Articles in Category: Ferrous Metals

China has something of a reputation as a copier rather than a developer of new technologies, so it is encouraging to read that researchers at Hunan Normal University (one wonders if they also have an Un-normal University?) have pioneered a technique to remove chrome as a polutant from waste waters. None would argue that chrome is a highly useful metal, mainly of course as an alloying element in stainless steels where it’s environmental  problems are low but it’s use in chrome plating, dye production, battery manufacture and so on often results in the developing world in large scale pollution in the form of leaching into water sources of chromate or hexavalent chrome. The research team  is developing a low cost method of absorbing the chrome onto magnetic nano-particle beads and then recycling the metal. The contaminated particles are removed from the water via an external magnetic field  where the metal is extracted before the particles  are returned for the waste water to be used again.

The technique would be of use anywhere. Heavy metals are present in waste water and could reduce the need for alternative and more expensive environmental safeguards associated with use of heavy metals in manufacturing.

–Stuart Burns

Stainless on the Slide?

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Ferrous Metals, Global Trade

Stainless steel prices will be flat this year but rise in early 2009 said MEPS this week in a brief report, blaming the current weakness on soft seasonal demand in Europe and a weak US housing market. We wouldn’t argue with the soft seasonal demand but we feel it goes further than that.  Though nickel prices have been falling, the price of stainless has been supported by a rising chrome price, but that too appears to have hit it’s peak and supply disruptions notwithstanding an easing in chrome prices would see stainless continue to slide well into next year. Global stainless production has continued to rise in spite of severe cut backs by China according to purchasing.com. Outokumpo the Finnish producer is saying the world is in over supply and without an increase in demand, prices are likely to continue to slide. Distributors are living hand to mouth avoiding stock replenishment in the belief prices will continue to ease, so the advice to consumers is do the same. Tomorrow’s price may be lower than today’s!

–Stuart Burns

Less than two weeks ago, we explained why the announced acquisition of Alpha Natural Resources, America’s largest producer of coking coal by Cleveland-Cliffs, North America’s largest iron ore pellet producer would be a better move for steel buyers than if a steel producer made the same acquisition. But the deal announced by Cleveland-Cliffs may not happen and instead, ArcelorMittal may counter with its own bid, according to this Bloomberg article.

Cleveland-Cliffs’ largest shareholder, hedge fund Harbinger Capital Partners, however, signaled its own opposition to the Cliffs deal. With a 16% ownership stake in the company, it would be difficult for the Cleveland-Cliffs’ Board to generate the necessary 2/3 vote needed to go forward with the takeover. The Harbinger opposition re-opens the door for ArcelorMittal who had made an earlier all-cash bid back in June. According to one analyst, the acquisition would allow ArcelorMittal to plug a hole in regard to securing raw materials.

But buyers should be suspicious of an ArcelorMittal/Alpha type tie-up. As we have previously reported, the costs to produce steel are more than reflected in the sales price. Though it would be difficult to prove from an anti-trust perspective (because this involves raw material and not the steel itself), I can’t help but think we should all be hoping Cleveland-Cliffs is able to pull of this acquisition.

–Lisa Reisman

A Tale of Two Distributors

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Ferrous Metals, Humor

Not long ago in a land actually quite nearby lived two metals distributors. One was called IM Hassle and the other was called Defiance. Defiance, being the bigger distributor with more power told all of his poor subjects (and they were quite poor you see because the price they had to pay for their steel was starting to take a real toll on other expenditures), “We must pass cost increases to our customers!” But what were the subjects to do? They needed the metal for there were oil and gas plants to build, so they paid. And lo and behold Defiance was happy, for they had set record second quarter sales and profits.

But IM Hassle, on the other hand, well, they did not have a record quarter. Oh yes, sales increased, afterall, the subjects needed their metal (and some plastic). Yet IM Hassle’s profits declined from a year ago. And when IM Hassle went to their owners, and the public to explain what had happened they said, “Ye higher operating expenses and costs from carbon products pressured margins and eroded earnings,” according to their henchman.

And so the moral of our story is this: If you don’t do well, blame it on rising costs. If you do well,  blame it  on rising costs.

The End.

–Lisa Reisman

My learned colleague Stuart mentioned to me yesterday that he saw an article in a trial subscription of Steel Business Briefing, that steel producers in the US “were exporting finished products overseas at under domestic prices.” Now if that wasn’t a hoot given all the squawking by US steel companies over foreign material entering the US market (which we have been regularly reporting on here here and here,) I don’t know what is!

If US producers sell under the domestic price then they could be held liable under anti-dumping claims. Though one of my favorite past-times is commenting on the all-so-powerful steel lobby, I can’t deny the fact that US exports overseas are very strong because of the [low] value of the dollar. And in all fairness US steel products are not the only recipients of overseas contract awards. Much of the reason the US economy hasn’t completely fallen in the gutter relates to the value of the dollar and strong US exports.

But it does seem well, rather fitting, that other nations should pull the anti-dumping trigger, an anti-competitive technique honed and refined by  the ole US of A steel industry.

–Lisa Reisman

The price of oil has come  down significantly over the last week or so falling from over $147/barrel to $126/barrel as of this writing. Is this the  top of the chart and if it continues to fall what can we expect for metals?

Some are still predicting $250/barrel for oil next year,  though others have called $50/barrel. Both seem extreme but the price fall this month has largely been attributed to investors, speculators, call them what you will, pulling out of the market in the realization that a slowing US market has resulted in a drop in demand from the world’s largest consumer. Lehman Brothers says global demand growth will be 47% lower than initial forecasts this year because of declining US consumption and slowing world growth. The issue then becomes what is the new level likely to be? For the time being, the price has settled around $125-127/barrel, balanced between a perception of a world shortage, political tensions over Iran, and monitoring of stock levels and demand during the summer season in the US and the Beijing Olympics in China. Read more

In a rather shocking story that came out late last week, Johnson Controls, the interiors and seating system Tier 1 automotive supplier, sued four suppliers for levying steel surcharges on them, alleging the suppliers had violated their purchasing contract. The story is rather shocking not because automotive suppliers have been squeezed considerably since the start of the year due to rising steel prices, or because they actually decided to execute a clause in their purchase contracts (good for them). No the story is shocking because it’s Johnson Controls.

For those of you who don’t know the Holland Michigan based supplier, they are known within automotive circles as a leading spend management, supplier relationship management, sourcing best practices firm. Just look at their financial performance vis-a-vis most if not all of their automotive competitors and you will find a top performer. In addition, Johnson Controls often take a more collaborative approach to supplier relationships. JCI as they are known  by their stock symbol, tend to adopt the Toyota way of working with suppliers as opposed to the approach taken by GM.

However, according to the Associated Press, a federal judge prevented a supplier of Johnson Controls from raising prices or halting shipments. Now some suppliers are stating they are in grave danger of survival and will therefore halt shipments anyway. Not exactly the Toyota way. But JCI wouldn’t be the first to try such tactics. We covered this story a couple of weeks ago here. It’s time to restore some semblance of market balance among steel producers, component suppliers and OEM’s. If not, we’re going to see  some of the  best  companies turn out to be the meanest!

–Lisa Reisman

MetalMiner has always held a strong free market philosophy.

Our belief is that in most cases, the benefits of lower-cost material to consumers outweighs the damage to domestic producers that global trade can bring. In our experience, calls for anti-dumping fines, import tariffs or quotas are nearly always brought by large industrial producers.    The losers are their customers in the thousands who are forced to pay higher prices than necessary and certainly higher than their competitors overseas.

However, we are not dogmatic and would accept that there may be exceptional circumstances where an industry is of such strategic value or the global supply sources are so unstable that for national security reasons, some form of protectionism is appropriate. Would we be happy if the domestic silicon producers serving the US chip market were forced out of business and the only remaining source of supply was North Korea? I don’t think so.

So does magnesium fall into this category?

Despite anti-dumping actions that have rumbled on since 2002 and punitive ad valorem rates of 17.86-21.71 percent being levied against Russian and Chinese producers, magnesium imports have still climbed 27 percent year over year, according to the USGS. However, even though the cost of dolomite from which the magnesium is extracted has not changed one cent, the price of magnesium metal has doubled over the last couple of years. Producers argue that the cost of ferro silicon and electricity have risen dramatically, and that without the anti-dumping tariffs, the one remaining producer, US Magnesium, would be forced out of business.

That may be the case, but is that worse than magnesium consumers in the US paying a substantial premium over Asian consumers? What is the net position to the US in terms of jobs, productivity and exports of finished products from paying an artificially high magnesium price?

Which brings us back to the question: is there a strategic reason why we should protect the remaining US producer? Magnesium is mainly used in high-strength aluminum alloys and in die-cast parts for automotive and aerospace applications – important, possibly strategic applications. But supply sources are varied and expanding. China (31%) and Russia (19%) have proved to be serious and stable suppliers, Israel (48%) for metal and (33%) alloy is the largest supply source and Canada (29%) for alloys are both above concern. In addition, Australia is making massive investments in new facilities with the latest technology which could see the country rival China in terms of low cost per ton. In truth, supply sources are numerous and from politically stable sources, therefore, we can not see an argument for depriving US magnesium consuming industries of competitively priced metal any longer.

So even under this case, we still say no to protectionism.

–Stuart Burns

For those that follow the new LME Billet  contract, or those that want to once we launch our new premium service, MetalMiner IndX (SM)  which daily tracks this and many other metals, there has been a telling development  in the prices over the last week few weeks or so. Amid continuous reports of rising steel costs, prices for Mediterranean and Far East delivery have steadily declined since a late June high of over $1250/ton. Yesterday’s close for a 3 month buyer was $1085/ton, down some 14% from the peak. The Far East price closed at US$ 960/ton, the first time it has been below $1000 since May shortly after it was launched. Billet is used to make long products particularly reinforcing bar in the Middle East. SBB also reports that Asian scrap prices are softening and we ask the question is this the first sign of a drop off in construction activity? Certainly southern Europe has seen a decline in the construction market for the last 2-3 months and rebar production has been re-directed to the busy Middle East market.    Is the decline in Middle East prices an indication of over supply or slowing activity? Domestic Chinese billet prices have eased over the last week and at $ 200/ton under the LME, the Far East price suggests any excess capacity can be exported in spite of export taxes. The Middle East is entering its seasonal quiet period so it may be too early to call. Certainly iron ore, coke and energy costs will underpin the market, but we still see demand softening and would not be surprised to see the Middle East price approach $1000/ton and the Far East drift downwards towards $900/ton as the summer progresses.

Watch this space.

–Stuart Burns

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With her remarkable swordsmanship in Kill Bill 1 and Kill Bill 2, we have Uma Thurman — and that killer Hattori Hanzo samurai sword — to thank for some of the best sword fights in recent movie history. Then again, critics could also praise the swordplay in Seven Samurai. And The Princess Bride. And even Highlander. What other films are we missing?

Whether you consider samurai swords an ancient art form, quick entertainment from Hollywood, or the wonder of all metals technology, the truth remains that the creators and crafters of samurai swords sure know what they’re doing with steel. Dr. Rick Vinci, a materials scientist and engineer at Lehigh University, tells PBS in an interview on the intricate weapons that the elemental mixtures in samurai swords offer an excellent example of metals engineering. “One can mass-produce swords, but one cannot mass-produce swords that are also objects of art,” he says, and explains the complicated requirements for a perfect samurai sword: the treatments, the chemistry, the right tools. Read more

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