Author Archives: Nichole Bastin

The Stainless Monthly Metals Index (MMI) rose by 1.8% month over month.

January 2022 Stainless MMI chart

Although nickel edged up slowly in price, it squeezed into a wedge that is susceptible to big time frame resistance. Prices continue to consolidate within an October-November 2021 high-low price range.

A continuation to the upside with more volume from the bulls could push prices even further. Lower volume, however, could lead to price breakdowns in Q1 2022.

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A&T Stainless petitions for tariff exclusion

U.S. flat-rolled stainless supply is expected to be constrained in 2022.

However, there may be some light at the end of the tunnel.

A&T Stainless, the joint venture between Allegheny Technologies (ATI) and China’s Tsingshan, has filed a new petition with the U.S. Department of Commerce for a tariff exclusion to import 304L and 316L hot-band coils from Indonesia.

In May 2018, Katie Benchina Olsen, MetalMiner’s senior stainless analyst, examined whether A&T Stainless should be granted an exemption. At the time, NAS and Outokumpu argued that they could supply slab to A&T Stainless. The exemption was denied.

The 2022 market is different because NAS, Outokumpu and Cleveland-Cliffs are all full capacity and have customers on strict allocation.

Approval would advance capacity

If the exemption is granted, A&T Stainless would restart the Direct Roll Anneal and Pickle (DRAP) line in Midland, Pennsylvania. The line would produce about 20,000 tons a month of thicknesses .048″ and heavier. If the DOC approves the request, the DRAP line would take several weeks to start up.

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The Aluminum Monthly Metals Index (MMI) rose 4.8% following two consecutive months of decline.

January 2022 Aluminum MMI chart

After a sharp 7.6% drop in the early days of November, prices appeared to have found a bottom and formed a bullish “cup and handle” technical pattern around the summer support levels.

Aluminum prices have broken out of the bullish pattern and now seek new resistance levels on the smaller time frames. The October high will serve as the price target on the longer time frame for this newly confirmed price reversal.

Does your company have an aluminum buying strategy based on current aluminum price trends?

Europe’s energy crisis shutters production

The European energy crisis remains bleak, as the aluminum sector sees further casualties.

Our own Stuart Burns noted last week that Europe’s largest (Aluminum Dunkerque Industries France) and second-largest (Alcoa’s San Ciprián) smelters saw production derailed as energy prices surged.

The cuts continue to roll in.

Most recently, Norsk Hydro’s Slovalko smelter will drop production to 60%. This cut, which equates to roughly 35 thousand mtpa, follows a previous cut which had lowered production down to 80% in 2019.

Soaring energy prices throughout Europe have eroded smelter profitability. Those smelters that rely upon long-term energy supply contracts and renewable energy, including hydroelectric capacity, have remained largely sheltered from the closures and cutbacks.

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The Raw Steels Monthly Metals Index (MMI) dropped by 7.7% month over month to 108, as steel prices fell in November.

December 2021 Raw Steels MMI

The U.S. steel market continues to show weakness. As HRC prices endure week-over week-declines, mill lead times have narrowed to historically average ranges.

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UK, Japan, Korea seek removal of Section 232 tariffs

Following an agreement reached with the E.U., the U.K., Japan and South Korea have all requested to renegotiate the Section 232 tariffs with the U.S.

The Trump administration imposed the tariffs in 2018, levying duties of 25% and 10% on steel and aluminum imports, respectively, from most countries. In late October, the parties announced that the U.S. and E.U. had renegotiated the import restrictions in favor of a tariff-rate quota system. Under the new arrangement, the U.S. would permit a limited volume of the metals produced in the E.U. into the U.S. with no Section 232 duty applied. For steel products, the quota would total 3.3 million metric tons, effective Jan. 1, 2022.

Japan, in particular, had requested an exemption from the tariffs since their onset, instead in favor of a trade agreement in line with WTO rules. Alongside the establishment of Japan-U.S. Commercial and Industrial Partnership (JUCIP), the U.S. said in mid-November that it would open discussions with Japan about a possible ease to the current duties. This announcement prompted South Korea to officially request negotiations, as both Japan and the E.U. are major competitors to the Korean steel industry.

Meanwhile, in a joint statement released Dec. 7, the U.S. and Britain indicated they will open talks regarding the tariffs. British trade minister Anne-Marie Trevelyan has invited the U.S. Commerce Secretary, Gina Raimondo, to visit the U.K. in January, as pressure grows to raise Britain’s retaliatory tariffs on U.S. products.

Chinese daily crude output lowest since 2017

Chinese daily steel production hit a four-year low in October.

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The Stainless Monthly Metals Index (MMI) held flat this month, while the stainless steel market is tight.

December 2021 Stainless MMI chart

Nickel prices appear to have consolidated following the late November spike. As with other base metals, nickel has started to show a high degree of volatility and uncertainty that would suggest a breakout of the current trading range is imminent.

Multiple bearish indicators, including decreased buyer volume as well as bearish wedge formations, lead to the probability of further breakdowns in price should nickel prices fail to sustain a bullish breakout above October’s high.

Indonesia expands stainless output

As the year winds to a close, Indonesia is on track to overtake India as the world’s second-leading stainless steel producer, according to data released by the U.K.-based research institute MEPS. Production during 2021 is expected to surpass 4.5 million tons. COVID-19 lockdown measures and oxygen rationing to steelmakers impacted Indian production in Q2. Production had returned on pace by the third quarter.

Meanwhile, as a result of power shortages and production cuts throughout the year, Chinese output remained constrained. Production in South Korea and Japan, however, is set to grow by 12% and 20%, respectively.

European output is expected to reach 7.06 million tons. U.S. total is expected to expand by 16% year over year to 2.5 million tons. In spite of this climb, U.S. flat-rolled stainless supply continues to be constrained, with no additional capacity on the horizon.

In total, forecasts for global stainless steel output in 2021 have reached 56.8 million tons to reflect 11.6% year-over-year growth. For 2022, global output is expected to expand by an additional 2.5% to 58.2 million tons.

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.

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The Copper Monthly Metals Index (MMI) held flat for this month’s reading.

December 2021 Copper MMI chart

After the mid-October spike, copper prices have begun to consolidate.

Any bullish technical patterns are at risk of invalidation, as prices appear to trade consistently lower. Additionally, its failure to break out of any bullish structures within smaller time frames suggests a weakness in buyer momentum.

Until the occurrence of a strong rally to continue the long-term uptrend, copper will likely become bearish, as it cannot sustain its breakthroughs of historical resistance levels.

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Fed may accelerate tapering

As inflationary pressures mount, the Federal Reserve may double the pace of its tapering of quantitative easing measures that were put in place at the onset of the pandemic. The Fed had started to reduce bond purchases from $120 billion per month in November on track to be completed by mid-2022.

Recent testimony from Fed Chair Jerome Powell indicated support for increasing tapering efforts, with expectations it may reach $30 billion per month following the upcoming Dec. 14-15 Federal Reserve board meetings.

The Consumer Price Index reached a 30-year high in October, expanding to 6.2%. In a recent blog post, the IMF encouraged such policy revisions, stating, “We see grounds for monetary policy in the United States—with gross domestic product close to pre-pandemic trends, tight labor markets, and now broad-based inflationary pressures—to place greater weight on inflation risks as compared to some other advanced economies including the euro area. It would be appropriate for the Federal Reserve to accelerate the taper of the asset purchases and bring forward the path for policy rate increase.”

Historically, copper prices have a positive correlation with inflation. Efforts to rein in inflation will likely add to bullish sentiment.

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The Aluminum Monthly Metals Index (MMI) fell for the second consecutive month, this month dropping by 3.9% as aluminum prices trended sideways.

December 2021 Aluminum MMI chart

After a sharp 7.6% drop in the early days of November, aluminum prices appeared to have found a bottom. Prices then traded sideways at summer support levels.

Currently, aluminum is in a period of volatility. Aluminum is showing patterns that suggest it may either bounce off support levels to breach newly formed resistance levels, thereby confirming a reversal, or continue with further breakdowns in price to find new, lower support levels and create a change in the long-term trend.

Does your company have an aluminum buying strategy based on current aluminum price trends?

Aluminum production to increase

An estimated 120,000 metric tons of aluminum extrusion ingot is expected annually following the completion of an aluminum recycling plant from Hydro Aluminum Metal of Norsk Hydro ASA. Construction will begin during the first half of 2022. The move is part of the company’s larger goal to double its postconsumer aluminum by 2025.

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The Stainless Monthly Metals Index (MMI) rose by 3.8% month over month.

November 2021 Stainless MMI chart

Nickel continues to be within an overall uptrend. However, LME prices experienced significant volatility throughout October.

Prices dropped as low as $17,810/mt in the early days of the month before they spiked to $20,475/mt by Oct. 21. Prices have since retraced and appear to have consolidated near February highs.

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

Base price, extras increase

As stainless steel demand increases while mill capacity remains steady, base prices and surcharges continue to increase.

Effective Nov. 1, Outokumpu announced a base price and extras increase, in addition to adding silicon to its alloy surcharge calculation. The increases affect the 200, 300, as well as 400 series.

Extras rose for products that impact productivity or add complexity to its mix, including tempers, width and gauges. Meanwhile, as ferrosilicon more than doubled in price since September, Outokumpu announced an adder for 301 Silicon followed by the implementation of a silicon component to its alloy surcharge. NAS’ November alloy surcharge for 304 also increased from October.

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.

China’s stainless output expected to rise

Amid the ongoing power crisis that caused metal prices to surge in October, China has eased power curbs in two key stainless-producing provinces.

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The Raw Steels Monthly Metals Index (MMI) dropped by 2.5% month over month.

November 2021 Raw Steels MMI chart

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

Auto steel demand shows weakness

auto production line

Ivan Traimak/Adobe Stock

Steel prices appear poised for a decline in coming months as auto steel demand shows weakness and new capacity is set to come online.

According to a report by Bloomberg, U.S. Steel Corp. recently offered “excess prime” steel that was previously earmarked for automotive companies. The firm made 50,000 tons of high-end steel from U.S. Steel Corp.’s Gary, Indiana facility — which is among the primary suppliers to U.S. auto companies — available to buyers after automakers declined to take on expected volumes.

While demand for automobiles remains strong, automakers continue to struggle with the ongoing semiconductor shortage.

Lead times for semiconductors have extended far above an average threshold of 9-12 weeks, hitting 22 weeks in October.

According to the Susquehanna Financial Group, power-management components stand at 25 weeks. Microcontroller lead times have ballooned to 38 weeks.

Falling auto production

Due to such shortages, automakers in recent months have either curtailed production or halted assembly lines altogether. Data from the Federal Reserve showed U.S. auto production plummet by 28.3% from August to September. September auto production fell to a seasonally adjusted annual rate of 1.06 million vehicles.

While some automakers have managed to reopen shuttered factories, production is expected to remain far below average.

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The Copper Monthly Metals Index (MMI) rose by 3.5% for this month’s reading.

Copper had a phenomenal rally since 2020 that saw LME prices ascend nearly 132% to $10,720/mt in May 2021. Since the summer of 2021, however, price action indicates some consolidation after prices tested the $10,250/mt mark earlier in October.

From a technical perspective, prices appear to be trading sideways at a historical resistance level. As such, buyers should watch markets in the coming months for the appearance of a clearer market trend.

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Copper pushed upward after Fed decision

Federal Reserve facade

Aaron Kohr/Adobe Stock

The Federal Reserve concluded its two-day meeting on Nov. 3, which pushed LME copper prices upwards.

Prices saw a 0.74% increase in one day following the Fed’s announcement that interest rates would remain near zero. Federal Reserve Chair Jerome Powell stated at the subsequent news conference, “We do not think it is a good time to raise interest rates because we want to see the labor market heal further.”

Powell’s statement triggered the S&P 500, the Nasdaq 100, the Dow Jones Industrial Average, as well as the Russell 2000 to close at all-time highs.

Alongside the pause in adjustments to interest rates, the Fed announced it would begin around mid-November to unwind the emergency stimulus measures put in place at the dawn of the pandemic, the Financial Times reported. The $120 billion monthly bond purchasing program is set to be gradually tapered. Purchase of treasury securities will fall by $10 billion per month while purchases of agency mortgage-backed securities will fall by $5 billion per month. The expected end point for this withdrawal is around June of 2022.

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The Aluminum Monthly Metals Index (MMI) fell for the first time in nine months, dropping by 1.5%.

November 2021 Aluminum MMI chart

After prices hit the record peak in late October, aluminum started to face some speed bumps when the price attempted to continue to trade upward.

Since Beijing’s intervention into the coal market, LME aluminum prices began to retrace back to mid-August prices. This follows an impressive rally that extended more than a year and saw aluminum outperform nearly all base metals (with the exception of tin).

From a technical perspective, aluminum prices currently lack sufficient bullish signals. October’s price action indicates a substantial risk for an overall trend reversal.

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Section 232 tariffs resolution

tariff

Feng Yu/Adobe Stock

A much-anticipated agreement was reached regarding the Section 232 tariffs between the U.S. and the European Union.

Former President Donald Trump imposed the tariffs in 2018, citing national security concerns under Section 232 of the Trade Expansion Act of 1962. The import duties came in at 25% for steel and 10% for aluminum. In 2020, the Trump administration went on to add tariffs on certain derivatives of aluminum and steel.

Under the new resolution announced in late October, the existing tariffs will be replaced with a tariff-rate quota (TRQ) effective Jan. 1, 2022.

For aluminum, the TRQ will apply to historically-based volumes of E.U. aluminum. Excess volumes that enter the U.S. market will still be subject to a duty of 10% (unless they are subject to an exclusion).

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