Articles in Category: Logistics

The pandemic certainly created a challenging environment for business in 2021.

Lockdowns hampered operations. Metal scarcity and rising metal prices caused immense cost pressures, loss of profits and, in some cases, bankruptcies.

One, although by no means the only issue, was disruption to global supply chains.

Research into the causes and potential solutions will be the stuff of analysts and pundits for years to come. A thoughtful report by Citi Bank entitled “GLOBAL SUPPLY CHAINS, The Complicated Road Back to ‘Normal’” holds out a feasible road map back to normality that deserves some scrutiny.

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Supply chain issues for metals, mining

supply chain chart

cacaroot/Adobe Stock

For MetalMiner readers, a graph on page 37 illustrates the disproportionate impact supply chain issues have had on the metals and mining industry, reports of disruption are a factor of twice more than the next nearest industry and a multiple of several times more widely covered issues, like retail and auto, that tend to dominate the media.

Rather than dwell on the question of how we got here, we would rather explore how these issues unwind.

When do global supply chains get back to normal?

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Importers of metals and metal components may be seeing a glimmer of light at the end of what has been a very long tunnel of logistics chaos, sky-high freight rates and shipping delays.

Freight rates have eased from peaks per 40ft container in the summer for some shippers of up to $15,000 to $9,000 last month. Rates have fallen further to around $7,000 today, as reported by the the Financial Times.

The number of vessels sitting off the ports of Los Angeles/Long Beach waiting to discharge have declined from 261 in September to 246 in October and 216 last month, the Financial Times reports.

Not a massive decline, but at least the trend appears in the right direction.

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Shipping rates down, but for how long?

Shipping

enanuchit/Adobe Stock

Still, before we break out the Christmas champagne early, not all the news is quite so positive.

Rates have declined. However, this is in part a reflection of the fact that the peak Christmas traffic has now passed. Current shipments will not arrive until into the New Year. As such, the impetus to ship come what may is over.

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This morning in metals news: pre-Labor Day retail gasoline prices are at their highest level in seven years; meanwhile, payroll employment rose by 235,000 in August; and, lastly, Norilsk Nickel has signed an agreement to build a liquefied natural gas icebreaker.

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Pre-Labor Day gasoline prices rise

gasoline pump

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To the chagrin of those driving this holiday weekend, pre-Labor Day gasoline prices have reached their highest level since 2014, the Energy Information Administration reported.

The average gas price reached $3.15 per gallon as of Aug. 30.

Furthermore, the price marked a 42% jump compared with the same point in 2020.

Payroll employment up 235K

U.S. payroll employment picked up by 235,000 in August, the Bureau of Labor Statistics reported.

Furthermore, monthly job growth so far this year has averaged 586,000 per month.

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This morning in metals news: Norsk Hydro plans to expand capacity at its Sjunnen aluminum extrusion plant; the Pilbara Ports Authority reported a decline in throughput in July; and, lastly, the United States International Trade Commission conducted a five-year sunset review on existing duty orders for carbon and alloy steel standard, line and pressure pipe from China.

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Hydro to boost capacity at Sjunnen

Norsk Hydro

filins/Adobe Stock

Oslo-based Norsk Hydro announced it plans to increase capacity at its extrusion plant in Sjunnen, Sweden.

The firm said it will finalize the expansion, which comes at a cost of €11.3 million, by the end of 2022.

“The decision to expand the aluminium casthouse operations in Sjunnen comes in response to an increased market demand for low-carbon aluminium profiles across all industries where Hydro Extrusions operates,” Hydro said.

“Furthermore, the location in the south of Sweden is ideal to capture available used aluminium metal from local industries which otherwise would have had to be transported long distances, increasing cost and carbon footprint of the final product.”

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Before we head into the weekend, let’s take a look back at the week that was and some of the metals storylines here on MetalMiner:

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Week of Aug. 16-20 (shipping sector disruptions, Chinese steel prices and more)

Shipping

enanuchit/Adobe Stock

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The global shipping market has been a depressing topic to report on this year.

We have posted two or three updates on the state of play over the last eight months, each time expecting the situation to improve. Depressingly, by the time we come back to it, it has, if anything, gotten worse.

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Rising shipping rates

Shipping

enanuchit/Adobe Stock

Freight rates have soared since the beginning of the year. Port congestion has increased and container availability has decreased. Shipping line shutouts have become a common feature.

Bloomberg reported that China has partly shut the world’s third-busiest container port after just one worker became infected with COVID-19. All inbound and outbound container services at Meishan terminal in Ningbo-Zhoushan Port were halted recently until further notice, closing approximately 25% of the port’s total container handling facilities.

This comes on top of an earlier closure of Yantian port in Shenzhen for about a month from late May. That closure led to goods backing up in factories and storage yards. Furthermore, it added to congestion at neighbouring ports.

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The global logistics market has gone through a horrible winter.

The pandemic caused massive disruption. US and European ports became gummed up with PPE and medical equipment. This resulted in port delays and tens of thousands of containers being out of position at destination when they are needed at origin, further exacerbating a lack of space.

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Shipping market challenges

Shipping

enanuchit/Adobe Stock

Shipping lines that had cut back in the pandemic have been caught on the hop. As such, they have been unable to catch up with the unprecedented surge in demand for shipping space as global supply chains have rushed to restock.

Any consumer who imports or relies on domestic suppliers who in turn import — or rely on imported components — will have been hit with delays and cost overruns.

Back in the early part of this year, many observers, us included, expected the market would improve. Indeed, freight rates – a barometer of demand – had started to come down early last month. That encouraged some to believe the worse was past.

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supply chain chart

cacaroot/Adobe Stock

Metal prices have been rising this year, in part because of a rapid recovery in consumer spending and manufacturing following last year’s lockdowns. China led the recovery, but the recoveries have strengthened in North America and, to a lesser extent, Europe.

As vaccines have rolled out, particularly in the US, sentiment has improved. Consumers have begun to spend some of that US $5.4 trillion — estimated by the Financial Times — of pent-up savings amassed during the lockdowns.

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Supply chain woes

However, constrained supply is also a major driver of metal prices.

In some cases, such as copper and zinc, this has been from lockdowns in major resource countries like Peru. In addition, tariff barriers have further squeezed consumers’ supply options.

The US added anti-dumping duties on some 18 aluminum sheet supplying countries earlier this year. Meanwhile, the European Union added aluminum flat rolled countervailing duties this year. Those added to those already in place for extrusions from last year on China. As a result, the moves significantly tightened aluminum supplies into the European market.

Further pressure has come from global logistics constraints and cost increases. That has come principally on the Asia to North America and Asia to European shipping routes. Routes have seen shipping delays, container shortages and a near tripling of freight rates over the last 12 months.

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Temperance Beer Co. brewery in Evanston

Source: Temperance Beer Co.

A little over a year has come and gone since the COVID-19 pandemic took hold in the US.

In addition to the immense human toll, the pandemic has changed the way many people live their lives. Work situations have changed, as many have switched out commutes to the office for a morning commute to their living rooms or home office spaces.

Furthermore, consumption habits have changed, too.

In the early days of the pandemic, many stocked up on masks, hand sanitizer and toilet paper.

The pandemic also changed consumers’ habits in other areas. One example? Beverages, namely where they are consumed — that is, not in bars — and in what type of container.

Whereas patrons may have consumed draught beer poured from kegs at a bar, many switched to drinking out of aluminum cans at home.

Naturally, this led to a run on aluminum cans and what has seemed to be a continuous can shortage that persists even now, over a year later.

We chatted recently with Josh Gilbert, owner and founder of local brewery Temperance Beer Co., located at 2000 Dempster St. in Evanston, Illinois.

We talked about what the last year has been like for the business, the shift in consumer habits, the resulting shift in the brewery’s procurement and his outlook for the rest of 2021.

Do you know the five best practices of sourcing metals, including aluminum?

COVID-19 pandemic impact — from keg to aluminum can

For brewers, the COVID-19 pandemic has shaken up their businesses in a number of ways.

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This morning in metals news: US steel capacity utilization reached 78.0% last week; Rio Tinto released its Q1 production results; and the Pilbara Ports Authority reported March shipping figures.

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US steel capacity utilization up to 78.0%

steel arrow up

Pavel Ignatov/Adobe Stock

The US steel capacity utilization rate for the week ending April 17 reached 78.0%, the American Iron and Steel Institute (AISI) reported Monday.

US mills produced 1.77 million net tons during the week. Furthermore, the weekly output marked an increase of 0.5% from the previous week. Meanwhile, compared with the same week in 2020, output rose by 42.7%.

Production has reached 26.7 million net tons in the year to date, or up 0.1% from the same period last year.

Rio Tinto releases Q1 production results

Miner Rio Tinto reported Q1 aluminum production of 803,000 metric tons, a 3% year-over-year increase.

Meanwhile, copper production reached 120,500 metric tons, down 9% year over year. The miner cited lower recoveries and throughput at its Escondida and Kennecott mines. Furthermore, Chinese border restrictions have impacted shipments from the Oyu Tolgoi mine in Mongolia, Rio Tinto said.

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