Industry News

India is likely to be the first nation to get access to Finex technology in steel production as South Korean steel giant POSCO has decided to introduce this technical application in steel production at its plant in Orissa and in the joint venture with Steel Authority of India Ltd. (SAIL) at Bokaro, according to a Commodity Online article.

SAIL and POSCO had already entered into an agreement for establishing a joint venture company for production of cold-rolled non-oriented (CRNO) products, and formation of a JV company with a Finex facility at Bokaro or any other location.

It is understood that the POSCO steel plant in Orissa will be the world’s first steel plant project to start with Finex and a mini flat mill. These processes are environment-friendly technologies with high productivity and cost effectiveness.

According to a Business Standard article, India’s government gave the steel industry a roadmap to lift crude steel capacity to 150 million metric tons in the last year of the 12th plan and then to 180-200 million tons by 2020 from the current 80 million tons.

The report quoted SAIL Chairman Chandra Sekhar Verma as saying that “steelmakers will have to embrace breakthrough ideas to be able to run our mills at new efficiency levels, allowing us to make steel with higher strength to weight ratio.” Capacity growth here will be sustainable, provided the industry makes use of progressive technologies occurring periodically, from raw material uses to finishing of steel to utilization of mill waste, Verma was quoted as saying.

According to Commodity Online, Finex technology is innovative, cost-effective and sustainable, developed by POSCO with its engineering partner, Siemens; innovative because it directly uses iron ore fines and non-coking coal without coking and sintering processes. It is cost-competitive because it uses those low-grade raw materials, and is sustainable and environmentally friendly compared to the conventional blast furnace. It emits significantly lower amounts of nitrogen oxide, sulfur oxide and dust. It also has great potential for reducing carbon dioxide.

POSCO claims that the mini flat mills decisively shorten the production chain from crude steel to hot rolled strip. In conventional hot strip production, the route runs from the continuous slab caster via storage and dressing, then onwards through the slab reheating furnace to the hot strip mill with its roughing train. The MFM technology, however, enables direct casting and rolling continuously, which are discontinuous in the conventional process. This process allows savings in investment, energy consumption and operating costs.

POSCO finally succeeded in innovative technology development after 15 years; in 1992, POSCO began to research replacing blast furnaces. Its total R&D investment to develop the Finex process and to succeed in commercializing it was 554.1 billion won (US $596 million).

The Korean government played a big role in Finex technology development and commercialization. In 1990, the government created a “Korean new steel R&D association” aimed at increasing the Korean steel industry’s competitiveness, and has funded the research with 22.2 billion won since 1992.

The World Steel Association (WSA) has said before that India is expected to show strong growth in steel use in the coming years due to its strong domestic economy, massive infrastructure needs and expansion of industrial production.

In 2011, India’s steel use is forecast to grow by 13.3 percent to reach 68.7 million tons. In 2012, the growth rate is forecast to accelerate further to 14.3 percent, according to WSA estimates.

TC Malhotra contributes to MetalMiner from New Delhi.

Remember zeroing? The controversial US practice in figuring antidumping violations that’s been frowned upon by the World Trade Organization (WTO), and has made trade enemies of certain US industries in the eyes of Japan, the European Union, and a host of other nations?

Well, that practice has likely met its demise, finally, based on the recent settlement of sorts between the US Trade Representative and the European Union and Japan. The three parties “signed agreements” to avoid Japanese and European trade penalties (in the millions of dollars) placed on US imports, not to mention continued WTO Appellate Body decisions that the practice is “inconsistent with WTO rules.”

What the heck is zeroing? Glad you asked. Based on a 2009 MetalMiner interview with Dan Ikenson, Associate Director for the Cato Institute’s Center for Trade Policy Studies (these WTO cases have been dragging on since 2003, after all), we can refresh your memory with the following examples.

“Say we are looking at a [potential] steel strip anti-dumping case. Let’s say only 3 transactions will form the basis of analysis (there would, of course, be many more). The case involves strip products manufactured in Japan. Here are the examples:

Example 1: Japan domestic price: $1000/ton, US price: $900/ton

Example 2: Japan domestic price: $1000/ton, US price: $1000/ton

Example 3: Japan domestic price: $900/ton‚ US price: $1000/ton

We might conclude that no dumping exists because everything balances in the wash, assuming volumes were also taken into consideration (which they are). In other words, if you average the three examples, one would conclude that no dumping exists.

But actually, a dumping duty would be assessed because Example 1 would be tossed out, or “zeroed.” Duty would be assessed based upon Japan dumping steel into the US market. All negative margins where the foreign price appears cheaper gets set to zero. Just as a drug company trying to prove a drug’s efficacy cannot throw out results in which no statistical correlation exists, the zeroing rule appears difficult to justify.”

That’s exactly why the USTR was under pressure to finally sign agreements with the EU and Japan. What do the agreements stipulate? All we know is that “the United States will complete the process – which began in December 2010 – of ending the zeroing practices found in these disputes to be inconsistent with WTO rules.” (We’re trying to get our hands on the language of the agreements to read between the lines.)

Continued in Part Two.

Here’s Episode 4 of MetalMiner’s Sourcing Outlook, brought to you by Zycus.

In the first episode of 2012, MetalMiner takes a look at the center of the commodity market storm — the EU debt crisis and impending (or already begun?) recession.

In MetalWatch, we check in on stainless steel, as the ThyssenKrupp-Outokumpu merger looms in the background. And in the One-On-One segment, Lisa Reisman discusses Buy America with Roger Ferch of the National Steel Bridge Alliance and Jennifer Diggins of Nucor. (*If you’ve watched clips of the interview that were previously published — here and here — you’ll want to make sure to watch the entire interview above, since we’ve included as-yet unseen footage.)

The episode is viewable here on the blog (look for this episode and future ones on the left side of the MetalMiner home page as we release them) and on MetalMiner’s YouTube channel. Please subscribe to MetalMiner’s YouTube channel if you haven’t already.

Enjoy, and check back in for the next episode!

Have you ever felt bad about that fixed-price metals contract you placed, only to find a month later the price had dropped? Or had trouble explaining to the VP of purchasing why you didn’t place a resting order last month when this month the metals price jumped 10 percent?

Don’t worry, predicting metals prices is notoriously difficult, and even when you are in possession of oodles of information, making the right decisions can feel as much like placing a bet as it does an informed choice. More to the point, you can take heart that when it goes wrong, you are in good company — or if not good company, at least highly paid company.

The FT reports that the commodities hedge fund industry has suffered its worst year in more than a decade as the sector’s top managers recorded heavy losses amid volatile markets. The average commodity hedge fund fell 1.7 percent in 2011, according to data sourced by the paper, the first loss since the index was created in 2000 and down from a rise of 10.7 percent in 2010.

To be fair, the Reuters-Jefferies CRB Index, a basket of commodities, fell 8.3 percent during the year, weighed down by falling prices for metals and agricultural raw materials. But aren’t hedge funds are supposed to be about making a gain regardless of market direction?

This is not just indicative of poor decision-making, it is a reflection of the fact that an overly narrow focus on the underlying fundamentals can lead to decisions that fail to take into account macro issues.

Mark Rzepczynski, chief executive of the funds group at FourWinds Capital Management, is quoted as saying, “traders who were specialists in a given commodity may have been hurt because they didn’t put enough weight on the risk-off trade. They were disadvantaged because they were looking at specific supply and demand factors.”

The risk-off trade over the last year has been the markets’ reaction to the European debt crisis and fears of slowing growth in China dampening demands for commodities. As money has pulled out of commodities and riskier assets, it has flowed into safe havens like US treasuries – not surprisingly, funds like Brevan Howard, which took a position anticipating falling treasury yields, bucked the industry trend and did rather well.

Possibly as an illustration of what the future holds, funds controlled by computer-driven strategies have been some of the best performers. According to this report, DE Shaw, founded by mathematician David Shaw, has seen its flagship Oculus fund return 18.5 percent this year, while Renaissance Technologies has seen its computer-driven institutional equities fund return 30 percent so far this year, and Quantitative Investment Management, achieved a return of 41.4 percent in the past 11 months.

A few commodities-based funds have managed to prosper in spite of difficult times. Velite, a natural gas fund, gained 51 percent, while Galena Metals posted a gain of 11 percent and Red Kite, a longtime bear on copper, also posted gains following the sell-off since the summer. For some hedgies, particularly the smaller funds, it has been a difficult few years with profits not exceeding the +20 percent watermark, where funds can charge their investors performance fees.

If anything, we take heart that MetalMiner’s mix of macroeconomic news, industry trends and developments, and specific metal market reporting seems to mirror the approach taken by the most successful hedge funds, who have in-depth product knowledge yet also allow for broader macro influences in their decision-making.

–Stuart Burns

Even though Eastman Kodak has declared bankruptcy, there is just enough industrial demand being mustered in the solar panel, battery and conductor sectors, not to mention investment in ETFs and physical metal, to give the silver price its best start in a new year since 1983.

According to a recent article in Bloomberg BusinessWeek, silver as a commodity is back in business. The silver price hit $33.8575 yesterday (up 22 percent since Dec. 31), and a survey of analysts points to a price average of $37.50. Silver is notorious for its volatility, and indeed proved the most volatile metal tracked by Bloomberg over the last eight months, dropping 44 percent over that time period.

Manufacturers on a Slow Rebound

Eastman Kodak and other photographic film manufacturers used to account for a good percentage of silver demand, but that has “slid at least 66 percent in the past decade,” according to estimates by the Silver Institute. (Kodak announced that it would stop producing Kodachrome film in 2009.)

But a mix of increased industrial usage (global solar-panel installations increased capacity by 70 percent last year, and Barclays Capital estimates manufacturers to use 15,415 tons of silver this year, up 2.5 percent from 2011) and physical investment (196 tons added to ETP holdings this month, and 189 tons of American Eagle silver coins bought) has definitely buoyed the silver price.

However, will silver’s bullish performance last?

Better Hold Your Breath

While analysts at Standard Chartered Bank and others sound positive on silver’s upswing in the short term, a few others are saying no. (Silver is still relatively cheap compared to gold, with the gold/silver ratio at 51.5, down from 57.4 in December, according to Bloomberg):

Source: goldprice.org

Larry Edelson, writing in ETF Daily News recently, made clear his view that precious metal markets, including silver, are headed down. The way he sees it, “in silver, we would need to see a daily close above $35.79 followed by a close above $37.79 on a Friday closing basis to turn silver’s intermediate-term trend back to bullish. Short of those signals, silver remains in a position to plummet yet again.”

Underpinning all of this, there is the whole Eurozone debacle, and the flailing Euro economy may still be the biggest roadblock to unfettered silver price growth. The Bloomberg article cites the IMF recently lowering its growth forecast from 4 percent to 3.3 percent as the main indication that these macro problems could cause trouble in this commodity market.

Edelson mentions the Eurozone crisis could mean better news for the US dollar than for gold or silver, as European debts will send capital more directly to the dollar.

Ultimately, to have silver break out of its mid-$30s range, we’d need a double-edged recovery in the Eurozone and an increase in worldwide manufacturing demand (developing and emerging economies must get back into stable-enough positions to buy more solar panels and plasma TVs) — otherwise, the silver bears may just have a point.

–Taras Berezowsky

Well well well, we should’ve seen this coming. Seems like just yesterday that MetalMiner covered Alcoa’s optimism on the future of the aluminum market — and the company’s stake in its success.

Now, with the global aluminum supply/demand balance out of whack in producers’ eyes — too much metal and not enough demand keeping prices down — Alcoa announced that they’re putting a sizable, permanent kibosh on their smelting operations. This comes on the heels of inventories spiking sharply just before 2012 began:

Source: John Gross, The Copper Journal

When all said and done, Alcoa will draw down its global smelting capacity by 12 percent. According to a Reuters article, that translates into 531,000 metric tons, and the closings of the Alcoa, Tenn., smelter (doubly sad, since the town was founded specifically for the company) and two of six smelters in Texas, which had already been idled.

Marginal costs of production are a big concern for aluminum producers (especially those in China), and with an excess of supply in the market, the flailing aluminum price in the past half year isn’t enough to keep most producers as profitable as they’d like. The gray metal hit $2,800/ton in May 2011, but has since come off around 30 percent, closer to $2,000/ton.

According to Reuters, many estimate that a quarter of global aluminum production isn’t sustainable at that that price. The FT reported that the US smelters Alcoa is closing are among the higher-cost plants in Alcoa’s portfolio, and the company has set a target of reaching the lowest 41 percent of the industry for aluminum production costs.”

But will the cuts sufficiently help boost aluminum prices? That remains to be seen.

Chinese analysts have noted that since certain Chinese aluminum producers cut back smelting capacity two months ago, prices have not appreciated enough to write home about., according to a MarketWatch report. Yao Xizhi, chief aluminum analyst at Antaike in Beijing, was quoted as saying that other Western producers would have to make significant cuts before there’d be any sustainable increases in prices.

Also, many say that physical premiums will remain under pressure” through Q1 due to stalling aluminum demand and high LME inventories. According to the article, Japanese premiums for the first quarter settled at $112-$113/ton, down from $118-119/ton in Q4 2011.

We’ll keep an eye out as the story develops.

–Taras Berezowsky

Guest commentator TC Malhotra contributes to MetalMiner from New Delhi.

India’s federal government hiked the export duty on iron ore to 30 percent from the previous rate of 20 percent. The Commerce Ministry has raised the export duty on both iron ore fines and lumps, effective Dec. 30, 2011.

The government had raised export duties on both lumps and fines before, to 20 percent, in last year’s budget to check the indiscriminate export of the key steel-making raw material and to encourage domestic value addition.

The duty rise is likely to hurt India’s export competitiveness, while the move will directly impact Indian mining companies that export ore, like Vedanta Resources subsidiary Sesa Goa.

Sesa Goa Vice President AN Joshi was quoted by media reports as saying that it will impact operations of ore exporters like them, even though it may not fully bring exports to a halt.

Shipments of lumps will stop, as it will not be economical for Indian companies to export them. However, fines will be exported as Indian steel companies do not use them, Joshi was quoted as saying.

Fines and lumps are two different forms of iron ore used by steelmakers. While all steel companies use lumps, fines have to be converted into pellet forms before being used.

However, industry analysts believe that domestic steelmakers will benefit from the government’s decision to hike the export duty, as it will make the mineral cheaper by almost 50 percent for local steel companies. At the same time, the decision would create roughly Rs 90 billion ($1.8 billion) in additional government revenue.

Pipeline To China

A report published in Indian business daily Hindu Business Line claims that Indian iron ore exporters fear losing further ground in China, their key market, because of the latest hike in the iron ore export duty.

India is the world’s third-largest exporter of iron ore, after Australia and Brazil. China, the world’s largest steel industry, imports a considerable amount of iron ore mainly from Australia, Brazil and India, but it is understood that Chinese medium-sized steel mills prefer Indian iron ore. However, the export duty increases during recent times have declined the percentage of Indian iron ore export mainly to China.

According to mining trade group Federation of Indian Mineral Industries (FIMI), India exported around 40 million metric tons of iron ore from April-November 2011. Another 5 to 7 million tons could find their way out. Still, overall exports would decline 50 percent this year from last year’s 97.6 million tons.

India shipped 117.3 million tons of iron ore in 2009-10.

R.K. Sharma, the federation’s secretary general, was quoted as saying that with high export tax and railway freight, India’s iron ore exports won’t exceed 50 million tons this fiscal year through March.

Besides the rise in export duty, there was another reason that helped further decrease iron ore exports. Following allegations of illegal mining, the South Indian state Karnataka imposed a ban on exports of the raw material as of July 2010.

According to the Business Line report, in 2009, the Indian share in China stood at 17 percent. The report stated further that the iron ore trade was expecting some good demand from China in the near term; however, with the export duty hike, the hopes for those deals have been dampened.

–TC Malhotra

Source: quickenloans.com

Huge events — some glorious, many catastrophic — took place in 2011, and a lot of them had an impact on metals markets. (For the most catastrophic natural events, such as the Japanese tsunami and ensuing Fukushima disaster, we’ve devoted a separate Best Of post.) However, here are some other news items that caught some MetalMiner coverage in 2011:

1. Tunisia, Egypt, Libya¦Who Next, and What Could It Mean For Metals?

The Arab Spring, as it came to be known, was a huge deal in the Middle Eastern world, and the political events are still playing out. Stuart took a good look at how the revolution played into other second- and third-world markets.

2. Glencore IPO: Good or Bad? And What Does It Mean?

Glencore got perhaps the most exposure of any commodities-related firm in 2011.

3. Are Glencore, JP Morgan and Goldman-Sachs Scamming the LME Warehouse System?

The “scandal” of sorts (the term may be a bit harsh, but the mainstream news coverage reflected it) involving inordinate backups at LME aluminum warehouses in Detroit got quite the attention. It’s still unresolved, as wait times to get the metal out of Detroit houses won’t get considerably better for at least another year.

–Taras Berezowsky

Source: questgarden.com

The headline says it all — so many producers and suppliers are at the whim of Mother Nature when it comes to running their business. 2011 was certainly no exception:

1. The Japanese Earthquake and Preliminary Impact on Global Metals Markets

The horrendous tsunami ruined many lives and livelihoods, and gave the world a nuclear scare. Japan’s auto and tech industries are still getting back on track…

2. Australian Floods Hit Coal Exports as Rising Prices Compound China’s Cost Woes

Floods down under are always a danger to the coal and iron ore export markets.

3. Thailand’s Floods Felt Around the World, Disrupting Global Manufacturing

The most recent disaster rippled through the electronics industry, among others.

–Taras Berezowsky

Source: blog.laptopmag.com

If you’re still picking up electronic gifts this week — whether it’s a Samsung laptop or a Nintendo Wii — take a moment to consider their contents: “conflict” minerals.

Covered by the mainstream this week on NPR.org, the conflict minerals story as it relates to the Dodd-Frank law and traceability has been a MetalMiner staple for the better part of 2011, reflected by the posts below. Through our relationship with Lawrence Heim of Elm Consulting, MetalMiner has been at the forefront of informing metal buyers on what they need to know when it comes to conflict minerals.

When the SEC comes out with its latest rulings, you can be sure to catch it on MetalMiner first.

1. Sourcing Requirements For Complying with New Dodd-Frank US Conflict Minerals Law Part One

2. Conflict Minerals Law and Supply Chain Traceability Part Two

3. Conflict Minerals Law, Supply Chain Due Diligence and Impact on Metal Buying Organizations Part Three

–Taras Berezowsky

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