Articles in Category: Non-ferrous Metals

It was another busy month in the world of metals.

Then again, these days quiet months in metals or in trade, generally, are few and far between.

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Trade tensions continued to rise, as $34 billion in tariffs on Chinese goods went into effect (China responded in kind), and an additional $16 billion in tariffs are under review. This week, President Donald Trump announced the intention to impose an additional $200 billion in tariffs on China, ratcheting up the stakes even further.

Meanwhile, a Section 232 investigation focusing on imports of automobiles and automotive components is unfolding. More than 2,300 public comments were submitted as part of the U.S. Department of Commerce’s review process, and public hearings are scheduled for next week.

Meanwhile, in metals markets, most base metals were down last month, with steel being the exception.

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A few highlights from this month’s round of Monthly Metal Index (MMI) reports:

  • Since peaking at $7,316/mt in June, the LME copper price dropped 12%.
  • The subindex for grain-oriented electrical steel was the only MMI to post an increase on the month.
  • The U.S. silver price hit its lowest level since January 2017, while U.S. gold bullion dropped to a one-year low.
  • Aluminum prices were also part of the general downtrend, as prices continued to move away from this year’s April peak (after Russian companies and their owners, including aluminum giant Rusal, were slapped with sanctions by the U.S.).

Read about all of the above and much more by downloading the July MMI report below.

China could be said to be making hay while the sun shines.

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A report in AluminiumInsider quotes China’s General Administration of Customs, saying the country’s total exports last month came to 485,000 metric tons, accounting for the second-highest total in the administration’s record-keeping history.

May’s output beat April’s total of 451,000 metric tons by 7.5% and bested May shipments a year earlier of 430,000 metric tons (a 12.8% increase). Only December 2014 had been higher at 542,700 metric tons.

But suggestions that this is the start of a flood may be premature.

Read more

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This morning in metal news, steel and aluminum exports from China were up in May; the National Retail Federation CEO panned the U.S.’s tariffs; and a White House economic analysis reportedly concludes President Trump’s tariffs will hurt economic growth.

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Exports on the Rise

Despite rising trade tensions, including Section 232 tariffs on steel and aluminum, China’s export totals of steel and aluminum were both up in May, according to Reuters.

Chinese aluminum exports were at their highest level in 3 1/2 years, according to the report.

NRF CEO Criticizes Tariffs

Matthew Shay, president and CEO of the National Retail Federation, was critical of the Trump administration’s trade agenda vis-a-vis tariffs, CNBC reported.

Shay, who spoke positively about the president’s December tax cut, argued the tariffs are counterproductive.

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“It makes no sense to go down this road when we have all this momentum,” Shay told CNBC.

White House Economic Analysis Bearish on Tariffs

According to a report by The New York Times, a White House economic analysis of the impact of Trump’s tariffs concludes they will hurt economic growth.

The Copper Monthly Metals Index (MMI) held steady in May at 84 points.

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The sideways trend came as a result of a combination of some elements of the metal basket increasing, such as LME copper, and others falling (such as scrap copper prices).

Source: MetalMiner analysis from FastMarkets

LME copper prices increased during the first week of June. Copper prices now appear headed toward the $7,000/mt ceiling. Copper prices breached that ceiling several times in 2017-2018.

LME copper prices have traded more sideways since the beginning of 2018, as copper prices took a backseat to aluminum and nickel. The Section 232 tariffs apply to both aluminum and nickel.

Global Copper Market

The global copper industry faces closures and mine disruptions, which could affect copper supply. However, given stronger global copper demand, mines have also tried to increase copper capacity. The supply and demand balance for copper calls for a slight surplus in 2018, but the forecast could change during this quarter.

The Indian Vedanta mine closed permanently in May due to protests, lack of compliance with environmental laws and a shooting incident. Vedanta’s Sterlite Copper smelter is one of only two major copper smelters in India.

Vedanta produces 400,000 tons of cathode copper per year. Plans to double capacity should have started after receipt of renewal consent. Rising capacity comes as a result of increased Indian copper consumption over the past few years. Current local demand growth is 7-8% yearly, positioning the country as a net copper importer at the end of the year.

Meanwhile, to meet profit targets, Chilean copper mines need to run at full capacity.

To achieve these objectives, copper output will likely increase. The Caserones copper mine could  produce around 110,000 tons of copper concentrate this year to the end of March 2019. This equates to a 91,000-ton production increase from last year.

However, current mine production levels suggest the mine is behind schedule due to technical problems. The Sierra Gorda Chilean mine is also suffering from technical challenges and running behind schedule.

Chinese Scrap Copper

Since the announcement of the ban on copper scrap in China last summer, MetalMiner has followed Chinese copper scrap prices closely.

Source: MetalMiner data from MetalMiner IndX(™)

LME copper prices and Chinese copper scrap prices tend to follow the same trend. Both appear to be in a long-term uptrend. However, scrap copper prices fell this month, while LME copper prices increased.

Therefore, the spread between Chinese copper scrap prices and LME copper prices has widened. The wider the spread, the higher the copper scrap consumption and, therefore, the price.

What This Means for Industrial Buyers

LME copper prices continued a recovery this month. Copper prices remain in a long-term uptrend. Therefore, buying organizations could expect further copper price increases.

Buying organizations reading the Metal Monthly Outlook had the opportunity to identify the buying signal at the beginning of April and reduce price risk by purchasing some volume. For those who want to understand how to reduce risks, take a free trial now to the MetalMiner Monthly Outlook.

Benchmark your current cold rolled coil sheet prices and see how it compares to the market

Actual Metal Prices and Trends

LME copper rose 0.2% to $6,834/mt as of June 1. Chinese primary cash copper fell 1.8% to $8,010.95/mt.

Chinese copper scrap fell 1.1% to $5,978.56/mt.

U.S. copper producer Grades 110 and 122 held at $3.82/pound, while Grade 102 held at $4.01/pound.

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This morning in metals news, Mexico hits back against the U.S.; tariffs aren’t good for relationships with allies, the Aluminum Association’s CEO says; and the E.U. could impose steel and aluminum safeguard measures as early as July.

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Mexico Hits Back

Retaliation on the heels of the U.S.’s decision to allow for the expiration of the temporary tariff exemptions for the E.U., Canada and Mexico is something that was expected.

Mexico did just that, placing tariffs on steel products and farm products, according to an NPR report.

According to the report, the steel products on the list are steel plates, bars and rods, and rolled steel.

Tariffs Don’t Make Friends

The Aluminum Association, the industry group representing American aluminum, has consistently expressed over the last year that any trade remedies vis-a-vis aluminum should focus primarily on Chinese overcapacity and should not harm market-economy trading partners.

Heidi Brock, CEO of the Aluminum Association, told NPR’s Rachel Martin that the tariffs could alienate the U.S. from its allies.

“In our view, illegally subsidized Chinese overcapacity is the problem,” Brock told NPR. “Tariffs and quotas on market economies really, in our concern, would be ultimately alienating allies that we need to help us on that problem.”

Needless to say, based on rhetoric since June 1 from the E.U., Canada and Mexico, it seems like that alienation has already begun to take shape.

Meanwhile, in Europe…

Speaking of retaliation, the E.U. could be set to do just that in the near future.

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E.U. Trade Commissioner Cecilia Malmstrom told Reuters that steel and aluminum safeguard measures could be instituted next month.

The decision by a provincial government in India to shut down a copper smelter plant may have serious repercussions on copper supplies, not only in India but also globally, experts claim.

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The Tuticorin-based plant was ordered shut by the government of the Tamil Nadu State after hundreds of angry local residents spilled out on the road to protest against the plant’s environmental impact on people’s lives. The protests turned bloody, as police firing led to the deaths of 13 protestors, Reuters report, and the permanent shutdown of the plant.

In its wake, the Tamil Nadu government, succumbing to continued public and political pressure, endorsed a closure order issued in May last year by the State’s pollution control board, effectively shutting down the plant.

Sterlite Copper is owned by the London-based Vedanta Group. The management clearly is not going to let go without a fight. The plant has been under a cloud for several years because locals have alleged that pollution from the smelter has led to health problems, including cancer.

But CEO P. Ramnath has been quoted as saying the closure of the plant would push India’s annual import bill by an estimated $2 billion.

The Tuticorin facilities include a custom smelter, a refinery, a phosphoric acid plant, sulphuric acid plants and a copper rod plant. In addition, there are a captive power plants located in Tuticorin.

As per one estimate, about 4,000 direct jobs and the livelihoods of another 20,000 people will be affected by the closure. Vedanta Sterlite is one of the largest copper producers in the country, and its closure means manufacturers in sectors ranging from electrical to defense will have to turn to imports.

In another move, the Tamil Nadu States Industries Promotion Corporation also canceled deal allotting land for the expansion of Sterlite Copper’s smelting plant.

In November 2017, Vedanta’s board approved the expansion of its copper smelter to 800,000 ton per annum from the present 400,000 tons per annum, with a capex of U.S. $717 million, of which U.S. $141 million has already been spent.

If that expansion were over, it would have made the smelter one of the world’s largest single-location copper smelting complexes.

On its part, Vedanta has termed the government’s order “an unfortunate development,” and said it would study it before deciding what to do next.

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India’s annual copper consumption is expected to almost triple to 2 million tons in the next decade, according to a projection from Hindalco Industries Ltd. Vedanta produced about 48% of the country’s total copper output of 842,961 tons in 2017-18, according to government data.

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This morning in metals news, Tata Steel completed its buy of the bankrupt Bhushan Steel, Chinese steel mills are turning to scrap and Turkey is preparing to respond over the U.S. tariffs on aluminum and steel.

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Tata Steel Buys Bhushan Steel

Indian firm Tata Steel completed its purchase of the bankrupt Bhushan Steel for $5.2 billion, Reuters reported.

Bhushan has an annual steelmaking capacity of 5.6 million tons, according to the report.

Scrapping Plans

Amid environmental rules, Chinese steel mills are looking to use more scrap, according to a report by the South China Morning Post.

The recycling of material comes as the government continues to crack down on “smoke-stack industries,” according to the report.

Turkey Plans Response on Section 232 Tariffs

Turkey is among the many countries not to have won an exemption from the U.S.’s Section 232 tariffs on steel and aluminum; unsurprisingly, Turkey is planning a response, according to one report.

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Turkey plans to impose tariffs worth about $266.5 million on U.S. products, including coal, paper, walnuts, almonds, tobacco and unprocessed rice, among other items, according to a report by the Hurriyet Daily News.

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Full disclosure – I am an owner of an iPhone, iPad and Macbook — and I don’t mind admitting it, a  longtime fan of Apple’s products — but even I cringe when the firm claims to have “worked with other metal companies to develop the proprietary technique, which allows for the generation of ‘green’ aluminium for the first ever time.”

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The claim follows the announcement late last week that at its Pittsburgh research center, Alcoa has developed a replacement for the carbon anodes used in the smelting of alumina to aluminium.

The carbon anode has the important role of delivering a strong electric current through the melt, but in the process carbon is converted to carbon dioxide and considerable levels of greenhouse gas emissions are produced.

But although Apple is said to be investing C$13 million (U.S. $10 million) in the joint venture called Elysis, it is a drop in the ocean compared to the C$120 million of funding from the governments of Canada and Quebec and, further, the C$55 million invested by Alcoa and Rio Tinto in order to achieve commercialization of the technology over the next five years.

Indeed, Alcoa and Rio each have a 48% stake in the JV, with the rest owned by the government of Quebec, so quite how Apple can claim any fame in this venture is hard to see.

OK, Apple’s hubris aside: is this a step forward in lowering aluminum’s carbon footprint?

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Major metals industry players Alcoa and Rio Tinto last week announced the world’s first carbon-free aluminum smelting process, which the firms billed as “the most significant innovation in the aluminium industry in more than a century.”

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The firms announced the innovation, which is the development of a smelting process that yields oxygen and removes greenhouse gas emissions from the traditional smelting process, according to a joint announcement from the companies.

“To advance larger scale development and commercialization of the new process, Alcoa and Rio Tinto are forming Elysis, a joint venture company to further develop the new process with a technology package planned for sale beginning in 2024,” the Alcoa release stated.

“Elysis, which will be headquartered in Montreal with a research facility in Quebec’s Saguenay–Lac-Saint-Jean region, will develop and license the technology so it can be used to retrofit existing smelters or build new facilities.”

According to the release, Alcoa and Rio Tinto are investing $55 million (CAD) in the venture, with Canada and Quebec investing $60 million (CAD) each.

Apple is also in on the venture, investing $13 million (CAD). Apple will also contribute technical support to the joint venture partners, according to the release.

“This discovery has been long sought in the aluminum industry, and this announcement is the culmination of the work from many dedicated Alcoa employees,” Alcoa President and CEO Roy Harvey said in the prepared statement. “Today, our history of innovation continues as we take aluminum’s sustainable advantage to a new level with the potential to improve the carbon footprint of a range of products from cars to consumer electronics.”

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The announcement certainly would mark a victory for greener processes — and with the reported investment totals going into Elysis, there is quite a bit of institutional support behind it.

In May, the Stainless Steel Monthly Metals Index (MMI) once again inched one point higher. The current reading stands at 77 points.

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The subindex inched higher driven by increasing LME nickel prices. Meanwhile, other related metals in the stainless steel basket traded flat. Chinese ferrochrome alloy decreased for the second consecutive month, this month by 3.2%.

LME Nickel

In April, LME nickel prices increased sharply, following some of the other base metals uptrends (such as aluminum and copper).

LME nickel prices went up to $16,685/mt and then corrected. LME nickel prices in May remain in an uptrend, with current prices around $13,900/mt.

Source: MetalMiner analysis of FastMarkets

LME nickel prices remain in a long-term uptrend that started back in June 2017, when LME nickel prices hovered around $8,900/mt.

However, nickel price momentum seems slower now than it was back in 2017.

Since February, LME nickel prices have traded more sideways. Buying trading volume still supports the uptrend, which may result in increasing nickel prices in the coming months.

Domestic Stainless Steel Market

Following the recovery in stainless steel price momentum, domestic stainless steel surcharges increased again this month. The 316/316L-coil NAS surcharge reached $1.01/pound, while the 304/304L-coil NAS surcharge increased to $0.71/pound.

Source: MetalMiner data from MetalMiner IndX(™)

After last month’s sideways trend for NAS stainless steel surcharges, the uptrend has started again. The 316/316L-coil NAS surcharge is currently moving toward the January 2013 peak of $1.12/pound. The surcharge has breached previous high peaks already.

China Stainless Steel Market

An abundance of stainless steel in China came as a result of new production in Indonesia. The Chinese-owned stainless company Tsingshan started production last August in Indonesia, with an annual capacity of around 3 million tons by the end of 2018. This annual capacity equates to 6% of last year’s global stainless steel capacity.

Due to this increased production, China became a net importer of hot-rolled stainless coil already in December 2017 for the first time in more than seven years, according to the International Steel Statistics Bureau. Chinese stainless steel stocks have risen, while Chinese stainless steel prices have not. In fact, Chinese stainless steel price currently trade sideways.

The current divergence between increasing LME nickel prices and Chinese stainless steel prices, plus increasing stainless steel stocks, may drive some mills to cut production. 

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What This Means for Industrial Buyers

Stainless steel price momentum appears to be strong this month, as stainless steel surcharges increased sharply.

With nickel in a bull market, buying organizations may want to follow the market closely for opportunities to buy on the dips. Hedging nickel may result in potential savings opportunities for buying organizations.

To understand how to adapt buying strategies to your specific needs on a monthly basis, take a free trial of our Monthly Outlook now.