China’s steel and aluminum market is undergoing a quiet revolution.

It’s not a revolution of investment or innovation.

Each month, MetalMiner hosts a webinar on a specific metals topic. Explore the upcoming webinars and sign up for each on the MetalMiner Events page.

Peak aluminum, steel in China?

China aluminum

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According to Reuters, Beijing’s target of peak coal use by 2030 is asserting a dampening effect on new steel mill and aluminum smelter investment.

As such, the country could be at or near peak production. As Reuters’ Andy Home notes, the country’s rising output over the years as had a dampening effect on prices. That trend has led some Western producers to cease operations.

But a combination of harsher environmental legislation resulting in Beijing dissuading investment in new coal fired power projects, combined with Western markets’ meaningful action — after years of simply complaining — to block out Chinese exports of aluminum and steel products suggests the Chinese impetus to build capacity and the rest of the world’s willingness to buy product are both going through a transformational change.

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The Construction Monthly Metals Index (MMI) held flat for this month’s reading.

June 2021 Construction MMI chart

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US construction spending ticks up in April

housing starts

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U.S. construction spending reached a seasonally adjusted annual rate of $1,524.2 billion in April, the Census Bureau reported.

The estimated April rate marked a 0.2% increase from the previous month and a 9.8% increase on a year-over-year basis.

Construction spending amounted to $452.3 billion during the first four months of the year, or up 5.8% from the same period in 2020.

Meanwhile, private construction spending reached a seasonally adjusted annual rate of $1,180.7 billion, up 0.4% from March. Under the umbrella of private construction, residential construction increased by 1.0% to a rate of $729.2 billion in April. Nonresidential construction fell by 0.5% to $451.4 billion in April.

Public construction spending fell 0.6% to $343.5 billion. Educational construction spending fell 0.5% to $84.8 billion. Highway construction rose 0.6% to $99.8 billion.

Construction employment declines in May

On the labor side, employment in the construction sector fell by 20,000 in May, the Census Bureau reported. Employment in construction is down by 225,000 from February 2020.

The Associated General Contractors of America noted contractors continue to struggle with unpredictability with respect to securing materials.

“Steadily worsening production and delivery delays have exceeded even the record cost increases for numerous materials as the biggest headache for many nonresidential contractors,” said Ken Simonson, the association’s chief economist. “If they can’t get the materials, they can’t put employees to work.”

ABI posts growth for third consecutive month

For the third straight month, the Architecture Billings Index, released monthly by the American Institute of Architects, showed growth (meaning an index value greater than 50).

After the onset of the pandemic, the ABI had contracted each month for a year until the February 2021 reading.

For April, the ABI checked in at 57.9, up from 55.6 the previous month. The design contracts index reached 61.7, up from 55.7 the previous month.

The ABI marked its highest level since before the Great Recession.

“Interest in new projects remained extremely strong as well, with the Inquiries score rising to 70.8, and the value of new signed design contracts reaching 61.7, the highest score in that index since data collection started in late 2010,” the ABI report stated. “This means that not only are clients talking to architecture firms about starting new projects, but that they are also signing contracts to begin that work at a high rate.”

By region, the Midwest led the way with an ABI reading of 60.6. Trailing the Midwest were the South (58.3), Northeast (55.0) and West (52.4).

As we’ve noted in this space on a regular basis, shortages and delays in receiving materials have had a ripple effect. The sudden surge in demand throughout some sectors has produced a bullwhip effect.

The ABI report noted the 0.8% jump in the Consumer Price Index from March to April and the 4.2% jump from April 2020 to April 2021, which marked the largest increases since before the Great Recession.

“In addition, core inflation rose by 0.9% in April, the largest increase in that indicator since 1981,” the ABI report notes. “Rising consumer prices at this time are largely caused by supply constraints due to a shortage of key inputs subsequently leading to production delays, and by rising demands for services, particularly travel and hospitality.”

Pending home sales drop in April

Meanwhile, in the housing market, pending home sales fell by 4.4% in April, the National Association of Realtors (NAR) reported.

“Contract signings are approaching pre-pandemic levels after the big surge due to the lack of sufficient supply of affordable homes,” said Lawrence Yun, NAR’s chief economist. “The upper-end market is still moving sharply as inventory is more plentiful there.”

Actual metals prices and trends

The Chinese rebar price dipped 0.7% month over month to $802 per metric ton. Meanwhile, the Chinese H-beam steel price fell 2.3% to $815 per metric ton.

The U.S. shredded scrap steel price rose by 3.2% to $450 per short ton.

The European 1050 commercial aluminum sheet price rose by 0.4% to $3,577 per metric ton.

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The Atlanta-based aluminum firm Novelis announced it is partnering with China’s leading universities to conduct research into the innovative use of aluminum.

The partnership between Novelis’ Shanghai Customer Solution Center (CSC) and the Tsinghua University Suzhou Automotive Research Institute (TSARI), confirmed by way of a memorandum of understanding (MoU) will drive research and development of aluminum products to promote a “low carbon, sustainable future.”

Novelis is a subsidiary of India’s Hindalco Industries Ltd. The company accounts for almost half of Hindalco’s consolidated revenue.

Furthermore, with operations in 10 countries, Novelis is one of the largest aluminum recyclers in the world. It reported U.S. $11.2 billion in net sales for the most recent fiscal year.

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

Novelis in China

aluminum sheet

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However, Novelis already has a significant presence in China.

Back in May, for example, the aluminum major announced that it would supply Nissan with a sustainable, lightweight aluminum body sheet for the all-new Qashqai SUV and create a closed-loop recycling system in Europe.

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The Aluminum Monthly Metals Index (MMI) increased by 0.9% this month, as aluminum prices reached a nine-year high during the first half of the month but later declined. 

June 2021 Aluminum MMI chart

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Aluminum prices

The LME aluminum price reached a nine-year high May 10 when it reached $2,565/mt. 

Since then, prices dropped below the $2,500/mt mark, averaging $2,434/mt throughout May.

Chinese prices behaved similarly to the LME. They reached a peak of CNY 20,030/mt on May 10 but have declined since then. 

EPI study claims tariffs incentivized US domestic production

On May 25, the Economic Policy Institute (EPI) published a white paper that argues the domestic aluminum producing and consuming industries have thrived as a result of the Section 232 tariff that former President Donald Trump implemented in March 2018. 

As MetalMiner reported last week, the EPI report argues the 10% duty has led to job growth in the sector and increased production.

The paper concluded that U.S. production of primary aluminum, including both alumina refining and secondary smelting and alloying of aluminum, increased by 37.6% to 1.14 million metric tons annually from March 2018 to February 2020. This increase came from the restart or production increase of five of the six smelters in the U.S. 

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This morning in metals news: Nucor Corporation today announced it will acquire Cornerstone Building Brands‘ insulated metal panels business; the oil price approached $70 per barrel to close last week; and the aluminum price has retraced over the last month.

Each month, MetalMiner hosts a webinar on a specific metals topic. Explore the upcoming webinars and sign up for each on the MetalMiner Events page.

Nucor to acquire insulated metal panels business

mergers and acquisitions

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Nucor announced today that it plans to acquire the insulated metal panels business of Cornerstone Building Brands.

The acquisition comes at a cash purchase price of $1 billion. Nucor said it expects the transaction to close later this year, pending regulatory approvals.

“Today’s announcement accelerates our vision to broaden value-added solutions that Nucor provides to our targeted end markets. Additionally, it enhances our strong financial position with attractive free cash flow conversion rates and accretive EBITDA margins,” Nucor President and CEO Leon Topalian said. “We are excited about this opportunity to acquire a historical leader and innovator in the quickly growing IMP product category serving the non-residential market.”

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This morning in metals news: during MetalMiner’s latest webinar Thursday, the team walked through the signs buyers should pay attention to that might indicate an end to the current state of allocation markets and metals shortages; the carbon footprint of aluminum can production in North America has plunged over the past three decades, according to a recent report; US average gasoline prices are at their highest level before Memorial Day since 2014; and the US international trade deficit declined in April.

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MetalMiner webinar now available in Video Archive


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In case you missed Thursday’s 30-minute webinar, video is available in the MetalMiner Video Archive.

Visit the Video Archive landing page to sign up to receive the video.

For metals buyers, metals markets have been defined by allocation and shortages for many months. As such, the MetalMiner team walked through the signs buyers should pay attention to that may indicate those scenarios could be winding down.

Furthermore, visit the MetalMiner Events page for a schedule and topics of upcoming MetalMiner webinars.

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Over three years later, analysis, assessments and calls for removal or maintenance continue to pour in with respect to the former Trump administration’s Section 232 tariffs on steel and aluminum.

In 2018, former President Donald Trump used Section 232 of the Trade Expansion Act of 1962 to impose tariffs on steel and aluminum of 25% and 10%, respectively, citing national security concerns. The administration sought to boost domestic industry and bring capacity utilization rates up to around 80% (considered a barometer of industry health).

With respect to aluminum, the Economic Policy Institute (EPI), in a white paper released this week, argues for the success of the Section 232 aluminum duty.

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EPI: Section 232 aluminum tariff spurred investment, jobs growth

tariffs overlaid on US currency

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Among its primary conclusions, the EPI white paper argues the 10% duty has led to job growth in the sector and increased production.

“Projects, investments, jobs, and capacity are on the rise since the initiation of the Section 232 aluminum tariffs,” the EPI argued. “At least 57 new and expansion projects are in downstream aluminum industries producing extruded (rod and bar, pipe and tube, and extruded shapes) and rolled (sheet and plate) products. These new and expanded facilities will employ more than 4,500 additional workers, generate $6 billion in new investments, and add more than 1.1 million metric tons of annual rolling and extrusion capacity to the downstream domestic aluminum industry.”

Furthermore, the EPI argued US primary aluminum production increased on the heels of the Section 232 tariff.

US primary aluminum production increased by 37.6% from March 2018-February 2020 compared with the previous two-year period, the EPI said.

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This morning in metals news: new-vehicle retail sales are on pace to hit their highest total ever for the month of May, according to J.D. Power and LMC Automotive; meanwhile, new orders for manufactured durable goods declined in April after 11 straight months of gains; and, lastly, LME aluminum has backtracked over the last two-plus weeks.

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

New-vehicle retail sales set to have record May

auto sale Stock

US new-vehicle retail sales are on pace to have a record May, J.D. Power and LMC Automotive reported in their jointly released automotive forecast today.

They project new-vehicle retail sales this month will reach 1,388,600, good for an increase of 34.0% year over year. Furthermore, the sales forecast would mark a jump of 10.6% compared with May 2019 sales.

“The U.S. auto industry is showing tremendous adaptability in maintaining a record sales pace, despite historically low inventory levels,” said Thomas King, president of the data and analytics division at J.D. Power. “May is usually one of the highest-volume sales months with buying activity peaking around the Memorial Day weekend when manufacturers typically offer incremental incentives. This year, notwithstanding supply constraints and significantly reduced incentives from manufacturers, May 2021 will be another record-breaking month for the industry.”

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aluminum ingot stacked for export

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A bullish report in Reuters last week advising metal output in China was breaking records, again, looks at odds with developments this week.

Relentlessly rising prices have taken a sharp about-turn, the BBC reported.

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

Rising metals output

Reuters reported that China’s aluminum production in April rose to a record monthly volume. China’s primary production reached 3.35 million metric tons in April. That marked a 2.3% jump from 3.28 million tons in March. Furthermore, it jumped by 12.4% from April 2020.

Nor was April an anomaly.

In the first four months of the year, China produced 13.02 million tons, a rise of 9.6% from the same period a year earlier. High prices and strong demand encouraged smelters to ramp up output. In addition, power restrictions in Inner Mongolia were eased.

The SHFE price hit 20,000 RMB ($3,106) per ton, the highest since 2011. In addition, production of 10 nonferrous metals — including copper, aluminum, lead, zinc and nickel – rose 11.6% to 5.48 million tons from a year earlier. Year-to-date output of the 10 metals rose by 11.5% to 21.43 million tons.

High prices have boosted output. While strong demand has also been a factor, investors have gone long and bid up prices.

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This morning in metals news: aluminum roller and recycler Novelis announced its quarterly financial results; meanwhile, the United States International Trade Commission voted Tuesday on anti-dumping duties for prestressed concrete steel wire strand; and, lastly, the Consumer Price Index rose by 0.8% in April.

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

Novelis reports ‘outstanding’ quarter

earnings sign

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Aluminum roller and recycler Novelis reported net income of $180 million during the quarter ending March 31, 2020 (Q4 of fiscal year 2021).

The performance marked a jump from $63 million in Q4 of fiscal year 2020.

“Guided by our purpose and driven by the resilience of our people and the strength of our partnerships, we safely navigated this extraordinary year to achieve outstanding results,” President and CEO Steve Fisher said. “With the ongoing successful integration of Aleris, a diverse and innovative product portfolio, and unmatched geographic footprint, we have proven our ability to deliver sustainable aluminum solutions to customers in a way that resulted in record financial performance.”

Furthermore, among other factors, higher average aluminum prices helped drive a 33% year-over-year rise in sales to $3.6 billion.

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