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Articles on: Metal Prices

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Rising trade tensions are all the talk these days, stemming from an increasingly complicated web of tariffs, counter-tariffs and World Trade Organization (WTO) disputes, not to mention the ongoing talks surrounding renegotiation of the 24-year-old North American Free Trade Agreement (NAFTA).

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On Wednesday, Secretary of Commerce Wilbur Ross testified before the Senate Finance Committee, during which he was grilled by committee members on the Trump administration’s current and proposed trade actions, including Section 232 steel and aluminum tariffs, the recently launched Section 232 automotive probe and the Section 232 exclusion request process. (The Department of Commerce this week announced it would grant 42 exclusion requests and deny 56. The total 98 requests in question represented less than 1% of the more than 20,000 requests received.)

The full video of the Wednesday hearing is available on the Senate Finance Committee website.

“Commerce has received more than 20,000 steel and aluminum exclusion requests (including resubmissions) and has posted more than 9,200 for public review and comment,” Ross said during his opening statement. “Commerce has also received more than 2,300 objections to exclusion requests. Review of exclusion requests and related objections is being conducted on a case-by-case basis in a fair and transparent process.”

In his opening statement, Senate Finance Committee Chairman Orrin Hatch (R-Utah) expressed concerns about the tariffs’ impact on domestic businesses.

“American manufacturers are already suffering the consequences of increased cost and decreased supply of steel and aluminum inputs,” Hatch said. “Take for example, Bish’s Steel Fabrication. Bish’s makes custom industrial equipment in my hometown, Salt Lake City, Utah, and sells to customers in the United States and around the globe. Bish’s has been in business since 1945, but because of the Section 232 tariffs, they are worried about their future. Steel prices are going up. Not just foreign steel subject to tariffs, but also U.S. steel.

“As a consequence, Bish’s has lost its competitive edge against foreign manufacturers and the company tells me that contracts for future work have all but dried up.”

Questions on the 232 Exclusion Process

Hatch also expressed reservations regarding the Section 232 tariff exclusion process.

“It should come as no surprise that many of us on the committee have concerns about the process, effects, and strategy behind these investigations and resulting actions,” he said. “That includes the serious problems that Senator Wyden and I raised in April about the product exclusion process, a process that still needs significant improvement.”

Ranking Member Ron Wyden (D-Oregon) also offered criticism of the process and its efficacy, and requested that Ross provide a specific timetable with specific fixes for the process so that “the small businesses and the workers who are contacting us can really have a sense of what’s going to happen.”

“It’s impossible to commit to a specific timetable when we don’t know how many requests are yet to come in,” Ross said. “That’s one big problem. As you can see, there are still requests coming in.”

Wyden, however, suggested the Department of Commerce was not prepared for the volume of requests that have come in.

Section 232 Auto Probe

On May 23, the Department of Commerce self-initiated a new Section 232 investigation into whether imports of automobiles and automotive parts threaten to impair the country’s national security.

In response to a question from Hatch regarding national security implications, Ross responded that it was still too early in the investigation to identify those factors. He added that as required by the law, he has sent a notification to Secretary of Defense James Mattis to seek his input on the investigation, as was done with the steel and aluminum cases.

In response to a later question from Sen. Chuck Grassley (R-Iowa), Ross added there is no decision yet as to whether to recommend tariffs.

“We are at the early stages of the process,” Ross said. “We have invited the various participants in the industry to make their submissions. They requested some extra time, so we gave them an extra week to do so.”

Production Restarts

In his opening statement, Ross argued for a positive effect of the tariffs, that being domestic manufacturers restarting previously idled capacity, listing a number of company announcements (including U.S. Steel’s announcements this year that it will restart two blast furnaces at its Granite City, Illinois plant).

Grassley asked Ross how long it will take for domestic plants to be able to ramp up production enough to bring prices of steel back down. Ross said he couldn’t identify exactly when the production restarts would come to fruition, but that they should happen in most cases by the end of the year.

He added, however, that certain “intermediary parties” withholding inventory from the market has contributed to price increases and that an investigation is being started to determine whether people “illegitimately are profiteering out of the tariffs.”

“So the price of steel and for a while the price of aluminum went up far more than is justified by the tariffs,” Ross said.

Canadian Steel

The Trump administration’s announcement late last month that it would let temporary exemptions from the Section 232 steel and aluminum tariffs expire for the E.U., Canada and Mexico have led to threats of retaliation from the intended parties and questions from some domestically about the purpose of such tariffs against market-economy trading partners and allies.

Sen. Michael Bennet (D-Colorado) asked Ross about Canada and how its steel industry is considered a threat to national security in the context of Section 232.

“What is the national security rationale for putting a tariff on the Canadian steel industry with whom we have a trade surplus?” Bennet asked.

Ross noted the remedy has to be a global solution, citing efforts by China, for example, to reroute exports through third-party countries in order to avoid tariffs.

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“The only way we’re going to solve the global steel overproduction and overcapacity [problem] is by getting all the other countries to play ball with us,” Ross said. “And while they’re complaining bitterly about the tariffs, the fact is they’re starting to take the kind of action, which if they had taken sooner, would have prevented this crisis.”

Sen. Pat Toomey (R-Pennsylvania), however, was not satisfied with Ross’ answer.

“What policy change would the Canadians have to make, what would they have to do so that the administration would stop taxing my constituents on the steel that they buy from Canada?” Toomey asked.

Ross suggested breakdown of talks on NAFTA contributed to the decision to lift the Section 232 exemptions for Canada and Mexico, and that the NAFTA talks could get a second wind on the heels of the July 1 Mexican presidential election.

“Our objective is to have a revitalized NAFTA, a NAFTA that helps America,” Ross said. “As part of that, the 232s would logically go away, both as it related to Canada [and] Mexico.”

Toomey followed up by arguing the proposed sunset clause suggested by the American negotiating team would lead to a “lesser” NAFTA and said the administration’s trade actions are based on “economic nationalism,” not national security considerations.

He also alluded to the recent bill he proposed along with Sen. Bob Corker (R-Tennessee), a bill which calls for giving Congress the authority to block the president’s tariff actions.

“I would urge my colleagues to support the legislation that Sen. Corker and I have, which would restore to Congress the authority to make the final decisions about the imposition of those tariffs.”

Sen. Rob Portman (R-Ohio) said he supported enacting trade remedies in the case of China, but that Section 232 should be used “very carefully and very selectively” and, more specifically, for national security reasons.

“Although the WTO has not yet adjudicated this case, if we’re pushing the envelope beyond national security, I think we lose a tool that could be very important for us in a true national security situation,” he said. “[I’m] deeply concerned about its application to Canada, as an example. … Mexico, the E.U., I don’t see the national security perspective there.”

The U.S. Department of Commerce. qingwa/Adobe Stock

This morning in metals news, the U.S. released the first round of exclusion request responses vis-a-vis the Section 232 steel tariff, copper bounces back and ThyssenKrupp looks to form a joint venture in China.

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Exclusion Time

The U.S. Department of Commerce announced Wednesday evening that it had begun granting Section 232 exclusion requests.

“This first set of exclusions confirm what we have said from the beginning – that we are taking a balanced approach that accounts for the needs of downstream industries while also recognizing the threatened impairment of our national security caused by imports,” Commerce Secretary Wilbur Ross said in a prepared statement.
The DOC announced it had decided to grant 42 exclusions. The seven requesting companies import steel products from Japan, Sweden, Belgium, Germany and China, according to the DOC release.
The seven companies receiving the exclusions are:
  • Schick Manufacturing, Inc. of Shelton, Connecticut
  • Nachi America Inc. of Greenwood, Indiana
  • Hankev International of Buena Park, California
  • Zapp Precision Wire of Summerville, South Carolina
  • U.S. Leakless, Inc. of Athens, Alabama
  • Woodings Industrial Corporation of Mars, Pennsylvania
  • PolyVision Corporation of Atlanta, Georgia

In addition, the DOC said it would be denying 56 steel tariff exclusion requests from 11 different companies.

Copper Moves Away From Three-Week Low

The price of copper recovered on the heels of hitting a three-week low, as measures by the Chinese government could work to augment demand in the country, Reuters reported.

Three-month LME copper moved up 0.4% on Thursday, according to the report.

ThyssenKrupp JV in China

German firm ThyssenKrupp — which has been in the news of late in the context of its joint venture plans with Tata Steel — has plans to team up with two companies to produce steel wheels in China, according to Reuters.

MetalMiner’s Annual Outlook provides 2018 buying strategies for carbon steel

ThyssenKrupp would enter a JV with Zhejiang Jingu and Ansteel, according to the report, with the German firm owning 34% of the JV.

Copper has been on a good run, you say?

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It has been drifting down for much of the first quarter and it has only been the scare of a strike at Escondida that has returned prices to levels last seen at the start of the year.

Source: London Metal Exchange

That is good in the sense that despite a persistent deficit market narrative around copper for the last few years, the reality is the copper market is pretty much balanced, according to Reuters.

Figures are approximations at best, in part because figures out of China are notoriously unreliable and partly because global copper supply is made up of two parts – primary, which at least outside of China can be estimated quite well, and scrap, which is an opaque market at the best of times.

When the copper price was low in 2015-16, copper scrap was hoarded, both intentionally and through lack of interest. But as the price hit highs of $7,300 per ton last December, that store was drawn onto the market, causing a surge in supply.

According to ICSG data quoted by Reuters, refined output actually fell slightly in 2017. Scrap, however, has made up the shortfall. According to the ICSG copper supply and demand were almost evenly matched in the last quarter of 2017, a situation that has probably moved into surplus with greater scrap supply this year.

Investors rushing for the exit in the form of mass dumping of long positions since the end of last year signals just how significant the perceived turnaround in copper’s fortunes has been. Year-end positions were in the region of 100,000 contracts but stand at just under 4,000 contracts now. Meanwhile, global inventories have surged, with 348,000 tons added across the three global exchanges (LME, CME, SHFE), according to Reuters. At a cumulative 889,000 tons at the end of March, exchange inventory was at its highest since 2003, the news source reports.

Under the circumstances, the copper price has held up rather well.

The narrative of strong global growth only recently took a knock from slower Chinese growth following a crackdown on debt in Asia’s largest economy, despite the fact copper imports – both refined and unrefined – have held up well this year.

So, is copper ripe for a correction? No, probably not — the market is balanced and threats to supply remain the most significant dynamic, but a return to a bull run is looking unlikely.

MetalMiner’s Annual Outlook provides 2018 buying strategies for carbon steel

Consumers can probably look for a settlement in Chile to herald an easing in prices rather than a collapse.

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This morning in metals news, energy companies are lobbying for exemptions from the U.S. steel tariff, U.S. steel exports dropped in April compared with the previous month, and steel and iron ore prices fell by the greatest amount since March.

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Asking for Exemptions

Several U.S. energy companies are looking to win exemptions from the U.S.’s 25% steel tariff, Reuters reported.

Of the nearly 21,000 exclusion requests received by the U.S. Department of Commerce, more than 500 are related to pipes and related materials, according to the report.

U.S. Steel Exports Down in April

The U.S.’s steel exports fell by 1% in April compared to the previous month, according to American Iron and Steel Institute (AISI) data cited by the Times of Northwest Indiana.

The steel export level in April, however, was up 0.5% compared with April 2017.

Steel Prices Drop

Prices of steel and iron ore fell by the greatest amount since March, according to Bloomberg, as trade tensions ratcheted up in the last week. The U.S. announced $50 billion in tariffs on Chinese imports on Friday, and President Donald Trump threatened an additional $200 billion in tariffs.

MetalMiner’s Annual Outlook provides 2018 buying strategies for carbon steel

Iron ore prices fell to a two-month low, according to the report, while LME nickel, zinc and copper all also fell.

China could be said to be making hay while the sun shines.

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A report in AluminiumInsider quotes China’s General Administration of Customs, saying the country’s total exports last month came to 485,000 metric tons, accounting for the second-highest total in the administration’s record-keeping history.

May’s output beat April’s total of 451,000 metric tons by 7.5% and bested May shipments a year earlier of 430,000 metric tons (a 12.8% increase). Only December 2014 had been higher at 542,700 metric tons.

But suggestions that this is the start of a flood may be premature.

Read more

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

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MetalMiner’s Annual Outlook provides 2018 buying strategies for carbon steel

So far in June, base metal prices have increased. Copper, zinc and tin increased sharply. Meanwhile, aluminum and nickel also increased, but a little less dramatically.

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Copper Rally

Copper prices breached the $7,300/mt level. Prices trading over this resistance level signals strength for the metal.

Source: MetalMiner analysis of FastMarkets

Copper has also outperformed in China, which may support copper prices longer.

Chinese copper imports have surged since the beginning of the year. According to Chinese customs data released at the beginning of this month, copper imports increased to 475,000 tons. The 22% increase compared to April imports marks the highest total in more than 17 months.

A strong copper appetite for the biggest world consumer, China, adds support to the current copper uptrend.

Zinc Price Rise

Zinc prices also increased this month. Zinc prices started a short-term downtrend in February. However, prices started to increase again this month.

Trading volumes seem strong, which could signal additional price strength.

Source: MetalMiner analysis of FastMarkets

Zinc prices remain in a long-term rally, which started at the beginning of 2016. During this rally, zinc prices have reached more than 10-year highs.

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What This Means for Industrial Buyers

Buying organizations should remember that industrial metals remain in a bullish market. Commodities increased, while the U.S. dollar showed weakness again. Therefore, base metals could continue to increase in the medium term.

Buying organizations reading the Metal Monthly Outlook had the opportunity to identify some buying signals at the beginning of April to reduce price risk by purchasing some volume.

For those who want to understand how to reduce risks, take a free trial now to the MetalMiner Monthly Outlook.

In case you missed it, our latest round of Monthly Metals Index (MMI) reports is in the books.

Tariffs once again dominated the headlines last week.

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With negotiations breaking down, the U.S. elected to impose the Section 232 steel and aluminum tariffs on the European Union, Canada and Mexico. The trio previously had a temporary exemption, which had been extended by 30 days the previous month, moving the deadline back to June 1.

However, the U.S. opted to slap the tariffs on the metals, sparking responses from each with respect to retaliatory measures.

Trade relations took another hit this past weekend, as President Donald Trump announced he would withdraw support from the G7 communique, bristling at comments Canadian Prime Minister Justin Trudeau had made regarding the U.S. tariffs on steel and aluminum.

Aside from policy, a few other highlights from the past month in metals:

  • The Aluminum MMI picked up another point for an index reading of 101.
  • U.S. automotive sales bounced back by 2.0% in May after a down April.
  • Construction spending in April rose 1.8% from the previous month, according to Census Bureau data.
  • Both LME nickel prices and stainless steel surcharges ticked up last month.

MetalMiner’s Annual Outlook provides 2018 buying strategies for carbon steel

Read about all of the above and much more by downloading the June MMI report below.

The Raw Steels Monthly Metals Index (MMI) increased three points this month, moving up for a June reading of 92.

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Domestic steel price momentum seems to keep going, with domestic steel prices increasing again. Chinese steel prices also increased in May, adding support to higher domestic steel prices.

Domestic steel prices remain at more than seven-year highs.

Source: MetalMiner data from MetalMiner IndX(™)

Steel prices also increased at the beginning of June. The pace of the increases seems to have slowed down, but prices remain in an uptrend.

Tariffs

June 1 served as the latest steel and aluminum tariff exemption deadline. However, on May 31 President Trump announced that no country exemptions will continue. Therefore, Canada, Mexico and the E.U. became subject to the steel and aluminum tariffs of 25% and 10%, respectively.

MetalMiner considered different policy scenarios with regard to tariffs. All of them — except a continued exemption of the steel tariffs — supported the U.S. domestic steel price increase. The current situation will support steel prices further.

Mexico has already hit back with trade tariffs on some other products (such as pork and bourbon) from the U.S.

Chinese Steel Prices

Chinese steel prices recovered from a  previous downtrend and increased again in May. Early June price indications also show higher prices and a recovery in Chinese steel prices.

Source: MetalMiner data from MetalMiner IndX(™)

Chinese steel prices fell in conjunction with their historical seasonal cycle, which appeared stronger due to the overcapacity closures and higher-than-expected production during the winter season in China. However, prices usually start to increase again around April-May, signaling the start of the construction season, when steel demand is high.

Despite recent price increases, Chinese steel remains cheaper than U.S. domestic steel (even with a  25% steel tariff). This comes down to the price run-up of U.S. domestic steel prices, which have moved toward 2012 highs.

Scrap Steel

Contrary to domestic steel price movements, domestic shredded scrap traded more sideways at the beginning of June. Price increases have slowed down, as shredded scrap prices moved toward 2014 levels.

Source: MetalMiner data from MetalMiner IndX(™)

However, given the current domestic steel price movements, buying organizations can expect higher shredded scrap prices in the coming months.

What This Means for Industrial Buyers

As steel prices remain high, buying organizations may want to follow price movements closely to decide when to commit to mid- and long-term purchases.

Buying organizations looking for more clarity on when to buy and how much to buy may want to take a free trial now to our Monthly Metal Buying Outlook.

Actual Raw Steel Prices and Trends

The U.S. Midwest HRC 3-month futures price increased this month by 12.4%, going up to $905/st.

Chinese steel billet prices decreased by 0.2%, while Chinese slab prices rose by 1.2%, moving to $665/mt.

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The U.S. shredded scrap price closed the month at $370/st, trading flat from last month’s reading.

The Stainless Steel Monthly Metals Index (MMI) skyrocketed this month, increasing by seven points. The current reading stands at 84.

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The index inched higher driven by the increase in stainless steel surcharges and a sharp increase in LME nickel prices in May. Other related metals in the stainless steel basket also increased.

LME Nickel

Nickel price momentum seems to have recovered again.

LME nickel prices increased at a quicker pace in May. The increases continued through the beginning of June, driving prices to 2014 highs. 

Source: MetalMiner analysis of FastMarkets

LME nickel prices keep moving away from 2017 lows.

MetalMiner previously recommended buying some volume forward. Given the current uncertainty in the steel and stainless industries, nickel prices remain supported for the short term.

In addition, a fundamental tightness in the nickel market has added support to the latest nickel price increases.

Domestic Stainless Steel Market

Following the recovery in stainless steel momentum, domestic stainless steel surcharges increased again this month. The 316/316L-coil NAS surcharge reached $1.02/pound.

Source: MetalMiner data from MetalMiner IndX(™)

The pace of stainless steel surcharge increases, however, appears to have slowed again this month. Yet stainless steel surcharges remain in a clear uptrend and rest well above 2015-2017 lows.

What This Means for Industrial Buyers

Stainless steel momentum appears stronger this month, as steel prices are skyrocketing. As both steel and nickel remain in a bull market, buying organizations may want to follow the market closely for opportunities to buy on the dips.

To understand how to adapt buying strategies to your specific needs on a monthly basis, take a free trial of our Monthly Outlook now.

MetalMiner’s Annual Outlook provides 2018 buying strategies for carbon steel

Actual Stainless Steel Prices and Trends

Chinese 304 stainless steel coil prices increased again this month by 2.02%, while Chinese 316 stainless steel coil prices rose further by 6.61%. Chinese Ferrochrome prices increased this month by 2.9%, to $1,990/mt.

Nickel prices increased by 10.5% to $15,210/mt.