Articles in Category: Ferrous Metals

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This morning in metals news, despite a recent detente, the U.S announced it would continue trade actions against China; Canada launched a dumping investigation of steel imports from China, Vietnam and South Korea; and China’s Chinalco gets closer to equaling rival Hongqiao in production with a recent deal.

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U.S.-China Trade Relationship Steps Back From Recent Truce

The U.S. announced it would continue trade actions against China, Reuters reported.

According to the report, the U.S. plans to announce by June 15 a list of approximately $50 billion in Chinese goods that will be subject to a 25% import tariff.

Canada Launches Dumping Probe

Sticking with the China theme, Canada announced that it has launched a dumping inquiry of Chinese steel imports (in addition to Vietnam and South Korea), Reuters reported.

The inquiry will seek to determine if cold-reduced flat-rolled sheet products of carbon steel have harmed Canadian industry, according to the report.

Chinalco Closes in on Hongqiao

The state-owned Chinalco inked a deal with the Yunnan government to increase its smelting capacity, a move that will bring it closer to equaling top producer Hongqiao, Reuters reported.

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According to the report, Yunnan Metallurgical Group will be merged into China Copper Co, a joint venture between Chinalco and the Yunnan provincial government.

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According to a World Steel Association report on Friday, global crude steel production in April was up 4.1% compared with April 2017.

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The 64 countries reporting to the World Steel Association produced 148.3 million tons (MT) in April.

According to the report, China’s crude steel production for April 2018 was 76.7 MT, up 4.8% compared to April 2017. Japan, meanwhile, hit 8.7 MT, down 0.4% from April 2017.

India hit 8.7 MT, up 5.6% compared to April 2017. South Korea’s crude steel production, was also up, by 7.1% to 5.9 MT last month.

Domestically, the U.S. produced 6.9 MT of crude steel in April 2018, up 3.6% from April 2017.

Within the European Union (E.U.), Italy hit 2.1 MT of crude steel, up by 3.7%. France produced 1.4 MT of crude steel, up by 10.7%. Spain produced 1.3 MT of crude steel, up by 7.5%.

Brazil’s production rose 1.9% to 3.0 MT, while Ukraine saw a 6.0% increase up to 1.7 MT.

Production in Turkey was down for the month, dropping 3.1% to 3.0 MT.

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The global crude steel capacity utilization rate was up 2.4 percentage points from April 2017, at 76.9% for April 2018.

Source: World Steel Association

Steelmakers’ fortunes are up, and for that we should all rejoice; an industry fighting bankruptcy or suffering long-running losses is not an industry that invests in its products or services.

But questions remain about how long the current run of good fortune will continue for Western steelmakers.

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Source: Financial Times

Posting Profits

On the plus side ArcelorMittal has just posted its best quarter since 2011 with EBITDA quarterly core profits rising 17% year on year to $2.5 billion for the January-March period.

Analysts quoted in the Financial Times put the recovery down to rounds of cost-cutting and efficiency instigated after the downturn of 2015-16. Rising global GDP and, hence, demand has built on these improvements to raise prices for steelmakers and, in particular, the delta between raw material costs and finished steel prices, lifting profitability to the highest in a decade.

Source: Financial Times

ThyssenKrupp of Germany posted a tripling of half-year earnings on the back of better sales prices and reduced losses, having offloaded its South American slab mill to Siderúrgica do Atlântico (CSA) and its Calvert, Alabama carbon and stainless mills to ArcelorMittal/Nippon Steel and Outokumpo, respectively.

Some would argue it got out at the bottom of the market and would have lost less if it had held on for a better price when the market turned, but both plants were making losses and ThyssenKrupp was under pressure from shareholders to turn the group around.

ThyssenKrupp is not alone — many steel mills have demerged, shuttered, divested or otherwise re-structured in order to focus on their more profitable opportunities in recent years and are reaping the benefits.

Eyes on Chinese Exports

However, the extent to which this happy state of affairs can continue lies, at least in part, in China.

As the Financial Times points out, a combination of industrial reform in China and positive profit margins has lifted steelmakers’ focus on the domestic market and reduced exports. From a peak of 110 million tons in 2015, China’s steel exports have shrunk by one-third to 73.3 million tons in 2017. The Financial Times credits this restriction of supply as helping restore a sense of balance to the steel market, which is reflected in regional price rises in Europe and North America.

There remains dispute about the depth and speed of the steel market restructuring program in China, but even if it is not as radical as the authorities claim it has contributed to sentiment and supported prices. The questions the Financial Times poses is thus: how long will this new balance last and, with prices falling in China, will exports rise later this year?

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Making Moves

An indication of European concern is a new registration program started just this month that requires importers to register all incoming shipments by origin, value and tariff code.

At present, there is no requirement for a license or any cases of approval not being given, but many see it as a first step to Brussels more closely monitoring steel (and aluminum) imports from China, Russia, etc., with a view to introducing quotas or tariffs if volumes rise.

For once, Brussels can be said to be ahead of the game.

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This morning in metals news, the E.U. opened a new steel investigation, turnover at Russian aluminum giant Rusal and Novelis announces a major investment.

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E.U. Investigates Chinese Steel

According to Reuters, the E.U. has launched a new investigation of Chinese hot-rolled steel sheet piles coming into Europe.

The E.U. already has 17 anti-dumping or anti-subsidy measures in place on various forms of steel, according to the report.

Rusal CEO, Directors Quit

The Russian aluminum firm, recently in the news for being one of the Russian companies hit with U.S. sanctions, announced Thursday that its CEO and seven of its directors have stepped down, according to a CNN report.

According to the report, Rusal’s stock was up 7% after the announcement, but is still down significantly from its level before the U.S. sanctions were announced.

Novelis Plans New Investment in China

American aluminum firm Novelis announced it plans to invest $180 million to augment its Chinese automotive body sheet capacity, Reuters reported.

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Per the report, the investment would lead to an additional 100,000 tons of capacity at the firm’s Changzhou plant.

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This morning in metals news, U.S.-China trade talks have led to a tenuous truce, Nippon Steel says strong demand is easing the blow of the U.S.’s steel tariff, and shares of US Steel and AK Steel dropped on the heels of the latest developments in the U.S.-China trade talks.

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Trade Truce

On the heels of a visit from Chinese trade officials to Washington late last week, Treasury Secretary Steven Mnuchin over the weekend announced the two countries had reached somewhat of a truce, for now.

Of course, the longevity of that truce remains in question. According to the Washington Post, Mnuchin said on Monday that the president could still impose tariffs on Chinese goods if a deal can’t be reached to scale back the U.S. trade deficit with China.

Nippon Says Demand Working to Lessen Blow of U.S. Tariffs

Japan’s Nippon Steel & Sumitomo Metal Corp said strong demand for steel has cut the impact of the U.S.’s import tariff on the metal, according to a Reuters report.

“There has been no major impact from the U.S. tariffs thanks to solid global demand,” Katsuhiro Miyamoto, Nippon Steel executive vice president, told Reuters.

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US Steel, AK Steel Shares Down After China Truce Announcement

Shares of US Steel and AK Steel fell 1.1% and 2.6%, respectively, in premarket trade Monday, according to MarketWatch. The drop came on the heels of the weekend’s announcement regarding a truce between the U.S. and China on trade.

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Even as news came in late last week that some of India’s biggest steelmakers were set to expand production after reporting solid quarterly earnings amid strong steel prices, well-known research agency CRISIL has said in a report that resolution of stressed steel assets – those that are bankrupt – will “alter” the Indian steel sector irrevocably.

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Steel companies with about 22 million tons (MT) of crude steel capacity have been referred to the National Company Law Tribunal (NCLT) in the first round of the stressed assets resolution process by India’s apex bank, the Reserve Bank of India (RBI).

The CRISIL research report said the resolution of these cases would alter India’s steel sector landscape in three ways:

  • Over half of steel sector’s outstanding debt would stand resolved
  • About a fifth of India’s crude steel capacity held by these companies will move to stronger hands, resulting in better working capital and liquidity management (which, in turn, would lead to improving utilization levels)
  • The flat steel segment would consolidate further and be controlled by fewer players – both domestic and global

“For acquirers of these assets, apart from attractive product portfolios & locational advantages, these assets also offer easy scalability,” said Prasad Koparkar, senior director of CRISIL Research. “The 22 MT of capacities under resolution have brownfield expansion potential of another 20-21 MT – based on their environment clearance and regulatory filings.”

India’s flat steel market is dominated by six players that account for 85% of the capacity, with the rest being distributed between smaller players and re-rollers. Of the six, three are currently part of the NCLT I resolution process.

Many, as reported by MetalMiner earlier, were being eyed by large domestic and international steelmakers for expansion or entry strategies.

The CRISIL report further claimed that based on various acquisition scenarios, the flat steel market in India was expected to consolidate further from the current scenario — of 85% being controlled by six players — to three or four players.

Already, India’s biggest steelmakers, such as JSW Steel Ltd., posted record net income last Wednesday and outlined a $6 billion plan to raise output. Tata Steel Ltd., which aims to double domestic capacity, swung to profit, helped by a one-time gain. Both are ramping up to meet an anticipated surge in domestic consumption, with the government set to spend trillions of dollars on expanding infrastructure.

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The Bloomberg report said JSW has forecast Indian steel consumption to rise by about 7.5% in the 2019 financial year.

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This morning in metals news, we updated our China MES page on market-economy status, steel production dropped in the Great Lakes region and the White House still hopes for a deal on the North American Free Trade Agreement (NAFTA) before the Thursday deadline.

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China and Market-Economy Status (MES)

MetalMiner originally published its China MES (Market Economy Status) page in 2016, covering everything about the years following China’s accession to the World Trade Organization (WTO) and its ensuing quest to receive all-important market-economy status.

As you probably know, a lot has happened since 2016 on the U.S.-China trade front, particularly since Donald Trump’s election as president. So, we updated the comprehensive page to cover recent developments, including the Section 232 and Section 301 probes, not to mention the recent back-and-forth threats of major tariffs on goods.

You can check out the updated page here.

Great Lakes Steel Production Falls

Steel production in the Great Lakes region last week fell 2.23% compared with production the previous week, according to American Iron and Steel Institute (AISI) data reported by the Northwest Indiana Times.

Production in the region last week amounted to 655,000 tons, according to the report.

Looking For a Deal

Despite a fast-approaching Thursday deadline, the U.S. is still hopeful it can reach a deal on renegotiating NAFTA with partners Canada and Mexico.

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White House Press Secretary Sarah Sanders told Fox News, as quoted by Reuters: “We still want to see something happen and we’re going to continue in those conversations. They’re ongoing now and we’re pushing forward and hopeful that we can get something done soon.”

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This morning in metals news, the deadline for Section 232 tariffs exemptions for certain countries falls tonight at midnight, AK Steel’s stock is up and the LME copper price tracked up Monday.

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Tariff Exemption Expiration Approaches

Several countries negotiated temporary exemptions from the Trump administration’s Section 232 tariffs on steel and aluminum (imposed last month). Canada, Mexico, Argentina, Australia, Brazil and the E.U. won temporary exemptions. South Korea also won a temporary exemption, which eventually became a long-term exemption after the progression of talks on the U.S.-Korea Free Trade Agreement (KORUS).

The key term there is “short term” — the deadline for the expiration of that exemption falls at midnight tonight.

Naturally, the E.U. and others are scrambling to win long-term exemptions before the tariffs hit their metal exports.

“For the time being our priority is the ongoing high-level dialogue to secure a permanent exemption,” said Cecilia Malmstrom, the E.U. trade commissioner, as quoted by the BBC.

AK Steel Stock Rises

After AK Steel reported better-than-expected Q1 financials, its stock jumped 2.3%, according to a MarketWatch report.

According to the report, the company expects market conditions to strengthen in Q2.

Copper, Aluminum Up

LME copper and aluminum rose on Monday, Reuters reported, as the U.S. dollar fell back from a recent three-month high.

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Despite light trade Monday, according to the report, LME copper rose 0.4%, while aluminum was up 0.1%.

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This morning in metals, steel mills in China’s second-biggest steelmaking province are shutting down, U.S. Steel reports its Q1 financials and Ecuadorian officials are engaging in talks to potentially bring a copper refinery to the country.

Chinese Mills Shut Down in Pollution-Curbing Measure

Several steel mills in the Chinese city of Xuzhou have been shut down in a pollution crackdown effort, Reuters reported.

According to the report, at least three mills have been shut down until they meet anti-pollution rules.

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The three mills have a combined annual steel capacity of 4.25 million tons, according to the report.

U.S. Steel Brings in $18M in Q1

U.S. Steel made $18 million in Q1, the Northwest Indiana Times reported, a far cry from the $180 million loss it posted in Q1 2017.

According to the report, U.S. Steel reported its stronger balance sheet was aided by investment at its mills in addition to the Section 232 measures from the Trump administration last month.

Potential Copper Refinery in Ecuador

According to a Bloomberg report, Ecuadorian officials are in talks with foreign companies with respect to building a copper refinery in the country.

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According to the report, Rebeca Illescas, the Ecuadorian mining minister, said Chinese and Japanese companies might be interested in the project, in addition to Glencore.

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This morning in metals, steel imports rose in March, global steel output was also up in March and miner Antofagasta reported a 10.5% drop in production in Q1.

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U.S. Steel Imports Jump in March

Citing U.S. Census Bureau data, the American Iron and Steel Institute (AISI) reported the U.S. imported a total of 3,327,000 net tons (NT) of steel in March 2018, including 2,480,000 net tons (NT) of finished steel (up 34.2% and 23.0%, respectively, vs. February final data).

Through three months of 2018, total and finished steel imports are 8,690,000 and 6,831,000 net tons (NT), down 3.0% and 1.7%, respectively, vs. the same period in 2017.

The finished steel import market share was an estimated 26% in March, up from the estimated 25% in the year to date.

Global Steel Output Rises 4% in March

The world produced more steel in March, Reuters reported.

Global steel output rose 4% last month, powered by lifted winter cuts in China and U.S. steel producers enjoying a post-Section 232 boost, Reuters reported.

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Antofagasta Production Slides in Q1

Miner Antofagasta, which operates primarily in Chile, announced its Q1 production dropped 10.5%, Reuters reported.