It’s possible you didn’t even realize it was missing, but the news is official: Aluminum’s back. The U.S. Environmental Protection Agency is now amending a clear water regulation, the F019 hazardous waste listing, which previously restricted the use of aluminum in automobiles. It’s been decided that cuts in carbon emissions are worth possible water contamination from the manufacturing process, although some consumers are still skeptic. Either way, this new legislation should lead to widespread use of the metal in the automobile industry. In fact, Forbes shares that the 2008 Ford Focus is already replacing steel with high-strength aluminum in front-brake calipers. Read more
Articles in Category: Ferrous Metals
- Ferrous Metals
This is part two of a two-part series. Click here to read the first part.
Yesterday, we talked about predictive markets and touched on their applicability to metal markets in general. Without surveying all of the literature, suffice it to say that predictive markets, can be much more accurate than traditional polling techniques or other analytical methods. So given the fact that there are dozens of research firms and analysts covering the metal and mining sector, why are there no predictive markets (at least, we couldn’t find one), with the exceptions noted from the comments in yesterday’s post (e.g. the futures markets for aluminum, copper and the balance of base metals).
To begin, there are several “must-haves” for a predictive market to work. And perhaps not surprisingly, many of these must-haves relate to the requirements of all markets in general. They all need liquidity or people to take positions. One of the primary reasons why the steel long products futures market has not come on stream, in our opinion is due to lack of liquidity on the producer side. See an earlier MetalMiner post on that subject here. Read more
If you can’t buy them, build them, seems to be the philosophy driving the major steel mills investment in new mines. A recent report in The Wall Street Journal details the challenges steel companies are facing in turning themselves into miners. Arcelor Mittal has purchased the rights to develop the old Liberian-Swedish-American mining company Lamco’s facilities in Liberia, closed in 1989 during the first of many civil wars and coups to blight the country in the 90’s. Mittal see this as one component of a hub of West African mining operations strategically placed to feed both their European and North American steel mills. The challenges are significant, since railway lines, bridges and roads have been lost over the last 20 years of strife. Prospective miners will need to rebuild the infrastructure before they can move one ton of iron ore. Project costs have already escalated from $900m to $1.5bn, and the mine isn’t due to start production before next year. Read more
As the AP reported late Thursday, the US economy skirted a recession posting a 0.9% increase in Gross Domestic Product (GDP). According to analysts, a recession is defined as two straight quarters of negative growth. One key factor in keeping the US economy out of recession — exports — helped pull up GDP. Although exports grew by 2.8%, analysts had expected stronger growth. Moreover, exports in the previous quarter had grown by 6.5%. Unfortunately this does not bode well for the second quarter as exports and business inventories were the key variables propping up the numbers.
The hope is that the economy will pick up in the third quarter from the positive effects of tax rebates and lower interest rates. The big question is how much the slowing economies of Europe and Japan will have on US exports. According to the AP report, economists are also very concerned about inflation, particularly oil, food and energy prices. But if steel prices have peaked, as we have reported and predicted in early 2008 predicted in early 2008, perhaps some of the inflationary pressures will ease and we can all catch our breath.
Only 20 days ago we reported that steel imports were set to rise. And that’s not a minute too soon, given that the price of steel has increased by 49-65% since the start of the year! According to Platts, US steel imports in April increased 14.5% over March and were 3.4% higher than in April 2007. Although the steel lobby might have you believe otherwise, steel imports are great for US manufacturers because they provide much needed competition in the marketplace and will help bring some semblance of normalcy back to the market place. Mind you, we aren’t going to see a big price drop off — but we’ve seen the rate of price increases drop heavily between May orders for June deliveries and June orders for July deliveries. Read more
If not, then the peak is possibly in sight, according to Purchasing.com. Drawing on comments made by CIBC Capital Markets, the article states that recent price increases have been more than can be warranted by raw material price increases alone — something long suspected by distributors and consumers alike — and levels now being charged are unsustainable.
Feedback from our own contacts in the market suggest that some major mills are completing June orders early and have spot capacity opportunities available, both of which are an about-face from just a couple of months ago, when requests for additional capacity were flatly declined.
We would be hesitant to call mid summer as the peak, but the availability of more capacity coupled with the room for some price adjustments could be the ingredients needed to bring some sense to the market.
With so much focus on China these days, it is a little-know fact that Russia, in 5th position, is one of the largest steel exporters in the world. Over half of the total is in ingots and semis such as HR coil and billets. Russia exported some 30 million tons in 2007, making them a major supplier to Western Europe and the US, according to steelonthenet. However, recent moves by the Russian government in response to rapidly rising domestic prices suggests this figure may dramatically decrease in the second half of this year if proposed export taxes are imposed. Read more
It sounds illogical. A farm bill that provides “government-sponsored insurance, counter-cyclical assistance, disaster aid and legacy payments tied to nothing, the five-year $307 billion bill lavishes cash on wealthy farm households, the main restriction on collecting it being a means test that applies to couples making more than $1.5m a year,” according to an article entitled: A Harvest of Disgrace, published by the Economist, can not possibly relate to anyone in the metals industry. Or can it? Read more
It’s an oft-cited fact that the steel price and level of demand is driven by a burgeoning need from China — yet in a recent conference speech, Xiong Bilin of the Chinese NDRC is reported to have said that China has 500 million tons of steel producing capacity and supply exceeds demand. In the same speech, the NDRC went on to explain the reason the authorities have been blocking the involvement of foreign steel companies in the building of new facilities in China: to try to head off a massive excess of production capacity. Read more
Buying a new car could become more expensive in the approaching months. Last week, automaker Honda Motor Co. announced that higher steel and other raw material costs could cause the company to increase the price of their vehicles. Honda, along with Toyota Motor Corp. and Nissan Motor Co., shared expectations of an operating profit drop in the immediate future. Toyota Motor Corp. admitted on Sunday that they are “near a price increase accord with steel suppliers to offset the rising cost of raw materials.” According to Bloomberg, “To help offset rising costs, Toyota plans to boost the price of some U.S. models this month by 0.7 percent on average. Nissan in April raised the price of its Versa compact car and Pathfinder sport-utility vehicle. Honda on May 12 said it is considering raising prices in North America, Japan and other markets.” Read more