Industry News

The United States Geological Survey (USGS) recently reported production figures for a select group of commodities, all of which are tied directly to the construction sector in the US.

Most importantly for MetalMiner, it looks at US aluminum, iron ore and zinc production, but the significant rises in all three metal categories (and in the non-metal categories, such as cement, sand/gravel and crushed stone) seem to be inversely related to the trends in the US housing market.

What’s Up?

Secondary aluminum production more specifically, aluminum alloys produced at secondary US smelters, minus primary aluminum consumed, according to the USGS) held steady from last quarter at 221,000 metric tons, but that represents a 35 percent increase from the same quarter in 2010. It’s been increasing the past three quarters because there’s been “increased availability of secondary material compared to primary material.

As the report mentions, the reason for higher quarterly production numbers is due in large part to the completion of previously planned projects rather than new starts, for example some of which were/are funded in part by the government’s American Reinvestment and Recovery Act. That’s why cement is up 11 percent in the third quarter from the second; sand and gravel is up 7 percent; and crushed stone up 14 percent.

What’s Down?

Here’s the catch. The US housing market is still holed up in the deepest part of the lingering previous recession (as the Beaulieu Brothers have highlighted before).

Total construction spending during the first nine months of 2011 was 3.5 percent less than it was in the same period of 2010, according to US Census figures quoted in the report. Also, the Census Bureau and HUD (Housing and Urban Development) department reported that revised figures for privately owned housing starts for 2011 (up through September) were 1.5 percent fewer than the same period in 2010.

A Wall Street Journal report yesterday suggested that the minute gains in home construction confidence are almost nullified by existing home sales (down 10 percent so far this year) and foreclosure supply increases.

What does that mean for aluminum? The global market is still in oversupply, with LME inventories continuing to hold above 4.5 million tons and prices generally heading in a downward direction since mid-2011. This is likely to continue, according to analyst firms such as Harbor Aluminum. Harbor maintains that “Global end user aluminum demand has stalled and we shouldn’t expect any meaningful improvement for the balance of the year.

However, Harbor also says that their market balance indicator points to an underlying deficit, and that market fundamentals will come back strongly in 2012.

–Taras Berezowsky

If Italy’s role in the European debt crisis is to have any tangible effect on the metals markets, it has already appeared on the European stainless steel front.

SMR, the Austria-based steel analysis firm, is forecasting that stainless steel demand could fall by as much as 10 percent in Italy in 2012, according to Reuters. Increased competition from Asian countries (which has been in effect for years now) and new austerity measures hoping to offset the sovereign debt crisis will be to blame, according to SMR.

Slackened demand is forcing the likes of ThyssenKrupp, Outokumpu and other European stainless steel makers to close down production significantly, a decision mainly led by new private equity investors who are bearish on the 2012 outlook, according to the article. It looks as though stainless steel demand in Western European economies (Italy, Germany, and others) will flat-line over the next year and a half, with Eastern European economies the only ones offering any sort of bright spot. However, US and global demand both look to be positive in 2012.

Key Components of Stainless Steel What Are They Doing?

Nickel prices should remain steady if not supported above $20,000 per ton, Marcus Moll, SMR’s founder, told Reuters. Also, the uptick in US molybdenum oxide prices could indicate increasing US demand.

The US moly oxide price stood at $12.78 per pound at the end of October, then rose to $12.83 per pound on Nov. 7; up to $12.93 on Nov. 10; and rose again on Nov. 14 to $13.43 per pound, according to our MetalMiner IndX. Although as of this writing the price has dropped to $13.25, Thompson Creek, a North American moly producer, quoted an average moly oxide price of $13.60 per pound on its website.

Ferrochrome prices, however, have fallen off in China. The local price fell to 8,300 yuan per metric ton from 8,500 on Nov. 8, and although it may appear as a small drop, sentiment from South African ferrochrome producers support the notion that prices in China have been low for a while. “People can’t lend at [the current] price level into China, Emmy Leeka, CEO of ferrochrome producer Hernic, told Reuters in another article. “Quite a number of guys are actually producing and dumping material into China below costs¦some of them are losing money already.

Industrial production and capacity utilization are both up slightly this month, based on the most recent numbers, and inflation is down, perhaps spurring consumers to make larger purchases (especially before the holidays); but can it be taken as a sign that the stainless market in the US is healthy? For one thing, the MEPS price index for North American 304 stainless dropped only 6 percent from September to October this year, compared to the EU’s drop of 10 percent. Ultimately, however, the picture is looking better in the US than in Europe, which is on the verge of its own 2008-style bust.

It would seem not everyone is frozen by indecision in the headlights of the European debt crisis. In many emerging markets, both governments and corporations are forging ahead with ambitious investments with plenty of money in the pocket or access to ready sources of finance. At the Dubai Air Show, Emirates Airlines, fast earning itself accolades for world’s most successful airline, has just placed a record order with Boeing, according to the Financial Times.

The order for 50 Boeing 777 long-haul aircraft is worth $18 billion at list prices, a record contract by value for the US company that will add to the 162 777s the airline already operates. Competition is equally fierce in the defense sector, where Boeing has not fared quite so well against their arch-rival Airbus. Via their military side, EADS, the group appears to have sidelined Boeing with sales of their Typhoon Eurofighter to India, where the Boeing F-18 and Lockheed Martin F16 have been dropped in favor of the Typhoon and possibly the French Dassualt Rafale for a 126-fighter-jet contract said to be worth $11 billion.

In Japan on the other hand, Lockheed looks to be in much better shape, edging the Typhoon out in favor of their stealth technology F-35, according to the Telegraph. Again, Boeing’s F18 is not looking too hot a prospect as, like the Typhoon, they can’t match the F-35’s stealth capabilities for running clandestine surveillance flights over North Korean, Chinese and Russian military assets in the region. The Typhoon has been trading recently on the highly successful results of over 3,000 operational hours over Libya, in which it is said to have achieved a 99% success rate against fixed targets and 98% success rate against mobile targets, apparently making its eye-watering, nearly $100 million price tag a bit of a bargain.

The wooden spoon goes to the poor old French, who haven’t secured a single sale outside France for the Rafale in spite of heavy lobbying by President Nicolas Sarkozy at every opportunity. Dassault had hoped to secure an order for 60 jets to replace the UAE’s aging fleet of Mirages, but it seems the order is more likely to go to the Typhoon in spite of three years of French lobbying.

Defense aircraft makers may be facing a stagnant market in Western countries as major players settled aircraft numbers for the next 10 to 15 years late last decade, but they have a wealth of sales opportunities in emerging and overseas markets among countries looking to replace fleets of aging Mirages, Migs and assorted American hardware. Brazil, for example, is tendering for the first 36 fighters to replace a collection of Mirages, Northrop F-5s and A-1s with either Boeing F-18s, Typhoons, possibly Saab Griffen’s and, oh yes, of course, the Rafale too. It’s not clear where Brazil sees the national threat by requiring so much expenditure, but apparently the total demand could rise to 100 aircraft potentially worth some $15 billion.

The governments of Qatar, Oman, South Korea, Denmark, Switzerland, Turkey, Romania, Malaysia and Bulgaria, in addition to the above, are all also reportedly considering acquiring aircraft. So on both the civilian and military aerospace front, Boeing, Lockheed Martin and European consortium EADS/Airbus, not to mention their component and subcontractor supply chains, are likely to remain busy well into the middle of the decade meeting the demand.

–Stuart Burns

MetalMiner is pleased to welcome Jason Busch, editor of our sister site Spend Matters.

MetalMiner affiliate site Spend Matters sent a representative to attend Emptoris’ annual user conference in Boston earlier this fall. Emptoris is a provider of sourcing, contract management and related technologies to help procurement organizations better negotiate, contract and gain visibility into their direct, indirect and services purchases. AngloAmerican recently signed a large relationship deal with Emptoris as a component of a broader sourcing and procurement cost-reduction initiative. From a systems perspective, AngloAmerican is investing in five distinct technology areas.

These are contract management, strategic sourcing, spend analysis, transact-to-pay (T2P) and master data management (MDM). Emptoris is providing the first three areas of software for AngloAmerican. These cost-reduction and visibility-enabling tools will sit on top of two ERP systems at AngloAmerican across more than a dozen instances of SAP and Eclipse. Along with these tools, by investing in the right skills, programs and people, AngloAmerican hopes to become the “industry leader and global benchmark for supply chain value creation” and has targeted the implementation of over “$1 billion of additional value by the end of 2011.

AngloAmerican’s sourcing-led plan started in 2008. It focused on three key areas:

  1. A “new operating model that would leverage a combination of category management and strategic sourcing to reduce costs
  2. Consistent processes, governance and a supplier performance management (SPM) framework
  3. Investing in teams and individuals within teams to deliver results

To drive savings, AngloAmerican identified 70 categories working with the various business groups (platinum, diamonds, copper, nickel, iron ore/manganese, metallurgical coal, thermal coal and “other mining/industrial) to pursue in a “manageable, understandable and consistent way. In addition to better process, automation and negotiation, the organization planned to rely on three distinct sources of value to drive savings: total cost of ownership (TCO) reduction, arbitrage opportunities and low-cost country sourcing (LCCS). The category teams would then create a strategic approach to leveraging spend within and across business units, taking full advantage of the 500 procurement team members that were part of the AngloAmerican team.

We’ll share additional commentary and lessons from AngloAmerican’s presentation and procurement transformation in the coming weeks, including their new themes and focus areas such as improving community relations and local procurement (e.g., micro-credit) to work with smaller and often disadvantaged (as we would call them in the US) suppliers.

Jason Busch

Few sunny days ahead for US solar manufacturing industry. Source: solarenergyfact.org

You may believe it was inevitable. Sooner or later, production of what is essentially a commodity item like photovoltaic solar panels would prove uncompetitive in Western markets as low-cost emerging markets reached critical mass and, in something of a downturn, flooded the market at prices Western producers could not match. Just about everyone commenting on the sector has been predicting the industry will only take off when panel prices drop to a level where electricity generation is economically viable without subsidy.

I should say we are not there yet; solar panels still require subsidy. In parts of Europe, they benefit from feed-in tariffs twice the current cost of power from the grid, guaranteed for 25 years as a government incentive. But panel prices in the US are reported in a NY Times article to have fallen dramatically in recent years. Wholesale prices are currently $1.00-1.20 per watt of capacity today, down from $1.80 in January and $3.30 in 2008.

Most were hoping falls in price would come from technological development and mass production, but in truth much of the fall has come about due to the market becoming awash with Chinese solar panels. From nothing in the middle of the last decade, Beijing has engineered phenomenal growth, both in domestic installed capacity and in exports. Chinese companies now export some 95 percent of the country’s solar panel production and are said to have three-fifths of global production capacity. Good news for consumers looking to take advantage of solar power, good news for the environmental lobby keen to see the uptake of renewable energy, and good news for installers for whom lower panel costs have helped fuel an industry that is growing generating capacity at 70 percent per year.

So is everyone happy? No; spare a thought for the domestic US solar panel manufacturing industry. Massive investments were made in production facilities to meet the projected demand. Controversial cases like that of Solyndra, the failed beneficiary of $528 million of government largesse (notwithstanding the impact of Chinese imports) have been dramatic.

Two other major US solar manufacturers that together are said to have represented one-sixth of US production capacity went bankrupt in August, and four others are laying off workers and cutting output. Seven producers led by Solar World, the US subsidiary of a German producer (the six other firms have kept their identities secret for fear of reprisals in accessing China’s market although how they expect to compete in China if they can’t compete in their home market is unclear) have called for anti-dumping and anti-subsidy cases against a wide range of Chinese solar panel makers.

The producers are calling for tariffs of more than 100 percent in retaliation for what they say are unfair government subsidies allowing Chinese makers to sell panels in the US, which would normally be 50 to 250 percent higher in their home market. In a Financial Times article, Timothy Brightbill, a partner with Wiley Rein, the law firm representing SolarWorld, said “China has a system of pervasive and illegal subsidy payments, including government cash grants and subsidized loans to the industry and subsidized raw material inputs. (Watch MetalMiner’s recent video interview with Brightbill here, where we discussed export restrictions and state-owned enterprises in regards to Trans-Pacific Partnership negotiations.)

Law requires the Commerce Department to issue a preliminary decision on the anti-dumping claim possibly in mid-January, but no later than late March, and on the anti-subsidy claim, no later than mid-May. Many trade experts expect that the decision would include steep tariffs on imports, but the ruling may be too late to save large sections of the US industry.

The issue is a politically charged one in Washington; President Obama made green technology and US jobs an objective by which his presidency would be judged, yet at the same time the US needs another trade dispute with China like it needs a hole in the head. The outcome is likely to be the worst possible for both issues.

–Stuart Burns

Eight pounds of plutonium-238 are set to go up into space with NASA’s next Mars mission, according to an NPR story. That may not sound like much, but these days, it’s a crucial amount. Even though the space fuel made of Pu-238 one of the five main plutonium isotopes has been powering NASA’s robotic missions for more than 30 years, the plutonium-238 supply faces a drastic shortage.

NPR quotes Len Dudzinski, the program executive for radioisotope power systems at NASA headquarters, saying that NASA doesn’t really know the exact US supply inventory of plutonium-238: “The Department of Energy knows the exact amount of plutonium that we have, and they don’t ordinarily share that number publicly.” The US DOE used to source its Pu-238 from the Savannah River Site K reactor in South Carolina, before it was taken offline in the 1980s. Lately, they’ve bought from Russia. According to a document from the Idaho National Laboratory cited by Wikipedia, the US has bought a total of 16.5 kilograms of Pu-238 so far.

According to the NPR story, Russia’s supply, which has mainly been the US’ source of Pu-238, has been drying up lately. (Or at least Russia’s willingness to sell it to the US; although DOE documents note that Russia no longer produces plutonium-238.) Either way, there is only enough Pu-238 for NASA’s deep-space missions to last through 2022. There are no known substitutes for what this isotope can do in space effectively convert heat to electricity. It’s also used for power generation in satellites.

Pu-238 is an isotope of nuclear-grade plutonium; the other type is weapons-grade plutonium. According to the World Nuclear Association, the half-life of Pu-238 is 88 years, compared to 6,560 years for Pu-240; 24,000 years for Pu-239; and 374,000 years for Pu-242. About 1300 metric tons of nuclear-grade plutonium has been produced globally to date (of which Pu-238 represents only a tiny fraction), and nuclear-weapon disarmament could yield up to 200 metric tons of weapons-grade plutonium, mostly in the former USSR.

Funding for domestic production of the fuel has spurred debate between Congress, the DOE and NASA. Even if production representing significant-enough capacity were started today, it would take at least five years to get enough material for one spacecraft, according to Bethany Johns, a public policy expert with the American Astronomical Society. Others estimate eight years of production to achieve the 11 pounds needed for NASA’s yearly quota. Evidently, only the Idaho National Laboratory in Idaho Falls and the Oak Ridge National Laboratory in Oak Ridge, Tennessee, which employ specific reactors that support fabrication, irradiation and recovery of neptunium-237 or americium targets, are capable of producing Pu-238 in the United States. The DOE runs both facilities.

This Advanced Test Reactor (ATR) is one of two in the US that supports Pu-238 production. Source: US Department of Energy

Back to the issue of strategic supply: does the shortage of plutonium-238 really pose a risk to national security as the shortage of some other metals would (such as rare earths)? It depends on which side of the space exploration argument one is on. Some argue that staying at the forefront of deep-space exploration is vital to US strategic interests; but others cannot justify spending the millions of dollars for upkeep of what they see as a “dated endeavor, starting with the expensive irradiation and recovery process. In early September 2011, Congress shot down a $15 million funding request for Pu-238 production, giving no reason.

Given the tight niche of this particular isotope’s uses, who knows how or even if shortages will impact our national security down the line. But if we should look at rare earth metals as strategic to the US economy, we should also consider the resourceful institutions we’ve built up domestically (e.g. NASA) as vital to the US’ future interests.

–Taras Berezowsky

The fraught investment environment that we all live in now just got rattled again last week, when MF Global, the financial broker-dealer headed by former Goldman Sachs honcho (and subsequent US senator and New Jersey governor) Jon Corzine, declared bankruptcy. Although MF Global’s situation resonates more immediately in financial circles, the company also has a stake in the metals sphere.

MF Global (who’s first two initials have always made me think of a rather unfortunate swear word) seems to have placed itself right in the middle of the post-recession recession to borrow a phrase coined by Spend Matters and market instability backfired on them. Amidst the European sovereign debt crisis, MF Global made some bets that investors were apparently not happy about, according to Bloomberg BusinessWeek. Missing money (to the tune of some $633 million) raised the CFTC’s eyebrows, and Corzine ultimately resigned, unable to take the heat any longer.

Turns out Corzine, who has a reputation for taking on massive investment risk — as he did with Goldman — and personal risk as governor (not wearing a safety belt in the passenger seat while his driver, a state-police officer, sped along on the freeway, resulting in a crash and life-threatening injuries), kept up the risky behavior with MF Global. As of Oct. 25, Bloomberg reported, the company “owned $6.3 billion of Italian, Spanish, Belgian, Portuguese and Irish debt. Ouch. I guess they bet the wrong way.

A look at MF Global’s plummeting stock performance against that of INTL FCStone. Source: Reuters

Interestingly, according to a Reuters report, the UK arm of MF Global is a “mid-size metals broker on the LME. Well, we should say “was a metals broker, as the company’s bankruptcy is forcing the team of brokers to look elsewhere. But MF had a sizable role they were one of only 12 firms with ring trading access, known as “Category 1. (“Category 2 allows all types of LME business, including electronic clearing.) Some analysts are saying that Beijing would be happy to tap into their expertise as a way to get into LME trading.

The Bank of China is reportedly already forming a commodity trading operation in London to be approved by 2012, which will have “Category 2 privileges on the LME, and the going bets are that they’ll snap up some former MF traders and brokers, according to Reuters.

MF Global UK Ltd. had quite a bit of metals business going. A separate Reuters article details the firm’s metals plays:

“It provided futures and options market-making, brokerage and clearing services for metals including copper, aluminum, zinc, lead, tin, nickel, aluminum alloy, molybdenum, cobalt, [and] steel billet…As a clearing member of the Commodity Exchange (COMEX) and the NYMEX, MF Global provided futures and options brokerage and clearing services for copper, gold and silver on COMEX, as well as platinum and palladium on NYMEX…It also offered over-the-counter (OTC) products and contracts, including LME versus COMEX copper arbitrage.

It also turns out that MF Global owns quite a sizable stake of the LME 4.7 percent, in fact, worth nearly 3 million pounds and in the event of an LME takeover (rather imminent), MF’s stake could be worth between 16.3 million and 46.5 million. KPMG, brought in as a third party to oversee proceedings, will have to decide how to handle these shares if no one buys the bankrupt company, according to LME spokesman Chris Evans.

Yet another financial downfall story shows us just the beginning of what an international debt crisis can do, not only to one firm, but also to the entire global metals trading industry and how it relates to the broader commodities markets. Will it affect metals prices in the medium-to-long term? We’ll see, but at least we know that the Euro debt crisis has already inflicted harm on the west side of the Atlantic.

–Taras Berezowsky

It’s a refreshing change to report that one industry sector is doing rather well in the US and rather poorly relatively speaking in China. Not that we wish the Chinese ill, but it becomes a bit wearing to hear month after month how one industry or another is about to be overtaken by rampant Chinese expansion; so when the US car industry reports modest sales growth, it should be a source of some encouragement.

According to figures in an FT article, US light-vehicle sales totaled 13.2 million to 13.3 million units last month, slightly above September and up from 12.3 million in October 2010. US carmakers believe they are benefiting from a lot of pent-up replacement demand helping GM post a 1.9 percent increase over a year earlier, Ford a 6 percent increase and Chrysler 27 percent!

Wanted: Chinese Car Sales

Meanwhile, falling sales growth at home is putting Chinese carmakers under pressure to try and export to maintain momentum. Even Western OEMs are reported to be doing better than Chinese manufacturers in their local market. Credit tightening and lack of any stimulus incentives are depressing car sales in China, encouraging firms to look to export markets for growth. But in spite of Fiat’s Sergio Marchionne warning US carmakers that China is coming, the reality is any carmaker that can’t even compete on quality with overseas OEMs in its home market is going to struggle to carve out a sizable export market.

Witness US manufacturers losing out to Japanese manufacturers in the 1990s. Understandably, Chinese carmakers have focused on cost-conscious, brand-blind emerging markets like Latin America, the Middle East and Russia. Even so, market share is minuscule: after an 80 percent increase in exports, China’s leader Chery Autos, combined with JAC and Lifan, between them only have 1.85 percent of the rapidly growing Brazilian market. On the face of it, Brazil should be ideal for Chinese models, stuffed as they are with extras yet offered at a slight discount to Western brands. But even Brazil’s emerging middle class is only gradually accepting Chinese-made cars, a trend that risks being choked off before it takes hold by a Brazilian tax increase. From December, the government will increase a tax on cars — those with less than 65-percent Brazilian, Mexican or regional content — by up to 30 percent, in a move reported to be aimed at Asian imports.

Stateside Viewpoints

Sergio Marchionne is quoted as saying at a Michigan auto industry conference in August, “Even assuming China were to export only 10% of what it produces which some analysts forecast will be 30 million vehicles by 2015 and 40 million by 2020 “the risk we face in our home markets is enormous.

Yes, taking those numbers alone it would be; but China’s growth in car production is slowing — they probably won’t be making 30 million cars by 2015, let alone 40 million by 2020. Nor will they have made the leaps and bounds necessary to produce vehicles of comparable quality to Western brands. At the same time, rising inflation and a gradually appreciating currency will make manufacturing in China a less attractive proposition than it was previously.

Western carmakers should be wary of China; just as Japanese, Korean and even Malaysian carmakers have made their mark and reduced the available market for Western manufacturers, so will the Chinese. But rising affluence around the world, the driving force behind rising car ownership, also brings rising expectations and Western carmakers have shown a remarkable ability to continue to innovate, improve quality and reduce costs, which has kept them in the game.

–Stuart Burns

While the ink on the brand-new US-South Korea Free Trade Agreement has barely had time to cool (to say nothing of President Obama’s and President Lee Myung-bak’s mutual courtship), Korea’s domestic 800-pound-gorilla of a steelmaker POSCO has been having some problems lately.

For one thing, POSCO’s profits have been, shall we say, less desirable than expected. Turns out, the global No. 3 steel producer’s bottom line suffered most from currency depreciation. As the Wall Street Journal reported, “currency-translation losses in the third quarter hit POSCO hard they lost 1.08 trillion won ($941 million). Comparatively, in the same quarter last year, they gained 208 billion won ($181.2 million).

How does this seemingly huge swing happen, you might ask? The answer lies in how South Korea’s steel companies invest in the US dollar. According to the Journal, POSCO and others “are susceptible to sharp movements in the won, as most have a largely unhedged net-short position in the dollar. That’s because their import costs, such as for iron ore and coal, exceed their export revenue. In essence, it takes more Korean won (1,178.10 to $1 at the end of September, compared to 1067.70 back in June) to buy the raw materials they need from other countries.

Although POSCO’s senior vice president Jeon Woo-sig was quoted as saying that POSCO will set their long-term sights on foreign raw materials companies and steel mills to merge with and/or acquire to remedy their growth problems, in the short term, the loss affects POSCO’s capex habits. Iron ore and energy producers, among others, must be raking it in, because raw materials costs are causing POSCO to cut spending 18 percent for the year, according to Bloomberg. Arcelor will also be cutting expenses by $1 billion by idling European mills and opting for cost-cutting alternatives.

As if a sorely underwhelming quarterly earnings report isn’t bad enough, POSCO is making moves to improve its distribution operations, which according to this article, are in “desperate need of a new growth engine. The company will now sell its entire product line through its sales outlets, regardless of steel form or type. It’s a classic case of rationalizing one’s supply base customers want to be able to one-stop shop, not having to go to two separate outlets for hot-rolled and cold-rolled products, thereby strengthening their “purchase efficiency. Why this hasn’t happened yet, well, who knows.

Adding insult to injury, all POSCO wants to do is build some steel plants in Dhinkia, Nuagaon and Gadakujang, India but it’s running into local opposition. NHRC teams are investigating alleged human rights abuses on the proposed sites, according to this New India Express dispatch. Villagers claim that the land rights belong to them, under the Forest Rights Act, since their forefathers have lived there since 1930.

Looks like trying times for the Korean steel market’s biggest player.

–Taras Berezowsky

Perhaps the US scrap markets won’t need to listen to all this blustery talk about heading into another recession. After all, with the recent AISI report that US raw steel production rose 14.3 percent year-on-year last week, up to 1.86 million tons, and capacity utilization also up to 75.1%, things might be looking good for the US industry.

In a separate report, Gerdau Steel Market Update shed light on the US role in the total global scrap trade. In Q2 2011 (the report indicates that the data reporting lags quite a bit), the US share of total global scrap trade hit an all-time high of 27.9 percent, double that of the EU’s share.

Source: Gerdau Steel Market Update

Turkey, as MetalMiner has consistently reported before, plays no small role in this share:

Source: Gerdau Steel Market Update

According to Census Bureau reports, US scrap exports broke a new record in August, valued at $4.075 billion. Turkey came in at fourth on the trading partner list, importing $358 million worth of total scrap, but first on the list for ferrous scrap, taking in 800,000 metric tons double the figure from the previous month.

However, that may change if Turkey continues to experience lower export volumes and revenues to their top trading partners, due to lower Middle East demand. The Istanbul Mineral and Metals Exporters’ Association (IMMIB) reported that the country’s steel exports to the United Arab Emirates, its largest steel export market, dropped nearly 18 percent from January to September 2011 (compared to the same period in 2010).

Despite US raw production numbers, domestic steel scrap prices may be on a slight downward trend. According to Scrap Price Bulletin, the composite prices for No. 1 HMS have been lowered to $408.50/gross ton  (from $416.83/gross ton last week) and shredded is down to $449.17/gross ton (from $452.50/gross ton one week ago).

Gerdau reports that sources are saying China is looking to increase its scrap consumption, even though its scrap imports have remained relatively flat in the years before and since 2009. With China’s producers still eating up iron ore like crazy (and making deals with the likes of Vale for cheaper ore amidst already-low spot prices), it doesn’t look like their scrap use will be going up anytime soon at least not until their end-use products begin reaching the end of their life cycle. And even then¦

–Taras Berezowsky

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