Prices for hot-rolled coil in Western Europe have continued their upward trend in October and November. Mills report solid bookings well into 2021, market participants said.

Are you prepared for your annual steel contract negotiations? Be sure to check out our five best practices. 

Hot-rolled coil deals

Offers and transactions over the previous week on hot-rolled coil produced within Western Europe for January delivery occurred at €520-530 ($595-615), a rise from previous deals of €490 ($560), traders said Nov. 2.

“Getting a hold of a competitive offer is tricky right now,” one U.K. trader commented to MetalMiner.

Demand mainly from the construction and auto sectors have helped to maintain a strong market for the flat-rolled product, traders noted.

ArcelorMittal also announced late last week that it would seek €550 ($640) on hot-rolled coil for February production from its Gijon plant in Spain, a second trader said.

Officials at the Luxembourg-headquartered group were unavailable for comment, however, despite several attempts.

Many producers had notably reduced production and took their hot ends off stream earlier in the year as the World Health Organization declared the COVD-19 virus a global pandemic and infections of the virus rose strongly throughout Europe.

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The Department of Commerce made a preliminary determination in its anti-dumping investigation covering non-refillable steel cylinders imported from China.

The MetalMiner 2021 Annual Outlook consolidates our 12-month view and provides buying organizations with a complete understanding of the fundamental factors driving prices and a detailed forecast that can be used when sourcing metals for 2021 — including expected average prices, support and resistance levels.

DOC rules steel cylinders dumped from China

The DOC determined China dumped the steel products into the U.S. at margins between 57.83% and 114.58%.

The domestic petitioner in the case is Worthington Industries of Columbus, Ohio.

“As a result of today’s decisions, Commerce will instruct U.S. Customs and Border Protection (CBP) to collect cash deposits from importers of non-refillable steel cylinders from China based on the preliminary rates noted above,” the DOC said in a release last week.

Imports of non-refillable steel cylinders reached a value of $21.5 million in 2019, per the DOC.

The U.S. International Trade Commission will make its final determination in the case by Feb. 22, 2021.

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French company Total’s love affair with India’s renewables sector continues.

Already having major joint ventures with India’s Adani Group firms for renewable energy projects, gas distribution, and other projects, Total’s chief executive Patrick Pouyanne said last week that his company aimed to increase its renewable energy portfolio in India to 6 gigawatts by 2025, per VCCircle.

Pouyanne was speaking in an online interview on the sidelines at the India Energy Forum by CERAWeek.

The MetalMiner 2021 Annual Outlook consolidates our 12-month view and provides buying organizations with a complete understanding of the fundamental factors driving prices and a detailed forecast that can be used when sourcing metals for 2021 — including expected average prices, support and resistance levels.

India’s renewable sector grows

In mid-October, the Competition Commission of India approved a transaction between Adani Green Energy and a subsidiary of Total to transfer 2.1 gigawatts of solar and wind energy assets to a joint venture company. Adani Green Energy and Total’s subsidiary each have 50% holding in the joint venture, Clean Technica reported.

Earlier in the year, Total and Adani Green Energy Ltd (AGEL) created a 50:50 joint venture. Adani transferred its solar assets in operation to the JV. These projects are in 11 Indian states and have a cumulative capacity of over 2 GW.

What’s more, all of them benefit from nearly 25-year power purchase agreements (PPA) with national and regional electricity distributors.

Total also has a 50:50 JV with Adani for a liquefied natural gas (LNG) import terminal. The terminal, located in the Indian province of Odisha, would have a capacity of 5 million tons per annum. It also has a 37.4% stake in Adani Gas Ltd, the publicly traded company for city gas distribution.

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Aerospace may be down, automotive is coming back, albeit going through immense change from internal combustion engine (ICE) to electric vehicles (EVs), but one sector of the aluminum market that is brewing up a storm is the aluminum can market.

Are you prepared for your annual aluminum contract negotiations? Be sure to check out our five best practices. 

Aluminum can market tightens amid pandemic

The media has been awash with reports for months now that the aluminum can market is really tight. As lockdowns hit this year and bars either closed or saw falling attendance, consumers switched to supermarkets and liquor stores for their soft and beer beverages.

Beer and soda sales have held up well and are actually increasing for some. But where brewers and drinks producers sold volume through hospitality outlets and delivered in kegs, they now have to meet demand in six-packs from supermarket shelves.

The switch to aluminum cans has been unprecedented. “For the most part, the North American can industry is sold out for the next 24-36 months, and we don’t see the supply chain catching up to real demand until 2025-26,” Credit Suisse said in a recent report.

According to SPGlobal, U.S. producer shipments of aluminum can stock for the domestic market in the second quarter rose 5.5% year over year to 912.5 million pounds. Meanwhile, in the first quarter, Aluminum Association data show U.S. imports of aluminum can sheet reached 118.18 million pounds. That figure compares with 71.59 million pounds in Q1 2019 — a 65% jump.

And therein lies the problem.

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Continuing the theme of the last few months, the U.S. steel sector continued to make gains in capacity utilization last week.

We know there are many popular steel contracting indices. But you shouldn’t use them all the time — sometimes they can favor the seller over the buyer. See why! 

Steel capacity utilization rises to 69.7%

Per the American Iron and Steel Institute, U.S. steel mills recorded a capacity utilization rate of 69.7% during the week ending Oct. 24.

Raw steel production during the week totaled 1.54 million net tons. Meanwhile, production during the week ending Oct. 24, 2019, totaled 1.81 million net tons, at a capacity utilization rate of 78.0%.

On a year-over-year basis, last week’s output marked a 14.6% decline.

Meanwhile, production for the week ending Oct. 24, 2020, ticked up 0.5% from the previous week.  Production during the week ending Oct. 17, 2020, totaled 1.54 million net tons at a capacity utilization rate of 69.4%.

YTD output down 19.3%

In the year to date through Oct. 24, U.S. mills produced 64 million net tons of steel, down 19.3% year over year.

Output during the same period in 2019 totaled 79.4 million net tons at a capacity utilization rate of 80.1%.

Regional output

Broken down by region, output during the week ending Oct. 24, 2020, totaled:

  • Northeast: 135,000 net tons
  • Great Lakes: 563,000 net tons
  • Midwest: 171,000 net tons
  • Southern: 600,000 net tons
  • Western: 73,000 net tons

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U.S. steel imports dipped 8.3% from August to September, according to U.S. Census Bureau data released Monday.

Are you prepared for your annual steel contract negotiations? Be sure to check out our five best practices

U.S. steel imports in September

In September 2020, the U.S. imported 1.1 million metric tons on steel products, down from 1.2 million metric tons the previous month.

Meanwhile, for the year to date (through August), the U.S. imported 14.9 million metric tons of steel products, down 20.7% year over year.

During the same period last year, the U.S. imported 18.8 million metric tons.

During the year-to-date period, the largest commodity decrease came for oil country goods, according the Census Bureau.

“Increases occurred primarily in tin free steel, used rails, and light shaped bars,” the Bureau reported. “The largest country decreases occurred with Russia. Increases occurred primarily with Turkey, Brazil, and Mexico.”

Hot-dipped galvanized sheet, strip imports gain

The largest import category, hot-dipped galvanized sheet and strip, checked in at 173,010 metric tons in September.

The September figure marked a rise from the 157,503 metric tons imported in August. Furthermore, the U.S. imported 177,943 metric tons in the category in September 2019.

Meanwhile, in the No. 2 category, hot-rolled sheet imports reached 137,497 metric tons in September, up from 97,334 metric tons in August. However, the September 2020 total marked a decline from September 2019’s 151,330 metric tons.

U.S. representatives: no to Section 232 electrical steel tariffs

Finally, U.S. imports of electrical sheet and strip totaled 1,764 metric tons in September — not exactly the largest share of the import total.

Furthermore, the total marked a decline from the 2,758 metric tons imported in August.

Nonetheless, several Congressmen recently sent a letter to Secretary of Commerce Wilbur Ross asking the Trump administration not to impose Section 232 tariffs on imports of electrical steel.

Rep. Denver Riggleman (R-VA) sent the letter, which Reps. Bruce Westerman (AR-04), Ben Cline (VA-06), Morgan Griffith (VA-09), and Dan Bishop (NC-09) cosigned.

“The manufacturing industry employs millions of Americans, and there is no reason to impose unnecessary tariffs that would put over 15,000 transformer industry jobs at risk,” Riggleman said in a release. “Access to affordable electricity is a pillar of American life and commerce. We must keep American workers at the forefront of progress as the U.S. continues to dominate the global energy sphere.”

Meanwhile, back in May, the Department of Commerce launched a Section 232 investigation into laminations and wound cores for incorporation into transformers, electrical transformers, and transformer regulators. 

Under Section 232, the secretary of commerce has 270 days from the launch of an investigation to provide a report with findings and recommendations to the president, which sets up for a late January deadline.

Meanwhile, as for domestic options for electrical steel buyers, AK Steel is the only U.S. producer of grain-oriented electrical steel (GOES). ATI exited the U.S. GOES production market in 2016.

Not all contracting indexes are created equal. In a steel price spike scenario, finished product indexes can be detrimental to your strategy. Learn when you should use what kind of contracting mechanisms.

West European steelmakers are likely to see improvements in production and demand for their rolled products in 2021, following the adverse economic effects due to COVID-19 in 2020, industry watchers predicted.

Volatility is the name of the game. Do you have a steel buying strategy that can handle the ups and downs?

Better 2021 for Western European steelmakers

“Next year should be better if you take the view that this year was diabolical,” one analyst said about 2020. Steelmakers in France, Spain, Italy, Germany and Benelux saw aggressive production cutbacks in crude steel and rolled products as governments undertook containment measures and economies slowed.

“COVID-19 practically destroyed demand,” the analyst added.

Localized lockdowns — rather than the national ones that occurred earlier in the year around Europe, when it was the epicenter of the virus — will also help to boost activity, the analyst said.

“If people are out of their homes, then there is economic activity,” he noted.

The World Steel Association (worldsteel) also predicted in its Oct. 15 short-range outlook that crude steel production within the European Union would improve by almost 11% to 149 million tonnes in 2021. Meanwhile, the Brussels-based organization predicted 134 million tonnes of production for 2020.

The latter forecast reflected a 15.2% decrease from the over 158 million tonnes of crude steel poured in 2019, worldsteel noted.

“On the positive side, health systems are in a much better shape to tackle the pandemic now due to the lessons learnt from the first wave,” worldsteel noted.

Furthermore, there is a careful balance between “containing the virus and maintaining the viability of economies,” worldsteel added.

COVID uncertainty

However, worldsteel offered a caveat in its outlook.

“Added to this in the northern hemisphere there is uncertainty over how COVID-19 will evolve during the upcoming flu season which may have a serious impact on the outlook for 2021. The risk is tilted toward the downside. A W-shaped recovery cannot be ruled out and a full recovery in 2021 is unlikely,” the organization warned.

While worldsteel’s outlook did not break down the figures by country, it indicated in its September figures that West European steelmakers’ crude production for the first eight months of 2020 fell by 19.7% year over year to 59.1 million tonnes. Meanwhile, production totaled 73.5 million tonnes from Jan. 1-Aug. 31 in 2019.

Those same West European producers are now operating at below 60% of their crude production capacity, which is approximately 16 million metric tonnes per month, a second analyst said.

Western European steelmakers’ profits decline

Two major steelmakers with assets in Western Europe also reported notable drops in their production and in their financial results.

ThyssenKrupp’s Steel Europe subsidiary recorded a €706 million ($835 million) EBITDA loss for the first nine months of its 2020 fiscal year ending June 30. Meanwhile, it reported a €77 million gain ($91.1 million) over the same time in 2019.

Net sales were down 20% year over year to approximately €5.5 billion ($6.5 billion) from €6.3 billion ($7.5 billion), the report indicated.

Steel shipments by the German group saw a 12.8% decline in its steel shipments to 6.83 million tonnes from 7.82 million tonnes for the same time, the German group noted.

ArcelorMittal produces longs and flats at several locations in Western Europe. The steelmaker announced closures in March as part of its COVID containment measures in Italy, France, Spain, Germany, Belgium. Those closures continued in the second quarter of 2020, the Luxembourg-headquartered group said in its H1 report.

Total crude steel production in that group’s Europe segment for the first six months of 2020 fell to 16.1 million metric tonnes, down 30.5% year over year from 23.4 million metric tonnes.

European steel prices slide

Average steel selling prices in Europe were also down 11.2% to $636 per metric tonne from $716, ArcelorMittal said.

Prices for hot and cold rolled coil have already started rising since mid-2020, however, sources said.

“Restocking is happening, especially in the auto sector. This is pushing up prices, though it remains to be seen what happens,” the second analyst said.

Producers’ lower production levels will also strike a balance between supply and demand, the first analyst said.

Prices for hot rolled coil in West Europe now average about €491 ($581) per metric tonne EXW, up from lows of €433 ($512) in March.

The analysts questioned for how long any price increases would be sustainable. Many stockists were replenishing their lower volumes in the face of some renewed activity.

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

The copper price breached $7,000 per ton this week, reaching $7,034 per ton on the LME — the highest level since June 2018.

What does this tell us? Is demand robust and supply constrained?

The MetalMiner 2021 Annual Outlook consolidates our 12-month view and provides buying organizations with a complete understanding of the fundamental factors driving prices and a detailed forecast that can be used when sourcing metals for 2021 — including expected average prices, support and resistance levels.

China’s recovery boosts copper price

Well, the world’s largest consumer, China, is certainly back to positive GDP growth. Its recovery from the pandemic lockdowns has been rapid and ahead of the rest of the world.  The country’s early application of infrastructure investment aided the recovery, which in turn boosted demand.

Higher refined metal imports support the impression China is on a 2009-2010 type stimulus led ramp-up in demand.

The reality is it will be much more highly nuanced this time, but a good story takes some discounting.

Supply side struggles

On the supply side, the pandemic has disrupted production in major copper-producing countries, like Chile.

Antofagasta advised this week their third-quarter production would be down 4.6%, according to the Financial Times.

The miner is not alone.

BHP, Glencore and Anglo American are also facing the same supply market risks. The whole Chilean market faces the risk of higher taxes and tighter water controls if Chile’s proposed re-writing of the constitution goes through.

An obvious marker driving copper price support is inventory levels. However, MetalMiner research has shown inventory and price have a very poor correlation on anything other than a short-term basis. Copper’s increased refined imports this year have in part gone to the restocking of China’s copper stocks rather than actual demand.

The Financial Times reports China has stockpiled 800,00 tons this year. At the same time, falling LME stocks are cited as evidence of metal shortage. However, what we are really seeing is a repositioning of inventory from outside China to inside China.

Is that demand or just speculative build?

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The International Lead and Zinc Study Group (ILZSG) forecast global lead and zinc demand will decline by 6.5% and 5.3%, respectively, this year.

Meanwhile, ILZSG forecast lead and zinc demand will rise by 4.4% and 6.6%, respectively, in 2021.

The MetalMiner 2021 Annual Outlook consolidates our 12-month view and provides buying organizations with a complete understanding of the fundamental factors driving prices and a detailed forecast that can be used when sourcing metals for 2021 — including expected average prices, support and resistance levels.

Lead demand

The ILZSG forecast lead demand will fall to 11.39 million tonnes this year. Next year, ILZSG forecast demand will pick up to 11.89 million tonnes.

In China, the world’s largest automotive market, the group forecast lead usage will decline this year. The group forecast China’s usage will fall by 1.6% this year. A drop in automotive production will be partially outset by increasing production of e-bikes and lead-acid batteries.

Furthermore, the group forecast lead usage will decline by 9.7% in Europe this year. In the U.S., the ILZSG forecast usage will decline by 7.5%.

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September 2020 housing starts in the U.S. got a big boost on a year-over-year basis, the Census Bureau and Department of Housing and Urban Development reported.

Privately owned housing starts increased 11.1% in September 2020 compared with September 2019.

The MetalMiner 2021 Annual Outlook consolidates our 12-month view and provides buying organizations with a complete understanding of the fundamental factors driving prices and a detailed forecast that can be used when sourcing metals for 2021 — including expected average prices, support and resistance levels.

September 2020 housing starts up 1.9% from August

Furthermore, September 2020 housing starts gained 1.9% month over month.

Starts reached a seasonally adjusted annual rate of 1,415,000 in September.

Meanwhile, single-family housing starts in September hit at a rate of 1,108,000, or up 8.5% from August. In addition, the September rate for units in buildings with five units or more reached 295,000.

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