Articles in Category: Non-ferrous Metals

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This morning in metals news, Chinese iron ore futures hit their highest price point in 10 months, Turkey’s steel sector takes another hit, and copper and zinc hit their 2019 highs.

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Iron Ore Rises

Is optimism building vis-a-vis a potential resolution to the ongoing U.S.-China trade dispute?

Apparently, yes (whether that leads to an actual diplomatic breakthrough is something else entirely).

And, according to Reuters, that optimism has contributed to sending Chinese iron ore futures up to a more than 10-month high, with Dalian ore gaining as much as 2.6%.

Strain on Turkish Steel

The Turkish steel sector was already under pressure after the 2018 diplomatic standoff over the detention of American pastor Andrew Brunson. Brunson was eventually released in October, but not before the Trump administration in August announced it would double its Section 232 tariffs on steel and aluminum with respect to imports from Turkey.

The move thus raised the duties to 50% and 20%, respectively, on a Turkish steel sector that was already suffering after the initial 25% steel duty was imposed in March 2018. U.S. imports of Turkish steel through the first half of 2018 were down 56% compared with the first half of 2017.

The hits keep on coming for the Turkish steel sector, as E.U. member states this week voted to impose steel quotas extending until 2021.

“Our export markets have disappeared, the local market hardly exists, we’ve got lots of capacity and no market,” a London-based Turkish steel trader was quoted by Reuters as saying.

Copper, Zinc Surging

The price of copper and zinc on Friday reached their highest levels in the year to date, CNBC reported.

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As with the Dalian iron ore surge, markets are seizing on optimism that a U.S.-China accord is drawing nearer.

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This morning in metals news, aluminum producer Alcoa Corporation reported its fourth-quarter and full-year 2018 results, India is considering a higher iron ore import duty and Shanghai steel futures moved up.

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Alcoa Reports 4Q Earnings

Pittsburgh-based aluminum producer Alcoa Corporation reported its fourth-quarter and full-year 2018 earnings this week, reporting adjusted net income of $125 million, excluding special items, for the final quarter of 2018.

The 4Q net income total was up from $119 million in the third quarter but down from $195 million in 4Q 2017.

For 2018 as a whole, the company reported adjusted net income excluding special items of $675 million, up from $563 million in 2017.

“Despite sequentially weaker commodity prices, we had a strong fourth quarter with higher profits in our Bauxite and Alumina segments,” President and CEO Roy Harvey said. “With the help of higher market prices earlier in the year, we increased annual profits, addressed liabilities, significantly strengthened our balance sheet, and began returning cash to stockholders. With markets likely to remain dynamic in 2019, we will focus on what we can control to continue improving our operations, addressing challenges with agility, and making the most of opportunities in the year ahead.”

In 2019, Alcoa projects a global aluminum deficit between 1.7 million and 2.1 million metric tons. In addition, Alcoa reported the global alumina market came in at a deficit of 0.6 million metric tons.

“In 2019, the Company expects the alumina market to move to a surplus that is projected to range between 0.2 million and 1 million metric tons, which assumes ongoing, third-party supply disruptions in the Atlantic region,” Alcoa states. “The projected alumina surplus is driven by China, where refining expansions are expected to outpace demand growth from smelting.”

India Considers Hiking Iron Ore Duty

According to a report from Creamer Media’s Mining Weekly, the Indian government is considering an increase to its iron ore import duty.

Per the report, domestic industry has lobbied the government to increase the current 2.5% duty on imported iron ore.

Shanghai Steel Picks Up

Global steel prices have lagged of late, but Thursday was a positive session for Shanghai steel futures, Reuters reported.

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Per the report, the most-traded rebar contract on the SHFE ticked up 0.8%, while hot rolled coil was also up 0.8%.

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A resolution that sought to reverse the Trump administration’s decision to ease sanctions on Russian companies — including aluminum heavyweight United Company Rusalfailed to pass this week, coming in at a 57-42 vote (just short of the 60 votes needed to pass).

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Sen. Chuck Schumer (D-NY) introduced the resolution Jan. 4, after which it was referred to the Committee on Banking, Housing, and Urban Affairs.

The resolution states that Congress “disapproves of the action relating to the application of sanctions imposed with respect to the Russian Federation proposed by the President in the report submitted to Congress under section 216(a)(1) of the Russia Sanctions Review Act of 2017 on December 19, 2018, relating to terminating sanctions imposed on En+ Group plc (“En+”), UC Rusal plc (“Rusal”), and JSC EuroSibEnergo (“ESE”).”

In April 2018, the U.S. Treasury Department announced sanctions against several Russian companies and their owners, including Russian oligarch Oleg Deripaska and Rusal (the second-largest aluminum producer in the world).

The April announcement sent aluminum prices skyrocketing on fears of Rusal aluminum being taken off the market.

2018 LME prices. Source: LME

As has been noted here previously, the Treasury proceeded to delay its deadline for U.S. companies to unwind business relations with the listed Russian firms, first from Oct. 23 to Nov. 12, to Dec.12, then Jan. 7, then Jan. 21.

However, on Dec. 19, 2019, the Treasury announced intentions to delist En+ Group (which has a controlling interest in Rusal), Rusal, and EuroSibEnergo.

“Treasury sanctioned these companies because of their ownership and control by sanctioned Russian oligarch Oleg Deripaska, not for the conduct of the companies themselves. These companies have committed to significantly diminish Deripaska’s ownership and sever his control.  The companies will be subject to ongoing compliance and will face severe consequences if they fail to comply,” Treasury Secretary Steven Mnuchin said in a release at the time. “OFAC maintains the ability under the terms of the agreement to have unprecedented levels of transparency into operations.”

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Notably, although the resolution ultimately did not receive the requisite votes to pass, 11 Senate Republicans voted in favor of the resolution to reverse the decision to ease sanctions — representing a now rare instance of bipartisanship.

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This morning in metals news, the E.U. approved new steel import curbs extending until 2021 with a vote Wednesday, the copper price picked up as the U.S. dollar loses momentum and the United States Trade Representative (USTR) says it will set up a system for exclusions if the tariff rate increases on the $200 billion of duties imposed on Chinese imports in September (currently sitting at 10%).

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E.U. Moves Forward with New Steel Quotas

As expected, E.U. member states voted to impose new steel quotas, part of the ongoing response to the U.S.’s Section 232 tariffs imposed in March 2018 and fears of redirected steel supplies flooding Europe.

E.U. member states approved provisional measures in July 2018, but the approval Wednesday puts quotas into place that will extend to July 2021.

Copper Rises, Dollar Softens

The U.S. dollar was cruising ever-upward throughout the tail end of 2018, but that momentum has seemingly slowed of late.

The U.S. dollar and base metals like copper correlate inversely, meaning a drop in one typically presages a rise in the other.

As Reuters reported Wednesday, the LME three-month copper price jumped for a second straight day, moving up 0.8%.

The U.S. dollar index declined to start the year but has bounced back in the past week, sitting at 96.04 as Wednesday morning.

USTR to Allow for Exclusions if Tariff Rate Rises on Chinese Goods

According to a Bloomberg report, the USTR has promised two senators that there will be an exclusion request process on the previously announced $200 billion in tariffs on Chinese goods if the tariff rate rises to 25%.

The $200 billion tariff package, imposed in September, came at a 10% tariff rate, with a built-in increase to 25% as of Jan. 1, 2019.

That increase, however, was postponed, as the U.S. and China began a 90-day negotiating period to hash out trade differences.

Unlike the previous $50 billion tariff package announced last year, the larger tariff package was not looped into a tariff exclusion request process (that is, a process by which companies can make the case that they need exemptions from the duty).

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However, according to the USTR letter cited by Bloomberg, the U.S. will allow for exemption requests if the tariff rate is ultimately elevated to 25%.

Base metals traded higher at the beginning of January. However, momentum appears to be weaker once again.

The DBB index has shown weakness since June 2018, when it started this short-term downtrend. MetalMiner has recently revised its market outlook, advising buying organizations to closely follow how the index develops.

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DBB index. Source: MetalMiner analysis of Yahoo Finance

Since 2016, the DBB base metals complex has remained in a long-term trend (see the chart below). Base metal prices have skyrocketed since then but moved lower in 2018, when concerns about the Chinese economy started to appear.

DBB index long-term trend. Source: MetalMiner analysis of Yahoo Finance

A weaker Chinese economy will move demand lower. However, 2018 closed with the six base metals in global deficit. Supply and demand has not moved; therefore prices, mostly economic expectations and trading changes have driven base metal markets.

The Drivers

The DBB index comprises three base metals: aluminum, copper and zinc.

LME aluminum prices moved higher at the beginning of January, but prices did not breach the $1,970/mt level that acted as a support for most 2018. Prices being unable to breach that support level signals weakness for the base metal complex.

LME Aluminum prices. Source: MetalMiner analysis of FastMarkets

Both LME copper and LME zinc prices started to increase slightly at the beginning of January. Similar to aluminum, prices of both base metals fell. LME copper remains below the $6,000/mt level, which has served as the psychological ceiling for copper prices.

What This Means for Industrial Buyers

The base metals complex seems seems weaker. MetalMiner recently switched the long-term uptrend to a sideways trend.

Buying organizations may want to follow price dynamics closely, as well as each specific base metal price. Adapting the right buying strategy becomes crucial to reducing risks.

Only the MetalMiner Monthly Outlook reports provide a continually updated snapshot of the market from which buying organizations can determine when and how much of the underlying metal to buy.

MetalMiner’s Annual Outlook provides 2019 buying strategies for carbon steel

For more information on how to mitigate price risk year-round, request a free trial to our Monthly Metal Buying Outlook.

With the January 2019 Monthly Metals Index (MMI) report, we can close the book on 2018 and what was a wild year in the world of metals and metals price movements.

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It was a book that closed with a pessimistic chapter for metals (and commodities in general), with many posting price declines as markets feel the effect of simmering trade tensions between the U.S. and China.

In our latest MMI report, you can read about all of the latest news and trends in our 10 metals subindexes: Automotive, Construction, Rare Earths, Renewables, Aluminum, Copper, Stainless Steel, Raw Steels, GOES and Global Precious.

A few highlights from this month’s round of reports:

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Read about all of the above and much more by downloading the January 2019 MMI Report below:

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This morning in metals news, China is eyeing improvements to its steel capacity structure, China’s 2018 aluminum exports surged and Shanghai rebar futures hit a two-month high.

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China’s Steel Structure

According to Reuters, China is looking to shift the focus of its steel industry in 2019 from one of fast growth to more optimized, high-quality development.

The report cites Yu Yong, chairman of the China Iron and Steel Association, who said a major push in 2019 will come in the form of “optimising production structure, adjusting layout of steel mills and pushing merger and acquisition.”

China’s Aluminum Exports Surge

China’s exports of unwrought aluminum and aluminum products jumped 20.9% in 2018 year over year, S&P Global Platts reported.

Per the same report, December exports were up 19.8% on a year-over-year basis.

Shanghai Rebar Price on the Rise

The Shanghai rebar price hit a two-month high Monday, Reuters reported.

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According to the report, rebar futures rose 1.6% to reach $528.44 per ton.

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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 stories here on MetalMiner:

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This morning in metals news, copper prices are buoyed by a softening U.S. dollar, Dalian iron ore drops and trade ministers from the U.S., Japan and the European Union met in Washington, D.C. yesterday.

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Copper Prices Rise

The price of copper has received some support this week, picking up steam on positive sentiment stemming from U.S.-China trade talks held Jan. 7-9.

On Thursday, the metal’s price rose for the fourth time in five sessions, Reuters reported, aided by a weakened dollar. The U.S. dollar and copper, like many metals, are inversely correlated.

The dollar index has been steadily declining over the last month and fell to 95.35 Thursday morning, down from 97.44 as of mid-December.

Dalian Iron Ore Falls

Chinese iron ore futures fell by 1% Thursday, according to another Reuters report.

According to the report, emergency anti-pollution measures announced in China this week impacted demand for steelmaking materials like iron ore.

U.S., Japan, E.U. Trade Ministers Meet

While the U.S.-China trade talks this week dominated the headlines, the U.S. also held talks with representatives from the E.U. and Japan in Washington, D.C. on Wednesday.

United States Trade Representative Robert Lighthizer, E.U. Trade Commissioner Cecilia Malmström and Hiroshige Seko, Japan’s minister of economy, trade and industry, discussed their “shared objective to address non market-oriented policies and practices of third countries that lead to severe overcapacity, create unfair competitive conditions for their workers and businesses, hinder the development and use of innovative technologies, and undermine the proper functioning of international trade, including where existing rules are not effective,” according to a USTR release.

Related to forced technology transfers — a central component of the U.S.’s Section 301 probe vis-a-vis Chinese trade practices — the ministers agreed to work together on the issue, according to the USTR release.

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“In the area of forced technology transfers, Ministers confirmed their agreement to cooperate on enforcement, on the development of new rules, on investment review for national security purposes and on export controls and further take stock of this cooperation by spring,” the release stated.

The January Aluminum Monthly Metals Index (MMI) fell 3.4% this month, coming in at a value of 85. The index fell 3 points from December’s reading and has returned to a low not seen since February 2017 when the index hit a value of 84.

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So far in January, LME aluminum prices have increased. LME aluminum prices fell below the $1,970/mt level, which has acted as support for most of 2018.

Source: MetalMiner analysis of Fastmarkets

LME aluminum prices seem to have found a new support at $1,795/mt. Prices have rebounded from that level and seem to have gained some momentum. The politics of trade and financial uncertainty in China, rather than supply and demand in the aluminum market have moved LME price levels in 2018.

Chinese Aluminum Scrap

The Chinese environment ministry announced restrictions of imports of scrap steel and aluminum starting July 1 of this year. Scrap steel and aluminum will be moved from an unrestricted import list of solid waste products used as raw materials, to a restricted import list.

SHFE aluminum prices also increased this month, following LME aluminum price dynamics. SHFE aluminum prices however, remain a short-term downtrend since August 2018.

Source: MetalMiner analysis of Fastmarkets

China’s Chalco (Aluminum Corporation of China Ltd.), the largest state-owned aluminum producer in the country, announced at the end of December that it would cut output as a result of falling aluminum prices. In 2017, China’s Chalco shut 470,000 tons of aluminum capacity, or 12% of their 3.93 million tons of primary aluminum capacity.

Production cuts come as a result of falling aluminum prices, ample supply in the country and weaker local demand. Chalco did not cut aluminum production due to environmental concerns, as their smelters remain outside the 28 northern Chinese cities that face special restrictions during the heating season. 

U.S. Domestic Aluminum

The current U.S. aluminum Midwest Premium has also traded sideways in January. The current price stands at $0.18/lb, the third straight month at that level. Despite the sideways trend for the premium, the current premium remains high.

Source: MetalMiner data from MetalMiner IndX(™)

Canada and the U.S. discussed tariffs on Canadian steel and aluminum this week. However, it does not seem that sanctions will be lifted for now. While the sanctions remain in place, domestic aluminum prices remain supported.

What This Means for Industrial Buyers

Despite the recent price increases, LME aluminum prices appear weaker. Tariffs, sanctions and supply concerns may act as a support to aluminum prices, both for LME aluminum and the U.S. Midwest Premium. However, the current base metals complex appears to have lost momentum. Therefore, adapting the “right” buying strategy becomes crucial to reduce risks. Only the MetalMiner Monthly Outlook reports provide a continuously updated snapshot of the market from which buying organizations can determine when and how much of the underlying metal to buy.

Click here for more info on how to mitigate price risk all year round — take a free trial of our Monthly Metal Buying Outlook.

Actual Aluminum Prices and Trends

LME aluminum prices fell this month, with a closing price in December of $1,849/mt. Meanwhile, Korean commercial grade 1050 sheet fell by 3.8% to $3.28/kilogram. Chinese aluminum primary cash prices fell by 2.5%, while Chinese aluminum bar prices fell by 2.4%. Chinese aluminum billet prices rose 2.2% this month, to $2,087/mt. The Indian primary cash price decreased by 6.6% to $1.85/kilogram.