Before we head into the weekend, let’s take a look back at the week that was and the metals storylines here on MetalMiner, including aluminum prices, rising power costs and much more:

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Week of Oct. 11-15 (aluminum prices, power costs and more)

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• Anglo American is exploring the possibility of a “hydrogen valley” in a PGM-rich area of South Africa.
• Maria Rosa Gobitz reported on aluminum price trends and other industry developments.
• Steel prices have started to show signs of slowing down, even as raw materials prices rise.
• ArcelorMittal plans to add a €50 surcharge on long products in Europe.
• Both job openings and hires declined in August, the Bureau of Labor Statistics reported.
• Stuart Burns took a look at iron ore prices with an eye to turmoil in the Chinese real estate sector.
• Reporting from LME Week 2021, Christopher Rivituso covered comments by LME CEO Matthew Chamberlain on the future of low-carbon aluminum.
• The Stainless MMI declined this month.
• General Motors and GE Renewable Energy have signed a memorandum of understanding to explore the development of a supply chain for rare earths and other materials needed for electric vehicles and renewable energy.
• The Consumer Price Index ticked up by 0.4% in September.
• Sohrab Darabshaw on rising raw materials prices’ impact on steel prices in India.
• The gold price retraced last month as the U.S. dollar picked up steam.
• Natural gas prices are likely to remain elevated through the upcoming winter, the Energy Information Administration forecast.
• The International Energy Agency released a 386-page World Energy Outlook.
• Rising power costs are squeezing European metals producers.

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The Renewables Monthly Metals Index (MMI) ticked up slightly for this month’s value.

(Editor’s note: This report also includes the MMI for grain-oriented electrical steel, or GOES.)

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Renewables make progress, but coal, oil saw 2021 comeback, IEA says

The International Energy Agency (IEA) recently released its 386-page World Energy Outlook 2021 report, in which it notes positive trends in renewable energy but setbacks in the form of recovering coal and oil use in 2021.

“The rapid but uneven economic recovery from last year’s Covid-induced recession is putting major strains on parts of today’s energy system, sparking sharp price rises in natural gas, coal and electricity markets,” the IEA reported. “For all the advances being made by renewables and electric mobility, 2021 is seeing a large rebound in coal and oil use. Largely for this reason, it is also seeing the second-largest annual increase in CO2 emissions in history.”

The IEA emphasized significant further investment is needed to reach the 1.5 degree stabilization goal laid out in the Net Zero Emissions by 2050 Scenario released in May 2021. The IEA said that transition requires “a surge in annual investment in clean energy projects and infrastructure to nearly USD 4 trillion” by 2030.

In many renewables applications, cost is a major obstacle, particularly for critical minerals or metals.

“Higher or more volatile prices for critical minerals such as lithium, cobalt, nickel, copper and rare earth elements could slow global progress towards a clean energy future or make it more costly,” the IEA added. “Price rallies for key minerals in 2021 could increase the costs of solar modules, wind turbines, electric vehicle (EV) batteries and power lines by 5-15%. If maintained over the period to 2030 in the NZE, this would add USD 700 billion to the investment required for these technologies.”

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The Global Precious Monthly Metals Index (MMI) lost ground this month, dropping by 12.9% as the gold price declined and the dollar strengthened last month.

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Gold slides, dollar gains

The U.S. gold bullion price fell in September, dropping from $1,814 per ounce as of Sept. 1 to $1,757 on Oct. 1, a 3.1% drop.

Meanwhile, gold historically correlates inversely with the U.S. dollar. Unsurprisingly, the U.S. dollar showed strength in September.

Last month, the Federal Reserve indicated it could soon finally begin tapering asset purchases, which is supportive for the dollar.

After closing Sept. 1 at 92.45, the U.S. dollar index closed Oct. 1 at 94.03.

Fed could begin tapering

As mentioned, the Federal Reserve last month indicated it could be set to begin tapering asset purchases.

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Steel prices in India have nearly doubled over the last year, reflective of rising steel prices across the globe.

But for India, several factors such as a steep rise in the prices of raw material like iron ore — and of late, coking coal — have contributed to the steep hike.

Due to China’s decision to cut steel production and exports, India is also experiencing a price increase. High domestic demand had led China to remove rebates and impose export taxes on certain steel products this year to discourage exports. Steel production is also set to be capped in order to reduce carbon dioxide emissions.

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Indian steel prices on the rise

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India’s steel industry has been impacted by the price hike in various ways.

For some major steel manufacturers, it has led to large profits. For many small and medium enterprises that manufacture steel and engineered products, it has led to losses.

Protests have been lodged with the Indian government due to the shortage of raw materials. After China, India is the world’s second-largest steel-producing country. The price escalation in India started in the second half of 2020-21 and has continued nearly unabated since then.

In June, for example, the wholesale price of hot rolled coils (HRC) shot up by approximately US $40 (Rs 3,000) to be approximately $1,533 (Rs 69,000) per ton. Cold rolled coils shot up by about $66 (Rs 5,000) to sell at approximately $1,146 (Rs 86,000) per ton. Prices of both HRC and CRC were nearly half in the same period in 2020. These forms of steel are used in the automobile, construction and transport sectors.

Domino effect

Because it is steel, the price hike has had a cascading effect on consumer goods, construction and other activities, too.

Steel plants in the country have hiked steel prices by around $80 (Rs 6,000) per ton in just the last eight days.

CNBC TV18 reported JP Morgan India was of the view that Indian steel prices were still about 15% discounted to imported steel prices. When the busy season post festivals, starts in India, post-festive season, demand could go up, leading to some increase in local steel prices.

The sudden rise in steel demand once the COVID lockdown had ended caught Indian steel companies off guard. The uptick in steel consumption along with a renewed focus on infrastructure and government initiatives (such as “Make in India”) have led to an increase in steel demand.

In 2017, as part of the national steel policy, the Indian government announced India would try to reach 300 million tons per year year of crude steel production capacity by 2030.

Coal crisis

Furthermore, a local coal crisis, which some experts predict could last for quarters, has hit the steel sector.

Like China, India is also staring at a power crisis due to coal shortage. Over 70% of India’s power still comes from coal-powered plants.

As of Oct. 6, 80% of India’s 135 coal-powered plants had less than eight days’ worth of supplies left, according to BloombergQuint.

There are several reasons for the coal shortage. Among them, India has reduced its investment in the fossil fuel as it gives priority to renewable energy to meet its climate change targets.

BloombergQuint cited JSW Steel Ltd. officials, who have gone on record to state that the coal shortage is likely to lead to steel price hikes for the next few quarters.

Volatility is the name of the game. Do you have a steel buying strategy that can handle the ups and downs?

The Rare Earths Monthly Metals Index (MMI) bounced back, rising by 11.6% this month.

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GM, GE Renewable Energy aim to develop rare earths supply chain

Automaker General Motors and GE Renewable Energy have signed a memorandum of understanding through which they will seek to develop a supply chain for rare earths and other materials needed for electric vehicles and renewable energy.

The parties will “evaluate opportunities to improve supplies of heavy and light rare earth materials and magnets, copper and electrical steel used for manufacturing of electric vehicles and renewable energy equipment,” GM said earlier this month.

Initially, they will focus on a Europe- and North America-based supply chain for vertically integrated magnet manufacturing.

“A secure, sustainable and resilient local supply chain for electric vehicle materials is critical to the execution of GM’s vision of an all-electric future,” said Shilpan Amin, GM vice president for Global Purchasing and Supply Chain. “Motors are one of the most important components of our Ultium Platform, and the heavy and light rare earth materials are an essential ingredient in our motor magnets. The combined scale of GM and GE will enable us to unlock the potential for securing low-carbon footprint, ESG-friendly, secure and cost competitive materials.”

Furthermore, the parties will evaluate “potential cooperation to support the development of new technologies and processes for both automotive and renewable power generation applications.”

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The Stainless Monthly Metals Index (MMI) fell by 1.9% for this month’s reading.

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Base price and surcharge increases

North American Stainless (NAS) increased 304, 304L and 316L effective Oct. 1 by reducing the discount by two points. For 304, this is an increase of approximately $0.0350/lb.

NAS increased 430 and other 200 and 300 series by reducing the discount by three points. Non-430 ferritics will increase by $0.04/lb, which makes for a total increase in 2021 of $0.31/lb.

Furthermore, alloy surcharges are increasing in October. NAS’ October alloy surcharge for 304 is $1.0641/lb, a decrease of $0.0038/lb compared to September.

U.S. imports

U.S. stainless steel imports decreased by 6.7% from a value of $343.6 million to $320.5 million, according to US Census Bureau data from July to August.

While most forms of stainless steel imports declined, wire rods imports nearly doubled. Imports jumped by 57.6% to a value of $4.4 million during the same period.

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London Metal Exchange CEO Matthew Chamberlain has expressed doubt over sourcing aluminum from exclusively low-carbon sources in the short term.

“There have been calls for us to exclude high-carbon production, but we don’t think that’s the right thing to do because there simply would not be enough aluminum on the market,” Chamberlain said on Oct. 11 in an interview with Bloomberg Markets and Finance.

Prices on the LME would also be significantly higher than they are now, he warned.

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LME aluminum price on the rise

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The LME’s three-month bid price for the base metal reached $3,019 per metric ton Oct. 11. That is up by one-third from $2,254 on April 12, data from the bourse showed.

Higher demand, plus production cuts in China, have helped to sharply boost benchmark aluminum prices over the past six months. The world has also faced supply chain disruptions as the global economy restarts after the COVID-19 pandemic.

Chamberlain could not say how much of a premium end-users would potentially pay on the base metal with a low-carbon footprint.

The LME’s announcement on the same day of its plans to collaborate with Düsseldorf-based spot trading platform Metalshub would help buyers to acquire the greener aluminum as well as to determine potential premiums, he said.

“What we foresee is a world where you have the LME to deal with high-level hedging … but there is a more digital way where you can then go and source specific parcels of metal with specific sustainability characteristics like low carbon,” Chamberlain stated.

Future of aluminum

Responding to a question over whether or not the exchange would potentially no longer accept “dirty” aluminum, Chamberlain stated that he did not rule it out in five to 10 years, as views on carbon vary.

“People have different views on the carbon footprint of our product, and that’s why we believe that disclosure and user choice is the right way to deal with it,” Chamberlain said.

“I certainly think the world could end up there,” where only lower-carbon is available, Chamberlain noted.

The bourse already does not accept metal that has exploited child labor or that has supported conflict financing as the world has decided that those are negative things, he added.

Chamberlain made the statements at the start of the LME Week, which is taking place in 2021 from Oct. 11-15. The event is an annual get-together for metal industry participants along the entire supply chain. The week includes seminars on trends and outlooks, along with networking sessions and the LME Dinner.

Events for the week in 2021 are more curtailed due to ongoing concerns over the COVID-19 global pandemic.

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The Raw Steels Monthly Metals Index (MMI) dropped by 2.4%, as most forms of steel around the world declined, despite coking coal prices being at all-time highs.

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Global steel production

According to the World Steel Association, global steel production declined for the fourth consecutive month in August.

The 64 reporting countries to World Steel produced a total of 156.8 million tons (5.06 million tons per day) for August, compared to 171.3 million tons (5.71 million tons per day) in April, which was the highest monthly production of the year on a tons-per-day basis.

China continues as the world’s top producer by eight times more than the second-largest producer, India. Chinese production during August reached 83.2 million tons (2.68 million tons per day), over 50% of global production.

China, however, posted a fourth consecutive month of production declines on a tons-per-day basis. Since April, China’s daily steel production fell by 17.8%.

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The Aluminum Monthly Metals Index (MMI) went up by 3.1% this month, as all forms of aluminum jumped this month.

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Primary capacity interest

Historically high prices, increasing demand and production cuts in China have opened a window of opportunity for aluminum producers.

Alcoa announced it is restarting the Alumar aluminum smelter in Sao Luis, Brazil. Alcoa owns 60% of the smelter, while South32 owns 40%. Operations were suspended in 2015, as aluminum prices declined. Its restart could bring a total operating capacity of 447,000 metric tons, with the first molten metal expected in the second quarter of 2022.

With this planned restart, Alcoa will have approximately 80% of its 2.99 million metric tons of global aluminum smelting capacity in operation.

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This morning in metals news: miner Anglo American announced the results of a feasibility exploring the potential for hydrogen in the South African economy; General Motors last week announced plans to double its revenue; and, lastly, steel prices have showed signs of flatlining of late.

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Anglo American explores role of hydrogen in South Africa

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In collaboration with several parties, miner Anglo American recently conducted a feasibility study “to explore the potential for a hydrogen valley anchored in the platinum group metals-rich Bushveld geological area, along the industrial and commercial corridor to Johannesburg and to the south coast at Durban.”

“The opportunity to create new engines of economic activity through hydrogen has been validated through this feasibility study with our partners,” said Natascha Viljoen, CEO of Anglo American’s PGMs business. “As a leading producer of platinum group metals (PGMs), we have for some years been working towards establishing the right ecosystem to successfully develop, scale-up and deploy hydrogen-fuelled solutions.”

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