Steel

MetalMiner experts recently joined ROTH Capital Partners for a webinar that covered a wide range of metals topics, including oil prices, macroeconomic trends, and insights into the aluminum, steel and copper markets.

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The webinar, which took place July 14, followed up on a previous MetalMiner-Roth webinar on May 20, 10 days after metals surged to record highs. Copper, for example, reached an all-time on May 10. MetalMiner CEO Lisa Reisman and Vice President of Business Solutions Don Hauser joined to share their insights on various markets, recapping metals movements in the two months since that peak.

If you missed it live, register here to receive a copy of the webinar recording to hear all of Reisman and Hauser’s insights from the hourlong webinar.

On July 28, get a sneak peek of the MetalMiner annual budgeting and forecasting workshop (a three-hour virtual event that will take place in August 2021). Get ready to plan for 2022. 

Bull market

While prices have come off of the record highs seen in May, they remain elevated. In short, we remain in a bull market.

“We are still in a bull market,” Reisman said. “The nonferrous metals are taking a pause but unless we see them start to fall off toward support levels … they’re still in a bull market.”

However, in terms of the “supercycle” narrative — which we have covered in this space previously — MetalMiner remains skeptical.

“The reason we’re struggling with the big supercycle narrative is that we would expect to see a decade, 1o years, of sustained, upward demand,” she said. “We don’t quite see that.”

With that said, metals demand currently is strong across a range of industries.

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This morning in metals news: ArcelorMittal said it plans to make its Sestao plant zero carbon emissions; meanwhile, the Producer Price Index for final demand increased by 1.0% in June; and, lastly, U.S. steel prices continue to rise.

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ArcelorMittal announces aim to build zero-carbon-emissions Sestao steel plant

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ArcelorMittal this week said it plans to make its steel plant in Sestao, Spain, the “world’s first full-scale zero carbon-emissions steel plant.”

“The development is the result of a memorandum of understanding signed today with the Government of Spain that will see an investment of €1 billion in the construction of a green hydrogen direct reduced iron (DRI) plant at its plant in Gijón, as well as a new hybrid electric arc furnace (EAF),” ArcelorMittal said.

The steelmaker said the new DRI plant will have capacity of 2.3 million metric tons. Of that total, 1 million metric tons would go to Sestao to be used as feedstocks in its electric arc furnaces (EAFs).

PPI up 1.0%

Elsewhere, the Producer Price Index (PPI) for final demand increased by 1.0% in June, the Bureau of Labor Statistics reported.

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Shanghai steel futures extended gains to hit an eight-week high on Monday, according to a post on Nasdaq.com. Futures made further gains overnight, according to MetalMiner’s Insights platform.

Rebar and hot rolled coil both hit peaks last seen on May 19, when the market last spiked only to crash after dire warnings from Beijing about speculative activity and the threat of action against excessive rises in commodity prices.

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Chinese steel price fall off, then bounce back

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Since prices came off they have been making a steady recovery. Beijing’s pressure to curb excess production capacity as part of wider environmental targets raises the prospect of material shortages in the face of still robust demand.

Late last week, the People’s Bank of China announced it would cut the bank’s reserve requirement ratio by 50 basis points, effective from July 15. It would release around 1 trillion yuan to underpin an economic recovery that Nasdaq reports is starting to lose momentum.

The move supported further price rises. However, in reality, it would take months for the PBOC’s relaxation of reserve requirements to filter though into any increase in construction activity and, hence, demand.

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The Raw Steels Monthly Metals Index (MMI) rose by 6.6%, as U.S. steel prices continued their rally.

The MetalMiner Best Practice Library offers a wealth of knowledge and tips to help buyers stay on top of metals markets and buying strategies.

Production, capability utilization rise

According to the World Steel Association, global crude steel production increased by 14.5% year over year for the first five months of 2021. North American steel production rose by 11.3% during that period, with a sharp 47.7% increase in May alone.

For the week of July 3, the American Iron and Steel Institute reported that domestic raw steel production totaled 1,842,000 net tons. The capability utilization rate reached 83.0%. There has been a slow but continuous increase since the week of Jan. 2, when the institute reported steel production was 1,650,000 net tons at a capability utilization rate of 74.6%.

Despite this increase, all forms of steel prices remain at an all-time high.

U.S. imports increase

The latest data from the Steel Import Monitoring and Analysis (SIMA) showed steel import permit applications for June increased by 12.4% compared to the previous month. Imports totaled 2,965,000 net tons.

Import permit tonnage for finished steel in June increased by 6.8% month over month to 1,982,000 net tons.

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China’s steelmaking raw materials and finished steel markets are in a real state of flux at the moment.

Receive the latest short-term and long-term outlook for the full range of industrial metals (base and ferrous) at the annual MetalMiner Forecasting Workshop on Aug. 25. 

Recovery and a new dynamic impacting steel prices

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On the one hand, a robust recovery from the pandemic has supported rapid price increases, both in raw materials such as iron ore and coking coal. Finished steel prices, such as rebar and HR coil, have also increased.

But Beijing’s recent policy initiatives around curbing steel output and controlling greenhouse gas emissions have created a new dynamic that should be supporting steel prices in the expectation of reduced output, yet depressing raw material prices in the expectation of reduced raw material demand.

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Russia’s plan to introduce from Aug. 1 a temporary export duty on metal exports has brought varied reactions from European industry watchers and market participants.

“It’s about showing the strength of the Russian metals industry,” one analyst told MetalMiner.

Russia’s planned tariff may also be a retaliatory measure against Europe and its proposed carbon tax on metals imports from high-carbon producers, of which Russia is one, the analyst added.

“It feels like it is a broadside shot,” the analyst said.

The MetalMiner Best Practice Library offers a wealth of knowledge and tips to help buyers stay on top of metals markets and buying strategies.

Russia export duty to cover steel, base metals

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The Russian Federal Government’s Decree No. 988 of June 25 stipulates a 15% export duty from Aug. 1 to Dec. 31 on all steel – semi-finished and finished – as well as on copper nickel, and low-grade aluminum leaving the country and the wider Eurasian Economic Union (EAEU).

Member states of the EAEU include Armenia, Belarus, Kazakhstan, Kyrgyzstan and Russia. In addition, Cuba, Moldova and Uzbekistan are observer states.

One of the more likely beneficiaries in Europe from the duty is the steel sector, sources told MetalMiner.

“Everybody loves this,” one analyst said about Russia’s tentative export duty, as it could further push up already-high prices for steel products in Europe.

Domestically produced hot rolled coil for Q4 production within Western Europe is now €1,170-€1,200 ($1,390-1,420) per ton exw, traders said. That marks an increase from the €1,120-1,130 ($1,370-1,385) reported earlier in June.

Planned shutdowns of rolling equipment or banking of hot ends for maintenance over Europe’s summer months could also further push up prices in the face of high demand throughout Western Europe, the analyst stated.

One steel trader voiced a similar opinion.

“This is great for everybody” the trader noted, as the decree will push up steel prices on both the domestic and import markets.

“Who’s gonna wait until the end of the year to acquire steel if Russia is out of the market?” the trader rhetorically asked.

Ukraine’s Metinvest is likely to also benefit from this. The group is a major supplier of long products into the E.U. Resulting higher prices will also mean more revenue.

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In an anticipated move, the European Union has published its decision to extend its steel safeguards for three more years.

EU members voted on the extension June 18 and it published the implementing regulation June 28.

The safeguards will extend from July 1, 2021, to June 30, 2024.

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“The initial safeguard measure was introduced in July 2018 to protect the Union steel market against trade diversion, following the US decision to impose, under its Section 232 legislation, duties on imports of steel into the US market,” the E.U. said in a statement. “The US Section 232 measures are still in force.”

Furthermore, the E.U. said that, in line with World Trade Organization (WTO) rules, duty-free steel import quotas will increase by 3% annually.

“The Commission will also initiate a review if the US introduces significant changes to its ‘Section 232’ measure on steel,” the E.U. added.

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EU steel safeguards to 2024

The EU steel safeguards first rolled out in provisional form in July 2018.

The European Steel Association welcomed the decision.

“We welcome that the EU steel safeguard regime has been extended,” said Axel Eggert, Director General of the European Steel Association (EUROFER). “The conditions that required the launch of the safeguard initially are still very much present – including global steel overcapacity and US Section 232.”

Eggert added that disruption of the market from the COVID-19 pandemic is not related to the safeguard measure.

“The current state of demand-supply disruption in the global steel industry – and in many other sectors – follows in the wake of the COVID crisis,” Eggert said. “However, it has nothing to do with the safeguard. Instead, the recovery of steel demand and the wider economic rebound has inspired a rush for material after the countercyclical destocking seen during the downturn.”

E.U.-U.S. trade relations

Trade tensions between the E.U. and U.S. rose throughout the Trump administration, which included the imposition of the Section 232 tariffs on steel and aluminum in 2018. Furthermore, tensions rose over the long-running Boeing-Airbus subsidy saga.

However, the two sides appear to be attempting to cool their jets vis-a-vis the dispute, which saw the WTO authorize billions of dollars in tariffs on both sides. Recently, the sides agreed to a suspension of the tariffs (albeit with the caveat that they could go back into effect if U.S. companies are not able to “compete fairly” in Europe).

As for Section 232, the Biden administration could look to further ease tensions.

“Nor will the widely reported probable removal of Section 232 tariffs on European mills this year have much impact on metal supply to U.S. consumers,” Stuart Burns wrote earlier this month. “Europe is almost as tight as the U.S. and simply doesn’t have much capacity to supply the U.S. market in 2021.

“The Biden administration is looking to relax the Section 232 tariffs, at least as far as Europe is concerned.”

Each month, MetalMiner hosts a webinar on a specific metals topic. Explore the upcoming webinars and sign up for each on the MetalMiner Events page.

U.S. steel capacity utilization reached 82.7% for the week ending June 26, the American Iron and Steel Institute reported Monday.

Each month, MetalMiner hosts a webinar on a specific metals topic. Explore the upcoming webinars and sign up for each on the MetalMiner Events page.

Steel capacity utilization takes small step back

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However, U.S. steel capacity utilization for the aforementioned week dipped from 82.9% the previous week.

Steel production during the week ending June 26 totaled 1,835,000 net tons, down 0.2% from the previous week. Meanwhile, production jumped by 44.3% on a year-over year basis.

During the same week in 2020, steel capacity languished at just 56.8%, as the industry had only just started to recover from the demand hit from March-May 2020.

As we noted last week, global crude steel production gained by 16.5% year over year in May. However, production dipped slightly in May from the previous month.

As Stuart Burns explained, the U.S. steel market remains tight, despite the steady rise in capacity utilization over the past year. Furthermore, U.S. buyers looking to import will likely have to look somewhere other than Europe.

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U.S. steel imports fell to 2.3 million metric tons in May, the Census Bureau reported.

The May import total marked a slight dip from the 2.4 million metric tons imported in April.

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Steel imports decline in May

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U.S. steel imports fell to 2.3 million metric tons in May, while imports through the first four months of the year were flat year over year at 8.4 million metric tons.

Imports of tin plate surged from 29,807 tons in April to 101,381 tons in May. Meanwhile, imports of cold-rolled sheets jumped from 89,028 metric tons to 131,497 metric tons in May.

In addition, hot dipped galvanized sheet and strip imports rose from 177,729 tons to 221,094 tons.

Imports of wire rod jumped from 57,343 tons to 93,849 tons.

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The steel market is running two diverging narratives.

In the U.S., the market remains extremely tight. Mill lead times are out to the end of this year. Furthermore, prices are set to stay high into 2022.

The situation is not dissimilar in Europe. In Europe, the steel market is seeing a similar post-pandemic bounceback, supply chain restocking and constraints, like the U.S., by tariffs on imported material.

But in the rest of the world, global steel production seems to be slowing. Raw material prices — iron ore, in particular — are easing.

Are you under pressure to generate steel cost savings? Make sure you are following these five best practices. 

Steel market narrative outside of US, Europe

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According to Capital Economics, global daily steel production in May came in somewhat lower than April, as output in China dipped.

The World Steel Association reported global steel production rose by an impressive 16.5% year over year in May. However, this is against a 2020 reference point during which many countries were only starting to emerge from national lockdowns in May 2020.

But looking at the month-over-month growth rate, daily global steel output fell by 0.4% in May. That followed a 3.5% rise in April.

At the same time, Beijing’s combination of dire warnings about manipulative speculative pricing, restrictions on credit for construction and pressure on polluting industries to reduce emissions have combined to cause a sharp correction on the previously buoyant iron ore price, down 9% on the Dalian exchange to $173/ton this week.

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