This morning in metals news: production has resumed at Tenaris‘ steel plant in Koppel, Pennsylvania; meanwhile, Anglo American said it has demerged its thermal coal operations in South Africa; and, lastly, the United Steelworkers union commented on the Biden administration’s recently released supply chain review.
Tenaris steel plant in Pennsylvania resumes production
Luxembourg-based Tenaris’ steel plant in Koppel, Pennsylvania, has resumed production after a yearlong hiatus for upgrades.
“Steel production is now underway at Tenaris’s first melt shop in the United States that will soon supply steel bars for its seamless pipe mills in the States and Canada,” Tenaris said in a press release.
“The steel shop in Koppel, PA, part of the company’s strategic acquisition of IPSCO, completed in 2020, has started producing steel bars following a year-long investment of more than $15M USD in upgrades to integrate the facility into Tenaris’ global network of steel mills.”
Last year, on the heels of the outset of the COVID-19 pandemic, Tenaris announced idling of a number of U.S. plants. In April 2020, the company said declining oil and gas prices, oversupply in the oil market and COVID-19 operational restrictions underpinned its decision.
Before we head into the weekend, let’s take a look back at the week that was and the metals news here on MetalMiner, including iron ore volatility, rare earths production quotas in China and much more:
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Week of May 31-June 4 (iron ore volatility, rare earths quotas and more)
This morning in metals news: US personal consumption expenditure rose in April; meanwhile, Norsk Hydro is teaming up on an offshore wind project in the Norwegian North Sea; and, lastly, the United Steelworkers asked the Biden administration for clarification on its domestic mining stance.
Activist investors and environmentalists make strange bedfellows, but both are like the hordes at the citadel gates of the oil majors.
In the US, activist investor Engine No. 1 forced at least two and possibly three directors onto the board of Exxon Mobil. In doing so, it aims to force a change in direction for the world’s largest oil company away from oil and gas and toward a lower-carbon future.
What is remarkable is Engine No. 1 drove through the imposition of new directors despite holding a mere 0.02% stake (or $54 million) in the company. It won the backing of state pension funds, like that of New York state, and asset managers such as BlackRock, Vanguard and State Street, the Financial Times reported.
Investor action was driven by chronic underperformance. That’s not just at Exxon but across the oil and gas sector, the post reports. It should be seen as the market’s growing demand for the oil business to address the challenges of the future and reposition itself for a world in which the markets demand issues seen as existential threats, like carbon emissions, are addressed in a meaningful way.
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This morning in metals news: during MetalMiner’s latest webinar Thursday, the team walked through the signs buyers should pay attention to that might indicate an end to the current state of allocation markets and metals shortages; the carbon footprint of aluminum can production in North America has plunged over the past three decades, according to a recent report; US average gasoline prices are at their highest level before Memorial Day since 2014; and the US international trade deficit declined in April.
For metals buyers, metals markets have been defined by allocation and shortages for many months. As such, the MetalMiner team walked through the signs buyers should pay attention to that may indicate those scenarios could be winding down.
This morning in metals news: UC Rusal will demerge its high-carbon assets; meanwhile, steel industry groups issued a renewed call to the Biden administration to ask him to keep the Section 232 steel tariff in place; and the copper price has picked back up this week.
En+ Group, parent group of Russian aluminum giant UC Rusal, announced today that the latter will demerge its high-carbon assets.
In addition, UC Rusal also plans to change its name to AL+.
The company plans to focus on developing inert anode technology and working toward production of carbon-free aluminum.
“This announcement is another major step in our journey to lead the global aluminium industry into the low carbon economy,” said Lord Barker, executive chairman of En+ Group. “AL+ will be a market leader in green aluminium production as measured by carbon footprint and other environmental credentials. However, this demerger additionally secures the future of important assets in Russia that also have a future in a low carbon world but which require a fundamentally different approach to technology and a different investment path to our major international businesses.”
Meanwhile, the demerged higher-carbon assets will form a new company under a new name. That includes alumina refineries in Russia (Achinsk, Pikalevo, Bogoslovsk and Ural) and smelters in Bratsk, Irkutsk, Novokuznetsk, Volgograd and Kandalaksha, all of which it says will undertake a “long-term modernisation programme.”
Brussels must feel a little like the Dutch boy with his finger in the dike when it comes to emissions.
No sooner do you create a solution to one problem – costing carbon dioxide emissions – than you create another – putting your domestic industries at a global disadvantage.
The Financial Times reported on calls by European industrial groups for the EU to introduce a carbon border tax. Rapidly rising prices for CO2 allowances raise the cost for the most-polluting industries far above any other region.
EU’s Emissions Trading System aims to encourage reduction in emissions
According to the Financial Times, carbon prices in the EU’s flagship Emissions Trading System (ETS), a cornerstone of the bloc’s ambitious new target to slash emissions 55% by 2030, are within touching distance of €50 a metric ton. That’s more than double their pre-pandemic level.
The ETS is intended to encourage investment in technologies that reduce carbon emissions by placing a financial burden on producers who simply maintain their existing level of emissions. The EU grants allowances to polluters and allows them to trade them in order to allow a commercial price to develop – if you like letting the market decide what the balance is between paying to pollute and investing more to avoid the cost and pollute less.
The problem appears to be that anticipation among traders and commercial buyers is supplies will tighten as the available allowances will shrink over time.
The result? Rising prices for those allowances left, piling pressure on the most polluting firms.
Rises this year have prompted Tata Steel to place a €12 ($14.40) per metric ton surcharge on its European steel. The fear is further increases will make European producers increasingly less competitive against imports from countries with no such taxation system.
The post reports estimates made by steel producers that the EU carbon price is now costing them approximately $95 ($114) per metric ton of steel produced. (The production of one ton, on average, emits two tons of CO2 the post suggests.
That equates to almost 10% of the current steel price near €1,000 ($1,200) a metric ton.
Producers go on to suggest the estimated annual hit to the EU steel sector from having to buy carbon allowances from the market could hit €3 billion this year. Steel producers would have to pay to buy shortfalls in their allowances from the open market.
The EU was due to unveil proposals for a carbon adjustment border tax in June. However, its implementation is not likely before 2023, at the earliest. Now, pressure is building to move up implementation to later this year.
The proposed border tax mechanism is initially set to target limited goods. Those include steel, cement, power generation and some chemicals. The mechanism will target goods imported from non-EU countries that do not have equivalent carbon pricing or emissions targets.
Ultimately, though, it could be extended to any carbon-intensive product. That includes other metals, like aluminum, zinc and ferro alloys (like FeMn and FeCr).
Letting the market decide the cost of polluting has merit. Price discovery in that way is likely to be more efficient than government-mandated prices.
However, the problem is the EU controls the provision of the allowances, making it a rigged market. It’s not an intentionally rigged market but one distorted by decisions made in Brussels on the size and allocation of allowances.
Steel suppliers selling into Europe and buyers from outside the bloc of components containing a significant steel content will therefore see the EU become less attractive in the run-up to the middle of the decade.
That is, unless or until similar carbon pricing policies are adopted elsewhere.
There is often a price to pay for being in the vanguard.
Before the weekend, let’s take a look at the week that was and the metals storylines here on MetalMiner, including an aluminum smelter labor deal, copper prices, environmental policy developments and more:
This morning in metals news: a $2 million project seeks to develop ways to more cost-effectively produce lightweight automotive sheet metals; meanwhile, U.S. Steel joined the global nonprofit ResponsibleSteel™; and the copper price has picked back up over the last week.
The MetalMiner Best Practice Library offers a wealth of knowledge and tips to help buyers stay on top of metals markets and buying strategies.
‘Clean Sheet Project’ aims to improve production of recyclable automotive sheet metals
Sven Fuchs/Adobe Stock
A $2 million project at the University of Michigan dubbed the Clean Sheet Project is looking to improve processes behind the production of recyclable, lightweight automotive sheet metals.
According to a release from the Michigan Engineer News Center, the project is a “key effort as major car manufacturers look to lightweight light-duty trucks and shift away from internal combustion engines toward electric cars which require more lightweight components to increase vehicle range.”
The research will initially focus on steel and aluminum, the report states, but could eventually expand to other materials.
Today is Earth Day, whatever that means for you. For once, though, the politicians are not adding to greenhouse gas emissions by flying around the world first class or, worse, in private jets to talk shop.
It’s a target that would require Americans to transform the way they drive, heat their homes and manufacture goods, the post reports.
Although the time frame is longer, the new goal nearly doubles the pledge that the Obama administration made to cut emissions by 26-28% below 2005 levels by 2025. It also builds on the UK’s ambitious plans announced earlier this week.
Nathan Hultman, director of the Center for Global Sustainability at the University of Maryland, described the 50% goal as attainable. However, it will require “pretty significant action across all sectors of the American economy.”
Autos and energy generation are tipped as two of the major industries to feel the impact of the new target, if supported by new legislation.