Industry News

U.S. housing starts in May were down once again, falling 0.9% compared with April and down 4.7% from May 2018, according to the U.S. Census Bureau and the Department of Housing and Urban Development.

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Housing starts in May totaled a seasonally annually adjusted rate of 1,290,000, down from 1,281,000 in April and 1,332,000 in May 2018.

Meanwhile, the May rate for units in buildings with five units or more reached 436,000.

As for building permits, privately owned housing units authorized in May reached a seasonally adjusted annual rate of 1,296,000, which marked a 0.3% increase from April’s 1,290,000 units but a 0.5% decline from May 2018’s 1,301,000 units.

Single‐family authorizations in May reached 815,000, up 3.7% from April’s 786,000. For buildings with five units or more, authorizations reached 442,000 in May.

Lastly, privately owned housing completions in May reached 1,213,00 units, marking a 9.5% decrease from April’s estimated 1,340,000 completions and a 2.8% decrease from May 2018’s 1,248,000 units.

Single‐family housing completions in May reached 890,000, down 5.0%  from the revised April rate of 937,000. Meanwhile, the May rate for buildings with five or more units reached 319,000.

In other housing market news, the National Association of Realtors (NAR) reported May 30 that April pending home sales fell in that month after posting growth in March.

NAR’s Pending Home Sales Index, which is based on contract signings, dropped 1.5% in April, down to 104.3 from March’s 105.9. On a year-over year basis, the Pending Home Sales Index dropped 2.0%, marking the 16th consecutive month of annual decreases, according to NAR.

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“Though the latest monthly figure shows a mild decline in contract signings, mortgage applications and consumer confidence have been steadily rising,” said Lawrence Yun, NAR’s chief economist. “It’s inevitable for sales to turn higher in a few months.

“Home price appreciation has been the strongest on the lower-end as inventory conditions have been consistently tight on homes priced under $250,000. Price conditions are soft on the upper-end, especially in high tax states like Connecticut, New York and Illinois.”

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This morning in metals news, the U.S. and China will resume trade talks, Tokyo Steel announced its first steel price cuts in nearly three years and Rio Tinto recently celebrated the launch of its automated heavy-haul rail network.

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Trade Talks

After last month’s tariffs fireworks, President Donald Trump indicated the U.S. and China will restart trade talks before this month’s G20 summit in Japan, Reuters reported.

Talks fell apart last month after Trump raised tariffs on $200 billion in Chinese goods, to which China responded with tariffs on $60 billion in U.S. goods.

The G20 summit is scheduled for June 28-29.

Tokyo Steel Announces Price Cuts

Japanese steelmaker Tokyo Steel announced it would cut prices for its steel products in July — marking the first price cut in 33 months, Reuters reported.

According to Reuters, the steelmaker is reducing all prices of steel bars by 7.8%, down to $591 per ton.

Rio Tinto Hails Automated Rail Network

Miner Rio Tinto recently celebrated the deployment of its long-distance rail network, AutoHaul, which it calls the “world’s first automated heavy-haul long distance rail network.”

The rail network will serve to move the miner’s supplies of iron ore through Western Australia.

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“The success of AutoHaul™ would not have been possible without the expertise, collaboration and dedication of teams within Rio Tinto and our numerous partners,” said Ivan Vella, Rio Tinto’s iron ore managing director of rail, port and core services. “I’d also like to commend our train driving workforce for their support and professionalism during the transition period.

“This project has cemented Western Australia as a leader in the heavy-haul rail industry and has attracted interest from around the world. The successful deployment of the world’s first heavy-haul long distance rail network demonstrates the potential for significant further improvement in such operations with others around the world looking to replicate.”

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For the year through June 15, U.S. steel mills are outperforming their 2018 production totals by a wide margin.

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U.S. steel mills churned out 45.0 million tons of steel for the year through June 15, according to the American Iron and Steel Institute (AISI). The total marked a 5.9% increase from the same period in 2018, when mills produced 42.5 million tons of steel.

Capacity utilization rate for the period reached 81.5% in 2019, up from 76.7% for the equivalent period in 2018.

Meanwhile, for the week ending June 15, production totaled 1.89 million tons at a capacity utilization rate of 81.1%. The weekly production marked a 4.0% year-over-year increase and a 0.6% increase from the previous week (when production totaled 1.88 million tons).

By region, production for the week ending June 15 totaled:

  • Northeast: 215,000 tons
  • Great Lakes: 710,000 tons
  • Midwest: 199,000 tons
  • Southern: 694,000 tons
  • Western: 69,000 tons

On the price front, the U.S. Midwest 3-month HRC price showed strength early in the month, opening at $577/st, according to MetalMiner IndX data, before rising as high as $592/st on June 5. Since then, the price has retreated, falling to $564/st as of June 17.

After opening the month at $837/st, U.S. HDG fell to $797/st as of June 17.

U.S. CRC has also lost ground, opening the month at $741/st and falling to $724/st as of June 17.

Overall, as MetalMiner’s Belinda Fuller noted in this Monday’s analyst note, CRC and plate prices held essentially flat through the first half of June.

In other steel news, the U.S. Steel’s Clairton Coke Works resumed full production late Monday after an electrical fire earlier in the day impacted the plant’s coke gas desulfurization processes.

“At approximately 8:15 p.m. on Monday, June 17, repairs were completed at our Clairton Plant following a small electrical fire that occurred early Monday morning,” U.S. Steel said in a statement. “At this time, normal operations have resumed and we have successfully restored the desulfurization process.

“Restarting the desulfurization facility and minimizing the potential for impacts to the environment and community were of the highest priority for the company.

“During this brief suspension of our desulfurization capabilities, mitigation efforts were deployed and no exceedances of sulfur dioxide were recorded at nearby air quality monitors as of data available through 5:00 p.m.”

On June 4, the steelmaker announced repairs to the plant that it said would allow it desulfurize 100% of the coke oven gas produced at the plant.

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“U. S. Steel is pleased to announce that we are now desulfurizing 100% of the coke oven gas generated at our Clairton Plant,” the steelmaker said in a statement earlier this month. “While we employed many effective mitigation measures after a fire on Dec. 24 caused catastrophic damage to the facility, we are now able to operate the state-of-the-art desulfurization plant again. This is an important milestone in our repair efforts and we will continue to monitor and adjust coking times as appropriate.”

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This morning in metals news, iron ore continues its hot streak, the Chinese government has summoned executives of 48 regional companies to demand they curb pollution from their facilities and a series of Section 301 public hearings kicks off today.

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Iron Ore Rises

The iron price has been ascendant so far this year, aided in large part by supply-side constraints.

According to the Australian Financial Review, the iron ore price last week posted its biggest weekly gain since February en route to a record high.

According to the report, the most-actively traded September Dalian iron ore contract jumped as much as 4% to $115.20/ton.

China Targets Pollution

The winter heating season in China officially ended in March, and steel production has ramped back up after the winter production curbs.

Despite the end of those curbs, the Chinese government is still asking companies to limit their pollution. According to Reuters, the government is summoning executives from 48 regional companies for a meeting in which they will order the firms to cut output.

Section 301 Hearings Begin

This week, a series of hearings will commence related to the ongoing Section 301 tariff saga, which now could see tariffs applied to the remaining $300 billion in Chinese goods that have yet to be slapped with duties by the U.S.

As such, the Office of the United States Trade Representative is hosting a series of public hearings on the subject, beginning today and concluding Tuesday, June 25.

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“The proposed tariffs are a supplemental action in response to China’s unfair trade practices related to technology transfer, intellectual property, and innovation, based on the findings in USTR’s investigation of China under Section 301 of the Trade Act of 1974,” the USTR said in a release. “Tariffs on $250 billion in goods from China are currently in effect under Section 301 trade action.”

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

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This morning in metals news, China’s May steel output surged, Thyssenkrupp named a new chairman of the executive board of its steel business and President Donald Trump continues to push for approval of the United States-Mexico-Canada Agreement (USMCA).

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China’s Steel Output Soars

China’s May steel output surged to a record high, Reuters reported, up to 89.09 million tons.

The May output marked an increase from the 81.13 million tons produced in May 2018.

Thyssenkrupp Names New Steel Business Chairman

On the heels of the cancelation of a proposed joint venture of the European steel operations of Thyssenkrupp and Tata Steel, the former had named a new chairman of its steel business.

The German firm announced Premal Desai will take over as chairman of the executive board of Steel Europe AG.

USMCA Update

The USMCA remains pending, as the trade agreement requires ratification by the legislatures of the U.S., Canada and Mexico.

On Thursday, President Donald Trump said approval of the deal is up to the U.S.

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Referring to Congress, Trump was quoted by Reuters as saying, “Hopefully they can act quickly because we could have that done very, very fast if we can get support from, really, the Democrats in Congress, (House Speaker) Nancy Pelosi, they have to put the bill forward.”

Among many other things, India is a land of auto rickshaws (or “tuk-tuks,” as they are called in Thailand).

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These three-wheeler “traffic dodgers” are a common sight on Indian roads. They also form part of India’s exports to other nations in Southeast Asia and Africa.

Just a couple of days ago, the tuk-tuk debuted in Omaha, Nebraska, too.

Perhaps keeping in mind its ever-increasing popularity around the globe, Indian steel company Jindal Stainless has announced it would soon be manufacturing stainless steel e-rickshaws, the Business Standard reported.

The steel major showed off a prototype at the 9th Electric Vehicles Expo, which drew enthusiastic crowds. About 600,000 e-rickshaws are being sold every year in India, and Jindal Stainless feels it could easily corner 25% of that multimillion-dollar market with its new product. Furthermore, the market is estimated to grow at 16% CAGR over the next five years, the Business Standard reported.

Jindal officials said there was demand from India’s first- and second-tier cities. One of them was Lucknow, the capital of India’s largest province, Uttar Pradesh. They expect an annual demand of 13,000 tons of steel from the sector by 2021.

Jindal claims to have manufactured India’s first-ever stainless steel e-rickshaw, claiming it was far superior in chassis performance as compared to carbon steel e-rickshaws.

The lifespan of the carbon steel vehicles is low as compared to the stainless steel counterpart. Safety, too, is better in the latter because of its high strength-to-weight ratio, improved crash resistance and corrosion prevention. Stainless steel components lead to 14-15% reduction in overall body weight, according to the Business Standard, resulting in higher battery efficiency. Not only that, a stainless steel “auto” will fetch a higher value when scrapped, as compared to the carbon steel counterpart.

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Jindal has already received advance orders of 100 stainless steel e-rickshaws. More are expected since India’s electric vehicle market is expected to grow exponentially in the coming decade.

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This morning in metals news, the oil price could slide further, Liberty Steel made an acquisition in Pennsylvania, and the E.U. adopted binding targets for zero- and low-emission vehicles in public procurement.

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Oil Price Slide

After rising to around $75/barrel in April, the Brent crude price has come off of late, leading some to wonder how much further the oil price has to go.

Rainer Michael Preiss, executive director of Taurus Wealth Advisors, told CNBC the oil price could plunge to $45 barrel if U.S.-China trade tensions escalate.

However, the price got a jolt Thursday on the heels of an incident in the Gulf of Oman in which two tankers were damaged — media reports have referred to the incident as possible attacks, although that assessment is not yet confirmed and no group has claimed responsibility.

The Brent crude price was up 2.73% as of 10:23 a.m. CDT.

Liberty Steel Acquires Johnstown Wire Technologies

Liberty Steel, a subsidiary of steel tycoon Sanjeev Gupta’s GFG Alliance, announced this week it had expanded its U.S. footprint with the acquisition of Johnstown Wire Technologies in Johnstown, Pennsylvania.

“The 250-worker advanced manufacturing facility at Johnstown will complement Liberty’s melting and rolling operations at Georgetown, South Carolina and Peoria, Illinois and, combined with its scrap processing plant in Tampa, Florida, will firmly embed the business along the full value chain in the U.S. steel market,” Liberty Steel said in a prepared statement.

Clean Vehicles

As part of the bloc’s ongoing efforts aimed at curbing harmful emissions from automobiles, the E.U. announced it had adopted binding targets for zero- and low-emission vehicles in public procurement.

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“The new rules will increase market certainty, stimulate innovation and promote the global competitiveness of European industry,” an E.U. release stated. “Clean vehicles will play a key role in cutting greenhouse gas emissions and air pollutant emissions, helping the EU to meet its Paris Agreement commitments.”

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This morning in metals news, ArcelorMittal’s CEO urged the E.U. to do more to combat the effects of the U.S.’s Section 232 steel tariff, April steel shipments fell 1.4% and China’s Ministry of Commerce said the U.S. is not being taken advantage of on trade.

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ArcelorMittal Urges More Action from E.U. on Steel

The E.U. imposed steel safeguards earlier this year, but ArcelorMittal CEO Lakshmi Mittal think they haven’t been enough.

The safeguards were imposed to combat rising imports into the E.U., which came about as a result of diverted supply from the U.S. (on the heels of its Section 232 tariffs on steel and aluminum).

However, Mittal told a German newspaper the safeguards haven’t been effective, Reuters reported.

U.S. Steel Shipments Fall 1.4%

U.S. steel shipments in April fell 1.4% from the previous month, according to the American Iron and Steel Institute (AISI).

April shipments reached 8.21 million net tons, down from 8.33 million net tons in March. However, shipments through the first four months of the year were up 3.5% compared with the same period last year.

MOFCOM: China Not Taking Advantage of the U.S.

A frequent talking point used by President Donald Trump is the concept that other countries are taking advantage of the U.S. when it comes to trade.

China’s Ministry of Commerce recently released a report, titled “US Gains from the China-US Trade and Economic Cooperation,” outlining the ways in which it argues the U.S. benefits from the two countries’ trade relationship.

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“The trade deficit with China results from both artificially-imposed restrictions, such as export control, and market forces,” the Ministry of Commerce said in a release. “Multiple factors are at play, including industrial competitiveness, economic structure, trade policies, the position of the US dollar as reserve currency, etc. The US has not been taken advantage of.”

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This morning in metals news, U.S. steel mills churned out steel at a capacity utilization rate of 81.5%, the E.U. officially blocked the proposed joint venture of the European operations of Tata Steel and Thyssenkrupp, and the Aluminum Association is looking for a new CEO.

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Capacity Rate Hits 81.5% Through June 1

The U.S. steel sector reached a capacity utilization rate of 81.5% for the year through June 8, the American Iron and Steel Institute (AISI) reported.

Adjusted year-to-date production for that period reached 43.1 million net tons, up 6.0% from the 40.7 million net tons during the same period last year (the capacity utilization rate for that period was 76.7%).

E.U. Blocks Tata, Thyssenkrupp JV

Signs were pointing in a negative direction last month for the fate of the proposed joint venture of Tata Steel and Thyssenkrupp’s European operations.

The E.U.’s competition regulators made it official this week, rejecting the proposed JV.

“Steel is a crucial input for many things we use in our everyday life, such as canned food and cars,” Commissioner Margrethe Vestager said in a release. “Millions of people in Europe work in these sectors and companies depend on competitive steel prices to sell on a global level. Without remedies addressing our serious competition concerns, the merger between Tata Steel and ThyssenKrupp would have resulted in higher prices. So we prohibited the merger to avoid serious harm to European industrial customers and consumers.”

Competition regulators were concerned the merger would raise prices and result in fewer choices for steel consumers in the market, arguing the firms did not make enough concessions to assuage those concerns.

The proposed JV would have yielded the second-largest steelmaking entity in Europe, behind only ArcelorMittal.

Aluminum Association CEO Resigns

The Aluminum Association announced the resignation of President and CEO Heidi Brock, who is leaving the industry group to become president and CEO of the American Forest & Paper Association.

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Brock led the Aluminum Association for eight years.

“I am grateful for the outstanding engagement and support I have received from the leadership, members and staff of the Aluminum Association for the past eight years,” Brock said in a release. “Working together, we have contributed to the growth of the U.S. aluminum industry and strengthened the communities in which it operates. It has been a privilege to serve in this role, and I will miss working closely with the exceptional team at the Aluminum Association and the wonderful representatives of our member companies. Given their talent, commitment, and strong industry story, I have every confidence in the Association’s continued success.”