Steel

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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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This morning in metals news, iron ore prices are up, a Kentucky company announces an expansion, and Canada will expand its targeted tariff relief as part of its ongoing efforts to tackle the U.S.’s Section 232 steel and aluminum tariffs.

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Iron Ore Ticks Up

Prices for mid- and high-grade iron ores surged Thursday, Business Insider Australia reported.

Benchmark 62% fines jumped 4.5% and higher-grade ore was up 1.9%, according to the report.

As noted yesterday, Chinese steel prices hit a five-week high.

MetalMiner’s Take: Despite the recent short-term shift in Chinese steel prices, the downtrend still appears sharper.

Prices usually tend to react to economic stimulus, but this reaction lasts just 1-2 weeks.

Chinese steel prices have showed weakness during most of 2018. It should be noted, with the winter heating season underway, prices decreased in 2017 during the winter season.

Kobe Steel Announces Bowling Green Expansion

Kobe Steel announced this week that its subsidiary Kobeloco Aluminum Products and Extrusions will invest $42 million toward the expansion of its plant in Bowling Green, Kentucky.

According to the company announcement, the expansion is expected to create about 90 jobs.

The plant manufactures and sells bumper materials and car frame materials.

“These aluminum extruded products are increasingly being used in cars,” the company release states. “In November 2018, KPEX began integrated production, ranging from melting and casting to the final manufacturing process of fabrication.”

MetalMiner’s Take: Manufacturing organizations have undoubtedly faced challenges as a result of tariffs, mostly in the form of volatile prices.

Clearly, some see advantages in expanding operations to serve strong domestic demand.

In January, MetalMiner will continue its coverage on the impact of tariffs on manufacturing, with an emphasis on whether or not U.S. companies have expanded or will grow U.S. operations as a result of the maker-to-user movement.

Canada to Expand Targeted Tariff Relief

Earlier this week, the Canadian Department of Finance announced expanded targeted tariff relief for the country’s aluminum and steel businesses.

Canada responded to the U.S.’s Section 232 tariffs on steel and aluminum with reciprocal tariffs. However, in an attempt to offer relief to domestic industry, the department announced it will provide “new targeted surtax relief on imports of steel and aluminum products, for specific companies facing particular circumstances, such as contractual obligations, and on shipments that were in transit before provisional safeguards were imposed.”

“Canada’s response to unjustified and counterproductive U.S. tariffs on Canadian steel and aluminum began on July 1, 2018, when the Government began applying dollar-for-dollar, reciprocal countermeasures on $16.6 billion of imports of steel, aluminum, and other products from the United States,” a Department of Finance release states.

“The measures below are a continuation of the Government’s balanced response—one that will support Canadian producers and manufacturers, while the Government works toward the complete repeal of all U.S. tariffs of Canadian steel and aluminum.”

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A full list of the products covered by Canada’s remission order can be found on the Department of Finance Canada website.

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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.

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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.

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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.

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This morning in metals news, Tokyo Steel says it will hold steel prices steady in January, base metals prices fell Monday and Australian miner Fortescue announces its mid-grade iron ore production expectations for 2019.

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Steady Steel Prices for Tokyo Steel

After prices increases in recent months, Tokyo Steel announced it will hold prices steady in January, Reuters reported.

MetalMiner’s Take: MetalMiner notes with interest what appears as a global pause on the long-term underlying bull metal market.

Commodities have recently switched from bullish to sideways. Industrial metals prices have largely declined in December and steel prices, both globally and in the U.S., continue to soften.

Will the bull market continue or will December mark a shift in the long-term outlook? December will likely provide a number of clues.

Metals Prices Fall

Copper and other base metals prices fell Monday on concerns about trade and demand, Reuters reported elsewhere.

LME copper fell 0.4% Monday, according to the report.

Mid-Grade Iron Ore Production

Australian miner Fortescue, hailing its maiden shipment of West Pilbara Fines, announced it will produce 5-10 million tons of the mid-grade iron ore next year.

The ore will be produced by “blending higher iron, low alumina ore from the western pits at Cloudbreak with ore from the Firetail mine.”

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The first shipment of the ore left the Herb Elliott Port in Port Hedland en route to Hunan Valin Steel Co., Ltd (Hunan Valin) in China, according to a Fortescue release.

Here’s what we’re tracking this morning in metals:

  • U.S. steel shipments are up in October. AISI has reported that U.S. steel mills shipped close to 8.2 million net tons in October, a 4.6% rise over the month of September — and a 6% increase from the 7.7 million net tons shipped in October 2017.
  • In a weekly briefing from Shanghai Metals Market released today, the near-term outlook appears to be weak for copper, aluminum and lead, according to the publication.
    • “Copper prices across Chinese markets are likely to hover in a wide range in the short term as supply growth slows and as demand improves,” the briefing stated. “China’s fixed-asset investment in the power sector rebounded for two consecutive months to -7.6% in October.”
    • Poor supply and demand in the aluminum market in China is likely to continue in December, according to SMM. Primary aluminum inventories across eight consumption areas in China are down by nearly 3% over the week ending Nov. 29, while 6063 billet stocks rose 3% across five major consumption areas, according to SMM data.
    • “China’s actual consumption of refined lead is estimated to decline 0.7% to 411,000 mt in December as demand weakens,” the briefing stated.

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  • Finally, in the non-news news, the U.S. Commerce Department released Secretary Wilbur Ross’ comments on the recent unanimous decision for the ITC’s final affirmative injury determinations in the antidumping duty and countervailing duty investigations involving Chinese imports of common alloy aluminum sheet (which came down Nov. 7): “The Department of Commerce will not stand idly by while products are illicitly forced upon U.S. markets,” said Ross. “I applaud the International Trade Commission for this determination in holding bad actors accountable for their actions on the international stage.”

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This morning in metals news, the state of falling global steel prices is a temporary condition attributable to Chinese overproduction ahead of winter cuts, according to miner Brazilian miner Vale; Chilean copper exports in November were less valuable; and the arrest of a Huawei Technologies executive has caused concern that it could cast a shadow on ongoing U.S.-China trade talks.

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Falling Steel

Brazilian iron ore miner Vale said the recent dip in global steel prices is temporary, a result of a Chinese surge in production just ahead of scheduled winter cuts, Reuters reported.

Unlike last year, Beijing has delegated authority on the exact specifications of the winter cuts — aimed at tackling pollution in the country’s industrial hubs — to local authorities this year, as opposed to the blanket cuts it imposed last year.

Chilean Copper

The world top copper producer, Chile, announced a budget surplus for November, but the value of its copper exports fell, according to a Reuters report citing the country’s central bank.

The value of its copper exports fell 12.5% in November, according to the report.

Arrest of Huawei CFO Raises Concerns Regarding U.S.-China Trade Talks

The Group of 20 (G20) summit saw President Donald Trump and President Xi Jinping agree to commencing a 90-day negotiating window on trade — a positive, if still uneasy step toward potential resolutions to the ongoing U.S.-China trade conflict.

However, the arrest of Huawei CFO Meng Wanzhou, at the behest of the U.S., has led to concern that it could impact the footing — uneasy footing — established for the current round of trade talks.

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According to the Washington Post, citing analysts in Beijing, the Chinese government, while upset about the arrest, will attempt to not allow it to impact the trade talks going forward.

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This morning in metals news, steel imports coming into the U.S. continue to be down from last year’s levels, Shanghai steel prices are down and the sharp corrective trend in iron ore prices could be coming to an end.

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U.S. Steel Import Market Share at 21% in November

According to a report by the American Iron and Steel Institute (AISI), U.S. steel import market share reached 20% for November.

Market share for the year to date is 23%, according to the report.

MetalMiner’s Take: What nuggets in the steel import data should buying organizations pay special attention to?

MetalMiner finds the rising import numbers of HRC and plate of greatest interest because it suggests the arbitrage between HRC prices (as well as plate prices) in the U.S. and elsewhere are so significant that buying organizations still achieve a lower total cost — even after paying a 25% import duty.

Rising imports for these two products will continue to put price pressure on domestic steel prices. Rising import levels (and 2018 imports for both products are higher than 2017 levels), suggest that the Q4 bounce that we have seen in prior years may not appear at all. The best way to gauge the trend is to track the spread between countries, factoring in freight, margin, duty, etc.

MetalMiner forecast subscribers can receive this kind of analysis via the MetalMiner Monthly Outlook.

Shanghai Steel Prices Fall

According to a Reuters report, Shanghai steel prices fell Thursday on oversupply concerns.

The most-traded SHFE rebar contract fell to 3,375 ($484.55) yuan per ton from an opening price of 3,360 yuan ($488.18) per ton.

An Iron Ore Recovery?

After a November that saw iron ore prices tumble, iron ore may be headed for a more stable period.

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According to Goldman Sachs, cited by Business Insider Australia, the iron ore price is expected to hold in the $60-$70 range over the coming 12 months.