Furthermore, through May, U.S. steel imports totaled 10.7 million metric tons, up 7% from 10.0 million through the first five months of 2020.
Pacing the June rise was a jump in imports of blooms, billets and slabs. Imports of the category reached 795,863 metric tons in June, up 31.7% from 604,340 metric tons in May. Meanwhile, the June total rose a whopping 1,000% compared with June 2020.
Imports of oil country goods jumped 35.2% from May to 154,073 metric tons in June.
In addition, imports of hot rolled sheets jumped by 50.7% to 311,461 metric tons in June. Imports of steel rebar rose 12.0% to 94,915 metric tons.
This morning in metals news: South Korean steelmaker POSCO reported its strongest operating profit in Q2 since Q3 2010; the United States International Trade Commission made a determination regarding steel wire mesh from Mexico; and, lastly, tin prices have been soaring.
This morning in metals news: import prices rose by 1.0% in June; Saudi Arabia and the United Arab Emirates have reportedly reached a deal to resolve their recent oil output spat; and, lastly, Norsk Hydro recently announced the restart of its aluminum extrusion plant in Sjunnen, Sweden.
According to a Financial Times report this week, European aluminum producers are calling for exclusion from the first phase of the E.U.’s CBAM. They claim the plan will put the industry at a competitive disadvantage to foreign rivals. The argue it will encourage firms to direct their low-carbon production to Europe and simply sell their high-carbon production elsewhere.
As such, the net effect will be little global reduction in carbon emissions but significant competitive damage to domestic European producers, whose own carbon footprint may not be as low as those foreign competitors.
Some European mills, like Norsk Hydro, have extensive hydroelectric-powered smelter capacity. However, smelters in Europe (including Norway) currently incur a carbon cost, which is part of their electricity prices, the Financial Times reports.
Even producers using hydro and nuclear power pay because of Europe’s marginal pricing system for electricity, which is usually set by coal-fired power stations.
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.
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.
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).
“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.”
This morning in metals news: the U.S. Court of International Trade voted to affirm the duty levels set by the Department of Commerce with respect to heavy walled rectangular steel pipes and tubes from Korea; meanwhile, U.S. distillate demand returned more quickly than gasoline and jet fuel demand; and, lastly, the copper price has bounced back this past week.
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“The combination of increases in both travel and economic activity in the United States has contributed to more demand for gasoline, distillate, and jet fuel, as reflected in the product supplied data of our Weekly Petroleum Status Report (WPSR),” the EIA reported. “Although demand has increased for all three of these products from their 2020 lows, the extent of the demand growth has differed by product.”
For the week ending June 18, the four-week average demand for gasoline reached 94% of the four-week average for the same week in 2019, the EIA reported. Meanwhile, distillate reached 98%, with jet fuel at 74%.
Copper price makes gains
Meanwhile, after an approximately six-week decline after hitting an all-time high, the copper price has made some gains over the last week.
The LME three-month copper price closed Monday at $9,460 per metric ton. The price had fallen to $9,070 per metric ton the previous Monday, June 21.
However, the price remains down 6.99% month over month.
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.
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.
This morning in metals news: Volvo plans to expand its electric vehicle production in South Carolina; U.S. import prices increased by 1.1% in May; and, lastly, Ford Motor Co. says Q2 2021 EBIT will come in higher than its expectations.
As such, the country could be at or near peak production. As Reuters’ Andy Home notes, the country’s rising output over the years as had a dampening effect on prices. That trend has led some Western producers to cease operations.
But a combination of harsher environmental legislation resulting in Beijing dissuading investment in new coal fired power projects, combined with Western markets’ meaningful action — after years of simply complaining — to block out Chinese exports of aluminum and steel products suggests the Chinese impetus to build capacity and the rest of the world’s willingness to buy product are both going through a transformational change.