Articles in Category: Ferrous Metals

The Raw Steels Monthly Metals Index (MMI) came in at 76 this month, a 5% drop, after several months of sideways movement and a May reading of 80.

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U.S. steel prices formed a clear downward price trend. A mix of factors led to the weakness: sluggish demand, companies working off inventory and macroeconomic uncertainty.

Source: MetalMiner data from MetalMiner IndX(™)

Even plate prices dropped this month after stubbornly sticking at around $1,000/st for a lengthy stretch after rising longer term. This month the price dropped by nearly 7%, from $962/st at the start of the month to $902/st in early June.

Similarly, the Chinese economy has shown weakness lately in steel-intensive sectors. However, government stimulus measures still generally kept HRC prices supported, with some weakness in the other form of flat-rolled products.

Recently, the China Caixin Manufacturing PMI held flat for the May reading, but the industrial and manufacturing production readings both declined by several points.

Source: MetalMiner data from MetalMiner IndX(™)

Meanwhile, U.S. steel prices dropped more steeply than Chinese prices, which edged down slightly this month. Looking at a price comparison of U.S. and Chinese HRC prices, the price gap continues to close.

Source: MetalMiner data from MetalMiner IndX(™)

The chart above shows the spread between U.S. and Chinese prices dropped to just over $100/st. In December, the price gap held at over $300/st, so U.S. products look more affordable based on a greater price drop, while Chinese prices stayed relatively flat.

What This Means for Industrial Buyers

Plate prices finally dropped this month, joining HRC, CRC and HDG in a downward price trend.

Given the shifting price dynamic, industrial buying organizations seeking more pricing guidance should try a free two-month trial of our Monthly Metal Buying Outlook report.

Buying organizations will want to read more about our longer-term steel price trends in our free Annual Outlook.

Actual Raw Steel Prices and Trends

This month U.S. prices registered the largest price drops in the index with the U.S. Midwest HRC futures spot price down 11.3% to $580/st and the 3-month price down 10.4% to $586/st. U.S. shredded scrap prices dropped 8.1% to $295/st.

Korean standard scrap steel prices fell by 6.8% to $127/st. Korean pig iron prices fell by 1.2% to $333/st.

Chinese steel slab prices were down by 5.9% to $489/st and steel billet dropped by 3.2% to $482/st.

Chinese iron ore PB fines for both high- and low-priced 58% Indian iron ore dropped by 2.4%, both at $59 per dry short ton.

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Chinese coking coal prices increased this month by 1.6% to $278/st, the only price in the index to increase this month.

The Stainless Steel Monthly Metals Index (MMI) dropped two points again this month, now down to 67. The index stayed relatively flat during the past few months since jumping in February from 61 to 68.

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Several prices in the index dropped significantly this month. Most prices declined more moderately, in the 1% to 3% range, with a couple of prices holding steady.

Source: MetalMiner analysis of FastMarkets

The LME nickel price declined 2.5% between May and June. During the first week of June, LME nickel prices dropped further but still managed to hold above $11,600/mt as of press time.

According to the International Stainless Steel Form (ISSF), stainless steel melt shop production increased by 5.4% to 50.7 million metric tons in 2018, up from 48.1 million metric tons in 2017. The organization forecasts continued growth in 2019.

In 2018, China accounted for 52.6% of global stainless steel production, according to ISSF. The U.S., meanwhile, accounted for 5.5% of global production. In absolute terms, the United States produced approximately 2.8 million tons of stainless steel last year, including slab and ingots.

Nickel pig iron production from China and Indonesia will increase in 2019, as it did during 2017 and 2018, which will contribute to lower prices, according to ISSF.

As reported by Reuters, the nickel market deficit narrowed during the first two months of the year, dropping to 5,700 metric tons from 24,400 metric tons during the same period of 2018.

However, LME and SHFE nickel stocks remain at historically low levels.

Domestic Stainless Steel Market

Source: MetalMiner data from MetalMiner IndX(™)

Stainless steel surcharges gave up some of their recent gains but still remain higher than at the start of the year.

Prices also remain higher from a longer-term perspective when compared with 2016 lows of around $0.40 per pound for 316/316L-Coil and $0.32 per pound for 304/304L-Coil. Nickel ore prices remain lower, causing the recent price weakness.

What This Means for Industrial Buyers

Like other steel prices, stainless steel prices showed weakness this month, following from weaker global demand combined with lower input prices.

For buying guidance, including resistance and support levels by metal, industrial buying organizations seeking more pricing guidance should try a free two-month trial of our Monthly Metal Buying Outlook report.

Buying organizations will want to read more about our longer-term steel price trends in our free Annual Outlook.

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Actual Stainless Steel Prices and Trends

This month, Chinese non-ferrous FeCr lumps decreased by 12.5% to $1,644/mt, the largest drop in the index.

The 316 Allegheny Ludlum stainless surcharge fell from $0.95/pound to $0.89/pound this month, a 6.3% decrease. The 304 Allegheny Ludlum Surcharge dropped back to $0.61/pound from $0.68/pound last month, a 7.8% decrease.

Chinese primary nickel decreased by 4.9% to $14,057/mt.

China 304 CR coil dropped 3.5% to $2,158/mt.

The remaining price declines ranged between 1.0% and 3.0%.

The exceptions were Indian primary nickel, up by 0.9% to $12.52/kilogram, and Chinese non-ferrous FeMo lumps, with flat pricing this month at $17,956/mt.

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This morning in metals news, U.S. steel import permit applications dropped last month, the Trump administration’s Section 232 aluminum tariff left its mark on operations at the Port of Oswego and the Trump administration released a new strategy that aims to ensure a reliable supply of critical minerals.

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Steel Import Permit Applications Drop in May

Steel import permit applications fell 10.8% in May compared with April, the American Iron and Steel Institute (AISI) reported.

By country, the largest finished steel import permit applications for offshore countries were: South Korea (296,000 NT, up 8% from April preliminary), Japan (123,000 NT, down 22%), Germany (77,000 NT, down 46%), Taiwan (76,000 NT, up 8%) and Vietnam (60,000 NT, down 24%).

Oswego Impact

Last month, the Trump administration lifted its Section 232 tariffs with respect to imports of steel and aluminum from Canada and Mexico — but the impact of the tariffs was still felt throughout the year since their implementation.

One such community that felt the impact was Oswego, New York, and its port, WRVO Public Media reported. According to the report, aluminum shipments into the port are down 50% this year, resulting in job cuts at the port, according to the director of the Oswego Port Authority.

Critical Minerals Strategy

This week, the Trump administration unveiled a report titled “A Federal Strategy to Ensure a Reliable Supply of Critical Minerals.

“The strategy directs the U.S. Department of the Interior (DOI) to locate domestic supplies of those minerals, ensure access to information necessary for the study and production of minerals, and expedite permitting for minerals projects,” a Department of the Interior release states.

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Last year, the DOI released a list of 35 minerals deemed critical to U.S. economy and security. According to the DOI, the U.S. relies on other counties for more than a dozen minerals, used in cellphones, automobiles, airplanes, ships and computers, the release states.

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A new government in India has steel companies and iron miners rushing to it with urgent pleas on iron ore mine auction.

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One appeal is for the government to auction iron ore mining licenses held by private miners when they expire in March 2020.

If that happens, it will come as a relief for India’s steel companies, as they will no longer have to rely on costly imports.

Mining leases of at least 59 iron ore mines with a total capacity of 85 MTY are set to expire March 31, 2020. These have a combined production capacity of around 60 MTY, but none of them has been put up for new auctions.

A few days ago, the Indian Chamber of Commerce (ICC), Associated Chambers of Commerce and Industry of India (Assocham) and the Chattisgarh Sponge Iron Manufacturers’ Association (CSIMA) sent off letters to NITI Aayog, India’s planning commission, and the mines ministry, making a case for mine auctions, Livemint reported.

Experts say production at non-integrated steel companies, which do not have access to captive iron ore resources, will be disturbed if the auctions were delayed any more, affecting even major steel companies like Rashtriya Ispat Nigam Ltd, Essar Steel and JSW Steel.

The letter to NITI Aayog by the ICC said accepting merchant miners’ request to extend their license till 2030 would mean a huge revenue loss by way of auction premium for the exchequer. It takes about two years for operations to restart once regulatory clearances are received.

For India’s iron ore miners, there’s new hope, however, given that international prices are over $100 a ton, the highest in five years, which means a restart in export of lower grades of ore from India.

The Indian province of Odisha has in excess of 100 million tons of inferior grade iron ore accumulated at mine heads, which nobody wants in India. Similar inventory is to be found in the province of Jharkhand. Both provinces account for over 80% of India’s accumulated iron ore stockpile, the Business Standard reported.

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In the recent past, export of iron ore failed to pick up, despite incentives. Miners are hopeful a supply disruption in Brazil and Australia will make global steelmakers look to source more iron ore from India.

Andrey Kuzmin/Adobe Stack

This morning in metals news, European steel sector leaders are asking the E.U. for action in the face of rising imports, the U.S. says China is playing the “blame game” and U.S. Commerce Secretary Wilbur Ross met with Mexico’s Secretary of Economy Graciela Márquez Colín.

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European Steel Sector Looks for Help

Amid challenging times for the European steel sector, steel chiefs there are asking the E.U. for help.

European steel sector leaders sent a letter to the E.U. asking it act, arguing the U.S.’s Section 232 steel tariff has resulted in an influx of diverted steel to the E.U., Reuters reported.

According to the steel sector leaders, E.U. steel imports have doubled since 2013.

Playing the ‘Blame Game’

The U.S. accused China of playing the so-called “blame game” in the two countries’ ongoing trade talks.

Despite auspicious signs, trade talks took a hit last month when President Donald Trump opted to raise tariffs on $200 billion in Chinese goods, after which China retaliated with tariffs on $60 billion in U.S. goods.

“The United States is disappointed that the Chinese have chosen in the ‘White Paper’ issued yesterday and recent public statements to pursue a blame game misrepresenting the nature and history of trade negotiations between the two countries,” the Office of the United States Trade Representative said in a release. “To understand where the parties are and where they can go, it is necessary to understand the history that has led to the current impasse.”

Another Front

Elsewhere, President Donald Trump recently threatened to impose an escalating tariff on all Mexican goods, beginning at 5%.

U.S. Commerce Secretary Wilbur Ross met with Mexico’s Economy Secretary Graciela Márquez Colín to discuss the issue.

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“Today, I met with Mexico’s Minister of Economy, Graciela Marquez, to discuss bilateral trade and United States’ upcoming plan to tariff Mexican goods at 5%,” Ross said in a release. “We also discussed next steps for the U.S.-Mexico-Canada Agreement. I reiterated the President’s message that Mexico needs to do more to help the U.S. address immigration across our shared border.”

The planned merger of Chinese behemoth Baowu Steel Group with a smaller rival is painted in rather dramatic terms, as if it is to be something that is feared.

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In practice, we should see this as a positive move.

The Financial Times reported this week that Baowu Steel Group is to buy a majority stake in smaller domestic rival Magang Steel as part of the state’s wider drive to close outdated capacity and merge the country’s fragmented steel sector — all part of the move to improve efficiencies and control.

The two companies had combined crude steel output last year of 87 million metric tons, the Financial Times reports, surpassing total U.S. steel output of 86.6 million tons. The combined group is only slightly behind the world’s No. 1 steelmaker, ArcelorMittal, which produced 92.5 million tons of crude steel in 2018.

Capacity of the merged group would be in the region of 90 million tons, making it likely that further acquisitions will see Baowu exceed ArcelorMittal at some stage in the not-too-distant future.

Beijing is actively encouraging state champions to absorb smaller rivals, as its plan is for the top 10 producers to account for some 60% of steel production (up from 35% now). In the process, Beijing can exert better control over the industry than it has managed in the past.

Baowu itself is the product of an earlier merger between Baosteel Iron & Steel and Wuhan Iron & Steel Corporation in 2016.

Baowu has a production target of 100 million tons by 2021. With standing capacity in the Chinese market said to be some 928 million tons while output was only 828 million tons last year, there is room for Baowu to achieve its target through acquisition of underperforming rivals.

The Chinese steel market is facing slowing demand and margins are weak – down 46% at Baosteel Iron & Steel, the Financial Times states – and widely reported to have already surpassed peak steel output.

The path from here on out will be based on consolidation, rationalization and better environmental controls  — all of which would be good for the wider global community.

A fragmented steel industry is less disciplined and more likely to seek local state support to maintain employment (while simultaneously dumping excess production on the world market).

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Consolidation improves the chances of a managed rationalization of facilities and output. It’s not guaranteed, of course, but it’s more accountable, with politically appointed and controlled management in place — prospects are improved where policy directives have failed in the past.

Zerophoto/Adobe Stock

This morning in metals news, Australian Prime Minister Scott Morrison said the country’s aluminum exports to the U.S. are fair, China’s Baowu Steel is acquiring a majority stake in rival Magang and the USTR announced an extension related to duties imposed on Chinese goods.

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Australia Abiding by Export Deal

Australian Prime Minister Scott Morrison said his country is sticking to its deal with the U.S. over aluminum exports, Reuters reported. The assurance comes on the heels of a report by The New York Times stating President Donald Trump considered imposing new tariffs on Australia.

Australia received exemptions from the U.S.’s Section 232 steel and aluminum tariffs imposed last year.

Baowu to Buy Majority Stake in Rival

Chinese steel giant Baowu Steel Group is buying a majority stake in rival steelmaker Magang Group Holding Co Ltd, Reuters reported.

Baowu ranked as the world’s second-largest steelmaker in 2017, according to World Steel Association data cited in the report.

Section 301 Notice

The United States Trade Representative released a notice Friday that it would release a notice on the Federal Register related to an extension for the time Chinese goods have to enter the U.S. before they are subject to a tariff rate increase (from 10% to 25%).

“Covered products that were exported from China to the United States prior to May 10, 2019 will remain subject to an additional 10 percent tariff if they enter into the U.S. before June 15, 2019, the USTR said in the release. “Originally, the deadline to enter the U.S. before the goods would be subject to an additional 25 percent tariff was June 1, 2019.

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“This limited extension will further account for customs enforcement factors and the transit time between China and the United States by sea.”

Norsk Hydro’s Alunorte refinery. Source: Norsk Hydro

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, President Donald Trump threatened to impose tariffs on all imports from Mexico, Shanghai steel prices are down and copper prices are en route to their biggest monthly fall since 2015.

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Trump Threatens More Tariffs on Mexican Goods

The United States, Mexico and Canada continue to work reach an agreement to pass the United States-Mexico-Canada Agreement (USMCA) — that effort took a step forward earlier this month when President Trump announced the removal of the Section 232 steel and aluminum tariffs with respect to imports of the metals from the U.S.’s NAFTA partners.

However, the effort might have taken a step back, as this week Trump threatened to impose tariffs on all Mexican imports. On Thursday, Trump tweeted the U.S. will impose a 5% tariff on all goods from Mexico as of June 10.

Despite Trump’s tariff threat, the White House is still looking to push the USMCA through this summer. United States Trade Representative Robert Lighthizer submitted a letter to Congress to help kickstart approval of the deal, CNBC reported.

The USMCA must be ratified by the three countries’ legislatures before it can go into effect.

Shanghai Steel Prices Fall

Shangahi steel prices fell to close the week on oversupply concerns, Reuters reported.

Shanghai rebar prices dipped 0.9% to 3,771 yuan ($545.60) per ton, according to the report.

Copper Continues Slide

The copper price has been on the decline in recent weeks, and will post its biggest monthly drop since November 2015, Reuters reported.

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The LME copper price dropped 9% this month, according to the report.

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This morning in metals news, the iron ore price slipped Thursday, the Indian steel import market is dominated by Japan and South Korea, and trade tensions between the U.S. and China continue to gain.

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Iron Ore Slows Down

Supported by supply-side concerns, the iron ore price has surged so far this year.

However, on Thursday, Chinese iron ore futures slipped, Reuters reported, with the most-traded iron ore contract on the Dalian Commodity Exchange falling 0.5% (albeit on lower volumes after higher transaction fees went into effect).

Japan, South Korea Dominate Indian Import Market

According to government data cited by Reuters, Japan and South Korea increased their share of the Indian steel import market to nearly two-thirds in April.

India’s steel imports from Japan increased 27% in April on a year-over-year basis, while imports from South Korea jumped 15%, according to Reuters.

Rising U.S.-China Tensions

Trade tensions between the U.S. and China are on the rise once again on the heels of the countries’ recent tariff tit-for-tat, in which President Trump raised tariffs on $200 billion in Chinese goods and China responded with tariffs on $60 billion in U.S. goods.

China on Thursday accused the U.S. of “economic terrorism,” CNN reported.

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As Stuart Burns noted this week, the situation could escalate further should China opt to leverage its dominance of the rare earths market.