Articles in Category: Supply & Demand

A recent Telegraph article suggests the West is sleepwalking into missing the next industrial revolution as China voraciously buys up raw material assets around the world. Those assets include securing its future supplies of cobalt, copper, lithium and other metals. The aforementioned comes in addition to its current domination of rare earth metals.

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China leads in race for raw materials

electric vehicle charging

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Although the Telegraph article focuses on the UK, the UK is not alone.

Other European countries, and even the US, are only just catching on to the perilous state of most Western economies’ reliance on very limited, and often hostile, supply sources for raw materials.

As the article reports, it takes seven years to plan and build a mine. In the last four years, China Molybdenum has plowed into the Democratic Republic of Congo’s 350 kilometer copper belt. The firm paid $2.6 billion (£2 billion) four years ago for the Tenke Fungurume mine from Freeport McMoRan.

It then expanded its empire in December, paying another $550 million for Freeport’s nearby Kisanfu mine. The mine gave it access to a further 6.3 million metric tons of copper. In addition, the mine offers access to 3.1 million metric tons of cobalt.

Chinese companies now dominate mining in the central African country that produces 70% of the world’s cobalt.

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In a surprise move last week, OPEC+ announced a further gradual relaxation of the group’s 2020 emergency 9.7 million barrels per day cut in oil output, causing the oil price to briefly retreat.

In December, OPEC+ had intended to ease the curb by about 500,000 barrels per day each month in 2021.

Brent crude oil price chart

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However, in the face of still weak demand, it postponed the easements.

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Oil price and supply

Meanwhile, in January Saudi Arabia surprised the market and its OPEC+ partners. The kingdom announced a voluntary additional cut of 1 million barrels per day. As a result, its output went to just over 8 million barrels per day b/d from its quota of 9 million barrels per day.

But the Kingdom has now announced it intends to gradually bring that back. It will increase production by 250,000 in May, 350,000 in June and 400,000 in July.

Since last year the 9.7 million b/d of OPEC+ cuts have been reduced to about 7 million barrels per day.

Output, however, remains well below pre-pandemic levels.

The latest announcement stated producers will collectively increase output by 350,000 barrels per day in May. They will add another 350,000 barrels per day in June and around 441,000 barrels per day for July, according to a report in the Financial Times.

Combined, Saudi Arabia and OPEC+’s amount to some 2 million barrels per day in the run-up to the summer.

Subdued demand as third wave of lockdowns hits parts of Europe

Demand is recovering. However, large parts of Europe are in a third wave of lockdowns; demand there remains subdued.

OPEC appears sensitive to not spooking the market and keen to minimize too much damage to the oil price.

The move surprised markets that were expecting no change, but the Brent crude oil price continued to trade around the $63 mark. The price has been at around that level for the last three weeks.

Major oil consumers like India and China will likely welcome the move. Greater output will be seen as one less support mechanism for higher prices this year.

Oilprice.com reports the move by OPEC+ in bullish terms, saying the market sees it as a vote of confidence in rising demand and that constraints on the market remain.

The US shale industry will likely see a further erosion of output this year, according to BloombergNEF last week. Output may shrink by another 485,000 barrels per day by the end of 2021 as producers focus on debt reduction and dividends over growth, according to the report.

For now, OPEC’s feared resurgence of shale oil has not materialized.

But as the battered and bruised fracking industry recovers, don’t count it out.

If the oil price remains at $60 per barrel or above, shale oil is profitable. One thing we do know about the industry is that, sooner or later, profit will justify a return of investment and growth.

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Continued tight supply for hot rolled coil in Western Europe has further pushed up prices for the flat product over the past 10 days.

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Hot rolled coil heats up

Some producers’ offer prices from late last week are now at least €900 ($1,060) per metric ton exw. Meanwhile, delivery times extend as far out as October, market participants said.

Cold rolled coil is on offer for €980 ($1,155), they added.

Western European steel factory

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“It’s impossible to get anything before June,” one trader said.

Hot rolled coil offers in mid March reached €850-900 ($1,000-1,060) for May rolling and June delivery. However, traders warned then that the price and lead times were not certain and could rise further.

Import offers for hot rolled coil are now $900-910 cost and freight (CFR) for European ports. That is up from $890-900 transacted earlier in March for material from India and Japan, respectively for May and June delivery, sources also noted.

Import prices could also face more increases, a second trader warned.

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strike

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The United Steelworkers union Monday announced a strike at nine Allegheny Technologies Inc. (ATI) facilities, citing what it calls “unfair labor practices.”

The ATI strike, which began at 7 a.m. EDT Monday, marked the first at ATI since 1994, according to media reports.

In addition, USW spokesperson Tony Montana told MetalMiner the strike involves workers at plants in:
  • Pennsylvania in Brackenridge, Latrobe, Natrona Heights, Vandergrift and Washington
  • Lockport, New York
  • Louisville, Ohio
  • New Bedford, Massachusetts
  • Waterbury, Connecticut

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USW announces ATI strike

“We are willing to meet with management all day, every day, but ATI needs to engage with us to resolve the outstanding issues,” USW International Vice President David McCall said in a prepared statement. “We will continue to bargain in good faith, and we strongly urge ATI to do start doing the same.

“Through generations of hard work and dedication, Steelworkers at ATI have earned and deserve the security of a union contract. We cannot allow the company to use the global pandemic as an excuse to reverse decades of collective bargaining progress.”

USW said negotiations with ATI began in January 2021. The union claimed the company “sought major economic and contract language concessions” from its roughly 1,300 union members. Furthermore, the union said members have not had a wage increase since 2014.

Meanwhile, the union had announced its intention to strike Friday, March 26.

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Suez Canal

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As the days went by and the disruption from the blockage of the Suez Canal by the container vessel Ever Given increased, the implications became more and more severe.

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Not all of those 360 vessels backed up waiting for the vessels to be freed are containing washing machines and laptops.

Suez Canal disruption

Some have live cargoes on board. Others have have ripening fruit. Lost cargoes will be significant, but may be worse for manufacturers will be the ongoing disruption.

ShippingWatch estimates it will take a week or more to clear the vessels back up into the Red Sea and Mediterranean.

But the damage has already been done.

Due to the non-arrival of vessels in both Europe and Asia, there will be trips out of both regions that are already being canceled (so-called blank sailings), because the container ships do not reach the ports on time and cannot unload and get new cargoes on board.

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US steel imports in February — and through the first two months of the year — are down compared with 2020, the Census Bureau reported.

imports

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US steel imports in February down 22% from previous month

US steel imports reached 1.71 million metric tons in February, according to preliminary data from the Census Bureau.

Imports fell from 2.20 million metric tons in January.

Meanwhile, February 2021 imports were up from the 1.37 million metric tons imported in February 2020.

Furthermore, imports were down over 7% in the year to date compared with the first two months of 2020.

According to the American Iron and Steel Institute (AISI), finished steel import market share reached an estimated 18% in February. Meanwhile, through the first two months of the year, import market share reached 17%.

In addition, after reaching 35% in 2017, steel import penetration fell to 26% by 2019, according to the Economic Policy Institute.

Tin plate, cold rolled sheet imports surge

February saw a surge in imports of tin plate and cold rolled sheets, among other steel products.

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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 coverage of the semiconductor shortage, the Midwest Premium and more.

A fire at a Japanese chip-making plant last week has slammed automotive operations. General Motors, Ford and many other automakers have announced idling of production as a result of the shortage.

Meanwhile, on the supply side, Intel announced plans to invest $20 billion to build two new Arizona plants. Furthermore, Intel said it aims to “serve the incredible global demand for semiconductor manufacturing.”

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Week of March 22-26 (semiconductor shortage, Midwest Premium and more)

semiconductor and automobile

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bull market

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Industrial metal buying organizations are in a difficult spot these days, as commodities are entrenched in a bull market.

After the initial demand hit that commodities took on at the end of Q1 2020 with the outset of the COVID-19 pandemic, materials prices have skyrocketed. Lead times have lengthened and demand for everything from automobiles to homes to electronics picked up around the middle of the year.

Since then, metals prices have been on a bullish run, putting pressure on buying organizations.

On Wednesday, March 24, MetalMiner hosted a webinar titled “When Will the Metals Bull Market End? (Am I Well Positioned to Get All of the Cost-Downs When Prices Fall?).” During the 30-minute session, MetalMiner CEO Lisa Reisman, Editor-at-large Stuart Burns and Vice President of Business Solutions Don Hauser walked buyers through the current state of commodities markets and strategies for how buyers should approach their metals spend in preparation for when prices eventually come down.

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Bull market

To metals buyers’ chagrin, prices remain elevated and supply is tight.

When polled, 44% of webinar participants said carbon steel has been their most budget-busting metal this calendar year. Meanwhile, 24% said stainless steel, 20% said aluminum and 12% said copper.

In addition, 66% of participants indicated they are also seeing price increases for value-add items (for example, coatings, gauge and width adders, and additional processing).

US steel prices, for example, have been relentless in their rise. Hot rolled coil closed earlier this week at $1,271 per short ton, up nearly 9% from a month ago. After a modest recovery in May 2020, hot rolled coil dipped again, falling as low as $454 per short ton in late August.

The price has come a long way since then.

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capacity utilization

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The US steel sector’s capacity utilization rate has consistently posted gains since a trough last spring at the outset of the COVID-19 pandemic.

This past week, however, the capacity utilization rate fell slightly.

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Capacity utilization dips to 77.3%

The US steel sector’s capacity utilization rate fell to 77.3% for the week ending March 20, the American Iron and Steel Institute reported this week.

Steel output during the week totaled 1.75 million net tons. The figure marked an increase of 0.7% year over year. Meanwhile, output declined 0.5% from the previous week, when capacity utilization reached 77.7%.

As for the year to date, production reached 19.6 million net tons. Capacity utilization during the period reached 76.8%. Production during the period fell 6.2% from the same time frame in 2020, when the rate reached 79.6%.

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Tangshan steel plant

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The recent curbs on steel making by the local government in one of China’s largest steel-producing cities, Tangshan, may have a cascading effect on steel procurement & demand, as well on iron ore supplies, some experts believe.

The Tangshan restrictions are in effect from March 20 to Dec. 31, 2021. Among other things, the restrictions penalize steel mills there that fail to meet emission control regulations.

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Tangshan part of countrywide effort

The curbs are in line with China’s fresh efforts to cut emissions meet carbon-neutrality targets. China aims to reach carbon neutrality by 2060.

Already, iron ore prices felt effects from the restrictions. Meanwhile, the long-term effect on the import-export of steel from China remains to be seen.

Daily iron ore consumption in Tangshan is also likely to drop drastically. The restrictions had led to the drop in iron ore futures but boosted hot-rolled coil (HRC) futures.

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