Aluminum

ArcelorMittal logo

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This morning in metals news: amid GFG Alliance’s financial crisis, ArcelorMittal has reportedly asked for cash upfront to supply Sanjeev Gupta’s steel mills; meanwhile, a so-called “green hydrogen” facility in Germany has started operations; and, finally, the LME three-month aluminum price has trended sideways this month.

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ArcelorMittal to ask for cash upfront to supply GFG mills

We’ve covered GFG Alliance’s financial crisis amid the collapse of its primary financial backer, Greensill Capital.

As a result, suppliers are looking for assurance of payment.

This week, Bloomberg reported ArcelorMittal is asking for cash upfront to supply GFG mills, as the latter grapples with questions of financing.

German green hydrogen facility starts up

A green hydrogen project in Germany called WindH2 has kicked off operations, CNBC reported.

The project involves German steelmaker Salzgitter, Avacon (a subsidiary of electric utility company E.ON) and multinational chemical company Linde.

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judge's gavel

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This morning in metals news: the US Court of International Trade rejected a tariff exclusion process challenge; meanwhile, a metals trader ordered 10,000 tons of copper blister and got something else; and, finally, aluminum is gaining popularity as a material for outdoor living products.

Grab your coffee and hear MetalMiner’s latest forecast for aluminum, copper, stainless and carbon steel. The webinar is on Wednesday, March 24, at 10 a.m. CDT: https://zoom.us/webinar/register/WN_6J8wAyYySfihVk3ZUH9yMA.

US Court of International Trade rules on Section 232 tariff exclusion process

Michigan-based metals supplier Thyssenkrupp Materials NA, Inc., challenged the Section 232 tariff exclusion process, arguing it leads to “exclusions on an application basis to specific requestors and not automatically to all importers of a particular article, creates a non-uniform tax across the United States in violation of the Uniformity Clause of the Constitution.”

Former President Donald Trump used Section 232 of the Trade Expansion Act of 1962 to impose tariffs in 2018. Trump imposed tariffs of 10% on imported aluminum and 25% on imported steel.

In addition, US importers could apply for exclusions to the tariffs through the Department of Commerce.

Thyssenkrupp Materials NA asked for two forms of relief. They asked for refunds on duties already paid, plus interest, for any good that any requestor has received an exclusion. Furthermore, the importer asked for an injunction preventing Customs and Border Protection from collecting duties on any product that has been granted an exclusion by any requestor.

The government, meanwhile, argued the importer did not make a claim for an exclusion that had been denied. As a result, it argued the importer had not received injury from the process.

The three-judge panel sided with the government in the case.

“Because the exclusion process promulgated by Commerce does not violate the Uniformity Clause of the Constitution and does not reflect an improper construction of the President’s Proclamations, the Government’s motion to dismiss is granted,” the judges concluded.

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The Aluminum Monthly Metals Index (MMI) picked up 6.3% for this month’s reading, as the China aluminum sector could get a price boost from the 14th Five-Year Plan. Furthermore, the Department of Commerce made anti-dumping and countervailing duty determinations on aluminum sheet.

March 2021 Aluminum MMI chart

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.

China’s 14th Five-Year Plan

By virtue of its having the largest aluminum and steel sectors in the world, China also faces a massive pollution problem.

Particularly given coal’s ongoing prevalence in the country, pollution is a problem Beijing is seeking to solve.

While some might question if the latest five-year plan goes far enough on climate, it is, at least, a step in the right direction.

As MetalMiner’s Stuart Burns explained yesterday vis-a-vis steel, the impact of the plan will be similar for aluminum.

In short, it could mean a tightening of supply and potentially rising prices in the medium term.

“The environmental targets are part of the new Five Year Plan and, as such, will evolve over the coming years rather than be applied over coming months,” Burns noted regarding the plan’s impact on aluminum. “But it may add a little fuel to investors’ interest in a tightening supply market narrative that underpinned copper and nickel prior to the recent selloff, and to a lesser extent that for aluminum.”

Overall, Burns said he expects China’s latest plan to be supportive rather than outright bullish in the short to medium term.

Xinhua, the state-run news agency, reported this month that China’s 14th Five-Year Plan will promote “green development and facilitate the harmonious co-existence between human and nature during the 14th Five-Year Plan (2021-2025) period, according to a government work report submitted Friday to the national legislature for deliberation.”

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Rusal logo

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One of the world’s leading producers of low-carbon aluminum, UC Rusal, announced a new collaboration with Japanese automotive component manufacturer Kosei, signifying yet another step in its over 30-year journey.

Last week, the Russian aluminum giant Rusal said Kosei had selected it to be its global supplier of high-quality aluminum alloys.

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

Rusal-Kosei aluminum supply deal

Kosei, set up in 1950, designs and manufactures vehicle wheels and autoparts. The firm operates from seven countries.

In the last 30 years, Rusal has proved to be a key partner of Kosei. Rusal has supplied the Japanese company with primary foundry aluminum alloys. Kosei uses in the material in factories in India, Japan, Thailand, and the US.

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industrial production

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This morning in metals news: US industrial production picked up in January; global aluminum output also rose in January; and, lastly, General Motors reported a milestone in the construction of a new battery cell manufacturing plant in northeast Ohio.

US industrial production rises

US industrial production rose by 0.9% in January, the Federal Reserve reported.

Furthermore, manufacturing output rose by 1.0%. Meanwhile, mining output picked up by 2.3%.

Industrial sector capacity utilization reached 75.6%, up by 0.7 percentage point. The rate, however, is down 4.0% from the long-run average from 1972-2020.

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Aluminum output picks up

Global aluminum production totaled 5.71 million tons in January, the International Aluminum Institute reported this week.

Furthermore, the total marked an increase from 5.47 million tons in January 2020.

Meanwhile, China’s output reached an estimated 3.3 million tons, up from 3.09 million tons in January 2020.

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tariffs headline over $100 bills

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Whether the new Biden administration creates a more insightful or sophisticated approach to trade remains to be seen.

But, if nothing else, a new administration is a chance for a reset on policies that have not worked as intended under a previous administration.

Aluminum tariff policy

The previous administration’s Section 232 tariffs on aluminum of 10% were well intentioned. The tariffs aimed to try to reverse the decline in US domestic aluminium smelting capacity.

In recognition of aluminum’s role in defense and aerospace applications, the government viewed the growing level of imports as a threat to national security. As such, creating a barrier to imports intended to allow US smelters to operate profitably and encouraged firms to reopen idled capacity. Furthermore, the hope was that, in time, firms would open new smelters.

The previous decade had been brutal for the US aluminium smelting industry.

By 2017, capacity utilization had fallen to 37%, according to Reuters.

Many hailed the strategy as a savior for the smelting industry. However, consumers would ultimately have to pay the bill.

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

Flaws in the plan

But even accepting that the COVID-19 pandemic made 2020 a far from typical year, it has become clear the tariff strategy has not worked on a number of levels.

While the inflationary cost of finished goods has been minor, the aluminum content even of a can of beer is a small fraction of the total product cost. It remains true that consumers have had to foot the bill.

It was always the intention that domestic producers would raise their prices to the import plus tariff price. The corresponding uplift was what was supposed to allow them to operate profitably again, to arrest the decline and reopen idled capacity.

Annualized production rose to 1.15 million tons at the end of 2018 from 750,000 tons a year earlier. The increase, however, proved short-lived. By the end of last year, national annualized production had fallen to 920,000 tons and capacity utilization to about 50%, Reuters reported.

Equally worrying the post states, there has been no new smelting capacity. The United States remains as dependent as ever on imports of primary metal.

Aluminum tariff and Canada

Buyers will remember the spike in prices that followed the reinstatement of tariffs on Canadian aluminium predicated on the “surge in imports,” as the Trump administration claimed at the time.

The reality was Canadian-origin metal had simply made up for the absence of Russian metal following Rusal’s pivot away from the US, largely to Asian markets, following the earlier sanctions on owner Oleg Deripaska. Russian imports collapsed from 725,000 tons in 2017 to only 136,000 tons last year. Shipments from Canada simply filled the gap, rising 10% in 2019.

The previous administration seemed to accept that imports from Canada should not be considered a strategic risk. Ultimately, it removed the tariff in September 2020.

But what of potential suppliers elsewhere? Would it not be of value to the US to widen its non-tariff supply base?

Biden rescinded permission to exempt the UAE recently for what seemed like political rather than national security reasons. China has never exported primary metal, so it remains irrelevant to this policy.

The years ahead

How the US handles imports of semi-finished products going forward will be the topic of a separate post. The US has inherited a fractious trade landscape as a result of the last few years.

It does so at a time of a fundamental re-evaluation of its trade priorities. Many would argue that re-evaluation is long overdue.

That re-evaluation includes its relationship with China. In that vein, the US is better off by working in cooperation with its allies and neighbors than the unilateral policies of the previous administration that have largely failed to deliver benefits.

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list of commodities prices

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Investment banks love a super cycle.

It spurs irrational investment and sucks in unwary investors. Furthermore, it encourages passive funds to up their allocation, even if only by fractions of a percent.

But with some $14 trillion invested in US equities alone, even a modest increase in passive investments into ETFs would reap significant rewards in fees.

As such, it may be not surprising that the big boys — like JP Morgan, as reported in Bloomberg, and Goldman Sachs, as reported in the Financial Times (admittedly focused more on oil) — are calling the start of the next commodities super cycle.

Cut-to-length adders. Width and gauge adders. Coatings. Feel confident in knowing what you should be paying for metal with MetalMiner should-cost models.

Commodities super cycle?

On the face of it, they appear to have some foundation.

As a separate post in the Financial Times observes, metals, agricultural and oil commodity indices have risen up to 40% since last July.

In part, this is due to a surge of interest in green-energy projects.

The EU, US and China have all promised to spend big. Hydrogen projects alone could receive €30 billion from the EU.

Copper has rallied to eight-year highs, around $8,375 per ton. The metal is benefiting from strong Chinese demand and the prospects for a more rapid transition to electric vehicles gains momentum. Glencore is quoted as saying world copper demand will double by 2050 and that mine investment is insufficient,

All of that certainly makes for a bullish landscape.

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robot building automotive aluminum component

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This morning in metals news: Novelis announced the commercial availability of a new class of high-strength automotive aluminum; meanwhile, the United States Geological Survey updated its Mineral Deposit Database for niobium; and the global aluminum market surplus more than tripled from 2019 to 2020.

Novelis announces new high-strength automotive aluminum

Atlanta-based Novelis today announced it will offer a new “ultra-high-strength” automotive aluminum solution.

The product, Novelis AdvanzTM 7UHS-s701, offers “lightweighting potential of up to 40% over existing ultra-high strength, hot-formed steel solutions.”

“The s701 technology represents the future of high-strength material in automotive applications and offers a clear alternative to the most advanced high-strength steel products,” said Philippe Meyer, senior vice president and chief technology officer at Novelis. “Aluminum is already the material of choice for lightweighting, and now we are offering a solution that helps automakers design even safer, lighter and better performing vehicles.”

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

USGS updates database entry for niobium

The United States Geological Survey (USGS) has updated its database entry for the mineral niobium.

“Niobium is vital to many sectors of our infrastructure and manufacturing economy, and the United States is 100 percent reliant on other countries for it,” said Jeff Mauk, USGS lead scientist for USMIN. “Updates to our database can help weigh the potential for domestic niobium production against the need for future trade agreements.”

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import tariff

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This morning in metals news: the Coalition of American Metal Manufacturers and Users called on the Biden administration to rescind the Section 232 steel and aluminum tariffs; meanwhile, the Energy Information Administration forecasts US energy-related CO2 emissions to rise after the mid-2030s; and, lastly, US President Joe Biden spoke this week with Chinese President Xi Jinping.

CAMMU urges Biden to ends Section 232 tariffs

The Coalition of American Metal Manufacturers and Users (CAMMU) sent President Joe Biden a letter Wednesday urging him remove the Section 232 tariffs on steel and aluminum.

In 2018, former President Donald Trump imposed the tariffs of 25% for steel and 10% for aluminum.

“By taking action to terminate the Trump tariffs, your Administration can prevent U.S. manufacturers from shutting down production lines, laying off workers, and potentially even closing their doors,” CAMMU said in the letter. “By contrast, the ripple effects of allowing these Section 232 tariffs to remain are substantial. Our member companies report not only record steel prices, but also delivery times stretching 12-16 weeks, causing significant disruptions.”

As we noted previously, however, Biden reversed Trump’s decision to rescind the tariff on aluminum from the UAE (a move he made on his final day in office).

See why technical analysis is a superior forecasting methodology over fundamental analysis and why it matters for your aluminum buy.

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US and UAE flags

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The Aluminum Monthly Metals Index (MMI) increased by 2.1% this month, as LME aluminum prices traded sideways and the US reinstated the Section 232 aluminum tariff on imports from the United Arab Emirates.

February 2021 Aluminum MMI chart

U.S. aluminum reinstates aluminum tariff on UAE

On Feb. 1, President Joe Biden reinstated the 10% aluminum tariff on imports from the United Arab Emirates.

Former President Donald Trump had lifted the aluminum tariff on his last day in office. The reinstated aluminum tariff went into effect Feb. 3.

The reinstatement suggests that it is unlikely the Biden administration will remove the aluminum tariffs imposed by the previous administration. However, as of today, no further decisions were announced on aluminum tariffs.

In addition, Biden’s “Buy American” plans could impact the U.S. domestic aluminum market. The plan will likely promote the manufacturing of essential components in construction, appliances and electronics in the US.

These measures are welcomed at the primary production level. However, not all end-product manufacturers are on board, as they claim these government interventions will artificially inflate the Midwest Premium.

The new administration also announced the delay of the effective date of the Aluminum Import Monitoring and Analysis (AIM) system that the U.S. Department of Commerce created. The Department of Commerce originally said the system would be available Jan. 25. However, it is delaying the launch until March 29. Licenses will not be required for covered aluminum imports until the new effective date.

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

High aluminum scrap demand

A Midwest-based trader told Construction & Demolition Recycling that demand for aluminum scrap remains high at secondary smelters that supply the automotive industry in the US

Chad Kripke, an executive vice president of Kripke Enterprise, a nonferrous scrap brokerage firm, confirmed that many sellers are relying on the spot market rather than signing contracts for 2021. This signals that it is a seller’s market.

This market environment is due to the reduced flows of scrap, which has caused spreads to tighten. As a result, secondary producers are opting to purchase scrap at what they might view as high prices rather than risking a lack of material.

New on MetalMiner Insights

This month, MetalMiner added additional U.S. aluminum prices to its Insights platform.

Besides the U.S. Midwest Premium Futures, the platform now includes prices for some of the most common forms of aluminum sheet and coil. It includes prices for: 1100 H14, 3003 H14, 5052 H32, 5083 H321, 6061 T6 and 6061 T651.

Price data goes back to Jan. 1, 2020.

Actual metals prices and trends

The Chinese aluminum scrap price increased 0.4% month over month to $2,067/mt as of Feb. 1. Meanwhile, LME primary three-month aluminum increased 0.4% to $1,988/mt.

Korean commercial 1050 aluminum sheet remained flat at $3.30/kg. However, its European equivalent increased 8.3% to $2,948/mt.

Chinese aluminum billet and aluminum bar rose 0.4% to $2,389/mt and $2,489/mt, respectively.

Chinese primary cash aluminum dropped 2.4% to $2,365/mt. Meanwhile, its Indian counterpart declined 2.2% to $2.24/kg.

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