Industry News

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Miner Rio Tinto released its first-quarter production results this week and downgraded its 2019 iron ore guidance on the heels of the recent cyclones battering the Western Australia coast.

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“Our iron ore business faced several challenges at the start of this year, particularly from tropical cyclones,” Rio Tinto CEO JS Jacques said in a prepared statement. “As a result, and following the continuing assessment of damage at the port resulting from the cyclones and other minor disruptions, 2019 guidance for Pilbara shipments is reduced to between 333 and 343 million tonnes.

“The quarterly operational performance in our other products was solid, generally higher than last year. Our focus remains on safety, delivering our ‘value over volume’ strategy and allocating capital with discipline, to continue delivering superior returns to our shareholders in the short, medium and long term.”

The new guidance for Pilbara iron ore shipments — of 333 million-343 million tons — is down from previous guidance of 338 million-350 million tons.

Pilbara iron ore shipments reached 69.1 million tons in the first quarter, down 14% year over year. Pilbara iron ore production of 76.0 million tons marked a 9% decline from Q1 2018.

“Production was significantly impacted by the weather disruptions in March and a fire at Cape Lambert A in January,” the Rio Tinto announcement states. “These events will have an impact on second quarter performance.”

Last month, Tropical Cyclone Veronica battered the northwestern Australia coast, leading to damages at the Cape Lambert A port terminal. The weather event led to the miner declaring force majeure on some iron ore contracts.

Earlier this month, Rio Tinto said the impact of Tropical Cyclone Veronica amounted to 14 million tons of iron ore production.

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Meanwhile, in other materials:

  • Rio Tinto’s Q1 bauxite production reached 12.8 million tons, up 1% from Q1 2018 and up 8% from the previous quarter.
  • Aluminum production hit 796,000 tons, flat on a year-over-year basis and down 3% from Q4 2018.
  • Iron ore pellets and concentrate production reached 2.5 million tons, up 5% from Q1 2018 but down 13% from Q4 2018.

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This morning in metals news, China’s steel sector continues to churn out more and more steel, copper prices soared to a nine-month high, and the oil price surged on falling U.S. stockpiles.

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China Steel Production

Despite a program of winter production curbs, 2018 proved to be a record year for Chinese steel production.

In the early months of 2019, that production shows no signs of abating (much to the chagrin of producers in other markets decrying the state of global overcapacity).

China’s first-quarter steel production hit 231 million tons, up 10% year over year and marking the largest Q1 output on record, Bloomberg reported.

Copper Hits 9-Month High

The copper price continues to ride a hot streak, hitting a nine-month peak Wednesday, Reuters reported.

Powering the rise was stronger-than-expected growth in the Chinese economy, according to the report, which grew 6.4% in Q1.

Oil Prices Rise to 2019 Peak

Speaking of price gains, the oil price has also shown upward momentum.

Brent crude reached $72/barrel on Wednesday, Reuters reported, partially driven by a drop in U.S. crude stocks.

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Meanwhile, the Energy Information Administration (EIA) released its Summer Fuels Outlook today, which forecasts U.S. gasoline prices will be lower this coming summer compared with summer 2018.

“Because gasoline and diesel taxes and distribution costs are generally stable across the United States, changes in U.S. retail gasoline and diesel prices are generally driven by changes in crude oil prices,” the EIA report explained. “EIA forecasts the Brent crude oil price to average $67 per barrel (b) this summer, the equivalent of $1.60/gal, compared with an average of $75/b, or $1.78/gal, last summer.”

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According to the American Iron and Steel Institute (AISI), U.S. steel mills have increased their steel production total by 6.8% for the year to date through April 13 compared with the same period in 2018.

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Adjusted year-to-date production through April 13 reached 28.0 million net tons, at a capability utilization rate of 81.9%.

Output during the aforementioned period marked a 6.8% increase from the 26.3 million net tons during the same period last year (when the capability utilization rate was 76.4%).

Meanwhile, for the single week ending on April 13, raw steel production hit 1.9 million net tons — up 7.6% from the same week in 2018 — at a capability utilization rate of 82.3%. Production for the same week in 2018 reached 1.8 million net tons at capability utilization rate of 76.0%.

Production for the week ending April 13, 2019, was down 0.7% from the previous week ending April 6, 2019 when production was 1.9 million net tons at a capability utilization rate of 82.8%.

By region, the Southern region led the way in raw steel production for the week ending April 13:

  • Northeast: 184,000 tons
  • Great Lakes: 725,000 tons
  • Midwest: 183,000 tons
  • Southern: 748,000 tons
  • Western: 75,000 tons

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Steel production has steadily grown in the year-plus since President Donald Trump opted to impose tariffs on imports of steel and aluminum. In the leadup to the tariffs, the Department of Commerce identified 80% as its goal for the steel sector’s capacity utilization rate, as that level is considered to be an indicator of industry health.

Demand for steel is still growing, but it can be expected to moderate in line with overall declines in overall economic growth.

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The World Steel Association released its Short Range Outlook (SRO) this week, which forecasts a 1.3% increase in global steel demand this year and a 1.0% increase in 2020.

“In 2019 and 2020, global steel demand is expected to continue to grow, but growth rates will moderate in tandem with a slowing global economy,” said Al Remeithi, chairman of the World Steel Association’s Economics Committee. “Uncertainty over the trade environment and volatility in the financial markets have not yet subsided and could pose downside risks to this forecast.”

While the 2019 forecast is still in positive territory, it would mark a decline from 2.1% demand growth in 2018.

China, of course, is undergoing trade talks with the U.S., which last year slapped a total of $250 billion worth of tariffs on imports from China. As with other industry sectors, China’s growth levels are closely monitored in the context of global growth trends.

According to the SRO, China’s steel demand is getting a boost this year from government stimulus measures.

“Chinese steel demand continues to decelerate as the combined effect of economic rebalancing and trade tension is leading to slowing investment and sluggish manufacturing performance,” the SRO states. “Mild government stimulus cushioned the economic slowdown in 2018. In 2019, the government is likely to heighten the level of stimulus, which is expected to boost steel demand.”

However, the SRO forecasts a “minor contraction” in Chinese steel demand in 2020 as government stimulus measures subside.

Steel demand is expected to continue to decelerate in developing countries. Demand growth in developing countries hit 3.1% in 2017, fell to 1.8% in 2018 and is forecast to drop to 0.3% in 2019.

The overall trend in declining demand is also expected to impact the automotive and construction sectors.

“As pent-up demand and government stimulus measures subsided, the automotive industry saw a sharp slowdown in growth in 2018 in many countries, in particular in the EU, Turkey and China,” the SRO states. “The largest decline was observed in Turkey (-9.0%) and in the UK (-5.5%).  As a result, global auto production growth decelerated to 2.2% in 2018 from 4.9% in 2017.”

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For the full report, visit the World Steel Association website.

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This morning in metals news, the price of SHFE rebar continued its rise Tuesday, the Aluminum Association released its first new material registration record in almost two decades and Brazilian steelmakers are struggling with an iron ore shortage.

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Shanghai Rebar Rises

The price of Shanghai rebar reached its highest level in over seven years amid expectations of infrastructure-related stimulus measures in China, Reuters reported.

The Shanghai rebar price closed up 1.4% Tuesday at 3,829 yuan ($570.45) per ton, according to the report.

Aluminum Association Announces Material Designation System for 3D Printing

The Aluminum Association this week released its first material designation record in almost two decades.

The designation covers so-called “purple sheets,” which cover aluminum powder used in 3D printing.

“The purple sheets are the newest addition to the Aluminum Association’s long-running ‘rainbow sheet’ series, which provides alloy designations and chemical composition limits for various types of aluminum,” the Aluminum Association said in a release. “Aluminum is the first materials industry to develop such a system specific to the 3D printing market.
“The first registration granted is for a high-strength aluminum alloy produced by HRL Laboratories, LLC. The association will grant HRL registration number 7A77.50 for the aluminum powder used to additively manufacture the alloy, and number 7A77.60L for the printed alloy.”

Iron Ore in Brazil

Brazilian steelmakers are facing a shortage of the key steelmaking ingredient iron ore in the months after Vale SA’s fatal dam breach at its Corrego do Feijao mine, Reuters reported.

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The company’s decision to halt operation at 10 of its sites in the southeastern state of Minas Gerais has disrupted supplies of iron ore pellets to steelmakers, according to the report.

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The Indian government has initiated an inquiry into an allegation of dumping of aluminum and zinc-coated flat steel products from China, the Republic of Korea and Vietnam.

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The probe will cover the October 2017-September 2018 period, but data from 2015 will also be looked at by India’s Directorate General of Trade Remedies (DGTR), which falls under the Commerce Ministry.

A report by the Press Trust of India said the investigation had been launched following a complaint by domestic producer JSW Steel Coated Products.

India, one of the fastest-growing economies in the world, has one of the highest trade tariffs in the world; for decades, its highly protectionist trade policy received flak.

Some experts have argued there was a risk that this protectionism could backfire somewhere down the line.

In the latest anti-dumping probe, it must be remembered that aluminum and zinc-coated steel are used largely in solar power projects, roofing and appliances (to name a few). India is currently very bullish on solar power projects; naturally, local producers are worried these projects have started using cheaper products from foreign shores.

If the allegation is eventually found to be true, the DGTR will then recommend imposition of the anti-dumping duty on the imports. The investigation has been initiated because there was some prima facie evidence found of dumping by the three countries.

The probe into the alleged dumping will help determine the existence, degree and effect of alleged dumping, and to recommend the amount of anti-dumping duty, which if levied, would be adequate to remove the injury to the domestic industry, according to the DGTR.

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Dumping of commodities negatively impacts the price of the same products in domestic markets.

Norwegian aluminum maker Norsk Hydro has recently been in the news for a cyber attack that brought much of its operations to a halt.

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More recently, however, the company turned to more positive news, announcing plans to upgrade technology at its Husnes plant to produce more aluminum for the automotive market.

Aluminum use in automobiles has increased in recent years as automakers try to churn out lighter, more fuel-efficient vehicles.

Of course, the steel industry hasn’t allowed aluminum to rise uncontested, as new, lighter forms of steel are developed. In fact, Crain’s Cleveland Business reported last year that AK Steel plans to roll out a new advanced, high-strength steel to automakers by 2021.

The ongoing steel-versus-aluminum war aside, Hydro said it will invest NOK 150 million (U.S. $17.6 million) on the new technology for the Husnes plant.

According to a company release, the plant will feature upgraded in-house casting technology dubbed “low pressure casting” (LPC) will “enable Hydro to provide materials with enhanced properties for various extrusion segments.”

“Forge stock for products like suspension arms and knuckles is an attractive market for aluminium within the automotive industry, which needs ever more aluminium to fill its need to lightweight cars and reduce emissions,” said Ola Sæter, head of Hydro’s fully-owned primary aluminum plants.

The new LPC will debut in 2020. According to Johan Berg, plant manager at Husnes, the new process affords Hydro the “flexibility to be able to cast both extrusion ingots and forging materials according to customer demand in a flexible and efficient way.”

“This investment is timed well with the ongoing upgrade of Hydro Husnes’ second electrolysis line that is due to start operations in 2020, with an annual planned output of 210,000 mt of aluminium semi-products,” Berg added. “Making use also of this new technology will significantly strengthen our position as a preferred partner delivering of aluminium to the automotive industry.”

Hydro Delays Earnings Release

In other news, the firm announced a delay in the release of its Q1 financial results, from April 30 to June 5, on account of last month’s cyber attack.

“The delayed Q1 2019 reporting date is a result of the previously communicated cyber attack, impacting the availability of certain systems and data to produce the quarterly report,” Norsk Hydro said in a prepared statement.

“The revised date is conditional upon the planned timeline for restoring operational and reporting systems.”

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Most of Hydro’s operations are “back to normal or near normal levels.” The firm’s energy segment is marked as “running as normal,” as is the bauxite and alumina segment, while its primary metal segment is running as normal “with higher degree of manual operation.”

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This morning in metals news, miner Rio Tinto announced Monday it will commit an additional $302 million toward the Resolution Copper project in Arizona, Rusal made its first post-sanctions U.S. investment and copper prices rose Monday.

Rio Tinto Announces $302M Additional Investment

Miner Rio Tinto announced Monday it will pitch in an additional $302 million toward the Resolution Copper project.

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“Resolution is one of the most significant undeveloped copper deposits in the world and this additional funding demonstrates Rio Tinto’s commitment to bring the mine into production,” Rio Tinto CEO JS Jacques said. “The comprehensive permitting process is well underway with the Environmental Impact Study on track to be completed next year according to the regulators schedule.

“The rise of electric vehicles, battery storage, new transmission technology and other green energy innovations are highly copper intensive. We need to prepare now to meet this future demand. Resolution will be well positioned to provide North American manufacturers the copper that is essential to their products.”

According to the company release, a fully operation Resolution project could supply one-fourth of U.S. copper demand.

Rusal Makes U.S. Deal

Russian aluminum giant Rusal, previously staring down U.S. sanctions, has made its first post-sanctions U.S. investment, Reuters reported.

According to the report, Rusal is partnering with U.S. manufacturer Braidy Industries to build a mill in Kentucky.

Copper Prices Rise

According to another Reuters report, copper prices made gains Monday on positive economic data from China and lower inventory.

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The copper price on the LME and SHFE ticked up 0.4% and 0.8%, respectively.

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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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This morning in metals news, iron ore shipments into China picked up in March after February’s 10-month low, India’s top court blocked ArcelorMittal’s attempt to buy the bankrupt Essar Steel and the E.U. opened the door to formal trade negotiations with the U.S.

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China’s Iron Ore Import Levels Rise in March

With winter production curbs winding down in China, imports of the steelmaking material iron ore picked up in March, Reuters reported.

China imported 86.42 million tons of iron ore in March, up from 83.08 million tons in February.

Indian Supreme Court Blocks ArcelorMittal’s Bid to Buy Essar Steel

India’s National Company Law Tribunal (NCLT) in early March gave the OK to ArcelorMittal’s plans to buy the bankrupt Essar Steel, thus allowing the former to enter the Indian market.

However, India’s Supreme Court had other ideas.

The Economic Times reported the country’s high court superseded the NCLT approval by ordering a halt to ArcelorMittal payments to buy the debt-laden Essar Steel.

E.U. Gives Initial OK Toward Initiation of Formal Trade Talks with U.S.

As the Trump administration this week announced it is considering imposing $11 billion worth of tariffs on a wide range of imports from the E.U., European countries gave the green light in the process to initiate formal trade talks with the U.S., Reuters reported.

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According to the report, two mandates have been put forth (still requiring final approval): cutting tariffs on industrial goods and “making it easier to show products meet E.U. or U.S. standards.”