Call me cynical if you will but Russian aluminum firm Rusal’s announcement, reported in the Financial Times last week, that it intends to invest $200 million for a 40% stake in a new Kentucky aluminum rolling mill — in partnership with privately owned Braidy Industries — has the ring of payback to it.

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The announcement comes just months after the U.S. dropped sanctions on the Russian company. The move marks the largest project to secure backing since President Donald Trump announced plans to impose tariffs of 10% on aluminum imports. As such, you can’t help but wonder what kind of “understanding” was reached that not only should Russian oligarch Oleg Deripaska park his shares in controlling En+ Group out of his direct day-to-day control, but that the group should make a major investment in U.S. aluminum production – a step domestic American producers have largely failed to do, despite Trump’s promises the tariffs would result in a wave of investment from domestic aluminum (and steel) producers.

Not that the fundamentals of the move are unsound.

Aluminum use in automotive – the intended market for the new plant’s output – is on the rise and the domestic U.S. market is painfully tight.

According to the Financial Times, under the agreement Rusal will supply the new mill with 2 million tons a year of primary aluminum for the next decade, further tying the group into the U.S. supply chain and making a repeat of the sanctions fiasco nearly impossible.

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Miner Rio Tinto released its first-quarter production results this week and downgraded its 2019 iron ore guidance on the heels of the recent cyclones battering the Western Australia coast.

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“Our iron ore business faced several challenges at the start of this year, particularly from tropical cyclones,” Rio Tinto CEO JS Jacques said in a prepared statement. “As a result, and following the continuing assessment of damage at the port resulting from the cyclones and other minor disruptions, 2019 guidance for Pilbara shipments is reduced to between 333 and 343 million tonnes.

“The quarterly operational performance in our other products was solid, generally higher than last year. Our focus remains on safety, delivering our ‘value over volume’ strategy and allocating capital with discipline, to continue delivering superior returns to our shareholders in the short, medium and long term.”

The new guidance for Pilbara iron ore shipments — of 333 million-343 million tons — is down from previous guidance of 338 million-350 million tons.

Pilbara iron ore shipments reached 69.1 million tons in the first quarter, down 14% year over year. Pilbara iron ore production of 76.0 million tons marked a 9% decline from Q1 2018.

“Production was significantly impacted by the weather disruptions in March and a fire at Cape Lambert A in January,” the Rio Tinto announcement states. “These events will have an impact on second quarter performance.”

Last month, Tropical Cyclone Veronica battered the northwestern Australia coast, leading to damages at the Cape Lambert A port terminal. The weather event led to the miner declaring force majeure on some iron ore contracts.

Earlier this month, Rio Tinto said the impact of Tropical Cyclone Veronica amounted to 14 million tons of iron ore production.

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Meanwhile, in other materials:

  • Rio Tinto’s Q1 bauxite production reached 12.8 million tons, up 1% from Q1 2018 and up 8% from the previous quarter.
  • Aluminum production hit 796,000 tons, flat on a year-over-year basis and down 3% from Q4 2018.
  • Iron ore pellets and concentrate production reached 2.5 million tons, up 5% from Q1 2018 but down 13% from Q4 2018.

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The Indian government has initiated an inquiry into an allegation of dumping of aluminum and zinc-coated flat steel products from China, the Republic of Korea and Vietnam.

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The probe will cover the October 2017-September 2018 period, but data from 2015 will also be looked at by India’s Directorate General of Trade Remedies (DGTR), which falls under the Commerce Ministry.

A report by the Press Trust of India said the investigation had been launched following a complaint by domestic producer JSW Steel Coated Products.

India, one of the fastest-growing economies in the world, has one of the highest trade tariffs in the world; for decades, its highly protectionist trade policy received flak.

Some experts have argued there was a risk that this protectionism could backfire somewhere down the line.

In the latest anti-dumping probe, it must be remembered that aluminum and zinc-coated steel are used largely in solar power projects, roofing and appliances (to name a few). India is currently very bullish on solar power projects; naturally, local producers are worried these projects have started using cheaper products from foreign shores.

If the allegation is eventually found to be true, the DGTR will then recommend imposition of the anti-dumping duty on the imports. The investigation has been initiated because there was some prima facie evidence found of dumping by the three countries.

The probe into the alleged dumping will help determine the existence, degree and effect of alleged dumping, and to recommend the amount of anti-dumping duty, which if levied, would be adequate to remove the injury to the domestic industry, according to the DGTR.

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Dumping of commodities negatively impacts the price of the same products in domestic markets.

Norwegian aluminum maker Norsk Hydro has recently been in the news for a cyber attack that brought much of its operations to a halt.

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More recently, however, the company turned to more positive news, announcing plans to upgrade technology at its Husnes plant to produce more aluminum for the automotive market.

Aluminum use in automobiles has increased in recent years as automakers try to churn out lighter, more fuel-efficient vehicles.

Of course, the steel industry hasn’t allowed aluminum to rise uncontested, as new, lighter forms of steel are developed. In fact, Crain’s Cleveland Business reported last year that AK Steel plans to roll out a new advanced, high-strength steel to automakers by 2021.

The ongoing steel-versus-aluminum war aside, Hydro said it will invest NOK 150 million (U.S. $17.6 million) on the new technology for the Husnes plant.

According to a company release, the plant will feature upgraded in-house casting technology dubbed “low pressure casting” (LPC) will “enable Hydro to provide materials with enhanced properties for various extrusion segments.”

“Forge stock for products like suspension arms and knuckles is an attractive market for aluminium within the automotive industry, which needs ever more aluminium to fill its need to lightweight cars and reduce emissions,” said Ola Sæter, head of Hydro’s fully-owned primary aluminum plants.

The new LPC will debut in 2020. According to Johan Berg, plant manager at Husnes, the new process affords Hydro the “flexibility to be able to cast both extrusion ingots and forging materials according to customer demand in a flexible and efficient way.”

“This investment is timed well with the ongoing upgrade of Hydro Husnes’ second electrolysis line that is due to start operations in 2020, with an annual planned output of 210,000 mt of aluminium semi-products,” Berg added. “Making use also of this new technology will significantly strengthen our position as a preferred partner delivering of aluminium to the automotive industry.”

Hydro Delays Earnings Release

In other news, the firm announced a delay in the release of its Q1 financial results, from April 30 to June 5, on account of last month’s cyber attack.

“The delayed Q1 2019 reporting date is a result of the previously communicated cyber attack, impacting the availability of certain systems and data to produce the quarterly report,” Norsk Hydro said in a prepared statement.

“The revised date is conditional upon the planned timeline for restoring operational and reporting systems.”

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Most of Hydro’s operations are “back to normal or near normal levels.” The firm’s energy segment is marked as “running as normal,” as is the bauxite and alumina segment, while its primary metal segment is running as normal “with higher degree of manual operation.”

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This morning in metals news, the U.S. and China’s trade negotiations march on, China’s Tewoo Group sells copper at below market value and a U.S. aluminum executive says tariffs aren’t the answer.

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Work to Do

After the latest round of trade talks between U.S. and China late last week, there remains “significant work” on the road to a deal, Reuters quoted the U.S. Trade Representative as saying in a statement.

Meanwhile, Chinese state media hailed “new progress” in the talks.

Tewoo Group Sells Copper at Less than Market Value

According to a Bloomberg report, Chinese commodity trader Tewoo Group is selling copper at less than market value.

Per the report, the trader sold some copper to other trading houses at a premium of $10 per ton, compared with the $54 per ton premium in Yangshan.

Aluminum Executive Pans Tariffs

Lee McCarter, CEO of JW Aluminum, thinks tariffs are not the answer to the domestic industry’s challenges.

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According to a report in The Post and Courier, McCarter called for an end to the tariffs and for the U.S. not to simply replace tariffs on Canadian and Mexican steel and aluminum with quotas.

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This morning in metals news, the Aluminum Association called for the removal of aluminum tariffs on Canada and Mexico, Norsk Hydro offered another update on its operations one week after it was hit by a cyber attack, and Vale SA’s 4Q 2018 iron ore output increased 8.2%.

Aluminum Groups: Remove Aluminum Tariff Before Passage of USMCA

The Aluminum Association released a joint letter with the Aluminum Association of Canada and the Instituto Mexicano del Aluminio calling for the removal of the U.S.’s Section 232 aluminum tariff before ratification of the pending United States-Mexico-Canada Agreement (USMCA).

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USMCA, meant as the successor to the North American Free Trade Agreement (NAFTA), was signed by the three countries’ leaders late last year, but still must be ratified by each country’s legislature. The U.S.’s Section 232 tariffs on steel and aluminum remain in effect for its neighbors to the north and south.

As such, the tariffs are a key sticking point as the parties move toward approval of the agreement.

“The new USMCA cannot work as intended without reinstating exemptions for Canada and Mexico from the 232 tariffs,” the joint statement said. “The Section 232 tariffs are limiting access for North American aluminum producers to reach their suppliers and customers – and in some cases, their own subsidiaries and facilities. This will hamper continued investment for our industry, which has experienced solid growth and significant investment in recent years.”

The letter also argued against the imposition of quotas.

“Replacing a tariff with a quota on aluminum imports in North America would be highly detrimental,” the letter continued. “If there is a quota system for aluminum trade within North America, it will be difficult to ensure that downstream manufacturers of aluminum products will have access to the aluminum inputs they need. Because primary aluminum is a traded commodity on the London Metals Exchange (LME), metal traders would be competing with mid- and downstream producers who need value-added primary aluminum with specific characteristics for their manufacturing processes. Additionally, semi-fabricated aluminum products can cross borders several times before final production.

“In a worst-case scenario, product could get stuck on one side of the border when the quota has been filled. To avoid shortages, companies may be forced to stockpile the metal, tying up capital that could be used to pay employees or upgrade equipment and exacerbating the impact of a quota system.”

Norsk Hydro Offers Updates in Wake of Cyber Attack 

Norwegian aluminum maker Norsk Hydro last week was struck by a cyber attack, forcing operations to come to a halt.

A week on, the firm offered an update on its process to bring operations back online. According to a note on Hydro’s website, “most operations are running at normal capacity.”

“In the most affected business area, Extruded Solutions, production is now at 70-80%, except for the Building Systems business unit, where operations remain almost at a standstill,” the company said in a release.

The company’s primary metal sector is “running as normal, with higher degree of manual operations.”

Vale Posts Higher Iron Ore Output in 4Q

In the quarter prior to the fatal tailings dam breach at Vale SA’s Corrego do Feijao mine in Brazil, the company’s iron ore output rose 8.2%, Reuters reported.

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Vale’s 2018 iron ore output reached 384.6 million tons, according to the report.

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This morning in metals news, Aeris Resources Ltd. has put in a big offer for a Glencore mine in Australia, trade volumes at the Port of Brownsville increased 6.6% in 2018 and one consultancy says U.S. tariffs on aluminum have actually driven Chinese exports of the metal.

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Aeris Bids for Glencore Mine in Australia

According to a MarketWatch report, Australian firm Aeris Resources Ltd. has put in a $575 million offer for a Glencore mine in eastern Australia (the story was first reported by the Australian Financial Review).

According to a release from Aeris, funding for the offer has not yet been finalized.

“Broadly, the current offer by Aeris comprises $US575m in mix of cash (approximately US$525m) and Aeris shares (approximately US$50m) plus a royalty payable to Glencore,” the release stated.

Trade Volumes Rise at Port of Brownsville

The Port of Brownsville, located on the U.S.-Mexico border in southeastern Texas, had a banner year in 2018.

“The Port of Brownsville set new records in tonnage and total operating revenue in 2018, moving 11.3 million tons of diverse cargos with operating revenues of more than $24.2 million,” a release from the port stated. “The results, announced today at the annual State of the Port Address, reveal a 6.6 percent increase in cargos, a 25 percent increase in rail movements, and a 2.5 percent increase in operating revenues from the previous year.”

“Congratulations to our partners, customers, and port users who all contributed to these new high-
water marks,” said John Reed, chairman of the Brownsville Navigation District, in the release. “Steel was up, almost all petroleum categories were up, dry bulk cement and sugar were way up.”

China’s Aluminum Exports

According to consultancy Wood Mackenzie, the U.S.’s tariffs on aluminum have actually “encouraged” China to export aluminum, S&P Global Platts reported.

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Using Section 232 of the Trade Expansion Act of 1962, the U.S. imposed tariffs on imported steel and aluminum in March 2018. The tariffs sparked concerns from some countries, including the European Union trading bloc, regarding the possibility of diverted supplies of Chinese steel and aluminum disrupting their domestic sectors. (As a result, the E.U. earlier this year imposed new steel safeguards.)

In addition, in April 2018 the E.U. announced it would begin monitoring levels of aluminum imports to determine if the Section 232 tariffs would lead to increased import levels.

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This morning in metals news, Chilean miner Antofagasta expects a copper deficit this year, Polish lawmakers have proposed slashing the country’s mining tax and hackers have targeted Norwegian aluminum maker Norsk Hydro.

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Copper Deficit

Chilean miner Antofagasta forecasts a 2019 copper deficit ranging between 100,000 and 300,000 tons, Reuters reported.

“When we talk about the deficit, I don’t think it’s going to be a big one… it’s probably in a range between 100,000 and 300,000 tonnes,” CEO Iván Arriagada was quoted as saying.

Poland Mulls Cutting Mining Tax

According to another Reuters report, Polish lawmakers are considering cutting the country’s mining tax.

The tax — introduced in 2012 — primarily affects copper and silver producer KGHM, which is a major employer in the country, according to the report.

Norsk Hydro Hacked

The news turned from the announcement of a new Norsk Hydro CEO Monday to hacking on Tuesday.

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According to Reuters, the Norwegian aluminum maker suffered an attack by hackers that forced several plants to go offline.

Norwegian aluminum maker Norsk Hydro ASA has a new CEO for the first time in a decade.

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The firm announced Monday that CEO Svein Richard Brandtzæg will be stepping down after 10 years. Hilde Merete Aasheim, executive vice president and head of Norsk Hydro’s primary metal business area, was appointed Brandtzæg’s successor.

“I am honored, and I very much look forward to leading Hydro into the next chapter, together with 35,000 competent and engaged colleagues around the world,” Aasheim said in a company release. “I am confident that we have what it takes to turn a current challenging situation, for Hydro and for the global aluminium industry, into opportunities that will build the company for the future.”

According to the release, Brandtzæg will remain with the company through the end of the year in an advisory capacity to Aasheim and the company’s technology board.

Reuters reported Brandtzæg had asked for an early retirement.

“It’s been a very hard year for (him), no doubt. It’s been a very demanding situation in Brazil,” Norsk Hydro Chairman Dag Mejdell told Reuters.

The Norwegian firm has struggled with embargoes on production at its Alunorte alumina refinery in Brazil following a heavy rainfall and flooding in February 2018 at the refinery.

Last year, Brazilian authorities ordered the firm to cut production at the refinery by 50% amid questions about a new bauxite residue disposal area; the Alunorte refinery resumed production at 50% capacity in October after briefly having shut down operations completely.

“The impact of the rainfall event in Barcarena, Brazil, in February 2018, has been thoroughly investigated through public agencies, professional reports from internal and independent third-party as well as public hearings,” the company said in its annual report for 2018. “Environmental authorities have confirmed that there were no leaks or overflow from Alunorte’s bauxite residue deposits.

“However, we did recognize a need to strengthen the robustness of the plant, and we have increased water treatment capacity to prepare the plant for future climate and weather changes. Our clear ambition is to make Alunorte the benchmark in our industry, ensuring sustainable operations and social development in the communities around us.”

Norsk Hydro last week announced its financial results for 2018, reporting net income of 4,232 NOK ($505 million), down from 9,184 NOK ($1.07 billion) in 2017. The firm’s share price also took a hit in 2018, closing at 39.21 NOK ($4.58) from a 2017 closing price of 62.35 NOK ($7.29).

“The curtailment at Alunorte has weakened our financial results and progress of our improvement program,” the annual report stated. “In addition, different tariffs and sanctions have influenced global markets and trade flows over the past year, also affecting our industry.”

Norsk Hydro added that the production embargoes on the Alunorte alumina refinery remain in effect.

“Hydro is in dialogue with all the relevant authorities, at the local, regional and national level in Brazil,” the company stated in its annual report. “We continue to seek a common agreed solution, so we can resume normal operations, using the new and modern deposit area and the state-of-the-art press filters. At the time of authorizing this report, the production embargoes on Alunorte remains in force. The timing with regards to when the embargoes may be lifted remains uncertain.”

The firm expects ramping back up to 75-85% capacity will take about two months (once the embargoes are lifted), adding that the “timing of a return to full production capacity at Alunorte depends on the commissioning process of DRS2 and the press filters.”

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Revenue from the company’s bauxite and alumina operations last year fell to 2,282 million NOK ($266.6 million) from 3,704 million NOK ($359.2 million) in 2017.

Source: Toyota

Automaker Toyota last week announced a push to increase its previous investment pledge in the U.S.

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Last week the automaker announced it would up a 2017 pledge to invest $10 billion in the U.S. over five years, increasing the investment up to $13 billion.

“These latest investments represent even more examples of our long-term commitment to build where we sell,” said Jim Lentz, chief executive officer for Toyota Motor North America, in a company release. “By boosting our U.S. manufacturing footprint, we can better serve our customers and dealers and position our manufacturing plants for future success with more domestic capacity.”

In addition to the wider pledge, Toyota announced investments totaling $750 million in five states: Alabama, Kentucky, Missouri, Tennessee and West Virginia. The investments include “production capacity increases and building expansions at Toyota’s unit plants in Huntsville, Alabama, Buffalo, West Virginia, Troy, Missouri and Jackson, Tennessee.”

An investment of $288 million aims to increase annual engine capacity from 670,000 to 900,000 by the end of 2021 at its Huntsville, Alabama plant, and will include the addition of 450 new jobs.

A $238 million investment at its Georgetown, Kentucky plant will see to the commencement of production of the Lexus ES 300h hybrid in May, with production of the RAV4 hybrid beginning in 2020.

Toyota is also investing in its Bodine Aluminum plant in Missouri toward the goal of producing an additional “864,000 cylinder heads for Toyota’s New Global Architecture (TNGA),” up from the current level of more than 3 million cylinder heads per year. The automaker is also investing in its Tennessee aluminum plant, namely for equipment and a building expansion to double its annual capacity of hybrid transaxle cases and housings to 240,000.

Toyota also plans to double its capacity of hybrid transaxles to 240,000 by 2021 at its West Virginia plant.

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Earlier this month the automaker reported its February U.S. sales were down 5.2% year over year. For the first two months of the year, Toyota’s U.S. sales are down 5.9% compared with the same time period in 2018.