Steel

scrap steel

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This morning in metals news: global steel groups renewed calls for the Global Forum on Steel Excess Capacity to continue its work targeting steel overcapacity; Freeport-McMoRan released its Q3 financial results; and, finally, U.S. natural gas exports to Mexico have increased.

Stop obsessing about the actual forecasted steel price. It’s more important to spot the trend. See why.

Steel groups call for renewed emphasis on steel overcapacity

Groups around the world have asked governments to “intensify” their work with the Global Forum on Steel Excess Capacity.

“Steel industries throughout the world expressed tremendous concern about the recent increase in steel overcapacity at a time when steel demand is severely depressed by the COVID-19 pandemic, reversing a trend of gradual decreases in overcapacity in the three years after the GFSEC was established (2016 – 2019),” the American Iron and Steel Institute (AISI) said in a release.

Among the action items suggested by the groups included development of “stronger disciplines” related to industrial subsidies. In addition, the groups called for upholding “effective trade remedies” in order to ensure a level playing field.

Freeport-McMoRan releases Q3 financials

Miner Freeport-McMoRan released its Q3 financials today, reporting net income of $329 million, up from a loss of $207 million in Q3 2019.

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India

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After a period of negative news following the COVID-19 pandemic, there’s finally some cheer for India’s steel industry, particularly related to Indian domestic steel demand.

Domestic steel demand has bounced back to pre-COVID levels. Automotive and white goods sector demand have driven the steel demand recovery.

Are you on the hook for communicating the company’s steel performance to the executive team? See what should be in that report!

Indian domestic steel demand recovers

As per a report by financial firm Motilal Oswal, higher steel prices and lower coking coal prices ensured Indian primary steel producers’ margins remained strong. In addition, the report noted there were signs of domestic steel demand recovering gradually in the country.

The Motilal Oswal report also pointed out that India’s finished steel consumption, too, is recovering gradually. India’s finished steel consumption registered a drop of as much as 85% year over year in April 2020.

Chinese demand boosts Indian steel

What’s more, a renewed demand in the largest steel consuming market in China also boosted the bullish steel market in India.

Steel trade data by China shows demand remains strong there. China’s net steel exports declined to 10-year lows in September 2020. In addition, China saw a spurt in passenger car sales in September.

Because of these developments in China, its fallout was also seen in the Indian markets. Steel prices have also firmed up and have shown consistent increases over the last four months since July.

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The U.S. steel sector continued to show incremental gains in capacity utilization last week.

Capacity utilization by U.S. mills rose to 69.4% for the week ending Oct. 17, 2020, according to the American Iron and Steel Institute (AISI).

See why technical analysis is a superior forecasting methodology over fundamental analysis and why it matters for your steel buy.

U.S. steel sector continues capacity gains

For the week ending Oct. 17, the U.S. steel sector’s capacity utilization rate rose to 69.4%, producing 1.54 million tons in the process.

The weekly output marked a 15.0% year-over-year decline. Output during the week ending Oct. 17, 2019, totaled 1.81 million tons at a capacity utilization rate of 78.0%.

Meanwhile, production for the week ending Oct. 17, 2020, rose 2.2% from the previous week. For the week ending Oct. 10, 2020, production reached 1.50 million net tons at a capacity utilization rate of 67.9%.

YTD output down 19.4%

Adjusted year-to-date production through Oct. 17 reached 62.48 million net tons. Capacity utilization rate during the period reached 66.3%.

The year-to-date output is down 19.4% from the 77.55 million net tons during the same period last year. The capacity utilization rate during that period reached 80.1%.

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According to the Financial Times, China’s President Xi Jinping surprised the global community by announcing last month a hugely ambitious plan to improve China’s environment and make the country carbon-neutral by 2060.

In addition, he said the country’s emissions would peak before 2030.

But does this really mean anything? If it does, what impact will it have on the country’s massive steel industry? The steel industry, of course, is the source of a significant proportion of the country’s carbon emissions?

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China’s environment and emissions figures

Firstly, let’s look at the scale of the proposition.

China is the world’s largest emitter of greenhouse gases (such as carbon dioxide and methane).

Last year, China’s emissions accounted for roughly 27% of the global total. The country’s total accounted for more than the U.S., Europe and Japan combined, the Financial Times reported.

Furthermore, the country consumes more coal than the rest of the world put together. In addition, China continues to commission new coal power plants.

On the one hand, China also leads the world in the deployment of solar power, wind power and electric vehicles. Its energy-efficiency policies are ambitious and successful. Significantly, there are no known climate change deniers in the Chinese leadership.

But is the pledge meaningful?

It contrasts poorly with that made by almost 70 countries and the E.U. Those countries have already pledged to make their economies “net-zero” greenhouse gas emitters by mid-century, or 10 years earlier than China’s pledge.

And the 2030 peak emissions date is a rehash of a commitment made back in 2014, suggesting peak emissions could be reached well before 2030 and the authorities are simply back-sliding.

Difficult changes

The scale of the challenge vis-a-vis China’s environment and emissions is considerable.

More than 85% of China’s primary energy last year came from coal, oil, and natural gas, all of which produce carbon dioxide. This came despite massive investment in solar and wind.

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The Raw Steels Monthly Metals Index (MMI) increased 2.8% for this month’s index value amid a steel market recovery.

October 2020 Raw Steels MMI chart

Stop obsessing about the actual forecasted steel price. It’s more important to spot the trend. See why.

Steel market recovery

All U.S. forms of steel prices increased throughout September.

HRC, CRC and HDG prices increased rapidly by 20.4%, 16.4% and 15.4%, respectively. Meanwhile, the plate price increased 4.3%. The wire rod price increased by 1.5%.

However, the Chinese steel market showed the opposite trend or traded sideways.

The Chinese HRC price dropped by 4.4%. CRC increased by 0.22% and HDG had a 6.4% jump the first day of September but remained flat for the rest of the months and through the first two weeks of October.

The prices’ increase in the U.S. market were followed by an increase in capability utilization rate. By the week ending Oct. 3, raw steel production increased to 66.1%. As such, the year-to-date capability utilization rate rose to 66.2% according to the American Iron and Steel Institute.

Over in the Asian market, there are overcapacity concerns.

The South East Asia Iron and Steel Institute (SEAISI) reported that the region, particularly Chinese steelmakers and banks, might have overinvested in new basic oxygen furnace (BOF) integrated mills.

The region’s current capacity is approximately 151 million metric tons. The proposed investment could bring it up to 50 million metric tons, creating 60 million metric tons of overcapacity from BOF alone. It is important to note that BOF mills cannot operate at low capacity.

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steel shipment

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This morning in metals news: U.S. steel prices have made significant gains in recent weeks; exports of liquefied natural gas (LNG) from two key Louisiana export terminals have resumed after Hurricane Laura; the coronavirus pandemic has impacted tin production in Bolivia.

Do you use cost breakdowns in your steel negotiations? See other tips in negotiating with mills and service centers

U.S. steel prices rise

U.S. steel prices have posted significant gains of late. HRC, for example, closed Wednesday at $589 per short ton, up 17.33% month over month.

Meanwhile, the CRC price closed Wednesday at $775 per short ton, up 15.5% month over month.

Finally, U.S. HDG closed Wednesday at $850 per short ton, up 12.73% month over month.

LNG exports resume from terminals hit by Hurricane Laura

Among other impacts, Hurricane Laura disrupted activities at two LNG export terminals in Louisiana.

However, on the heels of the hurricane, the Sabine Pass terminal resumed exports Sept. 11, per the Energy Information Administration. Sabine Pass is the largest LNG export facility in the U.S.

However, the resumption of activity at Cameron terminal did not occur until Oct. 5 due to persisting infrastructural damage at the facility.

Furthermore, the next hurricane on the way could lead to further damage.

“Currently, Hurricane Delta, a Category 4 storm in the Gulf of Mexico, is expected to make landfall in Louisiana on Friday, October 9,” the EIA reported. “Depending on the path of Hurricane Delta, Cameron and Sabine Pass may take precautionary measures and temporarily suspend operations as they did before Hurricane Laura.”

Tin output in Bolivia

The coronavirus pandemic has impacted tin production in Bolivia, the International Tin Association (ITA) reported this week.

Tin concentrate production in the first quarter of the year fell 30% year over year.

In addition, coronavirus-related closures prevented production 2,600 tonnes of refined ton in Q2, the ITA estimated.

Are you on the hook for communicating the company’s steel performance to the executive team? See what should be in that report!

India

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India’s Commerce Ministry has launched an inquiry, based on a complaint by Indian steel players, to review the need to reimpose anti-dumping duties on certain steel products imported from at least seven countries, the New Indian Express reported.

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

Reimposition of anti-dumping duties

A few months ago, India imposed duties on steel products imported from the U.S., China, Korea, European Union, South Africa, Taiwan and Thailand. With the duties, India aimed to safeguard Indian steel manufacturers from cheap imports.

However, the Commerce Ministry’s Directorate General of Trade Remedies (DGTR) launched a an anti-dumping probe. The investigation follows an application filed by Jindal Stainless Ltd, Jindal Stainless (Hisar) Ltd and Jindal Stainless Steelway Ltd. The “sunset” review covers imports of cold-rolled flat products of stainless steel, of width ranging from 600-1,250 mm from the seven countries.

Countries can impose tariffs on such dumped products to provide a level playing field for domestic manufacturers.

Dumping happens when a company or country exports an item at a price lower than the price of the one made in its domestic market. As such, dumping impacts the product price in the importing nation.

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India

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No, we don’t mean that much-vaunted but still distant dream of India becoming a second China economically — the disparity expands rather than contracts with time — but rather could India become a pariah state after China in terms of feeling the pain of anti-dumping duties, quotas, and tariffs (particularly with respect to Indian metal exports)?

It has already happened in Europe on stainless steel long product. The E.U. has imposed an annual quota and punitive 25% tariffs for every kilogram over that limit in a bid to protect its domestic producers.

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

With rise to No. 2, could Indian metal exports be next to face tariffs?

Last year, India ranked the second-largest steel producer in the world behind China. (However, India’s production totaled not much more than a tenth of China’s output.)

India is becoming a global force in many ferrous and non-ferrous metals.

Originally, the rationale was India’s huge population and low per-capita consumption of metals suggested growth prospects on a Chinese scale.

Such potential has led to considerable investment. A good level of domestic resource — iron ore in particular — has meant economies of scale have favored domestic growth prospects.

But slow GDP growth, a bureaucratic business environment and tortuous legal environment over land ownership have slowed what should otherwise have been a meteoric rise.

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aluminum price landing page with should-cost price

MetalMiner’s metals price landing pages (aluminum, steel and stainless steel) now feature the LME three-month prices set against MetalMiner’s track record, in addition to “should-cost” prices.

How much should your metals buy cost?

It’s a simple question that doesn’t always have a simple answer — or, at the very least, an answer that’s easy to get.

MetalMiner’s “should-cost” models aim to cut through the confusion and give buyers concrete ideas of what the products they’re buying should be costing them.

The MetalMiner should-cost models cover aluminum, steel and stainless steel.

So, what exactly do the models offer?

Aluminum should-cost model

With respect to aluminum:

  • Comprehensive price breakdowns, including conversion cost for specific grade, thickness and width.
  • In addition, the model is global; buyers can use from multiple regions.
  • Lastly, buying organizations can more effectively “lock” conversion costs.

“Many competitors publish the LME three-month price along with the MW premium,” MetalMiner CEO and Executive Editor Lisa Reisman recently noted. “Few, if any, publish the conversion adder based upon grade, gauge, width etc. The MetalMiner aluminum should-cost model provides a level of granularity not previously available in the marketplace.”

Carbon steel

As for carbon steel, there is currently no North American price index for finished steel inclusive of adders and extras.

In addition, the carbon steel should-cost model includes:

  • Most steel contracts are agreed on the basis of base price, which provides little to no flexibility to negotiate on total price. The steel should-cost model provides a price breakdown for adders/extras, which can generate additional cost savings for steel buyers.
  • The model includes a price breakdown comparison of major U.S. steel mills. Buyers can use the information to negotiate annual sourcing contracts.
  • Furthermore, the model contains a high level of granularity for specific types of steel (examples of specificity can be found on our carbon steel price landing page).

Stainless steel

What about stainless?

Similarly, there is currently no North American price index for stainless. In addition, the MetalMiner stainless should-cost model:

  • Contains a high level of granularity for specific types of stainless. Examples of specificity can be found on our stainless price landing page.
  • Second, the model features comprehensive price breakdowns (base price + gauge/width + finish + surcharge + vinyl + CTL).
  • Lastly, it provides better means of negotiating effectively with suppliers.

For more information about the MetalMiner Insights platform and should-cost models, visit the MetalMiner Insights landing page

hot rolled steel

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The steel capacity utilization rate in the U.S. for the week ending Sept. 19 fell to 64.5%.

See why technical analysis is a superior forecasting methodology over fundamental analysis and why it matters for your steel buy.

Steel capacity utilization rate for week ending Sept. 19 drops

The steel capacity utilization rate for the week ending Sept. 19 marked a slight decline from the previous week, when it reached 65.1%, according to the American Iron and Steel Institute (AISI).

U.S. mills churned out 1.45 million net tons of steel during the week, down 19.7% on a year-over-year basis. The capacity utilization rate during the same week in 2019 stood at 77.4%.

Furthermore, production during the week marked a slight decline from the previous week, when production totaled 1.46 million net tons.

YTD output down 20.1%

In addition to the capacity utilization rate, adjusted year-to-date production reached 56.2 million net tons.

Steel mills’ capacity utilization rate reached 65.8% during the aforementioned period.

Meanwhile, for the same time frame in 2019, production totaled 70.3 million net tons at a capacity utilization rate of 80.3%.

Regional output

By region, production for the week ending Sept. 19, 2020, totaled:

  • Northeast: 135,000 net tons
  • Great Lakes: 527,000 net tons
  • Midwest: 169,000 net tons
  • Southern: 553,000 net tons
  • Western: 62,000 net tons

Capacity utilization down, but steel prices make gains

On the price front, U.S. steel prices have showed significant upward momentum in recent weeks.

The U.S. HDG price closed Monday at $804 per short ton, up 11.98% month over month.

Meanwhile, U.S. CRC closed Monday at $729 per short ton, up 11.47% month over month.

U.S. HRC also made significant gains. The HRC price closed Monday at $560 per short ton, or up 19.4%.

Although capacity utilization has been rising on the whole in recent months, the automotive sector’s recovery has, in part, supported steel prices.

“The recovery of the U.S. auto industry might be driving the steel price increases,” Maria Rosa Gobitz wrote in last week Raw Steels MMI report.

“U.S. auto production continued to improve. Producers such as General MotorsFord and Fiat Chrysler ramped up their assembly plants.

“However, supply has not quite caught up with demand. As such, U.S. auto inventory continues to tighten.”

Are you prepared for your annual steel contract negotiations? Be sure to check out our five best practices. 

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