This morning in metals news, U.S. Steel has offered Stelco a 25% stake in its Minntac operation, LME copper fell to a two-week low and China’s industrial profits plunged 36.7% in the first quarter.
This morning in metals news, the United States Trade Representative will soon consider whether to extend tariff exclusions granted last year for imports of certain products from China, the GFG Alliance is aiming to consolidate its steel operations and make the new consolidated entity carbon-neutral by 2030, and LME copper prices continue to make gains this month.
USTR to Consider Tariff Exclusion Extensions
Last December, the USTR granted tariff exclusions on $34 billion worth of imports from China.
With those exclusions set to expire later this year, the USTR will soon initiate a process to consider whether or not to extend them.
“The United States Trade Representative (USTR) will commence on November 1, 2019 a process for considering extending for up to twelve months certain exclusions from additional tariffs on Chinese imports that were granted last December and are set to expire on December 28, 2019,” the USTR said.
“In a Federal Register notice to be published this week, USTR will provide details on the process for submitting comments favoring or opposing specified tariff exclusions. The period for submitting comments will run from November 1, 2019 to November 30, 2019.”
GFG Alliance Eyes Carbon-Neutral Future
The GFG Alliance, which includes Liberty House steel plants around the world, is aiming to consolidate its steel production into a single global company: the Liberty Steel Group.
“A single global company with 18 million tonnes of rolled steel capacity annually is to be launched through a consolidation of GFG Alliance’s steel businesses, with an ambition to lead the industry towards a carbon-neutral future,” Liberty House announced Tuesday.
“The family-owned alliance led by Sanjeev Gupta today announces that Liberty Steel Group, which altogether employs 30,000 people in 10 countries, will be incorporated by the end of this year through a merger of GFG’s upstream and downstream steel manufacturing, mining and distribution businesses around the world.”
The new group will aim to be carbon-neutral by 2030.
“At the heart of the group’s mission will be an ambition to build on GFG’s existing GREENSTEEL strategy to aim for net carbon neutral status by 2030 – placing Liberty Steel Group on a pathway to become the first carbon neutral steel company in the world,” the company said. “This will include exploration of the best use of new technologies such as hydrogen generated from renewable power to produce steel.”
LME Copper Rises
The LME three-month copper price, after approaching MetalMiner’s short-term support price in early October, has since made incremental gains throughout the month.
As of Monday, the LME three-month price rose to $5,910/mt, marking a 2.91% month-over-month increase, according to MetalMiner IndX data.
This morning in metals news, U.S. imports of steel through the first eight months of the year are down 13.6%, Rio Tinto signed a memorandum of understanding (MOU) with China’s largest steel producer and LME copper prices fell Thursday.
Steel Imports Down 14%
U.S. imports of steel for the year through August are down 14% compared with the same period last year, the American Iron and Steel Institute (AISI) reported.
Imports through the first eight months of the year totaled 20.67 million tons. Finished steel import market share for August checked in at 19%, just below the 20% mark for the year to date.
Rio Signs MOU with Baowu
Rio Tinto has signed an MOU with China Baowu Steel Group and Tsinghua University through which the parties will partner to “develop and implement new methods” to reduce carbon emissions across the steel value chain.
“This pioneering partnership across the steel value chain will bring together solutions to help address the steel industry’s carbon footprint and improve its environmental performance,” Rio Tinto CEO J-S Jacques said.
“The materials we produce have an important role to play in the transition to a low carbon future and we are committed to partnering with our customers and others to find the most sustainable ways to produce, process and market them. We are already doing this in aluminium and now, through this partnership, we will be doing it in the steel industry.”
LME Copper Falls
The LME copper three-month price bounced back from MetalMiner’s short-term support level earlier this month, rising 1.13% over the last month, according to MetalMiner IndX data.
However, the price dropped Thursday, falling 0.7% to $5,750/mt.
As noted earlier this week, global copper mine production dropped 1.4% in the first half of the year, while refined copper production fell 1%, according to the International Copper Study Group.
This morning in metals news, the Federal Reserve is expected today to cut interest rates once again, the LME copper price dropped ahead of the Fed’s decision and Steel Authority of India Ltd. (SAIL) shares rose Tuesday.
Federal Reserve Expected to Make Interest Rate Cut
The Federal Reserve is expected to cut interest rates again later today, CNBC reported.
If the cut comes to fruition, it would mark just the second interest rate cut since the Great Recession.
London Copper Falls
Ahead of the Fed’s decision today, copper on the LME dropped, Reuters reported.
LME three-month copper slipped 0.1% to $5,816.50 per ton, Reuters reported, while the most-traded SHFE copper contract dropped 0.2% to 47,310 yuan per ton ($6,673.63 per ton).
SAIL Shares Rise
Shares of Steel Authority of India Ltd. (SAIL) rose on Tuesday to a four-month intraday high, Bloomberg reported.
The rise came on the heels of the Indian government’s decision to allow the state-run producer to sell 70 million tons of iron ore from its captive mines, according to Bloomberg.
This morning in metals news, President Donald Trump threatened to close the southern border with Mexico, U.S. Steel was fined over $700,000 for air pollution violations and the LME copper price fell Tuesday.
Trump Threatens to Close Mexico Border
President Trump intensified his stance on the situation at the border with Mexico, tweeting Monday that “Our detention areas are maxed out & we will take no more illegals. Next step is to close the Border!”
It remains to be seen if he will act on those words; however, such a closure would have wide-ranging ramifications, impacting both the humanitarian crisis at the border and, from a business perspective, throwing a wrench into supply chains.
Trump’s threat also comes at a time when the U.S., Canada and Mexico are in a holding pattern over approval of the United States-Mexico-Canada Agreement (meant as the successor to NAFTA). The executives of the three countries signed the deal during the G20 Summit in Buenos Aires late last year, but the trade deal must be ratified by each country’s legislature.
U.S. Steel Fined Over Emissions
U.S. Steel was hit with a fine of over $700,000 over emissions at its Clairton Coke Works facility in Pennsylvania, the Pittsburgh Post-Gazette reported.
According to the report, the company was fined $707,568 over air pollution violations at the facility during the second half of 2018, elevating the total fines levied against U.S. Steel over the last year to more than $2.3 million.
Dollar Rises, LME Copper Falls
The LME copper price dipped as the U.S. dollar gained strength, Reuters reported.
In addition, supply concerns stemming from a protest at the Las Bambas copper mine in Peru eased upon the government’s offer of a deal to end the protestors’ blockade, according to the report.
This morning in metals news, U.S. Treasury Secretary Steven Mnuchin tweeted Friday that this week’s round of trade talks with China were “constructive,” LME copper is on its way for its first quarterly gain since the end of 2017 and China’s imports of copper are forecast to dip this year.
U.S.-China Talks Continue
Markets reacted positively late this week on optimism from the latest round of U.S.-China trade talks, this time held in Beijing over Thursday and Friday.
U.S. Treasury Secretary Steven Mnuchin tweeted that the talks were constructive.
.@USTradeRep and I concluded constructive trade talks in Beijing. I look forward to welcoming China’s Vice Premier Liu He to continue these important discussions in Washington next week. #USEmbassyChina pic.twitter.com/ikfcDZ10IL
— Steven Mnuchin (@stevenmnuchin1) March 29, 2019
As Mnuchin noted, trade talks are scheduled to continue next week in Washington, D.C.
Copper Makes Gains
According to Reuters, LME copper is set to notch its first quarterly gain since the end of 2017.
Copper stockpiles in LME-registered warehouses are moving toward 11-year lows, according to the report.
China Copper Imports
Speaking of copper, China is expected to import far less of the metal in 2019, according to a Reuters report citing research house Antaike.
According to the report, China’s copper imports are forecast to fall 14.7% on account of increased domestic production.
This morning in metals news, the copper price fell Tuesday, U.S. steel mills have produced at a capacity rate of 80.7% through Feb. 16 and a $1.8 billion steel mill could be coming to Texas.
With renewed U.S.-China trade talks scheduled today, the price of copper dropped, Reuters reported.
LME copper fell 0.6% to $6,245 per ton, according to the report.
Capacity Utilization Rate
U.S. steel mills posted a capacity utilization rate of 80.7% for the year through Feb. 16, according to the American Iron and Steel Institute’s weekly steel production report.
Adjusted year-to-date production through Feb. 16 hit 12.7 million net tons, up 8.4% from the 11.8 million net tons during the same period last year at a capability utilization rate of 75.7%.
Steel Dynamics Plant Search
San Patricio County in south Texas is in the mix for a new $1.8 billion steel plant in the works from Steel Dynamics, according to the Corpus Christi Caller Times.
In November, Steel Dynamics announced plans to build a new organic flat roll steel mill with an annual capacity of 3.0 million tons. The mill was expected to create about 600 jobs, according to the steelmaker.
“The company currently expects to locate the facility in the southwestern United States, to cost effectively serve not only the southern United States, but also the underserved Mexican flat roll steel market,” the company said in a release. “Determination of the final site location is subject to state and local government infrastructure and incentive support. Upon final site selection and the receipt of required environmental and operating permits, the company would expect to begin construction in 2020, followed by the commencement of operations in the second half of 2021.”
This morning in metals news, copper gains momentum, Japan’s steel federation thinks domestic output will grow this year and U.S. Steel will have to pay at least $40 million to repair one of its facilities after a fire.
Copper Reaches Seven-Week High
Copper prices surged to a seven-week high on Thursday, Reuters reported, inversely with a dropping U.S. dollar.
LME copper jumped 0.5% to hit $6,167 per ton, according to the report.
Japanese Domestic Output
The chief of Japan’s steel federation said Japan’s domestic steel output will likely be higher, aided by demand from the 2020 Tokyo Olympics, according to a Reuters report.
In 2018, Japan’s steel output slipped 0.3% on a year-over-year basis, as India overtook it for the No. 2 spot on the list of the world’s top steel producers.
U.S. Steel to Repair Clairton Plant After Fire
U.S. Steel announced this week that it would need to spend at least $40 million on repairs after a fire at its Clairton Coke Plant (just south of Pittsburgh), the Pittsburgh Post-Gazette reported.
The fire ran through the building on Christmas Eve, leading to county officials to issue air quality alerts.
In January, the Copper Monthly Metals Index (MMI) dropped 3.9%, falling back 3 points to the November 2018 level of 74. Lower LME copper prices drove the index lower.
Similar to other base metals, LME copper prices fell in December. LME copper prices fell below the $6,000/mt level, which served as a stiff resistance level for most of 2017. Prices over this level indicate a bullish copper market, while prices below that level signal a more bearish trend. This level has represented a psychological signal for “Doctor Copper” since 2017.
So far in January, LME copper prices have increased. However, current levels remain below that $6,000/mt psychological ceiling. Trading volume also appears weaker, which does not support a sharp uptrend.
Global Copper Outlook
According to data released in January, Chilean copper production reached 540,720 tons in November, the highest level in 13 years. The increase was driven by higher ore grades and more efficient processes. As reported by Chile’s national statistics agency INE, copper production increased 7% in November versus October. Production reached its highest levels since December 2005.
Anglo American announced that overall production will increase more than expected between 2018-2021. Forecasts suggest 2018 production increased by 2%, driven by increases in copper output. 2019 production could increase by another 3%, and 2020-2021 production by an additional 5%.
Despite this forecast by Anglo American, the International Copper Study Group (ICSG) announced a wider deficit in September. The global refined copper deficit increased to 168,000 tons in September from the previous 43,000 tons in August. For the first nine months of 2018, the market saw a 595,000-ton deficit versus the previous year’s deficit of 226,000 tons.
Chinese Scrap Copper
LME copper prices and Chinese copper scrap prices tend to follow the same trend. However, this month they traded differently. LME copper prices fell while Chinese copper scrap prices increased. The divergence between LME copper prices and Chinese copper scrap has become more notable recently, driven by lower scrap availability in China.
The spread has become smaller this month. The wider the spread, the higher the copper scrap consumption, and therefore, the price.
What This Means for Industrial Buyers
LME copper prices fell this month, moving below the $6,000/mt level. Buying organizations will want to understand how to react to the latest copper price movements. Adapting the “right” buying strategy becomes crucial to reduce risks. Only MetalMiner’s Monthly Outlook reports provide a continuously updated snapshot of the market from which buying organizations can determine when and how much of the underlying metal to buy.
Actual Copper Prices and Trends
In December, most of the prices that comprise the Copper MMI basket fell. LME copper decreased by 4.87% this month. Indian copper prices also fell by 5.91%, while Chinese cash primary copper prices decreased by 3.83%. Prices of U.S. copper producer grades 110 and 122 fell by 3.36%. Meanwhile, the price of U.S. copper producer grade 102 decreased by 3.2%, to $3.64/pound.
This morning in metals news, U.S. senators are asking for an independent review of the Trump administration’s Section 232 tariff waiver process, LME copper is down for the third straight day and Chinese steel mills are preparing for difficult times ahead.
The review of Section 232 tariff exemption requests from domestic companies has been going on since June, and the process has come in for much criticism.
According to a Bloomberg report, a bipartisan group of senators have asked for an independent review of the tariff waiver process, noting that as of last month only about one-third of the approximately 50,000 requests had been addressed.
LME Copper Down Again
London copper has been on the slide of late, dropping Tuesday for the third straight day, Reuters reported.
According to the report, the drop comes after comments by President Donald Trump to the Wall Street Journal related to China. The president said it was unlikely the U.S. would agree to China’s request to delay the scheduled Jan. 1 tariff rate increase — up to 25% from 10% — on the previously announced $200 billion tariff package.
Chinese Steel Mills Hit a Rough Patch
According to another Reuters report, Chinese steel producers posted losses for the first time in three years.
Per the report, as a result of falling prices, some mills are looking to utilize more low-grade iron ore in the steelmaking process in an effort to tamp down costs.
MetalMiner’s Take: In markets in which profit margins erode, simple supply and demand fundamentals ought to take hold — producers ought to limit supply to boost profits.
In the U.S., producers did exactly that for years and years, operating at below 80% utilization rates (U.S. producers have only recently hit those production rates as a result of the tariffs, the bullish commodity market and a booming economy).
When Chinese producers start to run losses, those producers ought to take a lesson from their American peers — and limit production to shore up profits.
But Chinese steel producers won’t do that. In fact, they will do the opposite — continue to produce, even at a loss, to keep people employed.
And once again, that excess steel will flow to the rest of the world.
Too much steel always has and always will put a lid on prices. Therefore, steel-buying organizations will want to watch very closely how much steel China produces, as well as the price per ton, as Chinese steel production and steel prices lead the U.S. market.