Articles in Category: Non-ferrous Metals

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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.

The May Aluminum Monthly Metals Index (MMI) increased six points. Skyrocketing LME aluminum prices drove the subindex value increase. The current Aluminum MMI subindex stands at 100 points, 6.4% higher than in April.

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LME aluminum price momentum recovered strongly in April. LME aluminum prices reached a more than seven-year high.

Source: MetalMiner analysis of FastMarkets

LME aluminum prices fell slightly at the end of the month. However, this movement appears as a price correction from previous highs. LME aluminum prices increased again at the beginning of May, showing a strong uptrend.

The Reasons for Aluminum Volatility

LME aluminum price volatility came as a result of U.S. sanctions levied April 6 on Russian companies and their owners.

Russia is the world’s second-largest aluminum producer (accounting for 6% of world production). Therefore, the sanctions created the alarm of supply shortages in the U.S., along with all international markets outside China.

However, the U.S.Treasury Department delayed the first due date for the sanctions until Oct. 23, at which point investors must divest or transfer debt and equity and industrial metal buyers must wind down pre-existing long-term contracts.

The delay in the aluminum sanctions eased LME aluminum prices; however, the market has tightened significantly.

SHFE Aluminum

Given the current alarm bell around aluminum and aluminum product shortages outside China, the country may see increased exports, despite U.S. tariffs. Therefore, market observers will want to follow SHFE aluminum prices closely.

Source: MetalMiner data from MetalMiner IndX(™)

Chinese SHFE prices traded similarly to LME prices. However, the degree of the SHFE price increase appears to be less sharp.

Chinese SHFE stocks fell for the first time in nine months (since June 2017) to 970,233 mt, according to exchange data.

U.S. Domestic Aluminum

As a result of the ongoing uncertainty in the aluminum market, U.S. aluminum Midwest premiums increased again to $0.19/pound, climbing to a more than three-year high.

At the end of April, the country-specific aluminum (and steel) tariff exemptions for the E.U., Canada and Mexico were extended until June 1. The decision came  just hours before the temporary exemptions from the tariffs expired.

The final agreements have not yet been released, but the government suggested that quotas will replace tariffs. This action could ease U.S. Midwest premiums.

What This Means for Industrial Buyers

The LME aluminum price retracement in April presented buying organizations with a good opportunity to buy some volume, as prices increased again later in the month.

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Adapting the right buying strategy becomes crucial to reduce risks. Given the ongoing uncertainty around aluminum and aluminum products, buying organizations may want to take a free trial now to our Monthly Metal Buying Outlook.

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This morning in metals news, the deadline for Section 232 tariffs exemptions for certain countries falls tonight at midnight, AK Steel’s stock is up and the LME copper price tracked up Monday.

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Tariff Exemption Expiration Approaches

Several countries negotiated temporary exemptions from the Trump administration’s Section 232 tariffs on steel and aluminum (imposed last month). Canada, Mexico, Argentina, Australia, Brazil and the E.U. won temporary exemptions. South Korea also won a temporary exemption, which eventually became a long-term exemption after the progression of talks on the U.S.-Korea Free Trade Agreement (KORUS).

The key term there is “short term” — the deadline for the expiration of that exemption falls at midnight tonight.

Naturally, the E.U. and others are scrambling to win long-term exemptions before the tariffs hit their metal exports.

“For the time being our priority is the ongoing high-level dialogue to secure a permanent exemption,” said Cecilia Malmstrom, the E.U. trade commissioner, as quoted by the BBC.

AK Steel Stock Rises

After AK Steel reported better-than-expected Q1 financials, its stock jumped 2.3%, according to a MarketWatch report.

According to the report, the company expects market conditions to strengthen in Q2.

Copper, Aluminum Up

LME copper and aluminum rose on Monday, Reuters reported, as the U.S. dollar fell back from a recent three-month high.

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Despite light trade Monday, according to the report, LME copper rose 0.4%, while aluminum was up 0.1%.

As my colleague Fouad Egbaria wrote last week, the U.S. administration’s relaxation of the timescale for implementation of sanctions against Rusal has had the effect of taking the panic out of the market. As a result, prices have fallen for several days, not just for aluminum but for other metals that the market feared could face the same threat — most notably nickel, in which Russian oligarch Oleg Deripaska has an interest.

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But the vagaries of Washington policy aside, the underlying fundamentals for the nickel market remain firm.

Global Nickel Production and Usage Projected to Grow This Year

Reuters reports that according to the International Nickel Study Group, world stainless steel melting production rose by 5.8% last year, while projecting that global nickel production and usage is expected to rise to 2.344 million tons (MT) in 2018.

In terms of tonnage, world nickel production is expected to grow from 2.07 MT last year to 2.22 MT this year, while usage is expected to increase from 2.19 MT in 2017 to 2.34 MT in 2018.

As a perspective on fundamentals reasserts itself, the nickel price has recovered, rising back about $14,000 per ton. Demand has remained robust among stainless producers, with production forecast to rise 4% this year to over 52 million tons, while fears remain around supply.

Philippines Industry Aims to Navigate Government Land Regulations

The Philippines was top supplier to China last year, but the government of President Rodrigo Duterte is not letting up on its efforts to curb environmental damage from the extraction industry and threats remain of nickel mining being curtailed.

Nickel Asia, the Philippines’ top nickel ore producer and operator of the only two nickel smelters in the country, is quoted by Reuters as saying it intends to ship 20 million tons of ore this year — up 17% on last year.

But the government is limiting the amount of land miners can develop at any one time in a spur to rehabilitate old workings.

The limits are highly restrictive, amounting to only 100 hectares for mines producing 9 million tons or more, or 162 hectares if the project has a processing plant on site. The biggest of Nickel Asia’s mines covers 5,000 hectares and even the smallest covers 700, so it will be interesting to see if the firm manages the expansion in output it is projecting.

Indonesian Output on the Rise

Output in Indonesia is recovering following a lifting of the 2014 ban. The country has reasserted itself as the No. 1 supplier to China in the first half of this year.

The ban was lifted partly as the country looked to make up for the loss of revenue when exports collapsed and partly as firms invest in the downstream processing the ban was intended to force through.

Further increases in output, however, are limited, and investment in new reserves has been poor, while the nickel price was lower over recent years so the ability of the market to respond to predicted increases in demand from electric car and battery makers is in question.

The Outlook

We could see a growing divergence in nickel prices with standard nickel stainless melting grades remaining firm in the short to medium term, but battery Grade A, high-purity nickel premiums rising strongly if demand materializes as expected.

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Supplies of such high-purity nickel are limited, with only major producers like BHP Billiton, Norilsk Nickel, Vale and Sumitomo able to supply.

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This morning in metals, steel mills in China’s second-biggest steelmaking province are shutting down, U.S. Steel reports its Q1 financials and Ecuadorian officials are engaging in talks to potentially bring a copper refinery to the country.

Chinese Mills Shut Down in Pollution-Curbing Measure

Several steel mills in the Chinese city of Xuzhou have been shut down in a pollution crackdown effort, Reuters reported.

According to the report, at least three mills have been shut down until they meet anti-pollution rules.

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The three mills have a combined annual steel capacity of 4.25 million tons, according to the report.

U.S. Steel Brings in $18M in Q1

U.S. Steel made $18 million in Q1, the Northwest Indiana Times reported, a far cry from the $180 million loss it posted in Q1 2017.

According to the report, U.S. Steel reported its stronger balance sheet was aided by investment at its mills in addition to the Section 232 measures from the Trump administration last month.

Potential Copper Refinery in Ecuador

According to a Bloomberg report, Ecuadorian officials are in talks with foreign companies with respect to building a copper refinery in the country.

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According to the report, Rebeca Illescas, the Ecuadorian mining minister, said Chinese and Japanese companies might be interested in the project, in addition to Glencore.

MetalMiner’s Stuart Burns touched on the rapid swing back downward for the aluminum price, which surged on news of U.S. sanctions on Russian oligarchs and companies but quickly dropped when the U.S. Treasury opened the door to potential easing of sanctions.

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But aluminum wasn’t the only metal to see its price drop precipitously in the last week.

LME nickel rose 15.8% between April 3 and April 19, from $13,555/mt to $15,700/mt. That surge has reversed, however, in recent days.

From that $15,700/mt mark, the price has dropped 10.7%, down to $14,025/mt as of April 23.

LME nickel price. Source: LME

The nickel price jumped 10% in a single day last week, the Financial Times reported, marking the biggest one-day jump since 2008, on concerns regarding the potential for sanctions to spread to Russian firm Norilsk Nickel.

Norilsk, however, was not among the 12 companies listed in the sanctions announced by the U.S. Treasury April 6.

Nonetheless, with the U.S. Treasury opening the door for the easing of sanctions if Russian oligarch Oleg Deripaska steps down from his role with aluminum giant Rusal — one of the companies listed in the initial sanctions announcement — the price of aluminum and other metals, like nickel, have tracked back down.

Given Rusal’s stake in Norilsk, last week’s fears regarding a potential supply crunch have for now been somewhat allayed. As such, with the Treasury’s softened stance on sanctions, prices have come back down.

On Monday, the Treasury extended the deadline for U.S. individuals to wind down activities with Rusal to Oct. 23.

“RUSAL has felt the impact of U.S. sanctions because of its entanglement with Oleg Deripaska, but the U.S. government is not targeting the hardworking people who depend on RUSAL and its subsidiaries,” Treasury Secretary Steven Mnuchin said in a prepared statement. “RUSAL has approached us to petition for delisting.  Given the impact on our partners and allies, we are issuing a general license extending the maintenance and wind-down period while we consider RUSAL’s petition.”

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At least for now, that’s good news for electric vehicle manufacturers, who are increasingly looking to nickel for use in lithium-ion batteries.

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Higher is the simple answer. The world with the exception of China was in deficit before U.S. sanctions against Oleg Derispaska and his aluminum company Rusal.

So when the three million tons of primary metal Rusal exports outside of Russia are taken out of a market already worried by the recent partial closure of Norsk Hydro’s Alunorte alumina plant and Albras primary smelter, one should not be surprised by price increases and panic.

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Not only is the market deprived of new deliveries by the sanctions, but according to Bloomberg some 36% of global stockpiles on the LME and up to one million tons of metal held in inventories outside of China supporting financing deals is currently in limbo as buyers, traders, banks and brokers refuse to handle it for fear of falling foul of sanctions.

Part of the problem is that a large percentage of Rusal’s metal is traded and resides in stock financing deals, compared to top metal from other producers like Norsk Hydro and Alcoa. This is a legacy of the flood of metal that started to swamp the global market from the 1990s onwards after the collapse of the Soviet Union.

Technically there is no legal restriction on buying metal produced and sold by Rusal before the sanctions were applied, according to Bloomberg. Even so, the products have become less desirable in the U.S. and Europe as consumers are unsure of the status.

In addition, this week the LME has banned any further deliveries into its system, raising the question of what Rusal is going to do with with the three million tons of metal it is churning out every year. There will be buyers out there, especially in Southeast Asia, but they will demand a discount to handle the brand. With restrictions of sales of its alumina, Rusal could simply cut production rather than try to dump metal into less well regulated overseas markets.

Maybe more of a risk is the fate of Rusal’s alumina production as the firm supplies other smelters than just its own, potentially depriving alternative producers from supplying an already tightening market. Alumina prices have surged to over $600/ton as the LME primary metal settlement prices have risen to over $2,500 per ton.

So where to now? Have buyers missed the boat? It’s impossible to say. There could well be a short-term correction, but Bloomberg quotes CRU analysts as saying that prices could reach $2,800-3,000/ton, levels not seen since 2008.

Alunorte’s alumina production cuts, forced following allegations of river pollution, could be resolved later this month like the resulting cuts at downstream Albras. But that would only return the primary plant from 230,000 tons to its capacity of 460,000 tons, a drop in the ocean next to Rusal’s three million tons. Brace yourselves: aluminum remains firmly in bull territory.

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Happy Friday, MetalMiner readers! Here’s a look back at this week’s top stories.

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  • A number of aluminum associations around the world wrote a joint letter urging G20 leaders to hold a forum on global aluminum overcapacity at this year’s G20 Summit, scheduled to take place from Nov. 30 to Dec. 1 in Buenos Aires.
  • After a steady downward trend, LME aluminum prices recovered, rising more than 13% in a week.
  • The U.S. International Trade Commission will advise the U.S. Trade Representative on proposed modifications to the U.S. Korea Free Trade Agreement (KORUS).
  • The EU is demanding compensation at the WTO for the U.S.’s Section 232 tariffs on steel and aluminum, arguing that the tariffs were imposed to protect U.S. industry. What is behind the U.S.’s national security argument?
  • Irene Martinez Canorea’s mid-month metals analysis shows aluminum as April’s top performer so far. Prices for copper and nickel have also risen, while other base metals have fallen.
  • U.S. and India have announced a joint task force on natural gas.

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