Articles in Category: Ferrous Metals

According to Reuters, spot 62% grade iron ore for delivery to China recently rose 1.6% to $93 per metric ton and the most-traded May 2019 iron ore contract on the Dalian Commodity Exchange soared as much as 4.1% to 710.5 yuan ($106) per ton — the highest for the Asian benchmark since 2013.

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Such robust price performance was not a one-day spike, but was reflected across the week as the contract gained nearly 10% during the first week of April on a combination of strong steel mill buying and concerns over constrained supply from both Australia and Brazil.

Nor was the bullish sentiment confined to iron ore, as Reuters reported coking coal on Monday rose 1% to 1,258.5 yuan ($187.29) a ton, and coke rose 1.4% to 2,048.5 yuan ($304.86).

Demand is at its seasonal peak as the weather warms in China and construction work begins in earnest, pushing up steel futures by more than 3% in early April. According to Reuters, the most-active construction steel rebar contract on the Shanghai Futures Exchange recently rose as much as 3.6% to 3,710 yuan ($552) a ton, its highest since Aug. 22, while hot-rolled coil jumped as much as 3.4% to 3,955 yuan a ton ($588).

Such performance suggests the steel market is roaring in China, fueled by another infrastructure spending spree, but the reality is something different.

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The Raw Steels Monthly Metals Index (MMI) fell by one point this month to 81, a 1.2% decline from the previous month’s MMI value.

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Price weakness in the index came from the U.S. HRC 3-month futures contract, with a 6.3% decline in price this month, while Chinese Dalian coking coal prices declined by 7.2%. The declining prices pulled the index down, in spite of the 16.2% increase in Korean scrap steel prices.

U.S.steel prices generally trended gently upward after stabilizing earlier in the year. CRC prices increased by around 3% on a month-on-month basis, while HDG increased by nearly 3%. HRC prices edged up by just over 1% while plate prices held steady month on month.

Source: MetalMiner data from MetalMiner IndX(™)

Overall, prices stayed firm, in line with seasonal supply and demand factors at work in construction, in particular. Generally stronger-than-expected industrial performance in both the U.S. and China provided price strength.

Similarly, and in line with more positive economic data than generally anticipated, Chinese steel prices increased so far this year, leading the U.S. price increase (as generally expected by technical analysis of steel prices since Chinese prices tend to move first).

Source: MetalMiner data from MetalMiner IndX(™)

Based on a basic visual comparison of Chinese steel prices with the China Manufacturing Purchasing Managers Index (PMI) trendline, as the PMI crosses the threshold over 50, steel prices tend to increase while they tended to fall during months of contractionary sub-50 readings. As we can see the PMI trending upward, we can expect steel prices to rise.

Source: Analysis of data from MetalMiner IndX(™), Yahoo.com and Investing.com

On the other hand, the comparison of trendlines between steel prices and China’s FXI, a large-cap ETF index, shows a relationship that appears weaker, with values moving in opposite directions at times (although still typically following a similar movement).

Given that China’s PMI reading increased recently, this indicates the potential for steel prices to show strength.

A Comparison of U.S. and Chinese Steel Prices

The spread between U.S. HRC and China HRC prices flattened out for the last couple readings after falling for a few months now, with a price differential in early April of $181/st.

Source: MetalMiner data from MetalMiner IndX(™)

This month, U.S. CRC prices outpaced China CRC prices. The spread once again trended slightly upward between the two after trending more or less downward since July 2018, with the current price differential of around $255/st.

Source: MetalMiner data from MetalMiner IndX(™)

Iron ore prices increased again this month, after some moderation in price increases from earlier this year. Weather issues stemming from Tropical Cyclone Veronica in Australia last month kept prices higher, in addition to a general improvement in the industrial outlook in China, which could support higher iron ore prices, and therefore higher steel prices. Coking coal prices, on the other hand, have generally fallen so far in 2019, which may exert downward pressure on steel prices.

What This Means for Industrial Buyers

Even with the lower index value this month, some forms of steel still showed upward momentum, indicating prices could be on the rise once again; that is, at least for the short term, supported by stronger-than-expected economic performance in the U.S. and China.

Like last month, plate prices continue to sit at high levels. Plate prices sit near $1,000/st, rising again after briefly falling back to $993/st in late March.

With prices still somewhat higher and other factors indicating some potential to increase further, buying organizations need to watch the market carefully for the right time to buy.

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Actual Raw Steel Prices and Trends

U.S. shredded scrap prices stayed flat during March while the U.S. HRC futures contract 3-month price fell 6.3%.

Chinese Dalian coking coal prices were down 7.2%, falling the most of all the metals tracked in the Raw Steels MMI basket.

The price of Korean scrap steel increased the most, jumping 16.25%. Other price movements in the basket were much more modest, oscillating around the plus or minus 1% mark.

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This morning in metals news, the U.S. steel sector’s capacity utilization rate for the year through April 6 reached 81.9%, the zinc price fell on easing supply concerns and miner Glencore is becoming a bigger and bigger player in the copper market.

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Steel Capacity Utilization Update

The American Iron and Steel Institute (AISI) released its weekly production report Monday, showing the sector’s capacity utilization rate for the year through April 6 had reached 81.9%.

Production during that time by volume reached 26.1 million tons, up 6.8% from the 24.5 million tons produced during the same time frame in 2018.

Meanwhile, for the week ending April 6, domestic raw steel production hit 1.9 million net tons at a capacity utilization rate of 82.8%, up from 1.8 million net tons and 76.3% for the same week in 2018. 

Zinc Price Dips

The price of zinc fell Tuesday based on the prospect of increased supplies of the metal, Reuters reported.

The LME zinc price dropped 1.6% to $2,860.50 per ton Tuesday, according to the report.

Glencore Ramps up Copper Buying

Copper is predicted by many to see a continued rise in demand as the world makes the move over to electric vehicles (EV).

One firm looking to snap up as much copper as it can is miner Glencore.

According to a Bloomberg analysis, Glencore was Chilean copper miner Codelco’s No. 1 customer in 2018.

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Illustrative of the miner’s increased emphasis on copper, the report notes Glencore did not even make the top 10 list of Codelco copper customers as of five years ago.

The Stainless Steel Monthly Metals Index (MMI) held steady this month at 71.

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LME nickel prices mostly ended up moving sideways as March progressed after hitting a six-month high early in the month, with the price peaking at $13,750/mt during trading.

Source: MetalMiner analysis of FastMarkets

SHFE nickel prices climbed back up to higher levels as well during the first quarter of 2019, currently at a higher year-on-year price as of April.

Source: MetalMiner analysis of FastMarkets

SHFE nickel prices showed strength on the back of the strong performance of the Caixin China General Manufacturing PMI, which hit 50.8 this March (its highest level since July 2018). The March PMI surpassed expectations and was up from 49.9 the previous month. The increase seems to come from Chinese state stimulus measures now impacting the economy, according to press reports. Additionally, other sources cite recovered export demand as the impetus behind the upbeat PMI reading.

The availability of cheaper pig nickel iron — an innovation created in China, which uses laterite nickel ores instead of pure nickel — helps mitigate nickel price increases by serving as an alternative to standard nickel as an input in stainless steel production.

In order to produce pig nickel iron, raw material, in the form of nickel laterite ore, generally must be sourced from outside of China, with Indonesia and the Philippines accounting for most nickel laterite ore production globally.

The mining of nickel laterite ore reserves out of Indonesia increased quite a bit as a result, with several notable Chinese joint ventures in operation or planning operations within Indonesia.

Recently, China’s Tsingshan Group, for example, partnered with GEM Co Ltd for the buildout of additional nickel-related production facilities in Sulawesi, a nickel mining hub in Indonesia. The recent project, which just broke ground in January, aims to develop nickel sulphate for export, slated for use in lithium-ion batteries for electric vehicles (EVs).

An earlier 2017 joint venture between Tsingshan and ERAMET formed around the nickel deposit at Weda Bay — said to house 9.3 million tons of nickel — focuses on nickel ferroalloy production.

Domestic Stainless Steel Market

This month, the 304/304L-Coil and 316/316L-Coil NAS surcharges remained the same as last month. Surcharges sit at higher levels than in the recent past, but are still down somewhat from the recent high point in July 2018.

What This Means for Industrial Buyers

Stainless steel prices stayed flat this month overall, with some declining prices reported among Chinese and Korean basket prices.

The Allegheny Ludlum 316 and 304 stainless surcharges did not move this month, while nickel prices in the basket showed mixed movement. LME nickel prices moved up slightly.

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Therefore, with prices essentially flat but somewhat high, industrial buyers may want to watch the market carefully in the coming weeks and adjust course as needed in case weaker Chinese prices offset typical seasonal price increases as we move into peak construction season.

Actual Stainless Steel Prices and Trends

This month, only a few of the prices in the stainless basket increased.

In particular, China FeCr (or Ferro Chrome) lumps increased in price by 6.2%, bucking the trend among the other Chinese prices in the basket, which otherwise declined.

Of the Chinese prices that decreased, 304 stainless coil dropped the most (by 3.5%), while the other price decreases were smaller, ranging from 0.3% to 1.2%. The Korean prices for 430 stainless steel coil and 304 stainless coil decreased as well (by less than 1%).

LME nickel and Indian primary nickel both increased in price by 0.8%.

The Allegheny Ludlum 316 and 304 stainless surcharges held flat this month.

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This morning in metals news, Russian investors are interested in Nevada copper, iron ore is booming and Vietnam’s steel sector looks to build on a record-setting 2018.

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Nevada Copper

Among other metals, copper will become increasingly important as electric vehicles gain market share.

As such, it’s no surprise that copper mining is heating up in many places, including the state of Nevada, according to a report by the High Country News.

The report notes a copper mine financed by a Russian oligarch is set to open this year, approximately 60 miles away from Tesla’s so-called Gigafactory.

Iron Ore Soars

Amid recent supply-side disruptions in Brazil after Vale SA’s tailings dam breach and in Australia (stemming from port damage as a result of the recent Tropical Cyclone Veronica), the iron ore price is rising fast.

According to the Hellenic Shipping News, the iron ore price rose above $92/ton this week, its highest level in over two years.

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Vietnam Steel Sector Could Grow Further

The Vietnam Steel Association is optimistic the country’s steel sector will continue to grow, even after a productive 2018, S&P Global Platts reported.

Vietnam’s crude steel production in 2018 hit a record 14.1 million tons, which marked a 23% year-over-year increase.

The U.S. Department of Commerce. qingwa/Adobe Stock

This morning in metals news, the United States International Trade Commission (USITC) made determinations in the anti-dumping and countervailing duty probes of large diameter welded pipe from Canada, Greece, South Korea and Turkey; Thyssenkrupp workers are looking for job guarantees in the case of a collapse of the German firm’s European joint venture with Tata Steel; and the Steel Authority of India Ltd. posted 8% crude steel production growth in fiscal year 2019.

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USITC Makes AD, CVD Determinations

The USITC made a number of determinations in the ongoing anti-dumping and countervailing duty probes related to imports of large diameter welded pipe from Greece, Turkey, South Korea and Canada.

“As a result of the USITC’s affirmative determinations, Commerce will issue: antidumping duty orders on imports of LDW carbon and alloy steel line pipe from Canada, Greece, Korea, and Turkey; a countervailing duty order on imports of LDW carbon and alloy steel line pipe from Korea; antidumping duty orders on imports of LDW carbon and alloy steel structural pipe from Canada, Korea, and Turkey; and a countervailing duty order on imports of LDW carbon and alloy steel structural pipe from Korea and Turkey,” the USITC stated in a release.

Thyssenkrupp Workers Look for Job Guarantees

Workers for German steelmaker Thyssenkrupp are looking for job assurances in case the firm’s planned 50:50 joint venture with Tata Steel doesn’t work out, Reuters reported.

The companies agreed to merge their European operations last year, creating what would ultimately be Europe’s second-largest steelmaking entity (behind only ArcelorMittal). Approval of the joint venture, however, is still pending review from European competition authorities.

In October, the European Commission launched an investigation of the proposed joint venture, noting concerns that the merger might “reduce competition in the supply of various high-end steels.”

SAIL Crude Steel Production Jumps 8%

The state-owned Steel Authority of India Ltd. (SAIL) posted crude steel production growth of 8% in fiscal year 2019, The Economic Times reported.

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The New Delhi-based steelmaker churned out 16.3 million tons of crude steel in the fiscal year, according to the report.

The mandate for the Global Forum on Steel Excess Capacity (GFSEC), an organization that has come in for criticism from the U.S., expires in November.

However, the European Steel Association (EUROFER) argues the forum, which has focused on creating policies to tackle global excess capacity, should have its mandate extended.

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EUROFER released a statement ahead of a meeting of the GFSEC March 28-29, calling for the extension of its mandate (scheduled to expire in November).

“We call on members of the Global Forum to agree on a continuation of the forum’s mandate beyond November 2019,” EUROFER Director General Axel Eggert said in a prepared statement. “Continued international work on excess capacity and related government support measures would contribute to the sustainability of our global industry.”

Steel excess capacity — which drives down prices and consequently floods markets with cheap product — has been a consistent talking point among steel circles in Europe and the U.S. As most are aware, the U.S. last year imposed tariffs on imported steel.

China, the world’s top steel producer, is often the target of complaints vis-a-vis overcapacity. China’s crude steel production has increased the last couple of years, from 807.6 million tons in 2016 to 870.9 million tons in 2017, then reaching a record 928.3 million tons in 2018.

Source: World Steel Association

The GFSEC was formed in September 2016 by G20 leaders at a Hangzhou summit.

“GFSEC’s work has already produced results, such as detailed statistics on steel capacity and production around the world and has instigated work to cut excess capacity where it is needed most,” Eggert added in his statement.

In late 2017, the 33 members of the GFSEC met and agreed to a set of six guiding principles for the creation of specific policies to combat overcapacity (the full report from the meeting is available here).

According to a release from the Organization for Economic Cooperation and Development (OECD), the principles “emphasize the importance of having the right policy framework conditions; they call for the removal of subsidies and other measures that distort steel markets; they stress the need for a level playing field among steel enterprises of all types of ownership; they highlight the importance of the Forum regularly updating its information on capacity and policy measures.”

Nonetheless, EUROFER said the agreement and steps taken since then mark only the “beginning of the process.”

“Global steel overcapacity is still at least 550 million tonnes, according to the OECD,” Eggert said. “We are still very much at the beginning of the process, and there is clearly a need for the GFSEC’s mandate to be extended.”

Furthermore, Eggert argued not extending the mandate would be dangerous.

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“In a world where global overcapacity is still very much present – and with proliferating trade distortions – there is a greater need than ever for the GFSEC,” Eggert said. “Not renewing the mandate of the Global Forum would mean abandoning the global steel industry when it is still at a perilous juncture. Effective multilateral cooperation is needed in order to preserve fair and free trade in this essential sector.”

The GFSEC came in for criticism from the U.S. last year following a meeting of members September 20, 2018, in Paris.

“Unfortunately, what we have seen to date leaves us questioning whether the Forum is capable of delivering on these objectives,” the Office of the United States Trade Representative said in a prepared statement following the meeting. “We do not see an equal commitment to the process from all Forum members. Commitments to provide timely information critical to the proper functioning of the Forum’s work, for example, have gone unfulfilled. More importantly, we have yet to see any concrete progress toward true market-based reform in the economies that have contributed most to the crisis of excess capacity in the steel sector.”

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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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This morning in metals news, Nucor announced a major investment toward a new steel plate mill in Brandenburg, Kentucky, steel CEOs ask the Trump administration to maintain the Section 232 duty on steel, and copper prices moved up as U.S.-China trade talks resumed today.

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Nucor Announces Kentucky Investment

Nucor Corporation is making a $1.35 billion investment toward a new steel plate mill in Brandenburg, Kentucky, the steelmaker announced Wednesday.

According to a company release, the mill is expected to have an annual capacity of 1.2 million tons and will be fully operational in 2022.

“This strategic investment will enable us to build a clear market leadership position in the U.S. plate market. Kentucky is an excellent location for this mill, right in the center of America’s largest plate consuming region,” said John Ferriola, chairman, CEO and president of Nucor Corporation, in a prepared statement. “Our acquisition of the Gallatinsheet mill in Ghent, Kentucky five years ago has been a tremendous success, and we are pleased to add a second mill in the state.”

Steel Executives Urge Trump Administration to Keep Steel Tariffs

With news this week that the Senate is planning on putting forth a bill that will target the president’s Section 232 authority, executives of domestic steel companies are asking the Trump administration to hold firm on maintaining the existing duties on steel imports.

“Now is not the time to blink,” U.S. Steel CEO David Burritt was quoted as saying during a hearing Wednesday, according to Reuters. “Section 232 must continue to be applied to all countries, especially the largest import sources, whether that’s a tariff or a hard quota. Even our best allies can be conduits for foreign steel from China or elsewhere.”

Copper Up on Trade Talks

The price of copper made gains Thursday as the U.S. and China reconvened for trade talks in Beijing today, Reuters reported.

In addition, protests at a Peru copper mine fueled concerns about supply disruption, according to the report.

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LME copper rose 0.6% to $6,372 per ton, according to the report.

Global crude steel production increased 4.1% in February compared with February 2018 production, according to the World Steel Association’s monthly production report.

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China’s Steel Production Growth Continues

Global production hit 137.3 million tons in February, down from 150.3 million tons in January. February 2018 production reached 131.9 million tons.

In Asia, China’s crude steel production for February 2019 hit 71.0 million tons, up 9.2% year over year (China’s steel production growth also hit 9.2% the previous month). India produced 8.7 million tons, marking a 2.3% year-over-year increase.

Japan’s production reached 7.7 million tons, which marked a 6.6% year-over-year decline. Earlier this month, the Nikkei Asian Review reported Japan’s economic index slipped for the third consecutive month, fueling concerns the country may be headed for a recession (or may already be in one).

South Korea’s crude steel production, meanwhile, rose 1.1% to 5.5 million tons.

U.S. Steel Production Up 4.6%

U.S. production continues to chug along, reaching 6.9 million tons in February, up 4.6% from the same month in 2018. As reported earlier this week, a legal challenge from the American Institute for International Steel (AIIS) of the constitutionality of the president’s Section 232 powers was struck down by the U.S. Court of International Trade (CIT).

Also of note, earlier this week — March 23 — marked the one-year anniversary of the Trump administration’s Section 232 tariffs on steel and aluminum. Since imposition of the duties, the U.S. steel sector has eclipsed the targeted 80% capacity utilization mark (identified as a goal of the Department of Commerce for both the domestic steel and aluminum sectors).

Despite the CIT ruling, the AIIS said it will appeal. In addition, a bipartisan bill addressing the authority over Section 232 is likely coming down the pipeline, as indicated by a release by Sen. Chuck Grassley (R-Iowa), who chairs the Senate Finance Committee.

“The U.S. Constitution gives Congress alone the job of regulating commerce with foreign nations,” Grassley said in a prepared statement. “During the height of the Cold War, Congress delegated sweeping power to the executive branch to adjust imports on the basis of national security. That was understandable given the era, but the benefit of time and experience has proven our Founders right in tasking Congress with authority over tariffs.

“Congress should take back some of this delegation of its Constitutional authority and rebalance trade powers between the two branches in a responsible way that doesn’t impede a president’s ability to protect America’s national security. I would like to work with the Ranking Member and my colleagues to find a path forward that can receive broad, bipartisan support.”

Around the World

Elsewhere, Italy’s crude steel production fell 2.7% to 2.0 million tons, while France produced 1.2 million tons of crude steel (down 0.3%) compared to February 2018. Spain’s production rose 2.5% to 1.1 million tons.

Ukraine’s production rose 5.0% to 1.7 million tons, while Brazil’s fell 1.7% to 2.7 million tons.

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Turkey’s steel sector continues to struggle, as it remains subject to double the standard Section 232 steel duty and is also impacted by the E.U.’s recently approved steel safeguards. Turkey’s crude steel production fell 12.5% in February, down to 2.6 million tons.