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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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 Oct. 4-8

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• Stuart Burns on the energy crisis in China.
• New orders for manufactured goods rose in August, the Census Bureau reported.
• China’s rare earths production is set to rise this year.
• Building on the energy theme, Burns zeroed in on India, particularly its coal crisis.
• Cleveland-Cliffs and the union representing workers at Rockport Works have reached a three-year labor deal.
• According to a recent report, Southeast Asia needs to invest approximately $2 trillion in renewable energy, electric vehicles and waste management.
• U.S. construction spending finished virtually unchanged from the previous month in August.
• Steel capacity utilization fell to 84.8% last week, the American Iron and Steel Institute (AISI) reported.
• The ongoing semiconductor shortage and resulting low inventories dented automotive sales in the third quarter.
• Nucor announced it is launching a new line of net-zero carbon steel products.
• Europe is also facing energy-related challenges.
• Thyssenkrupp Steel is restarting a blast furnace at its Duisburg plant.
• Copper demand doubts are weighing on prices for the red metal.
• Nonfarm payroll employment in the U.S. rose by 194,000 jobs in September.

The MetalMiner 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 2022.

The Copper Monthly Metals Index (MMI) fell 1.7%, as the copper demand picture could be set to weaken and the LME three-month and China primary cash prices fell month over month.

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The Fed effect and Congress delays

As the Federal Reserve prepares to scale down its pandemic strategy, copper prices dropped. The Fed reported it would hike rates and pare back the asset purchase program (i.e., quantitative easing).

This news benefited the U.S. dollar, which increased over the past month. This is particularly important to copper. The U.S. dollar and commodities have historically moved in a perfect inverse relationship.

Moreover, Congress’ decisions — or lack of them — could cause market turmoil and impact copper prices. The bipartisan infrastructure deal remains delayed in the House of Representatives.  Congress has not taken action on increasing the debt ceiling, adding to the potential market turmoil, though it does appear that Republicans have agreed to a short-term debt ceiling cover into December.

China looming over prices

Meanwhile, the second-largest economy in the world continues to show signs of volatility.

China is the biggest consumer and producer of refined copper. Its latest issue involves a power crisis that has impacted both copper production and also manufacturing. Both have experienced restrictions.

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The Automotive Monthly Metals Index (MMI) held flat for this month’s reading, as U.S. auto sales slumped in Q3.

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US auto sales slip in Q3

General Motors reported its third-quarter sales fell from 665,192 vehicles in Q3 2020 to 446,997 vehicles in Q3 2021, a 32.8% drop.

The automaker cited semiconductor supply chain disruptions and “historically low inventories.”

“During the quarter, GM provided an update for investors that its wholesale volumes in North America in the second half of 2021 would be down about 200,000 units from the first half, largely because of supply chain disruptions in Malaysia caused by COVID-19, with most of the impact occurring during the third quarter,” the automaker said. “GM’s financial outlook is still expected to be within the calendar year guidance range previously provided as the company continues to develop solutions to mitigate the impacts of the semiconductor shortage and Chevrolet Bolt EV recall.”

Meanwhile, Ford reported total sales in the U.S. fell 17.7% in September. Unlike its truck and car segments, Ford SUV sales jumped by 3.4%.

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The Construction Monthly Metals Index (MMI) fell for this month’s value, as U.S. construction spending came in virtually unchanged from the previous month.

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US construction spending

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U.S. construction spending in August reached a seasonally adjusted annual rate of $1,584.1 billion, up minimally from the revised July estimate of $1,584.0 billion, the Census Bureau reported.

Meanwhile, the August rate increased by 8.9% from August 2020.

During the first eight months of 2021, construction spending totaled $1,034.5 billion. The year-to-date total marked a 7.0% year-over-year increase.

Private construction spending reached a seasonally adjusted annual rate of $1,242.2 billion, or down 0.1% from July. Residential construction rose 0.4% to $786.6 billion. Nonresidential construction fell 1.0% to $455.6 billion in August.

Public construction spending reached a rate of $341.9 billion, up 0.5%. Educational construction rose 1.1% to $79.8 billion. Highway construction rose 1.6% to $98.3 billion.

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