Aluminum

GM workers earlier this month went on a nationwide strike, the first since 2007 at the Big 3 automaker. Photo by Jeffrey Sauger for General Motors

This morning in metals news, the nationwide General Motors strike has entered its third week, Norsk Hydro is opening a new aluminum research lab and Thyssenkrupp announced a new CEO will take over Oct. 1.

Keep up to date on everything going on in the world of trade and tariffs via MetalMiner’s Trade Resource Center.

GM Strike Continues

Earlier this month, the United Automobile Workers (UAW) union announced a nationwide strike at General Motors, the first for the automaker since 2007.

Now, the strike is entering its third week, as negotiations between the union and GM continue.

“We are standing strong and standing together on #SolidaritySunday!” UAW said in a statement released Sunday.

“UAW members across the country will continue to stand strong together until GM ensures fairness and economic justice for workers.”

Norsk Hydro Opens Aluminum Research Lab

Norwegian firm Norsk Hydro is opening a new aluminum research lab in Sweden, at which it will “test new types of aluminium alloys and their extrudability for eventual use in applications that are innovative and which can help customers reduce their carbon footprint.”

“The Extrusion Test Center is located adjacent to Hydro’s product application lab in Finspång, and includes a new aluminium extrusion press and metal casting facilities,” Hydro said. “The investment extends and complements the company’s global research and product application capabilities toward the growing market for sustainable aluminium solutions.”

New CEO Taking Over at Thyssenkrupp

Earlier this month, MetalMiner’s Stuart Burns delved into the challenges faced by German steelmaker Thyssnkrupp, including its efforts to spin off its profitable elevator business and its departure from the German blue chip DAX index.

The shakeup doesn’t stop there, however, for the German firm.

The company announced the termination of CEO Guido Kerkhoff’s mandate; Kerkhoff will be replaced by Martina Merz as of Oct. 1.

Kerkhoff’s tenure as CEO ends after just over a year, having been appointed to the role in July 2018.

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“I would like to thank the employees of thyssenkrupp for their support, which I received especially last year,” Kerkhoff said in a prepared statement. “My goal has always been making thyssenkrupp successful again. It was therefore a matter of course for me last year to take responsibility for the company at a particularly difficult time. I am convinced that the strategic realignment we announced in May will be a success. The company is close to my heart, so I wish Martina Merz, the new Executive Board and all employees all the best for the future and a successful future for the company.”

It is hardly surprising that En+, owners of Russian aluminum producer Rusal, are pressuring the LME to force other aluminum producers to disclose their carbon footprint.

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Rusal finds itself in the fortunate position of all its smelting capacity being powered by renewable hydroelectric power. When by fair means or foul En+ came to acquire much of Russia’s primary aluminum assets in the years after the collapse of the Soviet Union, the fact the majority of its power came from hydro was of little consequence beyond the benefit it was a reliable power source and one not subject to fluctuating global energy prices in the way that coal, natural gas or oil can be.

But in those days, global warming and corporate environmental responsibility was in its infancy. Now, the producer’s carbon footprint is a very significant contributor to its brand strength — either a huge asset, if it is near zero, or a huge negative if the firm has a significant negative carbon footprint.

Rusal has made efforts in recent years to close its few aging coal-powered generating facilities and invested in its hydro plants, both for energy security and because it had the vision to see that a total reliance on near zero-emission hydropower was a potential major brand strength.

Firms are demanding their supply chain measure and report their carbon footprint and are becoming increasingly sensitive to the contribution this makes to the carbon footprint of their own products and services.

With the vast energy demands inherent in aluminum production, aluminum consumers are often more aware than other industries about these metrics. Some producers, like Rusal and Norsk Hydro, can supply material with a very low-carbon signature because of their primary smelters’ power sources, while Novelis’s scrap-based supply chain has a significantly lower carbon footprint than semi-finished manufacturers sourcing raw material from most conventional primary supply chains.

Others based on coal and using older technologies can produce up to 20 tons of carbon dioxide for every ton of aluminum, according to the Financial Times.

Nor is the aluminum industry alone.

Just last month, Forbes listed 101 corporations pledging to improve their environmental credentials, notably their carbon footprint (but also sustainability in various forms).

These firms and their shareholders are not, on the whole, spending hard-earned dollars to achieve such goals out of altruism; they are an example of the old idiom nothing gets done unless someone can make money out of it.

These firms see burnishing their image by such means as likely to boost sales. Whether they are part of the minority that denies we even have a climate change problem is not, from a business perspective, relevant. The vast majority of their customers do increasingly believe we have a problem and are willing to make purchases decisions on the basis of their supplier’s image as a sustainable and environmentally responsible company.

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So, En+ lobbying the LME is a move to maximize what they rightly see as an opportunity to position themselves as the lowest carbon content major supplier in the marketplace. To the extent that they are successful, it will translate directly to the bottom line in enhanced sales and security as a preferred supplier.

They are not alone in their exploitation of such opportunities, but you have to admire the way they are showing much of the rest of the industry the way.

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This morning in metals news, China’s aluminum production dipped in August compared with the previous month, China plans to bring its first domestically developed sources of medical cobalt-60 to the market and copper prices are down.

China Aluminum Production Falls

China’s August aluminum production fell compared with the previous month, Reuters reported.

The country saw its aluminum production fall 0.5% compared with July production, down to approximately 2.97 million tons, according to Reuters.

Sources of Cobalt-60 to Go to Market

China plans on bringing its first domestically developed sources of medical cobalt-60 to the market, state news agency Xinhua reported.

According to Xinhua, the cobalt-60 will be used to produce gamma knives used for cancer treatment.

Copper Prices Fall

Impacted by a slowdown in Chinese industrial activity, copper prices fell to start the week, Reuters reported.

Three-month LME copper slipped 1.5% down to $5,887 per ton.

The Aluminum Monthly Metals Index (MMI) dropped again this month, falling by one point to 83.

All but one of the prices tracked for the index dropped this month, with India’s primary cash price showing the biggest drop at 4.4%, followed by the LME primary 3-month price (down by 3.4%).

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LME aluminum prices weakened into early August and moved sideways until early September, when prices moved toward the $1,800/mt range.

Source: MetalMiner analysis of London Metal Exchange (LME) and FastMarkets.

SHFE Aluminum Prices Gained Recently, But Momentum Looks Weak

Source: MetalMiner analysis of Fastmarkets

SHFE aluminum prices increased recently, but upward momentum still looks weak, comparatively speaking.

Overall, the price is still moving in a sideways band below the CNY 14,500/mt level where it has traded during the past year or so; however, it looks set to break through this resistance price soon.

As reported by MetalMiner’s Stuart Burns, China’s top state primary aluminum producer, Chalco, reported an 8% drop in output for the first half of the year, compared with the same period of 2018. Primary aluminum production totaled 1.89 million tons, compared to 2.06 million tons during the first six months of 2018.

Additionally, outages brought output down temporarily, including flooding at Hongqiao. As a result of the outages, exports dropped to the lowest level since February. According to Reuters, exports dropped to 466,000 tons in August, down around 10% when compared with August 2018.

Global Demand Weakness Continues

While demand in the United States remained relatively stable, demand in other regions looks weaker.

Norsk Hydro recently announced plans to close some aluminum foil production in Germany as part of restructuring efforts aimed at increasing the profitability of its rolled products business.

Novelis’ Acquisition of Aleris Under Scrutiny

The U.S. Justice Department filed a lawsuit objecting to Novelis Inc.’s purchase of Aleris Corporation on Sept. 4 due to concerns over higher future prices for automotive aluminum sheet.

According to an issued statement, competition would be hindered, with Novelis controlling 60% of projected domestic capacity.

U.S. Aluminum Premiums

The U.S. Midwest Premium remains at around $0.18/pound.

What This Means for Industrial Buyers

The sideways to bearish market for aluminum led to the index decline. Buying organizations will need to pay careful attention to short-, medium- and long-term buying signals.

Buying organizations interested in tracking industrial metals prices with ease should request a demo of the MetalMiner Insights platform.

Buying organizations seeking more insight into longer-term steel price trends should read MetalMiner’s Annual Metal Buying Outlook.

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Actual Metal Prices and Trends

European commercial 1050 sheet increased by 1.3% to $2393/mt. European 5083 plate dropped by 2.1% to $2,729/mt.

India’s primary cash price dropped by 4.4% to $1.94/kilogram.

The LME primary 3-month price dropped by 3.4% to $1,746/mt.

Korean commercial 1050 sheet, 5052 coil premium over 1050, and 3003 coil premium over 1050 all decreased by less than 1%, to $2.96, $3.12 and $3.00 per kilogram, respectively.

Chinese prices all declined by under 1%. Aluminum billet priced at $2,061/mt, while bar priced at $2,729/mt. China’s aluminum scrap price dropped the most, by 0.9%, to $1,813/mt. The primary cash price stayed essentially flat at $2,015/mt.

GDP figures may be holding up well, but metal consumption in China suggests the global slowdown and the ongoing trade war with the U.S. are taking their toll on China’s manufacturing sector.

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Reuters reported top state primary aluminum producer Chalco is quoted as filing an 8% fall in output, with primary aluminum output of 1.89 million tonnes in the first half of the year, down from 2.06 million tons compared with the first half of 2018.

Overall, revenue actually rose 15% to 94.9 billion yuan, despite a 10% drop in the primary aluminum segment, helped by rising alumina output. Alumina output increased 3.2% year-on-year to 6.82 million tons, fueling a trading revenue increase of 23%.

But higher primary metal costs and weak prices in the primary sector hit profits. In the second quarter alone, Chalco’s net profit dropped 52.7% from a year earlier, while revenue was up 11.3% year on year.

In a separate Reuters article, the news source reported exports have also been hit, falling 4.3% in August from the previous month despite a weaker yuan. Unexpected production outages at two key smelters meant there was less metal available for overseas shipments following flooding at Hongqiao’s premises earlier last month and a separate outage in Xinjiang.

Last month, China exported 466,000 tons of unwrought aluminum, including primary metal, alloy and semi-finished products. The total was the lowest since February and was also down 9.9% from August 2018.

Supporting the aluminum picture, imports of unwrought copper — including anode, refined and semi-finished copper — products into China stood at 404,000 tons last month, Reuters reported, down 3.8% from the 420,000 tonnes in July and also down 3.8% year on year. The article went on to state the decline came despite copper prices in China being mostly high enough in August for traders to make a profit by buying on the London Metal Exchange, the global price benchmark, and selling on China’s Shanghai Futures Exchange (encouraging bookings of physical copper imports into China).

The blame for the drop in demand is laid at China’s bruising trade war with the United States, driving a fourth straight month of contraction in factory output in August, according to an official survey.

China is not alone, of course.

U.S. manufacturing output has remained positive, albeit slower than a year earlier. However, early indicators, like the Institute for Supply Management survey, showed a contraction in August — the first since 2016, according to Bloomberg. That suggests at least parts of the manufacturing landscape are facing rising headwinds; we would be complacent to think the consequences of the trade war are falling solely on China.

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Western Europe is also slowing fast. German manufacturing is arguably already flirting with recession as a consequence of a slowing Chinese economy.

Just as a rising tide lifts all boats, falling global GDP correspondingly depresses prospects for all.

Zerophoto/Adobe Stock

This morning in metals news, China’s trade activity with respect to aluminum and copper slowed in August, Nucor announced Chairman and CEO John Ferriola will be retiring at the end of the calendar year and residents of an Arizona town expressed staunch opposition to a proposed aluminum recycling plant.

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China’s Aluminum Exports, Copper Imports Fall

China’s imports of copper and exports of aluminum fell in August as the trade war with the U.S. escalated with the most recent exchange of tariffs.

China’s copper imports fell 3.8% in August compared with the previous month, Reuters reported, while aluminum exports fell 4.3% compared with July totals.

Nucor CEO to Retire

Nucor Chairman and CEO John Ferriola will retire at the end of this year, the company reported.

Ferriola has served as chairman since 2014 and CEO since 2013.

Nucor’s Board of Directors elected Leon J. Topalian, 51, to be president and chief operating officer, effective Sept. 5, 2019. Topalian will succeed Ferriola as CEO on Jan. 1, 2020.

Residents Oppose Proposed Arizona Aluminum Recycling Plant

Locals in the Arizona farming town of Wenden have come out in opposition to an aluminum recycling plant proposed for the town, azcentral.com reported.

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According to the report, residents urged officials from the Arizona Department of Environmental Quality not to grant an air-quality permit for the proposed Alliance Metals plant.

Pittsburgh-based Alcoa Corporation announced it had reached a tentative agreement on a four-year labor deal with the United Steelworkers union, a deal covering five locations and 1,700 employees.

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Alcoa is a producer of bauxite, alumina and aluminum products. Alcoa shares closed Friday up 0.73% at $17.93.

“The United Steelworkers will now set the date for its members to vote on the proposal, which will cover employees represented by the union at Warrick Operations in Indiana, Massena Operations in New York, Gum Springs in Arkansas, Wenatchee Works in Washington, and Point Comfort in Texas,” Alcoa said in a release.

“Most of the union members eligible to vote on the proposed Master Agreement are employed at Warrick Operations, where the union represents employees at the aluminum smelter and rolling mill, and at the Massena Operations smelter. The Point Comfort alumina refinery and the Wenatchee Works aluminum smelter are both fully curtailed.”

According to Alcoa, the union is now set to schedule a vote on the agreement. The parties had agreed May 15 to honor the existing contract to avoid a work stoppage and allow for further negotiations.

“We came to the table months ago prepared to negotiate in good faith for a fair contract, but management made us fight for it every step of the way,” USW International President Tom Conway said in a release. “We are proud of what we have accomplished due to the unity, strength and solidarity of local union leaders, members and Contract Action Teams.”

The USW negotiating committee will recommend the proposed agreement for ratification by union members.

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“The proposed contract builds on decades of collective bargaining progress with hard-fought economic and non-economic improvements,” USW District 7 Director Michael Millsap said. “Our members have earned and deserve fair wages, benefits and working conditions.” 

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This morning in metals news, the copper price ticked up Wednesday, an appeals court is reconsidering an aluminum antitrust suit involving several big-name companies and Rio Tinto is taking over a mining site in British Columbia.

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Copper Price Rises

The copper price picked up Wednesday on optimism stemming from the Chinese government’s stimulus measures, Reuters reported.

LME copper moved up 0.2% while the most-traded ShFE copper contract jumped 0.5%.

Aluminum Antitrust Appeal Moves Forward

An antitrust case involving Goldman Sachs, JPMorgan Chase and miner Glencore has been revived by a U.S. appeals court, Reuters reported.

According to the appeal from aluminum purchasers, the companies allegedly conspired to drive up aluminum prices by reducing supply.

Rio Tinto Agrees to Buy BC Mine

Miner Rio Tinto has agreed to take a 100% stake in Triumph Gold’s Andalusite Peak mine property in British Columbia, Mining Weekly reported.

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According to the report, the property was first staked by Triumph Gold in January 2017; high grade copper, gold and silver mineralization was identified on the site.

The Canadian government recently announced policy and regulation changes that it argues “will help improve Canada’s trade remedy system for all sectors.”

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Earlier this month, Canada announced changes to its anti-dumping policy, in addition to the establishment of a new aluminum import monitoring and a pledge to strengthen its existing steel import monitoring system.

“Amendments are being made to the Special Import Measures Regulations to ensure that an appropriate level of anti-dumping duties can be applied to goods that are dumped into Canada,” the Department of Finance said in a release.

“This will provide greater flexibility to the Canada Border Services Agency (CBSA) to address situations where there may be distortions in the price of the goods in the country of export. It clarifies alternative methods to calculate the costs of production of the imported goods, in cases where the price of inputs is distorted because of purchases made between affiliated companies or because of a particular market situation.”

Anti-dumping policy changes will also help the CBSA in its attempts to determine whether a product has been dumped.

“This will make it easier for the CBSA to compare the price of the goods imported into Canada with the price of the goods sold by the same exporter to a different country, to find whether there is dumping,” the Department of Finance said. “Changes will also allow the CBSA to better identify dumping that occurs in targeted patterns and is hidden by high prices.”

In addition, as of Sept. 1, 2019, certain aluminum products will be added to the Import Control List.

“Aluminum importers will be required to cite the GIP on CBSA import declarations in order to import the products into Canada,” the Department of Finance continued. “As a direct result of these changes, the industry and the Government will have access to more timely aluminum import data—making it easier to quickly identify whether global oversupply of aluminum is making its way to Canada.”

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Meanwhile, the Aluminum Association in the U.S. applauded the Canadian government’s announced reforms.

“Strong trade enforcement is absolutely essential to a fair, rules-based global trading system,” said Lauren Wilk, the Aluminum Association’s vice president for policy. “Including aluminum products in Canada’s import monitoring system will help government officials and the industry to identify trends in trade flows and address aluminum misclassification, transshipment and evasion of duties.

“The Aluminum Association has been a strong advocate for the creation of an aluminum import monitoring system in the United States to address similar issues in our country, and we look forward to working with the U.S. government to develop a program that will help ensure U.S. aluminum producers can compete on a level playing field within North America.”

Various sources are reporting both a slowing in demand growth and a fall in output for primary aluminum. So far this year, that combination has been led by a faster fall in output, pushing the market into a larger deficit position as the first half progressed.

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Reuters reported the results of a poll showing a forecast for a global aluminum deficit of 550,000 metric tons this year — down from an earlier estimate of 868,240 tons — as demand growth has recently slowed.

Inventory levels support estimates of a deficit.

Primary inventories in warehouses tracked by the Shanghai Futures Exchange (ShFE) are hovering at their lowest since April 2017, according to Reuters. LME stockpiles have improved recently, but are still down 22% from the beginning of the year.

Not surprisingly, futures markets in China are showing more resilience to a generally depressed commodities sector. The ShFE’s most-traded aluminum contract is at its highest since May 29, hitting 14,285 yuan ($2,022.02) a ton last week before easing to close at 14,200 yuan a ton.

The LME, on the other hand, has continued to drift lower over the last two weeks after failing to hold above $1,800 a ton in July.

The disparity in outlook is down to the domestic production situation in China.

New smelter startups have been delayed as Beijing is taking a hard line with aluminum producers, forcing those keen to open up new capacity to close corresponding capacity at older, less efficient plants. Summer production has at best been flat and first-half production is marginally down from last year’s level.

Investors have been encouraged as Typhoon Lekima stormed over Shandong province, causing widespread flooding. Although there are no reports yet of aluminum outages as a result of the typhoon, the expectation is some smelters will suffer flooding and/or power failures, resulting in lost production.

Consumption, however, is softening, both in China and the rest of the world.

Weaker automotive production is a significant factor, as trade worries are causing just that — worries — rather than a significant downturn in non-automotive consumption so far. Expectations are for a pickup in Chinese domestic primary production this fall as the impact of the flooding wanes and those delayed startups come onstream.

Meanwhile, consumption is expected to soften further in Europe and Japan as both areas flirt with stagnation at best or, possibly, outright recession (being the only remaining mature markets open to China after tariffs essentially shut off the U.S. market).

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The prospects this year for a rise in aluminum prices remain poor. However, if demand holds up and supply continues to be constrained, it could set the scene for a gradual rise next year, particularly if a resolution to the trade war is miraculously agreed.