Articles in Category: Non-ferrous Metals

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This morning in metals news, U.S. steel mills produced at a capacity utilization rate of 80.6% for the year through Feb. 9, U.S. steel mill shipments rose 4.8% in 2018 on a year-over-year basis and a Peruvian plant used to produce copper will be partially suspended for the next 3-5 days.

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Capacity Rate Maintains Level Above 80%

U.S. raw steel production for the year through Feb. 9 reached 10.9 million tons, according to the American Iron and Steel Institute (AISI), up 9.3% from the 9.9 million tons produced during the same period in 2018.

For the aforementioned period this year, U.S. steel mills produced at a capacity utilization rate of 80.6%, up from 75.7% for the same period in 2018.

For the week ending Feb. 9, production hit 1.9 million tons at a capacity utilization rate of 81.5%.

December Steel Shipments Up 6.5%

According to another AISI report, U.S. steel mills in December shipped 7.8 million net tons, marking a 0.8% increase from the previous month and a 6.5% increase year over year.

Shipments for the full year hit 95.3 million net tons, up 4.8% compared with 2017 shipments.

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Southern Copper Corp. Announces Suspension of Peru Plant

According to a Reuters report, Southern Copper Corp. announced the partial suspension of a plant in Peru used to produce copper.

The plant will not restart for another 3-5 days, according to the report, as the miner works on tailings and railway infrastructure.

The Copper Monthly Metals Index (MMI) hit 76 this month, up 2.7% after a decrease last month — yet it remains in an oscillating pattern that began in the summer of 2018.

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LME copper prices. Source: MetalMiner analysis of Fastmarkets

LME copper prices trended upward this month but were still within the oscillating pattern that started July 2018.

After hitting the late December low of $5,725/mt, the LME price trended upward since early January. LME copper prices increased throughout the first two months of 2019 but are still technically within the resistance boundary of the oscillating pattern, marked by the $6380/mt price point.

From a longer-term perspective, this is beyond the $6,000/mt level that served as the resistance point when prices trended lower during the first seven months of 2017.

A recent report from the International Copper Study Group (ICSG) showed worldwide demand increases are edging out global supply increases of ore and refined production, in terms of aggregate numbers.

The most notable production change reported was an increase in Chilean mine production. The most notable demand increase was the 7% increase in China, most likely due to lower availability of copper scrap in China, as discussed in this month’s MetalMiner February Monthly Outlook.

Vedanta was able to reopen its south Indian copper smelter when the country’s Supreme Court ruled in its favor and overturned a decision by the National Green Tribunal (NGT) to permanently shut down the copper smelter operation due to alleged pollution at its plant in the city of Thoothukudi.

Chinese Scrap Copper

Source: MetalMiner analysis of Fastmarkets

After some divergence in pricing trends, the LME copper and Chinese copper scrap prices re-synchronized in an upward trend. This is due to a short-term LME copper price turnaround, while the China index price is still trending upward gently.

China’s copper premiums fell to an 18-month low recently, indicating there may be some demand weakness.

What This Means for Industrial Buyers

LME copper price momentum appears solid so far during 2019.

Throughout most of 2018, both LME copper and Chinese copper scrap prices trended downward.

Both prices have turned around; however, the uptrend remains somewhat weak.

Historically speaking, prices remain fairly low. With a mild 2.7% increase in the MMI index this month, it’s too soon to determine if copper’s short-term sideways trend is over. Volumes, however, appear fairly buoyant, and prices have trended upward at the start of February.

It’s important for buying organizations to understand how to react to copper price movements. The MetalMiner Monthly Outlook report helps buyers understand the copper marketplace.

Want to a see Cold Rolled price forecast? Get two monthly reports for free!

Actual Copper Prices and Trends

In January, most of the prices in the Copper MMI basket increased, with the exception of Korean copper strip, which fell 0.24%.

Indian copper cash prices increased the most, by 4.24%, to $6.14/kilogram.

The remaining copper prices in the basket increased in the range of 1.8-3.19%, with an average change of 2.59%.

[Editor’s note: This is the third and final part of our series on tariffs. In case you missed them, read Part 1 and Part 2.]

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2002 Bush Section 201 Steel Tariffs

All of this background analysis brings us to the heart of the current debate: are the tariffs “bad” for the economy and manufacturing?

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The only trade study published on tariffs that measures actual impact — as opposed to using models to support claims — sheds some light.

As previously reported by MetalMiner, a 2003 study used primary research with 419 steel-consuming companies, as opposed to econometric modeling.  At the time, this represented fully 22% of all steel purchased by companies in the U.S. That study concluded “overall employment of steel-consuming industries generally fell or remained flat in 2002-03” compared with the previous two years, but that productivity and wages increased over the three-year period.

Moreover, the study noted a $30.4 million GDP loss — not nothing, but insignificant against the total.

Perhaps most ironically among steel-consuming companies, “overall sales and profits increased, while capital investment fell, for most steel-consuming industries in 2002-03 – the period after the implementation of the safeguard measures.”

Not all results were positive.

Half of industry respondents reported higher steel prices and 43% said that they could not pass those costs onto their customers. Some reported that producers broke contracts.

Finally, 32% of respondents saw higher lead times, while 46% of respondents noted difficulties in obtaining materials.

Which Brings Us Back to the ‘Model’ Studies…

The use of models remains inherently flawed because most models require the use of forward-looking data and assumptions.

The Coalition for a Prosperous America conducted a trade study that generated different results from the Koch study, primarily by taking into consideration actual baseline GDP and total employment data, and CBO forecasts for GDP and employment (the CBO is considered by policy wonks to be the most neutral of all economic reporting government entities).

That study also factored in industry plans and announcements from the steel industry and used the Regional Economic Modeling Inc’s (REMI) model, which is used widely by think tanks, state and local governments, etc.

Other Government Research Debunks Broader Negative Tariff Impact Claims

A Congressional Research Service (CRS) analysis points to negative impacts from the tariffs on steel and aluminum. That analysis, however, suggests a much narrower range of impacts from higher prices of steel and aluminum to lower imports of those same commodities.

The study also claims input costs will rise for downstream manufacturers. Certainly, prices have risen with the imposition of the tariffs. However, nobody has conducted research to determine if manufacturers could pass down costs and/or if their profits were lower, higher or about the same as prior to the tariffs.

In other words, have the higher prices actually impacted GDP and employment data?

The CRS study suggests the two biggest variables to consider relates to downstream prices and availability of imports, which will depend upon the range of product and country exclusions and the degree to which other countries retaliate.

Regardless, the ISM Report on Manufacturing released in December, which also relies upon primary research with downstream manufacturers, reported: “Despite U.S. tariffs on foreign steel and aluminum, prices for those key materials have declined, executives said.”

Those price declines mirror current commodity market conditions in which the overall bull market appears to have run out of steam. MetalMiner’s long-term outlook for both commodities and industrial metals shifted from bullish to bearish back in December 2018 and January 2019, respectively.

It’s easy to glob onto the mainstream trade war discourse and assume the widely circulated studies must serve as the whole truth. The truth, however, requires the media and the public to acknowledge real anti-tariff media bias, the actual overcapacity conditions that led to the imposition of Section 232 in the first place, and the impacts measured post-tariff as reported by those that actually, as opposed to theoretically, felt the impact (e.g. downstream manufacturing organizations).

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The “war” on trade requires all of us to dig deeper and perhaps seek to learn what we don’t know.

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This morning in metals news, ArcelorMittal  on steel demand in China (and elsewhere), copper lost ground after several upward sessions in a row and Mexico’s steel industry is not happy with the government’s decision to not renew steel safeguards protecting against steel from countries with which Mexico does not have a trade agreement.

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Chinese Steel Demand

ArcelorMittal expects the steel sector to come back down a bit after a run of strong prices, according to a Bloomberg report.

Unsurprisingly, much of that expected decline has to do with softening demand in China. Per the report, the firm expects steel demand growth to slow around the world,  and contract in China for the first time since 2015.

Copper Falls

After three straight upward sessions for London copper, the price fell back Thursday, Reuters reported.

LME copper fell 0.2% Thursday, according to the report. Meanwhile, Chinese markets remain closed over the Lunar New Year holiday break.

Mexico’s Steel Safeguards

According to an S&P Global Platts report, Mexican industry groups are not happy with the government’s decision to let a 15% steel safeguard lapse.

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The safeguard applied to imports from countries with which Mexico does not have a trade agreement, according to the report.

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This morning in metals news, copper rises for third straight session, President Donald Trump’s State of the Union addresses China, NAFTA and more, and Japan’s Nippon Steel & Sumitomo Metal Corp. reported its quarterly earnings.

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Copper Picks Up

According to Reuters, the copper price rose for the third straight session Wednesday.

With a March deadline approaching — after which Trump has pledged the U.S. will increase the tariff rate from 10% to 25% on $200 billion worth of Chinese goods coming into the U.S. — the report states another round of U.S.-China trade talks is scheduled next week in Beijing. As such, the copper price picked up, as it has when the news cycle shifts toward the easing of trade tensions between the two economic powerhouses.

Trump Talks China, NAFTA During State of the Union

After a delay due to the partial government shutdown, President Donald Trump delivered his State of the Union address before members of Congress Tuesday night.

As U.S.-China trade talks continue — with talks scheduled for next week in Beijing after a recent visit from Vice Premier Liu He to Washington, D.C. — Trump again cited U.S. trade gripes against China.

“We are now making it clear to China that after years of targeting our industries, and stealing our intellectual property, the theft of American jobs and wealth has come to an end,” Trump said. “Therefore, we recently imposed tariffs on $250 billion of Chinese goods — and now our Treasury is receiving billions of dollars a month from a country that never gave us a dime. But I don’t blame China for taking advantage of us — I blame our leaders and representatives for allowing this travesty to happen. I have great respect for President Xi, and we are now working on a new trade deal with China. But it must include real, structural change to end unfair trade practices, reduce our chronic trade deficit, and protect American jobs.”
On the North American Free Trade Agreement (NAFTA), Trump touted its pending replacement, the United States-Mexico-Canada Agreement (USMCA), which must be ratified by the legislatures of the three countries.

“Another historic trade blunder was the catastrophe known as NAFTA,” he said.

“I have met the men and women of Michigan, Ohio, Pennsylvania, Indiana, New Hampshire, and many other States whose dreams were shattered by NAFTA. For years, politicians promised them they would negotiate for a better deal. But no one ever tried — until now.

“Our new U.S.-Mexico-Canada Agreement — or USMCA — will replace NAFTA and deliver for American workers: bringing back our manufacturing jobs, expanding American agriculture, protecting intellectual property, and ensuring that more cars are proudly stamped with four beautiful words: made in the USA.

“Tonight, I am also asking you to pass the United States Reciprocal Trade Act, so that if another country places an unfair tariff on an American product, we can charge them the exact same tariff on the same product that they sell to us.”

Nippon Reports Quarterly Results

Nippon Steel & Sumitomo Metal Corp. released its third quarter fiscal year 2018 (Oct. 1-Dec. 31) financial results today, cutting its 2019 profit forecast by 6%, Reuters reported.

For Q3 2018, Nippon reported ordinary profit ¥256.4 billion, up from ¥225.4 billion for Q3 2017.

The firm’s steel segment picked up in sales and profit in Q3 2018.

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“In the Steelmaking and Steel Fabrication segment, domestic steel demand remained solid, especially for shipments to the automotive sector, and overseas steel demand as a whole was on a rising trend,” Nippon’s financial report states. “In the domestic steel markets, prices were at a generally high level against a background of stable demand, while prices declined in the overseas markets in the third quarter of fiscal 2018, due to uncertainty over China’s economic outlook.”

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The Construction Monthly Metals Index (MMI) held flat, sticking at 82 for the third straight month.

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U.S. Construction Spending

U.S. construction spending in November (the most recently available data) hit an estimated $1,299.9 billion, up 0.8% from the October total $1,289.7 billion.

November spending marked a 3.4% increase from the November 2017 construction spending total.

For the first 11 months of the year, spending hit $1,200.7 billion, a 4.5% increase from the January-November 2017 period (when spending hit $1,149.3 billion).

Under private construction, spending hit $993.4 billion in November, marking 1.3% increase from the revised October total of $980.4 billion. Furthermore, residential construction hit $542.5 billion, up 3.5% from October. Meanwhile, nonresidential construction hit $524.2 billion, down 1.2% from October.

As for public construction, spending reached $306.5 billion, 0.9% below the October total of $309.3 billion. Educational construction hit $76.7 billion, marking a 2.0% drop from October’s $78.3 billion. Highway construction spending reached $93.4 billion, up 1.7% from October’s $91.8 billion.

Architecture Billings Index

The Architecture Billings Index (ABI), released monthly by the American Institute of Architects, indicated modest billings growth to close 2018.

The December ABI came in at a value of 50.4 (anything greater than 50 indicates growth). The December ABI marks a drop from the previous month, when it reached 54.7.

“But despite flat billings in December, firm billings increased every month of the year in 2018,” the ABI report states. “And while concern about a potential economic slowdown looms for 2019, firms are not yet seeing any clear signs of it in their project workloads.”

Billings growth was the strongest in the Midwest, which posted an ABI of 56.3. Trailing the Midwest were the Northeast (51.6), South (49.4) and the West (49.2).

On the jobs front, the report notes the construction sector added 280,000 jobs in 2018, an uptick of 30,000 from the construction jobs added in 2017.

This month’s ABI survey of architecture industry professionals asked about the stock market volatility December and its level of impact on billings growth.

According to the ABI report, just 5% of respondents indicated the December volatility impacted their current projects, while an additional 29% reported “they have heard rumblings of potential impacts but haven’t seen anything definitive just yet.”

Actual Metal Prices and Trends

Chinese rebar steel ticked up 0.5% month over month to $559.36/mt as of Feb. 1. Chinese H-beam steel also moved up 4% to $559.36/mt.

U.S. shredded scrap steel fell 11.0% to $314/st.

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European commercial 1050 aluminum sheet fell 0.5% to $2,654.15/mt. Chinese aluminum bar rose 3.1% to $2,152.41/mt. Meanwhile, 62% iron ore PB fines rose 2.6% to $78.31 per dry metric 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 metals storylines here on MetalMiner:

  • Global crude steel production rose 4.6% year over year in 2018, while China’s piece of the pie grew.
  • A dam breach at Brazilian miner Vale’s Corrego do Feijao iron ore mine has left more than 100 dead and hundreds remain missing.
  • Take a listen to MetalMiner’s latest podcast episode, this time on a word that seems to be picking up steam: reshoring. MetalMiner chats with Harry Moser of the Reshoring Initiative.
  • U.S. steel mills hit a capacity utilization rate just over 80% for the year through Jan. 26.
  • AK Steel recently announced its 4Q 2018 and full-year financial results, also announcing it will shutter its already mostly idled Ashland Works by the end of the year.
  • Who really wins after the exchange of metals tariffs between the U.S. and Canada, two longtime allies?
  • India moved just past Japan into the No. 2 spot of top global steel producers last year.
  • U.S. Steel, Nucor Corporation and Tesla all reported their quarterly results earlier this week.
  • Gold has previously been losing a bit of its sheen, but it seems to be shining one again (or, at least, on its way back).

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This morning in metals news, copper gains momentum, Japan’s steel federation thinks domestic output will grow this year and U.S. Steel will have to pay at least $40 million to repair one of its facilities after a fire.

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Copper Reaches Seven-Week High

Copper prices surged to a seven-week high on Thursday, Reuters reported, inversely with a dropping U.S. dollar.

LME copper jumped 0.5% to hit $6,167 per ton, according to the report.

Japanese Domestic Output

The chief of Japan’s steel federation said Japan’s domestic steel output will likely be higher, aided by demand from the 2020 Tokyo Olympics, according to a Reuters report.

In 2018, Japan’s steel output slipped 0.3% on a year-over-year basis, as India overtook it for the No. 2 spot on the list of the world’s top steel producers.

U.S. Steel to Repair Clairton Plant After Fire

U.S. Steel announced this week that it would need to spend at least $40 million on repairs after a fire at its Clairton Coke Plant (just south of Pittsburgh), the Pittsburgh Post-Gazette reported.

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The fire ran through the building on Christmas Eve, leading to county officials to issue air quality alerts.

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This morning in metals news, buyers are turning to Australia after a dam breach at one of Vale’s Brazilian iron ore operations, U.S. Sen. Chuck Grassley (R-Iowa) said the Trump administration should lift its Section 232 tariffs before the United States-Mexico-Canada Agreement (USMCA) is ratified and U.S.-China trade talks are set to resume this week.

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Iron Ore Supply

Following a dam breach at Brazilian miner Vale S.A.’s Corrego do Feijao mine — which left at least 60 dead and hundreds missing — buyers are looking elsewhere to meet some of the lost supply.

According to Reuters, buyers could look to Australia for their supply, which could knock Vale off from its position as the top seaborne iron ore supplier.

Grassley: Administration Must Lift Section 232 Tariffs Before Congress Ratifies USMCA

The Iowa senator, in a statement co-authored with Iowa Secretary of Agriculture Mike Naig, wrote in a statement Wednesday that the Trump administration should lift its steel and aluminum tariffs vis-a-vis Canada and Mexico before Congress ratifies the trilateral trade deal.

“Unfortunately, our producers are unlikely to realize the market access promises of USMCA while the Section 232 tariffs on steel and aluminum imports from Canada and Mexico remain. Because of these tariffs, Mexico and Canada have imposed retaliatory tariffs on American exports,” the statement said. “Mexico has hit our pork exports with a 20 percent tariff. According to Iowa State University economist Dermot Hayes, this is costing our pork producers $12 per animal, meaning industrywide losses of $1.5 billion annually. Paired with Chinese retaliatory tariffs on pork, soybeans, corn and wheat, our farmers need relief fast.

“Before Congress considers legislation to implement USMCA, the Administration should lift tariffs on steel and aluminum imports from our top two trading partners and secure the elimination of retaliatory tariffs that stand to wipe out gains our farmers have made over the past two and a half decades. As one of Iowa’s U.S. senators and chairman of the Senate Finance Committee, which is tasked with leading the implementation of USMCA in the Senate, and as the secretary of agriculture for one of the largest pork, dairy, poultry, soybean, corn and cattle-exporting states in the nation, we’ll be working all hands on deck to get the job done. But we need the Administration to help us pave the way.”

U.S.-China Trade Talks Continue

The U.S. and China are set to resume trade talks this week with a visit to Washington, D.C. scheduled from China’s Vice Premier Liu He, Reuters reported.

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According to the report, President Donald Trump will meet with Liu on Thursday.

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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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