steel price

We are used to steel producers and their trade bodies raising objections to steel imports from China here in Europe, even from Russia and Ukraine but here’s a new one: Iran.

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Reuters reported last week that Steel lobby group Eurofer said Iranian exports to Europe had leapt to just over 1 million metric tons annually, putting the country just behind India at 1.9 mmt, and third to China at 5.7 mmt last year. Read more

The Federal Reserve is hinting at multiple short-term interest rate increases this year, a sign that the central bank expects the recent economic surge to continue and wants to limit the possible impact of inflation.

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Minutes from the Fed’s two-day meeting Jan. 31-Feb. 1 show that the tax cuts and spending proposals floated by the Trump administration continue to loom large over the central bank’s decisions. While the Fed chose to leave its interest rates unchanged at the meeting three weeks ago, investors widely expect two to three more rate hikes this year, perhaps as early as March, as the Fed continues on its path of gradually raising interest rates to combat gathering inflation.

Yet the central bank emphasized that it would adjust the pace of rate increases in line with the economy’s performance.

Fortescue Reports $1.2 Billion Profit

Australia’s Fortescue Metals Group Ltd. reported yesterday a 383% rise in interim net profit to $1.2 billion, surpassing the $319 million in the year-earlier period on the back of a surprise surge in iron ore prices… somehow this still fell short of market expectations.

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Analysts had forecast profit for the six months to Dec. 31 of about $1.5 billion, according to Thomson Reuters data.

India produced 8.4 million metric tons of steel in January, registering a growth of 12% against the same period last year, according to data by the World Steel Association. India became one of the top major steel producers in the world, beating China whose production grew by 7.4%.

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The WSA report only props up what the government here has been saying for some time now, that India is making efforts to ramp up domestic steel and to ensure more consumers opt for it rather than other materials such as plastic.

India needs more scrap if it’s to meet its production goals. Source: Alumisource.

At a “Make In Steel” conference in the nation’s capital, New Delhi, Minister of Steel Chaudhary Birender Singh said steel demand grew 3.3% from April to December 2016, and growth was expected to continue in the coming months due to long-term government policies and an increase in infrastructure spending. Clearly, all of this is not mere lip service.

Steel Ministry officials and domestic steelmakers are optimistic that with more infrastructure projects coming up, demand will likely continue to increase.

The WSA predicted steel demand in India will grow at a rate of 5.7% in 2017.

To push demand, the government has used a combination of measures — incentives, imposition of various trade remedial measures such as minimum import prices, anti-dumping and safeguard measures and better quality control.

To increase consumption and production, it also unveiled a draft National Steel Policy 2017, to soon replace the National Steel Policy 2005. The policy aims to increase the domestic steel production capacity to 300 mmt from the current 85 mmt by 2030-31.

Now, as one more step in the process, it has decided to set up of two scrap-based steel plants, one in the west and the other in the north of the country, to boost production capacity. India has relatively few steel scrap-based electric arc furnaces (EAFs) of low capacity compared to similar-sized nations.

Over 40% of scrap available in the four states in northern India and around 67% of the scrap the western state of Gujarat was imported. Steel made out of scrap is expected to be of higher quality and could be used for expanding production of end-use products such as scientific instrument.

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Currently, India imports 6 mmt of scrap annually but will be able to produce 7.5 mmt of scrap by 2025 as supply from end-of-life cars and trucks, a major supply stream, is expected to grow.

The Department of Commerce placed preliminary countervailing duties on Turkish steel rebar imports today, the trade case is ongoing.

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Countervailing duties are placed on products found by Commerce to have been injuriously subsidized by foreign governments importing said products into the U.S. The definition of a countervailable subsidy is financial assistance from foreign governments that benefits the production of goods from foreign companies and is limited to specific enterprises or industries, or is contingent either upon export performance or upon the use of domestic goods over imported goods.

Commerce calculated a preliminary subsidy rate of 3.47% for the mandatory respondent Habaş Sinai ve Tibbi Gazlar Istihsal Endüstrisi A.Ş. (Habas).

There  an existing countervailing duty on rebar from the Republic of Turkey (79 Fed. Reg. 65,926 (Dep’t Commerce Nov. 6, 2014). This new countervailing duties investigation on rebar from Turkey covers only rebar produced and/or exported by those companies that are excluded from the 2014 Turkey order. Read more

US hot-rolled coil prices retrace. Source: MetalMiner IndX.

Since November — Coinciding with Donald Trump’s victory — U.S. steel prices have been on a tear.

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However, in February momentum started to cool down. It’s now buyers’ job to determine whether this is a major peak or just a pause within this bull market.

Chinese Steel Capacity Rises in 2016

In February, a report by Greenpeace East Asia and Chinese consultancy Custeel “stated that despite China’s high-profile efforts to tackle overcapacity, China’s operating steel capacity increased in 2016,” according to Reuters. In its reporting, the Washington Post noted that the co-authored report “says that 73% of the announced cuts in capacity were already idle — in other words the plants were not operating. Only 23 million metric tons of cut capacity involved shutting down production plants that were operating.”

Meanwhile, some 49 mmt of capacity that had previously been suspended was restarted, and 12 mmt of new operating capacity came online. That means that China added 37 million metric tons additional operating capacity in 2016.

Hot-rolled coil prices in China also take a pause. Source: MetalMiner IndX.

This news is bearish for steel prices and it is likely contributing to lower steel prices in February, both in the U.S. and China. Read more

The London Metal Exchange steel scrap contract is coming of age much more rapidly than the old steel billet contract did. Unlike its older sibling, the steel scrap contract has the prospect of becoming a meaningful and valuable tool both for the trade but also for analysts and financial players.

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The LME Ferrous Monthly Update report for February reported there was steady uptake of both scrap and steel rebar contracts last year and that there was  a surge of activity in January, for both February dates and out to September of this year. LME Steel Scrap and LME Steel Rebar both traded record volumes last month. LME Steel Scrap traded the equivalent of 262,450 metric tons composed of almost 2,500 individual trades, the LME reports.

Source London Metal Exchange

As volume and liquidity builds, the contract will become more representative of real market prices and as a result increasingly relevant as a viable tool. One measure of liquidity is the narrowing of bid/offer spreads. In a non-liquid market buyers and sellers are harder to find and spreads tend to be wider, but as volume has built market makers have been able to narrow the spreads reducing trading costs and increasing the attractiveness of the contract for hedging. Read more

Much to the delight of not only its executives and employees but both the global steel sector and even stock markets, the Luxembourg-based steel giant ArcelorMittal has posted its first annual profit in more than five years, registering the biggest jump in earnings in the same period.

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The world’s largest steelmaker by output swung from a $7.9 billion net loss in 2015 to a net profit of $1.8 billion last year. Read more

All work has stopped at Freeport-McMoran‘s giant Grasberg copper mine in Indonesia, just over a month after the country halted exports of copper concentrate to boost domestic industries.

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Freeport had said the suspension would require the mine to slash output by 60% to approximately 70 million pounds of metal per month if it did not get an export permit by mid-February, due to limited storage. A strike at Freeport’s sole domestic taker of copper concentrate, PT Smelting is expected to last at least until March and has limited Freeport’s output options as Grasberg’s storage sites are now full.

Nippon Exec: Chinese Steel Prices Will Hold Firm

Nippon Steel & Sumitomo Metal Corp., Japan’s biggest steelmaker, expects steel prices in top consumer China to hold firm at least until its Communist Party congress late this year, amid solid demand that is underpinning coking coal and iron ore markets.

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Chinese futures contracts for steel rebar used in construction have already risen 17% in 2017, on top of a gain of more than 60% last year

Slowly but surely, India seems to be shifting the goal posts on its minimum import price policy designed to protect the domestic steel industry.

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India recently extended the anti-dumping duty on cold-rolled flat steel products from four nations, including China, Brazil and South Korea to guard the domestic steel industry from cheap imports for another two months. The duty was expected to expire after six months and was recently extended to give it a total duration of eight.

Domestic Indian steelmakers could see their protective minimum import prices for steel products lifted. Source: Adobe Stock/ft2010.

India had previously imposed a minimum import prices (MIP) to protect the steel industry and the cold-rolled duties came in addition to the MIP. The policy was described as a short-term emergency measure while anti-dumping duties are a long-term measure to protect the country’s trade.

Yet, according to a recent media report, India’s steel secretary Aruna Sharma said there would be no minimum import price (MIP) extension for 19 steel products.

How the MIP Started

India started imposing an anti-dumping duty of $474-$557 per metric ton on hot-rolled flat products of alloy and non-alloy steel imported from China, Japan, South Korea, Russia, Brazil and Indonesia in August. Read more

The Trump administration is exploring the idea of classifying currency manipulation, such as when China sets the value of the yuan/renminbi deliberately low to promote exports, as an unfair trade government subsidy that U.S. manufacturers can then petition the Commerce Department for redress against.

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The Wall Street Journal reported that, under the plan, the Commerce Secretary (Trump has nominated Wilbur Ross for the job) would designate the practice of currency manipulation as an unfair subsidy when employed by any nation. This plan would not single out China, or any other country, but rather give U.S. companies the opportunity to pursue trade remedies such as countervailing duties on imports from nations that artificially set currency values low.

Dollar vs. RMB

The value of the renminbi against the US dollar has consistently fallen since China removed its peg. Chart: Jeff Yoders/MetalMiner.

Last year, we created an interactive narrative experience showing how China has changed its currency values since it joined the World Trade Organization. Many countries and the WTO, itself, have wrestled with how to deal with Chinese exports in recent years but no country has considered creating a currency manipulation category for dumping of foreign exports that would, presumably, be enforceable under current WTO rules.

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The currency plans, according to the WSJ, are part of a China strategy being put together by the White House’s National Trade Council, led by economist Peter Navarro. The policy seeks to balance the administration’s dual goals of challenging China on trade while still keeping relations  — and most trade — with the massive country on a fairly even keel. That’s why the policy does not single out China and would apply to all nations that reset the values of their currency without direction from an independent body such as the European Central Bank or Federal Reserve.

The difficulty in enforcing such a policy would be that nations such as China could cry foul at the WTO and say that the ECB or Fed are not really independent. A definition of what is an independent central bank might be challenged in the WTO.