Aluminum

This morning in metals news: Alcoa said it plans to restart its Alumar aluminum smelter in Brazil; meanwhile, the Energy Information Administration forecasts hydropower generation will fall by 14% this year; and, lastly, European automakers are looking to bypass China in their rare earths supply chains.

Are you under pressure to generate aluminum cost savings? Make sure you are following these five best practices. 

Alcoa to restart Alumar smelter

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Alcoa this week announced plans to restart its Alumar aluminum smelter in Brazil.

The smelter has been fully curtailed since 2015. The facility has annual capacity of 268,000 metric tons.

“The process to restart the idle capacity will begin immediately,” Alcoa said. “The first molten metal is expected in the second quarter of 2022, and the full 268,000 mtpy of capacity is expected to be operational in the fourth quarter of 2022. By 2024, the Alumar smelter will be powered with 100 percent renewable energy.”

Hydropower hit by drought

Speaking of renewable energy, the EIA forecasts hydropower generation to decline by 14% this year.

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Anyone following the financial papers cannot have failed to read lurid reports regarding China’s Evergrande construction company, which appears on the brink of collapse.

Volatility is the name of the game. Do you have a steel buying strategy that can handle the ups and downs?

Chinese markets fall on Evergrande crisis

Indeed, stock markets in China took a heavy fall this week on news that the world’s most indebted construction firm could fail to repay interest coupons due this week and next.

Evergrande was valued at $41 billion in 2020. However, its market capitalization fell to just $3.7 billion now, as it became apparent the highly leveraged company with total liabilities of some $300 billion was struggling to repay a modest onshore interest debt this week.

Evergrande’s woes are merely the symptom of a much bigger problem.

As the Financial Times notes, China’s vast real estate sector, which contributes some 29% of the country’s gross domestic product, is so overbuilt that rather than leading as China’s prime driver of economic growth, it is fast becoming a drag on it.

According to the Financial Times, there is enough empty property in China to house over 90 million people. To put that in perspective, there are five G7 countries – France, Germany, Italy, the U.K. and Canada — that could fit their entire populations into those empty Chinese apartments, with room to spare.

Oversupply has been a problem for several years. But after much prevarication, President Xi Jinping has formulated three red lines to reduce debt levels in the sector. While by no means the only perpetrator, Evergrande has failed all three red lines. Those lines are the ratio of liabilities to assets, of net debt to equity, and cash to short-term debt.

However, it is simply the first and largest to be thrown to the wolves as an example to the rest.

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This morning in metals news: Ford Motor Co. is collaborating with Redwood Materials on a closed-loop battery recycling and building out the domestic electric vehicle battery supply chain; Norway will expand natural gas exports to Europe; and, lastly, aluminum prices have slowed down after peaking Sept. 13.

Many may be wondering how to set buying strategies for 2022 with so many variables in the air. The old saying goes, “Nothing kills high prices like high prices” — but does that still hold true?

Ford, Redwood to team up on closed-loop battery recycling

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Ford Motor Co. announced it will collaborate with battery materials company Redwood Materials on closed-loop battery recycling.

The companies also said they will work together to build out a domestic battery supply chain.

“Ford and Redwood are collaborating to integrate battery recycling into Ford’s domestic battery strategy. Redwood’s recycling technology can recover, on average, more than 95% of the elements like nickel, cobalt, lithium and copper,” the automaker said. “These materials can be reused in a closed-loop with Redwood moving to produce anode copper foil and cathode active materials for future battery production. By using locally produced, recycled battery materials, Ford can drive down costs, increase battery materials supply and reduce its reliance on imports and mining of raw materials.”

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It is a curious insight into E.U. thinking when there is a clear case for anti-dumping duties only for them to be rowed back at the 11^th hour after complaints from just two aluminum users and one importer.

Do you know the five best practices of sourcing metals, including aluminum?

Chinese aluminum and European anti-dumping duties

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You must assume they are well connected. Pretty much the whole aluminum manufacturing sector had been behind the original case to investigate.

Currently, following an announcement made in April 2021, provisional duties of between 19.3% and 46.7% were set to become definitive duties of between 14% and 25% from October.

Those duties would have stayed in place for five years. But it seems the rapid rise in aluminum prices has sparked panic, if not in Brussels then at least among importers with the most to lose.

As such, pressure has been applied to postpone the investigation.

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The Construction Monthly Metals Index (MMI) picked up by 4.9% for this month’s reading.

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US construction spending

U.S. construction spending reached a seasonally adjusted annual rate of $1,568.8 billion in July, the Census Bureau reported earlier this month.

The July rate marked a 0.3% increase from the previous month. Furthermore, the July figure jumped by 9.0% compared with July 2020.

During the first seven months of the year, construction spending totaled $883.2 billion, up 6.2% year over year.

Private construction spending reached a rate of $1,231.0 billion, or up 0.3%. Within private construction, residential construction reached an annual rate of $773.0 billion in July, up 0.5% from June. Nonresidential construction came in at $458.0 billion in July, or down 0.2%.

Meanwhile, public construction reached $337.8 billion, up 0.7%. Educational construction checked in at $79.7 billion, down 0.5%. Highway construction rose by 1.9% to a rate of $94.5 billion.

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This morning in metals news: the U.S. steel capacity utilization rate rose to 85.3% for the week ending Sept. 11; Norsk Hydro signed an energy deal; and, lastly, aluminum prices have continued to skyrocket.

Stop obsessing about the actual forecasted aluminum price. It’s more important to spot the trend. See why.

Steel capacity utilization rises to 85.3%

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The U.S. steel capacity utilization rate picked up to 85.3% for the week ending Sept. 11, the American Iron and Steel Institute (AISI) reported.

U.S. steel production during the week totaled 1.88 million net tons. Production for the week rose by 0.9% from the previous week. Furthermore, output jumped by 22.4% year over year.

For the year to date, production totaled 65.8 million net tons at a capacity utilization rate of 80.8%.

Hydro signs natural gas deal

Oslo-based Norsk Hydro said it had signed a 15-year deal for the supply of liquefied natural gas (LNG) to its Alunorte alumina refinery in Brazil.

Hydro signed the supply deal with New Fortress Energy.

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This morning in metals news: Aluminum prices reach 10-year highs after a coup in Guinea threatens to disrupt global bauxite supply. In other news, steep commodity prices send China’s factory-gate inflation to a 13-year high. Also in the news, Hurricane Ida’s damage leaves more than 75% of U.S. Gulf of Mexico oil production offline.

Each month, MetalMiner hosts a webinar on a specific metals topic. This month’s discussion is Carbon Steel 2022: What types of steel contracts to set up and when to execute them. Explore the upcoming webinars and sign up for each on the MetalMiner Events page.
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An aluminum market that has lived with Chinese oversupply for two decades is experiencing a very different year in 2021.

According to Reuters, it is starting to price in a very different future.

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Aluminum prices of the future

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The world needs more aluminum to go green. However, the smelters that produce the stuff use huge amounts of power. Those smelter account for around 2% of all manmade emissions each year, much of which is due to Asia’s overwhelming reliance on coal as a power source.

Squaring the circle between aluminum’s huge power demands and efforts to meet emissions commitments is proving very challenging for China’s aluminum industry. The post reports IAI estimates that the world will need another 25 million tons of primary metal production to meet an expected 80% rise in demand by 2050, fueled in large part by the drive to decarbonize.

Yet, even that daunting target assumes a 100% recycling rate. Even with the best of intentions, that is unlikely to happen.

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The Aluminum Monthly Metals Index (MMI) increased by 4.1% for this month’s reading.

Do you know the five best practices of sourcing metals, including aluminum?

LME three-month aluminum prices are only $100/mt away from 2011 prices.

Overall, LME aluminum traded up despite some volatility in August.

Prices took their largest dip Aug. 16-19 before recovering. During the same period, LME trading volumes got heavier, marking a negative trend.

However, volumes got even heavier as the price increased. This ultimately signals that the market remains bullish.

Chinese prices also climbed this month. SHFE volumes — along with prices — picked up heavily toward the end of the month, consistent with a strong bullish trend.

Beijing wary of rising aluminum prices

Rising aluminum prices have become a concern for China.

Bloomberg reported that the China Nonferrous Metals Association believes the steep increase of the aluminum price is not supported by fundamentals and substitutions could emerge.

Record high prices have already deterred the manufacturing sector in China.

China’s Caixin Index has dropped since June. In August, the index dropped below the 50 level, meaning factory activity is contracting.

On Sept. 1, China released its third batch of metals from state reserves. The move is an attempt to control prices and prevent commodities inflation from hurting economic growth. However, the release did not dent prices.

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This morning in metals news: Norsk Hydro announced it is extending its partnership with Equinor and Panasonic; meanwhile, North American Stainless earlier this month issued a flat product price announcement; and, lastly, aluminum prices remain elevated.

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Norsk Hydro extends battery partnership

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Oslo-based aluminum maker Norsk Hydro yesterday announced it is extending its partnership with Panasonic and Equinor to create a joint European battery business.

“The strategic partnership will continue to develop the business case for a sustainable and cost-competitive European battery business,” Norsk Hydro said in a release.

“The joint battery initiative has refined possible Norwegian site locations for a potential European battery business to a handful. At the same time, the project will be looking at alternative locations in the European Union.”

NAS issues price announcement

Earlier this month, North American Stainless announced several price changes for its products.

The price changes included:

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