Articles in Category: Supply & Demand

U.S. trade

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This morning in metals news: the US international goods trade deficit moved up slightly from December to January; meanwhile, MetalMiner sister site SpendMatters took to LinkedIn for feedback on President Joe Biden’s executive order on supply chains; and, lastly, Sweden will be home to what will reportedly be the world’s largest “green hydrogen plant.”

US trade deficit rises in January

The US trade deficit in January reached $83.7 billion, the Census Bureau reported.

The trade deficit increased from $83.2 billion in December.

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

Spend Matters analyst looks at Biden administration’s supply chain executive order

Speaking of the trade deficit and trade in general, in light of President Joe Biden signing an executive order to address US supply chain problems for semiconductor chips, large-capacity batteries for electric vehicles, rare earth minerals and pharmaceuticals, Spend Matters analyst Pierre Mitchell took to LinkedIn to get a conversation started.

“Hey, if a 78-year-old guy from Scranton gets it, maybe more C-level execs will finally now get serious about supply chain risk management,” Mitchell writes. “Actually, most do, especially after the pandemic, but it’s still depressing when so many wait until they get a major disruption. Is this finally a sea change … or ‘C-change’?”

MetalMiner’s Stuart Burns recently outlined the geopolitical chess game taking place over rare earth materials.

To be a part of the conversation, engage with Mitchell’s post on LinkedIn to voice your opinions.

World’s largest ‘green hydrogen plant’

Steelmaking is a traditionally high-polluting industry. But, slowly but surely, steelmakers around the world are touting newfound green bona fides.

CNBC reported yesterday that Sweden could soon be home to the “world’s largest green hydrogen plant.”

The firm, H2 Green Steel, will aim to provide the European market with steel made with a “fossil-free manufacturing process,” CNBC reported.

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President Joe Biden’s latest executive order seeks to secure a variety of important supply chains.

For example, in one higher-profile case, General Motors recently announced it would extend downtimes at several plants as a result of a semiconductor shortage.

As we’ve noted in our Rare Earths Monthly Metals Index (MMI) series, rare earths supply has long been a point of concern for the US, particularly the Pentagon. (Recently, MetalMiner’s Stuart Burns delved into China’s overwhelming control of the rare earths processing market and indications Beijing is considering tighter rare earths export regulations.)

In that vein, the president’s latest executive order — his 33rd in just over a month in office, which the White House said he would sign Wednesday — aims to secure those critical supply chains.

The White House said the order focuses on six key areas:

  • the defense industrial base
  • the public health and biological preparedness industrial base
  • the information and communications technology (ICT) industrial base
  • the energy sector industrial base
  • the transportation industrial base
  • supply chains for agricultural commodities and food production

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list of commodities prices

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Investment banks love a super cycle.

It spurs irrational investment and sucks in unwary investors. Furthermore, it encourages passive funds to up their allocation, even if only by fractions of a percent.

But with some $14 trillion invested in US equities alone, even a modest increase in passive investments into ETFs would reap significant rewards in fees.

As such, it may be not surprising that the big boys — like JP Morgan, as reported in Bloomberg, and Goldman Sachs, as reported in the Financial Times (admittedly focused more on oil) — are calling the start of the next commodities super cycle.

Cut-to-length adders. Width and gauge adders. Coatings. Feel confident in knowing what you should be paying for metal with MetalMiner should-cost models.

Commodities super cycle?

On the face of it, they appear to have some foundation.

As a separate post in the Financial Times observes, metals, agricultural and oil commodity indices have risen up to 40% since last July.

In part, this is due to a surge of interest in green-energy projects.

The EU, US and China have all promised to spend big. Hydrogen projects alone could receive €30 billion from the EU.

Copper has rallied to eight-year highs, around $8,375 per ton. The metal is benefiting from strong Chinese demand and the prospects for a more rapid transition to electric vehicles gains momentum. Glencore is quoted as saying world copper demand will double by 2050 and that mine investment is insufficient,

All of that certainly makes for a bullish landscape.

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joint venture puzzle pieces

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This morning in metals news: officials held a groundbreaking ceremony at the AM/NS Calvert mill earlier this month; President Joe Biden is expected to sign an executive order that calls for assessments of several critical supply chains; and US housing starts fell in January.

AM/NS Calvert officials hail expansion project

Officials celebrated the imminent expansion project at the AM/NS Calvert mill in Alabama with a groundbreaking ceremony earlier this month, al.com reported.

The Alabama mill is a 50/50 joint venture of ArcelorMittal and Nippon Steel. In December, ArcelorMittal completed the sale of most of its North American assets to Cleveland-Cliffs.

However, the AM/NS Calvert mill is one of the few assets not included in the sale.

Last August, ArcelorMittal announced its intention to build an electric arc furnace at the mill.

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

Biden to sign executive order for supply chain assessments

President Joe Biden will sign an executive order calling for assessments of various US supply chains, Yahoo News reported.

The order will call for assessments of supply chains for semiconductors, medical supplies, rare earths and electric car batteries.

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rare earths loaded on cargo ship in China

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Although presented as the evil machinations of an enemy state, a recent Financial Times article lays out the rare earths dilemma China faces.

Rare earths in the crosshairs

Rare earths industry executives made unofficial statements indicating Chinese government officials had asked them how badly companies in the US and Europe, including defense contractors, would be affected if China restricted rare earth exports during a bilateral dispute.

The conversations should be seen against the backdrop of moves last month by the Ministry of Industry and Information Technology.

The ministry proposed draft controls on the production and export of 17 rare earth minerals from China. Although China doesn’t control the world supply of mined ores, it does dominate the refining into useable salts and metals, controlling about 80% of global supply.

Nonetheless, the country itself remains at risk to unstable ore supplies from countries like Myanmar. That may help explain Beijing’s tacit support for the recent military coup there.

The US even sends its ores to China for refining. That’s not because it doesn’t have the technical knowhow; the US simply lacks the facilities. Furthermore, China is more willing to tolerate the environmental damage from the dreadfully polluting refining process.

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

Rare earths supply dependence

This lack of refining capacity leaves the US and most of its Western allies horribly exposed.

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Indonesia on a globe

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Electric vehicle manufacturers are wooing Indonesia to create a nickel-based battery supply chain in that country.

Elon Musk’s Tesla and China’s Contemporary Amperex Technology, otherwise known as CATL, and South Korea’s LG Chem are in the fray. 

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

Firms look to secure Indonesian nickel supply

A senior Indonesian government official told news agency Reuters the government had recently received Tesla’s investment proposal. 

Since early last year, Tesla has been courting Indonesia because for the value of its strategic commodities, including nickel. Nickel is a critical metal used in batteries for EVs due to its properties enabling mass energy storage capabilities. Furthermore, nickel reduces the overall cost of batteries by limiting the amount of cobalt required. 

Tesla seems to have come back to the Indonesian government with a reworked proposal to the one it had submitted in May 2020. The latter had shown reluctance in just signing a raw material supply agreement. 

The minister told reporters, while acknowledging Tesla had sent its proposal, that Tesla’s engagement in Indonesia would extend past raw materials. If Tesla only wants to take raw materials, then the government was not too keen in pursuing a partnership.

Indonesia is also talking to CATL and LG Chem regarding their plans to create an EV battery supply chain, the Nikkei Asia reported. 

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US and UAE flags

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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 the Biden administration reimposing a tariff on aluminum from the UAE, copper demand and much more.

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

Week of Feb. 8-12 (Biden administration reinstates UAE aluminum tariff, copper demand and more)

Stop obsessing about the actual forecasted aluminum price. It’s more important to spot the trend.

General Motors headquarters

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This morning in metals news: automaker General Motors is facing challenges related to semiconductor supply; meanwhile, Oslo-based Norsk Hydro reported its Q4 2020 financial results; and, lastly, the oil price continues to tick up.

Semiconductor supply

End users across sectors are dealing with material shortage challenges.

The automotive sector is no different.

This week, General Motors announced it would extend previously announced downtimes at its Fairfax, CAMI and San Luis Potosi.

“Semiconductor supply remains an issue that is facing the entire industry,” GM said in a release. “GM’s plan is to leverage every available semiconductor to build and ship our most popular and in-demand products, including full-size trucks and SUVs and Corvettes for our customers. Our supply chain organization is working closely with our supply base to find solutions for our suppliers’ semiconductor requirements and to mitigate impacts on GM.”

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Norsk Hydro reports Q4 results

Oslo-based aluminum firm Norsk Hydro reported Q4 EBIT of NOK 1,449 million (US $171 million).

Meanwhile, the firm reported Q4 2019 EBIT of NOK 560 million (US $66 million).

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copper bars

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The Copper Monthly Metals Index (MMI) increased for the fourth consecutive month, rising by 1.1%, as copper demand is likely to remain strong this year.

February 2021 Copper MMI chart

Copper prices traded sideways throughout January, which proved to be a slow month for the red metal. Most of its momentum over the past year came from China, which has stopped some of its manufacturing ahead of the Chinese New Year celebrations.

However, copper prices might pick up as key industries — such as construction, consumer appliances and automotive — continue to grow. Copper demand should also benefit from the “Buy American” policy that the Biden administration plans to implement.

The plan would promote the U.S. manufacture of essential components in construction, appliances, electronics and automotive.

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

Global copper demand

As mentioned above, it’s not likely that copper demand will slow down in 2021.

In the US, new home and home renovation demand spiked since the pandemic started, along with electronics demand. Analysts at CitiBank expect the copper market to shift into a deficit in the second half of the year with a minor surplus overall for 2021, Reuters reported. They also forecast deficits in 2022 and 2023.

The US Census Bureau and the US Department of Housing and Urban Development reported building permits in December increased by 4.5% compared to November and 17.3% above the December 2019 rate. Privately owned housing continued to increase in December, rising by 5.8% from the previous month and by 5.2% compared to December 2019. The uptrend started in September 2020.

China will continue to play an important role in the copper market. The country accounts for about half of global primary consumption, which is then used to manufacture export goods.

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China story steel production

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After global crude steel production rose for four consecutive years, output declined last year, the World Steel Association reported Tuesday.

Global crude steel production drops 0.9% in 2020

Global crude steel production fell by 0.9% in 2020 compared with 2019, the World Steel Association reported.

Production had increased every year from 2015-2019.

Output last year totaled 1.86 billion tons, down from 1.88 billion tons in 2019.

Mirroring its economic recovery compared with the rest of the world, China’s steel production remained strong compared with the rest of the world. China’s output rose from 1.0 billion tons in 2019 to 1.05 billion tons in 2020.

As such, China’s share of global output jumped from 53.3% to 56.5%.

India and Japan, the No. 2 and No. 3 steel producers, respectively, both saw their output decline in 2020. India’s fell by 10.6%, while Japan’s dropped by 16.2%.

Among the top 10 steel producers in the world, only China, Russia, Turkey and Iran posted year-over-year growth.

See why technical analysis is a superior forecasting methodology over fundamental analysis and why it matters for your steel buy.

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