Articles in Category: Ferrous Metals

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

China steel plant

gui yong nian/Adobe Stock

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.

July 2021 Raw Steels MMI chart

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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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The Stainless Monthly Metals Index (MMI) increased by 2.1% for this month’s reading.

July 2021 Stainless MMI chart

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Nickel pig iron replacement

As steel prices continue to rally, stainless steel producers in China seem to be saving costs by replacing refined nickel with nickel pig iron (NPI). NPI is a lower-nickel-content substitute for refined nickel.

Satellite service SAVANT, which tracks smelter activity, reported that nickel smelting activity was lower than seasonally expected. The company claimed global nickel activity for June was at its lowest in five years.

At the same time, NPI smelting activity in China grew significantly, making April and June the highest readings in the past five years.

Tentative agreement between ATI, USW

After a three-months strike, Allegheny Technologies Inc (ATI) and the United Steelworkers (USW) reached a tentative agreement on July 2.

The agreement includes onetime payments, wage increases and a premium-free health insurance plan for union members. As soon as the agreement is signed, USW members are expected to resume work.

The strike affected approximately 1,300 workers in specialty rolled products locations across nine locations: Brackenridge, Latrobe, Natrona Heights, Vandergrift, Washington (Pennsylvania), Lockport (New York), Louisville (Ohio), New Bedford (Massachusetts) and Waterbury (Connecticut).

The specialty rolled products include a variety of stainless steel sheets, specialty coils, cold rolled stainless steel, and stainless and specialty alloy plates. More specifically, these plants produce: light gauge cold rolled stainless steel strip; titanium strip and sheet; nickel; precision rolled strip; cold rolled stainless; and alloys, such as high-temperature, corrosion-resistant, nickel-based and duplex.

As MetalMiner previously reported, the ATI strikes constrained U.S. stainless flat-rolled supply. For months, industrial metal buying organizations faced serious challenges in purchasing metal, not only due to the supply constraint but also because stainless steel prices are at an all-time high. In addition, soaring freight rates have also made imports a costly proposition.

Base price consolidates

After U.S. mills announced their fourth base price increase of the year in June, no further increases were announced for July.

U.S. mills have increased prices on products, which reduce available production capacity. Alloys other than 304, 304L and 316L have been subject to greater increases. Non-standard widths and light gauge extras have risen several times in the last six months.

Buyers should expect additional extras increases as mills continue to optimize their product mix to maximize volume.

Alloy surcharges are increasing in July. NAS’ July alloy surcharge for 304 is $0.9930/lb, an increase of $0.0318/lb compared to June.

Actual metals prices and trends

The Allegheny Ludlum 304 stainless surcharge ticked up by 3.0% month over month to $1.02 per pound this month. Meanwhile, the Allegheny Ludlum 316 surcharge surged to $1.45 per pound.

Chinese 316 cold rolled coil dropped 0.6% to $3,903 per metric ton as of July 1. Meanwhile, 304 cold rolled coil climbed 2.5% to $2,865 per metric ton. Chinese primary nickel surged by 0.5% to $21,093 per metric ton.

LME three-month nickel jumped 3.3% to $18,440 per metric ton.

Indian primary nickel declined by 1.4% to $18.20 per kilogram.

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

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

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Recovery and a new dynamic impacting steel prices

China steel production

Zhao Jiankang/AdobeStock

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.

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Russia export duty to cover steel, base metals

tariff

Feng Yu/Adobe Stock

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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This morning in metals news: U.S. steel capacity utilization rose to 83.0% last week; meanwhile, the U.S. Department of Commerce is now requiring and collecting aluminum import licenses; and, lastly, General Motors said it will source U.S.-based lithium.

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

Steel capacity utilization reaches 83.0%

hot rolled steel

niteenrk/Adobe Stock

The U.S. steel capacity utilization rate reached 83.0% last week, the American Iron and Steel Institute reported.

Steel production during the week totaled 1,842,000 net tons. The output marked an increase of 0.4% from the previous week and a 41.0% jump year over year.

Furthermore, output in the year to date reached 46,896,000 net tons at a steel capacity utilization rate of 79.0%.

DOC to collect aluminum import licenses

As part of the Aluminum Import Monitoring system, the Department of Commerce recently announced it began requiring and collecting aluminum import licenses as of June 28.

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India’s steel story continues to grow in 2021. New plants are being commissioned and major steel companies are reporting growth in production, too.

India’s leading producer, Tata Steel, for example, has reported in the current quarter of fiscal year 2022, production of 4.62 million tons against 2.99 million in the same period last year.

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India’s steel highs and lows

India

Zerophoto/Adobe Stock

In March-April 2020, India’s steel capacity utilization plunged as a result of the nationwide lockdown imposed to curb the spread of COVID-19.

But now, things are changing for the better, according to production reports, uptake reports and analyst forecasts.

The World Steel Association (WSA) reported India’s production rose by almost 47% in May this year.

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This morning in metals news: U.S. fossil fuel consumption last year fell to its lowest level in nearly 30 years; nonfarm payroll employment rose by 850,000 in June; and, lastly, the American Iron and Steel Institute commented on the House’s INVEST in America Act.

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.

Fossil fuel consumption falls

crude oil

phonlamaiphoto/Adobe Stock

U.S. fossil fuel consumption fell to its lowest level in nearly 30 years, the Energy Information Administration reported.

Total U.S. consumption of fossil fuels fell to 72.9 quadrillion British thermal units in 2020. The total marked a 9% decline from 2019.

“Last year marked the largest annual decrease in U.S. fossil fuel consumption in both absolute and percentage terms since at least 1949, the earliest year in our annual data series,” the EIA said. “Economic responses to the COVID-19 pandemic in 2020, including a 15% decrease in energy consumption in the U.S. transportation sector, drove much of the decline. The United States also had relatively warmer weather in 2020, which reduced demand for heating fuels.”

Nonfarm payroll employment up by 850,000

Nonfarm payroll employment rose by 850,000 in June, the Bureau of Labor Statistics reported.

Meanwhile, the national unemployment rate remained at 5.9%.

Read more

Before we head into the weekend, let’s take a look back at the week that was and some of the metals storylines here on MetalMiner.

This week, we touched on the USMCA (which turned 1 on Thursday), Stuart Burns covered the relationship between inventory levels and metals demand, and much more.

On the USMCA — which went into effect July 1, 2020, almost four years after NAFTA talks began — United States Trade Representative Katherine Tai offered some comments this week on the occasion.

“We should also celebrate the USMCA because of what it represents: a renewed commitment by our three countries to pursue negotiations that raise standards and create a race to the top,” she said.

Furthermore, USMCA trade ministers will meet in Mexico City on July 7 to commemorate the one-year anniversary of the trade agreement.

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Week of June 28-July 2 (USMCA, metal stock levels and more)

USMCA

ronniechua/Adobe Stock

  • The global lead and zinc markets were in surplus through the first four months of 2021, the International Lead and Zinc Study Group said.
  • Meanwhile, GDP rose in all 50 states in the first quarter, the Bureau of Economic Analysis (BEA) reported.
  • In addition, Stuart Burns covered Russia’s plans to impose export taxes on key metals.
  • U.S. steel capacity utilization for the week ending June 26 reached 82.7%, the American Iron and Steel Institute reported.
  • The U.S. Court of International Trade made a ruling affirming duty levels set by the Department of Commerce with respect to heavy walled rectangular steel pipes and tubes from Korea.
  • Burns on the loss of support for the zinc price.
  • The E.U. voted to extend steel safeguards, originally imposed in 2018, for an additional three years.
  • The USMCA Labor Council convened for the first time, pursuant to the 1-year-old agreement’s chapter on labor.
  • Think stock levels are a reliable indicator of true metals demand? Think again.
  • Norsk Hydro has signed a letter of intent to build an aluminum recycling plant in Michigan.
  • Meanwhile, the United States-Mexico-Canada Agreement, or USMCA, hit the one-year mark this Thursday.
  • The U.S. goods and services deficit rose in May from the previous month.
  • Lastly, for subscribers, the MetalMiner Monthly Outlook for July is now available.

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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.

E.U. flag

Andrey Kuzmin/Adobe Stack

“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.

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