Articles in Category: Supply & Demand

The Raw Steels Monthly Metals Index (MMI) rose by 12.7% month over month to 121, as scrap prices made gains this past month.

January 2022 Raw Steels MMI chart

U.S. steel prices continue to retreat from their 2021 peaks. At the start of the year, hot rolled coil prices sat almost 18% below the October high.

US steelmakers invest in scrap processing

As electric arc furnace (EAF) capacity expands, U.S. steelmakers are working to secure steel scrap supply, as the Wall Street Journal explained in a recent report.

In November, Cleveland-Cliffs purchased Ferrous Processing & Trading Co. for $775 million. The company represents 15% of the U.S. prime market. As Cleveland-Cliffs is the largest steel supplier to the auto sector, the acquisition will allow Cleveland-Cliffs to negotiate scrap collection from its own customers.

Also in November, North Star BlueScope purchased steel-scrap processing operations and the Delta Yard for $240 million from MetalX.

These recent purchases follow Nucor’s own acquisitions of both Garden Street Iron and Metal Inc. and Grossman Iron and Steel Co. Nucor currently operates 65 scrapyards. Its newest additions will serve to feed its forthcoming or expanding mills.

In total, investments from top steelmakers in scrap processors exceeded $1 billion in 2021.

EAFs, which are fed by scrap, currently account for roughly 70% of U.S. steel production. That share is expected to grow in the coming year as even more capacity comes online. Around 8 million tons of flat-rolled steel capacity was added over the past few years and an additional 10 million tons will be added by the end of 2024. North Star BlueScope alone will grow its own steel capacity by around 40% in 2022.

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The Renewables Monthly Metals Index (MMI) ticked up 4.5% for this month’s value.

December 2021 Renewables MMI chart

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

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EIA: renewables account for 20% of electricity generation

In its most recent Short-Term Energy Outlook, the Energy Information Administration reported the U.S.’s share of electricity generation from renewables will come in at about 20% in 2021.

That share is at about the same level in 2020, EIA reported.

Meanwhile, it forecast the share of renewables for electricity generation to rise to 22% in 2022. Renewables are expected to gain from a decline in natural gas use.

“The natural gas share declines in 2022 as a result of continued high fuel costs and an increasing share of renewable generation,” EIA noted. “As a result of the higher expected natural gas prices, the annual forecast share of electricity generation from coal rises from 20% in 2020 to 23% in 2021 and then drops slightly to 22% in 2022.”

The EIA forecast the U.S. will add 16.2 GW in utility-scale solar capacity in 2021. Meanwhile, it forecast an addition of 20.9 GW in 2022.

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U.S. President Joe Biden on Monday signed the $1.2 trillion Infrastructure Investment and Jobs Act into law.

The bill includes funding to upgrade the country’s transportation infrastructure, electric grid and more. As such, the projects will certainly need metals like steel, copper and aluminum, among others.

infrastructure

Newport Coast Media/Adobe Stock

In that vein, we recently chatted with Mike Stier, Norsk Hydro vice president of finance and strategy, about the bill’s potential impacts on the aluminum market.

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Infrastructure bill’s impact on aluminum demand

Infrastructure investment has traditionally been viewed in the context of roads, bridges, airports, etc. However, the infrastructure bill has a forward-looking environmental component to tackle climate change, Stier noted.

Among those improvements include supporting the electrification of cars and supporting infrastructure and upgrading power grids. All of those projects will impact aluminium demand. From its conductive properties to its use in vehicle lightweighting to demand for products like road signs, walkways, or masts and towers, aluminum is likely to get a demand boost as a result of the bill.

Demand time frame

So, how quickly will the bill’s provisions and projects start to impact demand for metals like aluminum?

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Before we head into the weekend, let’s take a look back at the week that was and the metals storylines here on MetalMiner, including softening steel prices, the House’s passage of the over $1 trillion infrastructure bill and more:

steel production

photollurg/Adobe Stock

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Week of Nov. 8-12 (steel prices, infrastructure bill and more)

  • Limited inventory and semiconductor shortages continue to weigh on U.S. automotive sales.
  • The House of Representatives voted to pass the Infrastructure Investment and Jobs Act last Friday. President Joe Biden will sign the bill during a ceremony Monday, Nov. 15.
  • MetalMiner’s Nichole Bastin delved into recent copper market trends.
  • Steel prices have started to soften.
  • Earlier this week, we broke down the infrastructure funding categories within the Infrastructure Investment and Jobs Act.
  • U.S. steel capacity utilization fell to 83.4% last week, the American Iron and Steel Institute reported.
  • Meanwhile, U.S. construction spending dipped in September, the Census Bureau reported.
  • A strong aluminum market has been a boon for Novelis, as reflected by its most recent quarterly report.
  • The Consumer Price Index rose by 0.9% in October, the Bureau of Labor Statistics reported. Furthermore, the index is up by 6.2% over the last 12 months.
  • The Greenland parliament this week voted to ban uranium mining and exploration, effectively halting the Kvanefjeld project.
  • Automotive sales in China fell by 9.4% year over year in October, the China Association of Automobile Manufacturers reported.
  • The Global Precious MMI rose by 5.8% for this month’s reading.
  • Lastly, German firm Aurubis AG announced plans to invest €300 million to build a metals recycling plant in the U.S.

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Few would argue that semiconductor shortages have hampered automotive output. Earlier in the year, automakers temporarily shuttered factories, cutting into output.

According to Toyota, it would slash worldwide vehicle production by 40% in September because of the shortage. Globally, the market lost some 2 million vehicles due to chip shortages.

As a result, automotive aluminum demand took a hit this year. While producers lost out in that premium sector, consumers in the wider industrial landscape had one less source of rampant demand sucking up precious supplies in what has been the worst buyers’ market for semi-finished aluminum products in memory.

Each month, MetalMiner hosts a webinar on a specific metals topic. Explore the upcoming webinars and sign up for each on the MetalMiner Events page.

Aluminum demand recovering in aerospace?

airplane in the sky

marchcattle/Adobe Stock

If the aluminum mills’ other favored industry, aerospace, had been running at its pre-pandemic levels, those same buyers would have faced even more constraints.

But lockdowns and even more extended international travel restrictions burst the bubble that had seen extended order books and solid build programs stretching out to the end of the decade.

Both Airbus and Boeing have seen build programs halved from pre-pandemic levels. While deliveries to airlines are now picking up, international air travel is still far from “normal.” That is true, even for a notoriously cyclical business.

So when Airbus announced its intention to aggressively ramp up in build rates, alarm bells began to ring up and down the supply chain.

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Several factors are likely to see base metals continue to encounter supply constraints into 2022.

Chief among them is demand, said Colin Hamilton, managing director of commodities research at BMO Capital Markets.

“We have never seen this level of demand impulse before,” he said in an Oct. 12 web presentation.

photonewman/Adobe Stock

Producers have also had difficulty keeping up with the demand, which Hamilton attributed partly to people working from home and ordering consumer durables online.

“This is bona fide, demand-driven deficit,” he added.

Hamilton’s statements came during LME Week, which took place Oct. 11-15. The event is an annual gathering for metal specialists, ranging from traders to analysts and CEOs, and includes an invite-only dinner hosted by the London Metal Exchange.

Each month, MetalMiner hosts a webinar on a specific metals topic. Explore the upcoming webinars and sign up for each on the MetalMiner Events page.

Energy crisis impacts metals supply

The global energy crisis has also played a role in the supply difficulties.

“We are struggling to get additional calories into the world,” Hamilton said.

Causes behind the energy crisis are not so much due to the energy transition, which is still in beginning stages, but because there are substantially higher levels of heating of space, Hamilton noted.

Buildings could help to remedy space heating, however, as they cover about 30% of global energy. There are some metals-intensive wins there. Smart facades of metals on buildings will allow for better temperature control. Meanwhile, improved ventilation in light of COVID will benefit zinc and copper. Furthermore, LED lighting is wiring-intensive.

The amount of data and Cloud IT spending and 5G have also proven energy-intensive.

“All these factors are playing into structurally higher energy demand growth than we were probably ready for,” Hamilton noted.

Chinese power outages

Power outages in China are also impacting industrial activity. The country has now resumed coal shipments from Australia after an informal ban in 2020.

“Chinese power outages are widespread. We are cutting more supply than demand,” Hamilton added.

Coal imports rose in September rose 76% year on year to 32.9 million metric tons, an Oct. 13 report from the Financial Times stated, itself citing official Chinese customs statistics.

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There doesn’t appear to be a lot of consensus around the copper market.

On the one hand, according to Reuters, the International Copper Study Group (ICSG) reports the global refined copper market will be roughly balanced between supply and demand this year. Meanwhile, the group forecasts a significant supply surplus in 2022.

The ICSG is predicting a small deficit of 42,000 tons this year. As for next year, it predicts a wave of new mine supply will push the market into a surplus of 328,000 tons.

Each month, MetalMiner hosts a webinar on a specific metals topic. Explore the upcoming webinars and sign up for each on the MetalMiner Events page.

Copper price picture

copper mine

vadiml/Adobe Stock

But Goldman Sachs is suggesting otherwise.

It says mine supply is likely to underperform, be late and, most importantly, a wave of refining disruption in China due to power problems is going to restrict supply and drive prices higher.

Just last week Goldman predicted $10,500 per ton, only for the spot price to break though it shortly thereafter.

The difference between the price for spot or prompt metal and that for delivery in three months on the LME has hit a record $350 per ton, according to the Financial Times.

In short, it is displaying all the hallmarks of a market under extreme duress.

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We wrote recently about the impact power rationing and rising coal costs were having on metals producers in Europe.

Well, it would seem that is not the only driver pushing semi-finished product prices higher this month.

Each month, MetalMiner hosts a webinar on a specific metals topic. Explore the upcoming webinars and sign up for each on the MetalMiner Events page.

Aluminum prices, alloying element shortages

aluminum ingot stacked for export

Olegs/Adobe Stock

The LME aluminum price been rising relentlessly. Furthermore, the availability of alloying elements is becoming so acute, both in terms of price and deliveries, that producers are sending out notes to clients advising that global shortages of raw materials like magnesium — critical in alloying higher grades of aluminum — could result in production stoppages and sharply higher prices later this quarter.

The problem, as is so often the case in the metals markets, is that China is the world’s largest source of alloying magnesium. That is in addition to a host of other similar metals, like manganese.

However, power rationing has impacted production there. European mills have no idea when this shortage will ease. They clearly feel the implications, both in terms of further price rises and delivery delays, which are so acute that they need to warn the market to set expectations.

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This morning in metals news: the World Steel Association forecast steel demand to rise by 4.5% this year; U.S. import prices increased in September; and, lastly, the Energy Information Administration forecasts U.S. coal-fired electricity generation will increase this year for the first time since 2014.

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Steel demand to rise 4.5%

China steel production

Zhao Jiankang/AdobeStock

The onset of the COVID-19 pandemic disrupted supply chains around the world and, for a time, dented global steel demand.

However, the World Steel Association forecast steel demand will finish up 4.5% in 2021. The rise comes after a just 0.1% increase in 2020. Meanwhile, the World Steel Association forecast demand to rise by 2.2% in 2022.

“2021 has seen a stronger than expected recovery in steel demand, leading to upward revisions in our forecast across the board except for China,” said Saeed Al Remeithi, chairman of the World Steel Association Economics Committee. “Due to this vigorous recovery,  global steel demand outside China is expected to return earlier than expected to its pre-pandemic level this year.

“Strong manufacturing activity bolstered by pent-up demand is the main contributor. The developed economies have outperformed our earlier expectations by a larger margin than the developing economies, reflecting the positive benefit of higher vaccination rates and government support measures.”

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China has previously been cast in a sinister role with respect to restricting the production and export of critical rare earth metals, usually salts, used to produce a host of products. Those products include magnets for consumers electronics and electric cars, defense equipment and advanced ceramics.

But while the country deliberately created a near monopoly position in the global rare earths refining market, it created a horrendous environmental problem in the process.

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Rare earths consolidation and rising prices

rare earths loaded on cargo ship in China

tab62/Adobe Stock

In an effort to clean up its environmental act and to gain better control over what had become a wild west mining and refining landscape, Beijing engineered consolidation in the industry to fewer but larger entities.

However, that’s when the criticism started, as China capped exports, causing a spike in prices.

That was largely short-lived. Prices returned to earth after a spike in 2017. However, prices have been rising strongly again this year due to surging demand, both within China and without.

Prices are up between 20-50% this year alone. Surging demand has fueled a bidding war for supplies in a constrained market. With China holding some 85% of global refining capacity and the only mine to refined products supply chain, it not only has a unique position but a unique responsibility in the market.

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