$1.5 billion US is a lot of money by any measure. However, the reality is that Glencore is making so much in this climate of metal scarcity and elevated prices, they likely won’t have a hard time accommodating the fine. So when metal market news broke of their massive, three nation fine, there was not much reaction. But as we’ll see, the money may not be the real concern.
Glencore is now an FTSE 100 company, which means it is under much more public scrutiny than when it was a freewheeling, privately-owned trader. Of course, that time period is also when much of the culture that led to their current disgrace evolved. Even so, the share price took a small hit from the news, but it is still up substantially on the month. What may be more difficult for Glencore to stomach is the damage the joint US, Brazilian, and UK reprimand will have on their reputation.
Keep yourself up to date on all the metal market news as well as commodity prices. Sign up for the weekly MetalMiner newsletter here.
According to a report in the Financial Times, the current chair of Glencore, Kalidas Madhavpeddi is not taking the news lying down. “Glencore today is not the company it was when the unacceptable practices behind this misconduct occurred,” he said.
So what exactly were these “unacceptable practices?”
The investigations started back in 2018 and ’19. Since then, the firm has plead guilty to multiple counts of bribery and market manipulation. This included breaking money-laundering laws and the US Foreign Corrupt Practices Act in Nigeria, the Democratic Republic of Congo, and Venezuela. They have since agreed to pay penalties of $700 million for the bribery. To resolve market manipulation investigations, the firm will pay $485 million.
Meanwhile, in the UK, a Serious Fraud Office prosecution charged the company with paying bribes of €10.5 million to influence officials at Société Nationale des Hydrocarbures and the Société Nationale de Raffinage. The goal, according to the UK, was to advantage Glencore’s operations in Cameroon. The company also stands accused of bribing agents to “assist them in obtaining crude oil cargoes or gain an undue favorable price for those cargos”.
Fines have still to be set for the latter cases but are included within the estimated total of $1.5 billion.
Many of us have read accounts of how trading companies and their “buccaneering ways” back in the day. In fact, like Robin Hood, some of us may have a degree of admiration for their sheer audacity. However, it’s important to remember that these were not victimless crimes. In many cases, payments were made to corrupt regimes and individuals. This influx of cases only served to tighten the hold despotic governments had over their countries.
In February, the Guardian reported that Glencore had set aside $1.5bn to cover potential fines and costs related to bribery and corruption investigations in the UK, US, and Brazil. Although the settlement is significant, it is still smaller than the $4 billion the company announced it will return to shareholders after record profits.
Whatever happens in the interim, this will not be the end of Glencore’s bad press. Both Dutch and Swiss authorities are reportedly investigating alleged wrongdoing. Some of this is thought to be related to operations in the Democratic Republic of Congo, where Glencore is a major player in cobalt and copper mining.
In the interest of fairness, Glencore is not an outlier in such shenanigans. While this post has no direct evidence to offer, it’s probable that all the major trading houses engage in such practices from time to time. In many cases, this was the only way to compete with each other for resources and cargoes.
Robin hood allegedly stole from the rich to give to the poor. However, in the case of the trading companies, they kept it for themselves. Not surprisingly, there are now calls for retired senior executives from the time these bribes were paid to be held to account. That said, we recommend you don’t hold your breath.
If you’re the type who likes to follow such unprincipled goings-on, we recommend you read The World for Sale by Javier Blas. If you lived through those years when Glencore was stirring the global financial pot, you’ll enjoy it that much more.
The easiest way to keep yourself informed of fluctuations in the metal marketplace is MetalMiner’s monthly MMI Report. Sign up here to begin receiving it completely FREE of charge. If you want a serious competitive edge in the metals industry, try a demo/tour of our revolutionary insights platform here.
The UK Trade Remedies Authority announced on Friday, May 20, that new measures should be put in place to “protect the UK’s aluminum extrusion industry” from dumped Chinese products.” The surprise move comes after an 11-month investigation into inconsistencies with aluminum bar imports.
The TRA made the recommendation to the organization’s current Secretary of State for International Trade, Anne-Marie Trevelyan. Spurring on the investigation were some of the UK’s few remaining aluminum extruders, particularly Norsk Hydro.
Keep yourself up-to-date on changes in the aluminum marketplace. Sign up for the weekly MetalMiner newsletter here.
After some initial research, the TRA concluded that imports of Chinese aluminum extrusions were being dumped into the UK at unfair prices. After noting this had caused significant injury to the UK’s own industry, the organization determined that a formal investigation was warranted.
In the meantime, the TRA will put some provisional measures in place. For example, importers will have to provide a bank guarantee to HMRC, the UK tax authority. This will have to cover any duty ultimately applied to imports over the next six months prior to a final determination.
The MetalMiner Insights platform now contains detailed 5000 and 6000 series aluminum bar prices. Try a demo/tour of the insights platform here.
The measures go into effect on May 28. And while the level of duty is unknown, the original investigation suggested some Chinese manufacturers had been underselling their products at between 7.3% and 29.1%. This is enough to expose importers to potential claims of nearly 1/3 the goods’ value.
Chinese aluminum bar products currently attract the same 6% duty level as imports from other countries. This is slightly less than the 7.5% duty applied by the EU on imports into the block. Meanwhile, rumors persist among trade buyers that the rule could apply to only those bars above 3.25″ (82.55mm) diameter. If true, this would impact only those commodities on the lower end of the cost spectrum.
While the TRA’s announcement makes no such distinction, there would be some logic in such a size cut-off. This is because UK extruders’ small presses cater to this end of the size range, and there are no domestic UK producers of larger diameter bars. As a result, companies need to import all large diameter product. In this case, additional duties would be self-defeating: protecting no one but damaging a broad consumer base in oil, gas, heavy engineering, and automotive.
Interviews with both UK importers and Chinese manufacturers make it clear this has come as a surprise to many in the industry. They also indicate that the almost-immediate application of the interim measures may do more harm than good. Specifically, it will affect those companies with orders in production or on shipment. After all, they have no means of canceling or mitigating potential costs.
The metal marketplace thrives on information. You can keep yourself properly informed with MetalMiner’s monthly Aluminum MMI Report. Sign up here to begin receiving it completely FREE of charge.
Global public opinion seems divided on whether or not to impose a “carbon tax” on the metal and mining sector. This goes double for steel. Depending on which side you’re listening to at a given moment, you’ll get very different opinions on the matter. Many economists, environmentalists, and the general public welcome the idea. The steel sector, of course, is firmly on the other side of the fence.
Historically, the metals mining sector has opposed carbon taxes. This is largely due to fears that it will inflate the final selling price. However, a growing section of economists believe that a carbon tax would be highly effective at reducing carbon emissions. As per World Bank’s figures, 27 countries have enacted carbon taxes so far. That said, only seven of them were mining countries.
Steel serves as one of the most widely-used building materials in the world. The process depends upon coking coal. So, for every ton of steel produced, nearly two tons of CO2 gets released. Altogether, this accounts for around 7% of global greenhouse gas emissions. These figures relate to BOF operations only.
Keep yourself up to date on the latest global metal prices, as well as all the factors that might affect them. Sign up for the weekly MetalMiner newsletter here.
Of late, US lawmakers have been working on a bipartisan energy and climate bill. According to reports, it may include a tax on carbon-intensive products entering the country. Last month, US Senator Joe Manchin, D-W.Va., began talking to both Republican and Democratic lawmakers about the possible impacts of such a bill.
According to this report, the discussion was occurring at the same time the European Union (EU) was working to implement a carbon border adjustment mechanism. Green activists feel that such tariffs may eventually cut down on emissions. At the same time, they hope to make domestic manufacturers more competitive against less carbon-efficient foreign companies.
But the proposal for such a bipartisan bill is still in the very early stages.
In July last year, US Senator Chris Coons, D-Del., co-chair of the Senate’s Climate Solutions Caucus, proposed a bill to impose a “polluter import fee.” The policy was intended to affect certain carbon-intensive products entering the US. It would initially apply to commodities like aluminum, cement, iron, steel, natural gas, petroleum, and coal. However, it would eventually expand to other types of imports. The revenue obtained from the fees could then be used to support technologies designed to reduce emissions.
In April this year, Pennsylvania became the first fossil fuel-producing state in the US to adopt a carbon pricing policy. This kind of pricing works by putting a monetary value on carbon. And therein lies the rub. What’s the correct price tag to put on carbon emissions?
So far, the Biden Administration has calculated $51 for every ton of carbon released. New York State, on the other hand, pegged the figure at $125. Meanwhile, the International Monetary Fund has been kicking around a “three-tier system.” In this structure, developed countries would pay US $75 (£56) per ton of carbon, while less-developed parts of the world would pay $50 (£37) and $25 (£18).
Carbon markets can be operated in one of two ways, according to the Paris Agreement 2015. The first is through an emissions trading system that caps a total target for emissions. The other option is to use a system that allocates “carbon permits” accordingly.
MetalMiner publishes a monthly Renewables and Grain Oriented Electrical Steel monthly MMI Report. Sign up here to begin receiving it completely FREE of charge.
Another possibility includes what’s known as a “carbon offsetting scheme.” This provides tradable carbon credits to offset carbon emissions outside the “capped area.” This third option imposes a fee on every ton of carbon emitted.
Ultimately, many in the US oppose levying tariffs on steel and other imports from countries with higher carbon dioxide outputs. This lobby claims that carbon taxes are too complex an issue and that merely imposing a tax will not solve the problem or fight climate change. Their solution? Simply make commodities more expensive.
Late last year, the European Union and the US negotiated what was billed as the world’s first carbon-based sectoral arrangement on steel and aluminum trade. However, it would not truly take effect until 2024. In the meantime, the two nations arrived at an “interim arrangement” for trade in the steel and aluminum sectors. This deal modified tariffs on EU suppliers and strengthened enforcement mechanisms to prevent “leakage” of Chinese steel and aluminum into the US.
In February of this year, participants in a webinar hosted by Euractiv, a Brussel-based policy events organizer, expressed worries that the European Commission’s Carbon Border Adjustment Mechanism could be counterproductive. They said this would prove especially true if it didn’t provide a solution for those EU exporters of steel and other products impacted by the policy.
Incidentally, the European steel industry exports 20 million MT every year, worth almost EUR £20 billion. The Mechanism is currently in the proposal stage and is still being discussed by the European Parliament.
Europe, however, seems to be ahead of the US in the march toward carbon compliance. Many steel companies, including H2 Green Steel and Hybrit of Sweden, have begun using hydrogen and non-fossil fuels to produce “green” steel.
The de-carbonization of the steel industry is going to be a long journey. Obviously, taxation is an option that’s still on the table. However, steel producers will have to decide on a technologically and economically viable way to decrease their carbon footprint. Whether the use of hydrogen is the answer remains to be seen.
If you want a serious competitive edge in the metals industry, try a demo/tour of our revolutionary insights platform here.
The Renewables Monthly Metals Index (MMI) fell 6.4% with notable drops in steel prices, particularly for plate.
Breaking news in the US Green Energy push. The Biden Administration has released an “action plan” intended to accelerate permitting on new green projects. The goal is to loosen the administrative red tape that keeps infrastructure investments from hitting their time and budget goals. The move is part of the $1.2 trillion Bipartisan Infrastructure Law. So far, this has proved to be one of the administration’s only “wins.”
Back in mid-April, MetalMiner reported that Biden had implemented the Defense Production Act again. This time, it was to boost US production of materials related to large capacity batteries, semiconductors, and critical minerals. The Cold War-era act has so far been used three times by the Biden administration to increase the production of protective equipment, vaccines, and fire hoses.
The Advanced Clean Energy Storage Project plans to be the world’s largest industrial green hydrogen facility. The site will be located near Delta, a small town near Central Utah’s Sevier River. This particular part of the state is already home to a hybrid plant combining geothermal and hydropower energy. It is also rich with solar fields, wind farms, and even hog manure natural gas plants.
The Advanced Clean Energy Storage Project will produce and store green hydrogen, which has significantly lower carbon emissions than traditional hydrogen. It is produced by using green energy to power water electrolysis, making it far superior to fossil fuels. In mid-April, the organization received a $500 Million conditional commitment from the US Department of Energy.
Over in the UK, the green energy conversation is taking a turn towards science fiction. More than 50 British tech organizations, including Airbus, SSTL, and Cambridge University, are currently working with the UK Space Energy Initiative to develop a space-based solar power plant.
The group believes that beaming electricity from space will help the UK meet its greenhouse gas emission targets by the middle of the century. Spokespersons for the project state that all of the technology necessary for such a power plant already exists. The problem, they say, is how to combine them into a project of this size and scope.
While Space.come has already produced a compelling video of what this process might look like, experts say we’re still years away from a workable solution.
The world is moving toward green energy, which necessitates a wide range of valuable metals. Keep yoursTelf informed on all the latest news and information by signing up for our weekly MetalMiner newsletter here.
The GOES MMI, the index for grain-oriented electrical steel, rose 14.1% from April to May.
Meanwhile, the largest grid operator in Texas asked residents to conserve energy during the current heat wave. The directive asked for homes to be set at 78 degrees or higher from 3-8pm over the weekend as well as to lay off the use of heavy appliances. Six power plants tripped offline at one time, costing the grid the energy to power 600,000 homes.
Back in early May, Zacks Investment Research cut shares of Aperam from “hold” to “sell.” This triggered a brief sell-off that was quickly recovered the next day as investors looked to grab up discounted shares. In the week since, however, the company has seen a steady decline, closing out this Friday at $35.85 a share. This is just shy of the 52-week low of $34.61 and well below the year high of $65.
Aperam S.A. manufactures and markets Stainless steel throughout South America and Europe. It produces both GOES and non-grain-oriented electrical steel and nickel alloys. Other major research firms have maintained the company’s “hold” rating, but price targets are already starting to slip.
Get all the latest metal marketplace news, facts, and figures with MetalMiner’s monthly MMI Report. Sign up here to begin receiving it FREE of charge. If you’re looking for a real competitive edge in the metals industry, try a demo/tour of our revolutionary insights platform here.
The UK government recently announced an asset freeze on London-headquartered metal and mining group Evraz. Authorities claim that Evraz is receiving benefits or support from the Russian government to conduct business in strategic and economic sectors. True or not, the freeze has broad implications for global steel production.
From steel to copper and beyond, it’s essential to stay up-to-date on the latest metal prices. You can receive all the latest data by signing up for the weekly MetalMiner newsletter here.
NIZHNY TAGIL, RUSSIA – JANUARY 01, 2014: Night view of the main entrance of the plant NTMK company Evraz. NTMK plant is the main enterprise of the city of Nizhny Tagil
HM Treasury’s Office of Financial Sanctions Implementation (OFSI) went public with the move against Evraz on Thursday, May 5. As in similar situations, the action was filed under the Sanctions and Anti-Money Laundering Act of 2018.
This specific law allows governments to freeze funds and economic resources of problematic persons, entities, or bodies. In this case, it refers to those involved in destabilizing Ukraine or undermining/threatening the country’s territorial integrity, sovereignty, or independence.
Evraz has steel making assets in Russia that include the Nizhniy Tagil (NTMK) and Western Siberia (Zapsib) plants. The OFSI also noted that the company controls coking coal mines in Raspadskaya and Yuzhkuzbassugol and an iron ore mind at Kachkanarsky.
However, the information made no mention of Evraz’s Mezhegeiugol coking coal mine in eastern Siberia or its vanadium production operations.
Freezing the assets of companies like Evraz has played a large role in how Western countries and the EU are punishing Russia for its Feb. 24 invasion of Ukraine. Indeed, back on Mar. 10, the UK’s Financial Conduct Authority officially suspended the group’s shares on the London Stock Exchange.
The earlier move was in response to the national government placing Roman Abramovich on its list of sanctioned individuals. Well known as the owner of Chelsea Football Club, Abramovich holds the single largest stake in Evraz (28.64%).
At that time, Evraz denied any involvement in actions against Ukraine. They have since reiterated claims that they mainly produce materials for construction and infrastructure.
For more insight on European steel prices, try a demo/tour of our revolutionary MetalMiner insights platform here.
Evraz NTMK poured 4.1 million metric tons of crude steel in 2018, from which it rolled about 4.6 million metric tons of finished product. The manufactured items included rails, long products, rings for mechanical engineering, and grinding balls. According to the group’s website, the plant also produced semis for tubular production.
Meanwhile, Zapsib’s product assortment includes long section steel and continuously cast and hot rolled slabs. The plant also produced continuously cast and hot rolled section billets, rails, and downstream products. In 2016, Zapsib produced 6.9 million tons of crude steel and 6.3 million metric tons of steel products.
The OFSI did note that Evraz could continue to operate with its North American subsidiaries. Allotments include “payments to or from those subsidiaries under any obligations or contracts” and “payments to or from any third party under any obligations or contracts.” It also includes the “receipt of payments made by the North American Subsidiaries for audit services.” The OFSI also added that “Evraz North America is permitted to pay for the audit services referred to in the previous sentence.”
One source noted that many Russian companies are trying to put distance between their overseas assets and their owners in Moscow. “Everyone is separating or thinking about spinning off assets abroad into separate divisions,” that analyst added. Only time will tell if their efforts will pay off.
Evraz North America’s headquarters are in Chicago, but the subsidiary has a welded pipe mill in Oregon (Evraz Portland) and a hot end and rail mill in Colorado (Evraz Pueblo).
In total, Evraz North America has six plants spread throughout the United States and Canada. The wholly-owned subsidiary can produce up to 2.3 million metric tons per year of crude steel via electric arc furnaces at Pueblo and Regina alone. The former is located in Colorado, while the latter is situated in Saskatchewan.
Besides having hot ends, the Pueblo plant can roll long products that include rail as well as wire rod and rebar in both coils and seamless pipes. Meanwhile, the Regina plant produces line pipe from its own rolled plate products.
Other Canadian sites, such as Camrose, Calgary, and Red Deer, produce casings and tubings for Oil Country Tubular Goods (OCTG) as well as straight- and spiral-weld line pipes. Evraz North America’s Portland plant also produces line pipe from the plate and hot coil it rolls on site
The easiest way to keep yourself informed about major changes in the metal marketplace is MetalMiner’s monthly MMI Report. Sign up here to begin receiving it FREE of charge.
The Stainless Steel MMI indicates that prices are holding fast.
This, as cold-rolled stainless imports to the U.S. have averaged above 40,000 MT per month for several straight months. Meanwhile, U.S. flat-rolled stainless producers have run at full capacity for over a year now. Still, they continue to place premiums on products they simply don’t want to make.
For NAS and Outokumpu Calvert, that category includes basically anything that is not 304, 304L, 316L 2B (or 2D) base gauge or 48 & 60 wide standard mechanicals. On the other hand, A.K. is focused on the ferritic side for automotive and highly selective about alloys that contain any nickel.
The metal marketplace moves quickly. You can move quicker with MetalMiner’s weekly newsletter. Sign up here and begin receiving valuable industry insights right away.
There are few options for supplying the volumes needed to satisfy the ongoing demand. The extra steel either needs to come from Allegheny & Tsingshan Stainless J.V.’s DRAP (Direct Roll Anneal and Pickle Line), or from imports. However, it can’t come from both.
With CRS import levels so high, the U.S. market simply doesn’t need the tons coming from A&T Stainless’ Midland facility. Indeed, back in March, all of A&T’s December / January 232 exemption petitions for Indonesian hot band were denied.
The company claimed they needed “clean” Indonesian band made from nickel pig iron that was free of residual elements. However, the Midland facility previously had no issues using scrap from Allegheny bands as well as other domestic and foreign suppliers.
NAS, Outokumpu, and Cleveland-Cliffs vehemently opposed granting A&T Stainless Section 232 exemptions. One of the main concerns was ATI’s J.V. partner Tsingshan, a Chinese military-backed steel conglomerate. Specifically, there were issues with nickel pig iron instead of scrap. On top of that, Tsingshan’s speculative actions regarding nickel almost brought down the LME.
As previously covered, no U.S. or European-based mill would have been able to do what Tsingshan did. On May 3rd, Cris Fuentes, CEO of North American Stainless, issued the following statement to MetalMiner regarding Tsingshan’s actions:
“China’s continued anti-competitive practices and blatant market manipulation at the London Metal Exchange threaten to devastate the American steel industry and its workers, weaken our national security, and slow progress in addressing climate change. As countries across the world work to limit dirty Chinese steel, Beijing has only become more manipulative. The Chinese military-backed steel conglomerate Tsingshan has built sprawling new industrial complexes in Indonesia that can produce 27 times more steel than that country uses in an entire year. These egregious cross-border subsidies (sic) lead to a costly game of whack-a-mole as American regulators struggle to keep pace. Washington policymakers must flex American muscle with new and modernized protections for steel to counter the growing threats from abroad.”
In a request for comment, Danielle Carlini General Manager, A&T Stainless said via email:
“We are disappointed the U.S. Department of Commerce denied A&T Stainless’s Section 232 tariff exclusion requests. We believe we meet the criteria for an exclusion and had looked forward to serving the needs of the market by bringing employees back to work through restarting idled assets. The Midland DRAP line that was idled in July 2020 will remain idled at this time. I cannot comment for Tsingshan.”
Stay abreast of changes in the metal marketplace with MetalMiner’s monthly MMI Report. Sign up here to begin receiving it FREE of charge. And if you’re looking for a real competitive edge in the metals industry, try a demo/tour of our revolutionary insights platform here.
There’s something afoot on the rare earths front in China. Specifically, the country recently decided that it wants to tighten its export control laws. The regulation passed about two years ago to stop importing countries from diverting “Chinese products for non-intended use.” In most cases, the “products” refer to rare earth elements, of which China is the world’s biggest producer.
The announcement comes just a few days after news that an American company may have found the largest reserves of rare earth elements in the US. In fact, US-China relations experts are still trying to connect the “geo-political” dots around China’s latest move and its implications.
A report from nikkei.com stated that going forward, exporters of Chinese products with potential military applications may have to provide documentation as to their intended use. Apparently, the ultimate goal is to “halt the militarization of sensitive tech.”
The article also reported “concerns” that the regulations would be arbitrarily enforced against countries that have poor diplomatic relations with Beijing. Officials did not name the US directly, of course. Still, it’s no secret that trade relations between the US and China have not been healthy since the Trump administration.
In December of 2020, China finally joined many other countries in passing an Export Control Law. The crux of the legislation gave Beijing control over strategic products and even advanced technology items. The move was widely seen as a response to US restrictions on Chinese IT firms like Huawei Technologies Co.
Rare earth minerals, metals, and more. Get the information you need from MetalMiner’s weekly newsletter. Sign up here and begin receiving valuable industry insights.
According to reports, China’s Ministry of Commerce has published its new export proposal with the intent of soliciting public comment. The regulations are also in line with the “total national security outlook” policy of President Xi Jinping. This includes 11 total areas of security coverage: politics, land, military, economy, culture, society, science and technology, information, ecology, resources, and nuclear.
If and when the proposed regulation becomes law, it will empower the Chinese Government to carry out a “risk assessment” of the country or region receiving the exported products. This would factor in both national security interests as well as foreign policy needs. Export licenses for “high-risk destinations” will also be subjected to even stricter screenings.
The Nikkei report went on to say that rare earth metals could be subject to export controls “depending on how authorities interpret the regulations.” Many of these materials feature in the manufacture of high-performance magnets. However, those importers who alter the “end use” without permission may find themselves on a regulated list. Repeat offenders may end up subjected to embargoes or even a revocation of their export license.
Ostensibly, the new law seeks to prevent the export of dangerous products to terrorist outfits or rogue nations. Still, how China plans to assess the risk level of export partners is not yet clear. Currently, China forbids the transfer of regulated products to third parties without the approval of the government. After Russia invaded Ukraine, China had got some flak for allowing the export of chips used in Russian missiles and spy satellites. There were also reports of US chips being used in missiles after being clandestinely exported via Bulgaria.
There’s a major semiconductor shortage in the world today, and the Ukraine conflict has only intensified US-China trade tensions. According to this report, US officials warned they would impose strict export controls on China should the country try to send semiconductors containing US technology to Ukraine. For this reason, the purported move by China was seen as an illegal attempt to help Russia cope with global sanctions.
Xinjiang Rare Metals National Mine Park
A wide range of industries rely on rare earth minerals, including automobiles, transportation, power generation, and defense. In recent decades, US investment in its homegrown chip industry has decreased. This was largely because Japan, Taiwan, South Korea, and China were making them far cheaper. Now, the US has decided to halt this reliance, especially when it comes to China.
That’s why the initial discovery report from Wyoming comes as such a happy surprise. According to the data, the rocks there have an unusually high content of several “rare earth” elements: Neodymium, Dysprosium, Praseodymium, and Terbium. All of these are essential for making the magnets used in electric vehicle motors and wind turbines.
American Rare Earths, the company conducting the exploration and analyses, also has holdings in Arizona and Nevada. Combined, all of these could ease US dependence on foreign sources of these key metals. Indeed, China controls roughly 87% of the magnets market, a fact that many US officials are desperate to change.
US Senators Tom Cotton & Mark Kelly recently introduced legislation that would establish a rare earth stockpile via the Department of Defense. It would also require defense contractors to stop buying rare earths from China by 2026. This follows an earlier bill introduced by senators Marco Rubio and Cindy Hyde-Smith. The latter’s goal was to provide Department of Energy funding that could support domestic manufacturing of finished rare earth products.
Clearly, for the US, the supply-chain mess, the pandemic, and the Ukraine conflict have served to highlight the importance of rare earth independence. Now, we need only wait to hear the final word on China’s counter-move.
Stay informed about the latest metal and mineral news with MetalMiner’s monthly MMI Report. Sign up here to begin receiving it FREE of charge. For a real competitive edge in the metals industry, try a demo/tour of our revolutionary insights platform here.
Following a strongly inflationary metal environment in Q1, Q2 2022 is looking like a whole different ballgame. Indeed, it’s no secret that the global economy is currently facing a number of major challenges. Alone, none of these would be enough to derail us from last year’s strong rebound. When added together, however, they’re helping to shape a far-from-rosy outlook for the 2022 metals forecast.
A recent Capital Economics note to clients phrases it particularly well, stating that “all three of the world’s major economic blocs are now facing significant headwinds.” In the US, the storm stems from an increasingly-hawkish Federal Reserve. Meanwhile, the euro-zone faces mounting pressure from the recent massive squeeze in real incomes which threatens to push the region into recession.
In China, the government’s immediate challenge has been quashing the continuing Omicron outbreak. Unfortunately, the country’s zero-COVID initiative has so far done little to affect the spread of the virus. What it has done is tightened restrictions across some of the country’s biggest and most economically-important cities.
The Omicron variant is by far the biggest wave of infections to hit China, a country still woefully under-protected in terms of vaccines. According to CE, the areas impacted account for some 40% of China’s GDP and 80% of China’s exports.
Stay ahead of movements in the metals market with MetalMiner’s weekly newsletter. Sign up here and begin receiving valuable industry insights right away.
China Activity in Areas with Local Outbreaks (%)
Even without the lockdowns, China’s outlook is challenging to say the least. Its construction sector is struggling under extreme debt. Meanwhile, fewer young buyers than ever before see any benefit to investing in the property market. To make matters worse, exports are struggling as consumption habits adjust in overseas markets.
CE points to Amazon’s Q1 results to illustrate a return to pre-COVID demand levels as services rebound. But according to Reuters, China’s factory activity slumped at the fastest pace in two years this past March. In fact, the Caixin purchasing manager’s index slid to 48.1, its lowest reading since the first pandemic wave in early 2020. The official PMI also dipped into contraction territory, slipping below 50 for the first time this year.
New orders are falling particularly fast, reflecting both stalled domestic demand and the disruption to overseas markets. Of course, most of these disruptions result from Russia’s “special military operation” in Ukraine. Regardless, if China’s economic growth slows and industrial and construction demand weakens, the metals forecast from the world’s largest consumer will weaken as well.
Not surprisingly, metals prices have already started slipping. After reaching a high above $10,600/mt last month, copper prices today fell below $9,500. There’s no doubt about it: the bears have returned to short the market. Aluminum has followed copper’s lead despite a March surge caused by the EU’s rejection of Russian supplies. China’s woes are a factor here, too, as the country has been ramping up primary metal output. As a result, semis exports have been rising strongly.
Demand is the prevailing narrative in today’s metals market. As activity in all three regions continues to slow, demand for industrial metals is likely to ease. Still, whether an improvement in global logistics delays remains a leading or lagging indicator is debatable. Either way, there’s no doubt they are gradually becoming less of an issue for metal supply. The bears may be here, but the market has yet to turn their way. Q2 and Q3 will have a lot to say in that discussion.
Stay informed about movements in the metals marketplace with MetalMiner’s monthly MMI Report. Sign up here to begin receiving it FREE of charge. And if you’re looking for a real competitive edge in the metals industry, try a demo/tour of our revolutionary insights platform here.
MetalMiner avails itself of both Artificial Intelligence (AI) and Technical Analysis (TA) to better understand market direction. In short-term analyses, AI works particularly well. However, when looking for long-term answers, TA is far more insightful. This is particularly true when determining the best market forecast in terms of bullish, sideways, or bearish.
For instance, of late, much attention has been paid to the S&P 500. This is because the index appears poised for a potential shift from sideways to bearish. Some would define such a shift as a “20 percent decline,” but percentage declines have little to do with market direction. Instead, they involve an actual break in support or climb over resistance.
The following chart helps illustrate just how critical this juncture will be for the future of the S&P 500. Here, red lines indicate resistance and green lines indicate support.
Obviously, prices can go in one of two directions. Still, the “breaking of support” to lower lows would not suggest a healthy economy. Ironically, some of the latest metals charts look pretty similar to the S&P 500. Take aluminum, for example:
Though still trading at historic highs, you can clearly see that aluminum has fallen below a significant support level. Suddenly, even the best aluminum price forecast seems derivative of other indices. In fact, in the following chart, you can see that Tin is following a similar trend.
Typically commodities and the stock market do not share much – if any – price correlation with one another. Indeed, our state-of-the-art MetalMiner correlation analysis only reinforces this truth. However, a few economic tea leaves suggest that trend changes could come sooner rather than later.
Get the latest on aluminum, tin, steel, and more. For the best market forecast around, you need MetalMiner’s weekly newsletter. Sign up here and begin receiving valuable industry insights.
The U.S. Dollar is currently trading at 103+/-, a five-year high, and has a negative .93 correlation with commodities prices. This suggests that prices could shift trends rather abruptly. Meanwhile, a recent WSJ article indicated that “higher interest rates typically support the dollar by making U.S. assets more attractive to yield-seeking investors. Investors expect that the Fed will increase short-term rates more aggressively this year than its central-bank peers.” Such a move could, in turn, put pressure on commodities regardless of supply chain hiccups, high energy prices, etc.
At the same time, MetalMiner has had its eye on Japan, where the yen has fallen to a 20-year low against the dollar. According to that same WSJ article, the Bank of Japan has pledged to maintain low interest rates despite rising inflation. Meanwhile, the Europeans may follow the Fed’s example, but they certainly won’t lead. All in all, the mix of easy and tight monetary policy will likely keep the dollar supported.
Of course, in addition to the higher USD, China’s FXI shares have begun trending down. This suggests that the world’s second-largest economy has its own challenges to overcome in the coming months (and years). Among them are Shanghai’s lockdowns, which recently entered their 6th week with no end in sight. Currently, even the best market forecast for our China’s vast manufacturing economy looks rather bleak.
Ultimately, rising inflation, along with some signs that U.S. demand has begun to slip, could impact both market momentum and trader sentiment. But whichever direction the market takes us, MetalMiner’s analysis will help lead the way.
Prepare yourself for tomorrow’s market today! Join us Wed May 4 from 11:00-11:30 for a participatory workshop on preparing your metal buy for a recessionary environment. And makes sure to stay informed about global steel markets with MetalMiner’s monthly MMI Report. Sign up here to begin receiving it FREE of charge.
It’s first-year economics: everything comes down to supply and demand. Historically, the push and pull between these two massive market forces are cyclical, and that includes steel. When you have more demand than supply, prices go up. Eventually, the prices get so high that people stop buying. After a while, the steel supply builds up, and prices plummet, leading to a surge in demand once again.
It’s a familiar dance – at least, it used to be. That was before the war in Ukraine, China’s ongoing lock downs, and global supply chain issues. Suddenly, having enough steel supply to meet even lowered demand is not a foregone conclusion. Still, economists aren’t the sort to simply throw up their hands and say, “whatever happens, happens.” Instead, they are constantly mapping out potential scenarios.
In this article, we’ll talk about some of the facts and factors at play.
We’re one-third the way through 2022, and it seems that no global crisis is too great to completely stave off steel demand. After a year in which steel prices hit historical highs and demand grew by an unexpected 2.1%, many insiders pointed to a “return to center.”
Indeed, in April, the World Steel Association forecasted a meager 0.4% increase in global demand. However, the organization added that they expected this number to slowly increase to 2.2% in 2023. The problem? Most of these estimates were made long before the current conflict, lockdowns, and supply chain failures.
Is demand really shrinking as much as forecasts predicted, or is the reduction in supply simply making it appear that way? It’s still too early to call. What we do know is that 2022’s supply woes are pushing up steel prices from the back end. This means that the cost relief we all expected simply isn’t coming. Of course, this raises a lot of questions about that 2.1% prediction for 2023.
Stay informed about the latest steel prices, industry news, and market analyses by subscribing to MetalMiner’s weekly newsletter here.
Considering all the predictions that 2022 would be a “dead spot” for steel demand, the price action has been stunning thus far. As expected, the year kicked off, with prices quickly retreating from 2021’s historic highs. But by the time March arrived, steel prices had seen their biggest month-over-month increase ever.
This reversal mostly hinged upon Russia’s invasion of Ukraine. The WSA ranks Ukraine as the 13th largest steel producer in the world, as well as the fifth largest exporter of iron by volume. Obviously, the war has devastated the country’s ability to produce. In fact, at the time of this writing, the Azovstal Iron and Steelworks in Mariupol – once capable of putting out 5.9 million tons of product per year – is serving as a shelter for besieged Ukrainian citizens.
The effects of the war have also led to major embargos, sanctions, and boycotts on Russian energy and commodities. Russia is #5 in global steel production, and its metal and coal exports were one of the first things on the chopping block when the EU started imposing sanctions. This means less Russian steel in Europe and less Russian power for European countries to make their own steel.
This would all be bad enough news for steel supply if it weren’t for the recent reports coming out of China, which produces some 56% of the world’s crude steel. Even back in 2021, the steel demand forecast was lowered based on weak economic data. But COVID lockdowns, crowded ports, and decarbonization efforts are choking the eastern giant’s production beyond our wildest fears.
Just last week, MetalMiner posted an article about how India might further establish itself on the global steel stage. After all, despite having a firm grasp on the #2 spot in global steel production, the subcontinent puts up a mere around 1/10th of China’s numbers. In short: there’s room for improvement. And if there was ever an opportunity to grow market share, this is it.
According to representatives from the Indian steel industry, the problems plaguing Europe and Asia have put the pinch on other major producers. They also claimed that India is currently the only one of those producers stepping up to the plate. In fact, a report from the India Brand Equity Foundation (IBEF) stated that the country’s crude steel production should increase 8-9% year over year in 2022.
So far, that number has averaged closer to 6% due to the increased costs associated with production. Still, with Japan, South Korea, Germany, and other Top 10 producers reporting negative growth, India’s efforts are commendable. How far will this go in making up for the shortfall caused by Russia, Ukraine, and China? Only time will tell.
Obviously, there’s no timeline in place for either the war or China’s economic woes. This means that other countries will need to join the effort to replenish global steel supply. If consumer demand remains, strong, (a big if) prices could continue to remain supported, at least in theory.
Many of these countries (Taiwan, Italy, Vietnam, Mexico, and France) have their own economic and supply chain woes. Still, Brazil – arguably one of the most imperiled economies in the West – has managed a rather impressive recovery after dropping the ball at the beginning of the year. With any luck, this will help ignite a trend.
Stay informed about fluctuating global steel prices with MetalMiner’s monthly MMI Report. Sign up here to begin receiving it FREE of charge. However, if you want to get a real edge on the metals industry, you can sign up for a demo of our revolutionary insights platform here.
©2022 MetalMiner All rights reserved. | Media Kit | Cookie Consent Settings | privacy policy | terms of service