Articles in Category: Public Policy

gold price

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This morning in metals news: the gold price continues to slide; the Federal Reserve released its latest Monetary Policy Report; and the record freeze in Texas is disrupting natural gas production.

Gold price weakens

After surging to around $2,035 per ounce in August, the gold price for the most part trended in a band between $1,850-$1,950 through the balance of 2020.

Of late, however, the gold price has retraced, even falling below the $1,800 threshold.

Gold closed Thursday at $1,775 per ounce.

The gold price has fallen, even as the US dollar has also continued to lag. The US dollar index reached 90.23 today, compared with just over 99 a year ago.

One thing worth monitoring is growing interest in cryptocurrencies, particularly Bitcoin. The cryptocurrency has surged above the $53,000 mark and jumped by approximately 80% this year.

Amid a run of loose monetary policy from central banks around the world, some investors will look to other assets. That could mean they’ll even look to assets other than time-tested safe havens, like gold.

It’s unlikely that the US dollar will lose its status as the global reserve currency anytime soon. However, cryptocurrencies like Bitcoin could potentially weigh on gold, leading some investors to rethink traditional safe-haven asset strategy.

A lot can change in a year. In February 2020, Bitcoin hovered around just under $10,000.

The MetalMiner Best Practice Library offers a wealth of knowledge and tips to help buyers stay on top of metals markets and buying strategies.

Fed releases Monetary Policy Report

Speaking of currency, the gold price and monetary policy, the Federal Reserve today released its latest Monetary Policy Report.

The report notes the labor market recovered as the year progressed. However, the pace of the recovery slowed down significantly late in 2020.

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The Renewables Monthly Metals Index (MMI) rose by 4.4% this month, as the Energy Information Administration released a forecast on renewable energy.

February 2021 Renewables MMI chart

(Editor’s note: This report also includes the MMI for grain-oriented electrical steel, or GOES.)

Renewable energy growth in the US

renewables

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US electricity generation from renewable energy sources is forecast to double over the next 30 years, according to the Energy Information Administration.

Renewable energy sources accounted for 21% of US electricity generation in 2020.  The EIA forecasts that percentage will reach 42% by 2050.

The renewable energy increase will come on the back of declining coal and nuclear power usage, the EIA said. Furthermore, wind power will account for the majority of renewable energy gains until 2024.

After that period, however, solar power will take over the majority of the gains.

“After the production tax credit (PTC) for wind phases out at the end of 2024, solar generation will account for almost 80% of the increase in renewable generation through 2050,” the EIA said. “Based on the Internal Revenue Service safe harbor guidance, EIA assumes that utility-scale solar PV facilities will receive a 30% investment tax credit (ITC) through 2023, which will then be reduced to 10% beginning in 2024.”

The MetalMiner Best Practice Library offers a wealth of knowledge and tips to help buyers stay on top of metals markets and buying strategies.

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Steel production

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This morning in metals news: the US steel sector’s steel capacity utilization rate dipped to 75.2% last week; meanwhile, Tata Steel reported its highest ever consolidated quarterly EBITDA; and, lastly, the Metals Service Center Institute (MSCI) launched a new campaign advocating for infrastructure investment.

Steel capacity utilization down to 75.2%

The US steel sector’s capacity utilization rate for the week ending Feb. 6. fell to 75.2%, the American Iron and Steel Institute (AISI) reported.

The rate fell from 76.1% the previous week.

Output during the week ending Feb. 6 reached 1.71 million net tons, a 7.5% year-over-year decline. Meanwhile, the week’s output declined by 1.2% from the previous week.

Furthermore, year-to-date production totaled 9.1 million net tons. The total marked a 9.3% year-over-year decline. Meanwhile, capacity utilization for the period reached 75.8%, down from 82.2% during the same period in 2020.

Volatility is the name of the game. Do you have a steel buying strategy that can handle the ups and downs?

Tata reports record quarterly EBITDA

Aside from steel capacity utilization in the US, India’s Tata Steel announced a record consolidated EBITDA for the quarter ending Dec. 31, 2020.

Tata’s consolidated EBITDA jumped 55% from the previous quarter to Rs. 9,540 crores (US $131 million).

In addition, crude steel production totaled 4.6 million tons, or up 3% year over year.

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US and UAE flags

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The Aluminum Monthly Metals Index (MMI) increased by 2.1% this month, as LME aluminum prices traded sideways and the US reinstated the Section 232 aluminum tariff on imports from the United Arab Emirates.

February 2021 Aluminum MMI chart

U.S. aluminum reinstates aluminum tariff on UAE

On Feb. 1, President Joe Biden reinstated the 10% aluminum tariff on imports from the United Arab Emirates.

Former President Donald Trump had lifted the aluminum tariff on his last day in office. The reinstated aluminum tariff went into effect Feb. 3.

The reinstatement suggests that it is unlikely the Biden administration will remove the aluminum tariffs imposed by the previous administration. However, as of today, no further decisions were announced on aluminum tariffs.

In addition, Biden’s “Buy American” plans could impact the U.S. domestic aluminum market. The plan will likely promote the manufacturing of essential components in construction, appliances and electronics in the US.

These measures are welcomed at the primary production level. However, not all end-product manufacturers are on board, as they claim these government interventions will artificially inflate the Midwest Premium.

The new administration also announced the delay of the effective date of the Aluminum Import Monitoring and Analysis (AIM) system that the U.S. Department of Commerce created. The Department of Commerce originally said the system would be available Jan. 25. However, it is delaying the launch until March 29. Licenses will not be required for covered aluminum imports until the new effective date.

Are rising MW premiums causing concern? See how service centers take advantage of that. 

High aluminum scrap demand

A Midwest-based trader told Construction & Demolition Recycling that demand for aluminum scrap remains high at secondary smelters that supply the automotive industry in the US

Chad Kripke, an executive vice president of Kripke Enterprise, a nonferrous scrap brokerage firm, confirmed that many sellers are relying on the spot market rather than signing contracts for 2021. This signals that it is a seller’s market.

This market environment is due to the reduced flows of scrap, which has caused spreads to tighten. As a result, secondary producers are opting to purchase scrap at what they might view as high prices rather than risking a lack of material.

New on MetalMiner Insights

This month, MetalMiner added additional U.S. aluminum prices to its Insights platform.

Besides the U.S. Midwest Premium Futures, the platform now includes prices for some of the most common forms of aluminum sheet and coil. It includes prices for: 1100 H14, 3003 H14, 5052 H32, 5083 H321, 6061 T6 and 6061 T651.

Price data goes back to Jan. 1, 2020.

Actual metals prices and trends

The Chinese aluminum scrap price increased 0.4% month over month to $2,067/mt as of Feb. 1. Meanwhile, LME primary three-month aluminum increased 0.4% to $1,988/mt.

Korean commercial 1050 aluminum sheet remained flat at $3.30/kg. However, its European equivalent increased 8.3% to $2,948/mt.

Chinese aluminum billet and aluminum bar rose 0.4% to $2,389/mt and $2,489/mt, respectively.

Chinese primary cash aluminum dropped 2.4% to $2,365/mt. Meanwhile, its Indian counterpart declined 2.2% to $2.24/kg.

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executive order

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In just over two weeks, President Joe Biden has signed 28 executive orders aimed at a wide variety of issues.

The orders range from Medicaid to the country’s pandemic response to augmenting public health supply chains.

Relevant to metals, Biden signed two orders aimed at increasing domestic content in federal procurement and the climate crisis.

“Both President Biden and President Trump, as part of their initial rounds of Executive Orders, each prioritized ‘Buy American’ type provisions — a notable point of similarity between two very different administrations,” said Alex Hontos, partner at international law firm Dorsey & Whitney.  “Indeed, aspects of President Biden’s Executive Order are very similar to President Trump’s 2017 Executive Order. However, President Biden’s Executive Order contains more directives than Trump’s BA Executive Order did.”

Biden’s ‘Buy American’ plan

Government plans seeking to increase purchases of domestically produced goods are nothing new.

In July 2019, Trump signed an executive order titled “Maximizing Use of American-Made Goods, Products, and Materials.” In the order, Trump said his administration would “enforce the Buy American Act to the greatest extent permitted by law.”

The order called for the Federal Acquisition Regulatory (FAR) Council to consider proposing an amendment to provisions in the Federal Acquisition Regulation regarding classification of items as being of foreign origin.

For iron and steel products, that meant “the cost of foreign iron and steel used in such iron and steel end products constitutes 5 percent or more of the cost of all the products used in such iron and steel end products.”

For all other end products, the percentage would increase to 45%.

Fast forward to 2021 — what does Biden’s executive order on the issue of promoting domestic content in federal procurement?

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executive order

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This morning in metals news: President Joe Biden on Monday signed an executive order aimed at boosting U.S. manufacturing; the U.S. steel sector’s capacity utilization rate during the week ending Jan. 23 reached 75.7%; and the Energy Information Administration expects energy-related carbon dioxide emissions to tick back up once again in 2021 and 2022 after declining in 2020.

Biden signs executive order to boost federal procurement of U.S.-made goods

President Joe Biden on Monday signed an executive order that aims to boost U.S. manufacturing by increasing federal procurement of U.S.-made materials.

“‘Made in America Laws’ means all statutes, regulations, rules, and Executive Orders relating to Federal financial assistance awards or Federal procurement, including those that refer to ‘Buy America’ or ‘Buy American,’ that require, or provide a preference for, the purchase or acquisition of goods, products, or materials produced in the United States, including iron, steel, and manufactured goods offered in the United States,” the executive order states.

Agencies can, however, seek to acquire waivers for exemption from the laws.

“To the extent permitted by law, before granting a waiver in the public interest, the relevant granting agency shall assess whether a significant portion of the cost advantage of a foreign-sourced product is the result of the use of dumped steel, iron, or manufactured goods or the use of injuriously subsidized steel, iron, or manufactured goods,” Section 5 of the executive order states. “The granting agency may consult with the International Trade Administration in making this assessment if the granting agency deems such consultation to be helpful.”

A director will lead the so-called Made in America Office. Furthermore, the director of the Office of Budget and Management will appoint the director of the Made in America Office.

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Steel capacity utilization hits 75.7%

Speaking of the executive order and U.S.-made products, the U.S. steel sector’s capacity utilization rate for the week ending Jan. 23 hit 75.7%, down from 76.7% the previous week, the American Iron and Steel Institute reported.

Meanwhile, output during the week totaled 1.72 million tons, or down 1.2% from the previous week. Furthermore, output decreased 9.9% year over year.

 CO2 emissions to rise in 2021, 2022

Per the Energy Information Administration, energy-related carbon dioxide emissions in the U.S. will likely increase this year and next after declining in 2020.

“Economic growth and the lessening of pandemic-related restrictions result in more energy consumption and associated CO2 emissions,” the EIA reported. “EIA expects total energy-related CO2 emissions to increase to 4.8 billion metric tons in 2021 and 4.9 billion metric tons in 2022.”

Volatility is the name of the game. Do you have a steel buying strategy that can handle the ups and downs?

India iron ore barge

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A chorus of protests against Indian iron-ore exports — with associations of sponge iron and steel-forgings manufacturers making common cause with the India Steel Association (ISA) — has brought pressure on ministers to ban exports of iron ore.

Of those exports, 90% goes to China.

The groups are protesting in a bid to support domestic steel mills from rising raw material costs.

Ministers have refrained from taking action, arguing they would rather the market decide when it makes sense to export and when to import.

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Iron ore export ban?

However, a ban hardly seems necessary.

A massive 30% export tax kicks in this quarter on the lower Fe grade material between 58 to 62%. That is expected to decimate exports this quarter, the Business Standard reports.

In an effort to improve supply, the authorities have taken action against underused mining leases.

According to the New Indian Express, production declined during 2020. Comparing the two years January to September 2019 to the same period in 2020, iron ore production totaled 110.95 million metric tons in 2019. Meanwhile, output reached 76.01 million metric tons in 2020, marking a 31.5% drop.

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imports

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This morning in metals news: U.S. import prices rose in December; the Aluminum Association commented on potential changes to the Section 232 aluminum tariff program; and November steel shipments dropped by 11.9%.

U.S. import prices gain by 0.9% in December

U.S. import prices jumped by 0.9% in December, per the Bureau of Labor Statistics. Furthermore, the December increase marked the largest jump in import prices since August.

Meanwhile, U.S. export prices rose by 1.1% after rising by 0.7% in November.

Aluminum Association calls for ‘targeted, multilateral’ approach

We previously noted several industry groups’ recent call for the incoming Biden administration to maintain existing steel tariffs and quotas.

In that vein, the Aluminum Association offered its own comments on the Section 232 aluminum tariff program.

“The Aluminum Association continues to favor a targeted approach to trade enforcement,” Aluminum Association President and CEO Tom Dobbins said in a prepared statement. “Across-the-board tariffs have failed to dent the non-market-based structural subsidies that drive overcapacity and hurt U.S. aluminum producers and workers. We look forward to working with President-elect Biden’s trade team on new, creative approaches to combat this perennial challenge, including renewed cooperation with traditional trading partners and allies.”

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The Rare Earths Monthly Metals Index (MMI) gained 18.2% for this month’s index value.

January 2021 Rare Earths MMI chart

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$2.3T pandemic aid, government spending package includes rare earths research funds

Late last year, President Donald Trump signed a $2.3 trillion pandemic aid and government funding package that included more than $800 million in funds for rare earths research and development.

Trump signed an executive order in September 2020 calling out the threat to dependence on foreign sources of critical minerals. The president also signed a similar executive order in 2017 that called for the secretary of the interior to identify critical minerals. Ultimately, the process produced a list of 35 critical minerals.

Section 7001 of the 5,593-page bill outlines funding related to critical minerals.

The bill text calls for the secretary of energy to “develop and assess advanced separation technologies for the extraction and recovery 17 of rare earth elements and other critical materials from coal and coal byproducts” and “determine if there are, and mitigate, 20 any potential environmental or public health im21 pacts that could arise from the recovery of rare 22 earth elements from coal-based resources.”

The bill called for authorization to appropriate $23 million for the aforementioned efforts in fiscal years 2021 and 2022.

MP Materials revenue rises 52%

In late November, California-based MP Materials released its Q3 and year-to-date financial results.

The firm announced Q3 revenue of $41 million, marking a 52% year-over-year increase.

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gas station pump

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This morning in metals news: U.S. average gas prices fell to their lowest level since 2016 last year; the U.S. Treasury announced sanctions against Iran’s steel industry; and Ford Motor Co. released its Q4 2020 U.S. sales results.

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U.S. average gas price drops in 2020

As MetalMiner readers know, we keep tabs on commodities like oil insofar as they can be price drivers for metals. In short, oil price increases are often supportive of metals prices. (Readers can learn more about our analysis in the most recent update to our Annual Outlook.)

Unsurprisingly, given the slowdown in travel last year stemming from the onset of the COVID-19 pandemic in the U.S., the average gas price fell to its lowest level since 2016, the Energy Information Administration (EIA) reported.

Per the EIA, the average gas price dropped to $2.17 per gallon.

Meanwhile, in mid-March 2020, before the declaration of a national emergency, the average stood at $2.38 per gallon.

U.S. levies sanctions on ‘key actors’ in Iran’s steel sector

The U.S. Treasury on Tuesday announced sanctions on several firms in the Iranian steel sector, in addition to a Chinese supplier of graphite electrodes.

The Treasury announced sanctions on China’s Kaifeng Pingmei New Carbon Materials Technology Co., Ltd. (KFCC), which sold graphite electrodes to Pasargad Steel Complex, the Treasury said.

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