Articles in Category: Supply & Demand

Not so long ago on a fall night here in Chicago, I had the opportunity to meet up with a couple of folks from a steel producer. 

What they told me then sounded a little scary — they suggested the “A” word — but not nearly as scary as current market conditions suggest. 

In metals markets, the “A” word does not contain three letters. 

It does, however, connote something far worse for many metal buying organizations: allocation!

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Dreaded allocation

Allocation markets cause sleepless nights for procurement professionals because, without material, lines get shut down and businesses fail to operate profitably. 

Undoubtedly, the dreaded “A” word is upon us, particularly for steel markets.

Back in May of this year, toward the end of the last COVID-19 “surge,” MetalMiner contemplated what could happen to steel prices once demand came back onstream.

MetalMiner saw two scenarios: a gradual increase in demand followed by panic buying or a rather dramatic increase in demand led by the automotive industry, combined with slow mill restarts and historically low starting inventory levels held by service centers. 

We assumed the first scenario, but obviously the second ensued.

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Steel production

buhanovskiy/AdobeStock

Keeping future demands in mind, Nippon Steel Corp. has decided to focus more on markets like the United States and India.

At the same time, it is reducing focus on Japan for the medium term.

The aim, according to a top-level executive of the Japanese steel company, is to capitalize on overseas profit which. At present, uptake in the global automobiles sector is largely driving that profit.

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Nippon looks overseas

News agency Reuters quoted Nippon Steel’s Executive Vice President Katsuhiro Miyamoto as saying they were looking at increasing the production capacity overseas, where demand is expected to go up.

Incidentally, Nippon, Japan’s biggest steelmaker and ArcelorMittal, the world’s largest steelmaker, had jointly bought India’s bankrupt Essar Steel, which has an annual capacity of 9.6 million tons.

Miyamoto also told the news agency during his interview that Nippon Steel was actively contemplating a plan to construct an electric furnace at its U.S. joint venture with ArcelorMittal in Calvert, Alabama. It will have a furnace of 1.5 MT of annual output capacity as a first step.

ArcelorMittal announced in September this year it would sell most of its U.S. assets to Cleveland-Cliffs Inc. The sale did not include the Calvert facility.

As for new venture ArcelorMittal Nippon Steel India, he said there are plans to increase capacity to between 12 million and 15 million tons in the future.

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solar power

AdobeStock/FenrisWolf

This morning in metals news: the Energy Information Administration (EIA) released its Short-Term Energy Outlook; the China Iron and Steel Association (CISA) wants to know why iron ore prices are soaring; and the CEO of Cleveland-Cliffs touted the company’s plans for steel in the region after its acquisition of ArcelorMittal USA.

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.

EIA releases Short-Term Energy Outlook

The EIA released its Short-Term Energy Outlook last week, noting the average Brent crude price in November rose by about $3 per barrel compared with the previous month.

Furthermore, the EIA forecast an average crude price of $49 per barrel in 2021, up from the expected average of $43 per barrel in Q4 2020.

The outlook also offered an update on renewables.

“EIA forecasts that planned additions to wind and solar generating capacity in 2020 and 2021 will contribute to increasing electricity generation from those sources,” the EIA said. “EIA expects the U.S. electric power sector will add 23.0 gigawatts (GW) of new wind capacity in 2020 and 9.5 GW of new capacity in 2021. Expected utility-scale solar capacity rises by 12.8 GW in 2020 and by 14.0 GW in 2021.”

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bulk cargo iron ore

masterskuz55/AdobeStock

This morning in metals news: the iron ore price is surging amid a Pilbara Ports Authority cyclone warning; Steel Dynamics shares jumped; and Rio Tinto declared a maiden ore reserve at a project in western Serbia.

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.

Iron ore price supported by cyclone warning off Australian coast

As Stuart Burns explained earlier this week, iron ore has been the star of 2020 in terms of upward price mobility.

The price is looking primed to make further gains. Australia’s Pilbara Ports Authority, which oversees the world’s largest iron ore export terminal, on Thursday issued cyclone alerts in which it advised it would clear the port and anchorages of the Port of Port Hedland of all large vessels.

“As of 0800 (WST), a tropical low is located some 740 kilometres/400 NM South East of Christmas Island,” the Pilbara Ports Authority wrote in its first alert Thursday.

In a subsequent alert, it announced it had completed clearing of the port and anchorages.

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iron ore

nikitos77/Adobe Stock

If we think copper, zinc, and even aluminum have performed well this year, none of them are a patch on iron ore.

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Iron ore prices rise

China’s iron ore imports fell for the second straight month in November. Imports dropped by 8.1% from a month earlier, Reuters reported.

However, prices still rose strongly.

China brought in 98.15 million metric tons last month, compared with 106.74 million tons of imports in October. Nonetheless, the November total rose 8.3% from November 2019.

The report went on to say that for the first 11 months of the year, iron ore imports stood at 1.07 billion tons. Meanwhile, full-year imports totaled 1.06 billion tons in 2019.

Imports seem to be constrained due to availability rather than lack of demand. Quite the contrary, prices are continuing to rise.

Spot iron ore hit the highest level since December 2013 last week. The Dalian Commodity Exchange price climbed a further 2.8% to Yuan 928 per metric ton (over $141 per ton). That is a rally of 50% since this time last year. The price is also up 72% since the end Q1 China lockdown crash pushed prices below $80 per ton.

Infrastructure stimulus investment and a strong construction market have supported steel prices. As a result, steel mills have been producing flat out and drawing down port stocks of raw materials like iron ore.

According to another Reuters report, imported iron ore stocked at 45 Chinese ports dipped for the fourth week over Nov. 27 to Dec. 3. Imports fell by 1.6 million tons from a week earlier to about 124.5 million tonnes, mainly due to lower arrivals.

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electric car battery

Electric car lithium battery pack. (Nischaporn/Adobe Stock)

In the coming months, metal prices could be buoyed by policies of the next U.S. presidential administration, Reuters reports.

President-elect Joe Biden plans to spend $2 trillion on infrastructure and promote green policies, which require the use of more batteries and solar panels — both of which rely heavily on metals.

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HRC hot-rolled coil steel

taitai6769/Adobe Stock

HRC mills in Western Europe continue to seek higher prices for hot rolled coil on high local demand and low availability, traders told MetalMiner.

End users are also trying to hedge their positions because November and December are the two months when they build up stocks before year’s end, traders said.

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.

Mills are now offering HRC at €600 ($715) per ton EXW for February/March delivery, up from previous deals of €520-530 ($620-630), sources said.

It’s not clear if any buyers have accepted the latest offers because they are still “swallowing this information,” one of the traders noted.

HRC from Russia, Turkey

The lack of available material on the local market is adding support to the offer prices, one trader added.

“The mills can wait,” the trader said about market acceptance, noting that even availability of imported HRC is becoming scarcer.

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China steel plant

gui yong nian/Adobe Stock

Not surprisingly, China paced a significant jump in October 2020 crude steel production.

Are you on the hook for communicating the company’s steel performance to the executive team? See what should be in that report!

October 2020 crude steel production up 7%

October 2020 global crude steel production has bounced back after a down spring and summer.

In March, global crude steel production fell 5.7% before taking a 13.1% dive in April.

From there, output recovered, even as the world continued to struggle with the COVID-19 pandemic.

Output remained down on a year-over-year basis in May, June and July before finally posting a 1.9% jump in August.

September output jumped 3.9% before growing 7% in October.

China leads the way in October production

Meanwhile, top steel producer China posted a 12.7% year-over-year increase in crude steel output in October.

The rise followed a 10.9% jump in September and an 8.4% increase in August.

China’s output totaled 92.2 million tons in October.

As MetalMiner’s Stuart Burns noted recently, China’s economic recovery has powered the rise of prices for a number of commodities.

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As the World Bureau of Metal Statistics (WBMS) will tell you, the global aluminum market reached a surplus of 1,603 kt in the January to September 2020 period.

That tripled the surplus of 480 kt recorded for the whole of 2019.

Do you know the five best practices of sourcing metals, including aluminum?

Global aluminum market sees rising production

Production continued to rise in China. In addition, production made a strong comeback in North America, where it rose 4.3% year over year, according to Capital Economics, largely due to the recovery of Alcoa’s Becancour smelter in Canada.

Chinese output grew 3.8% to nearly 31 million tons in the January to October period. Even so, demand still outstripped supply. The country imported some 766 kt of primary metal, according to Reuters.

Despite Chinese demand — or maybe because of it — an estimated 3.2-million-ton global surplus will build this year, according to CRU estimates. Some 2.9 million tons of that tonnage will occur outside of China.

Aluminum stocks and demand

Yet if ever there was an example of how exchange stocks are no indication of demand, LME inventory levels actually fell this year (down by 53 kt so far).

Surplus production has a way of disappearing off the radar in the aluminum market. The stock and finance trade soaks up excess production and profitably stores it away on the back of a strong LME forward price curve.

The portion that is visible via the LME’s off-warrant reporting structure doubled from 730 kt in February to 1.56 million tons by September. That figured has continued to climb since.

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copper smelter

Bombardho/Adobe Stock

Earlier today we touched on aluminum prices — well, the copper price is similarly ascendant.

The copper price has, as we’ve mentioned on multiple occasions, been supported by a recovering Chinese economy.

Furthermore, according to data released Monday by the International Copper Study Group (ICSG), global copper production declined over the first eight months of the year.

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

Copper price rises to 2020 high

The LME three-month copper price closed last week at $7,195 per metric ton, its high for 2020.

In addition, the price point in fact marked its highest since early 2014.

How much further can it go? Certainly, markets at large and metals in particular — including copper — showed upward momentum after recent announcements of potentially effective COVID-19 vaccines from Pfizer and Moderna.

As Maria Rosa Gobitz explained in this month’s Copper Monthly Metals Index (MMI) report, copper prices could continue to go up. In fact, according to investment bank Goldman Sachs, copper could rise to $7,500 per metric ton by this time next year.

While it’s still early to say, with the copper price already approaching the $7,200 mark, $7,500 next year is not out of the question. The LME three-month copper last reached the $7,500 per metric ton mark in spring 2013.

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