Industry News

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, including competition between the COMEX and LME vis-á-vis electrification, consolidating copper prices, the upcoming MetalMiner 2020 Forecasting Workshop and much more:

Each month, MetalMiner hosts a webinar on a specific metals topic. Explore the upcoming webinars and sign up for each on the MetalMiner Events page.

Week of July 19-23 (electrification, hot rolled coil prices in Western Europe and much more)

electric vehicle charging

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This morning in metals news: South Korean steelmaker POSCO reported its strongest operating profit in Q2 since Q3 2010; the United States International Trade Commission made a determination regarding steel wire mesh from Mexico; and, lastly, tin prices have been soaring.

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POSCO records strong Q2

POSCO logo

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South Korean steelmaker POSCO reported its strongest operating profit since 2010 in the second quarter of this year.

The steelmaker reported Q2 2020 operating profit of 168 billion KRW ($145.6 million), which jumped to 2,201 billion KRW ($1.9 billion) in Q2 2021.

Crude steel production reached 9.45 million tons in Q2 at a capacity utilization rate of 93.2%. Meanwhile, the steelmaker tallied 9.56 million tons in Q1 at a rate of 95.3%.

However, the Q2 rate marked a sizeable jump from the second quarter of 2020, when output reached 7.79 million tons at rate of 77.0%.

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This morning in metals news: copper prices have stabilized over the last month; U.S. natural gas prices have surged to their highest level since 2014; and, lastly, Cleveland-Cliffs released its second-quarter results.

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Copper prices stabilize

list of commodities prices

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MetalMiner Senior Forecast Analyst Maria Rosa Gobitz earlier this month covered the copper market, for which she noted prices had started to consolidate.

The LME three-month copper price had surged to an all-time high May 10 of around $10,700 per metric ton. The price proceeded to cool over the next 5-6 weeks, falling as low as $9,070 per metric ton.

The copper price then consolidated and has traded largely sideways over the last month. On Wednesday, the price closed at $9,244 per metric ton, or up 1.92% month over month, per MetalMiner Insights data.

Natural gas prices surge

Meanwhile, in energy news, U.S. natural gas prices have reached their highest level since 2014, the Energy Information Administration (EIA) reported.

“In June, the U.S. natural gas spot price at the Henry Hub averaged $3.26 per million British thermal units (MMBtu), the highest price during any summer month (April–September) since 2014,” the EIA reported. “Prices in July have increased from June, averaging $3.67/MMBtu through the first two weeks of July. Spot prices for July 14 in every one of the more than 175 pricing hubs tracked by Natural Gas Intelligence exceeded $3.00/MMBtu.”

Cleveland-Cliffs releases Q2 results

Cleveland-Cliffs reported net income of $795 million during Q2 2021, compared with a loss of $108 million during Q2 2020.

“In the second quarter of 2021 we achieved all-time quarterly records in revenue, net income, and adjusted EBITDA,” Chairman, President and CEO Lourenco Goncalves said. “The numbers unequivocally confirm our efficiency in operating the new footprint, resulting from the integration of the two major steel companies acquired in 2020 as a single and indivisible mining and steel company. They also demonstrate our flawless execution in ramping up our state-of-the-art Direct Reduction plant in Toledo to the current level of production above nominal capacity.”

Each month, MetalMiner hosts a webinar on a specific metals topic. Explore the upcoming webinars and sign up for each on the MetalMiner Events page.

This morning in metals news: global aluminum production rose in June compared to last year, the International Aluminum Institute reported; Ford of Europe reported its Q2 sales; and, lastly, June electricity demand surged amid a heat wave in the Pacific Northwest.

Each month, MetalMiner hosts a webinar on a specific metals topic. Explore the upcoming webinars and sign up for each on the MetalMiner Events page.

Global aluminum production rises in June

aluminum ingot

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Global aluminum production reached 5.55 million tons in June, the International Aluminum Institute reported Tuesday.

The June total marked an increase from 5.31 million tons in June 2020. However, output declined from the 5.75 million tons tallied in May 2021.

Furthermore, China’s output reached an estimated 3.25 million tons in June 2021, up from 3.03 million tons in June 2020. However, its output declined from May’s 3.35 million tons.

Ford reports Q2 Europe sales

Meanwhile, Ford of Europe touted sales of 242,618 vehicles in Q2 2021, up 43.7% year over year.

For the year to date (through June), Ford of Europe reported sales jumped 22.6% year over year.

According to the automaker, 46% of its passenger vehicle sales in Euro 20 countries in the second quarter were electric vehicles.

Electricity demand jumps in PNW

Amid a historic heat wave for the Pacific Northwest in June, electricity demand surged, the Energy Information Administration reported.

“A heat wave in the Northwest United States in late June led to more regional demand for electricity. During periods of high temperatures, electricity demand increases as people turn up their air conditioners, dehumidifiers, fans, and other cooling equipment,” the EIA reported. “Very high temperature events, like the one in June in the Northwest, tend to push electricity demand to very high levels.”

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While the rest of the world is trying to com to grips with the European Union’s proposed carbon border adjustment mechanism (CBAM) – which calls for the levying of charges on non-E.U. products in relation to their embedded carbon footprint — China, on the other hand, is currently grappling with a slightly different energy-related issue.

A massive heat wave in some parts of the country coupled with a shortage of coal because of China’s spat with chief supplier Australia has sent coal prices soaring.

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China to ramp up coal production

coal pile

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Now, China, the world’s biggest consumer of coal, plans to add almost 110 million tons (MT) per year of advanced production capacity in the second half of this year to meet the rising demand of coal.

This Economic Times reported China’s National Development and Reform Commission (NDRC) said that around 400 MT of coal mining capacity is under review for the government’s approval. Another 70 MT capacity is also under construction, and would be launched in a phased manner.

What’s more, China’s state planner has asked power plants to build their coal inventory to the equivalent of at least seven days of consumption by July 21. News agency Reuters said the Chinese government was trying its best to ensure electric supply to the coal-fired plants amid surging power consumption from industrial and residential users.

In the first half of 2021, China has already added over 140 MT of coal mining capacity.

Eleven provinces registered record-breaking power load a few days ago, the Economic Times reported, as the heat wave led to higher use of electricity. In the first six months of 2021, power consumption rose by 16% from a year earlier, the report added.

Old coal

While simultaneously augmenting coal capacity, the NDRC has come down on outdated coal capacity. Where once there were 10,000 coal mines in China in 2015, now there are about 5,000. The NDRC has been urging coal miners to set up advanced mining capacity and ramp up output.

China’s average daily coal consumption has gone up to over 2.2 MT at key power plants in at least eight provinces in China as of July 15, Reuters reported.

Meanwhile, the South China Morning Post quoted the NDRC, which said China will release over 10 MT of coal from its state reserves.

Each month, MetalMiner hosts a webinar on a specific metals topic. Explore the upcoming webinars and sign up for each on the MetalMiner Events page.

The CME’s Comex and London Metal Exchange (LME) are squaring up for the industrial revolution that is electrification, according to recent posts by Bloomberg and the Financial Times.

Both exchanges are busy developing and, more importantly, marketing products that cater to industry’s need to hedge exposure to forward prices for key battery ingredients. Whether for car batteries, electronic goods or power grid storage, the key metals are demanded by a common technology: lithium-ion batteries.

Each month, MetalMiner hosts a webinar on a specific metals topic. Explore the upcoming webinars and sign up for each on the MetalMiner Events page.

Futures exchanges launch lithium hydroxide contracts

London Metal Exchange

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Both exchanges have launched identical lithium hydroxide cash settled contracts based on the Fastmarkets prices for China, Japan and South Korea – the key battery-producing regions.

So far, volumes are light. But with lithium hydroxide prices up some 86% this year, the market is arguably crying out for a hedging mechanism.

Initially, miners were said to be reluctant to support such a product, preferring long-term mine-to-consumer contracts. The same is the case for aluminum.

Eventually, the industry came round.

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This morning in metals news: the U.S. steel capacity utilization rate rose to 84.1% last week; privately owned housing starts jumped in June; and, lastly, Pedro Castillo has been declared president-election in Peru.

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US steel capacity utilization rises to 84.1%

hot rolled steel

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The U.S. steel capacity utilization rate continues to rise, jumping to 84.1% for the week ending July 17, the American Iron and Steel Institute reported.

The sector churned out 1.86 million net tons during the week. The output total marked an increase of 0.4% from the previous week and 37.7% year over year.

For the year to date, output reached 50.8 million net tons at a capacity utilization rate of 79.6%.

Housing starts jump in June

Meanwhile, privately owned housing starts reached a seasonally adjusted annual rate of 1.64 million in June, the Census Bureau reported.

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Novolipetsk Steel (NLMK) reported a 10.8% increase year over year in its crude production for H1 2021. The steelmaker benefited from stronger demand, as economies in Russia and abroad restarted economic activity, the group said.

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NLMK ramps up production

Postmodern Studio/Adobe StockTotal crude production across all NLMK’s steelmaking assets came to 8.94 million metric tons, compared with 8.07 million tons over the same time in 2020, the group said in its July 13 operational results.

Rebuilding work on the converter shop at NLMK’s main site in Lipetsk also helped to raise production, the group added. Its capacity percentage averaged to 95.5%, up from 93% over the first six months of 2020.

NLMK has a crude steel capacity of 17 million metric tons per year. The majority of that volume comes from Lipetsk, which can pour up to 12.4 million metric tons per year. The crude steel is then cast into slab for rolling hot and cold rolled coil transformer and dynamo steel, as well as pre-painted.

Lipetsk also supplies its slabs to assets in Europe and the United States for further rolling into coils or plate.

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This morning in metals news: Rio Tinto reported its Q2 production results; U.S. unemployment rates were down in seven states in June; and, lastly, the U.S. once again led the way in petroleum and natural gas production last year.

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Rio Tinto reports Q2 production results

Rio Tinto sign

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Miner Rio Tinto recently reported its Q2 production results, reporting Pilbara iron ore production of 75.9 million tons.

The total marked a 9% year-over-year decline and a 1% decline compared with the previous quarter.

Bauxite production reached 13.7 million tons, or down 6% year over year and up 1% from the previous quarter.

Unemployment falls in seven states

Unemployment rates fell in seven U.S. states in June, the Bureau of Labor Statistics reported.

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Reducing carbon emissions seems to be on the top of everybody’s agenda at the moment.

A recent post in The New York Times reports on proposals being discussed in the European Union to drive the region’s pivot away from fossil fuels over the next nine years.

Receive the latest short-term and long-term outlook for the full range of industrial metals (base and ferrous) at the annual MetalMiner Forecasting Workshop on Aug. 25

Tariffs for exporters with weaker carbon emissions regulations

carbon emissions

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According to the report, the most radical and possibly contentious proposal would impose tariffs on certain imports from countries with less-stringent climate protection rules.

The proposals would also include eliminating the sales of new petrol- and diesel-powered cars in just 14 years. They also call for a 55% reduction in greenhouse gas emissions by 2030 (compared with 1990 levels).

According to The New York Times, at the heart of the European road map is increased prices for carbon.

Nearly every sector of the economy would have to pay a price for the emissions it produces. In turn, that would affect things like cement in construction and fuel for cruise ships.

Proposed tariffs on imports of goods made outside the European Union, in countries with less-stringent climate policies, could invite disputes at the World Trade Organization. The cross-border carbon tax proposal could have the greatest impact on goods from Russia and Turkey, mainly iron, steel and aluminum.

We covered that topic recently following howls of protest by European steel and aluminum producers that overseas supplier could simply direct low-carbon production to Europe and sell their higher-carbon content production elsewhere. That would leave a net-zero reduction in global carbon emissions. Furthermore, it would damage European manufacturers’ home markets by allowing in low-tariff imports from producers they deem to be cheating the system.

The US perspective

The good news for U.S. exports to Europe is any impact would be far smaller.

Little in the way of raw material is shipped from the U.S. to the E.U.

Anyway, Democrats are looking at a similar tax, termed the “polluters tax” intended to have a similar impact.

The proposals, if passed, would see the last gasoline or diesel cars sold in the European Union by 2035. According to the post, they would require that 38.5% of all energy be from renewables by 2030. The proposals also call for a significant increase in the price charged for carbon emitted to make the use of fossil fuels increasingly expensive.

Role of China

China is the world’s largest polluter. However, it faces some unique challenges.

Its power generation industry is one of the youngest among major economies, with numerous new power stations coming onstream every month. To switch from that overwhelmingly coal-based capacity would entail eye-watering capital losses.

Ahead of the upcoming Glasgow-hosted COP-26 climate talks later this year, China has just announced it will launch its long-awaited carbon market. According to The New York Times, it would be the world’s largest by volume of emissions.

As with all carbon markets, though, its efficacy will in part be down to how generous Beijing’s get- out-of-jail-free cards it issues to polluters in the form of carbon credits.

Nonetheless, it would be a start.

Political process

Politically, this has some way to go.

It is estimated it will take two years for the European Union’s policies to be debated, negotiated and finally agreed across the E.U.’s 27 national governments and with Brussels.

Views differ widely as to priorities. Some countries, like Denmark, are already well on the way in the process of a huge switch to renewables. Others, like Poland and Germany, still rely heavily on coal for power generation. Hence, their industrial base would face substantial implications — unless carbon credits were so generous they would make the proposals meaningless.

Someone has to pay for such a colossal shift. It is always, in the end, the consumer.

Politicians at the local level are well aware of this and will to varying degrees look to push the consequences as far into the future as possible — if not for when they are no longer in power then at least when they are in different ministerial roles. Then, it’s someone else’s problem.

All the same, the flow of history is clear. Where governments fail, the market may well lead. Many firms, from automakers to electronics, are already seeing marketing opportunities in zero-carbon products. Those firms are shifting supply chains to be able to deliver that claim to market.

Politicians’ rhetoric on the issue is widely supported by the majority of the public (at least in Europe).

But that may change as the costs begin to bite.

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