This morning in metals news: the U.S. and E.U. have reportedly reached a deal to end the long-running Airbus–Boeing dispute over state subsidies; meanwhile, U.S. steel capacity utilization touched 82.6% last week, the American Iron and Steel Institute reported; and, lastly, Cleveland-Cliffs announced increases to its second-quarter and full-year 2021 financial guidance.
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US, EU reach deal to end Airbus-Boeing dispute
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Allegations of state subsidies between the U.S. and E.U. vis-a-vis their respective aircraft manufacturers, Boeing and Airbus, have extended all the way back to 2004.
Now, the parties have reportedly reached a deal to end the dispute.
In 2019, the World Trade Organization authorized the U.S. to impose up to $7.5 billion in tariffs on E.U. goods. Meanwhile, last year, the WTO authorized the E.U. to impose $4 billion in tariffs on U.S. goods.
The Stainless Monthly Metals Index (MMI) increased by 4.3% for this month’s reading, as stainless steel demand is likely to continue to grow in the years ahead.
According to International Stainless Steel Forum (ISSF) data, stainless steel melt shop production increased by 24.7% year over year to 14.5 million metric tons through the first quarter of 2021.
Most of the production increase came from Europe and the U.S., where production jumped by 11.0% and 9.7%, respectively. The only region that saw a production contraction was China. China’s production fell by 0.5% to 8,198,000 metric tons.
This coincides with a report by Precedence Research, in which it estimates the stainless steel market size to increase to U.S. $168.24 billion by 2027 from U.S. $106.84 billion in 2019.
Precedence anticipates a 57.5% increase over the eight-year period due to the growing preference for stainless steel over ordinary steel and its increasing application in pre-engineered buildings. Additionally, demand for steel from construction and automotive and transportation sectors is expected to keep growing.
Since April 2020, Chinese steel prices have traded up consistently with a short decline period around December 2020. Around mid-May, all forms of Chinese steel prices peaked, as demand continued to soar in China.
Steel demand in China increased in the past few months as the government implemented its economic recovery plan, which includes infrastructure spending. Increasing steel prices continue to bring up infrastructure costs.
On May 26, steel prices saw a price drop of approximately 20% for all forms of steel. The sudden price decline in China could have been triggered by the severe punishment the Chinese government threatened to impose on any excessive speculation and fake news that might inflate critical raw material prices, such as steel.
After Chinese prices corrected, they continued to go up but at a slower rate, closing May at CNY 6,060/mt from CNY 6,100/mt at the end of April. Since, they continued to increase the first week of June but remain below the CNY 6,250/mt level.
However, volumes do not suggest speculation. Rather, the Chinese government wishes to control the rising price situation. After all, a lower domestic price can help boost the competitive advantage for Chinese firms exporting value-added products.
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 steel sector news, the Biden administration’s release of a 250-page supply chain report and much more:
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The MetalMiner Best Practice Library offers a wealth of knowledge and tips to help buyers stay on top of metals markets and buying strategies.
Week of June 7-11 (steel sector news, Biden administration’s supply chain review and more)
Aluminum prices retraced after peaking May 10, Maria Rosa Gobitz explained this week.
Earlier this week, the Biden administration released a 250-page report summarizing agency heads’ findings and recommendations after executing 100-day supply chain reviews.
Despite hopes that adverse conditions in the shipping market would ease, in many cases they’ve gotten worse, Stuart Burns explained.
Novelisis teaming up with a Chinese university to develop innovative uses for aluminum in the automotive sector.
Meanwhile, U.S. job openings reached a record high of 9.3 million in April, the Census Bureau reported.
This morning in metals news: production has resumed at Tenaris‘ steel plant in Koppel, Pennsylvania; meanwhile, Anglo American said it has demerged its thermal coal operations in South Africa; and, lastly, the United Steelworkers union commented on the Biden administration’s recently released supply chain review.
Tenaris steel plant in Pennsylvania resumes production
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Luxembourg-based Tenaris’ steel plant in Koppel, Pennsylvania, has resumed production after a yearlong hiatus for upgrades.
“Steel production is now underway at Tenaris’s first melt shop in the United States that will soon supply steel bars for its seamless pipe mills in the States and Canada,” Tenaris said in a press release.
“The steel shop in Koppel, PA, part of the company’s strategic acquisition of IPSCO, completed in 2020, has started producing steel bars following a year-long investment of more than $15M USD in upgrades to integrate the facility into Tenaris’ global network of steel mills.”
Last year, on the heels of the outset of the COVID-19 pandemic, Tenaris announced idling of a number of U.S. plants. In April 2020, the company said declining oil and gas prices, oversupply in the oil market and COVID-19 operational restrictions underpinned its decision.
According to Reuters, Beijing’s target of peak coal use by 2030 is asserting a dampening effect on new steel mill and aluminum smelter investment.
As such, the country could be at or near peak production. As Reuters’ Andy Home notes, the country’s rising output over the years as had a dampening effect on prices. That trend has led some Western producers to cease operations.
But a combination of harsher environmental legislation resulting in Beijing dissuading investment in new coal fired power projects, combined with Western markets’ meaningful action — after years of simply complaining — to block out Chinese exports of aluminum and steel products suggests the Chinese impetus to build capacity and the rest of the world’s willingness to buy product are both going through a transformational change.
This morning in metals news: the United States International Trade Commission made determinations in a five-year sunset review covering imports of cut-to-length carbon steel plate; meanwhile, United States Trade Representative Katherine Tai will outline the Biden-Harris administration’s “worker-centered trade policy” today; and, lastly, the Consumer Price Index for All Urban Consumers rose by 0.6% in May.
The MetalMiner Best Practice Library offers a wealth of knowledge and tips to help buyers stay on top of metals markets and buying strategies.
USITC rules on cut-to-length carbon steel plate imports
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The USITC recently made determinations in a five-year sunset review regarding an existing anti-dumping duty order on cut-to-length carbon steel plate from China and terminating suspended investigations on imports of the product from Russia and Ukraine.
In its vote, the USITC said revoking the anti-dumping duty order on the carbon steel plate from China “would be likely to lead to continuation or recurrence of material injury within a reasonably foreseeable time.”
It also voted to maintain existing suspension agreements for the imports from Russia and Ukraine.
The Construction Monthly Metals Index (MMI) held flat for this month’s reading.
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US construction spending ticks up in April
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U.S. construction spending reached a seasonally adjusted annual rate of $1,524.2 billion in April, the Census Bureau reported.
The estimated April rate marked a 0.2% increase from the previous month and a 9.8% increase on a year-over-year basis.
Construction spending amounted to $452.3 billion during the first four months of the year, or up 5.8% from the same period in 2020.
Meanwhile, private construction spending reached a seasonally adjusted annual rate of $1,180.7 billion, up 0.4% from March. Under the umbrella of private construction, residential construction increased by 1.0% to a rate of $729.2 billion in April. Nonresidential construction fell by 0.5% to $451.4 billion in April.
Public construction spending fell 0.6% to $343.5 billion. Educational construction spending fell 0.5% to $84.8 billion. Highway construction rose 0.6% to $99.8 billion.
Construction employment declines in May
On the labor side, employment in the construction sector fell by 20,000 in May, the Census Bureau reported. Employment in construction is down by 225,000 from February 2020.
The Associated General Contractors of America noted contractors continue to struggle with unpredictability with respect to securing materials.
“Steadily worsening production and delivery delays have exceeded even the record cost increases for numerous materials as the biggest headache for many nonresidential contractors,” said Ken Simonson, the association’s chief economist. “If they can’t get the materials, they can’t put employees to work.”
ABI posts growth for third consecutive month
For the third straight month, the Architecture Billings Index, released monthly by the American Institute of Architects, showed growth (meaning an index value greater than 50).
After the onset of the pandemic, the ABI had contracted each month for a year until the February 2021 reading.
For April, the ABI checked in at 57.9, up from 55.6 the previous month. The design contracts index reached 61.7, up from 55.7 the previous month.
The ABI marked its highest level since before the Great Recession.
“Interest in new projects remained extremely strong as well, with the Inquiries score rising to 70.8, and the value of new signed design contracts reaching 61.7, the highest score in that index since data collection started in late 2010,” the ABI report stated. “This means that not only are clients talking to architecture firms about starting new projects, but that they are also signing contracts to begin that work at a high rate.”
By region, the Midwest led the way with an ABI reading of 60.6. Trailing the Midwest were the South (58.3), Northeast (55.0) and West (52.4).
As we’ve noted in this space on a regular basis, shortages and delays in receiving materials have had a ripple effect. The sudden surge in demand throughout some sectors has produced a bullwhip effect.
The ABI report noted the 0.8% jump in the Consumer Price Index from March to April and the 4.2% jump from April 2020 to April 2021, which marked the largest increases since before the Great Recession.
“In addition, core inflation rose by 0.9% in April, the largest increase in that indicator since 1981,” the ABI report notes. “Rising consumer prices at this time are largely caused by supply constraints due to a shortage of key inputs subsequently leading to production delays, and by rising demands for services, particularly travel and hospitality.”
Pending home sales drop in April
Meanwhile, in the housing market, pending home sales fell by 4.4% in April, the National Association of Realtors (NAR) reported.
“Contract signings are approaching pre-pandemic levels after the big surge due to the lack of sufficient supply of affordable homes,” said Lawrence Yun, NAR’s chief economist. “The upper-end market is still moving sharply as inventory is more plentiful there.”
Actual metals prices and trends
The Chinese rebar price dipped 0.7% month over month to $802 per metric ton. Meanwhile, the Chinese H-beam steel price fell 2.3% to $815 per metric ton.
The U.S. shredded scrap steel price rose by 3.2% to $450 per short ton.
The European 1050 commercial aluminum sheet price rose by 0.4% to $3,577 per metric ton.
This morning in metals news: as the U.S. economy reopened, job openings hit a record high in April; meanwhile, steel prices continue to rise; and, lastly, emissions from the electric power sector have declined as it has shifted from coal to natural gas.
The MetalMiner Best Practice Library offers a wealth of knowledge and tips to help buyers stay on top of metals markets and buying strategies.
Job openings hit record high in April
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U.S job openings reached a record high of 9.3 million on the last business day of April, the U.S. Census Bureau reported.
Hires, meanwhile, reached 6.1 million, little changed from the previous month.
“Total separations increased to 5.8 million,” the Census Bureau added. “Within separations, the quits rate reached a series high of 2.7 percent while the layoffs and discharges rate decreased to a series low of 1.0 percent.”
In durable goods manufacturing, separations increased by 7,000.
This morning in metals news: the Biden administration today released a 250-page report detailing the findings of its 100-day supply chain review; meanwhile, the US steel capacity utilization rate ticked up to 82.3%; and, lastly, the U.S. goods and services deficit fell in April compared with the previous month.
Earlier this year, President Joe Biden signed an executive order calling for 100-day reviews of critical U.S. supply chains. The reviews in question included those for things like critical minerals, semiconductors and high-capacity batteries.
The 100-day period has come and gone. Today, the administration released a 250-page report detailing its findings.
“The COVID-19 pandemic and resulting economic dislocation revealed long-standing vulnerabilities in our supply chains,” the report’s introduction states. “The pandemic’s drastic impacts on demand patterns for a range of medical products including essential medicines wreaked havoc on the U.S. healthcare system. As the world shifted to work and learn from home, it created a global semiconductor chip shortage impacting automotive, industrial, and communications products, among others.”
In addition to its deeper analysis, the report included six broad recommendations for strengthening U.S. supply chains:
