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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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• Metal prices picked up across the board in February.
• MetalMiner’s sister site SpendMatters published a guest contribution on the maker-to-user movement.
• The Office of the United States Trade Representative released the 2019 Trade Policy Agenda and 2018 Annual Report.
• U.S. steel mills have produced at a capacity utilization rate of 81.1% for the year through March 2.
• We kicked off our monthly round of Monthly Metals Index (MMI) reports — check out the subindex roundups published this week:
  • Automotive
  • Construction
  • Aluminum
  • Raw Steels
• Brexit uncertainty will more than likely linger long past the March 29 deadline, Stuart Burns explains.
• India’s JSW Steel recently inked a $700 million supply deal with Duferco International Trading Holding.

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This morning in metals news, China’s copper imports fell in February, U.S. Steel won an award sponsored by the Department of Energy and General Motors rolled out its last Chevy Cruze this week.

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Copper Imports, Aluminum Exports Down in China

China’s February copper imports fell to their lowest level in 11 months, Reuters reported, while copper concentrate imports rose to an all-time high.

Meanwhile, China’s aluminum exports fell 37.9% in February compared to the previous month, according to the report.

U.S. Steel Wins DOE Award

U.S. Steel won an award from the High-Performance Computing for Manufacturing Program sponsored by the Department of Energy, which will allow the company to “expand the company’s manufacturing capabilities for advanced high-strength steel.”

“The goal of the winning project, drafted by researchers Evgueni Nikitenko and Susan Farjami at U. S. Steel’s Research and Technology Center in Munhall, Pa., is to enhance the company’s hot strip mill model used in creating AHSS,” a U.S. Steel release stated. “This type of steel is used by automakers to manufacture economically lightweight vehicles to meet increasing fuel efficiency requirements while maintaining exceptionally high safety standards.”

According to the release, the project research will take place at the Lawrence Livermore National Lab, which will receive $300,000 to collaborate with U.S. Steel.

End of the Cruze

Per its announcement late last year, General Motors idled its Lordtown, Ohio assembly plant earlier this week, where the automaker rolled out its last Chevy Cruze vehicle.

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According to NBC News, the closure will lead to the elimination of nearly 1,700 hourly jobs by the end of the month.

The Raw Steels Monthly Metals Index (MMI) increased slightly again this month, moving to an MMI reading of 82, an increase of 2.5% month on month.

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This month, U.S. raw steel prices stopped their multimonth decline off peak highs and began moving sideways overall. Typically, steel prices tend to trend upward through Q1, but that is not a hard and fast rule (supply and demand factors and general macroeconomic conditions play a role).

Source: MetalMiner data from MetalMiner IndX(™)

Plate prices seemed to finally hit a point of price resistance this month and fell back to $997/st. Even at this price, plate prices remain at a historic high. Typically, HDG prices trend higher than plate. However, the plate price exceeded the HDG price this fall and continues to ride higher than HDG.

Source: MetalMiner data from MetalMiner IndX(™)

The HDG price has dropped from the 2018 price surge and now appears back at levels typical of 2016-17 when the price oscillated around the $900/st mark, which served as a historically significant resistance point during 2014 (prior to steep HDG price decreases in 2015).

Iron ore prices increased during February based on continuing supply concerns, but supply issues will likely ease as the year progresses.

Based on a better-than-expected China manufacturing PMI release in February, iron ore, coking coal and coke futures prices increased in late February on a four-day rally based on optimism over the steel sector’s 2019 performance. In early March, however, prices appear to have moderated on demand concerns.

What This Means for Industrial Buyers

Plate prices may have peaked but they remain historically high, oscillating around the $1,000/st mark after reaching $1,022/st in December.

HRC, CRC and HDG prices moved sideways during the month, a shift from the recent downward trend in prices.

Given the shift in trend to sideways for raw steels, buying organizations will want to watch the market carefully for opportunities to buy.

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Actual Raw Steel Prices and Trends

U.S. shredded scrap prices registered a month-over-month price increase of 5.73%, rising to $332/st, reversing last month’s 11% price decrease.

LME scrap prices also increased. The primary one-month futures price increased by 9.58%, while the LME primary three-month price registered an increase of 2.78% since the beginning of February.

Korean standard scrap steel prices fell by 11.28%, reversing the price increase during the past few months, and ended at $155.56/mt (down from the October high of $193.69/mt).

Chinese coking coal prices increased this month by 2.34% — flattening out somewhat after recent monthly double-digit increases — to $322.56/mt at the start of March.

Chinese iron ore prices were flat month on month. The Chinese pig iron price fell 9.5%.

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The March Aluminum Monthly Metals Index (MMI) increased again this month, rising 2.3% for an index value of 88, up from February’s value of 86.

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LME aluminum prices ended February near the price at the month’s outset, thus ending only slightly higher month on month following a dip in price around mid-month.

The LME price ended at $1,913/mt and once again failed to breach the long-term price resistance point of $1,970/mt during February. In the early days of March, the price dropped further to around $1,872/mt during trade at the start of the first full week.

Prices show weakness in that the slope of increase has continued to decline as the year progresses.

Source: Fastmarkets

SHFE prices have flattened out. The metal currently is moving in a sideways price trend on the back of a strengthened pricing pattern (when compared with generally falling prices in China since September).

Source: MetalMiner analysis of Fastmarkets

Prices appear constrained by high levels of Chinese production of both alumina and aluminum, in addition to weakening Chinese domestic demand. During 2018, Chinese aluminum production increased by 9.9%, rising to 72.53 million tons.

Recently, the Chongqing-based Bosai Group restarted Chalco’s Nanchuan alumina plant that closed in 2014 due to low alumina prices. According to a recent Reuters article, Bosai leased the plant from Chalco for the next 15 years with alumina production underway and the first production to come off the line very soon. This will add to raw alumina supply and may contribute to further price declines as the new supply comes online.

U.S. Domestic Aluminum

Meanwhile, the U.S. Midwest Premium rose slightly in February to $0.19/pound, and still remains at a historic high. Even with the rising premium, ingot prices continue to trend lower due to strong supply.

The LME Western European Aluminum Premium stayed flat, coming in at $75/mt in February, while the LME East Asian Aluminum Premium also stayed flat at $85/mt.

What This Means for Industrial Buyers

During February, aluminum prices continued to trend sideways.

Industrial indicators show a weaker domestic economy in China, which could constrain price increases.

LME warehouse stocks increased quite a bit into the new year, also likely dampening price increases. SHFE warehouse stocks also remain sizable from a longer-term perspective, with some restocking increasing volume into 2019.

These factors suppress aluminum price increases, even in an uncertain macroeconomic trade environment.

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Actual Aluminum Prices and Trends

Both LME and SHFE aluminum prices continued trending sideways during the past month. While the U.S. Midwest Premium nudged upward this month and remains high, it is offset by strong supply.

India’s primary cash price increased 9.9% this month, while China’s primary cash price increased 2.1%. Korean prices fell this month in the 3-4% range.

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The Construction Monthly Metals Index (MMI) held flat for an MMI reading of 82 this month.

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U.S. Construction Spending

According to Census Bureau data released earlier this week, U.S. construction spending in December 2018 reached an estimated $1,292.7 billion, down 0.6% from the previous month but up 1.6% year over year.

Construction value in 2018 surged 4.1% from 2017, according to the Census Bureau release, up to $1,297.7 billion from $1,246 billion.

Broken down by type, spending on private construction hit $991.2 billion, down 0.6% from November’s estimate of $997.1 billion.

Within private construction, residential construction hit $536.7 billion in December, down 1.4% from the November estimate of $544.2 billion. Nonresidential construction reached $454.5 billion in December, up 0.4% from the revised November estimate of $452.9 billion.

Meanwhile, public construction spending in December was $301.5 billion, down 0.6% from the revised November estimate of $303.5 billion. Within public construction, educational construction reached $77.5 billion, holding flat from November spending. Highway construction reached $89.1 billion, marking a decrease of 0.9% from November’s estimate of $89.9 billion.

Billings Growth Strong to Start 2019

According to the monthly Architecture Billings Growth Index (ABI) released by the American Institute of Architects, billings growth was strong in January.

The January ABI came in for a reading of 55.3, up from 51.0 the previous month (anything above 50.0 indicates billings growth).

The strong month comes despite the partial government shutdown that extended into late January. According to the AIA release, the January score of 55.3 was the highest ABI value in more than two years.

Speaking of the government shutdown, this month’s ABI survey question asked respondents about the impact of the shutdown on their business. According to the release, a majority of respondents said the shutdown had no impact. However, 12% said the shutdown had a direct impact on at least one of their projects and 10% said it had an indirect impact (meaning contractors and/0r clients were impacted by the shutdown).

In addition, according to the survey results, firms with a residential specialization were slightly more likely than firms of other specializations to have been directly impacted by the shutdown.

By region, the South and Midwest posted the strongest billings growth in January. The four regions tracked in the ABI posted January values of:

• South: 54.7
• Midwest: 54.4
• Northeast: 52.4
• West: 51.5

Actual Metal Prices and Trends

Chinese rebar steel increased 1.3% to $566.49/mt as of March 1. Chinese H-beam steel jumped 1.0% to $564.99/mt.

U.S. shredded scrap steel jumped 5.7% to $332/st.

European commercial 1050 sheet aluminum increased 1.5% to $2,603.37/mt. Chinese aluminum bar jumped 1.5% to $2,185.24/mt.

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Chinese 62% iron ore fines increased 0.2% to $78.47/dry metric ton.

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This morning in metals news, the Wall Street Journal reports the U.S. and China are approaching a deal to roll back tariffs imposed over the last year, the Steel Authority of India Ltd. (SAIL) boosted iron ore production last month and iron ore prices are on the rise.

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A Trade Resolution?

Global markets have followed every twist and turn in the ongoing U.S.-China trade talks with bated breath.

The two countries have imposed a total of $310 billion worth of tariffs on each other’s goods since last summer, injecting uncertainty into markets and raising concerns about the moves’ impact on growth.

However, this weekend the Wall Street Journal reported the two countries might be nearing a deal to roll back the tariffs, Reuters reported. According to a source cited in the report, the countries may ink the deal during a summit later this month.

SAIL’s Iron Ore Production Soars

The Economic Times reported SAIL’s February iron ore production jumped 11.62% year over year.

The state-owned steelmaker posted an all-time record in daily average output, producing 66,620 tons per day.

Iron Ore Prices

Iron ore prices are surging, Business Insider Australia reported, partially on policy news from China’s biggest steelmaking city.

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According to the report, the city of Tangshan issued a smog alert that curbed industrial activity, which thus offered price support to higher grades of iron ore.

On the heels of the doldrums of December, metals prices have made gains through the first two months in 2019.

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February was an especially strong month for a number of metals.

However, markets are especially sensitive to any snippets of news coming out of the ongoing U.S.-China trade talks. President Donald Trump recently delayed the March 1 deadline for a planned tariff rate increase as talks continued.

Whether the two countries reach a meaningful deal anytime soon remains to be seen; as of now, however, metals prices are enjoying a bit of upward momentum.

Read more

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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• The European Automobile Manufacturers’ Association (ACEA) recently weighed in on the Trump administration’s Section 232 automotive investigation.
• Both zinc and lead posted supply deficits in 2018, according to a recent report by the International Lead and Zinc Study Group.
• Supply concerns have given the oil price a bit of a boost of late.
• The U.S. Department of Commerce said cast iron soil pipe from China coming into the U.S. has benefited from countervailable subsidies.
• Global crude steel production in January was up 1% year over year.
• As U.S.-China trade talks continue, Burns looked at the key issues both sides will be negotiating.
• India wants to upgrade its massive railway network, but a lack of domestic steel options is working against the government’s Make in India initiative.
• The Department of Commerce launched new anti-dumping and countervailing duty investigations related to imports of fabricated structural steel from Canada, Mexico and China.

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Global crude steel production growth slowed in January, hitting its lowest level since August.

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According to the World Steel Association, global crude steel production rose 1.0% year over year in January, down from 3.8% growth in December. Global steel production in January hit 146.7 million tons (MT).

Crude steel production growth for China (in red) and the world. Source: worldsteel.org

As usual, China led the way in crude steel production, churning out 75.0 MT, marking a year-over-year increase of 4.3%. India, which recently passed Japan as the world’s second-largest steel producer, produced 9.2 MT, which was down 1.9% year over year. The country India passed in the steel production standings, Japan, saw its production fall 9.8% to 8.1 MT, while South Korea’s production fell 1.5% to 6.2 MT.

The U.S. produced 7.6 MT in January 2019, marking an 11.0% year-over-year increase. U.S. steel mills continue to fill an incrementally larger share of total capacity. According to the American Iron and Steel Institute, U.S. steel mills churned out steel at a capacity utilization rate of 80.9% through Feb. 23 of this year, up from 75.7% for the same period in 2018.

By tonnage, U.S. steel mills produced 14.6 million net tons in the year through Feb. 23, which marked an 8.0% increase over the same period in 2018.

In Europe, Italy’s crude steel production fell 3.6% to 2.0 MT, which France’s dropped 9.7% to 1.2 MT. Spain also produced 1.2 MT, marking an increase of 5.9%.

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Crude steel production in Ukraine hit 1.9 MT, down 4.9%, while Brazil’s crude steel production rose 2.3% to 2.9 MT.

Turkey’s steel sector continues to face challenges, with 2.6 MT in January marking a 19.5% year-over-year decline. Turkey’s steel remains subject to the U.S.’s Section 232 steel tariff, which the Trump administration increased to 50% from 25% last year amid diplomatic tensions. In addition, another Turkish export market, the E.U., recently imposed new steel safeguards in an effort to curb diverted steel supplies (which it sees as an outcome of the U.S.’s Section 232 action).

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This morning in metals news, President Donald Trump over the weekend announced he would delay the previously scheduled March 1 tariff bump on a wide range of Chinese goods, British Steel Ltd. could take a hit if a Brexit deal cannot be reached and Brazil’s iron ore sector could experience significant disruptions in 2019.

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Tariff Delay

Trade negotiations between the U.S. and China continued over the weekend, during which President Donald Trump announced he would delay a previously scheduled March 1 tariff rate increase.

Last year, the U.S. imposed tariffs on $200 billion worth of Chinese imports at a rate of 10%, which was then scheduled to rise to 25% as of Jan. 1. However, following further negotiations, the two countries agreed to begin a 90-day negotiating window and the U.S. delayed the tariff bump to March 1.

“I am pleased to report that the U.S. has made substantial progress in our trade talks with China on important structural issues including intellectual property protection, technology transfer, agriculture, services, currency, and many other issues,” Trump said in a tweet over the weekend.

He added that as a result of the “productive talks, I will be delaying the U.S. increase in tariffs now scheduled for March 1. Assuming both sides make additional progress, we will be planning a Summit for President Xi and myself, at Mar-a-Lago, to conclude an agreement. A very good weekend for U.S. & China!”

British Steel and Brexit

According to Bloomberg, British Steel Ltd. could take a hit of $130 million if Prime Minister Theresa May fails to orchestrate a Brexit deal with the E.U. before the March 29 deadline.

The financial hit comes as the E.U. earlier this year suspending free carbon permits in preparation for a no-deal scenario, according to the report.

Brazil Iron Ore Disruptions

The Brazilian iron ore market has already been disrupted this year, primarily as a result of the fatal tailings dam collapse at Vale SA’s Corrego do Feijao mine in January.

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However, excluding Vale, Brazil’s iron ore sector could see a disruption of 8 million tons of ore this year, according to a mining.com report citing Wood Mackenzie.