Industry News

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This morning in metals news, China says it hopes to reach a compromise with the U.S. on trade, the U.S. Department of Commerce self-initiated an investigation related to imports of corrosion-resistant steel products and iron ore prices continue to slide.

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Looking for a Deal

Chinese government officials recently expressed the willingness to do what is necessary to combat U.S. tariffs while also indicating a desire to reach the U.S. “halfway” for a trade deal.

The U.S.’s imposition of a 10% tariff on an additional $300 billion on Chinese goods is set to go into effect Sept. 1. Tensions were dialed back slightly this week when the United States Trade Representative announced that tariffs on select items from the $300 billion tariff list, including cellphones and laptop computers, would be delayed until later this year.

“We hope the U.S. side will meet China half-way, and implement the consensus reached by the two leaders during their meeting in Osaka, and look for mutually acceptable solutions through dialogue on the basis of equality and mutual respect,” said Hua Chunying, a Chinese foreign ministry spokesperson, as quoted by CNBC.

DOC Launches Circumvention Probe

The U.S. Department of Commerce plans to investigate possible circumvention with respect to imports of corrosion-resistant steel products from Costa Rica, Guatemala, Malaysia, South Africa and the United Arab Emirates.

“In these inquiries, Commerce will determine whether imports of CORE completed in Costa Rica, Guatemala, Malaysia, South Africa, and the UAE using Chinese-origin substrate, or imports of CORE completed in Malaysia using Taiwanese-origin substrate, are circumventing the antidumping duty (AD) and countervailing duty (CVD) orders on CORE from China or the AD order on CORE from Taiwan,” the Department of Commerce said in a release.

Iron Ore Prices Continue to Fall

Prices for the steelmaking material iron ore continue to fall after reaching five-year highs earlier this summer.

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According to Reuters, China’s stimulus spending has not been enough to offset the reintroduction of iron ore supplies to the market (after supply-side disruptions in Australia and Brazil earlier this year).

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India’s National Aluminium Company (NALCO) has had expansion plans on the anvil for some time now.

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Towards this goal, it has started taking the first steps.

Part of this effort is the indigenization of technology and equipment specific to the aluminum sector. It is a commonly known fact that only is India’s per capita aluminum consumption is low as compared with other countries, and much of the industry is dependent on imports and foreign technology.

A few days ago, the state-owned company signed a joint venture agreement with another public sector undertaking, the Mishra Dhatu Nigam (MIDHANI), to set up a high-end aluminum alloys plant for manufacturing of plates, sheets and more, the Business Standard reported.

MIDHANI and NALCO will, at least at the start, be equal shareholders in the joint venture company, according to the Business Standard.

NALCO has lined up a multibillion-dollar fund to increase capacity, get into new areas (like mining and tech), and step up coal production.

Under this funding plan, it is on the way to setting up an alumina refinery stream that is likely to be commissioned in 2021-2022.

But a more recent move by the company has caught the media’s attention in India.

According to The Financial Express, NALCO will soon set up a technology division.

The aim of the new division is to research and develop indigenous technologies for making equipment that will cater to the domestic aluminum industry. The board has already cleared the proposal; now the proposal is before the mines ministry.

All this is part of the government’s “Make In India” plan. Initially, it will collaborate with foreign suppliers to develop technology and expertise. Then, it will link up with domestic fabricators to manufacture equipment that will largely be India-specific.

The Financial Express reported said engineers will be studying technologies and engineering available across the world, particularly in Australia and Brazil.

A few weeks ago, NALCO, Hindustan Copper Ltd and Mineral Exploration Co Ltd (MECL) signed an agreement to set up a 40:30:30 joint venture company called Khanij Bidesh India Ltd (KABIL) to establish a supply chain for critical and strategic minerals in India.  Pralhad Joshi, minister of Coal, Mines and Parliamentary Affairs, in a statement before Parliament said while KABIL will ensure the mineral security of the nation, it will also help in realizing the objective of import substitution.

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India’s per-capita aluminum consumption at 3 kg, compared with the global average of 11 kg, is extremely low. Projections indicate consumption would go up at a compounded annual growth rate of 7.5% to reach 10 million tons per year by 2031-32, according The Financial Express.

Source: The Coca-Cola Company

This morning in metals news, beverage maker Coca-Cola has announced it will shift to aluminum cans for its Dasani water brand, the U.S. Department of Commerce announced it found evidence of dumping of refillable stainless steel kegs from Mexico and China still plans to send trade officials to Washington next month for talks.

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Coca-Cola Announces New Dasani Packaging

In an effort to reduce plastic use and increase the use of recyclable materials, Coca-Cola announced plans to shift its Dasani water brand’s packaging from plastic bottles to aluminum.

“Updates to DASANI’s packaging line-up are designed to reduce plastic waste and increase the use of recycled and renewable materials in the United States, while ensuring that all DASANI bottles continue to be fully recyclable,” the company said.

Under the beverage maker’s proposed “World Without Waste” program, it aims to produce make its bottles and cans with an average of 50% recycled material by 2030. The company will roll out the water brand in aluminum cans in the northeastern U.S. in the fall (and 2020 everywhere else), and aluminum bottles in mid-2020.

U.S. Rules on Stainless Steel Keg Dumping Case

The U.S. Department of Commerce announced it had found evidence of dumping with respect to imports of stainless steel kegs from Mexico.

According to the department, the kegs were sold at less than fair value in the U.S. at a rate of 18.48%.

Last year, imports of the kegs from Mexico were valued at $13.4 million, according to the Department of Commerce.

China to Continue with Planned September Meetings

Despite the recent U.S. announcement of tariffs on an additional $300 billion in Chinese goods, Chinese trade officials still plan to visit Washington in September as planned, Bloomberg reported.

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However, according to a source cited by Bloomberg, China is unlikely to make concessions next month.

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This morning in metals news, the United States Trade Representative (USTR) announced the U.S. would delay some of the recently announced tariffs on Chinese goods, what could be the largest copper mine project in North America recently got a key approval from the U.S. Forest Service and a Turkish military pension fund has a £900 billion revival plan for British Steel.

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U.S. to Delay Some Tariffs

On Aug. 1, President Donald Trump announced the U.S. would impose a 10% tariff on an additional $300 billion in Chinese goods as of Sept. 1.

On Tuesday, however, the USTR said the tariffs for select items included in that tariff list would be pushed back to Dec. 15.

“Further, as part of USTR’s public comment and hearing process, it was determined that the tariff should be delayed to December 15 for certain articles,” the USTR said in a release. “Products in this group include, for example, cell phones, laptop computers, video game consoles, certain toys, computer monitors, and certain items of footwear and clothing.”

The USTR said it will conduct an exclusion process for the items included in the tariff list. In addition, it plans to publish information today related to the items affected by today’s announcement.

Resolution Copper Project Moves Closer to Go-Ahead

Rio Tinto’s Resolution Copper project in Arizona, which the miner says could be the largest in North America, has received an important approval from the U.S. Forest Service, Kitco News reported.

According to the report, the government agency issued a Draft Environmental Impact Statement for the project, which moves the Arizona project closer to development.

A £900B Revival Plan

A Turkish military pension fund has emerged as the favorite to take over the ailing British Steel, which went into liquidation earlier this year after it failed to secure a second government loan.

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According to Sky News, Ataer Holding has a £900 billion investment plan to nurse British Steel, the U.K.’s second-largest steelmaker, back to health.

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This morning in metals news, the world’s top aluminum producer was flooded after Typhoon Lekima, Chinese cities did not meet targets to cut pollution and iron ore prices continue to slide.

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China Hongqiao Takes Damages After Typhoon

The world’s largest aluminum producer, China Hongqiao, was flooded over the weekend after Typhoon Lekima struck Shandong province, Reuters reported.

According to an affiliate, a wall at the firm’s aluminum plants was “immediately overwhelmed” by water flooding from the Xiaofu river Sunday night.

Chinese Cities Fail to Meet Pollution Curb Targets

China has continued its battle against pollution, but some cities have failed to meet their targets.

According to another Reuters report, China’s steelmaking province of Hebei is summoning the leaders of three cities — Handan, Hengshui and Xingtai — after they did not meet pollution curb targets during the first six months of 2019.

Iron Ore Continues to Fall

After reaching a five-year high earlier this summer, the iron ore price has quickly retraced in recent weeks.

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According to Bloomberg, the iron ore price fell toward the $80 per ton mark, led by concerns regarding slowing economic growth in China.

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Since April this year, the Indian automobile sector has been seeing signs of a slowdown in sales. This has led to job cuts and expressions of concern from some major domestic steel producers.

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The slump in the sales of four- and two-wheelers has forced companies and ancillary automotive supply units to either shut down factories for specific hours (even days) or axe shifts, leading to a reduction in both temporary and permanent workers.

Auto sales for the June quarter are at their lowest in almost two decades, according to the Business Standard, only adding to the worries of domestic flat steel producers.

Many producers are now wondering what the immediate future holds for them.

There are no signs of any immediate revival in auto sales, especially after some economy experts warned of a coming recession in India.

Added to this is the Indian government’s new drive to bring in electric vehicles. Some major automobile companies, already on the path of a switch to electric, have stopped manufacturing diesel vehicles.

Yet, there are steel and automobile industry experts who are downplaying the drop in sales.

T.V. Narendran, CEO and managing director of Tata Steel, told the Business Standard recently that the platform economy (for example, Uber and Ola) is a bigger disruptor than electric vehicles. In his opinion, as more and more people took to cab-hailing apps, the need to have their own vehicles would come down, he said.

In the June quarter, the total sales of cars, sport utility vehicles and vans declined 18.4%, the largest drop since a 23.1% drop in the third quarter of 2000-01. Every segment of the auto industry reported a double-digit decline.

A recent report in India’s national daily, The Hindustan Times, said automobile ancillaries in and around Jamshedpur, where Tata Steel’s main plant exists, were facing tough times due to a series of block closures in Tata Motors in the past month because of a market slowdown. A local association leader told the paper that about 30-odd such ancillary “steel sector companies” were on the verge of closing down, even as a dozen others had already downed their shutters.

The report quoted Inder Agrawal, president of the Aditaypur Small Industries Association, as saying that recession in the auto sector is always cyclical and that he expects things to normalize after September.

According to media reports, because of the automobile sector slowdown, steel companies were diverting products towards alternative segments, such as renewables, oil and gas, and structural steel.

Flat and long steel products are two categories which find application in the auto and infrastructure sectors, respectively.

A report by news agency Reuters said India’s JSW Steel Ltd had acknowledged that a weaker steel market coupled with a drop in global demand and a local slowdown could impact the turnaround time for its newly acquired Monnet Ispat assets. The report, though, added that JSW’s chairman downplayed any substantial impact on financials.

On the sidelines of the company’s annual meeting, Sajjan Jindal, co-chair of JSW Steel Ltd, said his company had always said it could take about two years to turn around and it would try and do it within that time frame.

He called the present slowdown in the automotive sector as “temporary” and was hopeful the sector will bounce back.

Another Reuters report, as published on the Al Jazeera website, said the auto industry has sought tax cuts and easier access to financing for both dealers and consumers to revive the industry.

The report quoted Automotive Component Manufacturers Association of India (ACMA) Director-General Vinnie Mehta as saying the sector was experiencing a “recessionary phase.”

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India’s automobile sector employs over 35 million people, directly and indirectly, according to the 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 storylines here on MetalMiner:

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This morning in metals news, British Steel could have a buyer lined up, protests have disrupted copper mine activities in Peru and the American Iron and Steel Institute (AISI) released July steel import data.

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British Steel Update

According to The Guardian, a Turkish military pension fund will emerge as the preferred bidder for British Steel, which could ultimately save thousands of jobs, including around 4,000 jobs at its Scunthorpe plant.

The British steelmaker, the U.K.’s second-largest steelmaker went into liquidation earlier this year after it failed to secure a government loan, leading to a bidding process began for the firm.

Greybull Capital purchased the firm from Tata Steel for a ceremonial £1 in 2016.

Protests Disrupt Peruvian Copper

Protests have disrupted copper flows in the world’s No. 2 copper producer, Peru.

According to Reuters, anti-mining protests in the country have prevented approximately $400 million in copper exports from reaching their destinations.

U.S. Steel Import Market Share Hits 19% in July

The U.S.’s steel import market share reached 19% in July, according to the American Iron and Steel Institute this week, citing the U.S. Department of Commerce’s Steel Import Monitoring and Analysis data.

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Steel import permit applications surged in July. Applications totaled 3.57 million tons in July, up 31.0% from June and up 75.1% from June’s final total of 2.04 million tons.

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This morning in metals news, iron ore prices this week have plunged, the Energy Information Administration (EIA) released its short-term energy outlook and China could weaken its currency further.

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Iron Ore Prices Plunge

After reaching five-year highs earlier this year, aided by supply-side disruptions in Brazil and Australia, the iron ore price has plunged this week.

The iron ore price reached around $120 per ton earlier this year, but has fallen to the $80s this week. According to Bloomberg, iron ore on the Singapore Exchange for September fell as much as 7% to $86.68 per ton, while Dalian Commodity Exchange futures fell as much as 5.1%.

EIA Releases Short-Term Energy Outlook

The EIA released its short-term energy outlook this week, predicting average monthly gasoline prices in the U.S. peaked in May at $2.86 per gallon.

The EIA estimated U.S. crude oil production in July reached 11.7 million b/d, down 0.3 million b/d from June.

Meanwhile, Brent crude spot prices averaged $64 per barrel in July, flat compared with June but down $10 per barrel from July 2019.

China Could Devalue Currency Further

Recently, the U.S. Treasury Department officially designated China a currency manipulator after China devalued its currency to levels not seen since the financial crisis.

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According to The New York Times, China could devalue its currency further. Per the report, on Thursday China’s central bank set the midpoint of the renminbi’s daily trading range above 7 to the U.S. dollar for the first time in over a decade.

These are trying times for Glencore, as the cobalt market price collapses due to surging supply and weak copper prices undermine the fundamentals for the miner’s Mutanda copper and cobalt mine in the Democratic Republic of the Congo.

The Financial Times reported Glencore will halt production at the world’s largest cobalt mine from the end of this year because it is “no longer economically viable.”

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In a letter to employees, the firm states, “Unfortunately due to the significant decrease in the cobalt price, increased inflation across some of our key input costs (mainly sulphuric acid) and the additional taxes imposed by the mining code, the mine is no longer economically viable over the long term,” the Financial Times reported.

The price of cobalt has fallen 40% this year, contributing to Glencore reporting a 32% drop in earnings for the first half of this year and net income shrinking to just $200 million.

As a whole, Glencore’s African copper division reported a loss of $315 million in the first half of the year due to higher costs and lower prices, the Financial Times stated in a separate report.

As part of the miner’s ongoing pain, Glencore’s trading arm was forced to take a mark-to-market loss of $350 million on about 10,000 tons of cobalt inventory it owns but has yet to sell. The firm traditionally sells at spot rather than on long-term prices, although that would not necessarily have saved it from price falls; even longer-term contracts generally have an adjustment factor to reflect market price trends.

Glencore has a record of taking the hard decisions early and shuttering mines that are loss-making.

The miner closed zinc mines in 2015 in response to low global prices; its actions are credited with helping the zinc market recover as a result.

Cobalt demand has traditionally been driven by its use as an alloying element, but it is increasingly being seen as part of the lithium battery demand story because of its role in production of advanced batteries. The electric vehicle (EV) market, though, has failed to match up to its hype this decade. Although both lithium and cobalt prices have risen as a result of battery makers securing their supply chain, the reality is supply is perfectly adequate.

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In the longer term, though the fundamentals remain solid, EV sales will rise over the next decade as prices become more affordable, ranges extend and charging infrastructure improves. Glencore is putting Mutanda on care and maintenance for the next two years, after which it will review its options.

Taking some 20% of global supply out of the market will put a floor under prices and shorten the time frame over which prices will recover.