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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, including the Airbus–Boeing subsidy saga, industrial production, Liberty Steel’s bid for German firm Thyssenkrupp’s steel division and much more.

The MetalMiner 2021 Annual Outlook consolidates our 12-month view and provides buying organizations with a complete understanding of the fundamental factors driving prices and a detailed forecast that can be used when sourcing metals for 2021 — including expected average prices, support and resistance levels.

Week of Oct. 19-23 (Airbus-Boeing saga, industrial production and more)

• Stuart Burns on the latest developments in the Airbus-Boeing saga over subsidies.
• Copper prices dipped to start the week.
• Industrial production in the U.S. fell in September, breaking a streak of four straight months of growth.
• Global aluminum production fell from August to September.
• Burns on Liberty Steel’s offer to buy German firm Thyssenkrupp’s steel division.
• Privately owned housing starts in the U.S. jumped 11.1% in September on a year-over-year basis.
• General Motors announced plans to invest $2 billion to repurpose its Spring Hill, Tennessee plant for the production of electric vehicles.
• India’s domestic steel demand is finally recovering.
• The ILZSG forecast global lead and zinc demand to decline this year before recovering in 2021.
• Global steel groups want governments to intensify efforts toward tackling the problem of excess capacity.
• Meanwhile, in South America, Burns weighed in on the Bolivian election results’ impact on the country’s mining sector.
• Although copper dipped to start the week, on a macroscopic level investors are bullish on copper and the metal’s fundamentals appear to be strong — how much more could Dr. Copper rise?
• Finally, Nucor and Cleveland-Cliffs released their Q3 financial results.

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The copper price breached $7,000 per ton this week, reaching $7,034 per ton on the LME — the highest level since June 2018.

What does this tell us? Is demand robust and supply constrained?

The MetalMiner 2021 Annual Outlook consolidates our 12-month view and provides buying organizations with a complete understanding of the fundamental factors driving prices and a detailed forecast that can be used when sourcing metals for 2021 — including expected average prices, support and resistance levels.

China’s recovery boosts copper price

Well, the world’s largest consumer, China, is certainly back to positive GDP growth. Its recovery from the pandemic lockdowns has been rapid and ahead of the rest of the world.  The country’s early application of infrastructure investment aided the recovery, which in turn boosted demand.

Higher refined metal imports support the impression China is on a 2009-2010 type stimulus led ramp-up in demand.

The reality is it will be much more highly nuanced this time, but a good story takes some discounting.

Supply side struggles

On the supply side, the pandemic has disrupted production in major copper-producing countries, like Chile.

Antofagasta advised this week their third-quarter production would be down 4.6%, according to the Financial Times.

The miner is not alone.

BHP, Glencore and Anglo American are also facing the same supply market risks. The whole Chilean market faces the risk of higher taxes and tighter water controls if Chile’s proposed re-writing of the constitution goes through.

An obvious marker driving copper price support is inventory levels. However, MetalMiner research has shown inventory and price have a very poor correlation on anything other than a short-term basis. Copper’s increased refined imports this year have in part gone to the restocking of China’s copper stocks rather than actual demand.

The Financial Times reports China has stockpiled 800,00 tons this year. At the same time, falling LME stocks are cited as evidence of metal shortage. However, what we are really seeing is a repositioning of inventory from outside China to inside China.

Is that demand or just speculative build?

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The U.S. steel sector continued to show incremental gains in capacity utilization last week.

Capacity utilization by U.S. mills rose to 69.4% for the week ending Oct. 17, 2020, according to the American Iron and Steel Institute (AISI).

See why technical analysis is a superior forecasting methodology over fundamental analysis and why it matters for your steel buy.

U.S. steel sector continues capacity gains

For the week ending Oct. 17, the U.S. steel sector’s capacity utilization rate rose to 69.4%, producing 1.54 million tons in the process.

The weekly output marked a 15.0% year-over-year decline. Output during the week ending Oct. 17, 2019, totaled 1.81 million tons at a capacity utilization rate of 78.0%.

Meanwhile, production for the week ending Oct. 17, 2020, rose 2.2% from the previous week. For the week ending Oct. 10, 2020, production reached 1.50 million net tons at a capacity utilization rate of 67.9%.

YTD output down 19.4%

Adjusted year-to-date production through Oct. 17 reached 62.48 million net tons. Capacity utilization rate during the period reached 66.3%.

The year-to-date output is down 19.4% from the 77.55 million net tons during the same period last year. The capacity utilization rate during that period reached 80.1%.

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This morning in metals news: LME copper gained Monday while SHFE copper retraced; the Pilbara Ports Authority recently released September shipping figures; and top copper producer Chile marks the one-year anniversary of widespread protests.

The MetalMiner 2021 Annual Outlook consolidates our 12-month view and provides buying organizations with a complete understanding of the fundamental factors driving prices and a detailed forecast that can be used when sourcing metals for 2021 — including expected average prices, support and resistance levels.

SHFE copper price slips

The SHFE copper price fell 0.4% on Monday, Kitco reported, down to CNY 51,280 ($7,653.16) per tonne.

Meanwhile, LME copper ticked up 0.2% to $6,753 per tonne.

PPA releases shipping data

Australia’s Pilbara Ports Authority recently reported it delivered a monthly throughput of 61.3 million tonnes in September 2020.

The September throughput marked a 8% year-over-year increase.

Meanwhile, at the critical iron ore terminal of the Port of Port Hedland, monthly throughput reached 46.1 million tonnes. Furthermore, of that total, iron ore exports accounted for 45.6 million tonnes. The monthly throughput from Port Hedland marked a 9% year-over-year increase.

Chile marks anniversary of October 2019 protests

Lastly, Reuters reported thousands gathered in the capital city of Santiago, Chile, to commemorate the one-year anniversary of protests in the country.

The protests last year led to over 30 deaths and thousands of injuries, Reuters reported.

Chile is the world’s No. 1 copper producer. Copper market watchers will want to keep an eye on developments in the country and monitor any potential supply disruptions.

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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: the nickel market; aluminum prices on the SHFE and LME; China’s metals rebound; and much more.

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Week in Review, Oct. 12-16 (nickel market, China’s metals rebound and more)

• The U.S. Department of Commerce last week issued a preliminary affirmative determination on anti-dumping duties applying to common alloy aluminum sheet imports from 18 countries.
• The nickel market is set to experience some level of disruption, MetalMiner’s Stuart Burns explained.
• Aluminum prices trended sideways in September, MetalMiner’s Maria Rosa Gobitz noted in this month’s Aluminum MMI report.
• Gobitz also broke down the month that was in the world of copper.
• The U.S. steel sector’s capacity utilization rate jumped to 67.9%.
• China’s economic recovery has powered the rebound for a number of metals markets.
• U.S. steel prices made gains across the board in September.
• U.S. imports of stainless steel products surged in September.
• Steel shipments from U.S. mills fell 22.9% in August.
• Chinese President Xi Jinping recently unveiled an ambitious plan to bring the country to carbon neutrality. However, is it feasible and, moreover, likely to take place as laid out?
• We released the October MMI report earlier this week, including coverage of 10 key metals areas.
• Circling back to the U.S.’s new anti-dumping duty on aluminum sheet, India’s sheet exports to the U.S. likely won’t be significantly affected.

The MetalMiner 2021 Annual Outlook consolidates our 12-month view and provides buying organizations with a complete understanding of the fundamental factors driving prices and a detailed forecast that can be used when sourcing metals for 2021 — including expected average prices, support and resistance levels.

This morning in metals news: the October Monthly Metals Index (MMI) report is out; the E.U. is reportedly considering imposing carbon border fees; and Alcoa released its third-quarter financial earnings.

The MetalMiner 2021 Annual Outlook consolidates our 12-month view and provides buying organizations with a complete understanding of the fundamental factors driving prices and a detailed forecast that can be used when sourcing metals for 2021 — including expected average prices, support and resistance levels.

October 2020 MMI report is out

For followers of our MMI series, the October 2020 MMI report is out and available for download.

The report covers 10 indexes: Automotive, Construction, Rare Earths, Renewables, GOES, Global Precious, Aluminum, Copper, Stainless Steel and Raw Steels.

To download the report, visit the MMI landing page.

E.U. mulls carbon border fee

Aside from the October 2020 MMI report, as Stuart Burns alluded to in his report earlier today, the E.U. is considering carbon border fees, Reuters reported.

Citing a senior official, Reuters reported the fees would apply to polluting goods for steel, cement and electricity.

Read more

Hor/Adobe Stock

This morning in metals news: August 2020 steel shipments by U.S. steel mills fell 22.9% year over year; Norsk Hydro announced the termination of a memorandum of understanding; and, finally, the copper price made mid-week gains.

The MetalMiner 2021 Annual Outlook consolidates our 12-month view and provides buying organizations with a complete understanding of the fundamental factors driving prices and a detailed forecast that can be used when sourcing metals for 2021 — including expected average prices, support and resistance levels.

August 2020 steel shipments

August 2020 steel shipments from U.S. mills fell by 22.9% on a year-over-year basis, the American Iron and Steel Institute (AISI) reported.

U.S. steel mills shipped 6.5 million net tons in August. The August total, however, marked an 8.2% increase from the previous month.

Furthermore, in the year to date, U.S. steel shipments reached 53.8 million net tons, down 17.0% compared with the first eight months of 2019.

Norsk Hydro terminates MOU

Norsk Hydro recently announced the termination of a memorandum of understanding (MOU) with Golar Power and CELBA.

The MOU included Hydro’s alumina refinery Alunorte, Golar Power Brasil Participações and Centrais Elétricas Barcarena (CELBA), with the ultimate goal of bringing liquified natural gas (LNG) to Hydro’s Alunorte refinery in Brazil.

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The Stainless Monthly Metals Index (MMI) decreased by 3.8% for this month’s index value, as U.S. stainless imports surged last month.

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

U.S. stainless imports rise 76%

The U.S. Department of Commerce reported the U.S. imported a total of 91,600 metric tons of all stainless products during September.

The September total marked a 76% year-over-year increase. In addition, the September total marked a 42% increase from the 2019 average of 64,600 metric tons.

The higher-than-usual import total is in line with the unexpected demand increase in major appliances, which use stainless steel sheets.

The U.S. market has a shortage in most appliances. This is due to customers storing larger amounts of food, plus shutdowns or personnel reduction manufacturers undertook for a few months. Additionally, manufacturers did not ramp up production to full capacity due to economic uncertainty.

These circumstances created a production backlog that might last well into 2021 and kickstart demand for stainless steel.

However, not all stainless products have recovered.

Outokumpu announced its intention to scale down its long products business, which includes wire rod, wire, bar, rebar and semi-finished long products.

The decision comes after the business made small net sales and negative adjusted EBITDAs. The scaledown measures include: personnel reduction, increasing operational efficiency and focusing on higher-value specialty grades.

E.U. imposes tariffs

Earlier we touched on U.S. stainless imports, which posted significant gains in September.

Meanwhile, the European Commission decided to impose import duties on hot-rolled stainless steel coil and sheets from China, Indonesia and Taiwan.

The tariffs from China are up to 19%. Meanwhile, they go up to 17.3% for Indonesian products and up to 7.5% from Taiwan. The tariffs kicked in Oct. 8.

The Commission made the decision after conducting an investigation. The probe ultimately determined the products were sold at artificially low prices, hurting producers from Belgium, Italy and Finland.

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The Raw Steels Monthly Metals Index (MMI) increased 2.8% for this month’s index value amid a steel market recovery.

Stop obsessing about the actual forecasted steel price. It’s more important to spot the trend. See why.

Steel market recovery

All U.S. forms of steel prices increased throughout September.

HRC, CRC and HDG prices increased rapidly by 20.4%, 16.4% and 15.4%, respectively. Meanwhile, the plate price increased 4.3%. The wire rod price increased by 1.5%.

However, the Chinese steel market showed the opposite trend or traded sideways.

The Chinese HRC price dropped by 4.4%. CRC increased by 0.22% and HDG had a 6.4% jump the first day of September but remained flat for the rest of the months and through the first two weeks of October.

The prices’ increase in the U.S. market were followed by an increase in capability utilization rate. By the week ending Oct. 3, raw steel production increased to 66.1%. As such, the year-to-date capability utilization rate rose to 66.2% according to the American Iron and Steel Institute.

Over in the Asian market, there are overcapacity concerns.

The South East Asia Iron and Steel Institute (SEAISI) reported that the region, particularly Chinese steelmakers and banks, might have overinvested in new basic oxygen furnace (BOF) integrated mills.

The region’s current capacity is approximately 151 million metric tons. The proposed investment could bring it up to 50 million metric tons, creating 60 million metric tons of overcapacity from BOF alone. It is important to note that BOF mills cannot operate at low capacity.

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A relatively swift exit from pandemic lockdowns and the impact of stimulus-led infrastructure investment have powered China’s metals rebound. Furthermore, the Shanghai Futures Exchange has continued its summer disconnect from the London Metal Exchange aluminum price, which started in April of this year.

The resulting arbitrage window has sucked in imports of aluminum primary and remelt alloy casting ingot. As a result, China’s imports are at levels not seen since the aftermath of the financial crisis in 2009.

Are rising MW premiums causing concern? See how service centers take advantage of that. 

China leads the metals rebound as aluminum imports surge

Combined imports of primary metal and unwrought alloy totaled 393,000 tonnes, just shy of the previous record of 394,000 tonnes in April 2009, according to Reuters. Furthermore, cumulative net imports reached 653,000 tonnes so far.

Alloy imports should be seen as in part as a replacement for lower scrap imports. However, even so, the disconnect has continued through the third quarter. Although that disconnect is expected to narrow in the run-up to year’s end, it underlines the current two-speed nature of the global manufacturing economy.

Meaning, there’s China and then there’s the rest of the world.

China tightened up on scrap grade import controls last year and precipitated a switch to imports of refined remelt alloy over scrap, even before the pandemic took hold.

Southeast Asian regional remelters have taken in the displaced scrap and exported alloy ingot to China. A similar trend is taking place with copper scrap and alloy ingot, possibly suggesting a structural shift that is here to stay.

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