This morning in metals news: the Energy Information Administration forecasts natural gas prices will remain elevated this winter; meanwhile, Rio Tinto said it is working on new technology for the production of low-carbon steel; and, lastly, miner BHP and South Korean steelmaker POSCO signed a memorandum of understanding to explore the reduction of greenhouse gas emissions in the steelmaking process.
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Natural gas prices to remain elevated this winter
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To the chagrin of industrial users and residential consumers alike, natural gas prices are likely to remain high this winter, the Energy Information Administration says.
“In our October Short-Term Energy Outlook (STEO), we forecast that natural gas spot prices at the U.S. benchmark Henry Hub will average $5.67 per million British thermal units (MMBtu) between October and March, the highest winter price since 2007–2008,” the EIA said. “The increase in Henry Hub prices in recent months and in our forecast reflect below-average storage levels heading into the winter heating season and strong demand for U.S. liquefied natural gas (LNG), even though we’ve seen relatively slow growth in U.S. natural gas production.”
However, the EIA forecasts Henry Hub prices will decline after Q1 2022.
This morning in metals news: The Consumer Price Index (CPI) rose by 0.4% in September; meanwhile, U.S. steel capacity utilization fell to 84.2%; and, lastly, the Energy Information Administration forecasts U.S. households will spend more on energy this winter.
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Consumer Price Index gains again
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The Consumer Price Index for All Urban Consumers rose by 0.4% in September, the Bureau of Labor Statistics reported.
The jump follows an increase of 0.3% in August.
Meanwhile, the index increased by 5.4% over the last 12 months (up from 5.3% for the 12-month period ending in August).
U.S. steel capacity utilization falls to 84.2%
U.S. steel capacity utilization fell to 84.2% for the week ending Oct. 9, down from 84.8% the previous week, the American Iron and Steel Institute reported.
This morning in metals news: job openings and new hires fell in August, the Census Bureau reported; steel producers in the U.K. are warning of an energy-related crisis; and, lastly, Liberty Steel received a £50 million boost that it says will preserve about 660 jobs.
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Job opening, hires slump in August
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Both job openings and hires declined in August, the Census Bureau reported today.
Job openings fell to 10.4 million as of the last business day of August. Meanwhile, hires decreased to 6.3 million.
U.K. steel sector sounds alarm over energy prices
As MetalMiner’s Stuart Burns covered in a series of posts last week, energy prices are a mounting concern all over the world.
The U.K. steel sector is warning that rising energy costs could become a crisis for the industry. Surging costs for natural gas and other commodities threaten the continuity of their operations, they argue.
“These extortionate prices are forcing some UK steelmakers to suspend their operations during periods when the cost of energy is quoted in the thousands per megawatt hour; last year, prices were roughly £50 per megawatt hour,” UK Steel Director General Gareth Stace said last month. “Even with the global steel market as buoyant as it is, these eye-watering prices are making it impossible to profitably make steel at certain times of the day and night.”
Lastly, sticking with the U.K., embattled steelmaker Liberty Steel says an infusion of £50 million will help preserve 660 jobs at Rotherham, the BBC reported.
The £50 million injection comes as part of parent group GFG Alliance’s restructuring following the collapse of its primary backer, Greensill Capital.
“GFG will inject £50 million of new funding into LIBERTY Steel UK (LSUK) to enable the restart of LSUK’s core Rotherham electric arc furnace,” GFG said in a release. “The provision of funding will set the platform to refinance LSUK operations in full, create a leading long-term GREENSTEEL hub, and support the RTC’s work of creating a profitable, restructured and focused business.”
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ArcelorMittal plans to introduce a €50 ($58) surcharge on all of its long products in Europe in order to account for sharply rising energy prices, an official with the Luxembourg-headquartered group said.
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ArcelorMittal introduces new surcharge
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“The price rise is temporary and primarily in response to the record rise we have seen in energy prices,” a spokesperson for the group said in a statement to MetalMiner.
The source did not say when exactly the surcharge would come into effect, except that it would “pretty soon.”
He also did not indicate how long the surcharge would last, saying that it would depend on energy prices.
This morning in metals news: miner Anglo American announced the results of a feasibility exploring the potential for hydrogen in the South African economy; General Motors last week announced plans to double its revenue; and, lastly, steel prices have showed signs of flatlining of late.
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Anglo American explores role of hydrogen in South Africa
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In collaboration with several parties, miner Anglo American recently conducted a feasibility study “to explore the potential for a hydrogen valley anchored in the platinum group metals-rich Bushveld geological area, along the industrial and commercial corridor to Johannesburg and to the south coast at Durban.”
“The opportunity to create new engines of economic activity through hydrogen has been validated through this feasibility study with our partners,” said Natascha Viljoen, CEO of Anglo American’s PGMs business. “As a leading producer of platinum group metals (PGMs), we have for some years been working towards establishing the right ecosystem to successfully develop, scale-up and deploy hydrogen-fuelled solutions.”
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This morning in metals news: U.S. nonfarm payroll employment rose by 194,000 jobs in September; meanwhile, U.S. Steel had another spill from a plant in Northwest Indiana; and, finally, U.S. gasoline exports reached seasonal highs in May, June and July.
The national unemployment rate fell by 0.4 percentage point to 4.8%.
Construction employment picked up by 22,000 in September. However, construction employment is down by 201,000 compared to its February 2020 level.
Meanwhile, manufacturing employment rose by 26,000 in September. Fabricated metal products rose by 8,000. However, motor vehicles and parts jobs fell by 6,000. Overall, manufacturing employment is down by 353,000 from February 2020.
Second spill at U.S. Steel plant
Less than two weeks after a spill from a U.S. Steel plant led to nearby beach closures, another spill occurred this week, the Northwest Indiana Times reported.
Thyssenkrupp Steel (TKS) has restarted at the Duisburg plant its blast furnace No. 1. The restart comes after a three-month stoppage for a partial reline, the German steelmaker and flats producer announced.
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Thyssenkrupp Steel furnace at Duisburg back at full capacity
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The furnace can now operate at full capacity. The furnace can produce 10,000 metric tons per day of pig iron, or 3.65 million metric tons per year, TKS stated Oct. 4.
TKS took BF 1 off stream in early July to conduct the partial reline. In this case, it left the furnace’s outer body intact. The previous campaign lasted over 13 years, TKS stated.
Relining a blast furnace carries a high cost, due to the premium charged for heat-resistant bricks that can contain graphite, carbon, alumina and silicon carbide.
We have written twice over the last week concerning the energy crunch, first in China and then India.
Thermal coal prices have risen to record levels, threatening to impact GDP growth as a result of electricity rationing.
The Financial Times observes that China has suffered a triple whammy of emissions restrictions on power generation, a shortage of coal, and price caps on electricity that mean demand is unaffected as input costs have risen.
India, which relies heavily on coal for its thermal power plant, is facing tight supplies and record prices. Nationally, it has only four days of stocks left.
But energy — whether it is in the form of coal, natural gas or oil — is a global commodity. Both Europe and the U.S. find themselves with their own set of challenges, more skewed to the tight natural gas market and rising global oil prices.
The U.K. is not alone but is possibly the most acutely exposed to Europe’s reliance on imported natural gas, particularly from Russia.
U.S. gas contracts for November delivery surged nearly 40% this week to hit £4 per therm (having started 2021 below 50p).
But a surprise announcement by Vladimir Putin yesterday saying Russia was prepared to increase supplies to stabilize prices prompted a sharp sell-off, sending the price down to £2.87.
Whether it stays there will depend in large part on whether Russia can honor that commitment in the months ahead. Russian state gas supplier Gazprom has come under intense criticism for deliberately shipping to no more than its minimal contractual obligations this year. The reality is Russia’s own inventory levels are also depleted after a harsh winter.
It is probably fair to say Europe’s energy markets are particularly exposed to supply disruptions despite supposedly being highly integrated.
Many large industrial consumers have complained that the E.U.’s Green Deal to make the bloc climate neutral by 2050 will only push up energy prices further. In turn, that could ultimately lead to social unrest. For example, high energy prices resulted in the French “gilets jaunes,” or yellow vests, demonstrations in 2018-2019.
Inflation, energy cost impacts
Rising energy prices have fueled inflation that was already being stoked by commodity price increase and supply chain problems for much of this year. Rising energy costs and inflation have been contributing factors in the August fall in German industrial orders. Orders fell 7.7%, a far sharper fall then economists had expected.
Meanwhile, rising energy costs have prompted the closure of large energy consumers across Europe, such as ammonia and fertilizer production. Meanwhile, in the U.S., oil prices this week hit the highest level in seven years after OPEC+ decided to maintain current production levels, which will see a planned increase of just 400,000 barrels a day from November.
U.S. administrators have talked about release from the strategic petroleum reserve and even limits or a ban on U.S. exports of crude oil to limit domestic oil price rises. The average price of gas at the pump has reached $3.19 a gallon, the highest in seven years.
The U.S. economy does not appear to be unduly hindered by the price rises yet. The private sector added a higher-than-expected 568,000 jobs in September, the biggest rise in three months. However, with midterm elections next year, high gas prices will not go down well with voters.
Looking ahead
Buyers of European components may expect to see some inflation in prices this year and next. Cost increases are coming, not just from metal prices but energy, wage costs and continuing logistics delays in Europe.
It is to be hoped the continent copes through this winter and cost increases do not derail the recovery. While manufacturers have been riding a wave of unprecedented demand recovery, it should not be mistaken as unstoppable.
A number of factors are converging to push up costs while potentially dampening demand. That makes a toxic mix for a still fragile recovery.
This morning in metals news: Nucor Corporation announced the launch of a line of net-zero carbon steel products; meanwhile, the American Iron and Steel Institute released September import permit application data; and, finally, average U.S. home mortgage rates continue to hover around 3%.
The steelmaker said General Motors will be the first recipient of the new Econiq™ line of net-zero carbon steel products.
“General Motors will receive the Econiq net-zero steel beginning in Q1 2022, and it is projected that all steel purchased by GM from Nucor will be net carbon neutral by the end of 2022,” Nucor said.
Steel import permit applications jump in September
U.S. steel permit import applications for September surged by 8.8% from August to September, the American Iron and Steel Institute reported.
September import permit application tonnage totaled 2.87 million net tons.
Furthermore, estimated finished steel import market share reached 22% in September, up from 20% for the year to date.
The average 30-year fixed rate mortgage this week dipped to 2.99%, down by 0.02 percentage point from the previous week. The 15-year rate fell to 2.23%.
“Mortgage rates continue to hover at around three percent again this week due to rising economic and financial market uncertainties,” Freddie Mac noted. “Unfortunately, with the expectation that both mortgage rates and home prices will continue to rise, competition remains high and housing affordability is declining.”
