Three years have passed since former President Donald Trump imposed Section 232 tariffs on steel and aluminum.

The administration cited national security concerns when imposing the tariffs. In addition, it aimed to raise capacity utilization of the US steel and aluminum sectors. (For the week ending March 20, US mills reached a steel capacity utilization rate of 77.3%.)

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Some countries received exemptions and domestic buyers have been able to win exclusions, which have mitigated the strength of the tariffs.

Metals consumers have expressed their opposition to the tariffs. For example, the Coalition of American Metal Manufacturers and Users (CAMMU) called for an end to the tariffs last year, citing the negative economic impact of the COVID-19 pandemic.

However, a recent review of the tariffs offered a more positive view.

The MetalMiner Best Practice Library offers a wealth of knowledge and tips to help buyers stay on top of metals markets and buying strategies.

EPI: Section 232 tariffs produced ‘near-immediate benefits’

According to a recent report this week by the Economic Policy Institute (EPI), the Section 232 tariffs offered “near-immediate benefits.”

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The aluminum market is undeniably tight, as consumers are having to wait months for metal and the Midwest Premium rises. In some locations — Europe, in particular —  consumers of rolled plate cannot secure new production space until well into Q3.

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Some mills have even pulled out of quoting for new business customers in 2021. Anti-dumping legislation on flat rolled products from China and a fire last year at a Russian rolling mill have combined to dramatically restrict supply options for consumers.

As a result, prices have moved up.

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US aluminum situation

The US is no better.

Semi-finished product prices are rising and lead times are extending. It is convenient to blame the recent decision to apply substantial anti-dumping duties on 18 countries supplying the US with flat rolled commercial aluminium. The move has severely distorted the supply market. A significant number of major supplying countries, including Germany, South Korea and Turkey, are shut out by the high tariffs.

However, the tariffs are not the only reason the market is tight.

As intended, the supply chain has now switched focus to domestic — or, at least, USMCA members’ North American mills. The result is lengthening lead times and price rises.

Some consumers have asked why the LME primary metal price hasn’t risen further in view of the tight market. The reality is what we are seeing is a distorted supply market, not a global primary metal shortage.

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Industrial metal buying organizations are in a difficult spot these days, as commodities are entrenched in a bull market.

After the initial demand hit that commodities took on at the end of Q1 2020 with the outset of the COVID-19 pandemic, materials prices have skyrocketed. Lead times have lengthened and demand for everything from automobiles to homes to electronics picked up around the middle of the year.

Since then, metals prices have been on a bullish run, putting pressure on buying organizations.

On Wednesday, March 24, MetalMiner hosted a webinar titled “When Will the Metals Bull Market End? (Am I Well Positioned to Get All of the Cost-Downs When Prices Fall?).” During the 30-minute session, MetalMiner CEO Lisa Reisman, Editor-at-large Stuart Burns and Vice President of Business Solutions Don Hauser walked buyers through the current state of commodities markets and strategies for how buyers should approach their metals spend in preparation for when prices eventually come down.

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Bull market

To metals buyers’ chagrin, prices remain elevated and supply is tight.

When polled, 44% of webinar participants said carbon steel has been their most budget-busting metal this calendar year. Meanwhile, 24% said stainless steel, 20% said aluminum and 12% said copper.

In addition, 66% of participants indicated they are also seeing price increases for value-add items (for example, coatings, gauge and width adders, and additional processing).

US steel prices, for example, have been relentless in their rise. Hot rolled coil closed earlier this week at $1,271 per short ton, up nearly 9% from a month ago. After a modest recovery in May 2020, hot rolled coil dipped again, falling as low as $454 per short ton in late August.

The price has come a long way since then.

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Despite significant drops in output earlier in 2020 at the outset of the COVID-19 pandemic, global copper mine production last year came in unchanged compared with the previous year.

According to the International Copper Study Group, the global copper market posted an apparent deficit of 560,000 tons in 2020.

The MetalMiner Best Practice Library offers a wealth of knowledge and tips to help buyers stay on top of metals markets and buying strategies.

ICSG: copper mine production flat in 2020

Copper mine production around the world took a dive in the first half of 2020, as the pandemic disrupted operations and metals demand patterns. Mine output dropped by 3.5% year over year in April-May 2020.

However, the second-half recovery, paced by China, saw production break even for the year.

Peru, the second-largest producer, saw mine production fall 12.5% in 2020. Top producer Chile, meanwhile, saw its output drop just 1%.

Elsewhere, after the transition of two mines to different ore zones, Indonesian output rose by 39%.

“COVID-19 related constraints and other operational issues also resulted in declines in production in other major copper mine producing countries, most notably Australia, Mexico and the United States,” the ICSG added.

Refined production up 1.5%

However, refined copper production rose by 1.5% year over year in 2020.

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The US steel sector’s capacity utilization rate has consistently posted gains since a trough last spring at the outset of the COVID-19 pandemic.

This past week, however, the capacity utilization rate fell slightly.

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Capacity utilization dips to 77.3%

The US steel sector’s capacity utilization rate fell to 77.3% for the week ending March 20, the American Iron and Steel Institute reported this week.

Steel output during the week totaled 1.75 million net tons. The figure marked an increase of 0.7% year over year. Meanwhile, output declined 0.5% from the previous week, when capacity utilization reached 77.7%.

As for the year to date, production reached 19.6 million net tons. Capacity utilization during the period reached 76.8%. Production during the period fell 6.2% from the same time frame in 2020, when the rate reached 79.6%.

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The recent curbs on steel making by the local government in one of China’s largest steel-producing cities, Tangshan, may have a cascading effect on steel procurement & demand, as well on iron ore supplies, some experts believe.

The Tangshan restrictions are in effect from March 20 to Dec. 31, 2021. Among other things, the restrictions penalize steel mills there that fail to meet emission control regulations.

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Tangshan part of countrywide effort

The curbs are in line with China’s fresh efforts to cut emissions meet carbon-neutrality targets. China aims to reach carbon neutrality by 2060.

Already, iron ore prices felt effects from the restrictions. Meanwhile, the long-term effect on the import-export of steel from China remains to be seen.

Daily iron ore consumption in Tangshan is also likely to drop drastically. The restrictions had led to the drop in iron ore futures but boosted hot-rolled coil (HRC) futures.

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Most carmakers had a pretty torrid first half of 2020, with factories disrupted, show rooms closed and consumers bunkered down in their homes. Sales plummeted across Europe and North America.

However, the second half of last year and, particularly, the first quarter of this year have seen carmakers’ prospects come roaring back.

The MetalMiner team will present a commodity forecast for copper, aluminum, stainless and carbon steel on Wednesday, March 24, at 10 a.m. CDT https://zoom.us/webinar/register/WN_6J8wAyYySfihVk3ZUH9yMA.

The move to electric vehicles

Yet, the turmoil being experienced by the industry is much more about the stop-go of last year.

Rather than cause a retrenchment, the pandemic has helped accelerate the move to electrification.

The greatest spur, however, has undoubtedly been government legislation.

EU penalties on carmakers that fail to meet emission reduction targets are driving a mass migration from internal combustion engines (ICE) to hybrids and fully electric vehicles. After a slow start, European carmakers are adopting aggressive transition plans.

Volkswagen goes all in on electric vehicles

Just this past week, Volkswagen announced — to the joy of its shareholders, who piled in to push shares up 20% — that the German automaker aims to become the global leader in electric cars by 2025. The automaker is placing heavy bets on next-generation lithium-ion batteries, the Financial Times reported.

Volkswagen says it will sell 1 million electric or hybrid cars this year, a tenfold increase from 2019, with half being fully electric vehicles and the rest plug-in hybrids.

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A lack of local availability, plus anti-dumping measures on some third-country imports into the European Union, have further pushed up hot rolled coil prices in Western Europe.

Grab your coffee and hear MetalMiner’s latest forecast for aluminum, copper, stainless and carbon steel on Wednesday, March 24, at 10 a.m. CDT:  https://zoom.us/webinar/register/WN_6J8wAyYySfihVk3ZUH9yMA.

Hot rolled coil price surge

Offers for the flat rolled product from Western European mills are now €850-900 ($1,015-$1,070) per tonne ex works for May rolling and June delivery, traders told MetalMiner. That moved up by an average one-third from the €750 ($894) that producers were offering in early February.

Production cuts by Western European mills could, however, make it difficult to secure finished product at those times and prices.

“You cannot buy a single tonne,” one trader said about acquiring hot rolled coil from Western European mills at present.

Rises in raw material prices and reported difficulties in securing ferrous scrap are also pushing up prices, a second trader said.

Hot rolled coil is used in construction applications. The flat rolled product is also used as feedstock for welded pipe production. It’s also used for rolling cold rolled coil and and to produce further downstream.

Anti-dumping measures, Chinese demand

Also supporting prices on the Western European domestic market are EU anti-dumping measures on HRC from Turkey and China. In addition, high demand for finished product from China has offered support, sources said.

“The Chinese [economy] is doing very well,” the first trader said.

High hot rolled coil demand in Southeast Asia for building and infrastructure projects is also supporting Western European prices, sources noted.

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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 of the week here on MetalMiner, including coverage of the nickel price, oil prices, housing starts and more.

Overall, steel prices continue to rise. Meanwhile, after experiencing significant price declines, lead and nickel have steadied of late. Aluminum continues to be on an upward trajectory, while copper has steadied after dropping from a Feb. 25 peak.

The MetalMiner team will be presenting a commodity forecast for copper, aluminum, stainless and carbon steel on Wednesday, March 24, at 10 a.m. CDT: https://zoom.us/webinar/register/WN_6J8wAyYySfihVk3ZUH9yMA

Week of March 15-19 (nickel price steadies, Honda announces temporary production suspension and more)

• Steel prices continue to rise, but could we be nearing a peak?
• Meanwhile, the nickel price plunged recently after some news on the supply front from Tsingshan Holding Group.
• U.S. Steel recently indicated it is increasingly bullish on the steel market.
• In addition, US steel production continues to post small increases in capacity utilization.
• The European Parliament passed a resolution for a Carbon Border Adjustment Mechanism.
• Stuart Burns weighed in on the US’s latest anti-dumping duties on aluminum sheet imports.
• The International Aluminum Institute outlined three “pathways” by which the aluminum sector can reduce its emissions.
• ArcelorMittal announced a new XCarb™ initiative through which it will offer customers green steel certificates and fund innovation to help move the steel industry toward carbon neutral steelmaking.
• Housing starts fell in February, according to the Census Bureau’s latest report.
• The Energy Information Administration expects oil prices to remain elevated through April.
• Contractors are more optimistic about market conditions, according to the US Chamber of Commerce’s latest Commercial Construction Index.
• Iron ore prices surged to a 10-year high before pulling back recently.
• Lastly, Honda announced a temporary suspension of much of its North American production.

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This morning in metals news: Honda announced it will suspend most of its North American automotive production; copper has leveled off over the last couple of weeks; and service center shipments declined in February.

The MetalMiner Best Practice Library offers a wealth of knowledge and tips to help buyers stay on top of metals markets and buying strategies.

Honda to suspend most North American production

In major automotive news, Honda said it will suspend most of its production in North America for a week, Reuters reported.

Per the report, the automaker cited a variety of factors for the production stoppage. The issues included: supply chain problems related to congestion at ports, the semiconductor shortage and inclement weather in recent weeks.

Copper price trends sideways

The LME copper price took a fall in late February and into March.

LME three-month copper fell from a Feb. 25 peak of $9,563 per metric ton down to $8,757 per metric ton March 4.

Since then, however, the price has traded sideways. Three-month copper closed Thursday at $9,025 per metric ton.

Service center shipments down in February

According to the Metals Service Center Institute, service center shipments declined in February.

US steel shipments fell by 4.4% year over year. Meanwhile, aluminum shipments fell by 2.0% year over year.

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