This morning in metals, here are a couple news items that piqued our interest:

• China giving the U.S. a break in trade “war” by lifting the tariff on cars… According to a story originally reported by Bloomberg today, China will lift the 25% retaliatory duty on cars for three months (thanks, China!) in an effort to defuse trade tensions with the U.S. The tariff “will be scrapped starting Jan. 1, China’s finance ministry said Friday, ” according to the article. “The temporary tax reduction for U.S. car imports comes as China heads for its very first annual vehicle sales decline in 28 years amid the trade war and an economic slowdown that’s undermining consumption momentum.” Full article here.

• …And here’s why: China’s economy is sputtering across the board. According to the WSJ, many economic and industrial indicators in China are causing worry. “Weakness was seen across the industrial sector,” the paper reports (paywall). “Automobile production shrank 3.2% last month from a year earlier, extending a 0.7% contraction in October. Chemical materials and products rose 1.9%, decelerating from 4.4% growth. Retail sales rose 8.1% in November from a year earlier, slowing from an 8.6% year-over-year gain in October.” Full article here.

• Cuba’s nickel production expected to top 50,000 tons in 2018. Nickel mining is a primary source of export revenue for the Communist country, according to a Reuters article, which has foundered in recent years. However, earnings from nickel are up over last year for Cuba, the 10th largest nickel producer globally (who knew!), so things are looking up for the island nation…at least in regards to nickel production. Full article here.

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The Week That Was

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To review what MetalMiner covered over the past week, check out my colleague JP Morris’ excellent rundown here over at our sister site Spend Matters — we couldn’t have written it better ourselves!

A hint of the highlights:

• Steel Prices Still Trend Down
• Platinum, Palladium Diverge
• Brexit, an Inside View

Here’s to a happy and relaxing weekend.

This morning in metals (and commodities), a few news bits we’re following:

• OPEC forecasts fall in demand for cartel’s crude next year. “OPEC estimates the world will need 31.4m barrels a day of the cartel’s crude next year, 2.1m b/d less than demand from 2017, as production from US shale fields continues to swell,” according to the Financial Times (paywall). “The figure underscores the dilemma facing big producer countries which have ramped up output in recent months, but seen oil prices fall by 30 per cent since October.” Full article here.
• Aluminum sector doing just fine with tariffs, according to one study…The Economic Policy Institute (EPI) “released a new economic study on the impact the aluminum tariffs have had on the aluminum industry, which shows conclusively that the tariffs are helping boost aluminum production and create jobs,” according to the Hellenic Shipping News. “The EPI study points out that as a result of the aluminum tariffs twenty-two new and expansion projects have been announced in downstream aluminum industries producing extruded (rod and bar, pipe and tube and extruded shapes) and rolled (sheet and plate) products.” Full article here.
• …but according to another study by Business Forward, “tariffs are destroying demand for products manufactured in U.S.” As Industry Week writes, “American manufacturers are paying 17.2% more than their foreign competitors for hot- and cold-rolled steel, according to a new study, from Business Forward released on Dec. 12.” MetalMiner’s old friend Josh Spoores, now Principal Steel Analyst for CRU, is quoted as saying, “Multiple U.S. manufacturers (that are able to) are planning to shift production elsewhere and import a good with steel rather than manufacture stuff in the U.S.” Full article here. 

Are you a metal buying organization with thoughts on the above? Leave a comment below!

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Here’s what we’re tracking this morning in metals:

• U.S. steel shipments are up in October. AISI has reported that U.S. steel mills shipped close to 8.2 million net tons in October, a 4.6% rise over the month of September — and a 6% increase from the 7.7 million net tons shipped in October 2017.
• In a weekly briefing from Shanghai Metals Market released today, the near-term outlook appears to be weak for copper, aluminum and lead, according to the publication.
  • “Copper prices across Chinese markets are likely to hover in a wide range in the short term as supply growth slows and as demand improves,” the briefing stated. “China’s fixed-asset investment in the power sector rebounded for two consecutive months to -7.6% in October.”
  • Poor supply and demand in the aluminum market in China is likely to continue in December, according to SMM. Primary aluminum inventories across eight consumption areas in China are down by nearly 3% over the week ending Nov. 29, while 6063 billet stocks rose 3% across five major consumption areas, according to SMM data.
  • “China’s actual consumption of refined lead is estimated to decline 0.7% to 411,000 mt in December as demand weakens,” the briefing stated.

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• Finally, in the non-news news, the U.S. Commerce Department released Secretary Wilbur Ross’ comments on the recent unanimous decision for the ITC’s final affirmative injury determinations in the antidumping duty and countervailing duty investigations involving Chinese imports of common alloy aluminum sheet (which came down Nov. 7): “The Department of Commerce will not stand idly by while products are illicitly forced upon U.S. markets,” said Ross. “I applaud the International Trade Commission for this determination in holding bad actors accountable for their actions on the international stage.”

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Indian-born British businessman Sanjeev Gupta’s global conglomerate GFG Alliance has signed a binding agreement to purchase all of the outstanding stock in Keystone Consolidated Industries, Inc. (KCI) from Contran Corporation.

Under terms of the deal, Liberty Steel USA, a company under the GFG umbrella, will acquire KCI, including all its subsidiaries, for U.S. $320 million in cash (less certain assumed liabilities), according to a GFG release.

The purchase is expected to close on or before Dec. 31, 2018, subject to regulatory issues.

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In October, GFG Alliance purchased steel plants in the Czech Republic, Romania, Macedonia and Italy from top global steelmaker ArcelorMittal, in the process doubling its worldwide steel-rolling capacity to 15 million tons per annum (mtpa). Incidentally, it also owns a U.S.-based steelworks in Georgetown, South Carolina.

Gupta, the executive chairman of Liberty Steel and GFG Alliance, said in a written statement that the Keystone acquisition was “a core part of GFG’s GREENSTEEL vision to become a leading U.S. producer of high quality, cleanly produced steel.”

Grant Quasha, chief investment officer for GFG North American, said in a statement that combined with Liberty Steel Georgetown, the Dallas-headquartered KCI will increase its downstream capabilities and create critical synergies.

Liberty Steel USA will have up to 1.8 mtpa of electric-arc furnace (EAF) melting capacity, 2 mtpa of wire rod rolling capacity, significant value-added downstream businesses and over 1,300 employees.

The combined company will have operations in Illinois, Ohio, South Carolina, New Mexico, Texas and Georgia.

Being in the business for over 100 years, Keystone Steel and Wire, a division of KCI, had recently posted its strongest results in its long history. It added a wire rod facility with a 1.1 mt capacity EAF, the market-leading agricultural fence products of RedBrand, industrial wire, an MBQ/SBQ bar mill, three welded wire reinforcement mesh facilities and a PC strand facility.

The acquisition will make Liberty one of the leading producers of wire rod in the U.S.

Of late, some analysts have been raising the red flag with respect to GFG’s rapid worldwide growth.

According to The Sunday Times report, some suppliers complained of being owed large sums by the conglomerate.

It was in 2017 that the GFG Alliance had acquired Liberty Steel Georgetown. The Georgetown facility was then restarted in June this year, and has been pushing up production to the current, 400 kt run rate by the first quarter of 2019.

Together, KCI and Liberty Steel Georgetown will now be at the core of GFG’s North American business, which the company is looking to grow further with additional acquisitions in the coming months.

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Contran Corporation, a holding company, operates through its wholly owned and majority-owned subsidiaries, including: Valhi, Inc., NL Industries, Inc., Kronos Worldwide, Inc. and CompX International Inc. Contran is a leading global producer and marketer of value-added titanium dioxide pigments, which are used to impart whiteness, brightness and opacity to a wide variety of products, including paints, plastics, paper, fibers and ceramics.

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Before we head into the weekend, let’s take a look back at the week that was and some of the metals storylines here on MetalMiner:

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• Following the signing of the United States-Mexico-Canada Agreement (USMCA) during the Group of 20 (G20) summit in Argentina, industry groups and companies shared their thoughts.
• Speaking of G20, Stuart Burns delved into what the G20 meant for U.S.-China relations and the prospects for a deescalation of trade tensions.
• U.S. aluminum maker Century Aluminum announced the expansion of its Sebree smelter in Kentucky.
• Miner Rio Tinto celebrated its first bauxite shipment from its Amrun mine in Australia.
• We kicked off our monthly round of Monthly Metals Index (MMI) reports this week. Check out the first installments for the following subindexes: Automotive, Construction, Rare Earths, Renewables and Aluminum.
• Burns touched on one indicator to consider when looking to predict the direction of metal prices: pollution levels in China.

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This morning in metals news, the state of falling global steel prices is a temporary condition attributable to Chinese overproduction ahead of winter cuts, according to miner Brazilian miner Vale; Chilean copper exports in November were less valuable; and the arrest of a Huawei Technologies executive has caused concern that it could cast a shadow on ongoing U.S.-China trade talks.

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Falling Steel

Brazilian iron ore miner Vale said the recent dip in global steel prices is temporary, a result of a Chinese surge in production just ahead of scheduled winter cuts, Reuters reported.

Unlike last year, Beijing has delegated authority on the exact specifications of the winter cuts — aimed at tackling pollution in the country’s industrial hubs — to local authorities this year, as opposed to the blanket cuts it imposed last year.

Chilean Copper

The world top copper producer, Chile, announced a budget surplus for November, but the value of its copper exports fell, according to a Reuters report citing the country’s central bank.

The value of its copper exports fell 12.5% in November, according to the report.

Arrest of Huawei CFO Raises Concerns Regarding U.S.-China Trade Talks

The Group of 20 (G20) summit saw President Donald Trump and President Xi Jinping agree to commencing a 90-day negotiating window on trade — a positive, if still uneasy step toward potential resolutions to the ongoing U.S.-China trade conflict.

However, the arrest of Huawei CFO Meng Wanzhou, at the behest of the U.S., has led to concern that it could impact the footing — uneasy footing — established for the current round of trade talks.

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According to the Washington Post, citing analysts in Beijing, the Chinese government, while upset about the arrest, will attempt to not allow it to impact the trade talks going forward.

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This morning in metals news, steel imports coming into the U.S. continue to be down from last year’s levels, Shanghai steel prices are down and the sharp corrective trend in iron ore prices could be coming to an end.

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U.S. Steel Import Market Share at 21% in November

According to a report by the American Iron and Steel Institute (AISI), U.S. steel import market share reached 20% for November.

Market share for the year to date is 23%, according to the report.

MetalMiner’s Take: What nuggets in the steel import data should buying organizations pay special attention to?

MetalMiner finds the rising import numbers of HRC and plate of greatest interest because it suggests the arbitrage between HRC prices (as well as plate prices) in the U.S. and elsewhere are so significant that buying organizations still achieve a lower total cost — even after paying a 25% import duty.

Rising imports for these two products will continue to put price pressure on domestic steel prices. Rising import levels (and 2018 imports for both products are higher than 2017 levels), suggest that the Q4 bounce that we have seen in prior years may not appear at all. The best way to gauge the trend is to track the spread between countries, factoring in freight, margin, duty, etc.

MetalMiner forecast subscribers can receive this kind of analysis via the MetalMiner Monthly Outlook.

Shanghai Steel Prices Fall

According to a Reuters report, Shanghai steel prices fell Thursday on oversupply concerns.

The most-traded SHFE rebar contract fell to 3,375 ($484.55) yuan per ton from an opening price of 3,360 yuan ($488.18) per ton.

An Iron Ore Recovery?

After a November that saw iron ore prices tumble, iron ore may be headed for a more stable period.

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According to Goldman Sachs, cited by Business Insider Australia, the iron ore price is expected to hold in the $60-$70 range over the coming 12 months.

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This morning in metals news, a Canadian miner is teaming up with a Japanese company on a major mine expansion effort in Chile, the U.K. steel sector is struggling with power costs and an Illinois steel plant is on the move.

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Teck Resources to Work with Sumitomo on Mine Expansion

Canadian miner Teck Resources announced it will team up with Japan’s Sumitomo on a planned copper mine expansion in Chile.

The expansion is set to come in at a cost of just under $4.8 billion.

“QB2 is one of the world’s premier undeveloped copper assets and this transaction further confirms the value of the project,” Teck Resources President and CEO Don Lindsay said. “This partnership significantly de-risks Teck’s investment in the project, enhances our project economics and preserves our ability to continue to return capital to shareholders and reduce bonds currently outstanding.”

U.K. Steel Sector’s Power Struggle

According to an industry report cited by Reuters, the U.K. steel sector is faced with much higher power costs than operators in neighboring countries.

According to the report, U.K. steel firms pay 50% more for power than French competitors and twice as much as German firms.

MetalMiner’s Take: The UK steel sector is facing a host of challenges — a report by Reuters that British steelmakers pay 50% more for electricity as their French competitors and twice as much as their German rivals is only part of the problem.

Brexit, as an upcoming article of ours will explain, is unraveling before our very eyes. This is dissuading continental consumers from placing 2019 contracts with British steelmakers, for fear of delayed deliveries and, possibly, the imposition of E.U. import tariffs if the U.K. crashes out (as opposed to achieving some kind of free trade agreement).

The U.K. power sector is itself challenged by lack of spare capacity, so there is little appetite for cutting big consumers like steel, cement or aluminum a low price deal.

Since 2000, E.U. rules have forced the U.K. to close over 15 large power stations and build thousands of wind turbines and solar panels to generate electricity in a bid to meet climate change targets — diktats that other E.U. states have simply chosen to ignore.

Alliance on the Move

An Illinois steel company is moving just across the Illinois-Indiana state line.

Alliance Steel — based in Bedford Park, a southwest suburb of Chicago — is making a move to Gary, Indiana, the Chicago Sun-Times reported.

MetalMiner’s Take: Alliance Steel might not be the first or the last steel operation to consider relocating to northwest Indiana.

Without a doubt, the decision to move to northwest Indiana has everything to do with high taxes in Illinois, a new governor whose budgetary and tax plans remain unclear, and the attraction of drawing a similar, if not the same, workforce with a much lower operating cost structure.

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A quiet revitalization of Gary has been ongoing, including new airport enhancements and investment in neighboring communities. Midwest buying organizations should expect more such moves.

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On Monday, miner Rio Tinto announced it had made the first shipment of bauxite from its Amrun mine in Australia, six weeks ahead of schedule.

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According to a company announcement, the $1.9 billion investment in the Amrun mine serves to replace production from the depleting East Weipa mine. The Amrun mine is expected to hit its full production rate of 22.8 million tons next year.

“Bringing Amrun online further strengthens our position as a leading supplier in the seaborne market. We have the largest bauxite resources in the industry and are geographically well positioned to supply China’s significant future import needs, as well as supporting our refinery and smelting operations in Australia and New Zealand.

“The Amrun mine will ensure generational jobs for Queenslanders and build significantly on our 55-year history on the Western Cape.”

The first shipment was hailed in a ceremony on the Western Cape York Peninsula, seeing the more than 80,000 tons of bauxite off to Rio Tinto’s Yarwun alumina refinery in Gladstone.

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Rio Tinto, the world’s largest bauxite producer, produced 50.8 million tons of bauxite last year. Bauxite ore is the world’s main source of aluminum. Bauxite is refined into alumina, which is then refined into pure aluminum.

According to the U.S. Geological Survey, global bauxite production hit 300,000 tons in 2017.

The miner’s announcement came after last week’s announcement of a $2.6 billion investment in the Western Australia Koodaideri iron ore mine, which the miner said will be its “most technologically advanced mine” once completed.

According to a Rio announcement, construction on the mine is set to begin next year, with production expected to begin in late 2021. The mine is expected to have an annual capacity of 43 million tons.

“Koodaideri is a game-changer for Rio Tinto,” Rio Tinto chief executive J-S Jacques said. “It will be the most technologically advanced mine we have ever built and sets a new benchmark for the industry in terms of the adoption of automation and the use of data to enhance safety and productivity.”

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This morning in metals news, U.S. steel production through Nov. 24 was up 5.6% compared with the same period last year, copper prices fell back Tuesday and Ford’s November U.S. sales were down.

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U.S. Steel Production

According to a recent American Iron and Steel Institute (AISI) report, U.S. steel production for the year (through the week ending Nov. 24) was up 5.6% compared with the same time frame in 2017.

For the period through Nov. 24, the U.S. produced 85.6 million tons at a capacity utilization rate of 78.1%, up from 81.1 million tons at a 74.2% rate last year.

For the week ending Nov. 24, the U.S. saw 1.9 million tons of production at a rate of 81.3%, up from 1.7 million tons at a 73.3% rate for the same week in 2017.

Copper Prices Fall

After making gains Monday, copper prices fell back Tuesday, according to a Reuters report.

Three-month London copper dropped 0.2% Tuesday, while the most-traded SHFE contract fell 0.7%, according to the report.

Ford November Sales

November proved to be a down month for Ford in the U.S. market.

The automaker’s November sales were down 6.9% year over year, with 196,303 units sold.

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Even truck and SUV sales slumped, down 2.3% and 4.9% year over year, respectively.