Articles in Category: Ferrous Metals


This morning in metals news, steel production in China could be at a peak, Tesla missed its Model 3 weekly production target and U.S. steel capacity utilization hit 79.2% last week.

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Steel Peak

According to a Bloomberg report, China is at peak steel this year, with a decline in production forecasted for next year.

The report cites studies by the Australian government, the world’s top iron ore producer.

Hitting the Brakes

Tesla has missed its weekly production target for its Model 3, Reuters reported, and cited tariffs for its struggles in the Chinese market.

However, the maker of electric vehicles produced 80,000 vehicles in Q3, according to the report.

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Capacity Utilization Rate Hits 79.2%

The U.S. steel capacity utilization rate hit 79.2% for the week ending Sept. 29, according to an American Iron and Steel Institute (AISI) report.

Year-to-date production is up 4.5% compared with the same time frame in 2017.

MetalMiner’s Take: U.S. steel capacity utilization rate seems to be increasing, reaching 79.2% at the end of September.

In 2017, capacity utilization rate for the same week was 73.4%. An increasing capacity utilization rate is driving lower steel imports in the U.S., which fell 1% from July to August.

Higher domestic production may move domestic steel prices lower. Supply concerns are easing; however, the potential ArcelorMittal disruption could create uncertainty again and move domestic steel prices higher.

In recent years China’s steel sector — particularly the large, state-owned steel mills — have benefited from the enforced closure of capacity on environmental grounds during the winter heating season.

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Contrarian as it may at first sound, closure of private mills largely — on the basis they are unregulated  and are supposedly the most polluting steel mills — was a boost to larger competitors.

About 140 million tons of “illegal” production was closed last year, Reuters reports, only for capacity to be further restricted by Beijing’s war on smog during the winter heating season. The forced closure of steel mills in 26 cities around Beijing and Tianjin hit national output, accordig to the report, contributing to a year-on-year contraction in output during November and December last year.

Demand, however, remained buoyant. As a result, prices rose and exports, the relief valve for excess capacity, fell.

Source: Reuters

It should be no surprise that steel mills in the rest of the world all benefited from less competition and, as a result, higher prices (long before America’s 25% steel import tariffs lifted prices further). Indeed, cumulatively, strong domestic demand and state meddling on environmental grounds have allowed China’s steel sector to make good money and focus on the buoyant domestic market for the last two years.

That may be about to change.

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This morning in metals news, the U.S. and Canada have reached a deal on the North American Free Trade Agreement (NAFTA) after several weeks of talks, Secretary of Commerce Wilbur Ross said the steel and aluminum tariffs on Canada and Mexico will remain in place, and copper prices are down on account of perceived drops in Chinese demand.

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Just in Time

In before a Washington-imposed deadline, Canada and the U.S. reached a deal on NAFTA late Sunday, which would keep the deal a trilateral arrangement (the U.S. and Mexico reached a preliminary agreement in August). The new deal is being called the United States-Mexico-Canada Agreement (USMCA).

“Late last night, our deadline, we reached a wonderful new Trade Deal with Canada, to be added into the deal already reached with Mexico,” President Donald Trump tweeted. “The new name will be The United States Mexico Canada Agreement, or USMCA. It is a great deal for all three countries, solves the many … deficiencies and mistakes in NAFTA, greatly opens markets to our Farmers and Manufacturers, reduces Trade Barriers to the U.S. and will bring all three Great Nations together in competition with the rest of the world. The USMCA is a historic transaction!”

United States Trade Representative Robert Lighthizer and Canadian Foreign Affairs Minister Chrystia Freeland released a joint statement on the deal.

“Today, Canada and the United States reached an agreement, alongside Mexico, on a new, modernized trade agreement for the 21st Century: the United States-Mexico-Canada Agreement (USMCA). USMCA will give our workers, farmers, ranchers and businesses a high-standard trade agreement that will result in freer markets, fairer trade and robust economic growth in our region.  It will strengthen the middle class, and create good, well-paying jobs and new opportunities for the nearly half billion people who call North America home.

“We look forward to further deepening our close economic ties when this new agreement enters into force.

“We would like to thank Mexican Economy Secretary Ildefonso Guajardo for his close collaboration over the past 13 months.”

Among the hangups for the U.S. in talks with Canada were dairy tariffs; however, the deal offers good news for U.S. dairy farmers, as it gives the U.S. greater access to the Canadian market.

Metals Tariffs Staying in Place

Even after the U.S. and Mexico reached their preliminary deal in August, questions remained regarding the U.S.’s Section 232 metals tariffs and whether they would remain in place with respect to Mexico (and Canada).

According to Secretary of Commerce Wilbur Ross, the new NAFTA — or USMCA, as it’s being called — will not result in the removal of the tariffs. Canada and Mexico initially had temporary exemptions to the steel and aluminum tariffs, but the exemptions were eventually allowed to expire June 1.

“There are problems specific to steel and aluminum relating to our national defense, and at this point of time, those stay the same,” Ross told Fox Business Network, as quoted by MarketWatch.

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Copper Slides on China Demand

Copper prices dropped on some not-so-positive news regarding Chinese demand, Reuters reported.

MetalMiner’s Take: A stream of bearish news out of China is having its impact on commodity prices.

For example, copper has shown weakness despite evidence from falling LME inventory that demand outside China remains firm.

Through the first five months of this year, China’s fixed-asset investment — a core driver of Chinese growth that includes spending on new buildings, machinery and infrastructure — grew at its slowest annual pace since at least 1995. Retail sales, an indicator of consumer demand, also increased at their slowest pace since 2003.

Investors are taking multiple data points indicating weakening demand and extrapolating slowing copper demand in the world’s largest consumer. Whether they are right depends in large part on the outcome of the current trade war with the U.S., to which an early resolution seems unlikely.

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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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This morning in metals news, copper and aluminum prices drop, Japanese steel exports fall and the U.S. and Canada still remain without a new deal vis-a-vis North American Free Trade Agreement (NAFTA) renegotiation efforts.

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Copper, Aluminum Prices Fall on Scaledown of China’s Winer Cuts

Copper and aluminum prices were both down Friday, partially stemming from news in China regarding its regimen of winter capacity cuts (aimed at reducing rampant pollution in the country).

According to Reuters, China’s decision to shy away from blanket winter cuts saw to a drop in copper and aluminum prices.

MetalMiner’s Take: LME copper prices decreased slightly this week.

However, LME copper prices have shown strength in September. Copper prices breached the $6,000/mt ceiling, back to July levels.

Meanwhile, LME aluminum prices traded more sideways this month.

China’s environmental curbs may create upward movement for the base metal, despite the decrease SHFE aluminum showed yesterday.

Winter cuts may reduce aluminum availability in a supply-concerned market.

Japan’s Steel Exports Drop

Japan’s August steel exports were down 0.9% compared with August 2017, according to S&P Global Platts.

However, exports were up 3.9% compared with July totals, according to the report.

NAFTA Standstill Continues

The U.S. and Canada have continued without having reached a deal on NAFTA, a month after the U.S. touted a preliminary deal with Mexico.

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According to Reuters, the U.S. plans on releasing the text of its trade agreement with Mexico, one that largely excludes Canada, according to lawmakers briefed on the text Thursday.

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This morning in metals news, U.S. steel imports fell in August, the Federal Reserve raised interest rates again and Ford’s CEO says the Trump administration’s metals tariffs have cost the automaker $1 billion in profits.

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Finished Steel Market Share Hits 21% in August

According to an American Iron and Steel Institute (AISI) report citing Census Bureau data, U.S. imports of finished steel fell 1% in August from July.

The U.S imported 2,966,000 net tons in August.

Meanwhile, finished steel import market share reached 21% in August, down from the year-to-date mark of 24%.

Raising Rates

The Federal Reserve announced another interest rate hike this week, Reuters reported.

“In view of realized and expected labor market conditions and inflation, the Committee decided to raise the target range for the federal funds rate to 2 to 2-1/4 percent,” the Fed said in a prepared statement.

“Information received since the Federal Open Market Committee met in August indicates that the labor market has continued to strengthen and that economic activity has been rising at a strong rate,” the statement added. “Job gains have been strong, on average, in recent months, and the unemployment rate has stayed low. Household spending and business fixed investment have grown strongly. On a 12-month basis, both overall inflation and inflation for items other than food and energy remain near 2 percent. Indicators of longer-term inflation expectations are little changed, on balance.”

MetalMiner’s Take: As expected, the Fed raised its range for the federal funds rate by 25 bps from 2% to 2.25% during its meeting yesterday, confirming more of the same is on the way.

Most expect that to mean another rate hike in December, followed by three more next year, and possibly one increase in 2020. The increase strengthened the dollar against all major currencies and sent a shiver through emerging-market currencies, while Wall Street reacted with a fall.

Going forward, a stronger dollar remains broadly bearish for commodity prices but is expected to have little impact on a relentless oil price, which continues to remain firmly in bull territory.

Ford CEO Says Metals Tariffs Cutting Into Profits

Many companies have issued statements claiming the Trump administration’s metals tariffs have had a negative impact on profits — Ford CEO Jim Hackett was among the latest to make the claim.

During a Bloomberg conference this week, Hackett said the metals tariffs have cost the automaker approximately $1 billion in profits.

“From Ford’s perspective the metals tariffs took about $1 billion in profit from us,” Hackett was quoted as saying by Reuters. “The irony of which is we source most of that in the U.S. today anyway. If it goes on any longer, it will do more damage.”

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MetalMiner’s Take: Many companies found themselves “covered” for 2018, particularly when they placed long-term buys earlier in the year. However, as 2019 contract negotiation season has fully commenced, buying organizations are seeing price increases not only for the semi-finished materials that they buy but also for the parts they purchase that contain metal. Though most major automotive OEMs negotiate steel and aluminum pricing using should-cost models and clean-sheeting (and likely did so well in advance of Section 232), producers and mills will still be looking to capture price increases next year compared to 2018 levels.

The real challenge for automotive OEMs, on the other hand, is having the visibility into the cost impact on the multi-tiered supply chains — here the OEMs may struggle to manage and help suppliers mitigate rising part prices.

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This morning in metals, the U.S. Census Bureau reported figures for August steel imports, Japanese aluminum consumers are looking to scrap and universities in the U.K. are conducting testing in the hopes of producing “greener” steel.

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U.S. Imports 2.7M Metric Tons of Steel in August

The U.S. Census Bureau reported Wednesday the U.S. imported 2.7 million metric tons of steel in August. The imports came in at a value of $2.5 billion.

The August total compares with the $2.6 billion valuation of July steel imports.

Scrap That

According to an S&P Global Platts report, scrap metal has become more appealing for Japanese consumers of aluminum.

According to the report, declining scrap prices have widened the scrap-primary spread and have pushed consumers toward the former.

Green Steel

Cheap and green steel … what’s not to like?

According to the BBC, universities in the U.K. are conducting testing to produce steel more cheaply and in a greener fashion.

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The BBC reports Swansea and Warwick universities, along with Tata Steel, have secured £7 million in funding to conduct new tests on limited quantities of new steel types.


According to a World Steel Association report, global crude steel production in August was up 2.6% compared with production in August 2017.

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The 64 countries reporting production to the World Steel Association produced a total of 151.7 million tons in August, according to the report. Global production reached 147.9 million tons in August 2017.

China produced 80.3 million tons in August, up 2.7% from August 2017 (when it was 78.2 million tons). Chinese production growth has been on the decline since May, when it hit 8.9%. Chinese production growth was up 7.2% year over year in July.

Meanwhile, India saw its production rise 3.7% year over year, up to 8.8 million tons.

The U.S. produced 7.5 million tons of crude steel in August 2018, marking an increase of 5.1% compared to August 2017.

Japan produced 8.8 million tons, marking a 0.9% year-over-year increase. South Korea hit 6.1 Mt, holding flat from August 2017.

As for Europe, Spain’s production hit 1.2 million tons, up 6.6%. Italy’s production rose 6.0% to 1.2 million tons. France’s crude steel production was 0.9 million tons, marking a 16.8% year-over-year decline.

Turkey’s crude steel production hit 3.0 million tons, down by 5.7%.

Eyes on Overcapacity

On the overcapacity front, as we noted Monday, steel-producing nations met in Paris last week to discuss strategies to curb global overcapacity.

During the Global Forum on Steel Excess Capacity, nations discussed the way forward, continuing a dialogue on a subject after the November 2017 meeting in Berlin.

In addition, a European Commission went after the U.S., calling its Section 232 tariffs “unjustified.”

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“The EU currently has an unprecedented number of trade defence measures in place targeting unfair imports of steel products, with a total of 53 anti-dumping and anti-subsidy measures,” the statement said. “The EU has also activated all legal and political tools at its disposal to fight unjustified US 232 measures.”

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Overcapacity was the word of the day at the Global Forum on Steel Excess Capacity last week.

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The forum, which took place Sept. 20 in Paris, brought together the world’s biggest steel-producing nations.

“The global challenge of overcapacity has strained trade relations and the global trade architecture to its breaking point,” E.U. Trade Commissioner Cecilia Malmström said. “Progress in this Forum at this sensitive time demonstrates that multilateral cooperation is not only possible, but that it is actually the best tool to tackle global challenges. Putting this agreed package in place is something that the European Union will now follow closely. Our workforce and our industry depend on these commitments being carried out.”

Vice-President for Jobs, Growth, Investment and Competitiveness Jyrki Katainen added: “This sends a clear message: we will not repeat the costly mistakes of the past, and must tackle excess capacity and its root causes to avoid dire social, economic, trade and political consequences in the future. This will protect growth and jobs in an efficient, sustainable EU steel industry. A lot of work lies ahead though and all members of the Global Forum will have to continue implementing their commitments resolutely and report to G20 Leaders.”

The Paris meeting built on last year’s meeting in Berlin, during which members agreed to embark on a package of reforms to address global steel overcapacity.

According to the European Commission statement, the members will assess subsides contributing to overcapacity by the end of the year and “identify further reductions to be taken” in 2019.

In other steel news, the European Commission statement refers to the U.S.’s Section 232 tariffs, which impact steel and aluminum, calling them “unjustified.”

While a select few countries have negotiated exemptions and quotas with respect to the tariffs, the E.U. remains subject to the tariffs.

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“The Commission has acted among others through trade defence, imposing antidumping and anti-subsidy duties, to shield the EU’s steel industry from the effects of unfair trade,” the release stated. “The EU currently has an unprecedented number of trade defence measures in place targeting unfair imports of steel products, with a total of 53 anti-dumping and anti-subsidy measures. The EU has also activated all legal and political tools at its disposal to fight unjustified US 232 measures.”

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This morning in metals news, the Office of the United States Trade Representative (USTR) dished out criticism for a global steel forum and its efforts toward curbing excess steel capacity, Chinese steel rebar prices are up and Walmart warns tariffs could result in price increases.

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USTR Criticizes Global Steel Forum

Following the Global Forum on Steel Excess Capacity ministerial meeting held in Paris yesterday, the USTR released a statement questioning the forum’s efficacy in efforts to curb global steel capacity.

“The United States thanks Argentina for its chairmanship of the Global Forum and for its efforts to achieve meaningful outcomes from the Forum process this year,” the statement begins. “The United States has been an active and committed partner in this process, working to seek prompt implementation of the Forum’s past policy recommendations, which are aimed at reducing excess capacity as well as restoring balance and market function in the global steel sector.”

However, the USTR argued the forum has not done enough to realize its goals.

“Unfortunately, what we have seen to date leaves us questioning whether the Forum is capable of delivering on these objectives,” the statement continued. “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.”

Chinese Rebar Prices Rise

Chinese construction steel rebar prices were up Friday, according to a Reuters report.

According to the report, the most-active contract on the SHFE rose 0.1% on Friday.

Walmart Warns of Price Increases as a Result of Tariffs

On the heels of Washington’s announcement this week of the forthcoming imposition of tariffs worth $200 billion on imports of Chinese goods, Walmart wrote a letter to USTR Robert Lighthizer warning that it may have to raise prices, Reuters reported.

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According to the report, the letter cited products which could be hit with price increases, which included gas grills, bicycles and Christmas lights.