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The Automotive Monthly Metals Index (MMI) dropped two points this month, down to a reading of 91 for May.

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U.S. Auto Sales

General Motors and Ford Motor Co. have turned to a quarterly sales reporting schedule, moving away from the traditional monthly reporting model. GM made the switch last year, with Ford following suit earlier this year.

However, the two automakers recently announced Q1 earnings. GM reported net revenue of $34.9 billion, down 3.4% year over year, and income of $2.1 billion, up 93.2% year over year (GM’s first-quarter sales fell 7% year over year). Ford, meanwhile, reported net revenue fell $1.6 billion to $40.3 billion, while income fell $600 million to $1.1 billion (Ford’s first-quarter sales fell 1.6% year over year).

Similarly, Fiat Chrysler announced earlier this month that it will start reporting on a quarterly basis beginning Oct. 1. For April, Fiat Chrysler sold 172,900 vehicles in the month compared to 184,149 vehicles in April 2018, a decrease of 6.1%.

In other news for the automaker, Reuters reported Friday that Fiat Chrysler entered into a $307.5 million settlement with about 100,000 U.S. owners of Fiat Chrysler diesel vehicles because of illegal software that caused the vehicles to emit excess emissions.

U.S. Honda sales edged up 0.1% in April, with car sales down 3.4% and truck sales up 3.1%.

“As industry sales continue to level off, we are increasing our share of the market through the strength of our car and truck lineups and our disciplined approach to sales,” said Henio Arcangeli Jr., senior vice president of automobile sales at American Honda Motor Co. “The compact SUV segment remains a bright spot for both Honda and Acura brands in 2019, with CR-V the outright retail sales leader in the industry’s largest segment, and the Acura RDX the fastest growing model in the compact luxury SUV segment in 2019 and the top-selling retail model.”

Nissan sales rose 9% year over year, with Nissan Altima sales up 59%.

Toyota sales fell 4.4% on a volume basis and 8.6% on a daily selling rate basis. Toyota recently announced Novelis Inc. would supply it with aluminum automotive body sheet for the new 2019 RAV4.

Hyundai reported auto sales picked up 1% to 55,420 vehicles in April 2019.

For the industry overall, MarketWatch reported April sales fell 6.1%, down to their lowest level since October 2014.

Tesla, Panasonic Relationship Under Stress

MetalMiner’s Stuart Burns last month touched on the TeslaPanasonic relationship after Panasonic announced it would not invest in an expansion of Tesla’s Nevada Gigafactory.

The Japanese firm manufactures battery cells for Tesla’s EV batteries.

“Output was meant to double next year, but after citing financial reasons the two companies have said they intend to increase production from the existing equipment rather than invest in more capacity,” Burns wrote. “Tesla’s record as a mass manufacturer has come in for considerable criticism over the last 18 months, first with repeated delays in deliveries of the Model 3 and now apparent significant underutilization of the battery plant.”

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Actual Metal Prices and Trends

The price of U.S. HDG fell 4.4% month over month to $881/st as of May 1. U.S. platinum bars rose 4.5% to $886/ounce. U.S. palladium bars fell 2.6% to $1,365/ounce.

Chinese primary lead fell 1.7% to $2,482.06/mt. LME copper dropped 0.9% to $6,435/mt. U.S. shredded scrap steel fell 3.3% to $321/st.

One of India’s premier industrial representative bodies, the nonprofit Federation of Indian Chambers of Commerce & Industry (FICCI) has expressed concern over the drop in mining concessions being awarded every year.

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In a presentation to Niti Aayog, a policy think tank of the Government of India (GoI), the Chamber called for the government to “expedite” auctions of mineral blocks, moneycontrol.com reported. The FICCI pointed out that the average of such sales had come down to 15 mines annually today, compared with the 300-400 mineral concessions given prior to 2015.

As part of reforms and in the interest of mining sector transparency, the Indian Parliament passed the Mines and Minerals Development and Regulation Amendment Bill in 2015. The Indian government claimed this had removed the arbitrariness seen earlier in such auctions.

FICCI said although the 2015 act does grant the winner of the mineral block with sub-surface mineral rights, the company had to face a lot of red tape to seek the surface rights and obtain necessary statutory clearances. This was a hindrance in converting successful auctions into production on the ground.

Citing unnamed sources, moneycontrol.com reported officials from Rio Tinto, Tata Steel, Vedanta and the Federation of Indian Mineral Industries (FIMI) also were part of the presentation.

The mining sector of India had already been demanding further reforms, including the implementation of a “One Tax Regime” in mineral production along the lines of GST, with the effective taxation rate (ETR) capped at 40%, the Hellenic Shipping News reported.

A few days ago, Niti Aayog itself set up a high level committee to look at ways and means of boosting mining in the country, according to CNBC-TV18 reported.

Mining contributes about 2% to India’s GDP, but some in India claim it could go up to as much as 10%.

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In FY 2018, for example, India’s import bill hit U.S. $465 billion, of which $126 billion, or 27%, consisted of metals and minerals alone.

Miner Glencore reported its Q1 2019 production figures this week, showing own-sourced copper production dipped 7% year over year, while cobalt production surged 56% year over year.

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Glencore’s copper production totaled 320.7 kt in Q1 2019, while cobalt production reached 10.9 kt.

According to the miner, the reduced copper output is explained by: reduced metal production in Australia due to flooding in Queensland; the impact of “safety-related stoppages and smelter outages at Mopani”; and the Alumbrera open-cut depletion and sale of Punitaqui in the second half of 2018.

While cobalt production is up, the miner has dealt with elevated levels of uranium in cobalt mined at its Katanga operation in the Democratic Republic of the Congo; as a result, Katanga made no cobalt sales in Q1, according to the company announcement.

“From April 2019, the export and sale of a limited quantity of cobalt, complying with appropriate regulations, was allowed to resume,” the company said. “Such resumption of exports remains subject to the relevant DRC export procedures, which include continued monitoring by the relevant authorities.”

Glencore’s zinc production in the quarter ticked up 8% to 262.3 kt, aided by the restart of the Lady Loretta mine in Australia. However, the total was weighed down by lower production at Kazzinc in Kazakhstan, stemming from a “safety-related investigation” at one mine.

Nickel production, meanwhile, fell 10% to 27.1 kt, impacted by severe weather in Canada.

Ferrochrome production of 402 kt held flat year over year, while coal production moved up 8% to 33.2 million tons.

The miner’s updated fiscal year 2019 guidance calls for 1,460 kt (+/- 30) of copper production, compared with the full-year 2018 production total of 1,454 kt.

Cobalt guidance came in at 57 kt (+/- 4), up from 42.2 kt in 2018. Zinc guidance checked in at 1,195 kt (+/- 30), up from 1,068 kt in 2018. Nickel production was 128 kt (+/- 5), compared with 124 kt in 2018.

Ferrchrome guidance was 1,640 kt (+/- 25), compared with 1,580 kt in 2018. Coal guidance was 145 million tons (+/- 3), compared with 129 million tons in 2018.

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Oil guidance of 5.5 mbbl (+/- 0.2) marked an increase from 4.6 mbbl for 2018.

After a chilly February for U.S. housing starts, starts were down again in March.

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According to a monthly report released jointly by the U.S. Census Bureau and the Department of Housing and Urban Development, privately owned housing starts in March were at a seasonally adjusted annual rate of 1,139,000.  March starts were down 0.3% from the revised February estimate of 1,142,000. Furthermore, March starts were down 14.2% from the March 2018 rate of 1,327,000.

According to the report, single‐family housing starts in March reached 785,000, down 0.4% from February’s 788,000. Meanwhile, the March rate for units in buildings with five units or more was 337,000.

On the other hand, the decline in housing starts moderated significantly from February. February housing starts plunged 8.7% compared with January. Winter weather is always factor to consider when assessing housing starts early in the year; however, it remains to be seen if the recent declines are part of a growing trend, or if starts will pick up as weather conditions become more amenable to construction.

On the other hand, U.S. housing starts increased from February to March in both 2017 and 2018.

Privately‐owned housing units authorized by building permits in March reached a seasonally adjusted annual rate of 1,269,000, marking a 1.7% decrease from the revised February rate of 1,291,000. March permits were down 7.8% from the March 2018 rate of 1,377,000.

Single‐family authorizations reached 808,000, down 1.1% from the revised February figure of 817,000. Meanwhile, authorizations of units in buildings with five units or more hit a rate of 425,000 in March.

As for completions, privately‐owned housing completions in March reached a seasonally adjusted annual rate of 1,313,000, down 1.9% from the revised February estimate of 1,338,000. However, March proved to be a more productive month on a year-over-year basis, as completions increased 6.8% compared with March 2018’s rate of 1,229,000.

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Single‐family housing completions in March reached 938,000, up 11.9% from the revised February rate of 838,000. For units in buildings with five units or more, the March rate reached 364,000.

The International Copper Study Group (ICSG) recently released its copper production report for January 2019, showing that global copper mine production for the month was flat on a year-over-year basis.

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According to the ICSG, production gains in some countries were offset by declines from major producers Indonesia and Chile. Chile’s production declined 4% year over year “mainly due to lower copper head grades.”

Meanwhile, Indonesian copper concentrate production fell 45% “as a consequence of the transition of the country’s major two mines to different ore zones leading to temporary reduced output levels.”

On the other side of the ledger, production in the No. 2 producer Peru, Australia, China and Mongolia increased. Restarts of temporarily closed capacity in the Democratic Republic of the Congo and Zambia saw to production increases in those countries to start the year.

World refined production increased by an estimated 3%, with primary production (i.e., electrolytic and electrowinning) increasing approximately 3.1% and secondary production (i.e., scrap) increasing by 1.9%. Growth in China paced the global growth in this department, while Australia and Brazil also contributed to the uptick.

In Chile, however, refined production was also down, falling 14% year over year on account of temporary smelter shutdowns related to compliance with new environmental regulations.

Indian copper production continues to be affected by the ongoing shutdown of Vedanta’s Tuticorin smelter. The smelter shut down in May 2018 on the heels of protests by locals regarding the environmental impact of the plant. Police fired on the protestors, resulting in 13 deaths. The Economic Times earlier this month reported that the Indian Supreme Court rejected Vedanta’s plea for an early hearing regarding the smelter in the southern state of Tamil Nadu.

According to the ICSG’s estimates, refined copper output increased in Africa by 7%, in Asia by 6%, in Europe by 2% and in Oceania by (25%), but dropped by 7.5% in the Americas.

As for the price of copper, the metal saw an increase of 2.8% from February to March, with an average LME price of $6,451.02/mt in March and $6,278.20/mt in February.

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However, the average LME price of $6,214.92/mt through the first quarter of 2019 marked a 4.7% dip below the full-year 2018 average.

Already labeled a protectionist regime, the Indian government recently issued notice to the World Trade Organization (WTO) of its intent to bring more stainless steel items under quality control, The Hindu Business Line reported.

The move has Indian importers of stainless steel worried.

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According to the draft “Steel and Steel Products (Quality Control) Order 2019” issued recently by the Indian Steel Ministry, compulsory testing of steel items is necessary from the Bureau of Indian Standards (BIS). For now, this is applicable to two categories of products.

Stampings/laminations/cores of transformers (with or without winding) have to be made from BIS standard marked steel sheet and strip, conforming to certain Indian Standard (IS) specifications, government’s draft order said.

India has around 50 carbon steel and three stainless steel products, including pipes and tubes, under such quality control. Now, it has notified the WTO of bringing 13 more steel items under the same regime.

The reason given for this new move is to ensure safety of infrastructure and the health of the Indian people.

The new move is bound to raise the hackles of some of India’s important trading partners, including the European Union. India’s explanation is that it cannot go merely by the international safety guidelines for production of steel, since many non-Indian producers do not have BIS certification.

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India is seeing a glut of imported steel flooding its market. In March this year, imports had gone up as much as 46% to meet India’s increasing steel demand. Now, steel experts are worried that if more items are brought under the BIS quality control, it would lead to an increase in the domestic prices of steel.

The U.S. Department of Commerce (DOC) last week made a preliminary affirmative determination in an anti-dumping probe related to imports of steel wheels from China.

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“Today, the U.S. Department of Commerce announced the affirmative preliminary determination in the antidumping duty (AD) investigation of imports of steel wheels 12 to 16.5 inches in diameter from China, finding that exporters from China have been dumping certain steel wheels in the United States at margins ranging from 38.27 to 44.35 percent,” the DOC announced.

The case was prompted by a petition from Elkhart, Indiana-based Dexstar Wheel, a division of Americana Development, Inc.

According to the DOC, imports of steel wheels from China in 2017 were valued at $87.2 million. By volume, the U.S. imported 42,195 metric tons of the product in 2015, which jumped to 46,264 metric tons in 2016 and 50,656 metric tons in 2017, according to a DOC fact sheet.

The department calculated dumping margins of 38.27% for Changzhou Chungang Machinery Co., Ltd and a 44.35% China-wide margin.

The scope of the investigation included “certain on-the-road steel wheels, discs, and rims for tubeless tires with a nominal wheel diameter of 12 inches to 16.5 inches, regardless of width.”

The next step is a final determination by the DOC, scheduled to come down by July 2, 2019. If the DOC rules in the affirmative again and the U.S. International Trade Commission (ITC) also issues a final affirmative determination, the DOC will then issue an anti-dumping order.

The ITC is scheduled to make its final determination by Aug. 15, 2019.

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According to the DOC, the Trump administration has initiated 157 new anti-dumping and countervailing duty investigations, marking a 283% increase from investigations launched during the equivalent period of the previous administration.

Trade talks aiming at a resolution to trade differences between the U.S. and China are ongoing. Reuters reported the next round of talks is scheduled for April 30 in Beijing, with additional talks scheduled for May 8 in Washington, D.C.

A year on from the U.S.’s anti-dumping and countervailing duty orders on Chinese aluminum foil, imports of the product have plunged.

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The Aluminum Association Trade Enforcement Working Group filed a petition requesting relief from imports of Chinese aluminum foil in May 2017. Almost one year later, the U.S. Department of Commerce issued anti-dumping and countervailing duty orders on aluminum foil from China ranging from 55-176%.

Since then, according to an Aluminum Association white paper released Tuesday titled “Targeted Trade Enforcement in Action: Aluminum Foil AD/CVD One Year Later,” imports of Chinese aluminum foil have fallen significantly.

Imports of aluminum foil from China by volume fell 64% from 2017 to 2018, down from 272.4 million tons to 97.7 million tons. The white paper also notes imports of “unfairly traded aluminum foil” from China accounted for 60% of U.S. import market share in 2017, but just 20% in 2018.

Monthly U.S. imports of Chinese aluminum foil, 2010-2018. Source: Aluminum Association

The white paper also touts an increase in investment in the domestic aluminum industry.

“Companies like JW Aluminum and Granges worked for the past several years to reinvest in the U.S. foil industry,” the Aluminum Association white paper states. “These firms have announced substantial capital investments – with a combined value of approximately $169 million – to expand and strengthen facilities at which they manufacture aluminum foil.”

Aluminum Association President and CEO Heidi Brock lauded the trade action’s impact on the domestic aluminum industry.

“One year after taking strong action to enforce our nation’s trade laws, we are seeing clear and significant progress in the U.S. aluminum foil market,” Brock said. “We’d once again like to recognize the hard work of the administration, including the Commerce Department and the International Trade Commission, in helping aluminum foil producers in the U.S. to compete on a level-playing field.”

Brock also highlighted the action taken vis-a-vis aluminum foil compared with the Trump administration’s blanket tariffs on steel and aluminum imports via a Section 232 probe. In that case, the Aluminum Association has called for the tariffs on trading partners like Canada and Mexico to be removed and for the Trump administration’s trade enforcement focus to be squared on Chinese overcapacity.

“Not all tariffs are created equal,” Brock said. “Targeted trade enforcement as we’ve seen successfully deployed in the aluminum foil and, more recently, common alloy sheet, markets are the best way to make an impact. This approach allows us to effectively address issues in the marketplace while avoiding needless and disruptive tariffs on vital trading partners who play by the rules.”

The Section 232 tariffs on imported steel and aluminum — of 25% and 10%, respectively — remain in effect with respect to imports from Canada and Mexico. That fact remains a sticking point in the ongoing process to approve the pending United States-Mexico-Canada Agreement (USMCA), the intended successor to the 1994 North American Free Trade Agreement (NAFTA).

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The USMCA was signed by President Donald Trump, Canadian Prime Minister Justin Trudeau and then-Mexican President Enrique Peña Nieto during the G20 Summit in Buenos Aires late last year. However, the agreement must be ratified by each country’s legislature before it can go into effect.

LME tin prices surged from December 2018 into late February 2019, rising almost weekly throughout the period. In that period, the LME tin price hit $21,870/mt at its short-term peak — up around 20% in about three months.

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Once prices turned around, weekly declines became more of the rule as the LME price gave up 8% of its recent gain, with the LME price now at $20,400/mt.

Source: MetalMiner analysis of Fastmarkets.com

A somewhat similar price trend occurred one year prior, when prices rose quickly between December 2017 and January 2018. The price trend formed a temporary flag formation following the price peak, after which prices turned sideways in a bearish triangular pattern before moving downward overall once again for some months. The LME price finished out 2018 by moving sideways.

Will LME tin prices repeat last year’s performance by peaking early then trending downward for many months into 2019? Or can we expect some different price action for tin this year?

Let’s look at some additional indicators to glean any possible insights.

Historically Speaking, Tin Prices Tend to be Volatile

Looking at a longer-term view, we see that LME tin prices tend to spike and fall again. Recent tin price movements are actually somewhat tame when compared to the 2012-2014 period (when the price spiked and fell in more extreme movements).

Source: MetalMiner analysis of Fastmarkets.com

Smaller trading volumes for the metal may factor into this greater volatility. Trading volumes can help provide a clue about what we might expect next for LME tin prices.

Consumption of the metal increased by 2.5% in 2018, compared with the year prior. This year, the International Tin Association (ITA) estimates global demand for tin will contract by 1%, with a usage forecast of 357,000 tons for 2019. On a related note, this year the ITA expects a production surplus for the first time since 2013.

Over the longer term, however, demand should continue to rise as tin becomes more integrated into various areas of higher-tech production methods related to high-capacity anode electrode materials. According to Reuters, due to increased demand in this area, global consumption could rise by an additional 60,000 tons per year by 2030.

Costs of Mining Tin Ore on the Rise

In recent years, tin prices came under pressure due to declining tin ore quality.

As quality declines, expenses related to mining the metal increase due to the necessity of shifting mining methods.

Alphamin, a tin mining company operating the Bisie tin project in the Democratic Republic of the Congo, announced this January that mining methods would shift from caving to cut and fill. The latter method targets more precise areas with a higher percentage of metal available; however, the company’s analysis indicates this will lead to higher costs per ton.

Also according to the International Tin Association, the bulk of global tin ore generally comes from just a handful of countries. Once one of these countries institutes new regulations – such as an export ban or new operational requirements – the supply chain potentially faces significant disruption.

Last year, the bulk of ore supply was sourced from China, Indonesia and Myanmar. China was also the largest destination for tin ore, using an estimated 45% of global supply in 2018.

Ethical Sourcing Issues May Drive Prices Higher

Based on the nature of mining, at times production methods face scrutiny for environmental reasons.

Taking an offensive approach, the International Tin Association (ITA) and the Responsible Business Alliance (RBA) – as part of its Responsible Minerals Initiative (RMI) – recently announced an operational agreement governing the tin value chain that targets the responsible production and sourcing of tin.

As part of this initiative, tin smelter audit criteria and OECD compliance will be scrutinized and improved. Other related initiatives include the new E.U. Minerals Supply Chain Due Diligence Regulation and new requirements coming online from the LME.

Compliance with ethical sourcing could put upward pressure on prices as companies, as new regulations could increase production costs.

Broader Industrial Metal Market Trends in Early 2019

In order to understand the price trend with an individual metal, looking at the performance of the sector can also help determine directionality of the individual metal.

The Thomson Reuters/CoreCommodity Research Bureau (CRB) Index covers a broad basket of commodities that includes some industrial metals with a heavy weighting toward energy (oil).

Source: MetalMiner analysis of Investing.com data

The CRB suggests some upward price movement compared with the past few months.

Source: MetalMiner analysis of Nasdaq.com data

When looking at any given metal price, the Invesco DB Base (DBB) Metals Fund trendline could provide clues as to tin’s price trend, given that the DBB tracks pricing of three major metals (aluminum, zinc and copper).

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

The DBB rose into 2019, but lately the upward trend flattened out, in line with a longer-term sideways price trend.

As the index struggles to stay above 17, which indicates some underlying price weakness for the index and, by association, other industrial metals (such as tin).

Implications for Industrial Buyers

Based on the structure of mining and production in the tin industry, volatility in pricing tends to be the rule rather than the exception.

Once again, the tin price sits around $20,400 — not surprisingly, since the LME price traded in a band around this level for some time now.

Industrial buyers will want to watch the tin market carefully in the coming weeks to see if the tin price downturn turns around or continues again this year.

Reports that Panasonic is stepping back from its commitment to develop its Reno, Nevada Gigafactory with Tesla have the note of warning about them suggesting all is not well with Tesla or for sales of its new Model 3 batteries, which the new factory was designed to make, according to TechCrunch.

But Tesla blames lowered deliveries of the Model 3 on delivery problems to Europe and China, not lack of demand.

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The firm further suggests its upcoming launch of its lease option on the Model 3 in North America will substantially increase demand.

That may be so, but the row back raises questions as accuracy of the original predictions for the Gigafactory and, by extension, for wider battery demand.

The Reno facility has been a partnership between the Japanese battery giant Panasonic and Tesla, with Panasonic making the battery cells and Tesla incorporating them in its Model 3 battery packs and energy storage products, Powerwall and Powerpack.

Together, the companies have invested U.S. $4.5 billion in the facility. According to Reuters, they had been planning to expand the plant’s capacity to the equivalent of 54 gigawatt hours (GWh) a year in 2020 from 35 GWh at present, according to a report in FinFeed.

However, as of July 2018, the plant was only reported to be running at an annualized run rate of 20 gigawatt hours of capacity.

TechCrunch also cast doubts on how successfully the plant is being run. The outlet notes that as of November, Panasonic had 11 production lines operating at Gigafactory 1 and that the company planned to add two more lines by the end of the year to bring total capacity up to 35 gigawatt-hours — but it is unclear if that was reached.

Output was meant to double next year, but after citing financial reasons the two companies have said they intend to increase production from the existing equipment rather than invest in more capacity. Tesla’s record as a mass manufacturer has come in for considerable criticism over the last 18 months, first with repeated delays in deliveries of the Model 3 and now apparent significant underutilization of the battery plant.

Tesla’s Gigafactory was meant to be America’s answer to a growing Chinese dominance in battery production.

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The firm will not be alone in seeking answers to why the project is apparently performing so poorly. Simple delays in Model 3 deliveries appear to be only part of the problem.