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This morning in metals news, the U.S.’s imports of steel are down 13.7% in the year to date, miner Glencore is partnering with other companies at the World Economic Forum on responsible sourcing and the Aluminum Association supported a bipartisan letter to Congress lobbying for an aluminum import monitoring program.

Keep up to date on everything going on in the world of trade and tariffs via MetalMiner’s Trade Resource Center.

Steel Imports Down 13.7%

U.S. imports of steel fell 13.7% through the first nine months of the year, according to the American Iron and Steel Institute (AISI).

The U.S. imported 22.6 million tons during the nine-month period this year.

In September, the U.S. imported 1.9 million tons of steel, down 6.2% compared with the August import total.

Glencore to Partner on Responsible Sourcing

Along with other companies, miner Glencore announced it will work on responsible sourcing initiatives with the World Economic Forum.

Glencore will participate in the Mining and Metals Blockchain Initiative, which will “explore the building of a blockchain platform to address transparency, the track and tracing of materials, the reporting of carbon emissions or increasing efficiency.”

Other companies participating in the initiative are: Antofagasta Minerals, Eurasian Resources Group Sàrl, Klöckner & Co, Minsur SA, Tata Steel Limited and Anglo American/De Beers (Tracr).

Aluminum Association Applauds Letter on Import Monitoring

The Aluminum Association on Thursday applauded a letter sent by members of Congress advocating for an aluminum import monitoring program.

“On behalf of the 162,000 Americans working in aluminum, we appreciate this bipartisan effort to shore up trade enforcement in our sector,” said Joe Quinn, vice president of public affairs at the Aluminum Association, in a release. “An aluminum import monitoring system is a necessary step to ensure that all aluminum producers are operating on a level playing field in a fair, rules-based global trading system.”

The letter, co-authored by the chairs of the Congressional Aluminum Caucus and addressed to Secretary of Commerce Wilbur Ross, cites China’s aluminum production growth.

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“A monitoring program would give the U.S. government — and the aluminum manufacturing sector — new tools to identify trends and trade flows to determine if there is circumvention or evasion of the industry’s AD/CVD orders and to swiftly address illegal activity,” the letter states. “Notably, Canada recently expanded its import monitoring system to include aluminum and aluminum products.”

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Before we head into the weekend, let’s take a look back at this week’s coverage on MetalMiner, which included analysis of Chinese steel production, the U.S.’s search for sources of rare earths outside of China, and falling copper and aluminum prices.

Keep up to date on everything going on in the world of trade and tariffs via MetalMiner’s Trade Resource Center.

• Despite production cuts aimed at mitigating pollution levels, Chinese steel production continues to rise.
• The U.S. is looking to secure new supplies of rare earths in an effort to lessen its dependence on China for the materials critical for a wide range of high-tech applications.
• Global steel production in August jumped 3.4% year over year.
• Copper prices are forecast to fall heading into the rest of 2019 and into 2020.
• Supply-and-demand fundamentals and a strong U.S. dollar are depressing the aluminum price.
• India is looking to ramp up its nuclear power capacity.
• MMI week is off and running with coverage of the automotive and construction sectors.

Looking for metal price forecasting and data analysis in one easy-to-use platform? Inquire about MetalMiner Insights today!

The world of metals procurement can be a difficult one to navigate, particularly amid the current climate of trade wars, tariffs and a bevy of other risks ranging from climate change to geopolitical tensions.

That’s why it’s vital to come to the marketplace with dynamic, relevant and accurate data to inform your decision-making.

MetalMiner’s new MetalMiner Insights platform does just that.

The new MetalMiner Insights platform is an invaluable resource of metals pricing information, utilizing a wide variety of tools to help buyers make informed decisions.

“For years, metals buyers have been using our monthly forecasting reports to improve their metal purchase timing. We always say we help you know when and how much to buy. By combining historic and current metals pricing with our forecasting and buying recommendations in one platform, MetalMiner Insights is truly a one-stop show for metals buyers seeking reliable market intelligence,” Reisman said. 

The platform combines metal prices with forecasting, in addition to data analysis capability. Pricing for some metals can be hard to find — in that vein, the new, easy-to-use platform features correlation modeling so users can assess prices for a desired metal based on another metal with which it closely correlates.

Among the assets MetalMiner insights can provide include:

• Full interactive charting of current and historic metals prices (in different currencies)
• Forecasting with tangible buying recommendations
• Cost savings diagnostic
• Correlation analysis (map your data to existing forecasts and/or create proxy tools for monitoring price trends)
• Interactive dashboard with optional pricing data feeds (e.g., inflation adjusters, monitor prices paid against market)
• Bid and RFQ templates for supplier negotiations

Buyers of a single corporate license obtain unlimited usage of the MetalMiner Insights platform across their organization.

To learn more about MetalMiner Insights, visit MetalMiner.com/Insights or contact Lisa Reisman via email at lreisman@metalminer.com or by phone at (773) 865-0387.

Fouad Egbaria/MetalMiner

Before we head into the weekend, let’s take a look at the week that was and some of the metals storylines here on MetalMiner:

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• Bill DeMartino of riskmethods recently spoke at MetalMiner’s Forecasting Workshop on the subject of risk mitigation tips and tools.
• A reported move by U.S. Steel could impact metals procurers’ spending strategies.
• MetalMiner’s Stuart Burns on the latest developments in the aluminum market.
• U.S. housing starts in July were down from the previous month but increased compared with July 2018.
• The U.S. Court of International Trade delivered a ruling on an appeal by Chinese companies of the U.S. Department of Commerce’s duties on aluminum foil.
• A Turkish military pension fund has emerged as the favorite in the bidding for British Steel.
• Burns weighed in on this week’s headlines regarding the rebuff of President Trump’s desire to buy Greenland.
• Fiscal year 2020 could see India notch its second consecutive year as a net steel importer.
• A recent visit to a Chicago nonprofit revealed a workspace where students of all backgrounds can learn how to weld, cast and woodwork.

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President Donald Trump’s suggestion that the U.S. could buy Greenland from Denmark was met with incredulity in Nuuk, Copenhagen and across Europe.

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“Greenland is not for sale. Greenland is not Danish. Greenland belongs to Greenland. I strongly hope this is not meant seriously,” Greenland Prime Minister Mette Frederiksen said during a visit to the territory on Sunday, as reported by The Times.

The prime minster added, “Thankfully, the time where you buy and sell other countries and populations is over. Let’s leave it there. Jokes aside, we will of course love to have an even closer strategic relationship with the United States.”

Frederiksen is said to have rejected Trump’s proposal, describing the notion of selling Greenland as “an absurd discussion.”

Strangely, Trump seems to have taken affront that the 58,000 population of Greenland did not want to be bought and sold like chattels. He then tried to lean on Denmark by commenting on how the U.S. protects Denmark and, as a result, should be more willing to sell its semi-autonomous territory (Greenland governs itself but relies on Denmark for its defense and foreign policy).

After being flatly refused by both Nuuk and Copenhagen, President Trump reacted in an apparent fit of pique, canceling his planned trip to Denmark next month.

Crass as the handling of this idea has been, it is not the first time the U.S. has tried to buy its massive neighbor.

Read more

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As metals buyers look to lock in their metals spend strategy, a reported decision by U.S. Steel could throw a wrench into some of those plans.

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According to a report by S&P Global Platts, the Pittsburgh-based steelmaker plans to move away from spot market-based adjustable price contracts for its sheet steel customers in 2020.

According to an internal letter cited by Platts, the steelmaker said “volatile and unpredictable” conditions in the flat-rolled market have contributed to increased use of adjustable price mechanisms.

A spokesperson for U.S. Steel declined to comment for this story, stating the company does not discuss customer relationships publicly.

In the second quarter of 2019, 23% of U.S. Steel’s steel in its flat-rolled segment was sold on spot-based contracts, according to the steelmaker’s quarterly reporting.

Meanwhile, 77% of the steelmaker’s sales came via contract-based arrangements, including: firm prices (33%); cost-based (5%); market-based, quarterly (20%); market-based, monthly (18%); and market-based, semi-annual (1%).

For the full-year 2018, the flat-rolled segment’s sales mix came in at 21% spot to 79% contract (33% fixed; 23% market-based, quarterly; 16% market-based, monthly; 6% cost-based; and 1% market-based, semi-annual).

The steelmaker recorded shipments in its flat-rolled segment of 3.08 million net tons in Q2 2019, up from 2.73 million net tons in Q1 2019.

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

However, in Q2 the average selling price per net ton from the steelmaker’s flat-rolled segment came in at $779 per net ton, down from $798 per net ton in Q1 and $819 per net ton in Q2 2018.

U.S. steel prices have steadily declined since mid-2018, a few months after the Trump administration used Section 232 of the Trade Expansion Act of 1962 to impose a 25% tariff on imported steel.

MetalMiner Executive Editor Lisa Reisman delivers a presentation during the MetalMiner Forecasting Workshop on July 25 in Chicago. Matt Liguori/MetalMiner

Metals procurement professionals are always looking for an extra edge to better set and coordinate their metals spend.

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Of course, a wide variety of factors enter the equation: cost, trade headwinds, supplier reliability, political movements and much more.

At MetalMiner’s Forecasting Workshop on July 25 — the first of two workshops this year — metals procurement professionals buying everything from steel to aluminum to rare earths gathered to glean insights on the metals climate in the year ahead and discussion regarding procurement strategies.

The July 25 workshop sold out; make sure to reserve your spot for the next MetalMiner Forecasting Workshop, scheduled for 11 a.m.-3 p.m. CT on Aug. 7, at 625 N. Michigan Ave., Chicago.

Attendees will have the chance to hear analysis from the MetalMiner team on the latest trends for: aluminum, copper, CRC, HDG, HRC, lead, nickel, plate, tin and zinc.

After a forecast presentation covering the aforementioned metals by MetalMiner Executive Editor Lisa Reisman and Procurement Forecast Analyst Belinda Fuller, workshop attendees broke into two “work the issue” groups to discuss their experiences vis-a-vis two questions:

• How do you renegotiate contracts when prices are down (assuming a single source is available for a particular item)?
• What should a buyer’s CRU (or alternative to CRU) strategy be for his or her steel buy?

In the discussion of the first question, moderated by MetalMiner’s Stuart Burns, attendees stressed the importance of data.

Bringing data to a renegotiation effort affords a greater level of credibility and increases the chances that a procurement professional will secure that discount he or she is looking for. Included in the umbrella of data is historical data to justify decreases or increases.

“The more data you bring into the process, the more credibility you have as a buyer,” Burns said.

In addition, the group discussed creating a “competitive situation” in the renegotiation effort, using teardown or should-cost models, and deploying correlation studies for certain metallic elements for which pricing data is perhaps not widely available.

In summarizing the group’s discussion, Burns delved into the idea of creating a competitive situation despite a sole-source relationship — an idea that, on its face, might seem contradictory.

“You still have to be able to get a sense as to where the rest of the market is,” Burns said. For example, he said, if you are buying wide coil, try to find out what’s happening in the markets for narrower coil products in order to judge if a supplier is adjusting price points as they should.

In addition, it’s important to split out costs, ranging from conversion costs, to metals costs, to logistics costs (e.g., a rise in oil prices).

In the second group, moderated by Reisman, attendees discussed the merits of negotiating in percentage or dollar terms, alternative contracting methods (for instance, buying from service centers), factors that determine or influence a percentage of premium or discount to CRU, and the pros and cons of scrap indexes.

Another focus of the discussion was the concept of a “portfolio” strategy, meaning a mix of spend via long-term buys, short-term buys and spot buying (particularly in a falling market, thus lowering a buyer’s average price per ton).

In terms of factors influencing premiums or discounts to the CRU, attendees listed: volume, whether one is purchasing from a service center or a mill and SKU proliferation, among others.

“The more consolidated you are, the better position you are in negotiating that CRU number,” said Reisman, summarizing the group’s discussion. “But also, mills are very interested in your adders because they make money on your adders.”

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

In addition, a good program for selling back scrap on the back end can be a useful tool in negotiating CRU discounts (particularly in the automotive sector).

MetalMiner’s second Forecasting Workshop of 2019 is scheduled for Aug. 7 – reserve your spot today.

The Audi e-tron. Source: Audi

Oslo-based Norsk Hydro has entered into an agreement with Audi to supply aluminum for the battery housing of the automaker’s first fully electric model.

The aluminum, Hydro says, is “processed and manufactured along the entire value chain in an environmentally conscious manner and under socially acceptable working conditions,” conditions which have been confirmed by the Aluminum Stewardship Initiative (ASI).

Buying Aluminum in 2019? Download MetalMiner’s free annual price outlook

According to Hydro, Audi received ASI certification for assembly of aluminum components late last year.

“This means that the aluminium sheets processed in the battery housing of the Audi e-tron are now demonstrably produced in a responsible manner along the entire value chain, from the extraction of the bauxite raw material to the end product,” Hydro said in a release.

“We are very proud to supply ASI-certified metal, especially for the Audi e‑tron, one of Audi’s flagships. We are constantly working on reducing our impact and that of our customers on the environment,” said Einar Glomnes, Hydro’s executive vice president. “This is an important milestone in our strategy of helping our customers to document the fact that they offer aluminium products that are procured and produced responsibly along the entire value chain.”

Audi is aiming to reduce its carbon dioxide emissions by 15% by 2025 (compared with 2015 emissions levels).

Even longer-term, Dr. Bernd Martens, a member of Audi’s Board of Management for Procurement and IT, said Audi wants to offer customers carbon-dioxide-neutral options by 2050.

To do that, we need a sustainable supply chain,” Martens said. “We therefore seek dialogue with our partners and, together with them, want to significantly reduce CO₂ emissions along the entire value chain.”

In other news, Hydro reported its second-quarter earnings earlier this month.

Hydro reported underlying EBIT of NOK 419 million (U.S. $48.3 million), up from NOK 364 million (U.S. $42.0 million) in Q2 2018.

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“Alunorte reached 80-85 percent capacity utilization in June, within the targeted 75-85 percent capacity utilization for the state-of-art press filter technology,” President and CEO Hilde Merete Aasheim said in a prepared statement. “Paragominas and Albras are also ramping up successfully. This is a great achievement by the Brazilian organization.”

Hydro’s Alunorte refinery had been operating at 50% capacity since early 2018, when Brazilian authorities imposed production constraints after a spill at the plant. In May, Brazilian authorities gave Hydro the green light to resume full production at the Alunorte refinery.

On Space Launch Complex 576-E at Vandenberg Air Force Base in California, Orbital Sciences workers monitor NASA’s Glory upper stack as a crane lifts it from a stationary rail for attachment to the Taurus XL rocket’s Stage 0.
Source: NASA

Following investigations regarding the cause of two launch failures in 2009 and 2011, NASA pointed the finger this week on faulty materials from aluminum manufacturer Sapa Profiles, Inc. (SPI).

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“NASA Launch Services Program (LSP) investigators have determined the technical root cause for the Taurus XL launch failures of NASA’s Orbiting Carbon Observatory (OCO) and Glory missions in 2009 and 2011, respectively: faulty materials provided by aluminum manufacturer, Sapa Profiles, Inc. (SPI),” NASA said in a release.

“LSP’s technical investigation led to the involvement of NASA’s Office of the Inspector General and the U.S. Department of Justice (DOJ). DOJ’s efforts, recently made public, resulted in the resolution of criminal charges and alleged civil claims against SPI, and its agreement to pay $46 million to the U.S. government and other commercial customers. This relates to a 19-year scheme that included falsifying thousands of certifications for aluminum extrusions to hundreds of customers.”

According to NASA, the failed Taurus XL missions resulted in a loss of more than $700 million and “years of people’s scientific work.”

Upon investigation, NASA concluded the crafts’ launch vehicle fairing, a “clamshell structure that encapsulates the satellite as it travels through the atmosphere,” had failed to separate on command.

“From NASA’s investigation, it is now known that SPI altered test results and provided false certifications to Orbital Sciences Corporation, the manufacturer of the Taurus XL, regarding the aluminum extrusions used in the payload fairing rail frangible joint,” NASA said. “A frangible joint is a structural separation system that is initiated using ordnance.”

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

SPI, now known as Hydro Extrusion Portland, Inc., recently pleaded guilty to one count of mail fraud and reached a settlement with the Department of Justice’s Civil Division to pay $46.9 million.

SPI is owned in a 50-50 share purchase agreement between Norwegian conglomerate Orkla ASA and Norsk Hydro, after Hydro acquired a 50% interest in SPI in 2017 for NOK 27 billion.

“As part of the share purchase agreement between Hydro and Orkla ASA, Orkla ASA will indemnify Hydro for 50 percent of the liability in relation to the DOJ’s investigations,” Norsk Hydro said in a release April 23. “As communicated in Hydro’s 2018 Annual Report on March 15, 2019, a charge of NOK 157 million has been included in Hydro’s Q4 2018 figures related to the agreement with DOJ.”

In the aftermath of the Section 232 tariffs on steel and aluminum going into effect in March 2018, we heard and read a lot about some of the largest American OEMs and their business challenges.

For example, Ford Motor Company’s claim that the tariffs cost the automaker $1 billion in profits last year.

But what’s not known or reported as much in the mainstream is what manufacturers have been doing to strategically mitigate tariff risk, or how their various business units and organizations put practices in place to hedge against that risk.

“We’re flexible, and we can move quickly now that we have started to qualify additional materials,” said Matt Marthinson, VP Supply Chain at JB Poindexter & Co., Inc. “So I like our chances much better than where we were just two years ago.”

A company like that has to be flexible — as a large-volume metals buyer, JB Poindexter is the largest truck manufacturer in the U.S. of Class 3 through Class 7 trucks, including the majority of UPS, FedEx, U.S. Postal Service, Penske and Ryder trucks across North America, according to Marthinson.

In a conversation with Lisa Reisman on our current podcast series, “The Maker-to-User Trend in the Time of Tariffs,” Marthinson lets listeners in on how an established transportation industry manufacturer with significant exposure to commodity risk views the tariff landscape, both now and into 2020.

Listen in!

According to his company bio, Matt Marthinson is the leader for the Supply Chain transformation initiative at JBPCO, which includes partnering with the business owners to consolidate and leverage spend across all business units. He has over 25 years of comprehensive business achievements and expertise in Lean Manufacturing Operations, Production Planning, Materials Management, Procurement, Transportation and Logistics, Sourcing and Supply Chain with Kaiser Aluminum, Honeywell, Alcoa and Hubbell Incorporated, most recently as vice president of strategic sourcing. Learn more here.

Maker-to-User in the Time of Tariffs: Background

After the U.S. Commerce Department’s Section 232 findings in early 2018, President Donald Trump took action — and the rest is history.

This new podcast series takes a closer look at the U.S. manufacturing landscape in our present time of trade tariffs, and how manufacturers themselves are affected by the tariffs (winners and losers).

For example, just over 90% of manufacturing industry respondents in a recent, informal MetalMiner poll indicated that the Trump tariffs have hurt their respective businesses, via increased material costs, inventory woes and longer lead times, among other effects.

However, other manufacturers — for example, Honda — have posted healthy profits over the last year.

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Ultimately, we’re interested in what all of this means for the “maker-to-user” trend that we’ve seen gain steam the past several years.

For an excellent primer on the “maker-to-user” movement and trends, download our free white paper on the topic here.

Listen to more episodes and follow the MetalMiner Podcast here.