Aluminum

Before we head into the weekend, let’s take a look back at the week that was and the metals storylines here on MetalMiner, including coverage of steel prices, US electricity consumption and much more:

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Week of April 12-16 (steel prices, electricity consumption and more)

• The Energy Information Administration (EIA) forecast US electricity consumption
  

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  will rise by 2.1% this year.

• Carbon dioxide emissions from the industrial sector fell by 8% in 2020, the EIA also reported.
• MetalMiner’s Stuart Burns on the development and adoption of processes behind so-called “green” steel.
• The strike at ATI continued this week, marking the third week of the labor stoppage at nine of the specialty materials firm’s facilities.
• In other green news, Oslo-based Norsk Hydro said it is exploring the possibility of developing and operating its own hydrogen facilities.
• Burns on the European aluminum sector’s objections to the EU’s Carbon Border Adjustment Mechanism.
• MetalMiner contributor Sohrab Darabshaw delved into India’s foray into graphite anode production.
• US steel capacity utilization fell to 77.6% last week, the American Iron and Steel Institute reported.
• The copper price steadied in the second half of March after plunging in late February and early March.
• Rising aluminum delivery premiums are indicative of a tight market.
• Rio Tinto said it had reached a new funding deal for the Oyu Tolgoi copper mine project.
• US steel price gains appear to have started to slow down.
• Alcoa reported first quarter net income of $175 million, citing the benefit of higher alumina and aluminum prices.

The MetalMiner Best Practice Library offers a wealth of knowledge and tips to help buyers stay on top of metals markets and buying strategies.

The Aluminum Monthly Metals Index (MMI) ticked up 2.0% for this month’s reading, as aluminum premiums remain elevated.

Does your company have an aluminum buying strategy based on current aluminum price trends?

Rising physical delivery aluminum premiums

For aluminum buyers vying for material, they’re finding physical delivery premiums are elevated.

In fact, rising premiums are a sign of market tightness, MetalMiner’s Stuart Burns explained this month. Furthermore, premiums are up in both the US and Europe.

Among the reasons for the rise, China’s shift to net importer has led to the country sucking up a large share of available supply.

“The resulting arbitrage has sucked in imports of both pure and alloy ingot,” Burns wrote. “China imported nearly a quarter of a million tons of primary and over 140,000 tons of alloy metal in just the first two months of this year. That brought its cumulative net totals to 1.3 million tons of primary and 1.1 million tons of alloy since the start of 2020.

“Imports like that, much on spot markets or via traders, has sucked exchange traded and shadow market metal east, placing it conveniently for short onward shipment to China.

“As a result, there is less metal available in warehouses in Europe and the US.”

The Midwest Premium reached $0.22 per pound this week. In January, the premium had fallen as low as $0.12 per pound.

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In a recent webinar MetalMiner ran for key clients, we posed a question regarding the recent rise of aluminum physical delivery premiums: what was behind rises and would they last?

Physical delivery premiums are a significant cost to consumers. It can be a cost that is hard to hedge except for large consumers with access to exchange-traded financial hedging instruments.

So, understanding what is driving higher premiums is helpful in terms of judging the likely trajectory of future metal costs.

Are rising MW premiums causing concern? See how service centers take advantage of that. 

Rising aluminum physical delivery premium

There are several platforms for reporting physical delivery premiums. For the US, the CME is the probably the best.

Reuters illustrated the relentless rise of the aluminum physical delivery premium since the start of Q4 2020. The Midwest Premium is now back above $400 per metric ton, a level not seen in two years.

If it is any consolation to our US readers, North America is not alone in seeing rising costs.

Read more

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This morning in metals news: US energy consumption fell by 7% in 2020; the United Steelworkers union commented on the details of President Joe Biden’s American Jobs Plan; and the aluminum price retraced last week.

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US energy consumption down 7% in 2020

Amid the impact of the COVID-19 pandemic, US energy consumption fell by 7% in 2020, the Energy Information Administration (EIA) reported.

“Last year marked the largest annual decrease in U.S. energy consumption in both percentage and absolute terms in our consumption data series that dates back to 1949,” the EIA said. “Much of the 2020 decrease in energy use is attributable to economic responses to the COVID-19 pandemic that began in the United States during the spring of 2020.”

USW on American Jobs Plan

As we noted last week, the United Steelworkers union last week announced a strike at nine Allegheny Technologies Inc. facilities. The move could have significant ramifications for stainless steel buyers, should it linger.

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President Joe Biden released details of the so-called American Jobs Plan, which among its stated goals aims to modernize infrastructure, revitalize manufacturing and create what it says will be “millions” of jobs.

The proposal will include an investment of approximately $2 trillion over the next 15 years, the White House said Wednesday.

The MetalMiner Best Practice Library offers a wealth of knowledge and tips to help buyers stay on top of metals markets and buying strategies.

Aluminum in infrastructure

On the heels of the announcement, domestic metals associations weighed in on the Biden administration’s wide-ranging proposal.

The Aluminum Association applauded the news in general terms, emphasizing aluminum’s role in infrastructure development.

“We are pleased to see the Biden administration and the Congress focusing on infrastructure investment as the national priority that it is,” Aluminum Association President and CEO Tom Dobbins said. “Aluminum is an essential element to America’s infrastructure future – used widely in the electric grid, solar panels, electric vehicle charging stations and buildings of all kinds. Major investment will also provide a once-in-a-generation opportunity to modernize the nation’s recycling infrastructure, vital to shoring up domestic aluminum supply chains and increasing manufacturing self-sufficiency.”

Dobbins added the Aluminum Association “stands ready to work with” the Biden administration and Congress on “investments that work for America’s vital aluminum manufacturing base.”

AISI supportive, but disagrees with funding

Meanwhile, in its own statement, the American Iron and Steel Institute (AISI) also praised the administration’s focus on infrastructure.

However, the industry group expressed its disagreement with the funding mechanisms in the proposal.

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Three years have passed since former President Donald Trump imposed Section 232 tariffs on steel and aluminum.

The administration cited national security concerns when imposing the tariffs. In addition, it aimed to raise capacity utilization of the US steel and aluminum sectors. (For the week ending March 20, US mills reached a steel capacity utilization rate of 77.3%.)

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Some countries received exemptions and domestic buyers have been able to win exclusions, which have mitigated the strength of the tariffs.

Metals consumers have expressed their opposition to the tariffs. For example, the Coalition of American Metal Manufacturers and Users (CAMMU) called for an end to the tariffs last year, citing the negative economic impact of the COVID-19 pandemic.

However, a recent review of the tariffs offered a more positive view.

The MetalMiner Best Practice Library offers a wealth of knowledge and tips to help buyers stay on top of metals markets and buying strategies.

EPI: Section 232 tariffs produced ‘near-immediate benefits’

According to a recent report this week by the Economic Policy Institute (EPI), the Section 232 tariffs offered “near-immediate benefits.”

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The aluminum market is undeniably tight, as consumers are having to wait months for metal and the Midwest Premium rises. In some locations — Europe, in particular —  consumers of rolled plate cannot secure new production space until well into Q3.

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Some mills have even pulled out of quoting for new business customers in 2021. Anti-dumping legislation on flat rolled products from China and a fire last year at a Russian rolling mill have combined to dramatically restrict supply options for consumers.

As a result, prices have moved up.

Are you on the hook for communicating the company’s aluminum performance to the executive team? See what should be in that report. 

US aluminum situation

The US is no better.

Semi-finished product prices are rising and lead times are extending. It is convenient to blame the recent decision to apply substantial anti-dumping duties on 18 countries supplying the US with flat rolled commercial aluminium. The move has severely distorted the supply market. A significant number of major supplying countries, including Germany, South Korea and Turkey, are shut out by the high tariffs.

However, the tariffs are not the only reason the market is tight.

As intended, the supply chain has now switched focus to domestic — or, at least, USMCA members’ North American mills. The result is lengthening lead times and price rises.

Some consumers have asked why the LME primary metal price hasn’t risen further in view of the tight market. The reality is what we are seeing is a distorted supply market, not a global primary metal shortage.

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This morning in metals news: ArcelorMittal announced a series of low-carbon initiatives; meanwhile, US import prices increased in February; and, lastly, the aluminum price has picked up this week.

Are you on the hook for communicating the company’s steel performance to the executive team? See what should be in that report. 

ArcelorMittal unveils XCarb™ low-carbon initiatives

ArcelorMittal today announced a trio of new low-carbon initiatives under the umbrella of what it is calling XCarb™.

“XCarb™ will ultimately bring together all of ArcelorMittal’s reduced, low and zero-carbon products and steelmaking activities, as well as wider initiatives and green innovation projects, into a single effort focused on achieving demonstrable progress towards carbon neutral steel,” ArcelorMittal said.

The program will include green steel certificates for customers.

“Across our ArcelorMittal Europe – Flat Products operations, we are investing in a broad range of initiatives to reduce carbon emissions from the blast furnace,” ArcelorMittal said. These initiatives range from our flagship Smart Carbon projects, such as Torero (transforming biomass into bio-coal to replace the use of coal in the blast furnace) and Carbalyst (capturing carbon-rich blast furnace waste gas and converting it into bio-ethanol, which can then be used to make low-carbon chemical products) to capturing hydrogen-rich waste gases from the steelmaking process and injecting them into the blast furnace to reduce coal use.”

In addition, the program includes recycled and renewably produced “pioneering products.”

Lastly, XCarb™ will also include an innovation fund. ArcelorMittal says it will invest $100 million annually into the fund. The fund will go toward “groundbreaking companies developing pioneering or breakthrough technologies that will accelerate the steel industry’s transition to carbon neutral steelmaking.”

Import prices rise

In addition to today’s ArcelorMittal news, US import prices picked up 1.3% in February, the Bureau of Labor Statistics reported.

Import prices gained, in part, due to higher fuel prices.

Prices for import fuel rose 11.1% in February after rising 9.0% in January.

Aluminum price gains

The LME three-month aluminum price closed Tuesday at $2,201 per metric ton.

A week ago, LME three-month aluminum reached $2,169 per metric ton.

Does aluminum content call to you? We’re rolling out more on LinkedIn.

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The International Aluminum Institute published a report outlining how the aluminum industry can reduce its emissions.

Manufacturers of metals are increasingly under pressure to modernize their production processes and make them “greener.”

In recent coverage, MetalMiner’s Stuart Burns has touched on China’s latest Five-Year Plan and its environmental implications for the country’s massive steel and aluminum sectors. Producers in Europe, meanwhile, have argued the continent’s stricter environmental standards and regulations put it at a competitive disadvantage.

On the other hand, decarbonizing and becoming “greener” is also becoming more and more of a branding opportunity.

“Rusal is at the forefront of promoting its primary metal as coming wholly from renewable (hydroelectric) sources,” Burns wrote last September. “European metals producers may not have such a clear advantage in terms of power supply.”

So, what does the industry need to do to keep up with the times and meet emissions targets?

Find more insight on MetalMiner’s LinkedIn.

IAI underscores three pathways to reducing emissions

The International Aluminum Institute recently outlined what it called three “pathways” for the aluminum sector to reduce greenhouse gas emissions.

In its report, the International Aluminum Institute outlined “realistic approaches” to emissions reductions. The Institute outlined the approaches in line with the International Energy Agency’s Beyond 2 Degree Scenario.

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Despite howls of protest from consumers, the Biden administration has doubled down on the Trump administration’s trade barriers with its latest move on aluminum tariffs.

The administration recently slapped semi-finished flat rolled aluminium anti-dumping duties on 18 countries supplying the US market.

Don’t miss the MetalMiner analyst team on March 24 at 10 a.m. CDT for a 30-minute metals market forecast and strategies to deploy in falling markets: https://zoom.us/webinar/register/WN_6J8wAyYySfihVk3ZUH9yMA.

Aluminum tariffs

Previous administrations’ focus on China — first on extrusions in 2011 and then foil and sheet in 2018 — succeeded in bringing down imports from 620,000 metric tons in 2017 to 170,000 tons last year, Reuters reported.

However, the wider Section 232 10% tariff is so riddled with exclusions and special exemptions that imports from the rest of the world have continued to make up a significant proportion of the market supply landscape.

Imports of sheet, plate and strip totaled 1.3 million metric tons in 2019. That represented about 62% of total aluminum product imports that year, according to Reuters. Although volumes shrunk sharply to 836,000 tons last year, this was due to the broader COVID-19 disruption to the U.S. manufacturing sector.

Total semis imports last year fell by 20%. Domestic shipments dropped by only 13% through November, suggesting the imposition of preliminary duties in October was already impacting buyers’ decisions.

According to Reuters, the new duties hit seven of last year’s top 10 product suppliers to the U.S. market, including South Korea, Germany and Turkey.

Canada, Saudi Arabia avoid aluminum tariff

The duties spared Canada, however, from which imports increased by 17%. They also spared Saudi Arabia, where Alcoa retains a close relationship with the Ma’aden smelter and rolling mill, despite having divested its 25.1% shareholding in 2019.

That Alcoa and its Saudi partner should essentially get an exemption comes as no surprise.

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