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On April 19, 2018, the U.S. Department of Commerce issued anti-dumping and countervailing duty orders on certain types of aluminum foil from China.

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Chinese producers appealed the decision, but the U.S. Court of International Trade this month opted to uphold the Commerce Department’s determination.

The Chinese plaintiffs lodging the appeal were: Jiangsu Zhongji Lamination Materials Co., (HK) Ltd., Jiangsu Zhongji Lamination Materials Co., Jiangsu Zhongji Lamination Materials Stock Co. Ltd., and Jiangsu Huafeng Aluminium Industry Co., Ltd.

Zhongji’s appeal focused on five aspects of the Commerce Department’s decision, including: the use of South Africa as the primary surrogate country in the case; using Descartes instead of Xeneta data to value international freight; valuing Zhongji’s aluminum scrap using the incorrect HTS classification; calculating Zhongji’s VAT adjustment “based on the wrong transaction”; and the deferment of the Commerce Department’s decision past the statutory deadline.

Zhongji argued the selection of South Africa as a surrogate country for comparison was not appropriate, claiming South African aluminum foil exports were distorted by subsidies and that Bulgaria’s aluminum foil values were more closely aligned with those of Zhongji.

The court, however, said Zhongji’s arguments did not meet the necessary legal standard.

“The subsidies alleged by Zhongji do not meet the ‘reason to believe or suspect’ standard,” the court stated in its case summary. “When there is evidence of a potential subsidy but Commerce has not previously found the specific program to be countervailable, Commerce does not per se reject the data in question and requires evidence of distortion before it will reject it.”

The court acknowledged that the Commerce Department did in fact submit its determination after both the 140- and 190-day statutory deadlines (the latter used for “extraordinarily complicated” cases).

“All parties agree that Commerce violated even the later deadline, which fell on October 4, 2017, by publishing its preliminary determination in the Federal Register on November 2, 2017,” the court summary states. “However, Commerce’s late filing of a preliminary determination does not preclude it from issuing an affirmative preliminary determination, as precedent dictates that statutory deadlines are not mandatory in the absence of an express statement of consequences from Congress.

“In light of this precedent, the court affirms Commerce’s affirmative preliminary determination and collection of duty deposits notwithstanding the missed deadline.”

Ultimately, Judge Gary S. Katzmann ruled in favor of the Commerce Department.

“The court affirms Commerce’s selection of primary surrogate country and data to value Zhongji’s aluminum foil inputs, as Commerce was within its discretion under 19 U.S.C. § 1677b and Policy Bulletin 04.1 in making those selections based on the evidence in the record,” Katzmann wrote. “Additionally, the court grants Commerce’s request for a remand to recalculate its VAT adjustment using the correct sale price. Finally, the court affirms Commerce’s preliminary determination and collection of duty deposits notwithstanding its violation of the statutory deadline.”

The Commerce Department now must file with the court and provide to the parties a revised determination of its VAT calculation within 90 days.

After the requisite determination is filed and provided to the relevant parties, “the parties shall have 30 days to submit briefs addressing the revised final determination to the court and the parties shall have 15 days thereafter to file reply briefs with the court.”

The Aluminum Association expressed its support for the court’s ruling.

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“The Aluminum Association was pleased that the U.S. Court of International Trade affirmed the bulk of the Department of Commerce’s final antidumping determination on certain aluminum foil from China,” said Lauren Wilk, the Aluminum Association’s vice president for policy and international trade. “The court’s decision reinforces the critical role rules play in a functioning global trading system. Targeted trade enforcement – as we’ve seen successfully deployed in the U.S. markets for aluminum foil and common alloy sheet– can have a meaningful and positive impact on U.S. manufacturers.

“The association and its member companies are determined to vigorously defend these orders and are committed to trade enforcement as a tool to address the symptoms of persistent Chinese overcapacity in the aluminum industry, which is impacting the entire value chain.”

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.

Risk factors are everywhere, especially in this era of escalating trade tensions among the world’s strongest economies.

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On top of the common risk factors businesses face — like weather events, supplier inefficiencies and freight costs — it’s critical to be smarter than ever about insulating supply chains from risk, whether from one-off events or longer-term developments.

Bill DeMartino, general manager of riskmethods North America, recently stopped by MetalMiner’s Forecasting Workshop to lay out the many risk factors impacting supply chains today, in addition to tools businesses can use to mitigate those risks.

riskmethods serves brands around the world, leveraging artificial intelligence to mitigate supply chain risk. The company offers several tools for businesses to assess the risk landscape, including the riskmethods Risk Radar™, which provides real-time insights into a firm’s supply chain network, and the riskmethods Impact Analyzer™, which generates impact scores so firms can assess how risk events might affect their supply chain network.

The appetite and will to change how companies orchestrate their supply chains is extant, particularly in response to the imposition of tariffs over the last year and a half.

“Based on survey data, we’re seeing a lot of these companies are reengineering their supply chains because of the tariff situation,” MetalMiner Executive Editor Lisa Reisman said.

When it comes to the metals sector, specifically, DeMartino pointed out a number of factors businesses should consider when working on their supply chains, calling out the acronym VUCA, which stands for “volatility, uncertainty, complexity and ambiguity.”

The tariff situation, for example, which kicked off approximately 18 months ago with the Trump administration’s Section 232 tariffs on imported steel and aluminum, fits under the category of ambiguity.

“This is the world that we’re operating in today,” DeMartino said. “This is the world that you have to deal with, this is the world that suppliers have to deal with.”

DeMartino said businesses need to improve at proactively managing risk rather than responding reactively. That approach includes monitoring supplier sites on a regular basis in order to better assess supplier quality and be able to adjust the supply chain network, if necessary.

So what are the challenges — risks — businesses are facing?

In a survey of the workshop’s attendees — metals procurement professionals — DeMartino noted many listed the same things: weather events (including natural disasters), financial health and geopolitical issues. When it comes to onboarding new suppliers, businesses typically assess price and service levels, but there are many other factors to consider, some of which might be early warning signs.

DeMartino said that last year riskmethods sent out approximately 22,000 threat alerts related to the approximately 250,000 active sites the firm covers in its database, noting that many of the alerts covered aligned with the concerns brought forth by the workshop attendees in their survey responses.

“We are seeing cyber attacks, civil unrest and all kinds of things that are critical,” he added.

Notably in the metals sector, in March, Norwegian aluminum producer Norsk Hydro fell victim to a cyber attack that impacted operations across all segments, particularly extruded solutions. When the company announced its Q1 2019 financial results in June, the impact of the cyber attack amounted to between NOK 300 million and 350 million (or approximately between U.S. $34 million and $39 million).

For onboarding itself, companies should of course consider price and financial health, but also consider a much wider range of risk factors, including: the nature of the business, where they operate, the geopolitical environment, the history of disputes in the supplier’s location, availability of labor, and currency issues, among other factors.

Another key factor is identifying early warning signs of emerging threats  — for example, with respect to financial health, if a supplier experiences a patent infringement or product recall, while later-stage warnings include plant closures or the departure of a company’s CFO — so the company is in a position to act before the credit rating is updated.

As for locations, China is of course a popular offshore sourcing location for U.S. companies. However, given the ongoing escalation in trade tensions between the two countries, U.S. businesses would be wise to at least consider alternative sourcing locations if possible.

Earlier this month, President Donald Trump announced the U.S. would impose a 10% tariff on an additional $300 billion in Chinese goods, effective Sept. 1, thus subjecting nearly all imports from China to tariffs. (Last week, however, the United States Trade Representative announced the U.S. would delay tariffs on some articles in the tariff list, including cellphones, laptop computers, video game consoles, certain toys, computer monitors, and certain items of footwear and clothing.)

With the climate of trade uncertainty in mind, DeMartino said businesses should treat countries the same way they treat individual suppliers. However, for companies considering moving parts of their supply chain out of China to other countries — India, for example — it’s important to remember that while those other countries may not be subject to the same tariff-related risk, they could present other forms of risk worth considering.

As businesses make these types of decisions, supply chain mapping is a valuable tool that offers a “visual representation” of the company’s supply chain base, DeMartino explained.

One obvious but important example, he noted, relates to physical events, like storms. When a particularly powerful weather event occurs, a meticulously mapped supply chain can allow for easy visualization of the problem area and whether or not the event will have a significant impact on the company’s supply chain base.

In addition, if a company moves from a single-source situation to dual-sourcing, but both sources are located in the same geographic risk area, the company will likely face the same issues it would if it were single-sourcing. As such, supply chain mapping allows businesses to visualize the risk landscape in a more comprehensive fashion.

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“Once you are able to create this visualization, it allows you to gain a lot of unique insights and values that you would not have otherwise,” DeMartino said.

Automotive markets just about everywhere are in decline this year.

The question is: to what extent is this a cyclical downturn as opposed to a structural shift?

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The Financial Times article reported Indian passenger vehicle sales fell 31% last month from the same time a year earlier, according to the Society of Indian Automobile Manufacturers. It was the worst month since the turn of the century in a dismal spell that has seen sales fall 20% or more for four consecutive months, while sales have failed to rise for more than a year.

India’s economy is slowing, with GDP growth falling to a five-year low of 5.8% in the first quarter of 2019. In addition, a liquidity squeeze caused by a crisis in its shadow banking sector is choking off consumer demand and business expansion.

The article goes on to explain that about 40% of new car loans came from these shadow banks, making liquidity tight. Although a reduction in India’s high car taxes — the government levies a 28% goods and services tax on cars, with the effective rate including other duties rising as high as 48% for some vehicles — is a possibility, it is unlikely the new administration’s cash-strapped budget could afford it.

Significant as India’s car market is — as recently as last year, India’s motor market was thought to be on course to overtake Germany and Japan and become the world’s third-largest, the Financial Times reported – Germany’s is even larger.

Yet, declines are dramatic in Germany, too.

Source: ING Bank

Germany’s problems are more nuanced.

Domestic production has been hit by the delayed introduction of the new worldwide light vehicle test procedure, which caused severe disruption to German automotive production and shipments.

But matching the introduction of the China 6 emission standard has also caused a downturn in Germany’s largest automotive export market: China.

To underline the importance of the market, ING Bank reported that in 2018 almost one-quarter of all cars sold in China were German. BMW and Daimler recorded more than one-third of their total car sales in China. For Volkswagen, the share is even bigger (40%).

Yet new car sales in China have fallen for 13 months in a row, a slump that started in the second half of 2018 when the trade war between China and the U.S. began to heat up, according to ING.

The trade war has been a factor. U.S. customs duties on Chinese goods worth U.S. $250 billion (with U.S. $300 billion to follow Sept. 1) and Chinese customs duties on U.S. goods worth U.S. $110 billion, car and car parts from China are being taxed at 27.5% in the U.S. since July 2018. U.S. autos are subject to China’s standard tariff rate of 15%.

Given that some German car manufacturers actually export U.S.-produced cars to China, there has been a clear and direct impact of the trade conflict on the German car industry.

But that is only part of the story.

The switch to China 6 meant consumers held off buying the older models despite a major distributor push to discount old stock.

But the industry worries China could be going through a structural shift.

According to ING, China is already the largest ride-hailing market in the world, with over 459 million customers and a turnover of around U.S. $53 billion. By comparison, where it all started in the U.S. there are currently 66 million users generating U.S. $49 billion in turnover.

To put things into perspective, one-third of the Chinese population already uses alternative mobility solutions, while in the U.S. the figure is around 20% and in the E.U. it is just 18%. Further, while in the U.S. ride-hailing is used occasionally by a car owner, in China many users are not yet on the car ownership ladder; as ride-hailing becomes more widespread, those users may elect never to become car owners.

According to JustAuto, new vehicle sales in China fell by 4.3% to 1.81 million units in July from 1.89 million units a year earlier, according to wholesale data released by the China Association of Automobile Manufacturers. This includes all vehicle types, passenger vehicles and commercial vehicles, with the cumulative seven-month total at 14.13 million units – down by 11.4% from the 15.96 million units sold in the same period of last year.

Jeff Schuster, president of global forecasting at LMC Automotive, is quoted in Europe’s Autonews as saying global light-vehicle sales will decline 2.6% in 2019 to 92.2 million units. Through 2025, he doesn’t see more than 2% growth as the mature markets of western Europe, the U.S., Japan and Korea contract in volume over the next five to seven years. Only electric vehicle production as a subset — coming from a very low base — is set to rise.

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The industry’s current downturn is in part cyclical and production will recover regionally as consumer confidence and access to credit improves.

At the same time, there is a structural shift happening that will impact the industry’s long-term future and create significant challenges for global western carmakers in the years ahead.

We are not stock market investors at MetalMiner. While we may hold shares, either as direct punts or as part of pension or investment funds, we do not consider ourselves stock market experts and, as such, rarely cover market movements unless part of a wider review of financial markets.

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That said, few can have missed the wild gyrations U.S. stock markets — also mirrored in Europe and Asia — have been going through this month. Those movements might lead one to question whether this has implications for commodity markets in general and metal markets in particular.

Anyone who has attended one of our market seminars will know there are clear correlations between share prices and commodities, so it is not an idle question to ask whether this month’s falls are a correction or the early signs of an end to the bull market that has powered shares higher for some 11 years.

Source: Financial Times

To answer that question, it helps to review why share prices have taken such a hammering.

Read more

A recent article in the ever insightful Stratfor Worldview this month underlines how the world is not short of copper ore deposits — they are, at least in this example, just in the wrong place.

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The article covers a long-running dispute between the Pakistani government and mining company Tethyan Copper Co., a joint venture between Canada’s Barrick Gold Corp. and Chile’s Antofagasta PLC, the article explains.

The dispute is over the legality of Tethyan’s claim and rights to exploit the copper and gold reserve at Reko Diq in Pakistan’s remote southwest Balochistan province, close to the Iran border.

Pakistan’s mining rights and practices, not to mention its infrastructure, are not fit for the purpose, as Tethyan’s story underlines all too well.

Rights were originally granted to BHP by way of a decades-old pact called the Chagai Hills Exploration Joint Venture Agreement (CHEJVA), signed in 1993 between the Balochistan Development Authority and the Australian miner. The rights were subsequently acquired by Tethyan, which has been in a long-running dispute ever since.

The company has invested some $220 million in exploration to prove the resource and carry out feasibility studies. However, probably in a bid to wring more out of the firm, legal challenges were taken to the provincial courts. The resulting legal proceedings caused delays, which finally drove the firm to take the case to the World Bank’s International Centre for Settlement of Investment Disputes (ICSID) and the International Chamber of Commerce, resulting in a $5.9 billion fine against the Pakistani authorities.

The current impasse is in neither party’s interests.

Tethyan has offered to negotiate a settlement, but with the Chinese on the sidelines bidding to extend their Belt and Road involvement in the region, conflicting loyalties and priorities are in play.

A solution, though, would be very much in Pakistan’s interests.

The resource is said to be the largest untouched deposit in the world, containing an estimated 2.2 billion metric tons of mineable ore that could yield 200,000 metric tons of copper and 250,000 troy ounces of gold annually for over half a century, Stratfor reports.

But exploiting it requires international expertise and finance.

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The ore must be processed into a fine powder at the mine head before converting it into a slurry concentrate for transport through a 682-kilometer pipeline to the Arabian seaport of Gwadar. At the port, the company planned to dry the concentrate before loading it onto ships for smelting abroad — missing an opportunity to value add to refine it into pure metal.

These are trying times for Glencore, as the cobalt market price collapses due to surging supply and weak copper prices undermine the fundamentals for the miner’s Mutanda copper and cobalt mine in the Democratic Republic of the Congo.

The Financial Times reported Glencore will halt production at the world’s largest cobalt mine from the end of this year because it is “no longer economically viable.”

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In a letter to employees, the firm states, “Unfortunately due to the significant decrease in the cobalt price, increased inflation across some of our key input costs (mainly sulphuric acid) and the additional taxes imposed by the mining code, the mine is no longer economically viable over the long term,” the Financial Times reported.

The price of cobalt has fallen 40% this year, contributing to Glencore reporting a 32% drop in earnings for the first half of this year and net income shrinking to just $200 million.

As a whole, Glencore’s African copper division reported a loss of $315 million in the first half of the year due to higher costs and lower prices, the Financial Times stated in a separate report.

As part of the miner’s ongoing pain, Glencore’s trading arm was forced to take a mark-to-market loss of $350 million on about 10,000 tons of cobalt inventory it owns but has yet to sell. The firm traditionally sells at spot rather than on long-term prices, although that would not necessarily have saved it from price falls; even longer-term contracts generally have an adjustment factor to reflect market price trends.

Glencore has a record of taking the hard decisions early and shuttering mines that are loss-making.

The miner closed zinc mines in 2015 in response to low global prices; its actions are credited with helping the zinc market recover as a result.

Cobalt demand has traditionally been driven by its use as an alloying element, but it is increasingly being seen as part of the lithium battery demand story because of its role in production of advanced batteries. The electric vehicle (EV) market, though, has failed to match up to its hype this decade. Although both lithium and cobalt prices have risen as a result of battery makers securing their supply chain, the reality is supply is perfectly adequate.

MetalMiner’s Annual Outlook provides 2019 buying strategies for carbon steel

In the longer term, though the fundamentals remain solid, EV sales will rise over the next decade as prices become more affordable, ranges extend and charging infrastructure improves. Glencore is putting Mutanda on care and maintenance for the next two years, after which it will review its options.

Taking some 20% of global supply out of the market will put a floor under prices and shorten the time frame over which prices will recover.

The Construction Monthly Metals Index (MMI) fell three points for an August reading of 78.

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U.S. Construction Spending

According to the U.S. Census Bureau’s most recent construction spending report, U.S. construction spending reached $1,287.0 billion in June, down 1.3% from the May estimate of $1,303.4 billion.

The June spending estimate also marked a 2.1% decline from the June 2018 estimate of $1,314.8 billion.

Private construction spending totaled $962.9 billion, down 0.4% from May. With private construction, residential construction totaled $507.2 billion, down 0.5% from May. Nonresidential construction reached $455.7 billion, down 0.3% from May.

Meanwhile, public construction spending reached $324.1 billion, down 3.7% from May. Educational construction reached $73.0 billion, down 6.8% from May. Highway construction reached a seasonally adjusted annual rate of $101.9 billion, down 6.4% from May.

Billings Decline in June

Architecture firm billings fell in June after essentially coming in flat the previous two months, according to the American Institute of Architects’ monthly Architecture Billings Index (ABI) report.

The June ABI reflected a contraction in billings with a reading of 49.1, down from 50.9 the previous month (anything greater than 50 indicates billings growth).

Billings have either declined or held flat each month since February, the ABI report showed, the longest such period since 2012.

“In addition, while inquiries into new work and the value of new design contracts remained positive in June, the pace of that growth continued to slow, with inquiries in particular falling to its lowest score in a decade,” the report states. “However, firms are still reporting strong backlogs of work in the pipeline, six and a half months on average, which continues to be the most robust that backlogs have been since we began collecting this data on a quarterly basis in 2010.”

By region, the South (51.9) was the only part of the U.S. in positive growth territory. The Northeast (46.1), Midwest (48.9) and West (49.3) regions all showed billings contraction in June.

This month, the ABI featured a survey of industry professionals on the issue of tariffs, asking them for their level of concern related to tariffs and trade-related retaliation. On a scale from 1-5 (with 1 meaning “not at all concerned” and 5 meaning “very concerned”), 35% of respondents answered either 4 or 5, while 37% checked in at 3 (meaning “somewhat concerned”).

Actual Metal Prices and Trends

Chinese rebar fell 1.0% month over month to $576.54/mt as of Aug. 1. Chinese H-beam steel rose 0.5% to $557.66/mt.

U.S. shredded scrap steel fell 6.2% to $257/st. European commercial 1050 aluminum fell 7.4% to $2,363.71/mt.

MetalMiner’s Annual Outlook provides 2019 buying strategies for carbon steel

Meanwhile, Chinese 62% iron ore PB fines fell 0.3% to $76.24/dmt.

Steven Husk/Adobe Stock

The Automotive Monthly Metals Index (MMI) fell one point this month for an August reading of 86.

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U.S. Auto Sales

Nissan reported July sales in the U.S. of 98,880 units, down 9.1% on a year-over-year basis.

Honda’s sales ticked up 1.9% to 141,296 units, with its car sales up 1.8% and truck sales up 2.1%.

Toyota Motor North America reported July sales were up 0.2% on a volume basis, but down 3.8% on a daily selling rate basis compared with July 2018.

Meanwhile, earlier this year Fiat Chrysler announced it would shift to quarterly sales reports, following other Detroit automakers General Motors and Ford Motor Company.

Fiat Chrysler did report its second-quarter financial results, reporting adjusted EBIT in North America of €1.57 billion, up €168 million from Q2 2018. Fiat Chrysler’s North American shipments fell 12% due to dealer stock reductions, according to the automaker.

“We continue to deliver strong performance in North America and LATAM. Robust demand for our new products, along with steps we’ve taken to exert discipline across all of our businesses, have generated the momentum to achieve our full-year 2019 guidance,” CEO Mike Manley said in a prepared statement.

General Motors announced Q2 2019 income of $2.4 billion, up 1.6% on a year-over-year basis. In addition, this week GM announced it would open a $65 million parts processing facility in Burton, Michigan, a suburb of Flint. According to GM, the facility will employ more than 800 hourly and salaried workers.

In this month’s J.D. Power and LMC Automotive forecast, July new-vehicle retails sales in the U.S. were expected to fall compared with July 2018. Meanwhile, total sales were forecast to fall 1.8% compared with July 2018.

The seasonally adjusted annualized rate for total sales was forecast to reach 16.7 million units this year, which would come in approximately flat compared with 2017, according to J.D. Power and LMC Automotive.

“July will be another month of modest sales declines—but with high vehicle expenditures—as the average new vehicle sales price exceeds $33,000, up over $1,400 from July 2018,” said Thomas King, senior vice president of J.D. Power’s data and analytics division.

According to J.D. Power, the rise in prices is being driven by “consumers paying more for recently launched SUVs and more attractive interest rates on new vehicles that help keep monthly payments affordable when purchasing more expensive vehicles.”

The Sales Climate in China

Recently, MetalMiner’s Stuart Burns weighed in on the challenges automakers are facing in China, the world’s largest automotive market.

As Burns explained, some foreign automakers are operating at remarkably low percentages of capacity in China.

“The Financial Times reported Ford’s plants in China operated at only 11% of capacity during the first six months of this year, as the firm’s car sales plunged to 27% of the same period last year,” Burns explained.

“Meanwhile, Peugeot owners PSA’s plant in Chang’an produced just 102 cars — yes, you read that right, 102 cars — in the first half of the year, meaning its capacity utilization was below 1%. The firm’s other joint venture with Dongfeng Auto ran at just 22% of capacity, the article reported, as sales were just 62% of the same H1 period last year.”

On the other hand, Japanese automakers and premium European brands have fared well, Burns noted.

“Japanese carmakers, for example, remain strong,” Burns wrote. “Honda and Toyota are both running extra shifts to maintain better than 100% capacity. Premium European brands are doing well, with Daimler’s Beijing Benz joint venture running close to 90% capacity while BMW Brilliance is running at 96%. If it were just the sale of low-end cars that were suffering, you would expect the Japanese carmakers and Volkswagen to also see a similarly sharp downturn, but they are not.”

Actual Metal Prices and Trends

U.S. HDG rose 4.4% month over month to $813/st as of Aug. 1. LME three-month copper fell 0.5% to $5,950/mt.

MetalMiner’s Annual Outlook provides 2019 buying strategies for carbon steel

U.S. shredded scrap steel fell 6.2% to $257/st. Korean 5052 aluminum coil premium fell 3.7% to $3.15/kg.

The Aluminum Monthly Metals Index (MMI) dropped two points this month to 84. Most of the prices tracked for the index dropped this month, with European prices dropping the most (by close to 7.5%). 

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LME aluminum prices fared best of all of the aluminum prices this month, posting a mild increase of less than 1%. Aluminum prices continued to move sideways in July, generally trading above $1,800/mt.

However, the price ended July weaker, then dropped — along with most industrial metals —  following the U.S. announcement of $300 million in new tariffs on China (effective Sept. 1).

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

SHFE aluminum prices moved sideways recently, but with some upward momentum evident and higher lows throughout the year.

Source: MetalMiner analysis of Fastmarkets

China produced 2.97 million tons of aluminum in June, down slightly from May’s production of 2.98 million tons. However, the June total was still up year on year by 1.3% up over May on a daily average basis, according to Reuters calculations. In May, production averaged 96,000 tons per day, and rose to 99,000 tons per day in June.

China’s higher daily production levels followed a jump in prices during May to around CNY 14,350/mt, which helped turned margins positive again for some smelters and fueled a production ramp-up.

China’s Zhongwang Holdings and its controlling shareholder, Liu Zhongtian, were recently charged with evading $1.8 billion in tariffs on aluminum imports. The company allegedly disguised the aluminum as pallets in order to evade the duties on U.S. imports from China.

Novelis Announces New High-Strength Automotive Aluminum Product

Novelis recently announced a new high-strength aluminum product for next-generation automotive body sheet design called AdvanzTM 6HS-s650.

According to the company, the advanced aluminum offers improved strength, lightweighting capabilities, formability, performance and structural integrity. The company estimates a 15-25% improvement over existing high-strength aluminum alloys. Compared with steel in similar applications, the end-weight outcome can be improved by 45%.

Novelis’ acquisition of Aleris faced new hurdles this month. European Union competition authorities required Novelis to offer concessions by Aug. 9. to gain approval for the $2.6 billion takeover.

U.S. Aluminum Premiums

The U.S. Midwest Premium dropped once again, but only slightly, to $0.17/lb. Softer demand in the U.S. still fails to offset supply tightness in the market, keeping premiums higher.

Source: MetalMiner Ind(X)SM

What This Means for Industrial Buyers

Demand weakness in most markets impacted the index this month. While macroeconomic uncertainty due to the latest trade situation recently impacted some prices, in the case of the weakening index, this came from a genuine downturn in demand.

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Actual Metal Prices and Trends

This month European prices decreased after increasing by around 2% last month. European commercial 1050 sheet and 5083 plate both dropped by 7.4% to $2,364/mt and $2,788/mt, respectively.

Korean prices also reversed and decreased this month after increasing in the 2% range in June. Korean commercial 1050 sheet, 5052 coil premium over 1050, and 3003 coil premium over 1050 all decreased in the range of 3-4% to $2.98, $3.15 and $3.02 per kilogram, respectively.

India’s primary cash price dropped by 2.9% to $2.03 per kilogram.

Chinese price movements were mixed and mild, holding essentially flat.

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The LME aluminum price gained the most, rising 0.8% to $1,807/mt.