steel price

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This morning in metals news, aluminum producer Alcoa Corporation reported its fourth-quarter and full-year 2018 results, India is considering a higher iron ore import duty and Shanghai steel futures moved up.

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Alcoa Reports 4Q Earnings

Pittsburgh-based aluminum producer Alcoa Corporation reported its fourth-quarter and full-year 2018 earnings this week, reporting adjusted net income of $125 million, excluding special items, for the final quarter of 2018.

The 4Q net income total was up from $119 million in the third quarter but down from $195 million in 4Q 2017.

For 2018 as a whole, the company reported adjusted net income excluding special items of $675 million, up from $563 million in 2017.

“Despite sequentially weaker commodity prices, we had a strong fourth quarter with higher profits in our Bauxite and Alumina segments,” President and CEO Roy Harvey said. “With the help of higher market prices earlier in the year, we increased annual profits, addressed liabilities, significantly strengthened our balance sheet, and began returning cash to stockholders. With markets likely to remain dynamic in 2019, we will focus on what we can control to continue improving our operations, addressing challenges with agility, and making the most of opportunities in the year ahead.”

In 2019, Alcoa projects a global aluminum deficit between 1.7 million and 2.1 million metric tons. In addition, Alcoa reported the global alumina market came in at a deficit of 0.6 million metric tons.

“In 2019, the Company expects the alumina market to move to a surplus that is projected to range between 0.2 million and 1 million metric tons, which assumes ongoing, third-party supply disruptions in the Atlantic region,” Alcoa states. “The projected alumina surplus is driven by China, where refining expansions are expected to outpace demand growth from smelting.”

India Considers Hiking Iron Ore Duty

According to a report from Creamer Media’s Mining Weekly, the Indian government is considering an increase to its iron ore import duty.

Per the report, domestic industry has lobbied the government to increase the current 2.5% duty on imported iron ore.

Shanghai Steel Picks Up

Global steel prices have lagged of late, but Thursday was a positive session for Shanghai steel futures, Reuters reported.

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

Per the report, the most-traded rebar contract on the SHFE ticked up 0.8%, while hot rolled coil was also up 0.8%.

Base metals traded higher at the beginning of January. However, momentum appears to be weaker once again.

The DBB index has shown weakness since June 2018, when it started this short-term downtrend. MetalMiner has recently revised its market outlook, advising buying organizations to closely follow how the index develops.

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DBB index. Source: MetalMiner analysis of Yahoo Finance

Since 2016, the DBB base metals complex has remained in a long-term trend (see the chart below). Base metal prices have skyrocketed since then but moved lower in 2018, when concerns about the Chinese economy started to appear.

DBB index long-term trend. Source: MetalMiner analysis of Yahoo Finance

A weaker Chinese economy will move demand lower. However, 2018 closed with the six base metals in global deficit. Supply and demand has not moved; therefore prices, mostly economic expectations and trading changes have driven base metal markets.

The Drivers

The DBB index comprises three base metals: aluminum, copper and zinc.

LME aluminum prices moved higher at the beginning of January, but prices did not breach the $1,970/mt level that acted as a support for most 2018. Prices being unable to breach that support level signals weakness for the base metal complex.

LME Aluminum prices. Source: MetalMiner analysis of FastMarkets

Both LME copper and LME zinc prices started to increase slightly at the beginning of January. Similar to aluminum, prices of both base metals fell. LME copper remains below the $6,000/mt level, which has served as the psychological ceiling for copper prices.

What This Means for Industrial Buyers

The base metals complex seems seems weaker. MetalMiner recently switched the long-term uptrend to a sideways trend.

Buying organizations may want to follow price dynamics closely, as well as each specific base metal price. Adapting the right buying strategy becomes crucial to reducing risks.

Only the MetalMiner Monthly Outlook reports provide a continually updated snapshot of the market from which buying organizations can determine when and how much of the underlying metal to buy.

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

For more information on how to mitigate price risk year-round, request a free trial to our Monthly Metal Buying Outlook.

With the January 2019 Monthly Metals Index (MMI) report, we can close the book on 2018 and what was a wild year in the world of metals and metals price movements.

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It was a book that closed with a pessimistic chapter for metals (and commodities in general), with many posting price declines as markets feel the effect of simmering trade tensions between the U.S. and China.

In our latest MMI report, you can read about all of the latest news and trends in our 10 metals subindexes: Automotive, Construction, Rare Earths, Renewables, Aluminum, Copper, Stainless Steel, Raw Steels, GOES and Global Precious.

A few highlights from this month’s round of reports:

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Read about all of the above and much more by downloading the January 2019 MMI Report below:

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This morning in metals news, China is eyeing improvements to its steel capacity structure, China’s 2018 aluminum exports surged and Shanghai rebar futures hit a two-month high.

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China’s Steel Structure

According to Reuters, China is looking to shift the focus of its steel industry in 2019 from one of fast growth to more optimized, high-quality development.

The report cites Yu Yong, chairman of the China Iron and Steel Association, who said a major push in 2019 will come in the form of “optimising production structure, adjusting layout of steel mills and pushing merger and acquisition.”

China’s Aluminum Exports Surge

China’s exports of unwrought aluminum and aluminum products jumped 20.9% in 2018 year over year, S&P Global Platts reported.

Per the same report, December exports were up 19.8% on a year-over-year basis.

Shanghai Rebar Price on the Rise

The Shanghai rebar price hit a two-month high Monday, Reuters reported.

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According to the report, rebar futures rose 1.6% to reach $528.44 per ton.

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They call it the law of unintended consequences and, broadly speaking, it was intended by the American sociologist Robert K. Merton to mean unintended consequences are outcomes that are not the ones foreseen and intended by a purposeful action — particularly actions of a government.

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Well, I don’t for one minute expect President Donald Trump gave much thought to the consequences for the rest of the world of his decision last year to slap 25% import tariffs on steel products from the rest of the world.

His focus was largely on a domestic audience and if he gave thought at all for the international consequences, it was probably the impact on China. Although steel imports into the U.S. from China were not as large as from suppliers like Russia, Ukraine, Brazil and Canada, the cumulative impact of deterring those suppliers from the U.S. market has been an increase in metal looking for a home in Europe.

The E.U. imposed a number of policies in response to the perceived threat of increased steel imports. One was to demand that most steel (and aluminum) imports into the E.U. apply for a form of licence, called Prior Surveillance. The measure is not designed to control imports as much as to monitor the precise origin, down to the level of manufacturer, probably with the intention of applying quotas or anti-dumping action at the manufacturer level at some stage in the near future.

But in the meantime, the E.U. feels it needs more of a blanket approach. As such, the European Commission has announced it will prolong until July 16, 2021, a 25% tariff on more than 20 types of steel ranging from stainless hot-rolled and cold-rolled sheets to rebars and railway material when the shipments exceed the average over the past three years.

According to the Gulf Times, 26 types of steel will be covered by the E.U.’s definitive measures, compared with 23 product categories under the provisional system and 28 within the scope of the original probe representing some 40% of the E.U.’s annual iron and steel imports.

The E.U.’s decision has not been met with universal approval. The decision was immensely popular among steel producers who pushed for the measures; however, consumers like the automotive sector called the move unhelpful and a cause of “regret,” according to S&P Global.

The European Automobile Manufacturers’ Association (ACEA) was quoted as saying “ACEA questions the need for such trade protectionist measures. In the automotive sector, access to EU steel production is extremely tight and imports remain necessary to fill supply-chain gaps.”

ACEA points out any increase in imports is down to increased consumption, not increased market penetration by overseas mills, saying “Motor vehicle manufacturing has increased by 5 million units per year since 2014, and some increase in steel imports has been necessary to meet this higher demand.”

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

It would seem U.S. carmakers and the wider steel-consuming industry are not alone in facing higher prices going into 2019.

As GDP growth slows — recent data shows it is certainly slowing in Europe and China — manufacturers’ factory gate prices will come under pressure as this translates into lower sales. Heightened raw material inputs will therefore squeeze margins in the year ahead.

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This morning in metals news, prices of Chinese steel and steelmaking ingredients were down Friday, India is in talks with the U.S. over a steel tariff exemption and Japanese crude steel output might be decline in the first quarter of 2019.

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Chinese Steel Prices Down

A number of metals are closing the year on a downward note, and Chinese steel is no exception.

Prices of Chinese steel and steelmaking ingredients were down Friday (the last Friday of the year), with the most-active SHFE rebar contract down 0.5%, according to Reuters.

India, U.S. in Talks Over Steel Tariff Exemption

The Trump administration imposed its Section 232 tariffs on imported steel and aluminum in March, but countries are still lobbying for exemptions from the 25% tariff on steel and 10% tariff on aluminum.

According to another Reuters report, India is in talks with the U.S. over the possibility of a steel tariff exemption.

India is the world’s ninth-largest steel exporter. According to the International Trade Administration, the U.S. ranked sixth as a destination for India’s steel exports, accounting for 4% of its exports, or 204,000 metric tons, through October of this year.

Japanese Steel Production to Drop in Q1?

Crude steel production in Japan might be starting 2019 with operational issues that could hamper production, according to a report by the Hellenic Shipping News citing a government ministry.

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According to the report, citing Japan’s Ministry of Economy, Trade and Industry (METI), estimated crude steel output could drop to 26.31 million tonnes during Q1 due to operational issues at various plants. That estimated production figure would mark a 0.4% drop from the same period in 2017, according to the report.

It was yet another busy year in the world of steel news.

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The main pillar of that news was the Trump administration’s imposition of a 25% tariff on imported steel.

That saga, of course, is ongoing.

A select few countries have won exemptions of some form from the tariffs (whether with or without a quota) — those being South Korea, Australia, Argentina and Brazil.

However, trading partners like Canada, Mexico and the European Union continue to push for exemptions of their own (after their temporary exemptions expired mid-year). Those efforts continue, even after the U.S., Mexico and Canada recently signed the United States-Mexico-Canada Agreement (USMCA), the successor to NAFTA, during the Group of 20 summit in Argentina.

As you’ll note, many of these stories also appeared in the recently published top 10 most-viewed posts of the year.

Given the events that transpired in 2018, there will be plenty more steel coverage to come in 2019.

  1. Steel Price Trends: An Upcoming Top?

  2. Section 232 Steel Probe Report Moves on to President Trump

  3. Raw Steels MMI: Steel Prices Sit at More Than Seven-Year High

  4. Department of Commerce Releases Section 232 Aluminum, Steel Recommendations

  5. Raw Steels MMI: Domestic Steel Price Momentum Continues to Grow

  6. Steel Prices Pick Up Momentum to Kick Off 2018

  7. Raw Steels MMI: Steel Prices Gain Momentum in February

  8. Raw Steels MMI: Domestic Steel Price Momentum Picks Up

  9. Stainless Steel MMI: LME Nickel Price, Stainless Surcharges Both Rise

  10. Stainless Steel MMI: LME Nickel Prices Fall But Stainless Steel Surcharges Rise

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

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Global crude steel production in November jumped 5.8% year over year, the World Steel Association reported today.

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Production from the 64 countries reporting to the World Steel Association hit 148.6 million tons (MT) in November, continuing an upward production growth trend that began in August. Steel production growth of 5.8% in November jumped from 5.1% in October.

Broken down by key producers, China’s crude steel production reached 77.6 MT, up 10.8% compared to November 2017. The production growth marked an increase from October, when year-over-year growth hit 9.1%.

The increase comes even with the winter heating season underway, with it production cuts aimed at tackling pollution in the country. Unlike last year, however, Beijing opted not to impose blanket cuts, instead delegating the scope of the cuts to local authorities.

Chinese steel rebar prices hit a five-week high this week, but the more relaxed program of winter cuts could see prices continue softening in the coming months. Chinese steel prices have lagged on account of weaker demand and the continued increases in production. However, a comprehensive trade detente between the U.S. and China would likely give a boost to China’s economy and augment steel demand.

The most-traded rebar contract on the SHFE closed at 3,481 yuan per ton ($506) on Thursday, up from an opening price of 3,433 yuan per ton ($496).

U.S. production continues to boast strong growth after the Trump administration’s Section 232 tariff on imported steel went into effect earlier this year. U.S. production in November hit 7.4 MT, marking an increase of 11.8% year over year.

Japanese production hit 8.7 MT, marking a year-over-year decrease of 0.5%. South Korea produced 5.9 MT in November, up 1.1% on a year-over-year basis.

In Europe, France produced 1.4 MT of crude steel in November, marking an increase of 12.8% compared to November 2017. Italy’s crude steel production hit 2.2 MT, down by 1.0%. Spain produced 1.3 MT, down 0.7%.

The European Commission launched a steel safeguard investigation in March in response to the U.S.’s Section 232 tariff and the subsequent concerns about diverted steel flooding the European market. The investigation, which covers 28 product categories, was to last nine months; however, the European Commission this week announced an extension of the duration of the probe, pushing its conclusion to Feb. 1, 2019.

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

Elsewhere, Brazil’s production reached 2.8 MT, down 6.1% year over year. Turkey’s crude steel production hit 3.1 MT, a decrease of 2.1% year over year. Crude steel production in Ukraine reached 1.7 MT, marking an 11.2% year-over-year decline.

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This morning in metals news, the U.S. Treasury Wednesday announced it will lift its sanctions against companies owned by Russian oligarch Oleg Deripaska (which includes aluminum giant United Company Rusal), Chinese steel prices hit a five-week high and Alcoa cuts aluminum production amid a labor dispute at its Becancour smelter in Quebec.

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U.S. to Lift Sanctions on Russian Firms

On Wednesday, the U.S. Treasury Department announced it would delist several Deripaska-controlled companies, not long after previously announcing a sanctions deadline pushback to Jan. 7.

“Treasury sanctioned these companies because of their ownership and control by sanctioned Russian oligarch Oleg Deripaska, not for the conduct of the companies themselves,” Treasury Secretary Steven T. Mnuchin said. “These companies have committed to significantly diminish Deripaska’s ownership and sever his control. The companies will be subject to ongoing compliance and will face severe consequences if they fail to comply. OFAC maintains the ability under the terms of the agreement to have unprecedented levels of transparency into operations.”

According to the Treasury Department’s announcement, it will terminate the sanctions imposed on En+ Group plc, UC Rusal plc and JSC EuroSibEnergo in 30 days.”

MetalMiner’s Take: LME aluminum prices have increased slightly today on the news knowing that the Trump administration will lift sanctions on Russian companies owned by oligarch Oleg Deripaska.

However, the increase does not appear sharp. Prices increased following the previous pattern, and aluminum prices are still lower than they were at the beginning of the month. This decision will not have a large impact on the aluminum market.

In April, when the sanctions were announced, the aluminum market felt constraint regarding supply; prices subsequently spiked.

However, current market conditions are far different from April 2018.

Crude oil prices are lower, commodities are decreasing and the U.S. dollar is rising. Also, Section 232 and all the other tariffs still remain in effect.

Therefore, buying organizations won’t see dramatic changes in LME aluminum prices, in both the short and long terms.

Alcoa to Cut Production at Quebec Smelter

Alcoa announced Wednesday that it will cut production by half at its Aluminerie de Bécancour Inc. smelter in Quebec.

“The Bécancour aluminum smelter, owned by Alcoa (74.95%) and Rio Tinto Alcan Inc. (25.05%), has nameplate capacity of 413,000 metric tons per year, across its three potlines,” Alcoa said in a release. “Two of the facility’s potlines were curtailed on January 11, 2018, after union members rejected a proposed labor agreement for hourly employees.”

Alcoa said curtailment of the one operating potline, which has a nameplate capacity of 138,000 metric tons per year, was “necessary to ensure continued safety and maintenance in light of recent retirements and departures.”

Alcoa and the union representing its workers still remain without a labor agreement almost a year after the other two potlines were curtailed.

“After extensive negotiations this year, ABI and the union have yet to reach an agreement on key terms to improve productivity and profitability,” Alcoa said in its release. “ABI’s management remains committed to reaching a negotiated agreement.”

According to Alcoa, curtailment of the one operating potline will begin Friday, Dec. 21.

Chinese Steel Prices Hit Five-Week High

Chinese steel prices, which have lagged of late, rose to their highest level in five weeks, Reuters reported.

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Shanghai rebar steel prices rose as much as 1.8% Thursday before settling up 1.5%, according to the report.

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This morning in metals news, the European Commission has extended its probe of steel imports, steel production in the Great Lakes region of the U.S. ticked up last week and Chinese aluminum companies will reportedly come together to discuss falling aluminum prices.

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E.U. Pushes Investigation End Back to Feb. 1

The European Commission has extended its investigation into potential remedies needed to address a surge of steel imports on the heels of the U.S. 25% tariff, Reuters reported.

The Commission launched a steel safeguard investigation in March and was to conclude in nine months (prior to the announced extension).

Great Lakes Steel Production Rises

Steel production in the Great Lakes region of the U.S. hit 726,000 tons last week, according to a report by the Times of Northwest Indiana.

The production total last week marked a 4.6% increase from the previous week.

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

Chinese Aluminum Producers Will Gather Over Dropping Prices

According to a Reuters report, representatives from China’s biggest aluminum producers will gather to discuss falling demand and aluminum prices.

MetalMiner’s Take: A pow-wow amongst China’s top aluminum brass won’t impact the macro trends impacting metals markets.

The facts remain, oil prices have sunk, critically falling below $50/barrel, which has moved commodities markets lower.

Astute buying organizations know that commodities and industrial metals as asset classes show tight correlation (but not always).

Industrial metals as of Dec. 1 remained in a long-term bull trend and a short-term sideways trend. Cutting aluminum production makes sense in markets with weak demand. Demand from China appears sluggish, yet it remains unclear if Chinese aluminum producers will show the strength and unity in reducing production.