MetalMiner’s Monthly Outlook!

Actual Stainless Steel Prices and Trends

Both Chinese 304 stainless steel coil decreased by 1.78%, while Chinese 316 stainless steel coil prices dropped 1.48% this month.

Meanwhile, Chinese Ferrochrome prices increased this month by 0.85%, up to $1,857/mt. Ferro Molybdenum lump prices jumped 7.5%, reaching $20,505/mt. Nickel prices also fell this month, dropping by 7.34% to $11,675/mt.

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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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• We kicked off our November MMI this week. In case you missed it, revisit our subindex recaps at the links below:
  • Automotive
  • Construction
  • Rare Earths
  • Renewables 
  • Copper
  • Raw Steels
  • Global Precious
  • Aluminum
• Sohrab Darabshaw writes about a recent Indian steel conclave, held Oct. 25 in New Delhi.
• The U.S.’s tariff exemption request process has been besieged with criticism from the very beginning. MetalMiner’s Stuart Burns offered an update on the state of the process.
• The U.S. pushed its sanctions deadline vis-a-vis a number of Russian firms and their owners to Dec. 12. Burns looked into what that means for the Russian aluminum giant Rusal.
• Businesses have to be ready for when natural disasters, like hurricanes, strike.

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This morning in metals news, the copper price has slipped to a one-week low, builders in British Columbia are asking the Canadian government to loosen limits on steel imports and U.S. tariffs contributed to a Pittsburgh steelmaker’s down third quarter.

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LME Copper Price Falls

The price of London copper dropped to its lowest level in a week, Reuters reported.

MetalMiner’s Take: LME copper prices have decreased this week, but are still over the $6,000 ceiling. The base metal is also influenced by a stronger U.S. dollar and weaker Chinese sentiment.

However, copper demand seems to be strong and supply is tightening. We could see copper increasing again in the upcoming month.

B.C. Builders Seek Steel Relief

Builders in British Columbia sent a letter to Canadian Prime Minister Justin Trudeau and Finance Minister Bill Morneau asking that 100,000 tons of rebar be exempted from steel tariffs and quotas announced in October, Reuters reported.

The Canadian government announced the steel safeguards last month.

Pittsburgh Steelmaker Says Tariffs a Factor in Down 3Q

Pittsburgh steelmaker Ampco-Pittsburgh Corp. reported a $7 million third-quarter loss, which its executives indicated was partially attributable to U.S. tariffs on steel, the Pittsburgh-Post Gazette reported.

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The company had purchased a plant in Ontario two years ago, according to the report.

MetalMiner’s Take: Steel tariffs, as MetalMiner has stated many times, have certainly supported higher prices — but they have not provided all of the lift.

A booming economy and the commodity bull market have also created challenges for buying organizations. Companies heavily reliant on non-U.S. sources have more exposure than those who are able to source domestically or regionally. Though MetalMiner has not conducted a formal analysis, most companies have passed on price increases as a way to mitigate some of the impacts of higher steel prices.

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The Raw Steels Monthly Metals Index (MMI) decreased this month, dropping two points for an MMI reading of 87 points. The Raw Steels MMI had held at 89 points since August.

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Domestic steel prices have showed slowing momentum since June 2018. Domestic steel prices increased sharply at the beginning of the year, driven by a bullish market in commodities and industrial metals and the Section 232 tariffs.

Buying organizations may want to remember that domestic steel prices have remained at more than seven-year highs this year.

Source: MetalMiner data from MetalMiner IndX(™)

Hot-rolled coil, cold-rolled coil and hot-dip galvanized prices decreased in October. Meanwhile, plate prices increased this month, supported by lower metal availability.

Source: MetalMiner data from MetalMiner IndX(™)

With budgeting season in full gear, domestic steel prices may start increasing at some point between November and January, according to historical steel price cyclicality analysis. Therefore, companies will need to know when and how much to buy.

Chinese Steel Prices

So far in November, all forms of Chinese steel prices have decreased. Chinese domestic steel prices started to decrease at the end of October, driven by the start of the winter season.

Source: MetalMiner data from MetalMiner IndX(™)

But the real question to ask around Chinese steel prices appears less apparent. Have prices really declined in RMB and has the currency moved (i.e., has the RMB depreciated) such that the steel price from a U.S. buyer’s perspective appears to be dropping?

When looking at the price of Chinese steel (HRC and CRC) in U.S. dollars, prices have in fact decreased.

We can do a simple calculation, looking at the percentage decrease from September 2018 to November 2018 in Chinese steel prices in RMB and USD. Chinese HRC prices in RMB decreased 6% in that period, while CRC prices dropped by 3% in the same time frame (also in RMB).

The same calculation in USD results in a 7% decrease for HRC prices and a 4% decrease for CRC.

Source: MetalMiner data from MetalMiner IndX(™)

The depreciation of the yuan has moved Chinese steel prices lower from a U.S. buyer’s perspective. A weaker currency makes Chinese goods more appealing, despite the tariffs.

Source: MetalMiner data from MetalMiner IndX(™)

The Spread and Cost Calculation

When looking at the historical spread, readers can see that the spread has been increasing for most 2018.

Source: MetalMiner data from MetalMiner IndX(™)

The spread between U.S. CRC prices and CRC Chinese prices has increased sharply since the beginning of 2018. The slope of the increase is even larger over the March-April period, when domestic steel prices skyrocketed.

The larger spread does not come about only due to higher U.S. domestic steel prices, but also by a weaker yuan. The combination of both factors has resulted in a lower Chinese price (and a larger spread).

To answer the question of importing steel from China or not, let’s look at U.S. versus Chinese prices.

Considering November prices in $/st for HRC and CRC in both countries, the freight at $90/st and the 25% steel tariff, the final price still appears to be appealing for U.S. buyers.

Source: MetalMiner analysis from MetalMiner IndX(™) data

Chinese prices could still increase by 8% or U.S. prices could still decrease by 8% (in the event of the other moving flat) without any change in the final price for both.

What This Means for Industrial Buyers

Buying organizations may want to pay close attention to Chinese and U.S. price dynamics to decide when to commit to mid- and long-term purchases. Adapting the right buying strategy becomes crucial to reducing risks.

Only the MetalMiner monthly outlooks provide a continually updated snapshot of the market from which buying organizations can determine when and how much to buy of the underlying metal.

For more information on how to mitigate price risk year-round, request a free trial to our Monthly Metal Buying Outlook.

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Actual Raw Steel Prices and Trends

The U.S. Midwest HRC 3-month futures price increased this month by 0.37%, moving to $813/st.

Chinese steel billet prices fell this month by 1.71%, while Chinese slab prices fell by 4.66% to $600/mt.

The U.S. shredded scrap price closed the month at $342/st, decreasing from last month.

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This morning in metals news, Shanghai rebar has dropped to a one-month low, cobalt prices are set to rise after a mining halt at a Glencore location in the Democratic Republic of the Congo (DRC) and BHP says a train derailment will impact its iron ore exports from Australia.

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Shanghai Rebar Steel Futures Down

Shanghai rebar steel futures have dropped to a one-month low, Reuters reported.

MetalMiner’s Take: SHFE rebar prices have fallen recently, but this slight drop is coming together with a general decrease in Chinese steel prices.

As for the other forms in the Chinese steel sector, SHFE rebar prices have been in an uptrend since April 2018 and have just started to slow down. Steel demand does not appear to be softer yet, while supply keep increasing due to the winter cuts.

The Chinese steel sector could be harmed if the expected cuts are lower than expected, and prices could fall further.

However, readers may also remember that Chinese steel prices have historically decreased during the winter season. Therefore, some price patterns could just be repeating last year’s price movements.

Cobalt Prices Set to Rise

A stoppage at a Glencore-run cobalt mine in the DRC is expected to boost the price of the metal,  which is in high demand by the electric vehicle sector.

According to the Financial Times, operations at the cobalt mine ceased Tuesday after trace amounts of uranium were discovered.

MetalMiner’s Take: Cobalt takes a page from aluminum markets.

News of a cobalt mine stoppage due to radiation could provide price support for cobalt, not too dissimilar to the temporary threat of a stoppage at a key miner of the raw material used to make aluminum.

Cobalt, however, unlike aluminum, has a much more concentrated supply market, with the DRC maintaining over 60% of total global supply.

And as many pundits predict, the rise of electric vehicles (and cobalt as a key material used in those vehicles) in other words, the demand side of the equation looks strong for both the mid- and long-term.

Therefore, buying organizations relying on cobalt will want to adapt the same kind of purchasing strategies used for other volatile materials such as aluminum and nickel.

Train Derailment to Impact BHP’s Australian Iron Ore Exports

According to a Reuters report, mining giant BHP Billiton said it expects interruptions to its iron ore exports as a result of the forced derailment of a train containing the commodity this week.

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According to the report, the miner said its reserves at Port Hedland are not expected to be able to cover the entire period of disruption.

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This morning in metals news, North American aluminum associations wrote a joint letter asking for quota-free tariff exemptions for Canadian and Mexican aluminum, European automakers plan to try out new LME steel contracts launching next year, and the LME copper price has dropped ahead of the U.S. midterm elections.

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Aluminum Associations Seek Quota-Free Tariff Exemption

Earlier this year, Canada and Mexico received temporary exemptions from the U.S.’s tariffs on steel and aluminum; however, those exemptions eventually were allowed to expire.

Since then, the Aluminum Association in the U.S. has continued to petition for the imposition of quota-free tariff exemptions for the U.S.’s neighbors to the north and south.

Aluminum associations in the three countries penned a joint letter to President Trump this week reiterating the call for quota-free tariff exemptions.

“On behalf of the North American aluminum industry, we the undersigned association leaders congratulate you on reaching an initial agreement on the United States-Mexico-Canada Agreement (USMCA),” the letter states. “We support a modernized, trilateral agreement that recognizes the importance of the integrated North American supply chain and enables the aluminum industry to meet growing demand year over year.

“We are now asking that you work together expeditiously with the other North American leaders to resolve the national security concerns related to the Section 232 tariffs on aluminum products within North America, and to ensure the United States reinstates the exemptions from the aluminum tariffs for Canada and Mexico.”

MetalMiner’s Take: Aluminum-buying organizations face significant material shortages within the U.S. market. Canada and Mexico will likely keep up the pressure to advocate for quota-free imports to the U.S., particularly since all three countries have come to an agreement via the USMCA (the successor to NAFTA).

In the meantime, buying organization should expect continued tightness.

Copper Price Slides

The LME copper price has slipped ahead of the U.S. midterm elections and a Federal Reserve meeting later this week, Reuters reported.

The LME copper price fell 0.4% Tuesday, according to the report.

MetalMiner’s Take: LME copper prices have increased so far in November. Despite some analysts claiming a bearish call for LME copper prices, the base metal seems to be moving up again.

Fed interest rate rises have not impacted LME copper prices or the U.S. dollar that much. The U.S. dollar tends to react for a couple of days, only to then follow its previous pace; LME copper shows the same behavior.

The important driver for copper is Chinese demand, which has not yet softened. That could make the difference in LME copper pricing. So far, LME copper prices may continue increasing in the upcoming months.

European Automakers to Try Out LME Steel Contracts Next Year

European automakers will be looking to tap into new LME steel contracts that are scheduled to be launched early next year, Reuters reported.

According to the report, the LME is planning to launch three hot rolled coil steel futures contracts next year.

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MetalMiner’s Take: Buying organizations could get excited about new LME steel contracts if they had the support of steel producers. It has taken the CME years to build up liquidity in its HRC contract.

Assuming the LME has identified multiple European steel producers willing to participate (a big question), then buying organizations will have another regionalized solution to mitigate steel-price volatility.

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It was the first edition of its kind, but it attracted quite an audience.

The International Steel Conclave, organized by the Indian Steel Association and Messe Frankfurt India, was held in the Indian capital of New Delhi on Oct. 25.

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Using the occasion to highlight the Indian government’s rapid strides in the steel sector, Minister Birender Singh said India is poised to achieve its stipulated target of 300 million tons of capacity by 2030. About 150 delegates and speakers, from national and international steel companies — including JSW Group, Tata Steel, JSPL, Steel Authority of India Ltd — were in attendance.

The minister lamented that though India does have good engineers and scientists, the country is not leading vis-à-vis innovation in steel technology. According to Singh, advancements would help reduce the country’s import bill.

Sounding positive on the forward movement of steel in India, Singh noted crude steel production capacity had gone up to 52 million tons, up by 6% from last year. He dubbed 2018 as a “year of new beginnings for the industry.”

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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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• Global crude steel production jumped 4.4% year over year in September.
• A recent PwC report overviews M&A activity in the metals sector throughout the third quarter of 2018.
• The European Steel Association’s director general said European steel markets are stabilizing, but they also face challenges in the form of tariffs and other trade-related concerns.
• MetalMiner’s Stuart Burns touched on one watchmaker’s plans to make a limited run of watches using scrap from the iconic Spitfighter plane.
• It’s been a news-filled several weeks at Norsk Hydro’s Alunorte alumina refinery in Brazil.
• The International Copper Study Group released a report covering global copper production in July.
• China’s ambassador to the U.S. urged the two countries to appeal to their “better angels” in their ongoing trade war.
• General Motors released its third-quarter financial results earlier this week.
• The strength of the U.S. dollar this year has meant lower commodities prices.

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