Industry News

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This morning in metals news, U.S. steel import permit applications surged in October, U.S. Steel has laid off workers at its Granite City operation and Port Hedland iron ore shipments to China dropped in October.

Keep up to date on everything going on in the world of trade and tariffs via MetalMiner’s Trade Resource Center.

Steel Import Permit Applications Surge

U.S. steel import permit applications for October jumped 34.6% compared with the September final import total, the American Iron and Steel Institute (AISI) reported this week.

Import permit applications for October totaled 2.56 million tons, according to AISI.

Meanwhile, steel import market share in October checked in at 17%.

U.S. Steel Lays Off Workers at Granite City

On the heels of news of layoffs at U.S. Steel’s taconite operations in Minnesota, the steelmaker has reportedly also laid off an unspecified number of nonunion workers at its Granite City, Illinois operation, the Belleville News-Democrat reported.

The Granite City operation famously received a boost after the Trump administration’s imposition of Section 232 tariffs on imported steel. Previously idled, in March and June of 2018, U.S. Steel announced it would restart two blast furnaces at the plant, welcoming back approximately 800 workers in the process.

Port Hedland Iron Ore Exports to China Drop in October

Exports of iron ore to China from Australia’s Port Hedland fell in October, Reuters reported.

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On a month-over-month basis, iron ore exports to China from the major port dropped 0.7% in October.

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This morning in metals news, the U.S.’s steel capacity utilization rate is 80.3% for the year through Nov. 9, up to 40 layoffs are coming at U.S. Steel’s Minnesota taconite operations and a South African steel plant operated by ArcelorMittal is being shut down.

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Capacity Utilization Reaches 80.3%

The U.S. steel industry’s capacity utilization rate reached 80.5% for the week ending Nov. 9, according to the American Iron and Steel Institute (AISI).

Capacity utilization for the year to date was 80.3%.

The sector produced 1.86 million tons of steel for the week ending Nov. 9, down 2.2% on a year-over-year basis and down 1.4% from the previous week.

Up to 40 Layoffs Coming at U.S. Steel’s Minnesota Plants

Challenging market conditions are prompting U.S. Steel to lay off up to 40 nonunion workers at two Minnesota taconite plants, the Minneapolis Star-Tribune reported.

According to the report, the Minntac and Keetac mines employ a total of approximately 2,200 workers.

ArcelorMittal to Shutter Saldanha Plant

Steelmaker ArcelorMittal will close its Saldanha steel plant in South Africa, India Today reported.

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“This difficult decision was taken in the context of constructive ongoing engagements with key stakeholders, including government and organised labour, to find alternative solutions to the dire situation in the South African steel industry,” the company was quoted as saying.

This morning in metals news, a Chinese firm is poised to take over the insolvent British Steel, Chinese iron ore futures were down Monday and speakers at a recent convention in Budapest weighed in on the stainless steel market.

Jingye to Buy British Steel

After talks with Turkey’s Ataer Holding fell apart, Chinese firm Jingye Steel has reportedly signed a deal to rescue British Steel, the BBC reported.

British Steel was put into forced liquidation in May, setting off a bidding process for the ailing steelmaker.

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According to the BBC, Jingye plans to £1.2 billion in British Steel.

The deal is pending and still requires regulatory approval, according to a statement by the Official Receiver.

“Completion of the contract is conditional on a number of matters, including gaining the necessary regulatory approvals,” the Official Receiver said. “The parties are working together to conclude a sale as soon as reasonably practicable.

“The business will continue to trade as normal during the period between exchange and completion. Support from employees, suppliers and customers since the liquidation has been a critical factor in achieving this outcome.”

Chinese Iron Ore Futures Slide

According to Reuters, Chinese iron ore futures fell by as much as 3.1% on Monday.

The most-traded iron ore futures contract on the Dalian Commodity Exchange fell 2.1% to 594 yuan ($84.93) per ton.

Rising Nickel, Falling Stainless Steel

At the recent BIR World Recycling Convention Round-Table Sessions held in Budapest, speakers delved into the seemingly curious current relationship between nickel prices and stainless steel values.

According to Natalie Scott-Gray, senior metals demand analyst at INTL FCStone, stainless steel production is forecast to rise 2% this year, with demand projected to rise 16% over the next five years, Recycling Today reported.

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Another guest speaker at the event, Olivier Masson, said the stainless steel market is going through a “relatively soft patch,” partially impacted by a shift in trading patterns as a result of the U.S.’s Section 232 tariffs and China’s exports of hot-rolled material, according to the Recycling Today report.

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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 coverage here on MetalMiner, including coverage of: Freeport-McMoRan’s use of artificial intelligence (AI), U.S. steel production, aluminum prices, U.S. automotive sales, construction spending and India’s decision to back away from the proposed RCEP trade pact.

Keep up to date on everything going on in the world of trade and tariffs via MetalMiner’s Trade Resource Center.

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This morning in metals news, tensions could ease between the U.S. and China on the tariff front, ArcelorMittal reported its third-quarter financial results and copper prices made gains this week.

Keep up to date on everything going on in the world of trade and tariffs via MetalMiner’s Trade Resource Center.

U.S., China Could Roll Back Tariffs with an Initial Deal

In what would represent a significant deescalation of trade tensions, the U.S. and China have reportedly agreed to roll back tariffs if they are able to reach a first-phase trade deal.

However, according to Reuters, the proposal faces internal opposition in the White House, with officials making conflicting public statements regarding tariff rollbacks either being or not being a condition for an initial trade deal.

ArcelorMittal Reports 3Q Results

ArcelorMittal reported a net loss of $539 million in Q3, compared with a net loss of $447 million in Q2.

The firm’s steel shipments fell 7.3% compared with the previous quarter.

Copper Price Rises

The LME three-month copper price has made gains over the last month.

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The price approached the $6,000/mt as the week has come to a close, reaching $5,949/mt. The price is up 4.59% on a month-over-month basis, per MetalMiner IndX data.

For a while, whether or not India would join the Regional Comprehensive Economic Partnership (RCEP) was touch and go.

But eventually, much to the relief of domestic steel companies and those from other sectors, the Narendra Modi-led Indian government decided to sit out the controversial RCEP trade pact, which features the 10 members of the Association of Southeast Asian Nations (ASEAN), plus China, Japan, Australia, New Zealand and South Korea.

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As Prime Minister Narendra Modi told the delegates at a negotiation meeting in Bangkok, “Neither the talisman of Gandhiji nor my own conscience permits me to join the RCEP.”

India’s decision comes seven years after negotiations over the free trade agreement began.

The RCEP covers trade in goods and services, in addition to investments, economic-technical cooperation, competition and intellectual property rights.

If India had joined RCEP, it would have become the largest trade agreement in the world, accounting for one-third of global economic output and half of the world’s population.

The remaining 15 nations have decided to go ahead with the deal, led by China.

According to some media reports, like one by India Today, the RCEP was a Chinese game plan to “save its manufacturing industries from folding under their own weight.”

India decided not to join the RCEP for several reasons. Among them, India wanted an important clause included for an auto-trigger mechanism as a shield against sudden and significant import surge from countries.

President of Indian Chambers of Commerce and Industry Sandip Somany was quoted in The Hindu as saying serious apprehensions on the RCEP had been expressed by several sectors, including steel, plastics, copper, aluminum, machine tools, paper, automobiles, chemicals, petro-chemicals and others.

For the domestic steel industry, the Indian prime minister’s announcement was music to its ears. The Indian steel industry had, from the start, opposed what it had dubbed a one-sided pact.

Speaking to LiveMint, Bhaskar Chatterjee, secretary general and executive head for Indian Steel Association, said representatives of the steel industry had met with the Indian Ministries of Commerce and Steel and the Indian Steel Association, where they asserted that if the signing the RCEP was inevitable, then steel items should be kept out of the agreement.

In addition to steel, other sectors that had expressed reservations about joining the RCEP were aluminum, petro-chemicals, agriculture, dairy, steel, rubber and textiles.

Experts were of the view that if other nations were allowed to ship their goods to India without absolutely any duty, they would obviously price them cheaper than their Indian counterparts, creating a market skewed against Indian producers and manufacturers. Playing at the back of the mind of Indian steel companies was 2016-17, when Chinese companies dumped steel in Indian markets in large volumes.

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One other reason behind Modi’s decision to walk away from the deal is the fact that the Indian economy today is particularly vulnerable and weak, with GDP growth stagnating and unemployment at new highs.

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This morning in metals news, No. 1 copper producer Chile saw its export levels drop 21% last month amid protests around the country, steel production in the U.S.’s Great Lakes region dropped last week and Shanghai Metals Markets forecast Chinese tin prices to rise back above $20,000 per ton by the end of the year.

Keep up to date on everything going on in the world of trade and tariffs via MetalMiner’s Trade Resource Center.

Chile Copper Exports Decline in October

Anti-government protests in several cities around Chile — including the capital, Santiago — have resulted in at least 23 deaths, according to Reuters, and had an impact on the country’s economy.

According to Reuters, while the protests have not significantly impacted copper mine production, Chile’s exports of copper dropped by 21% in October.

Great Lakes Steel Production Down

Steel production in the U.S.’s Great Lakes region declined by 26,000 tons last week, the Times of Northwest Indiana reported.

Production last week reached 676,000 tons, according to the Times, marking a 3.6% decline.

SMM: SHFE Tin Could Breach $20K Per Ton This Year

According to Shanghai Metals Markets, the SHFE tin price could bounce back this year and rise above $20,000 per ton.

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“In line with other analysts, SMM are positive on the tin market for the remainder of the year,” the International Tin Association said in a release. “While we are forecasting stable demand in Q4 and falling supply (particularly in China), we expect that any price increase this year will be resisted by the high stocks on the LME. In 2020, we also see demand returning to the market as economic growth recovers and uncertainty dissipates. However, currently idled production is likely to re-enter the market to cope with increased consumption. Next year, we see tin recovering from current uncharacteristic lows, but feel that average price forecasts of US$ 22,000/tonne are slightly optimistic.”

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This morning in metals news, miner Rio Tinto has advanced work on its Oyu Tolgoi copper and gold mine project, the U.S. is reportedly considering rolling back some tariffs against China, and Novelis announced its quarterly financial results.

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Rio Tinto Reaches ‘Significant Milestone’

Earlier this year, MetalMiner’s Stuart Burns weighed in on delays at Rio Tinto’s massive Oyu Tolgoi project in Mongolia, citing possible delays of 16-30 months.

This week, however, the miner offered positive news, announcing the completion of a portion of the project.

“Rio Tinto has achieved a significant milestone at the Oyu Tolgoi mine in Mongolia with the completion of Shaft 2, which enables the acceleration of work on the underground development,” the miner said. “Shaft 2, a 10 metre diameter shaft sunk to approximately 1.3 kilometres below the surface, has now entered into the final stages of commissioning.

“This is a critical piece of infrastructure and will enable a step change in terms of delivering the underground mine. Shaft 2 can carry 300 people per cage cycle versus a maximum of 60 people per cage cycle through Shaft 1. The 48 tonne capacity cage can now be used to support logistics, transporting supplies and components for development of the mine.”

Tariff Talks

Among other issues, tariffs remain at the center of the trade dispute between the U.S. and China.

China has asked the U.S. to drop tariffs in exchange for an initial deal. In that vein, according to several media reports, the U.S. is considering rolling back approximately $112 billion worth in tariffs on Chinese goods toward a first-phase trade deal.

Novelis’ Net Income Rises 31% YoY

For the second quarter of Novelis’ fiscal year 2020, the firm reported net income of $160 million, marking a 31% year-over-year increase.

Adjusted EBITDA reached $374 million, up 5% year over year.

In addition, Novelis’ acquisition of Aleris Corporation is expected to close in the coming months.

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“On July 26, 2018, Novelis announced it signed a definitive agreement to acquire Aleris Corporation,” the company said. “Having received conditional approval in the European Union, as well as a clear path forward for approval in the U.S., Novelis continues to work closely with the Chinese State Administration for Market Regulation to receive its approval. The company expects to close the transaction by January 21, 2020, the outside date under the merger agreement.”

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To an external viewer, the wheels can appear to grind slowly at the world’s oldest metal exchange.

But the years have taught the London Metal Exchange about the danger of hasty rule changes — often made for the best of intentions, such changes can lead to unexpected consequences.

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In addition, as the LME is at pains to point out, the exchange’s network of warehouses operates in numerous locations around the world, each with distinct laws and regulations; new rules not carefully though out could contravene those differing sets of laws.

As frustrating as it can sometimes be to the trade, the LME’s cautious approach to changes designed to improve the experience for buyers, sellers, and stakeholders of the market — such as warehouse operators — is a methodology that in the long run mitigates the risk of “unintended consequences.”

The LME’s recent changes take just such a cautious approach.

After consultation far and wide, the LME released a Press Office statement Friday that outlined three main changes, plus additional commentary on what was proposed but the LME felt was too early to implement.

Broadly, the first change is intended to improve logistical optimization and is designed in part to guard against the structural queue model. The Queue-Based Rent Capping (QBRC) period has been extended from 50 to 80 days over a nine-month period and is intended to allow warehouse operators to compete more effectively for metal.

Queues have been probably the most sensitive issue the LME has had to address in the years since the financial crisis, so extending the permitted period took some consideration.

The exchange says it remains vigilant to such incentives not out-bidding or distorting physical market premiums and has instigated a reporting regime to monitor such risks. The LME intends to freeze rents and FOT load out charges until 2027-28 to mitigate the gulf between LME and non-LME warehouse rates.

On the topic of off-warrant stocks, the exchange is implementing a reporting regime intended to increase transparency and allow the market “to trade on the basis of a more holistic view of metal availability” – a move many of us welcome.

The LME intends to do this by requiring reporting for any metal in LME-registered sheds and/or under agreements in which the owner has a right to warrant metal in the future but is currently not on warrant.

Although the identity of the off-warrant metal owners will not be revealed, warehouse companies will gather and report the tonnage data periodically. There will still be some material that is not stored in exchange warehouses and where the owner is willing to pass the option of ever delivering such metal onto the exchange — but that is likely to be the exception.

Ultimately, the LME remains the market of last resort, as such is an option any investor would want to retain.

Do not, however, expect this data to be instantly available.

The LME caveats its plans by saying it will not release the data unless and until it is satisfied that the data is reliable and accurate – that could mean months, possibly a year, of monitoring.

Finally, of less interest to metal consumers is the seemingly arcane practice of so-called “evergreen rent deals,” whereby the owner retains an interest in warehouse rent on warrants they have sold on.

Going forward, this practice is only to be allowed on metal that is placed on warrant for the first time, not for warrants that are already registered and sold on. The intention is to incentivize metal coming onto the exchange but avoid a largely pointless ongoing cost that adds nothing to market efficiency.

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As we said in the opener, these changes are an opening gambit and remain subject to monitoring and, if necessary, adjustment should any of the changes prove counterproductive or should additional steps be required.

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This morning in metals news, Workday is acquiring sourcing and procurement firm Scout RFP, the Italian government and ArcelorMittal are butting heads over the latter’s intention to pull out of its Ilva contract and the U.S. might not have to impose tariffs on imported automobiles.

Keep up to date on everything going on in the world of trade and tariffs via MetalMiner’s Trade Resource Center.

Workday Acquiring Sourcing and Procurement Firm Scout

MetalMiner sister site SpendMatters has all the news regarding Workday’s acquisition of sourcing provider Scout RFP for $540 million.

According to Workday, a finance and HR solutions provider, closing on the deal should occur by Jan. 31, 2020.

Check out other SpendMatters coverage of the acquisition, including Jason Busch’s analysis of the acquisition and background information on the companies.

Italy, ArcelorMittal Clash Over Ilva

On Tuesday, ArcelorMittal sent a letter to Italian firm Ilva detailing its intention to terminate a previously announced deal to purchase the struggling steelmaker.

ArcelorMittal closed on the deal Oct. 31, 2018.

“The Agreement stipulates that, in the event that a new law affects the environmental plan for the Taranto plant so as to materially impair the ability to operate it or to implement its industrial plan, the Company has a contractual right to withdraw from the Agreement,” ArcelorMittal said. “Effective on 3 November 2019, the Italian Parliament has removed the legal protection necessary for the Company to implement its environmental plan without the risk of criminal liability, thus justifying the withdrawal notice.”

However, Italian Prime Minister Giuseppe Conte pushed back, arguing the contract must be respected and that he won’t “bend” on the issue, Reuters reported.

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U.S. Auto Tariff Deadline Draws Near

A deadline is fast approaching.

This month, President Donald Trump will have to decide whether to impose tariffs on imported automobiles and auto parts, much to the chagrin of European automakers.

The decision comes pursuant to the processes of Section 232 of the Trade Expansion Act of 1962 — the same statute used to impose tariffs on imported aluminum and steel based on national security concerns.

Secretary of Commerce Wilbur Ross, however, cited conversations with automakers in the E.U. and Japan in noting the U.S. may not need to impose the new tariffs, Bloomberg reported.