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Despite a plunging LME price and dire short-term prospects for metal consumption in Europe and the U.S., aluminum mills are still following through on long-term plans to improve their environmental credentials.

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They are doing this, particularly, to lower the carbon content of their products to meet buyers’ increasing focus on such environmental considerations.

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This morning in metals news, the U.S. deficit fell in January, aluminum prices ticked up slightly this week and the CEO of the American Iron and Steel Institute is retiring.

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According to the U.S. Federal Reserve’s latest report on industrial production, industrial production in December dipped 0.3%.

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Industrial capacity utilization dipped by 0.4 percentage point to 77.0%, which is down from the long-run average — from 1972-2018 — of 79.8%

Utilities fell 5.6% on the month, down to an index reading of 101.6% (with a reading of 100% equivalent to production in 2012) — marking its first decline since August.

“The drop for utilities resulted from a large decrease in demand for heating, as unseasonably warm weather in December followed unseasonably cold weather in November,” the Fed said.

Manufacturing ticks up in December

However, manufacturing production was up 0.2% (after rising 1.0% in November), while mining increased 1.3% after posting declines in four of the previous five months (including a 0.2% drop in November).

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This morning in metals news, aluminum maker Alcoa released its financial results for Q4 and 2019, an Ohio steel plant touts investment that it says will bring new jobs and a Pittsburgh-based metals manufacturer says it will have to close a facility unless it wins a steel tariff exemption.

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Alcoa releases quarterly financials

Aluminum maker Alcoa reported a net loss of $303 million ($57 million excluding special items) in Q4 2019.

Fourth-quarter revenue came in at $2.4 billion, down from $2.6 billion the previous quarter and $3.3 billion in Q4 2018.

“In 2019, we acted to further strengthen Alcoa, completing the divestiture of uncompetitive assets, modernizing labor agreements in three countries, implementing a new operating model, and making quick progress on the asset review process we announced last quarter,” Alcoa President and CEO Roy Harvey said.

“While the market in alumina and aluminum challenged us, we maintained a strong cash balance of nearly $900 million and drove operational stability,” Harvey said. “Also, our low-cost, top-tier bauxite and alumina segments both set new annual production records based on our current portfolio.”

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The Aluminum Monthly Metals Index (MMI) bounced off last month’s three-year low with a three-point increase to 86. All prices in the index increased by more than 3%.

LME aluminum prices increased in December and surpassed $1,830/mt in early January.

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

Now analysts are watching to see if lackluster demand will allow recent increases to stick.

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According to recent data from the International Aluminum Institute, global aluminum production in November totaled 5.19 million tons, down from 5.35 million tons the previous month.

Buying Aluminum in 2019? Download MetalMiner’s free annual price outlook

Production in November was also down on a year-over-year basis compared with 5.33 million tons produced in November 2018.

China’s production drops

No. 1 producer China churned out an estimated 2.88 million tons in November, down from 2.98 million tons in October and 3.04 million tons in November 2018.

Around the world

Elsewhere, production from Gulf Cooperation Council (GCC) countries totaled 481,000 tons, down from 494,000 tons the previous month and up from the 432,000 tons produced in November 2018.

Production in east and central Europe totaled 345,000 tons in November, down from 356,000 tons in October and 332,000 tons in November 2018.

Meanwhile, in western Europe, production totaled 282,000 tons in November, down from 286,000 tons the previous month and the 310,000 ton produced in November 2018.

North American production totaled 311,000 tons in November, down from 316,000 tons in October and 318,000 tons in November 2018.

Alumina production

As for alumina production, global output reached 10.92 million tons in November.

China’s aluminum production totaled 5.78 million tons in November.

In other alumina news, Norsk Hydro said power outages impacted its operations at Paragominas and Alunorte (its Brazilian alumina refinery). The firm said a transmission tower overturned Dec. 18, causing the outages.

As a result, production at Alunorte was temporarily reduced to 50-70% “to prolong the lifetime of the bauxite inventories.”

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Aluminum price

The LME aluminum price reached $1,1816/mt as of late last week, up 4.22% from the previous month, according to MetalMiner IndX data.

(To revisit 2019 in aluminum news, check out our most-viewed aluminum-centric posts of the previous year.)

Norsk Hydro’s Alunorte refinery. Source: Norsk Hydro

Continuing our look back at some of the most-viewed posts of the year on MetalMiner, today we’ll take a look at some of the most popular aluminum-centric posts of the year.

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We already reviewed the top steel posts of the year.

Below are the top 10 most-viewed aluminum-centric posts here on MetalMiner this year:

  1. Trump Drops Metals Tariffs on Canada, Mexico; What’s the Impact on Steel, Aluminum Prices?

  2. Aluminum is in Deficit, but Prices Don’t Reflect Any Shortage

  3. Aluminum MMI: Aluminum Prices Fall Despite Global Supply Deficit

  4. Aluminum MMI: Aluminum Prices Decline While Monthly Index Gains 2.3%

  5. Aluminum MMI: Tight Aluminum Supplies Stave Off Further Price Drops For Now

  6. Alunorte’s Restart Does Not Bode Well for Aluminum Prices

  7. Aluminum Market is in Balance – For Now

  8. Aluminum Prices Rising Despite Weak Demand

  9. Aluminum Dissonance: Why Have Prices Softened Despite Supply Deficit?

  10. Aluminum MMI: Falling Chinese Prices Offset by Strong Prices in ROW

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This morning in metals news, President Donald Trump won’t go through with a previous tariff threat on Brazilian steel and aluminum, Chinese stainless steel production growth is forecast to drop in 2020, and a power outage impact Norsk Hydro operations last week.

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U.S. backs off tariff threat

After President Trump met with Brazilian President Jair Bolsonaro last Friday, Trump agreed not to follow through on a previous threat to impose steel and aluminum tariffs on Brazilian exports, the Wall Street Journal reported.

The news comes less than a month after the initial threat, which would have reversed an exemption granted to Brazil (and Argentina) when the Trump administration initially imposed Section 232 steel and aluminum tariffs in March 2018.

Chinese stainless production growth to drop in 2020

China’s stainless steel production growth is forecast to drop in 2020, according to the Hellenic Shipping News.

Growth is expected to hit 5% next year, down from 11% this year.

Norsk Hydro hit with power outages

Norway’s Norsk Hydro saw power outages impact its operations at Alunorte and Paragominas last week.

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

“On December 18, a transmission tower overturned, ceasing power supply to Hydro’s Paragominas bauxite mine in Brazil, temporarily halting the production at the mine,” Norsk Hydro said. “Regular power supply to Paragominas is expected to resume within 5-10 days.”

The firm said capacity at the Alunorte alumina refinery will be temporarily reduced to 50-70% in order to extend the life of bauxite inventories there.

Aluminum producers in India, like their steel counterparts, are going through some trying times.

Buying Aluminum in 2019? Download MetalMiner’s free annual price outlook

Rising imports, which could only get worse because of the U.S.-China trade war, and an increase in the cost of production have prompted Indian aluminum producers write to the government, asking it to overcome the anomalies in the duty structure by slashing duties on critical inputs.

Import duties on critical inputs are rendering finished aluminum products uncompetitive in international markets.

Trying to grow in this kind of a market, global aluminum major Hindalco has plans to diversify its portfolio. It is actively looking at the electric car market, the logistics sector and the can business to expand.

In an interview with CNBC, Managing Director Satish Pai said the company is actively looking at the can market because of the ongoing anti-plastic movement. Demand for aluminum cans is going up, he pointed out, which meant Hindalco would be expanding its capacity in the near future.

But what has come as a slight surprise was the aluminum major’s foray into logistics, with the launch of aluminum trailers — a first in India — and lightweight aluminum transport vehicles and trailers.

The idea is to help lower the logistics cost by about 15%, according to a report by the Business Standard.

Hindalco Industries, the flagship company of Aditya Birla Group, has decided to enter the truck and trailer market and replace the existing mild-steel usage with aluminum alloy, Pai said in an interview to the Business Standard.

Currently, logistics cost in India is at about 14%, compared with the U.S. cost of about 10% and Japan’s 11%. In addition to warehousing, transportation was the other major factor contributing to logistics costs.

As a start, Hindalco will provide these aluminum trailers for group company Ultratech Cement. For building the aluminum cargo containers and transport vehicles, the company has started working jointly with fabricators across India.

Hindalco is eyeing India’s trailer production market, which is estimated to be around 20,000 units per annum and is growing at a rate of about 12% per year.

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On the electric vehicles front, Hindalco is also actively looking at building smaller electric vehicles for last-mile delivery purpose, which is a crucial component of the logistics chain.

President Donald Trump said last week that he would impose import tariffs on steel and aluminum from Brazil and Argentina, accusing them of manipulating their currencies and hurting American farmers.

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“Therefore, effective immediately, I will restore the Tariffs on all steel & aluminium that is shipped into the U.S. from those countries,” Trump tweeted — taking both countries and the markets by surprise.

Both Brazil and Argentina had been exempted from the 25% steel tariff and 10% aluminum tariff imposed in March 2018 following negotiations that settled in May of that year, which resulted in a quota system to limit imports to the previous year’s level.

The gist of the president’s case is both countries have devalued their currencies and, as a result, undercut American farmers looking to export agricultural products like soy beans to China and elsewhere.

It’s true to say both the Brazilian real and the Argentinian peso have fallen relative to the dollar, but Brad Setser, a senior fellow for international economics at the Council on Foreign Relations, is quoted in The New York Times as saying neither Brazil nor Argentina was manipulating its currency. In fact, both countries had been selling foreign exchange reserves to prop up the value of their currencies.

He added Argentina was in a “full-blown” economic crisis and was close to running out of such foreign exchange. The Argentinian peso has lost nearly 60% of its value against the dollar this year, the Financial Times reported, following the failure of populist politics and investor worries in the face of a rising debt burden.

To suggest either Brazil or Argentina have any control over their currencies is laughable.

Argentina faces debt repayments that it will struggle to pay, with more than $60 billion coming due in 2020, an earlier Financial Times article noted. The article reports the markets are rattled over concerns that Mr. Fernández may resort to printing money to cover some of the government’s spending commitments and to stimulate an economic recovery, with the country mired in recession.

The fear is that could fuel what is already one of the highest inflation rates in the world, running at around 50%. While the loss of steel and aluminum sales to the U.S. would be serious, the two products make up some 3% of Argentinian exports, paling in comparison to the agricultural sector, which dominates Argentina’s exports.

Like Brazil, Argentina is caught between a rock and a hard place.

Both economies are struggling. The Brazilian real recently fell to a record low against the dollar as the economy tries to tackle high unemployment and weak growth, while Argentina is in an outright recession.

Both countries need all the export dollars they can earn, but in many ways they need China more than the U.S.

Weaker currencies do help them win export business; it is true they have benefitted from the U.S.-China trade war, but it was not of their making.

As The New York Times states, China is a major purchaser of American pork, soybeans and other agricultural goods. As the U.S. and China have slapped tariffs on each other’s products, China has shifted to purchasing products from Brazil and Argentina instead, annoying Washington in the process.

Quite what they expect the two South American countries to do, though, is unclear. Both countries have been trying to support their currencies all year, to no avail.

Maybe Washington is hoping both countries will voluntarily limit sales to China? Would the U.S. do that if the roles were reversed?

Nor would the imposition of tariffs be a win-win for the U.S. steel industry.

Brazil exports some $2.2 billion of steel products to the U.S., but much of it is as semi-finished material, such as rolling slabs, the U.S. Department of Commerce reported this year. Raising costs for U.S. steel companies that import Brazilian slab and other semis will be the price for supporting American farmers — if this action is followed through as expected.

Nor has a grace period been suggested to allow material on the water to arrive and be cleared, as is normally the case with the imposition of such tariffs. The announcement said the tariff would be applied immediately, potentially imposing massive fines on companies with hundreds of millions of dollars of material on the water or in manufacture.

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No doubt the tariff announcement is intended as a negotiating tactic to force parties to come to the table.

Similar moves elsewhere have met with mixed success — let’s hope this case is resolved sooner rather than later.