Articles on: Metal Prices

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The Automotive Monthly Metals Index (MMI) held flat this month for an MMI reading of 85.

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U.S. Auto Sales

The Big 3, which now all report sales on a quarterly basis, released sales figures for the third quarter.

General Motors reported third-quarter deliveries of 738,638 vehicles, marking a 6.3% year-over-year increase.

Negotiations between GM and the United Automobile Workers (UAW) union entered their third week this week, UAW rejected the latest GM offer on Sept. 30, according to a UAW statement.

“This proposal that the Company provided to us on day 15 of the strike did not satisfy your contract demands or needs,” UAW Vice President Terry Dittes said in a release. “There were many areas that came up short like health care, wages, temporary employees, skilled trades and job security to name a few.  Additionally, concessionary proposals still remain in the company’s proposals as of late last night.”

Earlier this month, MetalMiner Executive Editor Lisa Reisman weighed in on a lingering strike’s potential impact on steel prices.

“Given that the U.S. market consumes about 110 million tons annually, and GM’s share represents about 8% of domestic steel production, it would take a 39-day strike to lower demand by 1 million tons, or 1%,” she wrote.

As of Thursday, Oct. 3, the strike has reached its 18th day.

Ford reported third-quarter vehicle sales of 580,251, down 4.9% on a year-over-year basis. However, Ford truck sales increased 8% year over year.

Fiat Chrysler’s third-quarter sales were flat compared with Q3 2018.

Honda sales were down 14.1% in September compared with September 2018 sales.

Toyota reported sales fell 16.5% in September on a volume basis and by 9.2% on a daily selling rate basis. Nissan’s September sales fell 17.6% on a year over year basis.

According to a jointly released forecast by J.D. Power and LMC Automotive, accounting for fewer selling days, September vehicle sales were down 7.8% compared with September 2018.

Ford, Mahindra Team Up

Ford recently announced a joint venture partnership with India’s Mahindra, which will aim to “develop, market and distribute Ford brand vehicles in India and Ford brand and Mahindra brand vehicles in high-growth emerging markets around the world.”

Ford will own a 49% controlling stake in the joint venture, with Mahindra owning a 51% stake.

“Ford and Mahindra have a long history of working together, and we are proud to partner with them to grow the Ford brand in India,” Ford’s Executive Chairman Bill Ford said in a release. “We remain deeply committed to our employees, dealers and suppliers, and this new era of collaboration will allow us to deliver more vehicles to consumers in this important market.”

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Actual Metal Prices and Trends

The U.S. HDG price fell 3.8% month over month to $804/st as of Oct. 1.

LME three-month copper was essentially flat, moving to $5,640/mt. U.S. shredded scrap steel fell 13.6% to $254/st.

The Korean aluminum 5052 coil premium rose 0.6% to $3.14 per kilogram.

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Aluminum consumers have watched the primary ingot price drift gradually lower since the beginning of this year.

Keep up to date on everything going on in the world of trade and tariffs via MetalMiner’s Trade Resource Center.

There have been peaks and troughs, of course, as the price is buffeted by trade news, mill outages or exchange rate movements.

Broadly speaking, however, our sideways market has been one of gradual decline.

As the price approaches the psychologically significant $1,700 per metric ton level, some will be wondering: can we expect resistance and a floor, or could prices continue down?

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This morning in metals news, the WTO ruled in favor of the U.S. in its ongoing battle with the E.U. over Airbus subsidies, striking workers at General Motors rejected the automaker’s latest offer, a Louisiana steel group has gone bankrupt and copper prices are slumping.

Keep up to date on everything going on in the world of trade and tariffs via MetalMiner’s Trade Resource Center.

WTO Rules in U.S.’s Favor

As part of the ongoing saga between the U.S. and E.U., a World Trade Organization (WTO) arbitration panel was set this week to determine the level of countertariff measures the U.S. would be permitted to apply against E.U. goods (in retaliation against the E.U. for its subsidies toward aircraft manufacturer Airbus).

On Wednesday, the panel announced it had ruled in the U.S.’s favor, affording the U.S. the ability to wield $7.5 billion in tariffs on E.U. goods.

A proposed tariff list released earlier this year by the United States Trade Representative included copper alloys, among other items.

Union Rejects GM Offer

A GM offer to end the UAW strike — now in its third week — was sent back by the union because it did not adequately address workers’ demands, according to UAW Director and Vice President Terry Dittes.

“Last night, Monday, September 30, 2019, GM passed a comprehensive proposal at 9:40 pm across the bargaining table,” Dittes said in a prepared statement.

“This proposal that the Company provided to us on day 15 of the strike did not satisfy your contract demands or needs. There were many areas that came up short like health care, wages, temporary employees, skilled trades and job security to name a few. Additionally, concessionary proposals still remain in the company’s proposals as of late last night.”

Bayou Steel Group Files for Bankruptcy

A Louisiana steel group has filed for bankruptcy, nola.com reported, impacting 400 workers at the Bayou Steel Group facility.

According to the report, the company has as much as $100 million in outstanding debts.

The closing comes 40 years after the mill in LaPlace, Louisiana, first opened, according to the report.

Copper Price Falls

LME copper was bid down 0.5% on Wednesday, Reuters reported, down to $5,660 per ton.

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As MetalMiner’s Stuart Burns explained earlier today, copper prices are forecast to decline further in the year ahead.

I have often thought the moniker of Dr. Copper to be something of a misnomer for the red metal.

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The argument goes copper’s core roles in numerous industries – power generation and transmission, consumer electronics, medical, increasingly transport, etc. — make demand for the metal a bellwether for economic strength or weakness.

Common sense suggests there is much truth in that relationship.

But prices are driven by more than just demand.

Prices should be supported if there is a lack of supply, yet the market seems solely fixated on the demand picture in China.

Copper’s weakening price during the year comes despite the International Copper Study Group reporting that copper production is down 1.4% in the first half and 2019 due to weather-related mine disruption in Chile and the transition of two mines in Indonesia to different ore zones, creating a deficit of some 220,000 tons for the first half of 2019.

All of that is enough, you would think, if indeed that was correct, to significantly support prices.

The copper market, however, is full of contradictions.

In a market apparently facing a deficit, copper stocks have risen markedly.

Source: Kitco

Fitch Solutions’ recent Macro Report predicts the copper market will be in surplus in the 2019-20 period and is forecasting lower prices for next year as mine supply accelerates and consumption remains positive (albeit at a gentler pace of growth than seen historically).

While China is expected to continue to increase output, it will be outstripped in percentage terms, at least by India, which Fitch sees averaging 7.8% annual growth through the next decade as the country’s Make in India policy forces firms to source metal from domestic smelters.

Chinese consumption, however, is predicted to remain weak. Chinese copper consumption growth was downgraded to an estimate of just 0.5% for 2019 compared with expectations of 2.8% growth earlier this year as industrial consumption continues to languish under weak automotive and consumer goods demand, in addition to modest infrastructure investment.

Fitch sees weakening prices through 2021, with a slow but gradual recovery not appearing before 2023 and beyond.

With German PMI numbers last month showing the steepest contraction in the sector since June 2009, demand in Europe’s largest economy is not going to make up for weak Chinese demand.

German output shrank the most since July 2012, according to Trading Economics, and new orders dropped to the greatest extent since April 2009. The Eurozone as a whole is suggesting contraction is likely on the basis of the PMI numbers; the same is true for Japan.

Only the U.S. and China remain cautiously positive, but with the two countries locked in a trade war that shows little sign of reaching a settlement before next year’s elections, the prospects for copper demand — and, hence, prices — remain weakened.

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Maybe Dr. Copper is living up to its name.

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This morning in metals news, U.S. Steel announced a new joint venture with Big River Steel, the E.U.-U.S. fight over aircraft subsidies continues and Chile’s copper output increased in August.

Keep up to date on everything going on in the world of trade and tariffs via MetalMiner’s Trade Resource Center.

U.S. Steel to Purchase 49.9% Interest in Big River Steel

U.S. Steel announced Tuesday it will purchase a 49.9% ownership interest in the Arkansas-based Big River Steel, a purchase coming with a $700 million price tag.

“Our new partnership with Big River is designed to accelerate our strategy to offer our customers the ‘best of both’ by bringing together the capabilities of integrated and mini mill steel production,” U.S. Steel President and CEO David B. Burritt said. “Big River operates the most advanced, state-of-the-art and sustainable mill in North America, and our investment would ultimately strengthen our competitive positioning in highly strategic steel-end markets, creating an unmatched value proposition for our stakeholders.”

U.S. Steel said the acquisition allows it to reshape its footprint in its flat-rolled segment “to create a more nimble, agile and customer-focused organization with new presence to serve growing U.S. and Mexico markets.”

E.U. Prepares for U.S. Tariffs in Airbus Saga

According to Phil Hogan, who will soon succeed Cecilia Malmstrom as E.U. trade commissioner, the E.U. “has to stand up for itself” in the ongoing battle with the U.S. over aircraft subsidies, CNBC reported.

The ongoing saga between the U.S. and the E.U. over aircraft subsidies to Boeing and Airbus, respectively, has dragged on for well over a decade and could soon be coming to a financial conclusion after moving through the notoriously slow-moving World Trade Organization (WTO) dispute settlement system.

The United States Trade Representative has proposed $11 billion in tariffs in retaliation against the E.U.’s subsidization of Airbus.

A World Trade Organization (WTO) ruling is expected soon regarding the scope of tariffs the U.S. will be permitted to apply.

Chile’s Copper Output Jumps in August

While the International Copper Study Group recently reported global copper production was down through the first half of the year, production in No. 1. producer Chile increased in August, Reuters reported.

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According to Reuters, Chile’s copper production surged 11% year over year in August.

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Global crude steel production increased 3.4% in August on a year-over-year basis, the World Steel Association reported.

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Production for the month reached 156 million tons, according to the World Steel Association report, which collects production data from 64 countries.

The 3.4% increase comes after a 1.4% year-over-year increase the previous month.

Broken down by individual countries, top steelmaker China produced an estimated 87.3 million tons, up 9.3% on a year-over-year basis — a sharp jump from last month’s 5% year-over-year increase.

As Stuart Burns explained yesterday, China’s production in recent years has continued to rise despite mandated production closures aimed at mitigating high pollution levels in many parts of the country. Production cuts were at first mandated by Beijing, but last year local authorities were set their own production cut levels.

“Fears are therefore rising that China could be on track to create a glut this winter despite the now normal winter closures,” Burns wrote.

“China’s rivals in southeast Asia are looking on warily concerned that rising exports will further depress regional prices as the domestic market fails to absorb the anticipated record output.

“That’s not good news for the rest of the world.

“Even markets protected by high tariffs like the U.S. will be dragged down by lower global prices and imports undercut domestic U.S. mills.”

As the winter heating season approaches in China, the scope of this year’s production cuts will prove to be a critical factor monitored by steel-producing nations around the world.

Elsewhere, Japan produced 8.1 million tons in August, down 7.8% year over year. South Korea’s crude steel production fell 2.6% to 5.9 million tons in August 2019.

In Europe, German production ticked up 0.8% to 3.3 million tons, while Italy’s production plunged 26.7% to 900,000 tons. France produced 1.1 million tons, up 11.2% year over year, while Spain’s production dropped 4.6% to 1.1 million tons.

U.S. production, meanwhile, hit 7.5 million tons, up 0.3% on a year-over-year basis.

According to the America Iron and Steel Institute (AISI), U.S. steel production for the year through Sept. 28 reached 72.6 million tons, up 3.4% compared with the same period last year.

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The U.S. steel sector’s capacity utilization rate checked in at 80.6% for the year through Sept. 28.

U.S. steel prices have been on the decline of late.

The U.S. HRC price is down 5.13% over the last month, down to $555/st as of Monday. U.S. CRC is down 1.98% to $741/st, while U.S. HDG is down 4.4% to $804/st.

The drop for plate has been even steeper, as U.S. plate is down 7.65% to $736/st.

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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 on MetalMiner, which this week touched on steel prices, the potential opening up of Greenland’s resources and U.S.-India trade talks.

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Keep up to date on everything going on in the world of trade and tariffs via MetalMiner’s Trade Resource Center.

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This morning in metals news, U.S. imports of steel through the first eight months of the year are down 13.6%, Rio Tinto signed a memorandum of understanding (MOU) with China’s largest steel producer and LME copper prices fell Thursday.

Keep up to date on everything going on in the world of trade and tariffs via MetalMiner’s Trade Resource Center.

Steel Imports Down 14%

U.S. imports of steel for the year through August are down 14% compared with the same period last year, the American Iron and Steel Institute (AISI) reported.

Imports through the first eight months of the year totaled 20.67 million tons. Finished steel import market share for August checked in at 19%, just below the 20% mark for the year to date.

Rio Signs MOU with Baowu

Rio Tinto has signed an MOU with China Baowu Steel Group and Tsinghua University through which the parties will partner to “develop and implement new methods” to reduce carbon emissions across the steel value chain.

“This pioneering partnership across the steel value chain will bring together solutions to help address the steel industry’s carbon footprint and improve its environmental performance,” Rio Tinto CEO J-S Jacques said.

“The materials we produce have an important role to play in the transition to a low carbon future and we are committed to partnering with our customers and others to find the most sustainable ways to produce, process and market them. We are already doing this in aluminium and now, through this partnership, we will be doing it in the steel industry.”

LME Copper Falls

The LME copper three-month price bounced back from MetalMiner’s short-term support level earlier this month, rising 1.13% over the last month, according to MetalMiner IndX data.

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However, the price dropped Thursday, falling 0.7% to $5,750/mt.

As noted earlier this week, global copper mine production dropped 1.4% in the first half of the year, while refined copper production fell 1%, according to the International Copper Study Group.

The primary reason to pay attention to Chinese steel prices pertains to the country’s price leadership in the global marketplace.

However, since currency dynamics shifted recently, now is a good time to take a more tactical look at the U.S.-China steel price spread.

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The price spread between U.S. and Chinese steel increased during the months following the March 2018 implementation of tariffs on steel imports into the U.S.

After peaking around June 2018, the price spread between U.S. and Chinese steel commodity prices then shrank again by July 2019 — to its lowest level since December 2017 — largely due to falling U.S. prices.

Source: MetalMiner data from MetalMiner IndX(™)

The spread for CRC looks similar, but at different dollar amounts.

Source: MetalMiner data from MetalMiner IndX(™)

As shown on the chart of the spread below, for HRC, the spread between prices narrowed significantly several times in recent history, but came closest to approaching zero in December 2017 and then again in January of 2019.

A smaller spread benefits U.S.-based producers, since similar prices disincentivize imports.

Source: MetalMiner data from MetalMiner IndX(™)

Once accounting for additional costs associated with shipping, finance, the cost of carry and margin, any time the spread exceeds around $90/st — meaning U.S. costs exceed Chinese steel costs by a minimum of $90/st — imports start to look attractive, all other things being equal.

With tariffs, this cost should theoretically provide a buffer against import competition for U.S. producers to the extent of the tariff cost, plus the original competitor’s price, shipping and related costs associated with imports.

For example, assume a tariff rate of 25% on a China HRC price of $485/st and a U.S. price of $585/st. With import freight plus costs at an estimated $90/st, the tariff adds an additional cost of $143.75/st, with an end price total of $718.75/st.

In this example, at this price point and tariff rate, we would need to see the price spread exceed $233.75/st (cost of importing, plus costs of tariffs) before imports theoretically make sense, as shown by the purple line in the chart above.

For CRC, the red line in the chart below indicates where a $90/st import charge intersects the spread line.

For a short time during the start of the tariffs, U.S. producer prices surged; therefore, producers may not have actually allowed the tariffs to render protection as intended by their use, per the HRC model shown above.

U.S. producer prices look to have already corrected from the aforementioned price surge.

Source: MetalMiner data from MetalMiner IndX(™)

Looking at the chart above, CRC imports should be more heavily impacted by the imposition of tariffs, since imports make more sense from a price perspective.

Instead of seeing tariffs as providing a buffer allowing higher prices, what seems closer to reality has more to do with China’s need to lower prices. With U.S. prices corrected, we expect to see lower Chinese prices, as producers drop prices to stay competitive.

In fact, recently we did see lower Chinese HRC prices and a fairly weak, but still sideways, domestic CRC price. Weaker demand in China is a key factor underpinning the price weakness.

Source: MetalMiner data from MetalMiner IndX(™)

Since June, as shown in the chart above, the domestic price of HRC steel in China trended lower, but just slightly (note the narrow range shown on the vertical axis).

In early August, the Chinese government allowed the currency to weaken to a 7-to-1 level vis-a-vis the yuan versus the dollar. This effectively dropped the price of Chinese steel for international buyers and the amount of the related percentage-based tariff.

Source: MetalMiner data from MetalMiner IndX(™)

Compared to HRC, China’s domestic CRC price trend has looked more firmly sideways since June 2019.

Source: MetalMiner data from MetalMiner IndX(™)

In the case of CRC, we can see more clearly in the chart below how the adjusted exchange rate impacts the international price of Chinese CRC steel exports, as the domestic price has nudged up overall since June.

Keep up to date on everything going on in the world of trade and tariffs via MetalMiner’s Trade Resource Center.

Source: MetalMiner data from MetalMiner IndX(™)

What This Means for Industrial Buyers

Chinese producer prices looked flat to weak during the summer months and into the fall, as the exchange rate adjustment made steel imports from China look more attractive.

Given the high levels of production from China, generally speaking, we can expect to see the highly competitive price environment to continue, providing industrial buyers with ample options for negotiations.

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This morning in metals news, Rio Tinto will offer independently certified and responsibly produced aluminum, Norsk Hydro hosts Investor Day and copper prices move upward.

Keep up to date on everything going on in the world of trade and tariffs via MetalMiner’s Trade Resource Center.

Rio Tinto to Offer Responsibly Sourced Aluminum

As MetalMiner’s Stuart Burns explained earlier today, companies around the world are looking to make their operations more sustainable (whether as a result of earnest beliefs about climate change or spurred by the thought that a more sustainable operation is good for the company’s brand).

As such, Rio Tinto has announced it will offer responsibly sourced and independently certified aluminum from its Canadian operations.

“The certification reinforces Rio Tinto’s commitment to responsible mining and metals production by providing independent verification that material can be traced through a ‘chain of custody’ spanning Rio Tinto’s Gove bauxite mine in Australia to its alumina refinery, aluminium smelters and casthouses in Quebec and British Columbia, Canada,” the company said.

Hydro Hails Climate Strategy

Aluminum maker Norsk Hydro’s Investor Day is an opportunity for the firm to highlight a variety of initiatives and company developments, including those related to sustainability.

In that vein, company is aiming to cut emissions related to sourcing and own processes by 30% by 2030.

“Cutting our emissions is an important part of our goal to drive sustainability. In 2013, we set an ambitious target to become the first carbon neutral aluminium company from a lifecycle perspective by 2020. Now, when our 2020 target is within reach, we are setting a new ambition for cutting our own emissions by 30% by 2030,” President and CEO Hilde Merete Aasheim.

Copper Gets a Boost

Copper prices ticked up Tuesday after positive news from the U.S.-China trade front.

U.S. Treasury Secretary Steven Mnuchin said he would meet with Chinese Vice Premier Liu He in two weeks (the two countries held deputy-level talks last week).

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As such, LME three-month copper rose 0.3% Tuesday, up to $5,794/mt, Reuters reported.