Articles in Category: Supply & Demand

According to the latest joint report from the U.S. Census Bureau and the Department of Housing and Urban Development, U.S. housing starts in April fell 2.5% compared with April 2018.

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However, April starts ticked up 5.7% from the previous month.

April housing starts reached a seasonally adjusted rate of 1,235,000, up from 1,168,000 in March but down from 1,267,000 in April 2018.

Drilling down further, single‐family housing starts in April came in at a rate of 854,000, marking an increase of 6.2% from the revised March total of 804,000. Meanwhile, the April rate for units in buildings with five units came in at 359,000, the joint report showed.

Privately owned housing completions in April fell 1.4% from the previous month, coming in at a seasonally adjusted annual rate of 1,312,000.  The April completions total, however, increased 5.5% on a year-over-year basis (April 2018 completions reached 1,244,000).

Single‐family housing completions in April came in at a rate of 918,000, down 4.1% from the revised March rate of 957,000. Meanwhile, April rate for units in buildings with five units or more was 381,000, up from 364,000 in March.

In terms of housing permits, privately owned housing units authorized by building permits in April hit a seasonally adjusted annual rate of 1,296,000, up 0.6% from the revised March rate of 1,288,000. However, the April figure marked a 5.0% decline from the April 2018 rate of 1,364,000.

Single‐family authorizations in April reached 782,000, down 4.2% from the revised March figure of 816,000.

Authorizations of units in buildings with five units or more were at a rate of 467,000 in April, up from 425,000 in March.

Lawrence Yun, chief economist for the National Association of Realtors® (NAR), recently delivered his mid-year home sales forecast.

“Home sales should be much stronger based on the economic fundamentals of jobs, interest rates, population and consumer confidence,” Yun was quoted as saying in an NAR release.

Yun added, however, there could be a rise in relocation of people and companies seeking more affordable markets.

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“While affordability has been sliding, it is still better than we saw in the year 2000,” Yun said. “This is due to much lower mortgage interest rates today.”

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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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  • MetalMiner’s Belinda Fuller’s Raw Steels MMI report runs down the month in the raw steels sector.
  • The World Bank recently launched a new fund targeting the development of sustainable mining practices to support renewable energy installation.
  • Stuart Burns on steelmaker ArcelorMittal’s decision to idle production at a number of its European facilities.
  • U.S.-China trade talks took a turn over the last week.
  • Fuller on rising China HRC prices.
  • Stocks markets have felt the pain on the heels of the latest chapter in the ongoing U.S.-China trade war saga.
  • What’s next for Tata Steel after its planned joint venture with German firm Thyssenkrupp fell apart amid regulatory scrutiny?
  • The International Lead and Zinc Study Group forecast a global surplus for lead this year and a zinc deficit.

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The International Maritime Organization’s (IMO) Jan. 1, 2020 deadline for shipping companies to use low-sulfur (0.5% max) fuel has been on and off in the news for months, but without much interest from those outside the industry or the environmental organizations that lobbied for its introduction.

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But now, with the deadline just months away, the implications are becoming more apparent.  Shipping lines are scrambling to fit scrubbers, but some are finding they have left it too late.

It currently takes some six weeks to retrofit a scrubber. With the surge in demand for scrubber equipment and a shortage of qualified engineers, yards are full of work over the next 12 months. Some 4.4 million twenty-foot equivalent units (TEU) in container ship capacity is taken out of service this year, according to JOC. That amounts to about 380 container ships and is already contributing to the worst on-time performance by carriers on the Asia-U.S. trades since 2012, the article reports.

In total some 550 box ships, totaling 6 million TEU, are due to be equipped with scrubbers — at a rate of about 30 vessels a month, consequently squeezing capacity.

Not all vessels are going for scrubbers, despite the current cost advantage.

The majority of vessels will opt to burn low-sulfur fuel oil, for which the premium is between U.S. $170 and $320 per metric ton over 3.5% sulfur fuel (apart from South America, where low-sulfur fuels already predominate and the premium is only $40/ton).

It costs between U.S. $5 million and $10 million for a scrubber system depending on the vessel and where it is fitted, plus greater maintenance and the downtime required for installation. But the price difference between low-sulfur fuel oil and heavy fuel oil can add U.S. $1 million to an Asia-Europe round trip for a ULVC.

Those opting not to fit scrubbers but pay the fuel premium are either biding their time by waiting for an installation slot or hoping the fuel premiums will fall. The change will likely also hasten the scrapping of older vessels deemed uneconomic to retrofit or operate at the higher fuel costs.

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As a result, shippers can expect rates to rise this year and next — either as a result of reduced capacity or lines paying higher bunker premiums (or both).

After a chilly February for U.S. housing starts, starts were down again in March.

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According to a monthly report released jointly by the U.S. Census Bureau and the Department of Housing and Urban Development, privately owned housing starts in March were at a seasonally adjusted annual rate of 1,139,000.  March starts were down 0.3% from the revised February estimate of 1,142,000. Furthermore, March starts were down 14.2% from the March 2018 rate of 1,327,000.

According to the report, single‐family housing starts in March reached 785,000, down 0.4% from February’s 788,000. Meanwhile, the March rate for units in buildings with five units or more was 337,000.

On the other hand, the decline in housing starts moderated significantly from February. February housing starts plunged 8.7% compared with January. Winter weather is always factor to consider when assessing housing starts early in the year; however, it remains to be seen if the recent declines are part of a growing trend, or if starts will pick up as weather conditions become more amenable to construction.

On the other hand, U.S. housing starts increased from February to March in both 2017 and 2018.

Privately‐owned housing units authorized by building permits in March reached a seasonally adjusted annual rate of 1,269,000, marking a 1.7% decrease from the revised February rate of 1,291,000. March permits were down 7.8% from the March 2018 rate of 1,377,000.

Single‐family authorizations reached 808,000, down 1.1% from the revised February figure of 817,000. Meanwhile, authorizations of units in buildings with five units or more hit a rate of 425,000 in March.

As for completions, privately‐owned housing completions in March reached a seasonally adjusted annual rate of 1,313,000, down 1.9% from the revised February estimate of 1,338,000. However, March proved to be a more productive month on a year-over-year basis, as completions increased 6.8% compared with March 2018’s rate of 1,229,000.

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Single‐family housing completions in March reached 938,000, up 11.9% from the revised February rate of 838,000. For units in buildings with five units or more, the March rate reached 364,000.

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The World Steel Association released its March global crude steel production report, detailing global crude steel production rose 4.9% year over year.

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March 2019 production reached 155.0 million tons. For the first three months of the year, production reached 444.1 million tons, up 4.5% compared with the first quarter of 2018.

Asia produced 312.9 million tons of crude steel, marking a 7.0% increase over the first quarter of 2018. Elsewhere, E.U. production reached 42.3 million tons of crude steel in the first quarter of 2019, marking a 2.0% decrease. North American crude steel production in Q1 reached 30.7 million tons, up 4.0% year over year.

China’s crude steel production for March 2019 hit 80.3 million tons, up 10.0% year over year. China’s program of winter production cuts ran from November through March, but Reuters earlier this month reported the country’s top two steelmaking cities, Tangshan and Handan, announced they would extend the production cuts.

India produced 9.4 million tons of crude steel in March 2019, falling 1.0% from March 2018. Japan’s production hit 9.1 million tons, holding flat from March 2018. South Korea’s production rose 2.8% to 6.3 million tons.

In Europe, Italy’s crude steel production fell 0.3% to 2.3 million tons, while France’s rose 2.3% to 1.4 million tons. Spain also produced 1.4 million tons, good for an increase of 5.9%.

The U.S. produced 7.8 million tons of crude steel in March 2019, marking a 5.7% year-over-year increase. According to the American Iron and Steel Institute (AISI), the U.S.’s adjusted year-to-date production through April 20 hit 29.95 million net tons, at a capability utilization rate of 81.9%. Production during that aforementioned period was up 6.9% from the equivalent period in 2018, during which the capability utilization rate was 76.4%.

Ukraine’s production spiked 15%, up to 2.0 million tons, while Brazil’s fell 8.6% to 2.8 million tons.

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Turkey’s production continued to decline, falling 11.7% in March down to 3.0 million tons. Turkey has struggled with shrinking export markets in the face of the U.S.’s Section 232 tariffs and the E.U.’s steel safeguard measures passed earlier this year.

According to a release on the China Iron and Steel Association website, the president of the Turkish Steel Exporters’ Association Adnan Aslan recently said Turkish steel exports could decline to 15-16 million metric tons in 2019, down from 21.4 million metric tons in 2018. In addition, Aslan highlighted the importance of tapping into new markets for the Turkish steel sector, including Southeast Asia, West Africa and Latin America.

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What a difference a month makes in commodity markets.

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Just a month back, we reviewed the delicate balance OPEC was facing in trying to drive prices higher without having to make further cuts in output.

It seemed every time they squeezed the market higher, greater U.S. shale output slowed the advance, yet OPEC lost market share.

But now the U.S. seems to be coming to OPEC’s aid.

The market was finely balanced after a loss of output from Libya, where a civil war is raging, and Venezuela, where state bankruptcy and U.S. sanctions have put output into what appears to be, if not terminal decline, then a fall that could take many years of investment before it can recover.

The Financial Times and the Times both reported this week that moves by the Trump administration to remove waivers previously granted to key oil-consuming countries has taken the market by surprise. The news caused oil prices to spike in anticipation of the market being deprived of Iranian production.

Japan, South Korea, Turkey, India and China will, according to the Financial Times, face pressure to cancel Iranian oil imports as the U.S. seeks to increase pressure on Tehran over what it sees as its role in state-sponsored regional terrorism.

Source: Refinitiv

The oil price has already risen sharply this year. Brent crude climbed 2.6% on Monday to $73.80 a barrel, after hitting a high of $74.31 in early Asia trading following the announcement by a U.S. official. West Texas Intermediate, the U.S. marker, rose as much as 1.2% to a high of $64.74, the highest intraday level in two weeks, the Financial Times reported.

According to the Financial Times, the U.S. hopes its traditional oil-producing allies will raise output to offset further falls in Iranian supply — as they did last year — but this decision is not without complications.

Saudi Arabia and OPEC are in conflict with the U.S. in wanting higher oil prices and a balanced market, yet the U.S. is making no efforts to restrict its own shale oil output, expecting OPEC to raise or lower its supply to keep prices stable.

The latest forecasts from major agencies, including OPEC and the U.S. Energy Information Administration, see the market in a deficit of up to 500,000 barrels a day this year, before more supplies from Iran — and possibly Venezuela and Libya — are lost, the Financial Times reports.

A tighter oil market will increase gasoline prices, contrary to a campaign pledge from the president to lower them. The U.S. still imports at least one-third of its oil supply and remains exposed to global oil prices, despite being the largest producer in the world this year.

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It would appear prices could rise further as the removal of waivers begins to bite and major consumers switch to other supply sources. Despite slower global growth, energy and transport costs look set to continue to rise. (We will be covering a development in marine transport next week that predicts higher container rates in 2019-20 and suggests supply chain managers should be factoring in higher costs later this year and next.)

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This morning in metals news, China’s steel sector continues to churn out more and more steel, copper prices soared to a nine-month high, and the oil price surged on falling U.S. stockpiles.

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China Steel Production

Despite a program of winter production curbs, 2018 proved to be a record year for Chinese steel production.

In the early months of 2019, that production shows no signs of abating (much to the chagrin of producers in other markets decrying the state of global overcapacity).

China’s first-quarter steel production hit 231 million tons, up 10% year over year and marking the largest Q1 output on record, Bloomberg reported.

Copper Hits 9-Month High

The copper price continues to ride a hot streak, hitting a nine-month peak Wednesday, Reuters reported.

Powering the rise was stronger-than-expected growth in the Chinese economy, according to the report, which grew 6.4% in Q1.

Oil Prices Rise to 2019 Peak

Speaking of price gains, the oil price has also shown upward momentum.

Brent crude reached $72/barrel on Wednesday, Reuters reported, partially driven by a drop in U.S. crude stocks.

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Meanwhile, the Energy Information Administration (EIA) released its Summer Fuels Outlook today, which forecasts U.S. gasoline prices will be lower this coming summer compared with summer 2018.

“Because gasoline and diesel taxes and distribution costs are generally stable across the United States, changes in U.S. retail gasoline and diesel prices are generally driven by changes in crude oil prices,” the EIA report explained. “EIA forecasts the Brent crude oil price to average $67 per barrel (b) this summer, the equivalent of $1.60/gal, compared with an average of $75/b, or $1.78/gal, last summer.”

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This morning in metals news, the price of SHFE rebar continued its rise Tuesday, the Aluminum Association released its first new material registration record in almost two decades and Brazilian steelmakers are struggling with an iron ore shortage.

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Shanghai Rebar Rises

The price of Shanghai rebar reached its highest level in over seven years amid expectations of infrastructure-related stimulus measures in China, Reuters reported.

The Shanghai rebar price closed up 1.4% Tuesday at 3,829 yuan ($570.45) per ton, according to the report.

Aluminum Association Announces Material Designation System for 3D Printing

The Aluminum Association this week released its first material designation record in almost two decades.

The designation covers so-called “purple sheets,” which cover aluminum powder used in 3D printing.

“The purple sheets are the newest addition to the Aluminum Association’s long-running ‘rainbow sheet’ series, which provides alloy designations and chemical composition limits for various types of aluminum,” the Aluminum Association said in a release. “Aluminum is the first materials industry to develop such a system specific to the 3D printing market.
“The first registration granted is for a high-strength aluminum alloy produced by HRL Laboratories, LLC. The association will grant HRL registration number 7A77.50 for the aluminum powder used to additively manufacture the alloy, and number 7A77.60L for the printed alloy.”

Iron Ore in Brazil

Brazilian steelmakers are facing a shortage of the key steelmaking ingredient iron ore in the months after Vale SA’s fatal dam breach at its Corrego do Feijao mine, Reuters reported.

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The company’s decision to halt operation at 10 of its sites in the southeastern state of Minas Gerais has disrupted supplies of iron ore pellets to steelmakers, according to the report.

According to Reuters, spot 62% grade iron ore for delivery to China recently rose 1.6% to $93 per metric ton and the most-traded May 2019 iron ore contract on the Dalian Commodity Exchange soared as much as 4.1% to 710.5 yuan ($106) per ton — the highest for the Asian benchmark since 2013.

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Such robust price performance was not a one-day spike, but was reflected across the week as the contract gained nearly 10% during the first week of April on a combination of strong steel mill buying and concerns over constrained supply from both Australia and Brazil.

Nor was the bullish sentiment confined to iron ore, as Reuters reported coking coal on Monday rose 1% to 1,258.5 yuan ($187.29) a ton, and coke rose 1.4% to 2,048.5 yuan ($304.86).

Demand is at its seasonal peak as the weather warms in China and construction work begins in earnest, pushing up steel futures by more than 3% in early April. According to Reuters, the most-active construction steel rebar contract on the Shanghai Futures Exchange recently rose as much as 3.6% to 3,710 yuan ($552) a ton, its highest since Aug. 22, while hot-rolled coil jumped as much as 3.4% to 3,955 yuan a ton ($588).

Such performance suggests the steel market is roaring in China, fueled by another infrastructure spending spree, but the reality is something different.

Read more

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Japan’s Sumitomo Metal Mining Co., Ltd., the second-largest producer of copper in Japan unveiled its fiscal year 2019 production guidance on Monday (for the year beginning this month).

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The company guidance calls for production of 420,000 tons of electrolytic copper. That total marks a 0.8% decline, or 3,200 tons, from FY 2018’s copper output.

Sumitomo notes maintenance work is scheduled for 35 days in FY 2019, which will impact copper production. The maintenance work will take place at the Toyo Smelter & Refinery in late October.

Electrolytic nickel production is expected to hit 62,600 tons, down 3.5%, or 2,300 tons, from FY 2018 production.

Ferronickel production, meanwhile, is expected to reach 13,330 tons, up 900 tons from FY 2018.

“In FY2019, we will continue to operate with two kilns and one electric furnace, the optimum production setup in terms of the current raw materials procurement environment,” Sumitomo said in its guidance statement.

Like copper, the company’s ferronickel segment also has planned maintenance work this fiscal year. At its Hyuga Smelting Co., Ltd., there will be maintenance work carried out on one line for 24 days in September and for nine days in February. Work on the other line at the smelter is scheduled to take place for nine days in September and for 27 days over February and March, according to the company release.

Gold production is expected to reach 16,200 tons. Silver production guidance for FY 2019 is 217,200 tons.

In other company news, Sumitomo recently announced it had discovered a new process to “recover and recycle cobalt in addition to copper and nickel from used lithium ion secondary batteries and intermediates generated in their production.”

“The process that SMM has developed selectively recovers nickel, cobalt and copper as an alloy by using a pyrometallurgical refining process independent of the existing process to separate majority of impurities from lithium ion secondary batteries,” a Sumitomo released explained. “Then the alloy is leached and refined by a hydrometallurgical process to recycle the nickel and cobalt for use as a battery material and the copper for electrolytic copper.”

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According to the release, the company established a pilot plant for this new recycling process in the city of Niihama, where the company will assess feasibility of the process and scaling up to “production level.”