Industry News

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This morning in metals news, the Department of Commerce made preliminary affirmative determinations with respect to imports of steel from Vietnam, iron ore is powering Australia’s trade surplus and copper slipped for the second straight session.

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DOC Issues Circumvention Rulings

The Department of Commerce announced Wednesday it had made affirmative preliminary determinations vis-a-vis circumvention related to imports of steel from Vietnam.

According to the DOC, the products covered include steel originally produced in South Korea and Taiwan and sent to Vietnam for “minor processing.”

“These duties will be imposed on future imports, and also on any unliquidated entries since August 2, 2018 (the date on which Commerce initiated these circumvention inquiries),” a DOC release stated. “The applicable cash deposit rates will be as high as 456.23 percent, depending on the origin of the substrate and the type of steel product exported to the United States.”

Iron Ore Powers Australia Surplus

Iron ore prices, which have surged to a five-year high, have lifted Australia to a trade surplus in May.

According to the Australian Broadcasting Corporation, Australia tallied a record $5.7 billion trade surplus in May, with the value of its iron ore shipments jumping 13%.

Copper Price Drops

After Monday’s post-G20 optimism provided a shot of optimism to copper prices, the metal has slipped for two straight days.

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According to Reuters, LME copper fell 0.1% on Wednesday, down to $5,883 per ton.

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This morning in metals news, India is likely to remain a net steel importer for at least the next two years, residents of Scunthorpe are concerned about the future of their town should British Steel close down and the copper price retreated to a one-week low.

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India to Remain Net Steel Importer

As steel imports continue to flow into the country, India is likely to remain a net steel importer over the next two years, Bloomberg reported citing Fitch Ratings Ltd.’s local unit.

India’s annual steel consumption is nearing 100 million tons, according to the report.

Worrying About the Future

A recent bid deadline came and went for the liquidated British Steel, based in Scunthorpe, England.

Media reports indicate there have been at least nine interested buyers, but it remains unclear if a buyer would be willing to take on the entirety of the business, as opposed to individual parts.

With the plant’s future in limbo, the BBC reported residents of Scunthorpe are concerned about a potential shuttering of the plant and the impact it would have on the town.

“If the worst comes to worst, and the steelworks does actually shut, it will be devastating for so many people here,” one resident is quoted as saying.

“People will probably have to move away.”

Copper Slides

On the heels of the weekend’s G20 Summit in Japan, the copper price fell to a one-week low Tuesday, Reuters reported.

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Copper prices soared to a six-week high on Monday. The LME copper price traded down 0.5% Tuesday, according to the report, down to $5,925 per ton, on weak global manufacturing data.

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According to the International Lead and Zinc Study Group’s (ILZSG) most recent report, the global lead and zinc markets both were in deficit through the first four months of the year.

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Zinc Deficit Hit 97,000 Tons

Global refined zinc supply fell short of demand by by 97,000 tons over the first four months of the year, according to the ILZSG.

World zinc mine production jumped by 1.5% during the four-month period to 4.12 million tons, paced largely by an increase in Australia, in addition to smaller increases in Europe, Namibia and South Africa. Meanwhile, zinc mine production fell in China, India, Mexico, Peru and the United States.

Meanwhile, refined zinc metal production fell during the first four months of the year to 4.25 million tons, down from 4.35 million tons during the equivalent period in 2018. According to ILZSG, refined zinc metal production increased in Mexico and Peru but fell in China, India and Russia.

Zinc usage, meanwhile, fell 1.3% to 4.35 million tons through the first four months of the year, depressed by a fall in apparent demand in China. Usage in the U.S., India, Japan and Europe remained flat.

Lead Deficit Reaches 39,000 Tons

The lead metal deficit for the first four months of the year hit 39,000 tons, according to the ILZSG.

Lead mine production ticked up 0.7% to 1.54 million tons, paced by increases in Sweden, India and Peru but partially offset by a decline in China.

Lead metal production also picked up during the four-month period, rising 2.3% to 3.87 million tons, paced by higher output in China, India and South Korea.

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Lead metal usage also increased 2.3%, up to 3.90 million tons for the four-month period.

According to ILZSG, China’s imports of lead contained in lead concentrates increased by 30.7% to 260,000 tons, while its net imports hit 67,000 tons compared with 13,000 tons of net exports during the same period in 2018.

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This morning in metals news, world leaders gathered in Japan this weekend for the G20 Summit, a deadline for bidding on the liquidated British Steel came and went June 30, and Australia’s iron ore exports are forecast to fall for the first time in 18 years.

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G20 Leaders Meet in Japan

Trade issues once again loomed over the proceedings at the latest G20 Summit, this time held in Japan over the weekend.

For the second straight summit, references to protectionism did not not appear in the summit’s communique, Reuters reported.

“We strive to realize a free, fair, non-discriminatory, transparent, predictable and stable trade and investment environment, and to keep our markets open. International trade and investment are important engines of growth, productivity, innovation, job creation and development,” the communique said.

The communique also offered support for the World Trade Organization (WTO), while also noting changes must be made to improve its dispute settlement system.

“Furthermore, we recognize the complementary roles of bilateral and regional free trade agreements that are WTO-consistent,” the statement said. “We will work to ensure a level playing field to foster an enabling business environment.”

British Steel Deadline Passes

Following the liquidation of the U.K.’s No. 2 steelmaker British Steel in May, a June 30 deadline was set for bidding on the embattled firm.

According to Yahoo Finance U.K., up to nine potential buyers have reported interest, but the challenge comes in finding a buyer willing to take up the entire firm, as opposed to just parts.

According to the Yahoo Finance U.K. report, Network Rail has made an offer for the “railway-critical parts of British Steel.

Australian Iron Ore Exports Down

This year could see Australia’s first drop in iron ore exports in nearly two decades, Bloomberg reported.

Australia’s Department of Industry, Innovation and Science cut its 2019 forecast for iron ore exports from 867 million tons to 814 million tons.

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Rio Tinto also recently downgraded its 2019 iron ore guidance.

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According to the International Copper Study Group’s (ICSG) most recently monthly report, global copper mine production dropped 1.3% in Q1 2019 compared with the same quarter the previous year.

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In addition, concentrate production fell 1% and solvent extraction-electrowinning fell 3.5%.

Top copper producer Chile saw production fall 5% in the quarter. More recently, a two-week strike at Codelco’s Chuquicamata mine reportedly came to an end last week, as the labor unions representing workers at the mine voted to accept an offer from the company.

Meanwhile, Indonesian concentrate production fell 52%. In the Democratic Republic of the Congo, production rose just 1.7% in Q1 after a total 11% jump in 2018.

While not enough to offset losses in Chile and Indonesia, production gains were realized in No. 2 producer Peru, Australia, China and Mongolia, according to the ICSG.

Global refined production also fell in the first quarter, dropping 1.1%, as primary production fell 1.5% while secondary scrap production increased 0.7%.

Chile’s refined output fell 32% “mainly to temporary smelter shutdowns whilst undergoing upgrades to comply with new environmental regulations.” Indian production fell 45% as Vedanta’s Tuticorin smelter remains shuttered.

Refined output was also down in Germany, Japan, Peru and the U.S.

However, apparent refined usage increased 0.8% in Q1, paced in part by a 4% increase in usage in China. World usage ex-China fell 2%.

In terms of prices, the average May price on the LME reached $6,028.31 per ton, down 6.5% from April’s average $6,445.10 per ton.

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Meanwhile, through the end of May, the high copper price on the LME was $6,572 per ton (reached March 1), with a low of $5,780.50 per ton (reached on May 31). The average price for the year through May was $6,221.50 per ton, marking a 4.6% decline from the 2018 annual average.

The European steel sector is facing an existential threat based on a variety of factors, according to the president of the European Steel Association (EUROFER), who spoke at the group’s annual conference June 26.

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The issue of rising imports has been a consistent complaint of the E.U. steel industry. Steel companies in the trading bloc have argued the U.S. Section 232 steel tariffs have diverted steel, ordinarily headed to the U.S., to Europe (among other places).

“As a result of the import duties applied by the United States as of 23 March 2018 under Section 232 the US Trade Expansion Act of 1962, exporting steel to the United States has become less attractive,” the European Commission said in February. “There are already indications that, as a consequence, steel suppliers have diverted some of their exports from the US to the EU.”

Earlier this year, the E.U. imposed steel safeguards in an attempt to mitigate the issue of rising imports; even so, many E.U. steel leaders argue the safeguards have not been effective.

“These challenges have the potential to erase the whole steel industry in Europe. On the other hand, these challenges bring us a great opportunity, if we can embrace change and use it to accelerate innovation,” EUROFER President Geert Van Poelvoorde said. “In 2018, there was a record 12% rise in European imports of finished steel products, in a market that grew only 3.3%. We are grateful that the European Commission recognised the problem and took action. However, the safeguard has failed in its objective for a large part of our industry.”

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In addition to rising imports and slowing demand, Van Poelvoorde referenced the E.U.’s role in curbing emissions and regulations aimed at doing so.

“For steelmakers, there are several possible routes to decarbonisation – and various pathways to achieve this are being tested by a range of steel companies,” Van Poelvoorde said. “However, funding for these projects has to come from many different sources: to achieve decarbonisation, Europe’s steel sector cannot go it alone, it needs massive investments and cooperation with other stakeholders.”

Val Poelvoorde added costs associated with emissions compliance in the E.U. represent a “cost restraint that non-EU producers do not face.”

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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, a workers’ strike came to an end at top copper producer Codelco’s Chuquicamata mine in Chile, South Korean steelmakers Posco and Hyundai Steel are facing government shutdown orders at some locations over emissions, and the liquidated British Steel has attracted some interest before a June 30 bid deadline.

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Strike Ends at Chuquicamata

A workers’ strike at Codelco’s Chuquicamata mine came to an end this week as workers voted to accept an offer from the company, Reuters reported.

The unions at the mine rejected a proposal from the company last weekend, as the strike dragged on for two weeks.

(MetalMiner’s Stuart Burns weighed in on the Chuquicamata strike yesterday.)

Posco, Hyundai Face Shutdowns

South Korean steelmakers Posco and Hyundai could see some of their furnaces shut down by government actions aimed at curbing emissions, the Nikkei Asian Review reported.

In fact, according to the report, one-third of the blast furnaces in the country are facing 10-day shutdown orders from the government.

Interest Comes in for British Steel

The previously set June 30 bid deadline for British Steel is fast approaching, and up to nine entities have expressed interest, Reuters reported.

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The steelmaker went into liquidation last May after it failed to secure a second government loan to continue its operations. The firm was owned by Greybull Capital, which purchased it from Tata Steel in 2016 for a nominal £1.

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This morning in metals news, the copper price didn’t budge Thursday ahead of a key meeting between U.S. President Donald Trump and Chinese President Xi Jinping, Nucor announced a price hike for flat-rolled steel products, and automaker Tesla won a tariff exemption on aluminum imported from Japan.

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Copper Price Holds Flat

Markets are anxiously awaiting the results of a key meeting between U.S. President Donald Trump and Chinese President Xi Jinping during the G20 Summit in Japan this weekend.

On Thursday, however, the copper price held flat.

The LME three-month copper price ticked up 0.1% Thursday after soaring to a five-week high during the previous session, Reuters reported.

Nucor Raises Flat-Rolled Steel Prices

Steelmaker Nucor announced its first price hike on flat-rolled steel since February, according to Yahoo! Finance.

The price hikes apply to HRC, CRC and HDG, according to the report.

Tesla Wins Aluminum Tariff Exemption

Electric car maker Tesla secured a tariff exemption for aluminum it imports from Japan, Reuters reported.

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The automaker sought the exemption for the aluminum — which it uses for the production of battery cells at its Nevada Gigafactory — at an annual rate of 10,000 tons, according to the report.

Copper appears to be caught in the crosswinds.

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After months of steady declines from a peak of U.S. $6,600 per ton in April, the copper price had drifted down to well below $6,000 per ton on fears of what impact the ongoing trade war between the U.S. and China would have on top consumer China.

But while trade war tensions continue to provide significant headwinds, an extending strike at Codelco’s Chuquicamata copper mine is raising concerns about supply.

The copper market is considered to be in deficit, according to Reuters, saying the global refined copper market showed a deficit of 51,000 metric tons in March, compared with a 72,000-ton surplus in February. Bloomberg cited the International Copper Study Group, which forecast a deficit of 189,000 tons by the end of this year.

Codelco’s strike has been rumbling on for 12 days now. Chuquicamata is the company’s third-largest mine, producing 321,000 metric tons last year (so over 10,000 tons have been lost so far).

Some 3,200 workers at the mine are represented by three unions. Their grievance is focused on comparable terms of employment between retiring older workers and incoming new workers. The company is holding back on the more generous terms older workers enjoy as they negotiate the severance of some 1,700 workers due to the transition from open pit to underground mine in the next 12 months.

So far, Codelco says it has made the best offer it can.

Workers, however, are not satisfied.

Negotiations are at an impasse. The union is going back to the workers later this week for an extension to the strike. In and of itself, the loss of Chuquicamata’s production is not critical for the copper market, but it heightens concerns about where supply is going to come from, as investment in new mines has been depressed for some years by excess supply and low prices.

Perversely, though, inventory has been rising.

Both the LME and SHFE have seen increases in stocks this year, although they have fallen somewhat in the last month or so. Generally, inventory levels do not suggest a market in crisis.

So, what can we make of the recent price rises: are they purely a reaction to the Chuquicamata strike and a weaker dollar boost to commodity prices, or the buildup for a move higher?

Demand, while less robust than previous years, remains fairly solid. Much of the negativity is down to fears over the trade conflict between the U.S. and China, as is the case with much of the commodity and equity markets; a resolution to that squabble would see a return of optimism and higher prices.

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Without it, though, it is hard to see significant upside to copper this year — the fundamentals are not supporting that yet. In the meantime, sentiment is king.